<PAGE>
Alliance
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Asset
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Allocation 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
September 3, 1996
Alliance Growth Investors Fund
Alliance Conservative Investors Fund
Table of Contents Page
The Funds at a Glance....................... 2
Expense Information......................... 3
Financial Highlights........................ 5
Description of the Funds.................... 7
Purchase and Sale of Shares................. 11
Management of the Funds..................... 13
Dividends, Distributions and Taxes.......... 15
General Information......................... 15
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
shares of Alliance Growth Investors Fund and Alliance Conservative Investors
Fund. 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
September 3, 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, call or write Alliance Fund
Services, Inc. at the address or the "Literature" telephone number shown above.
This Prospectus offers three classes of shares which may be purchased at the
investor's choice at a price equal to their net asset value (i) plus an initial
sales charge imposed at the time of purchase (the "Class A shares"), (ii) with a
contingent deferred sales charge imposed on most redemptions made within four
years of purchase (the "Class B shares"), or (iii) without any initial or
contingent deferred sales charge, as long as the shares are held for one year or
more (the "Class C shares"). See "Purchase and Sale of Shares" and "Management
of the Funds--Distribution Plans."
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.
[LOGO] Alliance(R)
Investing without the Mystery.(SM)
(R)/SM These are registered marks used under license 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 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 more than 100 mutual funds. Since 1971, Alliance
has earned a reputation as a leader in the investment world, with over $168
billion in assets under management as of June 30, 1996. Alliance provides
investment management services to 33 of the FORTUNE 100 companies.
Getting Started . . .
Shares of the Funds are available through your financial representative and most
banks, insurance companies and brokerage firms nationwide. Shares can be
purchased for a minimum initial investment of $250, and subsequent investments
can be made for as little as $50. In addition, Alliance offers several time and
money saving services to investors. Be sure to ask your financial representative
about:
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Automatic Reinvestment
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Automatic Investment Program
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Retirement Plans
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Dividend Direction Plans
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Auto Exchange
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Systematic Withdrawals
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A Choice of Purchase Plans
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Telephone Transactions
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24 Hour Information
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[LOGO] Alliance(R)
Investing without the Mystery.(SM)
(R)/SM These are registered marks used under license from the owner, Alliance
Capital Management L.P.
2
<PAGE>
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Expense Information
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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 a Fund and estimated annual expenses for each class of shares.
The examples following the tables show the cumulative expenses attributable to a
hypothetical $1,000 investment in each class for the periods specified.
Growth Investors Fund
<TABLE>
<CAPTION>
Class A Shares Class B Shares Class C Shares
-------------- -------------- --------------
<S> <C> <C> <C>
Shareholder Transaction Expenses
Maximum sales charge imposed on purchases
(as a percentage of offering price).................. 4.25%(a) None None
Sales charge imposed on dividend reinvestments......... None None None
Deferred sales charge (as a percentage of
original purchase price or redemption proceeds,
whichever is lower).................................. None 4.0% during 1.0% during
the first year, the first year,
decreasing 0% thereafter
1.0% annually
to 0% after
the fourth
year(b)
Exchange fee........................................... None None None
Annual Fund Operating Expenses
(as a percentage of average net assets)
Management fees (after waiver)(c)...................... 0.50% 0.50% 0.50%
Rule 12b-1 fees........................................ 0.30%(d) 1.00% 1.00%
Other expenses(e)...................................... 0.60% 0.60% 0.60%
---- ---- ----
Total Fund operating expenses (after waiver
and expense reimbursement)(f).......................... 1.40% 2.10% 2.10%
==== ==== ====
</TABLE>
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(a) Reduced for larger purchases. Purchases of $1,000,000 or more are not
subject to an initial sales charge but may be subject to a 1.0% deferred
sales charge if redeemed within one year of purchase. See "Purchase and
Sale of Shares--How to Buy Shares"--page 11.
(b) As described herein, Class B shares will automatically convert to Class A
shares after eight years. See "Purchase and Sale of Shares--How to Buy
Shares--Class B Shares--Deferred Sales Charge Alternative"--page 11.
(c) 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%.
(d) Reflects the amount to which the Principal Underwriter has currently
undertaken to the Trustees to limit payments under the Fund's Class A
Distribution Plan.
(e) These expenses include a transfer agency fee payable to Alliance Fund
Services, Inc., an affiliate of Alliance, based on the number of
shareholder accounts maintained for the Fund.
(f) Reflects the agreement of Alliance to limit total Fund operating expenses.
In the absence of such agreement, total Fund operating expenses would have
been 1.65%, 2.35% and 2.36%, respectively, for the Class A, Class B and
Class C shares.
Example
<TABLE>
<CAPTION>
Cumulative Expenses Paid for the Period of:
-------------------------------------------
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C>
An investor would pay the following
expenses on a $1,000 investment,
assuming (i) a 5% annual return
throughout the period and (ii)
redemption at the end of the period:
Class A................................... $56 $85 $116 $203
Class B................................... $61 $86 $113 $225(a)
Class C................................... $31 $66 $113 $243
An investor would pay the
following expenses on the
same $1,000 investment
assuming no redemption at
the end of the period:
Class A................................... $56 $85 $116 $203
Class B................................... $21 $66 $113 $225(a)
Class C................................... $21 $66 $113 $243
</TABLE>
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(a) Assumes the Class B shares converted to Class A shares after eight years.
See note (b) above.
3
<PAGE>
Conservative Investors Fund
<TABLE>
<CAPTION>
Class A Shares Class B Shares Class C Shares
-------------- -------------- --------------
<S> <C> <C> <C>
Shareholder Transaction Expenses
Maximum sales charge imposed on purchases
(as a percentage of offering price)........... 4.25%(a) None None
Sales charge imposed on dividend reinvestments.. None None None
Deferred sales charge (as a percentage of
original purchase price or redemption
proceeds, whichever is lower)................. None 4.0% during 1.0% during
the first year, decreasing the first year,
1.0% annually 0% thereafter
to 0% after
the fourth year(b)
Exchange fee.................................... None None None
Annual Fund Operating Expenses
(as a percentage of average net assets)
Management fees (after waiver)(c)............... 0.41% 0.41% 0.41%
Rule 12b-1 fees................................. 0.30%(d) 1.00% 1.00%
Other expenses(e)............................... 0.69% 0.69% 0.69%
---- ---- ----
Total Fund operating expenses (after waiver)(f)... 1.40% 2.10% 2.10%
==== ==== ====
</TABLE>
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(a) Reduced for larger purchases. Purchases of $1,000,000 or more are not
subject to an initial sales charge but may be subject to a 1.0% deferred
sales charge if redeemed within one year of purchase. See "Purchase and
Sale of Shares--How to Buy Shares"--page 11.
(b) Class B shares automatically convert to Class A shares after eight years.
See "Purchase and Sale of Shares--How to Buy Shares--Class B
Shares--Deferred Sales Charge Alternative"--page 11.
(c) 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%.
(d) Reflects the amount to which the Principal Underwriter has currently
undertaken to the Trustees to limit payments under the Fund's Class A
Distribution Plan.
(e) These expenses include a transfer agency fee payable to Alliance Fund
Services, Inc., an affiliate of Alliance, based on the number of
shareholder accounts maintained for the Fund.
(f) Reflects the agreement of Alliance to limit total Fund operating expenses.
In the absence of such agreement, total Fund operating expenses would have
been 1.73%, 2.44% and 2.45%, respectively, for the Class A, Class B and
Class C shares.
Example
<TABLE>
<CAPTION>
Cumulative Expenses Paid for the Period of:
-------------------------------------------
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C>
An investor would pay the
following expenses on a
$1,000 investment assuming
(i) a 5% annual return throughout
the period and (ii) redemption
at the end of the period:
Class A....................... $ 56 $ 85 $116 $203
Class B....................... $ 61 $ 86 $113 $225(a)
Class C....................... $ 31 $ 66 $113 $243
An investor would pay the
following expenses on the
same $1,000 investment
assuming no redemption at
the end of the period:
Class A....................... $ 56 $ 85 $116 $203
Class B....................... $ 21 $ 66 $113 $225(a)
Class C....................... $ 21 $ 66 $113 $243
</TABLE>
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(a) Assumes the Class B shares converted to Class A shares after eight years.
See note (b) above.
The purpose of the foregoing tables is to assist the investor in understanding
the various costs and expenses that an investor in a Fund will bear directly or
indirectly. Long-term shareholders of a Fund may pay aggregate sales charges
totalling more than the economic equivalent of the maximum initial sales charges
permitted by the Rules of Fair Practice of the National Association of
Securities Dealers, Inc. See "Management of the Funds--Distribution Plans." The
examples set forth above assume reinvestment of all dividends and distributions
and utilize a 5% annual rate of return, as mandated by regulations of the
Securities and Exchange Commission (the "Commission"). The examples should not
be considered a representation of future expenses; actual expenses may be
greater or less than those shown. Actual return will vary.
4
<PAGE>
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Financial Highlights
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Selected Data For a Share of Beneficial Interest Outstanding Throughout Each
Period
The information in the following tables, which pertains to the fiscal
years indicated, has been audited by Price Waterhouse LLP, the Trust's
independent accountants, whose report thereon appears in the Statement of
Additional Information. The following information should be read in conjunction
with the financial statements and related notes which are included in the
Statement of Additional Information. Further information about a Fund's
performance is contained in the Trust's annual report to shareholders which may
be obtained without charge by contacting Alliance Fund Services, Inc. at the
address or the "Literature" telephone number shown on the cover of this
Prospectus. 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.
<TABLE>
<CAPTION>
Growth Investors Fund
Class A
--------------------------------------------------------
May 4,
Year Ended Year Ended Year Ended 1992(a)
April 30, April 30, April 30, To April 30,
1996 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.............................................. .10* .25* .12* .20*
Net realized and unrealized gain on investments.................... 2.75 .38 .39 1.43
--------- --------- --------- ---------
Net increase in net asset value from operations.................... 2.85 .63 .51 1.63
--------- --------- --------- ---------
Less: Distributions
Dividends from net investment income............................... (.26) (.15) (.11) (.16)
Distributions from net realized gains.............................. (.59) (.01) (.14) (.12)
--------- --------- --------- ---------
Total dividends and distributions.................................. (.85) (.16) (.25) (.28)
--------- --------- --------- ---------
Net asset value, end of period..................................... $ 14.08 $ 12.08 $ 11.61 $ 11.35
========= ========= ========= =========
Total Return
Total investment return based on net asset value(b)................ 23.87% 5.57% 4.46% 16.32
========= ========= ========= =========
Ratios/Supplemental Data:
Net assets, end of year (000's omitted)............................ $ 30,608 $ 22,189 $16,759 $ 3,503
Ratios to average net assets of:
Expenses, net of waivers/reimbursements.......................... 1.40% 1.40% 1.40% 1.40%(c)
Expenses, before waivers/reimbursements.......................... 1.65% 1.97% 2.33% 4.27%(c)
Net investment income............................................ 2.02% 2.32% 1.67% 1.91%(c)
Portfolio turnover rate............................................ 209% 134% 96% 114%
<CAPTION>
Growth Investors Fund Growth Investors Fund
Class B Class C
------------------------------------------ ---------------------------------
Year Year Year May 4, Year Year August 2,
Ended Ended Ended 1992(a) Ended Ended 1993(d)
April 30, April 30, April 30, To April 30, April 30, April 30, To April 30,
1996 1995 1994 1993 1996 1995 1994
--------- --------- --------- ------------ --------- --------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period................. $ 12.09 $ 11.65 $ 11.41 $ 10.00 $ 12.10 $ 11.65 $ 11.88
-------- -------- -------- -------- -------- -------- --------
Income from Investment Operations:
Net investment income................................ .06* .17* .07* .07* .06* .18* .08*
Net realized and unrealized gain (loss) on
investments...................................... 2.70 .38 .37 1.45 2.70 .38 (.11)
-------- -------- -------- -------- -------- -------- --------
Net increase (decrease) in net asset value from
operations....................................... 2.76 .55 .44 1.52 2.76 .56 (.03)
-------- -------- -------- -------- -------- -------- --------
Less: Distributions
Dividends from net investment income................. (.18) (.10) (.06) (.05) (.18) (.10) (.06)
Distributions from net realized gains................ (.59) (.01) (.14) (.06) (.59) (.01) (.14)
-------- -------- -------- -------- -------- -------- --------
Total dividends and distributions.................... (.77) (.11) (.20) (.11) (.77) (.11) (.20)
-------- -------- -------- -------- -------- -------- --------
Net asset value, end of period....................... $ 14.08 $ 12.09 $ 11.65 $ 11.41 $ 14.09 $ 12.10 $ 11.65
======== ======== ======== ======== ======== ======== ========
Total Return
Total investment return based on net asset value(b).. 23.06% 4.83% 3.84% 15.23% 23.04% 4.91% (.26)%
======== ======== ======== ======== ======== ======== ========
Ratios/Supplemental Data:
Net assets, end of year (000's omitted).............. $ 59,978 $ 43,328 $ 30,871 $ 7,999 $ 5,915 $ 4,247 $ 3,280
Ratios to average net assets of:
Expenses, net of waivers/reimbursements.......... 2.10% 2.10% 2.11 2.15%(c) 2.10% 2.10% 2.10%(c)
Expenses, before waivers/reimbursements.......... 2.35% 2.67% 3.00 4.48%(c) 2.36% 2.66% 3.02%(c)
Net investment income.............................. 1.15% 1.62% .95 1.07%(c) .13% 1.62% 1.04%(c)
Portfolio turnover rate.............................. 209% 134% 96% 114% 209% 134% 96%
</TABLE>
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Please refer to the footnotes on page 6.
5
<PAGE>
<TABLE>
<CAPTION>
Conservative Investors Fund
Class A
---------------------------------------------------------
May 4,
Year Ended Year Ended Year Ended 1992(a)
April 30, April 30, April 30, To April 30,
1996 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............................................. .51* .48* .31* .39*
Net realized and unrealized (loss) gain on investments............ .80 (.02) (.26) .82
------- -------- -------- -------
Net increase in net asset value from operations................... 1.31 .46 .05 1.21
------- -------- -------- -------
Less: Distributions
Dividends from net investment income.............................. (.55) (.45) (.29) (.36)
Distributions from net realized gains............................. -0- -0- (.18) (.06)
------- -------- -------- -------
Total dividends and distributions................................. (.55) (.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)............... 12.69% 4.65% .35% 12.25%
======= ======== ======== =======
Ratios/Supplemental Data:
Net assets, end of year (000's omitted)........................... $14,161 $16,105 $15,595 $5,339
Ratios to average net assets of:
Expenses, net of waivers/reimbursements...................... 1.40% 1.40% 1.40% 1.40%(c)
Expenses, before waivers/reimbursements...................... 1.73% 1.83% 2.03% 3.45%(c)
Net investment income........................................ 4.43% 4.66% 3.43% 3.92%(c)
Portfolio turnover rate........................................... 267% 248% 133% 84%
<CAPTION>
Conservative Conservative
Investors Fund Investors Fund
Class B Class C
------------------------------------------------------------------------
May 4, August 2,
Year Year Year 1992(a) Year Year 1993(d)
Ended Ended Ended Ended Ended
To To
April 30, April 30, April 30, April 30, April 30, April 30, April 30,
1996 1995 1994 1993 1996 1995 1994
---------- --------- ---------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period.................... $ 10.51 $ 10.47 $ 10.8 $ 10.00 $ 10.52 $ 10.47 $ 11.12
------- ------- ------- ------- ------- ------- -------
Income from Investment Operations:
Net investment income................................... .43* .46* .24* .24* .41* .46* .18*
Net realized and unrealized gain
(loss) on investments................................... .82 (.02) (.26) .89 .83 (.01) (.50)
------- ------- ------- ------- ------- ------- -------
Net increase (decrease) in net
asset value from operations............................. 1.25 .44 (.02) 1.13 1.24 .45 (.32)
Less: Distributions
Dividends from net investment income.................... (.45) (.40) (.21) (.22) (.45) (.40) (.15)
Distributions from net realized gains................... -0- -0- (.18) (.03) -0- -0- (.18)
------- ------- ------- ------- ------- ------- -------
Total dividends and distributions....................... (.45) (.40) (.39) (.25) (.45) (.40) (.33)
------- ------- ------- ------- ------- ------- -------
Net asset value, end of period.......................... $ 11.31 $ 10.51 $ 10.47 $ 10.88 $ 11.31 $ 10.52 $ 10.47
======= ======= ======= ======= ======= ======= =======
Total Return
Total investment return based on net asset value(b)..... 11.95% 3.91% (.31)% 11.39% 11.84% 4.01% (2.98)%
======= ======= ======= ======= ======= ======= =======
Ratios/Supplemental Data:
Net assets, end of year (000's omitted)................. 31,979 $30,542 $ 29,697 $ 9,210 $ 5,326 $ 4,419 $ 4,375
Ratios to average net assets of:
Expenses, net of waivers/reimbursements............ 2.10% 2.10% 2.11% 2.15%(c) 2.10% 2.10% 2.10%(c)
Expenses, before waivers/reimbursements............ 2.44% 2.52% 2.73% 3.95%(c) 2.45% 2.52% 2.69%(c)
Net investment income.............................. 3.72% 3.96% 2.72% 3.06%(c) 3.71% 3.97 2.94%(c)
Portfolio turnover rate................................. 267% 248 133% 84% 267% 248% 133%
</TABLE>
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* Net of fee waived and expenses reimbursed by Alliance.
(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.
6
<PAGE>
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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 selecting specific securities 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 is therefore intended to 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 an assessment
of 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 to 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 U.S. and non-U.S. issuers.
All fixed-income securities owned by the Fund will be of investment grade at the
time of purchase. This means that they will be in one of the top four rating
categories assigned by Standard & Poor's ("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 by
S&P or Baa by Moody's) 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 appropriate under 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 U.S. 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.
7
<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.
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, in the opinion of Alliance, 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., BB or lower by S&P or Ba
or lower by Moody's) 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 at the time of purchase below
investment grade, that is, securities rated BB or lower by S&P or Ba or lower by
Moody's, or in unrated securities deemed to be of comparable quality at the time
of purchase 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 or nationalization of assets, 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 increased with respect to 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.
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 that are not
publicly traded, including securities sold pursuant to Rule 144A under the
Securities Act of 1933 ("Rule 144A Securities"). The sale of these securities is
usually
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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. 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 the 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.
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, each of 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 rated at the time of purchase at least Caa-
by Moody's or CCC- by S&P or in unrated securities judged by Alliance to be of
comparable quality at the time of purchase. 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, 1996, 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 incidence of default) than comparable higher-rated
securities because issuers are more vulnerable to economic downturns, higher
interest rates or adverse issuer-specific developments. In addition, the prices
of High-Yield Securities are generally subject to greater market risk, and
therefore react more sharply to changes in interest
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<PAGE>
rates. The value and liquidity of High-Yield Securities may be diminished by
adverse publicity or 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 appropriate under 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 conversion feature. Also, the price of
the convertible security will normally vary to some degree with changes in the
price of the underlying stock although under 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
generally vary to some degree inversely with interest rates. Convertible debt
securities that are rated below (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.
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 a Fund. Furthermore, as with any debt securities, the values
of equity-linked debt securities will generally vary inversely with changes in
interest rates. A 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, a Fund could lose its entire investment in equity-
linked debt securities.
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 to liquidate other investments in order to satisfy its dividend
requirements at times when Alliance would not otherwise deem it advisable to do
so.
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
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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 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. The portfolio
turnover rate for each Fund is included under "Financial Highlights." 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
- ----------------------------
HOW TO BUY SHARES
You can purchase shares through broker-dealers, banks or other financial
intermediaries, or directly through Alliance. 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.
Existing shareholders may make subsequent purchases by electronic funds transfer
if they have completed the Telephone Transactions section of the Subscription
Application or the Shareholder Options form obtained from Alliance Fund
Services, Inc. ("AFS"). Telephone purchase orders can be made by calling (800)
221-5672, may not exceed $500,000, must be received by the Fund by 3:00 p.m.
Eastern time on a Fund business day and will be made at the next day's net asset
value (less any applicable sales charge).
The Funds offer the following classes of shares:
Class A Shares--Initial Sales Charge Alternative
You can purchase Class A shares at net asset value plus an initial sales charge,
as follows:
Initial Sales Charge
as % of Commission to
Net Amount as % of Dealer/Agent as %
Amount Purchased Invested Offering Price of Offering Price
Less than $100,000 4.44% 4.25% 4.00%
$100,000 to less
than $250,000 3.36 3.25 3.00
$250,000 to less
than $500,000 2.30 2.25 2.00
$500,000 to less
than $1,000,000 1.78 1.75 1.50
On purchases of $1,000,000 or more, you pay no initial sales charge but may pay
a contingent deferred sales charge ("CDSC") equal to 1% of the lesser of net
asset value at the time of redemption or original cost if you redeem within one
year; Alliance may pay the dealer or agent a fee of up to 1% of the dollar
amount purchased. Certain purchases of Class A shares may qualify for reduced or
eliminated sales charges in accordance with the Funds' Combined Purchase
Privilege, Cumulative Quantity Discount, Statement of Intention, Privilege for
Certain Retirement Plans, Reinstatement Privilege and Sales at Net Asset Value
programs. Consult the Application and the Statement of Additional Information.
Class B Shares--Deferred Sales Charge Alternative
You can purchase Class B shares at net asset value without an initial sales
charge. However, you may pay a CDSC if you redeem shares within
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four years after purchase. The amount of the CDSC (expressed as a percentage of
the lesser of the current net asset value or original cost) will vary according
to the number of years from the purchase of the Class B shares until the
redemption of those shares, as follows:
CDSC
Shares Purchased
On or After
Year Since Purchase November 19, 1993
- -----------------------------------------------
First 4%
Second 3%
Third 2%
Fourth 1%
Thereafter None
Shares purchased before November 19, 1993 are subject to a different CDSC
schedule.
Class B shares are subject to higher distribution fees than Class A shares for a
period of eight years (at which time they convert to Class A shares). Because of
these higher fees, Class B shares pay correspondingly lower dividends and may
have a lower net asset value than Class A shares.
Class C Shares--Asset-Based Sales Charge Alternative
You can purchase Class C shares at net asset value without any initial sales
charge. The Fund will thus receive the full amount of your purchase, and, if you
hold your shares for one year or more, you will receive the entire net asset
value of your shares upon redemption. Class C shares incur higher distribution
fees than Class A shares and do not convert to any other class of shares of the
Fund. Because of these higher fees, Class C shares pay correspondingly lower
dividends and may have a lower net asset value than Class A shares.
Class C shares redeemed within one year of purchase will be subject to a CDSC
equal to 1.0% of the lesser of their original cost or net asset value at the
time of redemption.
Application of the CDSC
Shares obtained from dividend or distribution reinvestment are not subject to
any CDSC. The CDSC is deducted from the amount of the redemption and is paid to
AFD. The CDSC will be waived on redemptions of shares following the death or
disability of a shareholder, to meet the requirements of certain qualified
retirement plans or pursuant to a monthly, bimonthly or quarterly systematic
withdrawal plan. See the Statement of Additional Information.
How The Funds Value Their Shares
The net asset value of each Class of shares of a Fund is calculated by dividing
the value of the Fund's net assets allocable to that Class by the outstanding
shares of that Class. Shares are valued each day the New York Stock Exchange
("Exchange") is open as of the close of regular trading (currently 4:00 p.m.
Eastern time). The portfolio securities of a Fund are valued at their current
market value determined on the basis of market quotations or, if such quotations
are not readily available, by such other methods as the Trustees believe would
accurately reflect fair market value.
General
The decision as to which Class is most beneficial to you depends on the amount
and intended length of your investment. If you are making a large investment,
thus qualifying for a reduced sales charge, you might consider Class A shares.
If you are making a smaller investment, you might consider Class B shares
because 100% of your purchase is invested immediately. If you are unsure of the
length of your investment, you might consider Class C shares because there is no
initial or, after one year, contingent deferred sales charge. Consult your
financial agent. There is no size limit on purchases of Class A shares. The
maximum purchase of Class B shares is $250,000. The maximum purchase of Class C
shares is $5,000,000. A Fund may refuse any order to purchase shares.
The Funds offer a fourth class of shares, Advisor Class shares, by means of a
separate Prospectus. Advisor Class shares may be purchased and held principally
through (i) accounts established under a fee-based program, sponsored and
maintained by a registered broker-dealer or other financial intermediary and
approved by AFD, 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 other financial intermediary, or its affiliate or agent, 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. Because
Advisor Class shares are offered without any initial sales charge or CDSC and
without ongoing distribution expenses, the performance of Advisor Class shares
will exceed that of Class A, Class B or Class C shares. You may obtain more
Information about Advisor Class shares by contacting AFS at 800-221-5672 or by
contacting your financial representative.
In addition to the discount or commission paid to dealers, AFD will from time to
time pay to dealers additional cash or other incentives that are conditioned
upon the sale of a specified minimum dollar amount of shares of a Fund and/or
other Alliance Mutual Funds. Such incentives may take the form of payment for
attendance at seminars, lunches, dinners, sporting events or theater
performances, or payment for travel, lodging and entertainment incurred in
connection with travel by persons associated with a dealer and their immediate
family members to urban or resort locations within or outside the United States.
Such a dealer may elect to receive cash incentives of equivalent amount in lieu
of such payments.
HOW TO SELL SHARES
You may "redeem," i.e., sell your shares to a Fund on any day the Exchange is
open, either directly or though your financial intermediary. The price you will
receive is the net asset value (less any applicable CDSC for Class B shares)
next calculated after a Fund receives your request in proper form. Proceeds
generally will be sent to you within seven days. However, for shares recently
purchased by check, a Fund will not send proceeds until it is reasonably
satisfied that the check has been collected (which may take up to 15 days).
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Selling Shares Through Your Broker
Your broker must receive your request before 4:00 p.m. Eastern time and your
broker must transmit your request to the Fund by 5:00 p.m. Eastern time to
receive that day's net asset value (less any applicable CDSC). Your broker 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 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 intermediary, AFS, and many commercial banks.
Additional documentation is required for the sale of shares by corporations,
representatives, 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 4:00 p.m. Eastern time on a Fund
business day in order to receive that day's net asset value, and may be made
only once in any 30-day period. A shareholder who has completed the Shareholder
Options form obtained from AFS, can elect to have the proceeds of his or her
redemption sent to his or her bank via an electronic funds transfer. Proceeds of
telephone redemptions also may be sent by check to a shareholder's address of
record. 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, 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.
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. Some
services are described in the attached Application. A shareholder's manual
explaining all available services will be provided upon request. To request a
shareholder's manual, call 800-227-4618.
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.
HOW TO EXCHANGE SHARES
You may exchange your investment in any Fund for shares of the same class 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.
Shares will continue to age without regard to exchanges for purposes of
determining the CDSC, if any, upon redemption and, in the case of Class B
shares, conversion to Class A shares. After an exchange, your Class B shares
will automatically convert to Class A shares in accordance with the conversion
schedule applicable to the Class B shares of the Alliance Mutual Fund you
originally purchased for cash ("original shares"). When redemption occurs, the
CDSC applicable to the original shares is applied.
Please read carefully the prospectus of the fund into which you are exchanging
before submitting the request. Call AFS at 800-221-5672 to exchange by telephone
shares not in certificate form. 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.
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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
investment advisory contract (the "Investment Advisory Contract") to provide
investment advice and, in general, to conduct the management and investment
programs 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 Robert G. Heisterberg, who has had such
responsibility since February 1996. Mr. Heisterberg is a Senior Vice President
and Global Economic Policy Analyst of Alliance and has been associated with
Alliance since 1977.
Alliance is a leading international investment manager supervising client
accounts with assets as of June 30, 1996 totalling more than $168 billion (of
which more than $55 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 51 registered
13
<PAGE>
investment companies managed by Alliance comprising more than 100 separate
investment portfolios currently have over two million shareholders. As of June
30, 1996, Alliance was retained as an investment manager of employee benefit
fund assets for 33 of the Fortune 100 companies.
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 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.
DISTRIBUTION PLANS
Rule 12b-1 adopted by the Commission under the Investment Company Act of 1940,
as amended (the "1940 Act"), permits an investment company to directly or
indirectly pay expenses associated with the distribution of its shares in
accordance with a duly adopted and approved plan. The Trust has adopted a plan
for each class of shares pursuant to Rule 12b-1 (each a "Plan" and collectively
the "Plans"). Pursuant to the Plans, each Fund pays AFD a Rule 12b-1
distribution services fee, which may not exceed an annual rate of .50% of the
Fund's aggregate average daily net assets attributable to the Class A shares,
1.00% of the Fund's aggregate average daily net assets attributable to the Class
B shares and 1.00% of the Fund's aggregate average daily net assets attributable
to the Class C shares, to compensate AFD for distribution services. The Trustees
currently limit payments under the Class A Plan to .30% of each Fund's aggregate
average daily net assets attributable to Class A shares. The Plans provide that
a portion of the distribution services fee, in an amount not to exceed .25%,
constitutes a service fee that AFD will use for personal service and/or the
maintenance of shareholder accounts.
Each Plan provides that AFD will use the distribution services fee received from
a Fund for payments (i) to compensate broker-dealers or other persons for
providing distribution assistance, (ii) to otherwise promote the sale of shares
of that Fund and (iii) to compensate broker-dealers, depository institutions and
other financial intermediaries for providing administrative, accounting and
other services with respect to that Fund's shareholders. In this regard, some
payments under the Plans are used to compensate financial intermediaries with
trail or maintenance commissions in an amount equal to .25%, annualized, with
respect to Class A shares and Class B shares, and 1.00%, annualized, with
respect to Class C shares, of the assets maintained in a Fund by their
customers. Distribution services fees are accrued daily and paid monthly, and
are charged as expenses of the Fund when accrued. The Plans also provide that
Alliance may use its own resources to finance the distribution of the Funds'
shares.
The Funds are not obligated under the Plans to pay any distribution services fee
in excess of the amounts set forth above. The purpose of the payments to AFD
under the Plans is to compensate AFD for its distribution services with respect
to the sale of the Funds' shares. Since AFD's compensation is not directly tied
to its expenses, the amount of compensation received by it under the Plans
during any year may be more or less than its actual expenses. For this reason,
the Plans are characterized by the staff of the Commission as being of the
"compensation" variety.
In the event that a Plan is terminated or not continued, (i) no distribution
services fees (other than current amounts accrued but not yet paid) would be
owed by the Funds to AFD with respect to the relevant class and (ii) the Funds
would not be obligated to pay AFD for any amounts expended by AFD not previously
recovered by AFD from distribution services fees in respect of shares of such
class or, in the case of Class B shares, recovered through deferred sales
charges. Unreimbursed distribution expenses incurred as of April 30, 1996 with
respect to the Class B shares of the Conservative Investors Fund amounted to
approximately $220,460, or approximately 1.56% of the net assets represented by
Class B shares on that date. Unreimbursed distribution expenses incurred as of
April 30, 1996 with respect to the Class C shares of the Conservative Investors
Fund amounted to approximately $100,992, or approximately 0.32% of the net
assets represented by Class C shares on that date. Unreimbursed distribution
expenses incurred as of April 30, 1996 with respect to the Class B shares of the
Growth Investors Fund amounted to approximately $452,949, or approximately 0.76%
of the net assets represented by Class B shares on that date. Unreimbursed
distribution expenses incurred as of April 30, 1996 with respect to the Class C
shares of the Growth Investors Fund amounted to approximately $62,756, or
approximately 1.06% of the net assets represented by Class C shares on that
date.
The Plans are in compliance with rules of the National Association of Securities
Dealers, Inc. which effectively limit the annual asset-based sales charges and
service fees that a mutual fund may impose on a class of shares to .75% and
.25%, respectively, of the average annual net assets attributable to that class.
The rules also limit the aggregate of all initial, deferred and asset-based
sales charges imposed with respect to a class of shares by a mutual fund that
also charges a service fee to 6.25% of cumulative gross sales of shares of that
class, plus interest at the prime rate plus 1% per annum.
14
<PAGE>
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 above. 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.
- ------------------------------
Dividends, Distributions
- ------------------------------
And Taxes
- ------------------------------
DIVIDENDS AND DISTRIBUTIONS
If you receive an income dividend or capital gains distribution in cash from a
Fund, you may, within 120 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 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 Conduct Rules 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 is divided into
15
<PAGE>
four classes of shares, three of which, designated Class A shares, Class B
shares and Class C shares, are offered by this Prospectus and one of which,
designated Adviser Class shares, is offered by another prospectus. The Trustees
may, subject to any required approvals by the Commission, 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.
In addition, upon approval by the Commission, fees and expenses other than those
described above may be allocated to any class of a series' shares.
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 a dollar amount (determined by
reference to the total number of shareholder accounts for all Alliance funds in
the Fund's broad investment category) charged to the Fund for each shareholder
account. The transfer agency fee with respect to the Class B and Class C shares
will be higher than the transfer agency fee with respect to the Class A shares,
reflecting the differential costs associated with the Class B and Class C
contingent deferred sales charge.
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 Class A, Class B and Class C shares
of each Fund. 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 Class A, Class B and Class C shares of each Fund.
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. Each Fund will include performance data for each of its Class A, Class B
and Class C shares in any advertisement or information including performance
data of the Funds. These 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.
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.
16
<PAGE>
Appendix A
RATINGS OF CORPORATE BONDS
Descriptions of the bond ratings of Standard & Poor's 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>
- --------------------------------------------------------------------------------
ALLIANCE SUBSCRIPTION APPLICATION
- --------------------------------------------------------------------------------
Alliance Asset Allocation Funds
Conservative Investors Fund Growth Investors Fund
================================================================================
INFORMATION AND INSTRUCTIONS
================================================================================
TO OPEN YOUR NEW ALLIANCE ACCOUNT
Please complete the application and mail it to:
Alliance Fund Services, Inc., P.O. Box 1520, Secaucus,
New Jersey 07096-1520
SIGNATURES - PLEASE BE SURE TO SIGN THE APPLICATION (SECTION 7)
If shares are registered in the name of:
o an individual, the individual should sign.
o joint tenants, both should sign.
o a custodian for a minor, the custodian should sign.
o a corporation or other organization, an authorized officer should sign
(please indicate corporate office or title).
o a trustee or other fiduciary, the fiduciary or fiduciaries should sign
(please indicate capacity).
REGISTRATION
To ensure proper tax reporting to the IRS:
o Individuals, Joint Tenants and Gift/Transfer to a Minor:
--Indicate your name exactly as it appears on your social security card.
o Trust/Other:
--Indicate the name of the entity exactly as it appeared on the notice
you received from the IRS when your Employer Identification number was
assigned.
PLEASE NOTE:
o Certain legal documents will be required from corporations or other
organizations, executors and trustees, or if a redemption is requested by
anyone other than the shareholder of record. If you have any questions
concerning a redemption, contact the Fund at the number below.
o In the case of redemptions or repurchases of shares 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.
IF WE CAN ASSIST YOU IN ANY WAY, PLEASE DO NOT HESITATE TO CALL US AT:
1-(800)221-5672.
<PAGE>
- --------------------------------------------------------------------------------
SUBSCRIPTION APPLICATION
- --------------------------------------------------------------------------------
ALLIANCE ASSET ALLOCATION FUNDS:
Alliance Conservative Investors Fund
Alliance Growth Investors Fund
(see instructions at the front of the application)
================================================================================
1. YOUR ACCOUNT REGISTRATION (Please Print)
================================================================================
[_] INDIVIDUAL OR JOINT ACCOUNT
---------------------------------------------------------------------------
Owner's Name (First Name) (MI) (Last Name)
- -
-----------------------------
Social Security Number (Required to open account)
---------------------------------------------------------------------------
Joint Owner's Name* (First Name) (MI) (Last Name)
*Joint Tenants with right of survivorship unless otherwise indicated
[_] GIFT/TRANSFER TO A MINOR
---------------------------------------------------------------------------
Custodian - One Name Only (First Name) (MI) (Last Name)
---------------------------------------------------------------------------
Minor's (First Name) (MI) (Last Name)
- -
------------------------
Minor's Social Security Under the State of ______ (Minor's Residence)
Number (Required to open Uniform Gifts/
account) Transfer to Minor's
Act
[_] TRUST ACCOUNT
-------------------------------------------------------------------------
Name of Trustee
-------------------------------------------------------------------------
Name of Trust
-------------------------------------------------------------------------
Name of Trust (cont'd)
---------------------------------- ------------------------------------
Trust Dated Tax ID or Social Security Number
(Required to open account)
[_] OTHER
-------------------------------------------------------------------------
Name of Corporation, Partnership or other Entity
-----------------------
Tax ID Number
================================================================================
2. ADDRESS
================================================================================
-------------------------------------------------------------------------
Street
-------------------------------------------------------------------------
City State Zip Code
-------------------------------------------------------------------------
If Non-U.S., Specify Country
- - - -
---------------------- ----------------------
Daytime Phone Evening Phone
I am a: [_] U.S. Citizen [_] Non-Resident Alien [_] Resident Alien [_] Other
[ For Alliance Use Only ]
<PAGE>
- --------------------------------------------------------------------------------
3. INITIAL INVESTMENT
- --------------------------------------------------------------------------------
Minimum: $250; Maximum: Class B only - $250,000; Class C only - $5,000,000. Make
all checks payable to The Alliance Conservative Investors Fund or Alliance
Growth Investors Fund in which you are investing.
I hereby subscribe for shares of the following Alliance Portfolio(s):
<TABLE>
<CAPTION>
Class B
Class A (Contingent
(Initial Deferred Class C
Sales Dollar Sales Dollar (Asset-based Dollar
Charge) Amount Charge) Amount Sales Charge) Amount
-------- ------ ----------- ------ ------------- ------
<S> <C> <C> <C> <C> <C> <C>
[_] Conservative
Investors Fund [_](42) ------ [_](53) ------ [_](342) ------
[_] Growth
Investors Fund [_](47) ------ [_](59) ------ [_](347) ------
</TABLE>
-------------------------------
DEALER USE ONLY
Wire Confirm No.:
-------------------------------
to be purchased with the enclosed check or draft for $___________
+ No checkwriting available on these funds.
- --------------------------------------------------------------------------------
4. REDUCED CHARGES (Class A Only)
- --------------------------------------------------------------------------------
If you, your spouse or minor children own shares in other Alliance funds, you
may be eligible for a reduced sales charge. Please list below any existing
accounts to be considered and complete the Right of Accumulation section or the
Statement of Intent section.
- ---------------------- -------------- ------------------------ --------------
Fund Account Number Fund Account Number
A. Right of Accumulation
[_] Please link the accounts listed above for Right of Accumulation privileges,
so that this and future purchases will receive any discount for which they
are eligible.
B. Statement of Intent
[_] I want to reduce my sales charge by agreeing to invest the following amount
over a 13-month period.
[_] $100,000 [_] $250,000 [_] $500,000 [_] $1,000,000 [_] $3,000,000
[_] $5,000,000
If the full amount indicated is not purchased within 13 months, I understand an
additional sales charge must be paid from my account.
- ---------------------- -------------- ------------------------ --------------
Name on Account Account Number Name on Account Account Number
- --------------------------------------------------------------------------------
5. DISTRIBUTION OPTIONS
- --------------------------------------------------------------------------------
If no box is checked, all distributions will be reinvested in additional shares
of the Fund.
Income Dividends: (elect one)
[_] Reinvest dividends [_] Pay dividends in cash [_] Use Dividend
Direction Plan
Capital Gains Distribution: (elect one)
[_] Reinvest capital gains [_] Pay capital gains in cash [_] Use Dividend
Direction Plan
If you elect to receive your income dividends or capital gains distributions in
cash, please enclose a PREPRINTED VOIDED CHECK from the bank account you wish to
have your dividends deposited into.**
If you wish to utilize the Dividend Direction Plan, please designate the
Alliance account you wish to have your dividends reinvested in:
- ------------------------------------- ----------------------------------------
Fund Name Existing Account No.
Special Distribution Instructions:
[_] Please pay my distributions via check and send to the address indicated in
Section 2.
[_] Please mail my distributions to the person and/or address designated below:
- ------------------------------------- ----------------------------------------
Name Address
- ------------------------------------- ------------------------- -------------
City State Zip
- --------------------------------------------------------------------------------
6. SHAREHOLDER OPTIONS
- --------------------------------------------------------------------------------
A. AUTOMATIC INVESTMENT PROGRAM (AIP) **
I hereby authorize Alliance Fund Services, Inc. to draw on my bank account,
on or about the ___ day of each month for a monthly investment in my Fund
account in the amount of $_____ (minimum $25 per month). Please attach a
PREPRINTED VOIDED CHECK from the bank account you with to use. NOTE: If your
bank is not a member of the NACHA, your Alliance account will be credited on
or about the 20th of each month.
The Fund requires signatures of bank account owners exactly as they appear
on bank records.
-------------------------- -------- -------------------------- -------
Individual Account Date Joint Account Date
** Your bank must be a member of the National Automated Clearing House
Association (NACHA).
<PAGE>
B. TELEPHONE TRANSACTIONS
You can call our toll-free number 1-800-221-5672 and instruct Alliance Fund
Services, Inc. in a recorded conversation to purchase, redeem or exchange
shares for your account. Purchase and redemption requests will be processed
via electronic funds transfer (EFT) to and from your bank account.
Instructions: . Review the information in the Prospectus about telephone
transaction services.
. Check the box next to the telephone transaction service(s)
you desire.
. If you select the telephone purchase or redemption privilege,
you must write "VOID" across the face of a check from the
bank account you wish to use and attach it to this
application.
Purchases and Redemptions via EFT**
[_] I hereby authorize Alliance Fund Services, Inc. to effect the purchase
and/or redemption of Fund shares for my account according to my telephone
instructions or telephone instructions from my Broker/Agent, and to
withdraw money or credit money for such shares via EFT from the bank
account I have selected.
The fund requires signatures of bank account owners exactly as they appear on
bank records.
--------------------------- --------- ---------------------- --------
Individual Account Owner Date Joint Account Owner Date
Telephone Exchanges and Redemptions by Check
Unless I have checked one or both boxes below, these privileges will
automatically apply, and by signing this application, I hereby authorize
Alliance Fund Services, Inc. to act on my telephone instructions, or on
telephone instructions from any person representing himself to be an
authorized employee of an investment dealer or agent requesting a redemption
or exchange on my behalf. (NOTE: Telephone exchanges may only be processed
between accounts that have identical registrations.) Telephone redemption
checks will only be mailed to the name and address of record; and the address
must have no change within the last 30 days. The maximum telephone redemption
amount is $25,000. This service can be enacted once every 30 days.
[_] I do not elect the telephone exchange service.
---
[_] I do not elect the telephone redemption by check service.
---
C. SYSTEMATIC WITHDRAWAL PLAN (SWP)**
In order to establish a SWP, an investor must own or purchase shares of the
Fund having a current net asset value of at least:
. $10,000 for monthly payments;
. $5,000 for bi-monthly payments;
. $4,000 for quarterly or less frequent payments
[_] I authorize this service to begin in _________, 19__, for the amount of
$_________ ($50.00 minimum)
Frequency: (Please select one)
[_] Monthly
[_] Bi-Monthly
[_] Quarterly
[_] Annually
[_] In the months circled: J F M A M J J A S O N D
Please send payments to: (please select one)
[_] My checking account. Select the date of the month on or about which you
wish the EFT payments to be made: _______. Please enclose a preprinted
voided check to ensure accuracy.
[_] My address of record designated in Section 2.
[_] The payee and address specified below:
-------------------------------------- -------------------------------------
Name of Payee Address
-------------------------------------- ---------------------- ------------
City State Zip
D. AUTO EXCHANGE
[_] I authorize Alliance Fund Services, Inc. to initiate a monthly exchange
for $________ ($25.00 minimum) on the ______ day of the month, into the
Alliance Fund noted below:
Fund Name:________________________________
[_] Existing account number:______________ [_] New account
Shares exchanged will be redeemed at net asset value computed on the date
of the month selected. (If the date selected is not a fund business day
the transaction will be processed on the prior fund business day.)
Certificates must remain unissued.
- --------------------------------------------------------------------------------
7. SHAREHOLDER AUTHORIZATION This section MUST be completed
- --------------------------------------------------------------------------------
I certify under penalty of perjury that the number shown in Section 1 of this
form is my correct tax identification number or social security number and that
I have not been notified that this account is subject to backup withholding.
By selecting any of the above telephone privileges, I agree that neither the
Fund nor its Investment Adviser, Principal Underwriter, Transfer Agent or other
Fund Agent will be liable for any loss, injury, damage or expense as a result of
acting upon telephone instructions purporting to be on my behalf, that the Fund
reasonably believes to be genuine, and that neither the Fund nor any such party
will be responsible for the authenticity of such telephone instructions. I
understand that any or all of these privileges may be discontinued by me or the
Fund at any time. I understand and agree that the Fund reserves the right to
refuse any telephone instructions and that my investment dealer or agent
reserves the right to refuse to issue any telephone instructions I may request.
For non-residents only: Under penalties of perjury, I certify that to the best
of my knowledge and belief, I qualify as a foreign person as indicated in
Section2.
I am of legal age and capacity and have received and read the Prospectus and
agree to its terms.
- ------------------------------------ ----------------
Signature Date
- ------------------------------------ ---------------- ---------------------
Signature Date Acceptance Date:
- --------------------------------------------------------------------------------
DEALER/AGENT AUTHORIZATION For selected Dealers or Agents ONLY.
- --------------------------------------------------------------------------------
We hereby authorize Alliance Fund Services, Inc. to act as our agent in
connection with transactions under this authorization form; and we guarantee the
signature(s) set forth in Section 7, as well as the legal capacity of the
shareholder.
Dealer/Agent Firm_________________________ Authorized Signature_______________
Representative First Name ________________ MI_____ Last Name__________________
Representative Number__________________________________________________________
Branch Office Address__________________________________________________________
City______________________________________ State______________ Zip Code ______
Branch Number_____________________________ Branch Phone (___)_________________
** Your bank must be a member of the National Automated Clearing House
Association (NACHA).
50620GEN-AAApp
<PAGE>
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
September 3, 1996
_________________________________________________________________
This Statement of Additional Information is not a prospectus and
should be read in conjunction with the Funds' current Prospectus.
A copy of the Funds' Prospectus may be obtained by contacting
Alliance Fund Services, Inc. at the address or telephone numbers
shown above.
_________________________________________________________________
TABLE OF CONTENTS
INVESTMENT POLICIES AND RESTRICTIONS...................... 3
ADDITIONAL INVESTMENT TECHNIQUES OF THE FUNDS............. 12
INVESTMENT RESTRICTIONS................................... 35
MANAGEMENT OF THE FUNDS................................... 39
PORTFOLIO TRANSACTIONS.................................... 45
EXPENSES OF THE FUNDS..................................... 47
PURCHASE OF SHARES........................................ 53
REDEMPTION AND REPURCHASE OF SHARES....................... 70
SHAREHOLDER SERVICES...................................... 73
NET ASSET VALUE........................................... 80
DIVIDENDS, DISTRIBUTIONS AND TAXES........................ 81
GENERAL INFORMATION....................................... 83
FINANCIAL STATEMENTS......................................
REPORT OF INDEPENDENT ACCOUNTANTS.........................
<PAGE>
APPENDIX.................................................. A-1
2
<PAGE>
INVESTMENT POLICIES AND RESTRICTIONS
The following investment policies and restrictions
supplement and should be read in conjunction with the information
set forth in the Prospectus of Alliance Conservative Investors
Fund (the "Conservative Investors Fund") and Alliance Growth
Investors Fund (the "Growth Investors Fund"), each a series of
The Alliance Portfolios (the "Trust"), under the heading
"Investment Objective and Policies." In addition to the
investment techniques described in this section for each of the
Funds, the Funds also may engage in the investment techniques
described below under the sub-heading "Additional Investment
Techniques of the Funds."
Investment Objectives and Policies of the Conservative
Investors Fund and Growth Investors Fund
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 is
therefore intended to provide for upside potential without
excessive volatility.
Alliance Capital Management L.P. (the "Adviser") has
established an asset allocation committee (the "Committee"), all
the members of which are employees of the Adviser, which is
responsible for setting and continually reviewing the asset mix
3
<PAGE>
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 particularly emphasize risk assessment of each asset class
viewed over the shorter term, while decisions for the Growth
Investors Fund are principally based on an assessment of 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 Fund is to achieve a
high total return without, in the view of the Adviser, undue risk
to principal. The 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 U.S. and non-U.S. issuers.
All fixed-income securities owned by the Fund will be of
investment grade at the time of purchase. This means that they
will be in one of the top four rating categories assigned by
Standard & Poor's ("S&P") or Moody's Investors Service, Inc.
("Moody's") or will be unrated securities of comparable quality
as determined by the Adviser. Securities in the fourth such
rating category (rated BBB by S&P or Baa by Moody's) 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 Fund falls
below investment grade (or, in the case of an unrated security,
the Adviser determines that it is no loner 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 the
Adviser, such investment is appropriate under the circumstances.
4
<PAGE>
For a description of the ratings referred to above, see Appendix
A to this Statement of Additional Information.
Equity securities invested in by the 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 U.S. economy over time.
The 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.
The 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 Fund is to achieve the
highest total return consistent with the Adviser'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, in the
opinion of the Adviser, 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., BB or lower by S&P or Ba or
lower by Moody's) or that are unrated but determined by the
Adviser 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
5
<PAGE>
and market risk. The Fund will not invest more than 25% of its
total assets in securities rated at the time of purchase below
investment grade, that is, securities rated BB or lower by S&P or
Ba or lower by Moody's, or in unrated securities deemed to be of
comparable quality at the time of purchase by the Adviser. 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 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 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.
High-Yield Securities. The Fund may invest in high-
yield, high-risk, fixed-income and convertible securities rated
at the time of purchase BB or lower by S&P or Ba or lower by
Moody's or, if unrated, judged by the Adviser to be of comparable
quality at the time of purchase ("High-Yield Securities"). The
Fund will generally invest in securities with a minimum rating at
the time of purchase of CCC- by S&P or Caa- by Moody's or in
unrated securities judged by the Adviser to be of comparable
quality at the time or purchase. However, from time to time, the
Fund may invest in securities rated in the lowest grades by
Moody's (C) or S&P (D) or in unrated securities judged by the
Adviser to be of comparable quality, if the Fund's management
determines that there are prospects for an upgrade or a favorable
conversion into equity securities (in the case of convertible
securities). Securities rated Ba or BB or lower (and comparable
unrated securities) are commonly referred to as "junk bonds."
Securities rated D by S&P are in default. During the fiscal year
ended April 30, 1996, the Fund did not invest in any High-Yield
Securities.
As with other fixed-income securities, High-Yield
Securities are subject to credit risk and market risk and their
yields may fluctuate. Market risk relates to changes in a
security's value as a result of changes in interest rates.
Credit risk relates to the ability of the issuer to make payments
of principal and interest. High-Yield Securities are subject to
greater credit risk (and potentially greater incidence of
6
<PAGE>
default) than comparable higher-rated securities because issuers
are more vulnerable to economic downturns, higher interest rates
or adverse issuer-specific developments. In addition, the prices
of High-Yield Securities are generally subject to greater market
risk and therefore react more sharply to changes in interest
rates. The value and liquidity of High-Yield Securities may be
diminished by adverse publicity or 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 Fund to sell High-Yield
Securities at their fair value either to meet redemption requests
or to respond to changes in the financial markets may be limited.
Thinly traded High-Yield Securities may be more difficult to
value accurately for the purpose of determining the Fund's net
asset value. Also, because the market for certain High-Yield
Securities is relatively new, that market may be particularly
sensitive to an economic downturn or a general increase in
interest rates. In addition, under such circumstances the values
of such securities may be more volatile.
Some High-Yield Securities in which the Fund may invest
may be subject to redemption or call provisions that may limit
increases in market value that might otherwise result from lower
interest rates while increasing the risk that the Fund may be
required to reinvest redemption or call proceeds during a period
of relatively low interest rates.
The credit ratings issued by Moody's and S&P, a
description of which is included as Appendix A to this Statement
of Additional Information, are subject to various limitations.
For example, while such ratings evaluate credit risk, they
ordinarily do not evaluate the market risk of High-Yield
Securities. In certain circumstances, the ratings may not
reflect in a timely fashion adverse developments affecting an
issuer. For these reasons, the Adviser conducts its own
independent credit analysis of High-Yield Securities. When the
Fund invests in securities in the lower rating categories, the
achievement of the Fund's goals is more dependent on the
Adviser's ability than would be the case if the Fund were
investing in higher rated securities.
In the event that the credit rating of a High-Yield
Security held by the Fund falls below its rating at the time of
purchase (or, in the case of unrated securities, the Adviser
determines that the quality of such security has deteriorated
since purchased by the Fund), the Fund will not be obligated to
dispose of such security and may continue to hold the obligation
if, in the opinion of the Adviser, such investment is appropriate
under the circumstances.
7
<PAGE>
Securities rated Baa by Moody's or BBB by S&P or judged
by the Adviser to be of comparable quality share some of the
speculative characteristics of High-Yield Securities described
above.
Additional Investment Policies and Techniques Applicable
to the Conservative Investors and Growth Investors Funds
Mortgage-Backed Securities. Each Fund may invest in
mortgage-backed securities, including collateralized mortgage
obligations ("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. During periods of declining
interest rates, such prepayments can be expected to accelerate
and the Fund would be required to reinvest the proceeds at the
lower interest rates then available. In addition, prepayments of
mortgages which underlie securities purchased at a premium could
result in capital losses.
Stripped Mortgage-Related Securities. The Fund may
invest in stripped mortgage-related securities ("SMRS"). SMRS
are derivative multi-class mortgage-related securities. SMRS may
be issued by the U.S. Government, its agencies or
instrumentalities, or by private originators of, or investors in,
mortgage loans, including savings and loan associations, mortgage
banks, commercial banks, investment banks and special purpose
subsidiaries of the foregoing.
SMRS are usually structured with two classes that
receive different proportions of the interest and principal
distributions on a pool of GNMA, FNMA or FHLMC certificates,
whole loans or private pass-through mortgage-related securities
("Mortgage Assets"). A common type of SMRS will have one class
receiving some of the interest and most of the principal from the
Mortgage Assets, while the other class will receive most of the
interest and the remainder of the principal. In the most extreme
case, one class will receive all of the interest (the interest-
only or "IO" class), while the other class will receive all of
the principal (the principal-only or "PO" class). The yield to
maturity on an IO class is extremely sensitive to the rate of
principal payments (including prepayments) on the related
8
<PAGE>
underlying Mortgage Assets, and a rapid rate of principal
prepayments may have a material adverse effect on the yield to
maturity of the IO class. The rate of principal prepayment will
change as the general level of interest rates fluctuates. If the
underlying Mortgage Assets experience greater than anticipated
principal prepayments, the Fund may fail to fully recoup its
initial investment in these securities. Due to their structure
and underlying cash flows, SMRS may be more volatile than
mortgage-related securities that are not stripped.
Although SMRS 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.
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 the interest rate during a specified
period or over the life of the security.
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 conversion feature. Also, the price
of the convertible security will normally vary to some degree
with changes in the price of the underlying stocks although under
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 generally vary to some degree inversely with interest rates.
Convertible debt securities that are rated below BBB by S&P or
Baa by Moody's or comparable unrated securities as determined by
the Adviser may share some or all of the risks of High-Yield
Securities. For a description of these risks, see "High-Yield
Securities" above.
Equity-Linked Debt Securities. Equity-linked debt
securities are securities with respect to which the amount of
9
<PAGE>
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 a Fund. Furthermore, as with any debt
securities, the values of equity-linked debt securities will
generally vary inversely with changes in interest rates. A
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, a Fund could lose its
entire investment in equity-linked debt securities.
Zero-Coupon and Payment-in-Kind Bonds. Each Fund may at
times invest in so-called "zero-coupon" bonds and "payment-in-
kind" bonds. Zero-coupon bonds are issued at a significant
discount from their principal amount in lieu of paying interest
periodically. Payment-in-kind bonds allow the issuer, at its
option, to make current interest payments on the bonds either in
cash or in additional bonds. Because zero-coupon bonds do not
pay current interest, their value is generally subject to greater
fluctuation in response to changes in market interest rates than
bonds which pay interest currently. Both zero-coupon and
payment-in-kind bonds allow an issuer to avoid the need to
generate cash to meet current interest payments. Accordingly,
such bonds may involve greater credit risks than bonds paying
interest currently. Even though such bonds do not pay current
interest in cash, the Fund is nonetheless required to accrue
interest income on such investments and to distribute such
amounts at least annually to shareholders. Thus, the Fund could
be required to liquidate other investments in order to satisfy
its dividend requirements at times when the Adviser would not
otherwise deem it advisable to do so.
Foreign Currency Exchange Transactions. Each Fund may
engage in foreign currency exchange transactions to protect
against uncertainty in the level of future currency exchange
rates. The Adviser expects to engage in foreign currency
exchange transactions in connection with the purchase and sale of
portfolio securities ("transaction hedging") and to protect
against changes in the value of specific portfolio positions
("position hedging").
The Funds may engage in transaction hedging to protect
against a change in foreign currency exchange rates between the
date on which the Fund contracted to purchase or sell a security
and the settlement date, or to "lock in" the U.S. dollar
equivalent of a dividend or interest payment in a foreign
10
<PAGE>
currency. The Funds may purchase or sell a foreign currency on a
spot (or cash) basis at the prevailing spot rate in connection
with the settlement of transactions in portfolio securities
denominated in that foreign currency.
If conditions warrant, the Funds may also enter into
contracts to purchase or sell foreign currencies at a future date
("forward contracts"), and may purchase and sell foreign currency
futures contracts, as a hedge against changes in foreign currency
exchange rates between the trade and settlement dates on
particular transactions and not for speculation. A foreign
currency forward contract is a negotiated agreement to exchange
currency at a future time at a rate or rates that may be higher
or lower than the spot rate. Foreign currency futures contracts
are standardized exchange-traded contracts and have margin
requirements.
For transaction hedging purposes, the Funds may also
purchase and sell call and put options on foreign currency
futures contracts and on foreign currencies.
Each Fund may engage in position hedging to protect
against a decline in value relative to the U.S. dollar of the
currencies in which its portfolio securities are denominated or
quoted (or an increase in value of a currency in which securities
the Fund intends to buy are denominated, when the Fund holds cash
or short-term investments). For position hedging purposes, each
Fund may purchase or sell foreign currency futures contracts,
foreign currency forward contracts, and options on foreign
currency futures contracts and on foreign currencies. In
connection with position hedging, the Funds may also purchase or
sell foreign currency on a spot basis.
A Fund's currency hedging transactions may call for the
delivery of one foreign currency in exchange for another foreign
currency and may at times not involve currencies in which its
portfolio securities are then denominated. The Adviser will
engage in such "cross hedging"activities when it believes that
such transactions provide significant hedging opportunities for a
Fund.
Portfolio Management
The Adviser manages each Fund's portfolio by buying and
selling securities to help attain its investment objective. The
portfolio turnover rate for each Fund is included under
"Financial Highlights" in the Funds' Prospectus. A high
portfolio turnover rate will involve greater costs to a Fund
(including brokerage commissions and transaction costs) and may
also result in the realization of taxable capital gains,
including short-term capital gains taxable at ordinary income
11
<PAGE>
rates. See "Dividends, Distributions and Taxes" and "Portfolio
Transactions" below.
ADDITIONAL INVESTMENT TECHNIQUES OF THE FUNDS
Repurchase Agreements
The repurchase agreements referred to in the Funds'
Prospectus are agreements by which a Fund purchases a security
and obtains a simultaneous commitment from the seller to
repurchase the security at an agreed upon price and date. The
resale price is in excess of the purchase price and reflects an
agreed upon market rate unrelated to the coupon rate on the
purchased security. The purchased security serves as collateral
for the obligation of the seller to repurchase the security and
the value of the purchased security is initially greater than or
equal to the amount of the repurchase obligation and the seller
is required to furnish additional collateral on a daily basis in
order to maintain with the purchaser securities with a value
greater than or equal to the amount of the repurchase obligation.
Such transactions afford the Funds the opportunity to earn a
return on temporarily available cash. While at times the
underlying security may be a bill, certificate of indebtedness,
note, or bond issued by an agency, authority or instrumentality
of the U.S. Government, the obligation of the seller is not
guaranteed by the U.S. Government and there is a risk that the
seller may fail to repurchase the underlying security, whether
because of the seller's bankruptcy or otherwise. In such event,
the Funds would attempt to exercise their rights with respect to
the underlying security, including possible disposition in the
market. However, the Funds may be subject to various delays and
risks of loss, including (a) possible declines in the value of
the underlying security during the period while the Funds seek to
enforce their rights thereto, (b) possible reduced levels of
income and lack of access to income during this period and
(c) inability to enforce rights and the expenses involved in the
attempted enforcement.
Non-Publicly Traded Securities
As described in the Prospectus, each of the Funds may
invest in securities that are not publicly traded, including
securities sold pursuant to Rule 144A under the Securities Act of
1933 ("Rule 144A Securities"). The sale of these securities is
usually restricted under Federal securities laws, and market
quotations may not be readily available. As a result, a Fund may
not be able to sell these securities (other than Rule 144A
Securities) unless they are registered under applicable Federal
and state securities laws, or may have to sell such securities at
less than fair market value. Investment in these securities is
restricted to 5% of a Fund's total assets (excluding, to the
12
<PAGE>
extent permitted by applicable law, Rule 144A Securities) and is
also subject to the restriction against investing more than 15%
of total assets in "illiquid" securities. To the extent
permitted by applicable law, Rule 144A Securities will not be
treated as "illiquid" for purposes of the foregoing restriction
so long as such securities meet the liquidity guidelines
established by the Trust's Board of Trustees. Pursuant to these
guidelines, the Adviser will monitor the liquidity of a Fund's
investment in Rule 144A Securities.
Foreign Securities
Each Fund may invest without limit in securities of
foreign issuers which are not publicly traded in the United
States, although each Fund generally will not invest more than
15% of its total assets (30% in the case of the Growth Investors
Fund) in such securities. Investment in foreign issuers or
securities principally traded outside the United States may
involve certain special risks due to foreign economic, political,
diplomatic and legal developments, including favorable or
unfavorable changes in currency exchange rates, exchange control
regulations (including currency blockage), expropriation or
nationalization of assets, confiscatory taxation, imposition of
withholding taxes on dividend or interest payments, and possible
difficulty in obtaining and enforcing judgments against foreign
entities. Furthermore, issuers of foreign securities are subject
to different, often less comprehensive, accounting, reporting and
disclosure requirements than domestic issuers. The securities of
some foreign companies and foreign securities markets are less
liquid and at times more volatile than securities of comparable
U.S. companies and U.S. securities markets, and foreign
securities markets may be subject to less regulation than U.S.
securities markets. The laws of some foreign countries may limit
the Funds' abilities to invest in securities of certain issuers
located in these countries. Foreign brokerage commissions and
other fees are also generally higher than in the United States.
There are also special tax considerations which apply to
securities of foreign issuers and securities principally traded
overseas. Foreign settlement procedures and trade regulations
may involve certain risks (such as delay in payment or delivery
of securities or in the recovery of the Fund's assets held
abroad) and expenses not present in the settlement of domestic
investments. The Fund may invest a portion of its assets in
developing countries or in countries with new or developing
capital markets. The risks noted above are generally increased
with respect to 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.
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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 Fund may buy or sell foreign currencies,
options on foreign currencies, foreign currency futures contracts
(and related options) and deal in forward foreign currency
exchange contracts in connection with the purchase and sale of
foreign investments. See "Additional Investment Policies and
Techniques Applicable to the Conservative Investors and Growth
Investors Funds - Foreign Currency Exchange Transactions" above.
Descriptions of Certain Money Market Securities
in Which the Funds May Invest
Certificates of Deposit, Bankers' Acceptances and Bank
Time Deposits. Certificates of deposit are receipts issued by a
bank in exchange for the deposit of funds. The issuer agrees to
pay the amount deposited plus interest to the bearer of the
receipt on the date specified on the certificate. The
certificate usually can be traded in the secondary market prior
to maturity.
Bankers' acceptances typically arise from short-term
credit arrangements designed to enable businesses to obtain funds
to finance commercial transactions. Generally, an acceptance is
a time draft drawn on a bank by an exporter or an importer to
obtain a stated amount of funds to pay for specific merchandise.
The draft is then "accepted" by another bank that, in effect,
unconditionally guarantees to pay the face value of the
instrument on its maturity date. The acceptance may then be held
by the accepting bank as an earning asset or it may be sold in
the secondary market at the going rate of discount for a specific
maturity. Although maturities for acceptances can be as long as
270 days, most maturities are six months or less.
Bank time deposits are funds kept on deposit with a bank
for a stated period of time in an interest bearing account. At
present, bank time deposits maturing in more than seven days are
not considered by the Adviser to be readily marketable.
Commercial Paper. Commercial paper consists of short-
term (usually from 1 to 270 days) unsecured promissory notes
issued by entities in order to finance their current operations.
Variable Notes. Variable amount master demand notes and
variable amount floating rate notes are obligations that permit
the investment of fluctuating amounts by a Fund at varying rates
of interest pursuant to direct arrangements between a Fund, as
lender, and the borrower. Master demand notes permit daily
fluctuations in the interest rate while the interest rate under
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variable amount floating rate notes fluctuates on a weekly basis.
These notes permit daily changes in the amounts borrowed. The
Funds have the right to increase the amount under these notes at
any time up to the full amount provided by the note agreement, or
to decrease the amount, and the borrower may repay up to the full
amount of the note without penalty. Because these types of notes
are direct lending arrangements between the lender and the
borrower, it is not generally contemplated that such instruments
will be traded and there is no secondary market for these notes.
Master demand notes are redeemable (and, thus, immediately
repayable by the borrower) at face value, plus accrued interest,
at any time. Variable amount floating rate notes are subject to
next-day redemption 14 days after the initial investment therein.
With both types of notes, therefore, the Funds' right to redeem
depends on the ability of the borrower to pay principal and
interest on demand. In connection with both types of note
arrangements, the Funds consider earning power, cash flow and
other liquidity ratios of the issuer. These notes, as such, are
not typically rated by credit rating agencies. Unless they are
so rated, a Fund may invest in them only if at the time of an
investment the issuer has an outstanding issue of unsecured debt
rated Aa or better by Moody's or AA or better by S&P.
Asset-Backed Securities
Each Fund may invest in asset-backed securities
(unrelated to first mortgage loans), which represent fractional
interests in pools of retail installment loans, leases or
revolving credit receivables, both secured (such as Certificates
for Automobile Receivables or "CARS") and unsecured (such as
Credit Card Receivable Securities or "CARDS"). These assets are
generally held by a trust and payments of principal and interest
or interest only are passed through monthly or quarterly to
certificate holders and may be guaranteed up to certain amounts
by letters of credit issued by a financial institution affiliated
or unaffiliated with the trustee or originator of the trust.
Like mortgages underlying mortgage-backed securities,
underlying automobile sales contracts or credit card receivables
are subject to prepayment, which may reduce the overall return to
certificate holders. Certificate holders may also experience
delays in payment if the full amounts due on underlying sales
contracts or receivables are not realized by the trust holding
the obligations because of unanticipated legal or administrative
costs of enforcing the contracts or because of depreciation or
damage to the collateral (usually automobiles) securing certain
contracts, or other factors. If consistent with their investment
objectives and policies, each of the Funds may invest in other
asset-backed securities that may be developed in the future.
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The staff of the Securities and Exchange Commission (the
"SEC") is of the view that certain asset-backed securities may
constitute investment companies under the Investment Company Act
of 1940 (the "1940 Act"). The Funds intend to conduct their
operations in a manner consistent with this view; therefore, the
Funds generally may not invest more than 10% of their total
assets in such securities without obtaining appropriate
regulatory relief.
Lending of Securities
Each Fund may seek to increase its income by lending
portfolio securities. Under present regulatory policies,
including those of the Board of Governors of the Federal Reserve
System and the SEC, such loans may be made only to member firms
of the New York Stock Exchange (the"Exchange") and would be
required to be secured continuously by collateral in cash, cash
equivalents, or U.S. Treasury Bills maintained on a current basis
at an amount at least equal to the market value of the securities
loaned. A Fund would have the right to call a loan and obtain
the securities loaned at any time on five days' notice. During
the existence of a loan, a Fund would continue to receive the
equivalent of the interest or dividends paid by the issuer on the
securities loaned and would also receive compensation based on
investment of the collateral. A Fund would not, however, have
the right to vote any securities having voting rights during the
existence of the loan but would call the loan in anticipation of
an important vote to be taken among holders of the securities or
of the giving or withholding of their consent on a material
matter affecting the investment. As with other extensions of
credit there are risks of delay in recovery or even loss of
rights in the collateral should the borrower of the securities
fail financially. However, the loans would be made only to firms
deemed by the Adviser to be of good standing, and when, in the
judgment of the Adviser, the consideration that can be earned
currently from securities loans of this type justifies the
attendant risk. The value of the securities loaned will not
exceed 25% of the value of such Fund's total assets at the time
any such loan is made.
Forward Commitments and When-Issued and Delayed
Delivery Securities
Each Fund may enter into forward commitments for the
purchase of securities and may purchase securities on a "when-
issued" or "delayed delivery" basis. Agreements for such
purchases might be entered into, for example, when a Fund
anticipates a decline in interest rates and is able to obtain a
more advantageous yield by committing currently to purchase
securities to be issued later. When a Fund purchases securities
in this manner (i.e., on a forward commitment, when-issued or
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delayed delivery basis), it does not pay for the securities until
they are received, and a Fund is required to create a segregated
account with the Trust's custodian and to maintain in that
account liquid assets in an amount equal to or greater than, on a
daily basis, the amount of the Fund's forward commitments and
when-issued or delayed delivery commitments.
A Fund will enter into forward commitments and make
commitments to purchase securities on a when-issued or delayed
delivery basis only with the intention of actually acquiring the
securities. However, a Fund may sell these securities before the
settlement date if it is deemed advisable as a matter of
investment strategy.
Although neither of the Funds intends to make such
purchases for speculative purposes and each Fund intends to
adhere to the provisions of SEC policies, purchases of securities
on such bases may involve more risk than other types of
purchases. For example, by committing to purchase securities in
the future, a Fund subjects itself to a risk of loss on such
commitments as well as on its portfolio securities. Also, a Fund
may have to sell assets which have been set aside in order to
meet redemptions. In addition, if a Fund determines it is
advisable as a matter of investment strategy to sell the forward
commitment or "when-issued" or "delayed delivery" securities
before delivery, that Fund may incur a gain or loss because of
market fluctuations since the time the commitment to purchase
such securities was made. Any such gain or loss would be treated
as a capital gain or loss and would be treated for tax purposes
as such. When the time comes to pay for the securities to be
purchased under a forward commitment or on a "when-issued" or
"delayed delivery" basis, a Fund will meet its obligations from
the then available cash flow or the sale of securities, or,
although it would not normally expect to do so, from the sale of
the forward commitment or "when-issued" or "delayed delivery"
securities themselves (which may have a value greater or less
than a Fund's payment obligation).
Options
Options on Securities. Each Fund intends to write only
covered options. In addition to the methods of "cover" described
in the Prospectus, each Fund may write call and put options and
may purchase call and put options on securities. This means that
so long as a Fund is obligated as the writer of a call option, it
will own the underlying securities subject to the option or
securities convertible into such securities without additional
consideration (or for additional cash consideration held in a
segregated account by the custodian). In the case of call
options on U.S. Treasury Bills, a Fund might own U.S. Treasury
Bills of a different series from those underlying the call
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option, but with a principal amount and value corresponding to
the option contract amount and a maturity date no later than that
of the securities deliverable under the call option. A Fund will
be considered "covered" with respect to a put option it writes,
if, so long as it is obligated as the writer of a put option, it
deposits and maintains with its custodian in a segregated account
liquid assets having a value equal to or greater than the
exercise price of the option.
Effecting a closing transaction in the case of a written
call option will permit a Fund to write another call option on
the underlying security with either a different exercise price or
expiration date or both, or in the case of a written put option
will permit a Fund to write another put option to the extent that
the exercise price thereof is secured by deposited cash or short-
term securities. Such transactions permit a Fund to generate
additional premium income, which will partially offset declines
in the value of portfolio securities or increases in the cost of
securities to be acquired. Also, effecting a closing transaction
will permit the cash or proceeds from the concurrent sale of any
securities subject to the option to be used for other investments
by a Fund, provided that another option on such security is not
written. If a Fund desires to sell a particular security from
its portfolio on which it has written a call option, it will
effect a closing transaction in connection with the option prior
to or concurrent with the sale of the security.
A Fund will realize a profit from a closing transaction
if the premium paid in connection with the closing of an option
written by the Fund is less than the premium received from
writing the option, or if the premium received in connection with
the closing of an option purchased by the Fund is more than the
premium paid for the original purchase. Conversely, a Fund will
suffer a loss if the premium paid or received in connection with
a closing transaction is more or less, respectively, than the
premium received or paid in establishing the option position.
Because increases in the market price of a call option will
generally reflect increases in the market price of the underlying
security, any loss resulting from the repurchase of a call option
previously written by a Fund is likely to be offset in whole or
in part by appreciation of the underlying security owned by the
Fund.
A Fund may purchase a security and then write a call
option against that security or may purchase a security and
concurrently write an option on it. The exercise price of the
call a Fund determines to write will depend upon the expected
price movement of the underlying security. The exercise price of
a call option may be below ("in-the-money"), equal to ("at-the-
money") or above ("out-of-the-money") the current value of the
underlying security at the time the option is written. In-the-
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money call options may be used when it is expected that the price
of the underlying security will decline moderately during the
option period. Out-of-the-money call options may be written when
it is expected that the premiums received from writing the call
option plus the appreciation in the market price of the
underlying security up to the exercise price will be greater than
the appreciation in the price of the underlying security alone.
If the call options are exercised in such transactions, a Fund's
maximum gain will be the premium received by it for writing the
option, adjusted upwards or downwards by the difference between
the Fund's purchase price of the security and the exercise price.
If the options are not exercised and the price of the underlying
security declines, the amount of such decline will be offset in
part, or entirely, by the premium received.
The writing of covered put options is similar in terms
of risk/return characteristics to buy-and-write transactions. If
the market price of the underlying security rises or otherwise is
above the exercise price, the put option will expire worthless
and a Fund's gain will be limited to the premium received. If
the market price of the underlying security declines or otherwise
is below the exercise price, a Fund may elect to close the
position or retain the option until it is exercised, at which
time the Fund will be required to take delivery of the security
at the exercise price; the Fund's return will be the premium
received from the put option minus the amount by which the market
price of the security is below the exercise price, which could
result in a loss. Out-of-the-money put options may be written
when it is expected that the price of the underlying security
will decline moderately during the option period. In-the-money
put options may be used when it is expected that the premiums
received from writing the put option plus the appreciation in the
market price of the underlying security up to the exercise price
will be greater than the appreciation in the price of the
underlying security alone.
Each of the Funds may also write combinations of put and
call options on the same security, known as "straddles," with the
same exercise and expiration date. By writing a straddle, a Fund
undertakes a simultaneous obligation to sell and purchase the
same security in the event that one of the options is exercised.
If the price of the security subsequently rises above the
exercise price, the call will likely be exercised and the Fund
will be required to sell the underlying security at a below
market price. This loss may be offset, however, in whole or
part, by the premiums received on the writing of the two options.
Conversely, if the price of the security declines by a sufficient
amount, the put will likely be exercised. The writing of
straddles will likely be effective, therefore, only where the
price of the security remains stable and neither the call nor the
put is exercised. In those instances where one of the options is
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exercised, the loss on the purchase or sale of the underlying
security may exceed the amount of the premiums received.
By writing a call option, a Fund limits its opportunity
to profit from any increase in the market value of the underlying
security above the exercise price of the option. By writing a
put option, a Fund assumes the risk that it may be required to
purchase the underlying security for an exercise price above its
then current market value, resulting in a capital loss unless the
security subsequently appreciates in value. Where options are
written for hedging purposes, such transactions constitute only a
partial hedge against declines in the value of portfolio
securities or against increases in the value of securities to be
acquired, up to the amount of the premium.
Each of the Funds may purchase put options to hedge
against a decline in the value of portfolio securities. If such
decline occurs, the put options will permit the Fund to sell the
securities at the exercise price or to close out the options at a
profit. By using put options in this way, a Fund will reduce any
profit it might otherwise have realized on the underlying
security by the amount of the premium paid for the put option and
by transaction costs.
A Fund may purchase call options to hedge against an
increase in the price of securities that the Fund anticipates
purchasing in the future. If such increase occurs, the call
option will permit the Fund to purchase the securities at the
exercise price, or to close out the options at a profit. The
premium paid for the call option plus any transaction costs will
reduce the benefit, if any, realized by a Fund upon exercise of
the option, and, unless the price of the underlying security
rises sufficiently, the option may expire worthless to the Fund
and the Fund will suffer a loss on the transaction to the extent
of the premium paid.
Options on Securities Indexes. Each Fund may write
(sell) covered call and put options on securities indexes and
purchase call and put options on securities indexes. A call
option on a securities index is considered covered if, so long as
a Fund is obligated as the writer of the call, the Fund holds in
its portfolio securities the price changes of which are, in the
opinion of the Adviser, expected to replicate substantially the
movement of the index or indexes upon which the options written
by the Fund are based. A put on a securities index written by a
Fund will be considered covered if, so long as it is obligated as
the writer of the put, the Fund segregates with its custodian
liquid assets having a value equal to or greater than the
exercise price of the option.
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A Fund may also purchase put options on securities
indexes to hedge its investments against a decline in value. By
purchasing a put option on a securities index, a Fund will seek
to offset a decline in the value of securities it owns through
appreciation of the put option. If the value of a Fund's
investments does not decline as anticipated, or if the value of
the option does not increase, the Fund's loss will be limited to
the premium paid for the option. The success of this strategy
will largely depend on the accuracy of the correlation between
the changes in value of the index and the changes in value of a
Fund's security holdings.
The purchase of call options on securities indexes may
be used by a Fund to attempt to reduce the risk of missing a
broad market advance, or an advance in an industry or market
segment, at a time when the Fund holds uninvested cash or short-
term debt securities awaiting investment. When purchasing call
options for this purpose, a Fund will also bear the risk of
losing all or a portion of the premium paid if the value of the
index does not rise. The purchase of call options on stock
indexes when a Fund is substantially fully invested is a form of
leverage, up to the amount of the premium and related transaction
costs, and involves risks of loss and of increased volatility
similar to those involved in purchasing calls on securities the
Fund owns.
Futures Contracts and Options on Futures Contracts
Futures Contracts. Each Fund may enter into interest
rate transactions with respect to futures contracts, index
futures contracts and foreign currency futures contracts.
(Unless otherwise specified, interest rate futures contracts,
index futures contracts and foreign currency futures contracts
are collectively referred to as "Futures Contracts.") Such
investment strategies will be used as a hedge and not for
speculation.
Purchases or sales of stock or bond index futures
contracts are used for hedging purposes to attempt to protect a
Fund's current or intended investments from broad fluctuations in
stock or bond prices. For example, a Fund may sell stock or bond
index futures contracts in anticipation of or during a market
decline to attempt to offset the decrease in market value of the
Fund's portfolio securities that might otherwise result. If such
decline occurs, the loss in value of portfolio securities may be
offset, in whole or part, by gains on the futures position. When
a Fund is not fully invested in the securities market and
anticipates a significant market advance, it may purchase stock
or bond index futures contracts in order to gain rapid market
exposure that may, in part or entirely, offset increases in the
cost of securities that the Fund intends to purchase. As such
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purchases are made, the corresponding positions in stock or bond
index futures contracts will be closed out.
Interest rate futures contracts are purchased or sold
for hedging purposes to attempt to protect against the effects of
interest rate changes on a Fund's current or intended investments
in fixed income securities. For example, if a Fund owned long-
term bonds and interest rates were expected to increase, that
Fund might sell interest rate futures contracts. Such a sale
would have much the same effect as selling some of the long-term
bonds in that Fund's portfolio. However, since the futures
market is more liquid than the cash market, the use of interest
rate futures contracts as a hedging technique allows a Fund to
hedge its interest rate risk without having to sell its portfolio
securities. If interest rates did increase, the value of the
debt securities in the portfolio would decline, but the value of
that Fund's interest rate futures contracts would be expected to
increase at approximately the same rate, thereby keeping the net
asset value of that Fund from declining as much as it otherwise
would have. On the other hand, if interest rates were expected
to decline, interest rate futures contracts could be purchased to
hedge in anticipation of subsequent purchases of long-term bonds
at higher prices. Because the fluctuations in the value of the
interest rate futures contracts should be similar to those of
long-term bonds, a Fund could protect itself against the effects
of the anticipated rise in the value of long-term bonds without
actually buying them until the necessary cash became available or
the market had stabilized. At that time, the interest rate
futures contracts could be liquidated and that Fund's cash
reserves could then be used to buy long-term bonds on the cash
market.
Each Fund may purchase and sell foreign currency futures
contracts for hedging purposes to attempt to protect its current
or intended investments from fluctuations in currency exchange
rates. Such fluctuations could reduce the dollar value of
portfolio securities denominated in foreign currencies, or
increase the cost of foreign-denominated securities to be
acquired, even if the value of such securities in the currencies
in which they are denominated remains constant. Each Fund may
sell futures contracts on a foreign currency, for example, when
it holds securities denominated in such currency and it
anticipates a decline in the value of such currency relative to
the dollar. In the event such decline occurs, the resulting
adverse effect on the value of foreign-denominated securities may
be offset, in whole or in part, by gains on the futures
contracts. However, if the value of the foreign currency
increases relative to the dollar, the Fund's loss on the foreign
currency futures contract may or may not be offset by an increase
in the value of the securities because a decline in the price of
the security stated in terms of the foreign currency may be
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greater than the increase in value as a result of the change in
exchange rates.
Conversely, the Funds could protect against a rise in
the dollar cost of foreign-denominated securities to be acquired
by purchasing futures contracts on the relevant currency, which
could offset, in whole or in part, the increased cost of such
securities resulting from a rise in the dollar value of the
underlying currencies. When a Fund purchases futures contracts
under such circumstances, however, and the price of securities to
be acquired instead declines as a result of appreciation of the
dollar, the Fund will sustain losses on its futures position
which could reduce or eliminate the benefits of the reduced cost
of portfolio securities to be acquired.
The Funds may also engage in currency "cross hedging"
when, in the opinion of the Adviser, the historical relationship
among foreign currencies suggests that a Fund may achieve
protection against fluctuations in currency exchange rates
similar to that described above at a reduced cost through the use
of a futures contract relating to a currency other than the U.S.
dollar or the currency in which the foreign security is
denominated. Such "cross hedging" is subject to the same risks
as those described above with respect to an unanticipated
increase or decline in the value of the subject currency relative
to the dollar.
Options on Futures Contracts. The writing of a call
option on a Futures Contract constitutes a partial hedge against
declining prices of the securities in the Fund's portfolio. If
the futures price at expiration of the option is below the
exercise price, a Fund will retain the full amount of the option
premium, which provides a partial hedge against any decline that
may have occurred in the Fund's portfolio holdings. The writing
of a put option on a Futures Contract constitutes a partial hedge
against increasing prices of the securities or other instruments
required to be delivered under the terms of the futures contract.
If the futures price at expiration of the put option is higher
than the exercise price, a Fund will retain the full amount of
the option premium, which provides a partial hedge against any
increase in the price of securities which the Fund intends to
purchase. If a put or call option a Fund has written is
exercised, the Fund will incur a loss which will be reduced by
the amount of the premium it receives. Depending on the degree
of correlation between changes in the value of its portfolio
securities and changes in the value of its options on futures
positions, a Fund's losses from exercised options on futures may
to some extent be reduced or increased by changes in the value of
portfolio securities.
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The Funds may purchase options on Futures Contracts for
hedging purposes instead of purchasing or selling the underlying
Futures Contracts. For example, where a decrease in the value of
portfolio securities is anticipated as a result of a projected
market-wide decline or changes in interest or exchange rates, a
Fund could, in lieu of selling futures contracts, purchase put
options thereon. In the event that such decrease occurs, it may
be offset, in whole or part, by a profit on the option. If the
market decline does not occur, the Fund will suffer a loss equal
to the price of the put. Where it is projected that the value of
securities to be acquired by a Fund will increase prior to
acquisition, due to a market advance or changes in interest or
exchange rates, a Fund could purchase call options on Futures
Contracts, rather than purchasing the underlying Futures
Contracts. If the market advances, the increased cost of
securities to be purchased may be offset by a profit on the call.
However, if the market declines, the Fund will suffer a loss
equal to the price of the call, but the securities which the Fund
intends to purchase may be less expensive.
Forward Foreign Currency Exchange Contracts
Each Fund may enter into forward foreign currency
exchange contracts ("Forward Contracts") to attempt to minimize
the risk to the Fund from adverse changes in the relationship
between the U.S. dollar and foreign currencies. The Funds intend
to enter into Forward Contracts for hedging purposes similar to
those described above in connection with their transactions in
foreign currency futures contracts. In particular, a Forward
Contract to sell a currency may be entered into in lieu of the
sale of a foreign currency futures contract where a Fund seeks to
protect against an anticipated increase in the exchange rate for
a specific currency which could reduce the dollar value of
portfolio securities denominated in such currency. Conversely, a
Fund may enter into a Forward Contract to purchase a given
currency to protect against a projected increase in the dollar
value of securities denominated in such currency which the Fund
intends to acquire. A Fund also may enter into a Forward
Contract in order to assure itself of a predetermined exchange
rate in connection with a security denominated in a foreign
currency. The Funds may engage in currency "cross hedging" when,
in the opinion of the Adviser, the historical relationship among
foreign currencies suggests that a Fund may achieve the same
protection for a foreign security at a reduced cost through the
use of a Forward Contract relating to a currency other than the
U.S. dollar or the foreign currency in which the security is
denominated.
If a hedging transaction in Forward Contracts is
successful, the decline in the value of portfolio securities or
the increase in the cost of securities to be acquired may be
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offset, at least in part, by profits on the Forward Contract.
Nevertheless, by entering into such Forward Contracts, a Fund may
be required to forego all or a portion of the benefits which
otherwise could have been obtained from favorable movements in
exchange rates.
Each Fund has established procedures consistent with SEC
policies concerning purchases of foreign currency through Forward
Contracts. Since those policies currently recommend that an
amount of a Fund's assets equal to the amount of the purchase be
held aside or segregated to be used to pay for the commitment, a
Fund will always have liquid assets available sufficient to cover
any commitments under these contracts or to limit any potential
risk.
Options on Foreign Currencies
Each Fund may purchase and write options on foreign
currencies for hedging purposes. For example, a decline in the
dollar value of a foreign currency in which portfolio securities
are denominated will reduce the dollar value of such securities,
even if their value in the foreign currency remains constant. In
order to protect against such diminutions in the value of
portfolio securities, the Funds may purchase put options on the
foreign currency. If the value of the currency does decline, the
Fund will have the right to sell such currency for a fixed amount
in dollars and will thereby offset, in whole or in part, the
adverse effect on its portfolio which otherwise would have
resulted.
Conversely, where a rise in the dollar value of a
currency in which securities to be acquired are denominated is
projected, thereby increasing the cost of such securities, the
Funds may purchase call options thereon. The purchase of such
options could offset, at least partially, the effects of the
adverse movements in exchange rates. As in the case of other
types of options, however, the benefit to a Fund from purchases
of foreign currency options will be reduced by the amount of the
premium and related transaction costs. In addition, where
currency exchange rates do not move in the direction or to the
extent anticipated, a Fund could sustain losses on transactions
in foreign currency options which would require it to forego a
portion or all of the benefits of advantageous changes in such
rates.
Each Fund may write options on foreign currencies for
the same types of hedging purposes or to increase return. For
example, where the Fund anticipates a decline in the dollar value
of foreign-denominated securities due to adverse fluctuations in
exchange rates it could, instead of purchasing a put option,
write a call option on the relevant currency. If the expected
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decline occurs, the option will most likely not be exercised, and
the diminution in value of portfolio securities will be offset by
the amount of the premium received.
Similarly, instead of purchasing a call option to hedge
against an anticipated increase in the dollar cost of securities
to be acquired, a Fund could write a put option on the relevant
currency, which, if rates move in the manner projected, will
expire unexercised and allow the Fund to hedge such increased
cost up to the amount of the premium. As in the case of other
types of options, however, the writing of a foreign currency
option will constitute only a partial hedge up to the amount of
the premium, and only if rates move in the expected direction.
If this does not occur, the option may be exercised and the Fund
will be required to purchase or sell the underlying currency at a
loss which may not be offset by the amount of the premium.
Through the writing of options on foreign currencies, a Fund also
may be required to forego all or a portion of the benefits which
might otherwise have been obtained from favorable movements in
exchange rates.
Risk Factors in Options, Futures and Forward Transactions
Risk of Imperfect Correlation of Hedging Instruments
With a Fund's Portfolio. The Funds' abilities effectively to
hedge all or a portion of their portfolios through transactions
in options, Futures Contracts, options on Futures Contracts,
Forward Contracts and options on foreign currencies depend on the
degree to which price movements in the underlying index or
instrument correlate with price movements in the securities that
are the subject of the hedge. In the case of futures and options
based on an index, the portfolio will not duplicate the
components of the index, and in the case of futures and options
on fixed income securities, the portfolio securities which are
being hedged may not be the same type of obligation underlying
such contract. As a result, the correlation, to the extent it
exists, probably will not be exact.
It should be noted that stock index futures contracts or
options based upon a narrower index of securities, such as those
of a particular industry group, may present greater risk than
options or futures based on a broad market index. This is due to
the fact that a narrower index is more susceptible to rapid and
extreme fluctuations as a result of changes in the value of a
small number of securities.
The trading of futures and options entails the
additional risk of imperfect correlation between movements in the
futures or option price and the price of the underlying index or
instrument. The anticipated spread between the prices may be
distorted due to the differences in the nature of the markets,
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such as differences in margin requirements, the liquidity of such
markets and the participation of speculators in the futures
market. In this regard, trading by speculators in futures and
options has in the past occasionally resulted in market
distortions, which may be difficult or impossible to predict,
particularly near the expiration of such contracts.
The trading of options on Futures Contracts also entails
the risk that changes in the value of the underlying Futures
Contract will not be fully reflected in the value of the option.
Further, with respect to options on securities, options
on foreign currencies, options on stock indexes and options on
Futures Contracts, the Funds are subject to the risk of market
movements between the time that the option is exercised and the
time of performance thereunder. This could increase the extent of
any loss suffered by a Fund in connection with such transactions.
If a Fund purchases futures or options in order to hedge
against a possible increase in the price of securities before the
Fund is able to invest its cash in such securities, the Fund
faces the risk that the market may instead decline. If the Fund
does not then invest in such securities because of concern as to
possible further market declines or for other reasons, the Fund
may realize a loss on the futures or option contract that is not
offset by a reduction in the price of securities purchased.
In writing a call option on a security, foreign
currency, index or futures contract, a Fund also incurs the risk
that changes in the value of the assets used to cover the
position will not correlate closely with changes in the value of
the option or underlying index or instrument. For example, when
a Fund writes a call option on a stock index, the securities used
as "cover" may not match the composition of the index, and the
Fund may not be fully covered. As a result, the Fund could
suffer a loss on the call which is not entirely offset or offset
at all by an increase in the value of the Fund's portfolio
securities.
The writing of options on securities, options on stock
indexes or options on Futures Contracts constitutes only a
partial hedge against fluctuations in the value of a Fund's
portfolio. When a Fund writes an option, it will receive premium
income in return for the holder's purchase of the right to
acquire or dispose of the underlying security or future or, in
the case of index options, cash. In the event that the price of
such obligation does not rise sufficiently above the exercise
price of the option, in the case of a call, or fall below the
exercise price, in the case of a put, the option will not be
exercised and the Fund will retain the amount of the premium,
which will constitute a partial hedge against any decline that
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may have occurred in the Fund's portfolio holdings, or against
the increase in the cost of the instruments to be acquired.
When the price of the underlying obligation moves
sufficiently in favor of the holder to warrant exercise of the
option, however, and the option is exercised, the Fund will incur
a loss which may only be partially offset by the amount of the
premium the Fund received. Moreover, by writing an option, a
Fund may be required to forego the benefits which might otherwise
have been obtained from an increase in the value of portfolio
securities or a decline in the value of securities to be
acquired.
In the event of the occurrence of any of the foregoing
adverse market events, a Fund's overall return may be lower than
if it had not engaged in the transactions described above.
With respect to the writing of straddles on securities,
a Fund incurs the risk that the price of the underlying security
will not remain stable, that one of the options written will be
exercised and that the resulting loss will not be offset by the
amount of the premiums received. Such transactions, therefore,
while creating an opportunity for increased return by providing a
Fund with two simultaneous premiums on the same security,
nonetheless involve additional risk, because the Fund may have an
option exercised against it regardless of whether the price of
the security increases or decreases.
Potential Lack of a Liquid Secondary Market. Prior to
exercise or expiration, a futures or option position can be
terminated only by entering into a closing purchase or sale
transaction. This requires a secondary market for such
instruments on the exchange on which the initial transaction was
entered into. While the Funds will enter into options or futures
positions only if there appears to be a liquid secondary market
therefor, there can be no assurance that such a market will exist
for any particular contracts at any specific time. In that
event, it may not be possible to close out a position held by a
Fund, and the Fund could be required to purchase or sell the
instrument underlying an option, make or receive a cash
settlement or meet ongoing variation margin requirements. Under
such circumstances, if the Fund has insufficient cash available
to meet margin requirements, it may be necessary to liquidate
portfolio securities at a time when it is disadvantageous to do
so. The inability to close out options and futures positions,
therefore, could have an adverse impact on the Funds' ability to
effectively hedge their portfolios, and could result in trading
losses.
The liquidity of a secondary market in a Futures
Contract or option thereon may be adversely affected by "daily
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price fluctuation limits," established by exchanges, which limit
the amount of fluctuation in the price of a contract during a
single trading day. Once the daily limit has been reached in the
contract, no trades may be entered into at a price beyond the
limit, thus preventing the liquidation of open futures or option
positions and requiring traders to make additional margin
deposits. Prices have in the past moved to the daily limit on a
number of consecutive trading days.
The trading of Futures Contracts and options (including
options on Futures Contracts) is also subject to the risk of
trading halts, suspensions, exchange or clearing house equipment
failures, government intervention, insolvency of a brokerage firm
or clearing house or other disruptions of normal trading
activity, which could at times make it difficult or impossible to
liquidate existing positions or to recover excess variation
margin payments.
The staff of the SEC has taken the position that over-
the-counter options and the assets used as cover for over-the-
counter options are illiquid securities, unless certain
arrangements are made with the other party to the option
contract, permitting the prompt liquidation of the option
position. The Funds will enter into those special arrangements
only with primary U.S. Government securities dealers recognized
by the Federal Reserve Bank of New York ("primary dealers").
Under these special arrangements, the Trust will enter into
contracts with primary dealers which provide that each Fund has
the absolute right to repurchase an option it writes at any time
at a repurchase price which represents fair market value, as
determined in good faith through negotiation between the parties,
but which in no event will exceed a price determined pursuant to
a formula contained in the contract. Although the specific
details of the formula may vary between contracts with different
primary dealers, the formula will generally be based on a
multiple of the premium received by the Fund for writing the
option, plus the amount, if any, by which the option is "in-the-
money." The formula will also include a factor to account for
the difference between the price of the security and the strike
price of the option if the option is written out-of-the-money.
Under such circumstances the Fund only needs to treat as illiquid
that amount of the "cover" assets equal to the amount by which
(i) the formula price exceeds (ii) any amount by which the market
value of the security subject to the option exceeds the exercise
price of the option (the amount by which the option is "in-the-
money"). Although each agreement will provide that the Fund's
repurchase price shall be determined in good faith (and that it
shall not exceed the maximum determined pursuant to the formula),
the formula price will not necessarily reflect the market value
of the option written; therefore, the Fund might pay more to
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repurchase the option contract than the Fund would pay to close
out a similar exchange-traded option.
Margin. Because of low initial margin deposits made
upon the opening of a futures position and the writing of an
option, such transactions involve substantial leverage. As a
result, relatively small movements in the price of the contract
can result in substantial unrealized gains or losses. However,
to the extent the Funds purchase or sell Futures Contracts and
options on Futures Contracts and purchase and write options on
securities and securities indexes for hedging purposes, any
losses incurred in connection therewith should, if the hedging
strategy is successful, be offset, in whole or in part, by
increases in the value of securities held by the Fund or
decreases in the prices of securities the Fund intends to
acquire. When a Fund writes options on securities or options on
stock indexes for other than hedging purposes, the margin
requirements associated with such transactions could expose the
Fund to greater risk.
Trading and Position Limits. The exchanges on which
futures and options are traded may impose limitations governing
the maximum number of positions on the same side of the market
and involving the same underlying instrument which may be held by
a single investor, whether acting alone or in concert with others
(regardless of whether such contracts are held on the same or
different exchanges or held or written in one or more accounts or
through one or more brokers). In addition, the Commodity Futures
Trading Commission (the "CFTC") and the various contract markets
have established limits referred to as "speculative position
limits" on the maximum net long or net short position which any
person may hold or control in a particular futures or option
contract. An exchange may order the liquidation of positions
found to be in violation of these limits and may impose other
sanctions or restrictions. The Adviser does not believe that
these trading and position limits will have any adverse impact on
the strategies for hedging the portfolios of the Funds.
Risks of Options on Futures Contracts. The amount of
risk a Fund assumes when it purchases an option on a Futures
Contract is the premium paid for the option, plus related
transaction costs. In order to profit from an option purchased,
however, it may be necessary to exercise the option and to
liquidate the underlying Futures Contract, subject to the risks
of the availability of a liquid offset market described herein.
The writer of an option on a Futures Contract is subject to the
risks of commodity futures trading, including the requirement of
initial and variation margin payments, as well as the additional
risk that movements in the price of the option may not correlate
with movements in the price of the underlying security, index,
currency or Futures Contract.
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Risks of Forward Contracts, Foreign Currency Futures
Contracts and Options Thereon, Options on Foreign Currencies and
Over-the-Counter Options on Securities. Transactions in Forward
Contracts, as well as futures and options on foreign currencies,
are subject to all of the correlation, liquidity and other risks
outlined above. In addition, however, such transactions are
subject to the risk of governmental actions affecting trading in
or the prices of currencies underlying such contracts, which
could restrict or eliminate trading and could have a substantial
adverse effect on the value of positions held by a Fund. In
addition, the value of such positions could be adversely affected
by a number of other complex political and economic factors
applicable to the countries issuing the underlying currencies.
Further, unlike trading in most other types of
instruments, there is no systematic reporting of last sale
information with respect to the foreign currencies underlying
contracts thereon. As a result, the available information on
which trading decisions will be based may not be as complete as
the comparable data on which a Fund makes investment and trading
decisions in connection with other transactions. Moreover,
because the foreign currency market is a global, twenty-four hour
market, events could occur on that market which will not be
reflected in the forward, futures or options markets until the
following day, thereby preventing the Funds from responding to
such events in a timely manner.
Settlements of exercises of over-the-counter Forward
Contracts or foreign currency options generally must occur within
the country issuing the underlying currency, which in turn
requires traders to accept or make delivery of such currencies in
conformity with any United Sates or foreign restrictions and
regulations regarding the maintenance of foreign banking
relationships and fees, taxes or other charges.
Unlike transactions entered into by the Funds in Futures
Contracts and exchange-traded options, options on foreign
currencies, Forward Contracts and over-the-counter options on
securities and securities indexes are not traded on contract
markets regulated by the CFTC or (with the exception of certain
foreign currency options) the SEC. Such instruments are instead
traded through financial institutions acting as market-makers,
although foreign currency options are also traded on certain
national securities exchanges, such as the Philadelphia Stock
Exchange and the Chicago Board Options Exchange, subject to SEC
regulation. In an over-the-counter trading environment, many of
the protections afforded to exchange participants will not be
available. For example, there are no daily price fluctuation
limits, and adverse market movements could therefore continue to
an unlimited extent over a period of time. Although the
purchaser of an option cannot lose more than the amount of the
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premium plus related transaction costs, this entire amount could
be lost. Moreover, the option writer could lose amounts
substantially in excess of the initial investment, due to the
margin and collateral requirements associated with such
positions.
In addition, over-the-counter transactions can be
entered into only with a financial institution willing to take
the opposite side, as principal, of a Fund's position unless the
institution acts as broker and is able to find another
counterparty willing to enter into the transaction with the Fund.
Where no such counterparty is available, it will not be possible
to enter into a desired transaction. There also may be no liquid
secondary market in the trading of over-the-counter contracts,
and a Fund could be required to retain options purchased or
written, or Forward Contracts entered into, until exercise,
expiration or maturity. This in turn could limit the Fund's
ability to profit from open positions or to reduce losses
experienced, and could result in greater losses.
Further, over-the-counter transactions are not subject
to the guarantee of an exchange clearing house, and a Fund will
therefore be subject to the risk of default by, or the bankruptcy
of, the financial institution serving as its counterparty. A
Fund will enter into an over-the-counter transaction only with
parties whose creditworthiness has been reviewed and found
satisfactory by the Adviser.
Transactions in over-the-counter options on foreign
currencies are subject to a number of conditions regarding the
commercial purpose of the purchaser of such option. The Funds
are not able to determine at this time whether or to what extent
additional restrictions on the trading of over-the-counter
options on foreign currencies may be imposed at some point in the
future, or the effect that any such restrictions may have on the
hedging strategies to be implemented by them.
As discussed below, CFTC regulations require that a Fund
not enter into transactions in commodity futures contracts or
commodity option contracts for other than "bona fide" hedging
purposes, unless the aggregate initial margin and premiums do not
exceed 5% of the fair market value of the Fund's assets.
Premiums paid to purchase over-the-counter options on foreign
currencies, and margins paid in connection with the writing of
such options, are required to be included in determining
compliance with this requirement, which could, depending upon the
existing positions in Futures Contracts and options on Futures
Contracts already entered into by a Fund, limit the Fund's
ability to purchase or write options on foreign currencies.
Conversely, the existence of open positions in options on foreign
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currencies could limit the ability of the Fund to enter into
desired transactions in other options or futures contracts.
While forward contracts are not presently subject to
regulation by the CFTC, the CFTC may in the future assert or be
granted authority to regulate such instruments. In such event,
the Fund's ability to utilize Forward Contracts in the manner set
forth above could be restricted.
Options on foreign currencies traded on national
securities exchanges are within the jurisdiction of the SEC, as
are other securities traded on such exchanges. As a result, many
of the protections provided to traders on organized exchanges
will be available with respect to such transactions. In
particular, all foreign currency option positions entered into on
a national securities exchange are cleared and guaranteed by the
Options Clearing Corporation ("OCC"), thereby reducing the risk
of counterparty default. Further, a liquid secondary market in
options traded on a national securities exchange may be more
readily available than in the over-the-counter market,
potentially permitting a Fund to liquidate open positions at a
profit prior to exercise or expiration, or to limit losses in the
event of adverse market movements.
The purchase and sale of exchange-traded foreign
currency options, however, is subject to the risks of the
availability of a liquid secondary market described above, as
well as the risks regarding adverse market movements, the
margining of options written, the nature of the foreign currency
market, possible intervention by governmental authorities and the
effects of other political and economic events. In addition,
exchange-traded options on foreign currencies involve certain
risks not presented by the over-the-counter market. For example,
exercise and settlement of such options must be made exclusively
through the OCC, which has established banking relationships in
applicable foreign countries for this purpose. As a result, if
it determines that foreign governmental restrictions or taxes
would prevent the orderly settlement of foreign currency option
exercises, or would result in undue burdens on the OCC or its
clearing member, the OCC may impose special procedures on
exercise and settlement, such as technical changes in the
mechanics of delivery of currency, the fixing of dollar
settlement prices or prohibitions on exercise.
Restrictions on the Use of Futures and Option Contracts
Under applicable regulations, when a Fund enters into
transactions in Futures Contracts and options on Futures
Contracts other than for bona fide hedging purposes, that Fund
maintains with its custodian in a segregated account cash, short-
term U.S. Government securities or high quality United States
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dollar denominated money market instruments, which, together with
any initial margin deposits, are equal to the aggregate market
value of the Futures Contracts and options on Futures Contracts
that it purchases. In addition, a Fund may not purchase or sell
such instruments for other than bona fide hedging purposes if,
immediately thereafter, the sum of the amount of initial margin
deposits on such futures and options positions and premiums paid
for options purchased would exceed 5% of the market value of the
Fund's total assets.
Each Fund has adopted the additional restriction that it
will not enter into a Futures Contract if, immediately
thereafter, the value of securities and other obligations
underlying all such Futures Contracts would exceed 50% of the
value of such Fund's total assets. Moreover, a Fund will not
purchase put and call options if as a result more than 10% of its
total assets would be invested in such options.
Economic Effects and Limitations
Income earned by a Fund from its hedging activities will
be treated as capital gain and, if not offset by net realized
capital losses incurred by a Fund, will be distributed to
shareholders in taxable distributions. Although gain from such
transactions may hedge against a decline in the value of a Fund's
portfolio securities, that gain, to the extent not offset by
losses, will be distributed in light of certain tax
considerations and will constitute a distribution of that portion
of the value preserved against decline.
No Fund will "over-hedge," that is, a Fund will not
maintain open short positions in futures or options contracts if,
in the aggregate, the market value of its open positions exceeds
the current market value of its securities portfolio plus or
minus the unrealized gain or loss on such open positions,
adjusted for the historical volatility relationship between the
portfolio and futures and options contracts.
Each Fund's ability to employ the options and futures
strategies described above will depend on the availability of
liquid markets in such instruments. Markets in financial futures
and related options are still developing. It is impossible to
predict the amount of trading interest that may hereafter exist
in various types of options or futures. Therefore no assurance
can be given that a Fund will be able to use these instruments
effectively for the purposes set forth above.
The Funds' ability to use options, futures and forward
contracts may be limited by tax considerations. In particular,
tax rules might affect the length of time for which the Funds can
hold such contracts and the character of the income earned on
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such contracts. In addition, differences between each Fund's
book income (upon the basis of which distributions are generally
made) and taxable income arising from its hedging activities may
result in return of capital distributions, and in some
circumstances, distributions in excess of the Fund's book income
may be required in order to meet tax requirements.
Future Developments
The above discussion relates to each Fund's proposed use
of Futures Contracts, options and options on Futures Contracts
currently available. As noted above, the relevant markets and
related regulations are evolving. In the event of future
regulatory or market developments, each Fund may also use
additional types of futures contracts or options and other
investment techniques for the purposes set forth above.
INVESTMENT RESTRICTIONS
Except as described below and except as otherwise
specifically stated in the Prospectus or this Statement of
Additional Information, the investment policies of each Fund set
forth in the Prospectus and in this Statement of Additional
Information are not fundamental and may be changed without
shareholder approval.
The following is a description of restrictions on the
investments to be made by the Funds, which restrictions may not
be changed without the approval of a majority of the outstanding
voting securities of the relevant Fund.
Neither of the Funds will:
(1) Borrow money in excess of 10% of the value (taken
at the lower of cost or current value) of its total
assets (not including the amount borrowed) at the
time the borrowing is made, and then only from
banks as a temporary measure to facilitate the
meeting of redemption requests (not for leverage)
which might otherwise require the untimely
disposition of portfolio investments or pending
settlement of securities transactions or for
extraordinary or emergency purposes.
(2) Underwrite securities issued by other persons
except to the extent that, in connection with the
disposition of its portfolio investments, it may be
deemed to be an underwriter under certain federal
securities laws.
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(3) Purchase or retain real estate or interests in real
estate, although each Fund may purchase securities
which are secured by real estate and securities of
companies which invest in or deal in real estate.
(4) Make loans to other persons except by the purchase
of obligations in which such Fund may invest
consistent with its investment policies and by
entering into repurchase agreements, or by lending
its portfolio securities representing not more than
25% of its total assets.
(5) Issue any senior security (as that term is defined
in the 1940 Act), if such issuance is specifically
prohibited by the 1940 Act or the rules and
regulations promulgated thereunder. For the
purposes of this restriction, collateral
arrangements with respect to options, Futures
Contracts and Options on Futures Contracts and
collateral arrangements with respect to initial and
variation margins are not deemed to be the issuance
of a senior security. (There is no intention to
issue senior securities except as set forth in
paragraph 1 above.)
It is also a fundamental policy of each Fund that it may
purchase and sell futures contracts and related options.
In addition, the following is a description of operating
policies which the Trust has adopted on behalf of the Funds but
which are not fundamental and are subject to change without
shareholder approval.
Neither of the Funds will:
(a) Pledge, mortgage, hypothecate or otherwise encumber
an amount of its assets taken at current value in
excess of 15% of its total assets (taken at the
lower of cost or current value) and then only to
secure borrowings permitted by restriction (1)
above. For the purpose of this restriction, the
deposit of securities and other collateral
arrangements with respect to reverse repurchase
agreements, options, Futures Contracts, Forward
Contracts and options on foreign currencies, and
payments of initial and variation margin in
connection therewith are not considered pledges or
other encumbrances.
(b) Purchase securities on margin, except that each
Fund may obtain such short-term credits as may be
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necessary for the clearance of purchases and sales
of securities, and except that each Fund may make
margin payments in connection with Futures
Contracts, Options on Futures Contracts, options,
Forward Contracts or options on foreign currencies.
(c) Make short sales of securities or maintain a short
position for the account of such Fund unless at all
times when a short position is open it owns an
equal amount of such securities or unless by virtue
of its ownership of other securities it has at all
such times a right to obtain securities (without
payment of further consideration) equivalent in
kind and amount to the securities sold, provided
that if such right is conditional the sale is made
upon equivalent conditions and further provided
that no Fund will make such short sales with
respect to securities having a value in excess of
5% of its total assets.
(d) Write, purchase or sell any put or call option or
any combination thereof, provided that this shall
not prevent a Fund from writing, purchasing and
selling puts, calls or combinations thereof with
respect to securities, indexes of securities or
foreign currencies, and with respect to Futures
Contracts.
(e) Purchase voting securities of any issuer if such
purchase, at the time thereof, would cause more
than 10% of the outstanding voting securities of
such issuer to be held by such Fund; or purchase
securities of any issuer if such purchase at the
time thereof would cause more than 10% of any class
of securities of such issuer to be held by such
Fund. For this purpose all indebtedness of an
issuer shall be deemed a single class and all
preferred stock of an issuer shall be deemed a
single class.
(f) Invest in securities of any issuer if, to the
knowledge of the Trust, officers and Trustees of
the Trust and officers and directors of the Adviser
who beneficially own more than 0.5% of the shares
of securities of that issuer together own more than
5%.
(g) Purchase securities issued by any other registered
open-end investment company or investment trust
except (A) by purchase in the open market where no
commission or profit to a sponsor or dealer results
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from such purchase other than the customary
broker's commission, or (B) where no commission or
profit to a sponsor or dealer results from such
purchase, or (C) when such purchase, though not
made in the open market, is part of a plan of
merger or consolidation; provided, however, that a
Fund will not purchase such securities if such
purchase at the time thereof would cause more than
5% of its total assets (taken at market value) to
be invested in the securities of such issuers; and,
provided further, that a Fund's purchases of
securities issued by such open-end investment
company will be consistent with the provisions of
the 1940 Act.
(h) Make investments for the purpose of exercising
control or management.
(i) Participate on a joint or joint and several basis
in any trading account in securities.
(j) Invest in interests in oil, gas, or other mineral
exploration or development programs, although each
Fund may purchase securities which are secured by
such interests and may purchase securities of
issuers which invest in or deal in oil, gas or
other mineral exploration or development programs.
(k) Purchase warrants, if, as a result, a Fund would
have more than 5% of its total assets invested in
warrants or more than 2% of its total assets
invested in warrants which are not listed on the
New York Stock Exchange or the American Stock
Exchange.
(l) Purchase commodities or commodity contracts,
provided that this shall not prevent a Fund from
entering into interest rate futures contracts,
securities index futures contracts, foreign
currency futures contracts, forward foreign
currency exchange contracts and options (including
options on any of the foregoing) to the extent such
action is consistent with such Fund's investment
objective and policies.
(m) Purchase additional securities in excess of 5% of
the value of its total assets until all of a Fund's
outstanding borrowings (as permitted and described
in Restriction No. 1 above) have been repaid.
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Whenever any investment restriction states a maximum
percentage of a Fund's assets which may be invested in any
security or other asset, it is intended that such maximum
percentage limitation be determined immediately after and as a
result of such Fund's acquisition of such securities or other
assets. Accordingly, any later increase or decrease beyond the
specified limitation resulting from a change in value or net
asset value will not be considered a violation of such percentage
limitation.
MANAGEMENT OF THE FUNDS
Adviser
Alliance Capital Management L.P. (the "Adviser"), a
Delaware limited partnership with principal offices at 1345
Avenue of the Americas, New York, New York 10105, has been
retained under an investment advisory agreement (the "Investment
Advisory Contract") to provide investment advice and, in general,
to conduct the management and investment program of the Trust
under the supervision of the Trust's Board of Trustees.
The Adviser is a leading international investment
manager supervising client accounts with assets as of June 30,
1996 of more than $168 billion (of which more than $55 billion
represented the assets of investment companies). The Adviser's
clients are primarily major corporate employee benefit funds,
public employee retirement systems, investment companies,
foundations and endowment funds and included, as of June 30,
1996, 33 of the FORTUNE 100 Companies. As of that date, the
Adviser and its subsidiaries employed more than 1,450 employees
who operated out of domestic offices and the overseas offices of
subsidiaries in Bombay, Istanbul, London, Sao Paulo, Sydney,
Tokyo, Toronto, Bahrain, Luxembourg and Singapore. The 50
registered investment companies comprising more than 100 separate
investment portfolios managed by the Adviser currently have over
more than two million shareholders.
Alliance Capital Management Corporation, sole general
partner of, and the owner of a 1% general partnership interest
in, the Adviser, is an indirect wholly-owned subsidiary of The
Equitable Life Assurance Society of the United States
("Equitable"), one of the largest life insurance companies in the
United States and a wholly-owned subsidiary of The Equitable
Companies Incorporated ("ECI"), a holding company controlled by
AXA, a French insurance holding company. As of June 30, 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 59% of the
issued and outstanding units representing assignments of
beneficial ownership of limited partnership interests in the
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Adviser ("Units"). As of June 30, 1996, approximately 32% and
10% 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 owns approximately 63.9% of the outstanding voting
shares of common stock of ECI. AXA is the holding company for an
international group of insurance and related financial services
companies. AXA's insurance operations are comprised of
activities in life insurance, property and casualty insurance and
reinsurance. The insurance operations are diverse geographically
with activities in France, the United states, the United Kingdom,
Canada and other countries, principally in Europe. AXA is also
engaged in asset management, investment banking and brokerage,
real estate and other financial services activities in the United
States and Europe. Based on information provided by AXA, as of
March 1, 1996, 42.1% of the voting 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 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
The Adviser serves as investment manager and adviser of
each of the Funds and furnishes continuously an investment
program for each Fund and manages, supervises and conducts the
affairs of each Fund. The Investment Advisory Contract also
provides that the Adviser will furnish or pay the expenses of the
Trust for office space, facilities and equipment, services of
executive and other personnel of the Trust and certain
administrative services. The Adviser is compensated for its
services to the Funds at an annual rate of .75% of each Fund's
average daily net assets. The Adviser has voluntarily undertaken
until further notice to waive its fees in respect of each Fund
and has agreed to bear certain expenses of the Class A, Class B
40
<PAGE>
and Class C shares of each Fund to the extent that expenses
exceed an annual rate of 1.40% for Class A shares and 2.10% for
Class B and Class C shares. The management fees for each Fund
are higher than those paid by most mutual funds.
The Investment Advisory Contract became effective on
July 23, 1993. The Investment Advisory Contract replaced an
earlier agreement (the "First Investment Advisory Contract")
between the Trust and Equitable Capital Management Corporation
("Equitable Capital") or Equitable, as the case may be, with
respect to the Funds. The First Investment Advisory Agreement
terminated because of its technical assignment in connection with
the transfer of substantially all of the assets comprising
Equitable Capital's business to the Adviser and certain of its
subsidiaries in exchange for newly issued limited partnership
interests in the Adviser and the assumption by the Adviser and
such subsidiaries of certain liabilities of Equitable Capital.
Equitable Capital was compensated for its services as investment
manager of the Funds at the same rates as are currently paid by
the Funds to the Adviser.
In anticipation of the assignment of the First
Investment Advisory Contract, the Investment Advisory Contract
was approved by the vote of the Trust's Trustees, including the
Trustees who are not parties to the Investment Advisory Contract
or interested persons of any such party, at meetings called for
the purpose and held on February 16, 1993 and March 31, 1993. At
a meeting held on April 8, 1993, a majority of the outstanding
voting securities of the Funds approved the Investment Advisory
Contract. Most recently, the continuance of the Investment
Advisory Contract until July 31, 1997 was approved by a vote,
cast in person, of the Board of Trustees, including a majority of
the Trustees who are not parties to the Investment Advisory
Contract or interested persons of any such party, at their
Regular Meeting held on July 17, 1996.
During the period May 1, 1995 through April 30, 1996,
the Adviser earned $387,903 in management fees from the
Conservative Investors Fund (an additional $174,857 in fees were
waived) and $632,516 from the Growth Investors Fund (an
additional $214,077 in fees were waived). During the period
May 1, 1994 through April 30, 1995, the Adviser earned $385,818
in management fees from the Conservative Investors Fund (an
additional $217,650 in fees were waived) and $464,336 from the
Growth Investors Fund (an additional $350,235 in fees were
waived). During the period July 23, 1993 through the fiscal year
ended April 30, 1994, the Adviser earned $202,051 in management
fees from the Conservative Investors Fund (an additional $164,848
in fees were waived) and $173,868 from the Growth Investors Fund
(an additional $215,813 in fees were waived). During the period
May 1, 1993 to July 22, 1993, Equitable Capital earned $42,814 in
41
<PAGE>
management fees from the Conservative Investors Fund (an
additional $31,138 in fees were waived) and $33,175 from the
Growth Investors Fund (an additional $25,249 in fees were
waived).
The Investment Advisory Contract provides that it will
continue in effect for two years from its date of execution and
thereafter from year to year if its continuance is approved at
least annually (i) by the Board of Trustees or by vote of a
majority of the outstanding voting securities of the relevant
Fund, and (ii) by vote of a majority of the Trustees who are not
interested persons of the Adviser cast in person at a meeting
called for the purpose of voting on such approval. Any amendment
to the Investment Advisory Contract must be approved by vote of a
majority of the outstanding voting securities of the relevant
Fund and by vote of a majority of the Trustees who are not such
interested persons, cast in person at a meeting called for the
purpose of voting on such approval. The Investment Advisory
Contract may be terminated without penalty by the Adviser, by
vote of the Trustees or by vote of a majority of the outstanding
voting securities of the relevant Fund upon sixty days' written
notice, and it terminates automatically in the event of its
assignment. The Adviser controls the word "Alliance" in the
names of the Trust and each Fund, and if Alliance should cease to
be the investment manager of any Fund, the Trust and such Fund
may be required to change their names and delete that word.
The Investment Advisory Contract provides that Alliance
shall not be subject to any liability in connection with the
performance of its services thereunder in the absence of willful
misfeasance, bad faith, gross negligence or reckless disregard of
its obligations and duties.
Trustees and Officers
The Trustees and principal officers of the Trust, their
ages as of the date of this Statement of Additional Information
and their primary occupations during the past five years are set
forth below.
Trustees
* John D. Carifa, 51, Chairman of the Board and
President, is the President, Chief Operating Officer, and a
Director of Alliance Capital Management Corporation, the general
partner of the Adviser. His address is 1345 Avenue of the
Americas, New York, New York 10105.
_________________________
* An "interested person" of the Trust, as defined by the 1940
Act.
42
<PAGE>
Alberta B. Arthurs, 63, is the Director for Arts and
Humanities for The Rockefeller Foundation. Her address is 1133
Avenue of the Americas, New York, New York 10036.
Ruth Block, 65, was formerly an Executive Vice President
and the Chief Insurance Officer of The Equitable Life Assurance
Society of the United States. She is a Director of Ecolab
Incorporated (specialty chemicals) and Amoco Corporation (oil and
gas). Her address is Box 4653, Stamford, Connecticut 06903.
Richard W. Couper, 73, is President Emeritus and Trustee
of The Woodrow Wilson Fellowship Foundation and President
Emeritus of the New York Public Library. His address is Box 345,
Clinton, New York 13323-0345.
Brenton W. Harries, 68, is a Director of Enhance
Reinsurance Co. and was formerly the President and Chief
Executive of Global Electronic Markets Company. His address is
14 Point Road, Wilson Point, South Norwalk, Connecticut 06854.
Donald J. Robinson, 62, was formerly a partner at
Orrick, Herrington & Sutcliffe and is currently of counsel to
that firm. His address is 599 Lexington Avenue, 26th Floor, New
York, New York 10022.
Officers
* John D. Carifa, President, see biography above.
Edmund P. Bergan, Jr., 46, 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 a Vice President 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, a Senior Vice President of ACMC, the general partner of
the Adviser. She is also Vice President of The Hudson River
43
<PAGE>
Trust. She was formerly Executive Vice President of Equitable
Capital. Her address is 1345 Avenue of the Americas, New York,
New York 10105.
Barbara J. Krumsiek, 44, 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 Conservative Investors Fund and by the Growth Investors
Fund for the fiscal year ended April 30, 1996, 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.
44
<PAGE>
Total Number
of Funds
in the
Alliance
Total Fund Complex,
Aggregate Aggregate Compensation Including
Compensation Compensation From the the Trust,
from the from the Alliance as to which
Conservative Growth Fund Complex the Trustee
Name of Trustee Investors Investors Including is a Director
of the Fund Fund Fund the Trust* or Trustee
________________ ___________ ____________ ___________ _____________
Alberta B. Arthurs $5,000 $5,000 $ 24,000 5
Ruth Block $5,000 $5,000 $159,000 39
John D. Carifa $ -- $ -- $ -- 52
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 August 15, 1996, the Trustees and officers of the
Trust as a group owned less than 1% of the outstanding shares of
any Fund or of the Trust as a whole.
The Trust undertakes to provide assistance to
shareholders in communications concerning the removal of any
Trustee of the Trust in accordance with Section 16 of the 1940
Act.
PORTFOLIO TRANSACTIONS
Under the general supervision of the Board of Trustees,
the Adviser makes the Funds' portfolio decisions and determines
the broker to be used in each specific transaction with the
objective of negotiating a combination of the most favorable
commission and the best price obtainable on each transaction
(generally defined as best execution). When consistent with the
objective of obtaining best execution, brokerage may be directed
to persons or firms supplying investment information to the
Adviser. Neither the Funds nor the Adviser have entered into
agreements or understandings with any brokers regarding the
placement of securities transactions because of research services
they provide. To the extent that such persons or firms supply
investment information to the Adviser for use in rendering
investment advice to the Funds, such information may be supplied
at no cost to the Adviser and, therefore, may have the effect of
reducing the expenses of the Adviser in rendering advice to the
45
<PAGE>
Funds. While it is impossible to place an actual dollar value on
such investment information, its receipt by the Adviser probably
does not reduce the overall expenses of the Adviser to any
material extent.
The investment information provided to the Adviser is of
the type described in Section 28(e) of the Securities Exchange
Act of 1934, as amended, and is designed to augment the Adviser's
own internal research and investment strategy capabilities.
Research services furnished by brokers through which the Funds
effect securities transactions are used by the Adviser in
carrying out its investment management responsibilities with
respect to all its clients' accounts. There may be occasions
where the transaction cost charged by a broker may be greater
than that which another broker may charge if it is determined in
good faith that the amount of such transaction cost is reasonable
in relation to the value of brokerage and research services
provided by the executing broker.
The Funds may deal in some instances in securities which
are not listed on a national securities exchange but are traded
in the over-the-counter market. They may also purchase listed
securities through the third market. Where transactions are
executed in the over-the-counter market or third market, the
Funds will seek to deal with the primary market makers; but when
necessary in order to obtain best execution, they will utilize
the services of others.
Aggregate securities transactions for the Funds during
the fiscal year ended April 30, 1996 were as follows: with
respect to the Conservative Investors Fund, $260,211,306 and, in
connection therewith, brokerage commissions of $75,237 (100%)
were allocated to persons or firms supplying research
information; and with respect to the Growth Investors Fund,
$322,321,206 and, in connection therewith, brokerage commission
of $386,197 (100%) were allocated to persons or firms supplying
research information. Aggregate securities transactions for the
Funds during the fiscal year ended April 30, 1995 were as
follows: with respect to the Conservative Investors Fund,
$207,531,166 and, in connection therewith, brokerage commissions
of $3,758 (100%) were allocated to persons or firms supplying
research information; and with respect to the Growth Investors
Fund, $154,095,965 and, in connection therewith, brokerage
commission of $143,563 (100%) were allocated to persons or firms
supplying research information. Aggregate securities
transactions for the Funds during the fiscal year ended April 30,
1994 were as follows: with respect to the Conservative Investors
Fund, $92,313,848 and, in connection therewith, brokerage
commissions of $10,178 (100%) were allocated to persons or firms
supplying research information; and with respect to the Growth
Investors Fund, $60,632,954 and, in connection therewith,
46
<PAGE>
brokerage commissions of $45,808 (100%) were allocated to persons
or firms supplying research information.
For the fiscal year ended April 30, 1996, the
Conservative Investors Fund paid an aggregate of $75,237 in
brokerage commissions; and the Growth Investors Fund paid an
aggregate of $386,197 in brokerage commissions. For the fiscal
year ended April 30, 1995, the Conservative Investors Fund paid
an aggregate of $3,758 in brokerage commissions; and the Growth
Investors Fund paid an aggregate of $143,563 in brokerage
commissions. For the fiscal year ended April 30, 1994, the
Conservative Investors Fund paid an aggregate of $10,178 in
brokerage commissions; and the Growth Investors Fund paid an
aggregate of $45,808 in brokerage commissions.
The Funds may from time to time place orders for the
purchase or sale of securities (including listed call options)
with Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ")
and with brokers which may have their transactions cleared or
settled, or both, by the Pershing Division of DLJ, for which DLJ
may receive a portion of the brokerage commission. In such
instances, the placement of orders with such brokers would be
consistent with the Funds' objective of obtaining the best
execution and would not be dependent upon the fact that DLJ is an
affiliate of the Adviser. With respect to orders placed with DLJ
for execution on a national securities exchange, commissions
received must conform to Section 17(e)(2)(A) of the 1940 Act and
Rule 17e-1 thereunder, which permit an affiliated person of a
registered investment company (such as the Trust), or any
affiliated person of such person, to receive a brokerage
commission from such registered investment company provided that
such commission is reasonable and fair compared to the
commissions received by other brokers in connection with
comparable transactions involving similar securities during a
comparable period of time.
The brokerage transactions engaged in by the Funds with
DLJ and its affiliates during the fiscal years ended April 30,
1994, April 30, 1995 and April 30, 1996, are set forth below:
% of Fund's % of Fund's
Amount Aggregate Aggregate
Fiscal Year Brokerage Brokerage Dollar Amount
Ended Fund Commission Commissions of Transactions
__________ ____ __________ ___________ _______________
1996 N.A. None None None
1995 Growth Investors $33 0% 0%
1994 N.A. None None None
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<PAGE>
The annual portfolio turnover rates of the securities of
the Conservative Investors Fund and the Growth Investors Fund for
the fiscal years ended April 30, 1996 and 1995 were 267% and 248%
for Conservative Investors and 209% and 134% for Growth
Investors, respectively.
EXPENSES OF THE FUNDS
In addition to the payments to the Adviser under the
Investment Advisory Contract described above, the Trust pays
certain other costs including (a) brokerage and commission
expenses, (b) Federal, state and local taxes, including issue and
transfer taxes incurred by or levied on a Fund, (c) interest
charges on borrowing, (d) fees and expenses of registering the
shares of the Funds under the appropriate Federal securities laws
and of qualifying shares of the Funds under applicable state
securities laws including expenses attendant upon renewing and
increasing such registrations and qualifications, (e) expenses of
printing and distributing the Funds' prospectuses and other
reports to shareholders, (f) costs of proxy solicitations,
(g) transfer agency fees described below, (h) charges and
expenses of the Trust's custodian, (i) compensation of the
Trust's officers, Trustees and employees who do not devote any
part of their time to the affairs of the Adviser or its
affiliates, (j) costs of stationery and supplies, and (k) such
promotional expenses as may be contemplated by the Distribution
Services Agreement described below.
Distribution Arrangements
Rule 12b-1 adopted by the SEC under the 1940 Act permits
an investment company to directly or indirectly pay expenses
associated with the distribution of its shares in accordance with
a duly adopted and approved plan. The Trust has adopted a plan
for each of Class A, Class B and Class C shares of the Funds
pursuant to Rule 12b-1 (each a "Plan" and collectively the
"Plans"). Pursuant to the Plans, each Fund pays Alliance Fund
Distributors, Inc. (the "Principal Underwriter") a Rule 12b-1
distribution services fee which may not exceed an annual rate of
.50% of a Fund's aggregate average daily net assets attributable
to the Class A shares, 1.00% of a Fund's aggregate average daily
net assets attributable to the Class B shares and 1.00% of a
Fund's aggregate average daily net assets attributable to the
Class C shares to compensate the Principal Underwriter for
distribution expenses. The Trustees currently limit payments
under the Class A Plan to .30% of a Fund's aggregate average
daily net assets attributable to the Class A shares. The Plans
provide that a portion of the distribution services fee in an
amount not to exceed .25% of the aggregate average daily net
assets of a Fund attributable to each of the Class A shares,
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<PAGE>
Class B shares and Class C shares constitutes a service fee that
the Principal Underwriter will use for personal service and/or
the maintenance of shareholder accounts. The Plans also provide
that the Adviser may use its own resources, which may include
management fees received by the Adviser from the Trust or other
investment companies which it manages and the Adviser's past
profits, to finance the distribution of the Funds' shares.
Each Plan may be terminated with respect to the class of
shares of any Fund to which the Plan relates by vote of a
majority of the Trustees who are not "interested persons" of the
Trust and who have no direct or indirect financial interest in
the operation of the Plans or in any agreement related to the
Plans (the "Qualified Trustees"), or by vote of a majority of the
outstanding voting securities of that class. Each Plan may be
amended by vote of the Trustees, including a majority of the
Qualified Trustees, cast in person at a meeting called for that
purpose. Any change in a Plan that would materially increase the
distribution costs to the class of shares of any Fund to which
the Plan relates requires approval by the affected class of
shareholders of that Fund. The Trustees review quarterly a
written report of such distribution costs and the purposes for
which such costs have been incurred with respect to each Fund's
Class A, Class B and Class C shares. For so long as the Plans
are in effect, selection and nomination of those Trustees who are
not interested persons of the Trust shall be committed to the
discretion of such disinterested persons July 1, 1996.
The Plans may be terminated with respect to any Fund or
class of shares thereof at any time on 60 days' written notice
without payment of any penalty by the Principal Underwriter or by
vote of a majority of the outstanding voting securities of that
Fund or that class (as appropriate) or by vote of a majority of
the Qualified Trustees.
The Plans will continue in effect with respect to each
Fund and each class of shares thereof for successive one-year
periods, provided that each such continuance is specifically
approved (i) by the vote of a majority of the Qualified Trustees
and (ii) by the vote of a majority of the entire Board of
Trustees cast in person at a meeting called for that purpose.
For services rendered by the Principal Underwriter in
connection with the distribution of Class A shares pursuant to
the Plan applicable to such shares, the Principal Underwriter
received $45,690 and $81,307 with respect to the Class A shares
of the Conservative Investors Fund and the Growth Investors Fund,
respectively, during the fiscal year ended April 30, 1996. For
services rendered by the Principal Underwriter in connection with
the distribution of Class A shares pursuant to the Plan
applicable to such shares, the Principal Underwriter received
49
<PAGE>
$47,590 and $58,355 with respect to the Class A shares of the
Conservative Investors Fund and the Growth Investors Fund,
respectively, during the fiscal year ended April 30, 1995. For
services rendered by the Principal Underwriter and Equico
Securities, Inc., the Trust's prior principal underwriter
("Equico"), in connection with the distribution of Class A shares
pursuant to the Plan applicable to such shares, Equico received
$3,700 and $2,574 with respect to the Class A shares of the
Conservative Investors Fund and the Growth Investors Fund,
respectively, during the fiscal year ended April 30, 1994; and
the Principal Underwriter received $26,447 and $21,336 with
respect to the Class A shares of the Conservative Investors Fund
and the Growth Investors Fund, respectively, during the fiscal
year ended April 30, 1994.
For services rendered by the Principal Underwriter in
connection with the distribution of Class B shares pursuant to
the Plan applicable to such shares, the Principal Underwriter
received $316,700 and $523,545 with respect to the Class B shares
of the Conservative Investors Fund and the Growth Investors Fund,
respectively, during the fiscal year ended April 30, 1996. For
services rendered by the Principal Underwriter in connection with
the distribution of Class B shares pursuant to the Plan
applicable to such shares, the Principal Underwriter received
$307,217 and $385,615 with respect to the Class B shares of the
Conservative Investors Fund and the Growth Investors Fund,
respectively, during the fiscal year ended April 30, 1995. For
services rendered by the Principal Underwriter and Equico in
connection with the distribution of Class B shares pursuant to
the Plan applicable to such shares, Equico received $29,317 and
$24,700 with respect to the Class B shares of the Conservative
Investors Fund and the Growth Investors Fund, respectively,
during the fiscal year ended April 30, 1994; and the Principal
Underwriter received $165,904 and $149,494 with respect to the
Class B shares of the Conservative Investors Fund and the Growth
Investors Fund, respectively, during the fiscal year ended
April 30, 1994.
For services rendered by the Principal Underwriter in
connection with the distribution of Class C shares pursuant to
the Plan applicable to such shares, the Principal Underwriter
received $48,204 and $48,786 with respect to the Class C shares
of the Conservative Investors Fund and the Growth Investors Fund,
respectively, during the fiscal year ended April 30, 1996. For
services rendered by the Principal Underwriter in connection with
the distribution of Class C shares pursuant to the Plan
applicable to such shares, the Principal Underwriter received
$48,572 and $38,982 with respect to the Class C shares of the
Conservative Investors Fund and the Growth Investors Fund,
respectively, during the fiscal year ended April 30, 1995. For
services rendered by the Principal Underwriter in connection with
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<PAGE>
the distribution of Class C shares pursuant to the Plan
applicable to such shares, the Principal Underwriter received
$15,339 and $11,203 with respect to the Class C shares of the
Conservative Investors Fund and the Growth Investors Fund,
respectively, during the fiscal year ended April 30, 1994.
The Principal Underwriter has informed the Trust that
expenses incurred by it and costs allocated to it in connection
with activities primarily intended to result in the sale of
Class A, Class B, and Class C shares, respectively, were as
follows for the periods indicated:
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<PAGE>
CONSERVATIVE INVESTORS FUND
Amount of Expense and Allocated Cost
Class A Shares Class B Shares Class C Shares
(For the Fiscal (For the Fiscal (For the Fiscal
Category Year ended Year ended Year ended
of Expense April 30, 1996) April 30, 1996) April 30, 1996)
Advertising/
Marketing $40,040 $93,534 $33,464
Printing and
Mailing of
Prospectuses
and Semi-Annual
and Annual
Reports to Other
than Current
Shareholders $5,042 $10,643 $3,998
Compensation to
Underwriters $4,306 $8,367 $2,811
Compensation to
Dealers $70,635 $420,778 $76,990
Compensation to
Sales
Personnel $ 0 $52,913 $ 0
Interest, Carrying
and Other
Financing
Charges $44,499 $77,575 $31,932
Other (includes
personnel costs
of those home
office employees
involved in the
distribution effort
and the travel-
related expenses
incurred by the
marketing personnel
conducting seminars $164,522 $705,212 $149,195
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GROWTH INVESTORS FUND
Amount of Expense and Allocated Cost
Class A Shares Class B Shares Class C Shares
(For the Fiscal (For the Fiscal (For the Fiscal
Category Year ended Year ended Year ended
of Expense April 30, 1996) April 30, 1996) April 30, 1996)
__________ ______________ ______________ _______________
Advertising/
Marketing $53,754 $123,355 $21,011
Printing and Mailing $6,380 $16,290 $2,707
of Prospectuses and
Semi-Annual and
Annual Reports
to Other than
Current Shareholders
Compensation to $13,281 $19,468 $2,951
Underwriters
Compensation
to Dealers
Compensation to
Sales Personnel $99,650 $771,272 $65,840
Interest, Carrying $ 0 $ 87,985 $ 0
and Other Financing
Charges
Other (includes
personnel $55,736 $96,088 $19,034
costs of those home
office employees
involved in the
distribution effort
and the travel-related
expenses incurred
by the marketing
personnel conducting
seminars) $228,801 $1,114,458 $111,212
Custodial Arrangements
State Street Bank and Trust Company, 225 Franklin
Street, Boston, MA, 02110 ("State Street Bank") is the Trust's
custodian.
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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 of the Class A shares, Class B shares,
Class C and Advisor Class shares of the Fund, plus reimbursement
for out-of-pocket expenses. The transfer agency fee with respect
to the Class B and Class C shares is higher than that with
respect to the Class A and Advisor Class shares, reflecting the
differential costs associated with the Class B and Class C
contingent deferred sales charge.
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."
General
Shares of the Funds are offered on a continuous basis at
a price equal to their net asset value plus an initial sales
charge at the time of purchase (the "initial sales charge
alternative"), with a contingent deferred sales charge (the
"deferred sales charge alternative"), without any initial sales
charge or, as long as the shares are held for one year or more,
without any contingent deferred sales charge (the "asset-based
sales charge alternative") or, to investors eligible to purchase
Advisor Class shares, without any initial, contingent deferred or
asset-based sales charges, in each case as described below.
Shares of the Funds that are offered subject to a sales charge
are offered on a continuous basis through (i) investment dealers
that are members of the National Association of Securities
Dealers, Inc. and have entered into selected dealer agreements
with the Principal Underwriter ("selected dealers"), (ii)
depository institutions and other financial intermediaries or
their affiliates, that have entered into selected agent
agreements with the Principal Underwriter ("selected agents"), or
(iii) the Principal Underwriter. Investors may purchase and
hold Advisor Class shares of the Fund principally through
(i) accounts established under fee-based programs, 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 sponsor, or its affiliate or agent, or (ii) self-
directed defined contribution employee benefit plans (e.g.,
401(k) plans) that have at least 1,000 participants or $25
million in assets.
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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.
The minimum for initial investments is $250; subsequent
investments (other than reinvestments of dividends and capital
gains distributions in shares) must be in the minimum amount of
$50. As described under "Shareholder Services," the Funds offer
an automatic investment program and a 403(b)(7) retirement plan
which permit investments of $25 or more. The subscriber may use
the Subscription Application found in the Prospectus for his or
her initial investment. Sales personnel of selected dealers and
agents distributing the Funds' shares may receive differing
compensation for selling Class A, Class B, Class C or Advisor
Class shares.
Investors may purchase shares of the Funds in the United
States either through selected dealers or agents or directly
through the Principal Underwriter. Shares may also be sold in
foreign countries where permissible. The Funds may refuse any
order for the purchase of shares. The Funds reserve the right to
suspend the sale of their shares to the public in response to
conditions in the securities markets or for other reasons.
The public offering price of shares of the Funds is
their net asset value, plus, in the case of most purchases of
Class A shares, a sales charge which will vary depending on the
amount of the purchase, as shown in the table in the Prospectus.
On each Fund business day on which a purchase or redemption order
is received by a Fund and trading in the types of securities in
which the Fund invests might materially affect the value of Fund
shares, the per share net asset value is computed in accordance
with the Trust's Agreement and Declaration of Trust and By-Laws
as of the next close of regular trading on the New York Stock
Exchange (the "Exchange") (currently 4:00 p.m. Eastern time) by
dividing the value of the total assets attributable to a class,
less its liabilities, by the total number of its shares then
outstanding. The respective per share net asset values of the
Class A, Class B, Class C and Advisor Class shares are expected
to be substantially the same. Under certain circumstances,
however, the per share net asset values of the Class B and Class
C shares may be lower than the per share net asset value of the
Class A and Advisor Class shares and the per share net asset
value of the Class A shares may be lower than that of the Advisor
Class shares, as a result of the daily expense accruals of the
55
<PAGE>
distribution and transfer agency fees applicable with respect to
those classes of shares. Even under those circumstances, the per
share net asset values of the four classes eventually will tend
to converge immediately after the payment of dividends, which
will differ by approximately the amount of the expense accrual
differential among the classes. A Fund business day is any
weekday, exclusive of national holidays on which the Exchange is
closed and Good Friday. For purposes of this computation, the
securities in a Fund's portfolio are valued at their current
market value determined on the basis of market quotations or, if
such quotations are not readily available, such other methods as
the Trustees believe would accurately reflect fair market value.
The Funds will accept unconditional orders for their
shares to be executed at the public offering price equal to their
net asset value next determined (plus applicable Class A sales
charges). Orders received by the Principal Underwriter prior to
the close of regular trading on the Exchange on each day the
Exchange is open for trading are priced at the net asset value
computed as of the close of regular trading on the Exchange on
that day (plus applicable Class A sales charges). In the case of
orders for purchase of shares placed through selected dealers,
agents or financial representatives, as applicable, the
applicable public offering price will be the net asset value as
so determined, but only if the selected dealer, agent or
financial representative receives the order prior to the close of
regular trading on the Exchange and transmits it to the Principal
Underwriter prior to its close of business that same day
(normally 5:00 p.m. Eastern time). The selected dealer, agent or
financial representative, as applicable, is responsible for
transmitting such orders by 5:00 p.m. If the selected dealer,
agent or financial representative fails to do so, the investor's
right to that day's closing price must be settled between the
investor, and the selected dealer, agent or financial
representatives, as applicable. If the selected dealer, agent or
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 Fund shares, a
shareholder may place orders to purchase additional shares by
telephone if the shareholder has completed the appropriate
portion of the Subscription Application or an "Autobuy"
application obtained by calling the "Literature" telephone number
shown on the cover of this Statement of Additional Information.
Except with respect to certain omnibus accounts, telephone
purchase orders may not exceed $500,000. Payment for shares
purchased by telephone can be made only by Electronic Funds
Transfer from a bank account maintained by the shareholder at a
bank that is a member of the National Automated Clearing House
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<PAGE>
Association ("NACHA"). If a shareholder's telephone purchase
request is received before 3:00 p.m. Eastern time on a Fund
business day, the order to purchase shares is automatically
placed the following Fund business day, and the applicable public
offering price will be the public offering price determined as of
the close of business on such following business day. Full and
fractional shares are credited to a subscriber's account in the
amount of his or her subscription. As a convenience to the
subscriber, and to avoid unnecessary expense to the Fund, share
certificates representing shares of the Fund are not issued
except upon written request to the Fund by the shareholder or his
or her authorized selected dealer or agent. This facilitates
later redemption and relieves the shareholder of the
responsibility for and inconvenience of lost or stolen
certificates. No certificates are issued for fractional shares,
although such shares remain in the shareholder's account on the
books of the Fund.
In addition to the discount or commission amount paid to
dealers or agents, the Principal Underwriter from time to time
pays additional cash bonuses or other incentives to dealers or
agents, including EQ Financial Consultants, Inc., formerly
Equico,("EQ Financial"), an affiliate of the Principal
Underwriter, in connection with the sale of shares of the Funds.
Such additional amounts may be utilized, in whole or in part, to
provide additional compensation to registered representatives who
sell shares of the Funds. On some occasions, such cash or other
incentives will be conditioned upon the sale of a specified
minimum dollar amount of the shares of a Fund and/or other
Alliance Mutual Funds, as defined below, during a specific period
of time. On some occasions, such cash or other incentives may
take the form of payment for attendance at seminars, meals,
sporting events or theater performances, or payment incurred in
connection with travel, lodging and entertainment by persons
associated with a dealer or agent and their immediate family
members to urban or resort locations within or outside the United
States. Such dealer or agent may elect to receive cash
incentives of equivalent amount in lieu of such payments.
Class A, Class B, Class C and Advisor Class shares each
represent an interest in the same portfolio of investments of the
Fund, have the same rights and are identical in all respects,
except that (i) Class A shares bear the expense of the initial
sales charge (or contingent deferred sales charge, when
applicable) and Class B and Class C shares bear the expense of
the deferred sales charge, (ii) Class B shares and Class C shares
each bear the expense of a higher distribution services fee than
do Class A shares, and Advisor Class shares do not bear such a
fee, (iii) Class B and Class C shares bear higher transfer agency
costs than do Class A and Advisor Class shares, (iv) each of
Class A, Class B and Class C has exclusive voting rights with
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<PAGE>
respect to provisions of the Rule 12b-1 Plan pursuant to which
its distribution services fee is paid and other matters for which
separate class voting is appropriate under applicable law,
provided that, if the Fund submits to a vote shareholders an
amendment to the Rule 12b-1 Plan that would materially increase
the amount to be paid thereunder with respect to the Class A
shares, the Class A shareholders and the Class B shareholders
will vote separately by Class, and (v) Class B shares are subject
to a conversion feature. Each class has different exchange
privileges and certain different shareholder service options
available.
Alternative Purchase Arrangements -- Class A, Class B and Class C
Shares**
Class A, Class B and Class C shares have the following
alternative purchase arrangements: Class A shares are sold to
investors choosing the initial sales charge alternative, Class B
shares are sold to investors choosing the deferred sales charge
alternative, and Class C shares are sold to investors choosing
the asset-based sales charge alternative. These alternative
purchase arrangements permit an investor to choose the method of
purchasing shares that is most beneficial given the amount of the
purchase, the length of time the investor expects to hold the
shares, and other circumstances. Investors should consider
whether, during the anticipated life of their investment in a
Fund, the accumulated distribution services fee and contingent
deferred sales charges on Class B shares prior to conversion, or
the accumulated distribution services fee and contingent deferred
sales charge on Class C shares, would be less than the initial
sales charge and accumulated distribution services fee on Class A
shares purchased at the same time, and to what extent such
differential would be offset by the higher return of Class A
shares. Class A shares will normally be more beneficial than
Class B shares to the investor who qualifies for reduced initial
sales charges on Class A shares, as described below. In this
regard, the Principal Underwriter will reject any order (except
orders from certain retirement plans) for more than $250,000 for
Class B shares. Class C shares will normally not be suitable for
the investor who qualifies to purchase Class A shares at net
asset value. For this reason, the Principal Underwriter will
reject any order for more than $5,000,000 for Class C shares.
Class A shares are subject to a lower distribution
services fee and, accordingly, pay correspondingly higher
dividends per share than Class B shares or Class C shares.
However, because initial sales charges are deducted at the time
_________________________
** Advisor Class shares are sold principally to investors
described above in this section under "-- General."
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<PAGE>
of purchase, most investors purchasing Class A shares would not
have all their funds invested initially and, therefore, would
initially own fewer shares. Investors not qualifying for reduced
initial sales charges who expect to maintain their investment for
an extended period of time might consider purchasing Class A
shares because the accumulated continuing distribution charges on
Class B shares or Class C shares may exceed the initial sales
charge on Class A shares during the life of the investment.
Again, however, such investors must weigh this consideration
against the fact that, because of such initial sales charges, not
all their funds will be invested initially.
Other investors might determine, however, that it would
be more advantageous to purchase Class B shares or Class C shares
in order to have all their funds invested initially, although
remaining subject to higher continuing distribution charges and,
being subject to a contingent deferred sales charge for a four-
year and one-year period, respectively. For example, based on
current fees and expenses, an investor subject to the 4.25%
initial sales charge would have to hold his or her investment
approximately seven years for the Class C distribution services
fee to exceed the initial sales charge plus the accumulated
distribution services fee of Class A shares. In this example, an
investor intending to maintain his or her investment for a longer
period might consider purchasing Class A shares. This example
does not take into account the time value of money, which further
reduces the impact of the Class C distribution services fees on
the investment, fluctuations in net asset value or the effect of
different performance assumptions.
Those investors who prefer to have all of their funds
invested initially but may not wish to retain Fund shares for the
period during which Class B shares are subject to a contingent
deferred sales charge may find it more advantageous to purchase
Class C shares.
The Trustees of the Trust have determined that currently
no conflict of interest exists between or among the Class A,
Class B, and Class C shares. On an ongoing basis, the Trustees
of the Trust, pursuant to their fiduciary duties under the 1940
Act and state laws will seek to ensure that no such conflict
arises.
Class A Shares
The public offering price of Class A shares is the net
asset value plus a sales charge, as set forth below:
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Discount or
Commission
As % of to Dealers
As % of the or Agents
Net Public As % of
Amount of Amount Offering Offering
Purchase Invested Price Price
_________ ________ ________ __________
Less than
$100,000 . . . . 4.44% 4.25% 4.00%
$100,000 but
less than
250,000 . . . . 3.36 3.25 3.00
250,000 but
less than
500,000 . . . . 2.30 2.25 2.00
500,000 but
less than
1,000,000*. . . 1.78 1.75 1.50
* There is no initial sales charge on transactions of $1,000,000
or more
With respect to purchases of $1,000,000 or more, Class A
shares redeemed within one year of purchase will be subject to a
contingent deferred sales charge equal to 1% of the lesser of the
cost of the shares being redeemed or their net asset value at the
time of redemption. Accordingly, no sales charge will be imposed
on increases in net asset value above the initial purchase price.
In addition, no charge will be assessed on shares derived from
reinvestment of dividends or capital gains distributions. The
contingent deferred sales charge on Class A shares will be waived
on certain redemptions, and such charge will be applied to
redemptions of shares by shareholders who hold both Class A and
shares of one or more other classes that are subject to a
contingent deferred sales charge, as described below under "--
Class B Shares" and "-- Class C shares." Proceeds from the
contingent deferred sales charge on Class A shares are paid to
the Principal Underwriter and are used by the Principal
Underwriter to defray the expenses of the Principal Underwriter
related to providing distribution-related services to the Funds
in connection with sales of Class A shares, such as the payment
of compensation to selected dealers and agents for selling Class
A Shares. With respect to purchases of $1,000,000 or more made
through selected dealers or agents, the Adviser may, pursuant to
the Rule 12b-1 Plans described above, pay such dealers or agents
from its own resources a fee of up to 1% of the amount invested
to compensate such dealers or agents for their distribution
assistance in connection with such purchases.
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<PAGE>
No initial sales charge is imposed on Class A shares
issued (i) pursuant to the automatic reinvestment of income
dividends or capital gains distributions or (ii) in exchange for
Class A shares of other "Alliance Mutual Funds" (a list of which
appears in "Combined Purchase Privilege" below), except that an
initial sales charge will be imposed on Class A shares issued in
exchange for Class A shares of AFD Exchange Reserves ("AFDER")
that were purchased for cash without the payment of an initial
sales charge and without being subject to a contingent deferred
sales charge. The Funds receive the entire net asset value of
their Class A shares sold to investors. The Principal
Underwriter's commission is the sales charge shown in the
Prospectus less any applicable discount or commission "reallowed"
to selected dealers and agents. The Principal Underwriter will
reallow discounts to selected dealers and agents in the amounts
indicated in the table in the Prospectus. The Principal
Underwriter may, however, elect to reallow the entire sales
charge to selected dealers and agents for all sales with respect
to which orders are placed with the Principal Underwriter. A
selected dealer who receives a reallowance in excess of 90% of
such a sales charge may be deemed to be an "underwriter" under
the Securities Act of 1933, as amended.
Set forth below is an example of the method of computing
the offering price of the Class A shares. The example assumes a
purchase of Class A shares of the Conservative Investors Fund and
of the Growth Investors Fund aggregating less than $100,000
subject to the schedule of sales charges set forth in the
Prospectus at a price based upon the net asset value of Class A
shares of the Fund on April 30, 1996.
Conservative Investors Fund
Net Asset Value per Class A Share
at April 30, 1996 $11.14
Per Share Sales Charge - 4.25%
of offering price (4.40% of net
asset value per share) $ .49
Class A Per Share Offering
Price to the Public $11.63
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Growth Investors Fund
Net Asset Value per Class A Share
at April 30, 1996 $14.08
Per Share Sales Charge - 4.25%
of offering price (4.40% of net
asset value per share) $ .62
Class A Per Share Offering
Price to the Public $14.70
Investors choosing the initial sales charge alternative
may under certain circumstances be entitled to pay (i) no reduced
initial sales charge (but be subject in most cases to a
contingent deferred sales charge) or (ii) a reduced initial sales
charge. The circumstances under which such an investor may pay a
reduced initial sales charge or no initial sales charge are
described below.
Combined Purchase Privilege. Certain persons may
qualify for the sales charge reductions indicated in the schedule
of such charges shown in the Prospectus by combining purchases of
shares of a Fund into a single "purchase," if the resulting
"purchase" totals at least $100,000. The term "purchase" refers
to: (i) a single purchase by an individual, or to concurrent
purchases, which in the aggregate are at least equal to the
prescribed amounts, by an individual, his or her spouse and their
children under the age of 21 years purchasing shares of a Fund
for his, her or their own account(s); (ii) a single purchase by a
trustee or other fiduciary purchasing shares for a single trust,
estate or single fiduciary account although more than one
beneficiary is involved; or (iii) a single purchase for the
employee benefit plans of a single employer. The term "purchase"
also includes purchases by any "company," as that term is defined
in the 1940 Act, but does not include purchases by any such
company which has not been in existence for at least six months
or which has no purpose other than the purchase of shares of a
Fund or shares of other registered investment companies at a
discount. The term "purchase" does not include purchases by any
group of individuals whose sole organizational nexus is that the
participants therein are credit card holders of a company, policy
holders of an insurance company, customers of either a bank or
broker-dealer or clients of an investment adviser. A "purchase"
may also include shares, purchased at the same time through a
single selected dealer or agent, of any other Alliance Mutual
Fund. Currently, the Alliance Mutual Funds include:
AFD Exchange Reserves
Alliance All-Asia Investment Fund, Inc.
Alliance Balanced Shares, Inc.
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<PAGE>
Alliance Bond Fund, Inc.
-Corporate Bond Portfolio
-U.S. Government Portfolio
Alliance Developing Markets Fund, Inc.
Alliance Global Dollar Government Fund, Inc.
Alliance Global Small Cap Fund, Inc.
Alliance Global Strategic Income Trust, Inc.
Alliance Growth and Income Fund, Inc.
Alliance Income Builder Fund, Inc.
Alliance International Fund
Alliance Limited Maturity Government Fund, Inc.
Alliance Mortgage Securities Income Fund, Inc.
Alliance Multi-Market Strategy Trust, Inc.
Alliance Municipal Income Fund, Inc.
-California Portfolio
-Insured California Portfolio
-Insured National Portfolio
-National Portfolio
-New York Portfolio
Alliance Municipal Income Fund II
-Arizona Portfolio
-Florida Portfolio
-Massachusetts Portfolio
-Michigan Portfolio
-Minnesota Portfolio
-New Jersey Portfolio
-Ohio Portfolio
-Pennsylvania Portfolio
-Virginia Portfolio
Alliance New Europe Fund, Inc.
Alliance North American Government Income Trust, Inc.
Alliance Premier Growth Fund, Inc.
Alliance Quasar Fund, Inc.
Alliance Short-Term Multi-Market Trust, Inc.
Alliance Technology Fund, Inc.
Alliance Utility Income Fund, Inc.
Alliance World Income Trust, Inc.
Alliance Worldwide Privatization Fund, Inc.
The Alliance Fund, Inc.
The Alliance Portfolios.
-Alliance Growth Fund
-Alliance Conservative Investors Fund
-Alliance Growth Investors Fund
-Alliance Strategic Balanced Fund
-Alliance Short-Term U.S. Government Fund
Prospectuses for the Alliance Mutual Funds may be
obtained without charge by contacting Alliance Fund Services,
Inc. at the address or the "Literature" telephone number shown on
the front cover of this Statement of Additional Information.
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<PAGE>
Cumulative Quantity Discount (Right of Accumulation).
An investor's purchase of additional Class A shares of a Fund may
qualify for a Cumulative Quantity Discount. The applicable sales
charge will be based on the total of:
(i) the investor's current purchase;
(ii) the net asset value (at the close of business on
the previous day) of (a) all Class A, Class B and
Class C shares of the Fund held by the investor and
(b) all shares of any other Alliance Mutual Fund
held by the investor; and
(iii) the net asset value of all shares described in
paragraph (ii) owned by another shareholder
eligible to combine his or her purchase with that
of the investor into a single "purchase" (see
above).
For example, if an investor owned shares of an Alliance
Mutual Fund worth $200,000 at their then current net asset value
and, subsequently, purchased Class A shares of the Fund worth an
additional $100,000, the initial sales charge for the $100,000
purchase would be at the rate applicable to a single $300,000
purchase of shares of the Fund.
To qualify for the Combined Purchase Privilege or to
obtain the Cumulative Quantity Discount on a purchase through a
selected dealer or agent, the investor or selected dealer or
agent must provide the Principal Underwriter with sufficient
information to verify that each purchase qualifies for the
privilege or discount.
Statement of Intention. Class A investors may also
obtain the reduced initial sales charges shown in the Prospectus
by means of a written Statement of Intention, which expresses the
investor's intention to invest not less than $100,000 within a
period of 13 months in Class A shares (or Class A, Class B, Class
C and/or Advisor Class shares) of a Fund or any other Alliance
Mutual Fund. Each purchase of shares under a Statement of
Intention will be made at the public offering price or prices
applicable at the time of such purchase to a single transaction
of the dollar amount indicated in the Statement of Intention. At
the investor's option, a Statement of Intention may include
purchases of shares of a Fund or any other Alliance Mutual Fund
made not more than 90 days prior to the date that the investor
signs the Statement of Intention; however, the 13-month period
during which the Statement of Intention is in effect will begin
on the date of the earliest purchase to be included.
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<PAGE>
Investors qualifying for the Combined Purchase Privilege
described above may purchase shares of the Alliance Mutual Funds
under a single Statement of Intention. For example, if at the
time an investor signs a Statement of Intention to invest at
least $100,000 in Class A shares of a Fund, the investor and the
investor's spouse each purchase shares of the Fund worth $20,000
(for a total of $40,000), it will be necessary to invest only a
total of $60,000 during the following 13 months in shares of the
Fund or any other Alliance Mutual Fund to qualify for the initial
sales charge on the total amount being invested, i.e., the
initial sales charge applicable to an investment of $100,000.
The Statement of Intention is not a binding obligation
upon the investor to purchase the full amount indicated. The
minimum initial investment under a Statement of Intention is 5%
of such amount. Shares purchased with the first 5% of such
amount will be held in escrow (while remaining registered in the
name of the investor) to secure payment of the higher initial
sales charge applicable to the shares actually purchased if the
full amount indicated is not purchased, and such escrowed shares
will be involuntarily redeemed to pay the additional sales
charge, if necessary. Dividends on escrowed shares, whether paid
in cash or reinvested in additional Fund shares, are not subject
to escrow. When the full amount indicated has been purchased,
the escrow will be released. To the extent that an investor
purchases more than the dollar amount indicated on the Statement
of Intention and qualifies for a further reduced sales charge,
the initial sales charge will be adjusted for the entire amount
purchased at the end of the 13-month period. The difference in
the initial sales charge will be used to purchase additional
shares of a Fund subject to the rate of sales charge applicable
to the actual amount of the aggregate purchases.
Investors wishing to enter into a Statement of Intention
in conjunction with their initial investment in Class A shares of
a Fund should complete the appropriate portion of the
Subscription Application found in the Prospectus while current
Class A shareholders desiring to do so can obtain a form of
Statement of Intention by contacting Alliance Fund Services, Inc.
at the address or telephone numbers shown on the cover of this
Statement of Additional Information.
Certain Retirement Plans. Multiple participant payroll
deduction retirement plans may also purchase shares of a Fund or
any other Alliance Mutual Fund at a reduced initial sales charge
on a monthly basis during the 13-month period following such a
plan's initial purchase. The initial sales charge applicable to
such initial purchase of shares of a Fund will be that normally
applicable, under the schedule of the initial sales charges set
forth above, to an investment 13 times larger than such initial
purchase. The sales charge applicable to each succeeding monthly
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<PAGE>
purchase will be that normally applicable, under such schedule,
to an investment equal to the sum of (i) the current month's
purchase multiplied by the number of months (including the
current month) remaining in the 13-month period, and (ii) the
total purchase previously made during the 13-month period. Sales
charges previously paid during such period will not be
retroactively adjusted on the basis of later purchases.
Reinstatement Privilege. A shareholder who has caused
any or all of his or her Class A or Class B shares of a Fund to
be redeemed or repurchased may reinvest all or any portion of the
redemption or repurchase proceeds in Class A shares of the Fund
at net asset value without any sales charge, provided that
(i) such reinvestment is made within 120 calendar days after the
redemption or repurchase date, and (ii) for Class B shares, a
contingent deferred sales charge has been paid and the Principal
Underwriter has approved, at its discretion, the reinstatement of
such shares. Shares are sold to a reinvesting shareholder at the
net asset value next determined as described above. A
reinstatement pursuant to this privilege will not cancel the
redemption or repurchase transaction; therefore, any gain or loss
so realized will be recognized for Federal tax purposes except
that no loss will be recognized to the extent that the proceeds
are reinvested in shares of the Fund. The reinstatement
privilege may be used by the shareholder only once, irrespective
of the number of shares redeemed or repurchased, except that the
privilege may be used more than once in connection with
transactions whose sole purpose is to transfer a shareholder's
interest in a Fund to his or her individual retirement account or
other qualified retirement plan account. Investors may exercise
the reinstatement privilege by written request sent to a Fund at
the address shown on the cover of this Statement of Additional
Information.
Sales at Net Asset Value. The Funds may sell their
Class A shares at net asset value (i.e., without any initial
sales charge), and without any contingent deferred sales charge
to certain categories of investors including: (i) investment
advisory clients of the Adviser or its affiliates; (ii) officers
and present or former Trustees of the Trust; present or former
directors and trustees of other investment companies managed by
the Adviser; present or retired full-time employees of the
Adviser; officers, directors and present or retired full-time
employees of ACMC, the Principal Underwriter, Alliance Fund
Services, Inc. and their affiliates; officers, directors and
present and full-time employees of selected dealers or agents; or
the spouse, sibling, direct ancestor or direct descendant
(collectively "relatives") of any such person; or any trust,
individual retirement account or retirement plan account for the
benefit of any such person or relative; or the estate of any such
person or relative, if such shares are purchased for investment
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<PAGE>
purposes (such shares may not be resold except to the relevant
Fund); (iii) the Adviser, Principal Underwriter, Alliance Fund
Services, Inc. and their affiliates; certain employee benefit
plans for employees of the Adviser, the Principal Underwriter,
Alliance Fund Services, Inc. and their affiliates; (iv) persons
participating in a fee-based program, sponsored and maintained by
a registered broker-dealer and approved by the Principal
Underwriter, pursuant to which such persons pay an asset-based
fee to such broker-dealer, or its affiliate or agent, for service
in the nature of investment advisory or administrative services;
(v) persons who establish to the Principal Underwriter's
satisfaction that they are investing in the Fund, within such
time period as may be designated by the Principal Underwriter,
proceeds of their redemption of shares of such other registered
investment companies as may be designated from time to time by
the Principal Underwriter; and (vi) employer-sponsored qualified
pension or profit-sharing plans (including Section 401(k) plans),
custodial accounts maintained pursuant to Section 403(b)(7)
retirement plans and individual retirement accounts (including
individual retirement accounts to which simplified employee
pension (SEP) contributions are made), if such plans or accounts
are established or administered under programs sponsored by
administrators or other persons that have been approved by the
Principal Underwriter.
Class B Shares
Investors purchase Class B shares at the public offering
price equal to the net asset value per share of the Class B
shares on the date of purchase without the imposition of a sales
charge at the time of purchase. The Class B shares are sold
without an initial sales charge so that the Funds will receive
the full amount of the investor's purchase payment.
Proceeds from the contingent deferred sales charge on
the Class B shares are paid to the Principal Underwriter and are
used by the Principal Underwriter to defray the expenses of the
Principal Underwriter related to providing distribution-related
services to the Funds in connection with the sale of the Class B
shares, such as the payment of compensation to selected dealers
and agents for selling Class B shares. The combination of the
contingent deferred sales charge and the distribution services
fee enables the Funds to sell Class B shares without a sales
charge being deducted at the time of purchase. The higher
distribution services fee incurred by Class B shares will cause
such shares to have a higher expense ratio and to pay lower
dividends than those related to Class A shares.
Contingent Deferred Sales Charge. Class B shares which
are redeemed within four years of purchase will be subject to a
contingent deferred sales charge at the rates set forth below
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charged as a percentage of the dollar amount subject thereto.
The charge will be assessed on an amount equal to the lesser of
the cost of the shares being redeemed or their net asset value at
the time of redemption. Accordingly, no sales charge will be
imposed on increases in net asset value above the initial
purchase price. In addition, no charge will be assessed on shares
derived from reinvestment of dividends or capital gains
distributions.
To illustrate, assume that an investor purchased 100
Class B shares at $10 per share (at a cost of $1,000) and in the
second year after purchase the net asset value per share is $12
and, during such time, the investor has acquired 10 additional
Class B shares upon dividend reinvestment. If at such time the
investor makes his or her first redemption of 50 Class B shares
(proceeds of $600), 10 Class B shares will not be subject to
charge because of dividend reinvestment. With respect to the
remaining 40 Class B shares, the charge is applied only to the
original cost of $10 per share and not to the increase in net
asset value of $2 per share. Therefore, $400 of the $600
redemption proceeds will be charged at a rate of 3.0% (the
applicable rate in the second year after purchase, as set forth
below).
The amount of the contingent deferred sales charge, if
any, will vary depending on the number of years from the time of
payment for the purchase of Class B shares until the time of
redemption of such shares.
Contingent Deferred Sales Charge as a % of Dollar Amount
Shares Purchased
On or After
Years since Shares Purchased August 2, 1993 Shares Purchased
Purchase Before but Before On or After
Subject to Change August 2, 1993 November 19, 1993 November 19, 1993
First 5.00% 5.50% 4.00%
Second 4.00% 4.50% 3.00%
Third 3.00% 3.50% 2.00%
Fourth 2.00% 2.50% 1.00%
Fifth 1.00% 1.50% None
Sixth None .50% None
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In determining the contingent deferred sales charge
applicable to a redemption, it will be assumed that the
redemption is first of any shares in the shareholder's Fund
account that are not subject to a contingent deferred sales
charge, second of Class B shares held for over four years, third
of any Class C shares that are not subject to a contingent
deferred sales charge and fourth of any Class A shares that are
subject to a contingent deferred sales charge held shortest
during the one-year period during which such shares are subject
to the sales charge, as the case may be. When Class B shares
acquired in an exchange are redeemed, the applicable contingent
deferred sales charge and conversion schedules will be the
schedules that applied to Class B shares of the Alliance Mutual
Fund originally purchased by the shareholder at the time of their
purchase.
The contingent deferred sales charge is waived on
redemptions of shares (i) following the death or disability, as
defined in the Internal Revenue Code of 1986, as amended (the
"Code"), of a shareholder, (ii) to the extent that the redemption
represents a minimum required distribution from an individual
retirement account or other retirement plan to a shareholder who
has attained the age of 70-1/2, (iii) that had been purchased by
present or former Trustees of the Trust, by the relative of any
such person, by any trust, individual retirement account or
retirement plan account for the benefit of any such person or
relative, or by the estate of any such person or relative, or
(iv) pursuant to a systematic withdrawal plan (see "Shareholder
Services - Systematic Withdrawal Plan" below).
Conversion Feature. Class B shares will automatically
convert to Class A shares on the tenth Fund business day in the
month following the month in which the eighth anniversary date of
the acceptance of the purchase order for the Class B shares
occurs and such shares will no longer be subject to a higher
distribution services fee. Such conversions will be on the basis
of the relative net asset values of the two classes, without the
imposition of any sales load, fee or other charge. The purpose
of the conversion feature is to reduce the distribution services
fee paid by holders of Class B shares that have been outstanding
long enough for the Principal Underwriter to have been
compensated for distribution expenses incurred in the sale of
such shares. See "Shareholder Services -- Exchange Privilege."
For purposes of conversion to Class A shares, Class B
shares purchased through the reinvestment of dividends and
distributions paid in respect of Class B shares in a
shareholder's account will be considered to be held in a separate
sub-account. Each time any Class B shares in the shareholder's
account (other than those in the sub-account) convert to Class A
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shares, an equal pro-rata portion of the Class B shares in the
sub-account will also convert to Class A.
The conversion of Class B shares to Class A shares is
subject to the continuing availability of an opinion of counsel
to the effect that (i) the assessment of the higher distribution
services fee and transfer agency costs with respect to Class B
shares does not result in a Fund's dividends or distributions
constituting "preferential dividends" under the Code, and
(ii) the conversion of Class B shares to Class A shares does not
constitute a taxable event under federal income tax law. The
conversion of Class B shares to Class A shares may be suspended
if such an opinion is no longer available at the time such
conversion is to occur. In that event, no further conversions of
Class B shares would occur, and shares might continue to be
subject to the higher distribution services fee for an indefinite
period.
Class C Shares
Investors purchase Class C shares at the public offering
price equal to the net asset value per share of the Class C
shares on the date of purchase without the imposition of a sales
charge either at the time of purchase or upon redemption. Class
C shares are sold without an initial sales charge so that a Fund
will receive the full amount of the investor's purchase payment
and, as long as the shares are held for one year or more, the
investor will receive as proceeds upon redemption the entire net
asset value of his or her Class C shares. The Class C
distribution services fee enables a Fund to sell Class C shares
without either an initial or contingent deferred sales charge, as
long as the shares are held for one year or more. Class C shares
do not convert to any other class of shares and incur higher
distribution services fees than Class A shares. Class C shares
will thus have a higher expense ratio and pay correspondingly
lower dividends than Class A shares.
Class C shares that are redeemed within one year of
purchase will be subject to a contingent deferred sales charge of
1%, charged as a percentage of the lesser of their original cost
or their net asset value at the time of redemption. Accordingly,
no sales charge will be imposed on increases in net asset value
above the initial purchase price. In addition, no charge will be
assessed on shares derived from reinvestment of dividends or
capital gains distributions. The contingent deferred sales
charge on Class C shares will be waived on certain redemptions,
and will be applied to redemptions of shares by shareholders who
hold both Class C shares and shares of one or more other classes
subject to a contingent deferred sales charge as described above
under "--Class B Shares."
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Proceeds from the contingent deferred sales charge are
paid to the Principal Underwriter and are used by the Principal
Underwriter to defray the expenses of the Principal Underwriter
related to providing distribution-related services to the Fund in
connection with the sale of the Class C shares, such as the
payment of compensation to selected dealers and agents for
selling Class C shares. The combination of the contingent
deferred sales charge and the distribution services fee enables
the Fund to sell the Class C shares without a sales charge being
deducted at the time of purchase. The higher distribution
services fee incurred by Class C shares will cause such shares to
have a higher expense ratio and to pay lower dividends than Class
A shares.
REDEMPTION AND REPURCHASE OF SHARES
The following information supplements that set forth in
the Funds' Prospectus under the heading "Purchase and Sale of
Share--How to Sell Shares." If you are an Advisor Class
shareholder through an account established under a fee-based
program, your fee-based program may impose requirements with
respect to the purchase, sale or exchange of Advisor Class shares
that are different from those described herein. A transaction
fee may be charged by your financial representative with respect
to the purchase, sale or exchange of Advisor Class shares made
through such financial representative.
Redemption
Subject only to the limitations described below, the
Funds will redeem the shares tendered to them, as described
below, at a redemption price equal to their net asset value as
next computed following the receipt of shares tendered for
redemption in proper form. Except for any contingent deferred
sales charge which may be applicable to Class A shares, Class B
shares or Class C shares, there is no redemption charge. Payment
of the redemption price will be made within seven days after a
Fund's receipt of such tender for redemption. If a shareholder
has any questions regarding what documents are required by his or
her fee-based program or employee benefit plan, the shareholder
should contact his or her financial representative.
The right of redemption may not be suspended or the date
of payment upon redemption postponed for more than seven days
after shares are tendered for redemption, except for any period
during which the Exchange is closed (other than customary weekend
and holiday closings) or during which the 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
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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 shares on redemption or repurchase
may be more or less than the cost of such shares to the
shareholder, depending upon the market value of a Fund's
portfolio securities at the time of such redemption or
repurchase. Redemption proceeds on Class A shares, Class B
shares and Class C shares will reflect the deduction of the
contingent deferred sales charge, if any. Payment (either in cash
or in portfolio securities) received by a shareholder upon
redemption or repurchase of his shares, assuming the shares
constitute capital assets in his hands, will result in long-term
or short-term capital gains (or loss) depending upon the
shareholder's holding period and basis in respect of the shares
redeemed.
To redeem shares of a Fund for which no share
certificates have been issued, the registered owner or owners
should forward a letter to the Fund containing a request for
redemption. The signature or signatures on the letter must be
guaranteed by an institution that is an "eligible guarantor" as
defined in Rule 17Ad-15 under the Securities Exchange Act of
1934, as amended.
Telephone Redemption By Electronic Funds Transfer. Each
Fund shareholder is entitled to request redemption by electronic
funds transfer, once in any 30 day period(except for certain
omnibus accounts) of shares for which no share certificates have
been issued by telephone at (800) 221-5672 by a shareholder who
has completed the appropriate portion of the Subscription
Application or, in the case of an existing shareholder, an
"Autosell" application obtained from Alliance Fund Services, Inc.
A telephone redemption request 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 noted below, each Fund shareholder is
eligible to request redemption by check, once in any 30-day
period, of Fund shares for which no share 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
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shareholder's address of record. Telephone redemption by check
is not available with respect to shares (i) for which
certificates have been issued, (ii) held in nominee or "street
name" accounts, (iii) 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.
General. During periods of drastic economic or market
developments, such as the market break of October 1987, it is
possible that shareholders would have difficulty in reaching
Alliance Fund Services, Inc. by telephone (although no such
difficulty was apparent at any time in connection with the 1987
market break). If a shareholder were to experience such
difficulty, the shareholder should issue written instructions to
Alliance Fund Services, Inc. at the address shown on the cover of
this Statement of Additional Information. The Funds reserve the
right to suspend or terminate their telephone redemption service
at any time without notice. Neither the Funds nor the Adviser,
the Principal Underwriter or Alliance Fund Services, Inc. will be
responsible for the authenticity of telephone requests for
redemptions that a Fund reasonably believes to be genuine.
Alliance Fund Services, Inc. will employ reasonable procedures in
order to verify that telephone requests for redemptions are
genuine, including, among others, recording such telephone
instructions and causing written confirmations of the resulting
transactions to be sent to shareholders. If Alliance Fund
Services, Inc. did not employ such procedures, it could be liable
for losses arising from unauthorized or fraudulent telephone
instructions. Selected dealers or agents may charge a commission
for handling telephone requests for redemptions.
To redeem shares of the Funds represented by share
certificates, the investor should forward the appropriate share
certificate or certificates, endorsed in blank or with blank
stock powers attached, to the relevant Fund with the request that
the shares represented thereby, or a specified portion thereof,
be redeemed. The stock assignment form on the reverse side of
each share certificate surrendered to the Fund for redemption
must be signed by the registered owner or owners exactly as the
registered name appears on the face of the certificate or,
alternatively, a stock power signed in the same manner may be
attached to the share certificate or certificates or, where
tender is made by mail, separately mailed to the relevant Fund.
The signature or signatures on the assignment form must be
guaranteed in the manner described above.
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Repurchase
The Funds may repurchase shares through the Principal
Underwriter, selected financial intermediaries or selected
dealers or agents. The repurchase price will be the net asset
value next determined after the Principal Underwriter receives
the request (less the contingent deferred sales charge, if any,
with respect to the Class A, Class B and Class C shares), except
that requests placed through selected dealers or agents before
the close of regular trading on the Exchange on any day will be
executed at the net asset value determined as of such close of
regular trading on that day if received by the Principal
Underwriter prior to its close of business on that day (normally
5:00 p.m. Eastern time). The financial intermediary, selected
dealer or agent is responsible for transmitting the request to
the Principal Underwriter by 5:00 p.m. If the financial
intermediary or selected dealer or agent fails to do so, the
shareholder's right to receive that day's closing price must be
settled between the shareholder and the dealer or agent. A
shareholder may offer shares of a Fund to the Principal
Underwriter either directly or through a selected dealer or
agent. Neither the Funds nor the Principal Underwriter charges a
fee or commission in connection with the repurchase of shares
(except for the contingent deferred sales charge, if any, with
respect to Class A, Class B and Class C shares). Normally, if
shares of the Funds are offered through a financial intermediary,
selected dealer or agent, the repurchase is settled by the
shareholder as an ordinary transaction with or through the
selected dealer or agent, who may charge the shareholder for this
service. The repurchase of shares of the Funds as described
above is a voluntary service of the Funds and the Funds may
suspend or terminate this practice at any time.
General
The Funds reserve the right to close out an account that
through redemption has remained below $200 for 90 days.
Shareholders will receive 60 days' written notice to increase the
account value before the account is closed. No contingent
deferred sales charge will be deducted from the proceeds of this
redemption. In the case of a redemption or repurchase of shares
of the Funds recently purchased by check, redemption proceeds
will not be made available until the relevant Fund is reasonably
assured that the check has cleared, normally up to 15 calendar
days following the purchase date.
SHAREHOLDER SERVICES
The following information supplements that set forth in
the Funds' Prospectus under the heading "Purchase and Sale of
Shares--Shareholder Services." The shareholder services set
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forth below are applicable to Class A, Class B, Class C and
Advisor Class shares unless otherwise indicated. If you are an
Advisor Class shareholder through an account established under a
fee-based program, your fee-based program may impose requirements
with respect to the purchase, sale or exchange of Advisor Class
shares of the Fund that are different from those described
herein. A transaction fee may be charged by your financial
representative with respect to the purchase, sale or exchange of
Advisor Class shares made through such financial representative.
Automatic Investment Program
Investors may purchase shares of the Funds through an
automatic investment program utilizing "pre-authorized check"
drafts drawn on the investor's own bank account. Under such a
program, pre-authorized monthly drafts for a fixed amount (at
least $25) are used to purchase shares through the selected
dealer or selected agent designated by the investor at the public
offering price next determined after the Principal Underwriter
receives the proceeds from the investor's bank. Drafts may be
made in paper form or, if the investor's bank is a member of the
NACHA, in electronic form. If made in paper form, the draft is
normally made on the 20th day of each month, or the next business
day thereafter. If made in electronic form, drafts can be made
on or about a date each month selected by the shareholder.
Investors wishing to establish an automatic investment program in
connection with their initial investment should complete the
appropriate portion of the Subscription Application found in the
Prospectus. Current shareholders should contact Alliance Fund
Services, Inc. at the address or telephone numbers shown on the
cover of this Statement of Additional Information to establish an
automatic investment program.
Exchange Privilege
You may exchange your investment in the Funds for shares
of the same class of other Alliance Mutual Funds (including AFD
Exchange Reserves, a money market fund managed by Alliance). In
addition, present Directors or Trustees of any Alliance Mutual
Fund may exchange Class A shares of any Alliance Mutual Fund for
Advisor Class shares of any other Alliance Mutual Fund, including
the Fund. If you make an exchange for shares of AFD Exchange
Reserves, you may exchange the shares of AFD Exchange Reserves
received in return only for shares of the Fund. Exchanges of
shares are made at the net asset value next determined after
receipt of a properly completed exchange request and 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.
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Shares will continue to age without regard to exchanges
for purpose of determining the CDSC, if any, upon redemption and,
in the case of Class B shares, for the purpose of conversion to
Class A shares. After an exchange, your Class B shares will
automatically convert to Class A shares in accordance with the
conversion schedule applicable to the Class B shares of the
Alliance Mutual Fund you originally purchased for cash ("original
shares"). When redemption occurs, the CDSC applicable to the
original shares is applied.
Please read carefully the prospectus of the mutual fund
into which you are exchanging before submitting the request.
Call 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.
All exchanges are subject to the minimum investment
requirements and any other applicable terms set forth in the
Prospectus for the Alliance Mutual Fund whose shares are being
acquired. An exchange is effected through the redemption of the
shares tendered for exchange and the purchase of shares being
acquired at their respective net asset values as next determined
following receipt by the Alliance Mutual Fund whose shares are
being exchanged of (i) proper instructions and all necessary
supporting documents as described in such fund's prospectus, or
(ii) a telephone request for such exchange in accordance with the
procedures set forth in the following paragraph. Exchanges
involving the redemption of shares recently purchased by check
will be permitted only after the Alliance Mutual Fund whose
shares have been tendered for exchange is reasonably assured that
the check has cleared, normally up to 15 calendar days following
the purchase date. Exchanges of shares of Alliance Mutual Funds
will generally result in the realization of a capital gain or
loss for Federal income tax purposes.
Each Fund shareholder, and the shareholder's selected
dealer, agent or financial representative, as applicable, are
authorized to make telephone requests for exchanges unless
Alliance Fund Services, Inc. receives written instruction to the
contrary from the shareholder, or the shareholder declines the
privilege by checking the appropriate box on the Subscription
Application found in the Prospectus. Such telephone requests
cannot be accepted with respect to shares then represented by
share certificates. Shares acquired pursuant to a telephone
request for exchange will be held under the same account
registration as the shares redeemed through such exchange.
Eligible shareholders desiring to make an exchange
should telephone Alliance Fund Services, Inc. with their account
number and other details of the exchange at (800) 221-5672 before
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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
transactions to be sent to shareholders. If Alliance Fund
Services, Inc. did not employ such procedures, it could be liable
for losses arising from unauthorized or fraudulent telephone
instructions. Selected dealers, agents or financial
representatives, as applicable, may charge a commission for
handling telephone requests for exchanges.
The exchange privilege is available only in states where
shares of the Alliance Mutual Funds being acquired may be legally
sold. Each Alliance Mutual Fund reserves the right, at any time
on 60 days' notice to its shareholders to modify, restrict or
terminate the exchange privilege.
Retirement Plans
The Funds may be a suitable investment vehicle for part
or all of the assets held in various types of retirement plans,
such as those listed below. The Funds have available forms of
such plans pursuant to which investments can be made in a Fund
and other Alliance Mutual Funds. Persons desiring information
concerning these plans should contact Alliance Fund Services,
Inc. at the "Literature" telephone number on the cover of this
Statement of Additional Information, or write to:
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Alliance Fund Services, Inc.
Retirement Plans
P.O. Box 1520
Secaucus, New Jersey 07096-1520
Individual Retirement Account ("IRA"). Individuals who
receive compensation, including earnings from self-employment,
are entitled to establish and make contributions to an IRA.
Taxation of the income and gains paid to an IRA by a Fund is
deferred until distribution from the IRA. An individual's
eligible contribution to an IRA will be deductible if neither the
individual nor his or her spouse is an active participant in an
employer-sponsored retirement plan. If the individual or his or
her spouse is an active participant in an employer-sponsored
retirement plan, the individual's contributions to an IRA may be
deductible, in whole or in part, depending on the amount of the
adjusted gross income of the individual and his or her spouse.
Employer-Sponsored Qualified Retirement Plans. Sole
proprietors, partnerships and corporations may sponsor qualified
money purchase pension and profit-sharing plans, including
Section 401(k) plans ("qualified plans"), under which annual tax-
deductible contributions are made within prescribed limits based
on compensation paid to participating individuals.
If the aggregate net asset value of shares of the
Alliance Mutual Funds held by a qualified plan investing through
the Alliance Premier Retirement Program reaches $5 million on or
before December 15 in any year, all Class B shares or Class C
shares of the Fund held by such plan can be exchanged, without
any sales charge, for Class A shares of such Fund shortly before
the end of the calendar year in which the $5 million level is
attained. The Fund waives any contingent deferred sales charge
applicable to redemptions of Class B shares by qualified plans
investing through the Alliance Premier Retirement Program.
Simplified Employee Pension Plan ("SEP"). Sole
proprietors, partnerships and corporations may sponsor a SEP
under which they make annual tax-deductible contributions to an
IRA established by each eligible employee within prescribed
limits based on employee compensation.
403(b)(7) Retirement Plan. Certain tax-exempt
organizations and public educational institutions may sponsor
retirements plans under which an employee may agree that monies
deducted from his or her compensation (minimum $25 per pay
period) may be contributed by the employer to a custodial account
established for the employee under the plan.
The Alliance Plans Division of Frontier Trust Company, a
subsidiary of The Equitable Life Assurance Society of the United
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States, which serves as custodian or trustee under the retirement
plan prototype forms available from the Funds, charges certain
nominal fees for establishing an account and for annual
maintenance. A portion of these fees is remitted to Alliance
Fund Services, Inc. as compensation for its services to the
retirement plan accounts maintained with a Fund.
Distributions from retirement plans are subject to
certain Code requirements in addition to normal redemption
procedures. For additional information please contact Alliance
Fund Services, Inc.
Dividend Direction Plan
A shareholder who already maintains, in addition to his
or her Class A, Class B, Class C or Advisor Class Fund account, a
Class A, Class B, Class C or Advisor Class account(s) with one or
more other Alliance Mutual Funds may direct that income dividends
and/or capital gains paid on his or her Class A, Class B, Class C
or Advisor Class Fund shares be automatically reinvested, in any
amount, without the payment of any sales or service charges, in
shares of the same class of such other Alliance Mutual Fund(s).
Further information can be obtained by contacting Alliance Fund
Services, Inc. at the address or the "Literature" telephone
number shown on the cover of this Statement of Additional
Information. Investors wishing to establish a dividend direction
plan in connection with their initial investment should complete
the appropriate section of the Subscription Application found in
the Prospectus. Current shareholders should contact Alliance
Fund Services, Inc. to establish a dividend direction plan.
Systematic Withdrawal Plan
General. Any shareholder who owns or purchases shares
of a Fund having a current net asset value of at least $4,000
(for quarterly or less frequent payments), $5,000 (for bi-monthly
payments) or $10,000 (for monthly payments) may establish a
systematic withdrawal plan under which the shareholder will
periodically receive a payment in a stated amount of not less
than $50 on a selected date. Systematic withdrawal plan
participants must elect to have their dividends and distributions
from a Fund automatically reinvested in additional shares of that
Fund.
Shares of a Fund owned by a participant in the Fund's
systematic withdrawal plan will be redeemed as necessary to meet
withdrawal payments and such withdrawal payments will be subject
to any taxes applicable to redemptions and, except as discussed
below, any applicable contingent deferred sales charge. Shares
acquired with reinvested dividends and distributions will be
liquidated first to provide such withdrawal payments and
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thereafter other shares will be liquidated to the extent
necessary, and depending upon the amount withdrawn, the
investor's principal may be depleted. A systematic withdrawal
plan may be terminated at any time by the shareholder or the
relevant Fund.
Withdrawal payments will not automatically end when a
shareholder's account reaches a certain minimum level.
Therefore, redemptions of shares under the plan may reduce or
even liquidate a shareholder's account and may subject the
shareholder to a Fund's involuntary redemption provisions. See
"How to Sell Shares -- General." Purchases of additional shares
concurrently with withdrawals are undesirable because of sales
charges when purchases are made. While an occasional lump-sum
investment may be made by a shareholder of Class A shares who is
maintaining a systematic withdrawal plan, such investment should
normally be an amount equivalent to three times the annual
withdrawal or $5,000, whichever is less.
Payments under a systematic withdrawal plan may be made
by check or electronically via the Automated Clearing House
("ACH") network. Investors wishing to establish a systematic
withdrawal plan in conjunction with their initial investment in
shares of a Fund should complete the appropriate portion of the
Subscription Application found in the Prospectus, while current
Fund shareholders desiring to do so can obtain an application
form by contacting Alliance Fund Services, Inc. at the address or
the "Literature" telephone number shown on the cover of this
Statement of Additional Information.
Class B and Class C CDSC Waiver . Under a systematic
withdrawal plan, up to 1% monthly, 2% bi-monthly or 3% quarterly
of the value at the time of redemption of the Class B shares in a
shareholder's account acquired after July 1, 1995 and the Class C
shares in a shareholder's account acquired on or after July 1,
1996 may be redeemed free of any contingent deferred sales
charge. Class B shares acquired on or after October 17, 1995 and
Class C shares acquired on or after July 1, 1996 that are not
subject to a contingent deferred sales charge (such as shares
acquired with reinvested dividends or distributions or shares
held beyond the period during which shares are subject to a
contingent deferred sales charge) will be redeemed first and will
count toward these limitations. Remaining Class B shares
acquired after July 1, 1995 that have been held the longest and
remaining Class C shares acquired on or after July 1, 1996 that
have been held the longest will be redeemed next. Redemptions of
Class B shares acquired after July 1, 1995 and Class C shares
acquired on or after July 1, 1996 in excess of the foregoing
limitations and redemptions of Class B shares acquired before
July 1, 1995 will be subject to any otherwise applicable
contingent deferred sales charge.
80
<PAGE>
Statements and Reports
Each shareholder receives semi-annual and annual reports
which include a portfolio of investments, financial statements
and, in the case of the annual report, the report of the Trust's
independent auditors, Price Waterhouse LLP, as well as a
confirmation of each purchase and redemption. By contacting his
or her broker or Alliance Fund Services, Inc., a shareholder can
arrange for copies of his or her account statements to be sent to
another person.
NET ASSET VALUE
The net asset value of a share of each class is the
quotient obtained by dividing the value, as of such closing, of
the net assets of the Fund allocable to that class (i.e., the
value of the assets of the Fund allocated to that class less the
liabilities of the Fund allocated to that class, including
expenses payable or accrued) by the total number of shares of
such class then outstanding at such closing.
For purposes of this computation, readily marketable
portfolio securities, including open short positions, listed on
the Exchange are valued at the last sale price reflected on the
consolidated tape at the close of the Exchange on the business
day as of which such value is being determined. If there has
been no sale on such day, then the security is valued at the mean
of the closing bid and asked prices on such day. If no bid and
asked prices are quoted on such day, then the security is valued
by such method as the Board of Trustees of the Trust shall
determine in good faith to reflect its fair market value.
Securities not listed on the Exchange but listed on other
national securities exchanges or admitted to trading on the
National Association of Securities Dealers Automatic Quotations,
Inc. ("NASDAQ") National List ("List") are valued in like manner.
Portfolio securities traded on more than one national
securities exchange are valued at the last sale price on the
business day as of which such value is being determined as
reflected on the tape at the close of the exchange representing
the principal market for such securities. Securities traded only
in the over-the-counter market, excluding those admitted to
trading on the List, are valued at the mean of the current bid
and asked prices therefor as reported by NASDAQ or, in the case
of securities not quoted by NASDAQ, the National Quotation Bureau
or such other comparable sources as the Board of Trustees of the
Trust deems appropriate to reflect the fair market value thereof.
Call options written or purchased by a Fund are valued at the
last sale price and put options purchased by a Fund are valued at
the last sale price. Readily marketable fixed-income securities
may be valued on the basis of prices provided by a pricing
81
<PAGE>
service when such prices are believed by the Adviser to reflect
the fair market value of such securities. The prices provided by
a pricing service take into account institutional size trading in
similar groups of securities and any developments related to
specific securities. U.S. Government Securities and other debt
instruments having 60 days or less remaining until maturity are
stated at amortized cost if their original maturity was 60 days
or less, or by amortizing their fair value as of the 61st day
prior to maturity if their original term to maturity exceeded 60
days (unless in either case the Board of Trustees of the Trust
determines that this method does not represent fair value). All
other assets, including restricted securities of a Fund, are
valued in such manner as the Board of Trustees of the Trust in
good faith deems appropriate to reflect their fair market value.
The Trustees may suspend the determination of a Fund's
net asset value (and the offering and sales of shares), subject
to the rules of the SEC and other governmental rules and
regulations, at a time when: (1) the Exchange is closed, other
than customary weekend and holiday closings, (2) an emergency
exists as a result of which it is not reasonably practicable for
a Fund to dispose of securities owned by it or to determine
fairly the value of its net assets, or (3) for the protection of
shareholders, the SEC by order permits a suspension of the right
of redemption or a postponement of the date of payment on
redemption.
The assets belonging to the Class A shares, the Class B
shares, the Class C shares and Advisor Class shares will be
invested together in a single portfolio.
DIVIDENDS, DISTRIBUTIONS AND TAXES
Each Fund intends to qualify for tax treatment as a
"regulated investment company" under the Internal Revenue Code
for each taxable year. In order to qualify as a regulated
investment company, each Fund must, among other things,
(1) derive at least 90% of its gross income from dividends,
interest, payments with respect to securities loans, and gains
from the sale or other disposition of stock or securities,
foreign currencies or other income (including gains from options,
futures or forward contracts) derived with respect to its
business of investing in stock, securities or currencies,
(2) derive less than 30% of its gross income from the sale or
other disposition of stock, securities, options, futures, forward
contracts, and certain foreign currencies (or options, futures,
or forward contracts on foreign currencies held for less than
three months), and (3) diversify its holdings so that at the end
of each quarter of its taxable year (i) at least 50% of the
market value of the Fund's assets is represented by cash or cash
items, U.S. Government Securities, securities of other regulated
82
<PAGE>
investment companies, and other securities limited, in respect of
any one issuer, to an amount not greater than 5% of the value of
the Fund's assets and 10% of the outstanding voting securities of
such issuer, and (ii) not more than 25% of the value of its
assets is invested in the securities of any one issuer (other
than U.S. Government Securities or the securities of other
regulated investment companies) or of two or more issuers that
the Fund controls and that are engaged in the same, similar, or
related trades or businesses. These requirements may restrict
the degree to which the Fund may engage in short-term trading and
limit the range of the Fund's investments. If a Fund qualifies
as a regulated investment company, it will not be subject to
federal income tax on the part of its income distributed to
shareholders, provided the Fund distributes during its taxable
year at least (a) 90% of its taxable net investment income
(generally, dividends, interest, certain other income, and the
excess, if any, of net short-term capital gain over net long-term
loss), and (b) 90% of the excess of (i) its tax-exempt interest
income less (ii) certain deductions attributable to that income.
Each Fund intends to make sufficient distributions to
shareholders to meet this requirement. Investors should consult
their own counsel for a complete understanding of the
requirements the Funds must meet to qualify for such treatment.
The information set forth in the Prospectus and the following
discussion relates solely to Federal income taxes on dividends
and distributions by a Fund and assumes that each Fund qualifies
as a regulated investment company. Investors should consult
their own counsel for further details and for the application of
state and local tax laws to his or her particular situation.
Dividends out of net ordinary income and distributions
of net short-term capital gains are taxable to shareholders as
ordinary income. The dividends-received deduction for
corporations should also be applicable to a Fund's dividends of
net investment income. The amount of such dividends and
distributions eligible for the dividends-received deduction is
limited to the amount of dividends from domestic corporations
received by a Fund during the fiscal year. Furthermore,
provisions of the tax law disallow the dividends-received
deduction to the extent a corporation's investment in shares of a
Fund is financed with indebtedness.
The excess of net long-term capital gains over the net
short-term capital losses realized and distributed by a Fund to
its shareholders as capital gains distributions will not be
taxable to the Fund but will be taxable to the shareholders as
long-term capital gains, irrespective of the length of time a
shareholder may have held his Fund shares. Capital gains
distributions are not eligible for the dividends-received
deduction referred to above. Any dividend or distribution
received by a shareholder on shares of the Fund shortly after the
83
<PAGE>
purchase of such shares by him or her will have the effect of
reducing the net asset value of such shares by the amount of such
dividend or distribution. A loss on the sale of shares held for
less than six months will be treated as a long-term capital loss
for Federal income tax purposes to the extent of any capital gain
distribution made with respect to such shares.
Dividends and distributions are taxable in the manner
described above regardless of whether they are paid to the
shareholder in cash or are reinvested in additional shares of a
Fund.
For Federal income tax purposes, when equity call
options which a Fund has written expire unexercised, the premiums
received by the Fund give rise to short-term capital gains at the
time of expiration. When a call written by a Fund is exercised,
the selling price or purchase price of stock is increased by the
amount of the premium, and the gain or loss on the sale of stock
becomes long-term or short-term depending on the holding period
of the stock. There may be short-term gains or losses associated
with closing purchase transactions.
Each Fund is required to withhold and remit to the U.S.
Treasury 31% of all dividend income paid to any shareholder
account for which an incorrect or no taxpayer identification
number has been provided or where the Fund is notified that the
shareholder has under-reported income in the past (or the
shareholder fails to certify that he or she is not subject to
such withholding). In addition, the Fund will be required to
withhold and remit to the U.S. Treasury 31% of the amount of the
proceeds of any redemption of shares of a shareholder account for
which an incorrect or no taxpayer identification number has been
provided.
The foregoing discussion relates only to U.S. Federal
income tax law as it affects U.S. shareholders. The effects of
Federal income tax law on non-U.S. shareholders may be
substantially different. Foreign investors should consult their
counsel for further information as to the U.S. tax consequences
of receipt of income from a Fund.
GENERAL INFORMATION
Description of the Trust
The Trust is organized as a Massachusetts business trust
under the laws of The Commonwealth of Massachusetts by an
Agreement and Declaration of Trust ("Declaration of Trust") dated
March 26, 1987, a copy of which is on file with the Secretary of
State of The Commonwealth of Massachusetts. The Trust is a
"series" company as described in Rule 18f-2 under the 1940 Act,
84
<PAGE>
having five separate portfolios, each of which is represented by
a separate series of shares. In addition to the Funds, the other
portfolios of the Trust are the Alliance Short-Term U.S.
Government Fund, the Alliance Growth Fund and the Alliance
Strategic Balanced Fund.
The Declaration of Trust permits the Trustees to issue
an unlimited number of full and fractional shares of each series
and of each class of shares thereof. The shares of each Fund and
each class thereof do not have any preemptive rights. Upon
termination of any Fund or any class thereof, whether pursuant to
liquidation of the Trust or otherwise, shareholders of that Fund
or that class are entitled to share pro rata in the net assets of
that Fund or that class then available for distribution to such
shareholders.
The assets received by the Trust for the issue or sale
of the Class A, Class B, Class C shares and Advisor Class of each
Fund and all income, earnings, profits, losses and proceeds
therefrom, subject only to the rights of creditors, are allocated
to, and constitute the underlying assets of, the appropriate
class of that Fund. The underlying assets of each Fund and each
class of shares thereof are segregated and are charged with the
expenses with respect to that Fund and that class and with a
share of the general expenses of the Trust. While the expenses
of the Trust are allocated to the separate books of account of
each Fund and each class of shares thereof, certain expenses may
be legally chargeable against the assets of all Funds or a
particular class of shares thereof.
The Declaration of Trust provides for the perpetual
existence of the Trust. The Trust or any Fund, however, may be
terminated at any time by vote of at least a majority of the
outstanding shares of each Fund affected. The Declaration of
Trust further provides that the Trustees may also terminate the
Trust upon written notice to the shareholders.
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 August 15, 1996:
85
<PAGE>
Names and Addresses % of Class
Conservative Investors Fund - Class C
Alliance Plan Div/FTC
C/F Jack S. Hoffman IRA
Rollover Account.......................... 5.52%
224 Windsor Drive
Mineral Wells, WV 26250-9623
Merrill Lynch
Mutual Fund Operations
4800 Deer Lake Dr. East 3rd Floor
Jacksonville, FL 32246-6486............. 9.55%
Growth Investors Fund - Class A
Trust for Profit Sharing Plan
for Employees of ACMC L.P. ................ 8.05%
1345 Avenue of the Americas
New York, NY 10105-0302
Growth Investors Fund - Class C
Merrill Lynch
Mutual Fund Operations
4800 Deer Lake Dr. East 3rd Floor
Jacksonville, FL 32246-6486............... 7.38%
Voting Rights
As summarized in the Prospectus, shareholders are
entitled to one vote for each full share held (with fractional
votes for fractional shares held) and will vote (to the extent
provided herein) in the election of Trustees and the termination
of the Trust or a Fund and on other matters submitted to the vote
of shareholders.
The By-Laws of the Trust provide that the shareholders
of any particular series or class shall not be entitled to vote
on any matters as to which such series or class is not affected.
Except with respect to matters as to which the Trustees have
determined that only the interests of one or more particular
series or classes are affected or as required by law, all of the
shares of each series or class shall, on matters as to which such
series or class is entitled to vote, vote with other series or
classes so entitled as a single class. Notwithstanding the
foregoing, with respect to matters which would otherwise be voted
on by two or more series or classes as a single class, the
Trustees may, in their sole discretion, submit such matters to
86
<PAGE>
the shareholders of any or all such series or classes,
separately. Rule 18f-2 under the 1940 Act provides in effect
that a series shall be deemed to be affected by a matter unless
it is clear that the interests of each series in the matter are
substantially identical or that the matter does not affect any
interest of such series. Although not governed by Rule 18f-2,
shares of each class of a Fund will vote separately with respect
to matters pertaining to the respective Distribution Plans
applicable to each class.
The terms "shareholder approval" and "majority of the
outstanding voting securities" as used in the Prospectus and this
Statement of Additional Information mean the lesser of (i) 67% or
more of the shares of the applicable Fund or applicable class
thereof represented at a meeting at which more than 50% of the
outstanding shares of such Fund or such class are represented or
(ii) more than 50% of the outstanding shares of such Fund or such
class.
There will normally be no meetings of shareholders for
the purpose of electing Trustees except that in accordance with
the 1940 Act (i) the Trust will hold a shareholders' meeting for
the election of Trustees at such time as less than a majority of
the Trustees holding office have been elected by shareholders,
and (ii) if, as a result of a vacancy on the Board of Trustees,
less than two-thirds of the Trustees holding office have been
elected by the shareholders, that vacancy may only be filled by a
vote of the shareholders. The Funds' shares have non-cumulative
voting rights, which means that the holders of more than 50% of
the shares voting for the election of Trustees can elect 100% of
the Trustees if they choose to do so, and in such event the
holders of the remaining less than 50% of the shares voting for
such election of Trustees will not be able to elect any person or
persons to the Board of Trustees. A special meeting of
shareholders for any purpose may be called by 10% of the Trust's
outstanding shareholders.
Except as set forth above, the Trustees shall continue
to hold office and may appoint successor Trustees.
No amendment may be made to the Declaration of Trust
without the affirmative vote of a majority of the outstanding
shares of the Trust except (i) to change the Trust's name,
(ii) to establish, change or eliminate the par value of shares or
(iii) to supply any omission, cure any ambiguity or cure, correct
or supplement any defective or inconsistent provision contained
in the Declaration of Trust.
87
<PAGE>
Shareholder and Trustee Liability
Under Massachusetts law shareholders could, under
certain circumstances, be held personally liable for the
obligations of the Trust. However, the Declaration of Trust
disclaims shareholder liability for acts or obligations of the
Trust and requires that notice of such disclaimer be given in
each agreement, obligation, or instrument entered into or
executed by the Trust or the Trustees. The Declaration of Trust
provides for indemnification out of a Fund's property for all
loss and expense of any shareholder of that Fund held liable on
account of being or having been a shareholder. Thus, the risk of
a shareholder incurring financial loss on account of shareholder
liability is limited to circumstances in which the Fund of which
he was a shareholder would be unable to meet its obligations.
The Declaration of Trust further provides that the
Trustees will not be liable for errors of judgment or mistakes of
fact or law. However, nothing in the Declaration of Trust
protects a Trustee against any liability to which the Trustee
would otherwise be subject by reason of willful misfeasance, bad
faith, gross negligence, or reckless disregard of the duties
involved in the conduct of his office. The By-Laws of the Trust
provide for indemnification by the Trust of the Trustees and the
officers of the Trust but no such person may be indemnified
against any liability to the Trust or the Trust's shareholders to
which he would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of
the duties involved in the conduct of his office.
Counsel
Legal matters in connection with the issuance of the
shares of the Funds offered hereby are passed upon by Ropes &
Gray, One International Place, Boston, Massachusetts 02110.
Independent Accountants
The financial statements of the Conservative Investors
Fund and Growth Investors Fund for the fiscal year ended
April 30, 1996, which are included in this Statement of
Additional Information, have been audited by Price Waterhouse
LLP, 1177 Avenue of the Americas, New York, New York 10036, the
Trust's independent auditors for such period, as stated in their
report appearing herein, and have been so included in reliance
upon such report given upon the authority of that firm as experts
in accounting and auditing.
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<PAGE>
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 shares 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 Conservative Investors and Growth Investors Funds
was 7.90% and 18.57%, respectively, for the one-year period ended
April 30, 1996. The average annual compounded total return for
Class A shares of the Conservative Investors and Growth Investors
Funds was 6.22% and 11.10%, respectively, for the period May 4,
1992 (commencement of distribution of Class A shares) through
April 30, 1996. The average annual compounded total return for
Class B shares of the Conservative Investors and Growth Investors
Funds was 7.95% and 19.06%, respectively, for the one year period
ended April 30, 1996. The average annual compounded total return
for Class B shares of the Conservative Investors and Growth
Investors Funds was 6.42% and 11.31%, respectively, for the
period May 4, 1992 (commencement of distribution of Class B
shares) through April 30, 1996. The average annual compounded
total return for Class C shares of the Conservative Investors and
Growth Investors Funds was 11.84% and 23.04% respectively, for
the one-year period ended April 30, 1996. The average annual
compounded total return for Class C shares of the Conservative
Investors and Growth Investors Funds was 4.50% and 9.62%,
respectively, for the period August 2, 1992 (commencement of
distribution of Class C shares) through April 30, 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.
89
<PAGE>
Advertisements quoting performance rankings of a Fund as
measured by financial publications or by independent
organizations such as Lipper Analytical Services, Inc. and
Morningstar, Inc., and advertisements presenting the historical
performance of such Fund, may also from time to time be sent to
investors or placed in newspapers and magazines such as The New
York Times, The Wall Street Journal, Barrons, Investor's Daily,
Money Magazine, Changing Times, Business Week and Forbes or other
media on behalf of such Fund.
Additional Information
This Statement of Additional Information does not
contain all the information set forth in the Registration
Statement filed by the Trust with the SEC under the Securities
Act of 1933. Copies of the Registration Statement may be obtained
at a reasonable charge from the SEC or may be examined, without
charge, at the offices of the SEC in Washington, D.C.
90
00250184.AJ7
PORTFOLIO OF INVESTMENTS
APRIL 30, 1996 ALLIANCE GROWTH INVESTORS FUND
_______________________________________________________________________________
COMPANY SHARES VALUE
- -------------------------------------------------------------------------
COMMON STOCKS & OTHER INVESTMENTS-73.2%
UNITED STATES INVESTMENTS-58.7%
CONSUMER NONCYCLICALS-17.0%
ADVERTISING-0.2%
Ha Lo Ind., Inc.* 3,500 $ 119,000
Outdoor Systems, Inc. 2,300 52,900
-----------
171,900
APPAREL & TEXTILES-0.3%
Gucci Group N.V.* 2,400 130,500
Nautica Enterprises, Inc.* 1,600 74,400
Tommy Hilfiger Corp.* 1,900 86,450
-----------
291,350
BEVERAGES-0.9%
PepsiCo., Inc. 10,600 673,100
Whitman Corp. 6,600 166,650
-----------
839,750
BIOTECHNOLOGY-1.9%
Amgen, Inc.* 17,500 1,006,250
Centocor, Inc.* 17,000 680,000
GelTex Pharmaceuticals, Inc.* 2,700 63,450
Liposome Co., Inc.* 2,600 63,700
Medimmune, Inc.* 3,800 62,700
-----------
1,876,100
BROADCASTING-2.6%
American Radio Systems Corp. Cl.A* 2,200 74,250
Cablevision Systems Corp. Cl.A* 11,000 548,625
Heritage Media Corp. Cl.A* 2,300 88,262
Infinity Broadcasting Corp.* 3,150 91,350
TCI Group Series A* 46,000 879,750
Tele-Communications, Inc.-Liberty Media Cl.A* 15,050 411,994
Valuevision International, Inc. Cl.A* 8,800 69,300
Viacom, Inc. Cl.B* 7,836 321,276
-----------
2,484,807
COSMETICS-0.6%
Gillette Co. 10,000 540,000
Estee Lauder Cos., Inc. Cl.A 2,300 84,238
-----------
624,238
DRUGS, HOSPITAL SUPPLIES & MEDICAL SERVICES-6.7%
Advanced Tissue Sciences, Inc.* 4,100 70,213
Amsco International, Inc.* 15,000 217,500
Baxter International, Inc. 7,000 309,750
Columbia/HCA Healthcare Corp. 10,000 531,250
Community Health Systems, Inc.* 1,800 78,075
Coventry Corp.* 5,900 114,312
Healthsource, Inc.* 20,000 682,500
Heartport, Inc.* 800 28,600
Merck & Co., Inc. 15,000 907,500
Ornda HealthCorp* 5,500 151,250
Pfizer, Inc. 16,500 1,136,437
Respironics, Inc.* 3,600 78,694
RoTech Medical Corp.* 2,000 83,000
Summit Technology, Inc.* 11,750 210,031
U.S. Healthcare, Inc. 5,000 260,625
United Healthcare Corp. 12,000 702,000
Value Health, Inc.* 15,000 436,875
Warner-Lambert Co. 4,000 447,000
-----------
6,445,612
ENTERTAINMENT & LEISURE-0.7%
Walt Disney Co. 10,270 636,740
FOOD PROCESSING-0.3%
Nabisco Holdings Corp. Cl.A 9,650 295,531
HOUSEHOLD PRODUCTS-0.7%
Colgate-Palmolive Co. 8,330 638,286
9
PORTFOLIO OF INVESTMENTS (CONTINUED) ALLIANCE GROWTH INVESTORS FUND
_______________________________________________________________________________
COMPANY SHARES VALUE
- -------------------------------------------------------------------------
PRINTING & PUBLISHING-0.1%
Applied Graphics Technologies* 5,100 $ 68,213
TOBACCO-2.0%
Philip Morris Cos., Inc. 22,000 1,982,750
-----------
16,355,277
TECHNOLOGY-14.8%
ADVERTISING-0.1%
Clear Channel Communications* 1,400 94,850
AEROSPACE & DEFENSE-0.5%
Boeing Co. 6,500 533,813
COMMUNICATIONS EQUIPMENT-0.9%
Andrew Corp.* 1,700 81,600
Cable Design Technologies Corp.* 700 23,100
DSC Communications Corp.* 13,000 409,500
Motorola, Inc. 6,000 367,500
-----------
881,700
COMPUTER HARDWARE-1.4%
BMC Industries, Inc. 4,700 125,725
Ceridian Corp.* 10,000 477,500
Cognex Corp.* 500 13,375
Digital Equipment Corp.* 3,000 179,250
Hewlett-Packard Co. 3,500 370,562
Optical Data Systems, Inc.* 2,900 79,387
Xircom, Inc.* 4,700 75,788
-----------
1,321,587
COMPUTER NETWORKING SOFTWARE-1.1%
3Com Corp.* 18,000 830,250
Bay Networks, Inc.* 8,000 252,000
-----------
1,082,250
COMPUTER PERIPHERALS-0.8%
Exabyte Corp.* 4,600 80,500
Seagate Technology, Inc.* 10,000 580,000
Western Digital Corp.* 2,900 68,150
-----------
728,650
COMPUTER SERVICES-1.9%
First Data Corp. 15,000 1,140,000
General Motors Corp. Cl.E 13,000 732,875
-----------
1,872,875
COMPUTER SOFTWARE-3.3%
Cadence Design Systems, Inc.* 1,700 88,825
cisco Systems, Inc.* 14,000 726,250
Hyperion Software Corp.* 4,900 61,250
Informix Corp.* 33,000 870,375
Metatools, Inc.* 300 8,400
Microsoft Corp.* 200 22,675
Oracle Systems Corp.* 21,450 723,937
Planning Sciences International Plc. (ADR)* 100 2,413
SCB Computer Technology, Inc.* 2,900 76,850
Sterling Software, Inc.* 6,300 489,825
Triple P.N.V.* 5,900 50,150
Wonderware Corp.* 2,600 58,500
-----------
3,179,450
ELECTRICAL EQUIPMENT-0.6%
General Electric Co. 7,000 542,500
Kemet Corp.* 2,400 57,300
-----------
599,800
SEMI-CONDUCTOR COMPONENTS-1.4%
Altera Corp.* 12,500 659,375
Atmel Corp.* 16,000 640,000
Teradyne, Inc.* 1,000 20,500
-----------
1,319,875
10
ALLIANCE GROWTH INVESTORS FUND
_______________________________________________________________________________
COMPANY SHARES VALUE
- -------------------------------------------------------------------------
SEMI-CONDUCTORS & RELATED-0.5%
Intel Corp. 7,000 $ 474,250
TELECOMMUNICATIONS-1.5%
Air-Touch Communications, Inc.* 11,000 343,750
Cellular Communications, Inc.* 1,000 52,437
CommNet Cellular, Inc.* 2,500 82,500
Cox Communications, Inc. Cl.A* 7,500 153,750
Digi International Inc.* 10,000 282,500
Intelcom Group, Inc.* 5,200 104,650
Millicom International Cellular, S.A.* 1,500 70,875
Mobilemedia Corp. Cl.A* 8,400 168,000
Telephone & Data Systems, Inc. 3,900 181,350
-----------
1,439,812
TELEPHONE UTILITY-0.7%
MCI Communications Corp. 20,000 588,750
U.S. Cellular Corp.* 2,300 76,188
-----------
664,938
MISCELLANEOUS-0.1%
ADT, Ltd.* 4,400 74,800
-----------
14,268,650
CREDIT SENSITIVE-10.7%
BANKS-1.6%
Chase Manhattan Corp. 8,000 551,000
First Union Corp. 15,000 922,500
-----------
1,473,500
BROKERAGE & MONEY MANAGEMENT-0.5%
Merrill Lynch & Co., Inc. 7,000 422,625
FINANCIAL SERVICES-0.2%
Money Store, Inc. 1,900 47,975
RAC Financial Group, Inc.* 3,300 101,888
Union Acceptance Corp. Cl.A* 4,900 75,950
-----------
225,813
INSURANCE-7.3%
20th Century Industries, Inc.* 3,500 54,687
Aetna Life & Casualty Co. 25,000 1,781,250
American International Group, Inc. 10,000 913,750
Compdent Corp.* 2,300 101,775
General Reinsurances Corp. 5,000 714,375
MGIC Investment Corp. 15,000 813,750
NAC Re Corp. 16,100 527,275
Penncorp Financial Group, Inc. 2,600 79,625
PMI Group, Inc. 5,000 212,500
Riscorp, Inc.* 4,000 94,500
TIG Holdings, Inc. 17,000 516,375
Travelers Group, Inc. 20,000 1,230,000
-----------
7,039,862
REAL ESTATE-0.2%
JP Realty, Inc. 2,800 55,650
The Macerich Co. 2,600 50,375
Summit Properties, Inc. 2,600 49,725
-----------
155,750
MISCELLANEOUS-0.9%
MBNA Corp. 30,000 851,250
-----------
10,168,800
CONSUMER CYCLICALS-4.7%
AIRLINES-1.2%
America West Airlines, Inc. Cl.B* 3,300 69,300
Delta Airlines, Inc. 5,000 401,875
Mesa Airlines, Inc.* 7,000 85,750
Northwest Airlines Corp. Cl.A* 14,000 637,000
-----------
1,193,925
11
PORTFOLIO OF INVESTMENTS (CONTINUED) ALLIANCE GROWTH INVESTORS FUND
_______________________________________________________________________________
COMPANY SHARES VALUE
- -------------------------------------------------------------------------
AUTO & RELATED-0.3%
Magna International, Inc. 6,290 $ 291,699
AUTO & TRUCKS-0.2%
Allen Group, Inc. 3,600 89,100
Xtra Corp. 1,800 81,900
-----------
171,000
PROFESSIONAL SERVICES-0.1%
Equity Corp. International* 2,500 71,563
RAILROAD TRANSPORTATION-0.2%
Hub Group, Inc. Cl.A* 3,000 69,750
Wisconsin Central Transportation Corp.* 1,100 92,950
-----------
162,700
RESTAURANTS & LODGING-1.8%
ITT Corp.* 13,900 846,162
La Quinta Inns, Inc. 4,900 143,325
Manhattan Bagel, Inc.* 2,500 70,000
McDonald's Corp. 13,640 653,015
Red Lion Hotels, Inc.* 3,500 77,000
-----------
1,789,502
RETAIL-GENERAL-0.8%
Consolidated Stores Corp.* 2,000 72,000
Federated Department
Stores, Inc.* 5,500 183,562
Lowe's Cos., Inc. 11,400 369,075
Nine West Group, Inc.* 2,700 115,763
Williams Sonoma, Inc.* 1,500 37,500
-----------
777,900
RETAIL-TOYS-0.1%
Hasbro, Inc. 2,400 88,200
-----------
4,546,489
BASIC INDUSTRIES-3.8%
APPLIANCES-0.1%
Black & Decker Corp. 2,500 100,625
ENERGY-0.1%
Republic Industries Inc.* 2,000 65,500
ENVIRONMENTAL CONTROL-0.8%
Continental Waste Industries Inc.* 5,000 60,000
United Waste Systems, Inc.* 1,200 66,000
USA Waste Services, Inc.* 10,000 260,000
WMX Technologies, Inc 12,500 434,375
-----------
820,375
MACHINERY-1.3%
Allied-Signal, Inc. 12,000 697,500
Coltec Industries, Inc.* 30,000 390,000
Comverse Technology, Inc.* 2,600 60,775
Pentair, Inc. 2,600 70,850
-----------
1,219,125
MINING & METALS-1.4%
Aluminum Co. of America 6,000 374,250
Century Aluminum Co.* 5,600 82,600
Kaiser Aluminum Corp.* 4,700 62,862
Ucar International, Inc.* 20,400 836,400
-----------
1,356,112
MISCELLANEOUS-0.1%
Oxford Resources Corp. Cl.A* 2,400 70,800
-----------
3,632,537
BASIC MATERIALS-3.6%
BUILDING & RELATED-0.2%
American Standard Cos., Inc* 6,300 177,975
CHEMICALS-2.8%
Cytec Industries, Inc.* 1,100 91,163
Freeport McMoran, Inc. 9,200 335,800
Hercules, Inc. 6,600 399,300
IMC Global, Inc. 5,000 184,375
Monsanto Co. 8,500 1,287,750
Olin Corp. 4,500 398,250
-----------
2,696,638
12
ALLIANCE GROWTH INVESTORS FUND
_______________________________________________________________________________
COMPANY SHARES VALUE
- -------------------------------------------------------------------------
CONTAINERS & PACKAGING-0.4%
Crown Cork & Seal Co., Inc. 8,000 $ 377,000
ENGINEERING & CONSTRUCTION-0.2%
Martin Marietta Materials, Inc. 10,600 242,475
-----------
3,494,088
ENERGY-2.8%
GAS EXPLORATIONS-0.0%
Sonat Offshore Drilling, Inc. 1,400 76,825
OIL & GAS SERVICES-2.8%
BJ Services Co.* 2,100 80,588
Diamond Shamrock, Inc. 2,000 67,750
Exxon Corp. 13,900 1,181,500
Global Marine, Inc.* 6,200 70,525
Louisiana Land & Exploration Co. 9,100 492,537
Mobil Corp. 5,800 667,000
Rowan Companies, Inc.* 4,200 61,950
Schlumberger, Ltd. 700 61,775
Yukong, Ltd. (GDR) 60 647
-----------
2,684,272
-----------
2,761,097
INVESTMENTCOMPANIES-0.9%
MUTUAL FUND-0.9%
India Fund, Inc. 30,000 333,750
Morgan Stanley Asia Pacific Fund 40,000 480,000
rights, expiring 5/08/96* 40,000 27,500
-----------
841,250
DIVERSIFIED-0.3%
AccuStaff, Inc* 2,200 65,450
Petco Animal Supplies, Inc. 2,100 60,375
-----------
125,825
FINANCIAL SERVICES-0.1%
MISCELLANEOUS-0.1%
Romac International, Inc.* 1,700 62,475
Total United States Investments
(cost $50,159,172) 56,256,488
FOREIGN INVESTMENTS-14.5%
AUSTRALIA-0.0%
National Australia Bank, Ltd. 6,000 53,826
Banks
AUSTRIA-0.0%
Austria Mikro Systeme International AG 170 20,672
Semi-Conductor Components
BELGIUM-0.0%
Kredietbank, N.V. 150 42,884
Banks
DENMARK-0.1%
Den Danske Bank 1,500 97,848
Banks
FINLAND-0.8%
Merita 'A' 20,000 42,979
Banks
Nokia AB OY Corp. pfd. 1,900 67,880
Communication Equipment
Nokia Corp. (ADR) 17,500 636,562
Communication Equipment
Orion-Yhtmae OY Cl. B 2,080 57,162
Drugs
-----------
804,583
FRANCE-1.4%
Banque National de Paris 2,400 100,226
Banks
Bouygues 800 81,277
Homebuilders
Cep Communications 300 27,222
Printing & Publishing
Danone 800 120,910
Food
Generale des Eaux 800 87,005
Diversified
GTM Entrepose, S.A. 840 54,131
Homebuilders
Klepierre 200 23,299
Real Estate
13
PORTFOLIO OF INVESTMENTS (CONTINUED) ALLIANCE GROWTH INVESTORS FUND
_______________________________________________________________________________
COMPANY SHARES VALUE
- -------------------------------------------------------------------------
Lafarge, S.A. 900 $ 57,649
Building & Construction
Legris Ind, S.A. 1,200 59,448
Capital Goods-Misc.
Pechiney, S.A. Cl.A 800 37,697
Metals & Mining
Peugeot PSA Peugeot Citroen 740 103,392
Auto & Related
Promodes 110 31,611
Apparel
Salomon, S.A. 70 48,766
Entertainment & Leisure
SIMCO 270 25,811
Real Estate
Societe Francaise d'Invetissements
Immobiliers et de Gestion 500 34,272
Real Estate
Societe Nacionale Elf Aquitaine 1,100 81,806
International Energy
Societe Des Immeubles 560 38,450
Miscellaneous
Societe Television Francaise 500 54,185
Printing, Publishing & Broadcasting
Total, S.A. Cl.B 2,000 135,733
Energy
Union du Credit - Bail Immobilier 600 58,636
Real Estate
Union Immobilier France 470 41,111
Real Estate
Usinor Sacilor 2,700 41,774
Mining & Metals
-----------
1,344,411
GERMANY-0.8%
Bayer A.G. 420 135,254
Chemicals
Deutsche Bank A.G. 1,900 91,059
Banks
Henkel KGaA, pfd. 260 99,693
Financial
Hornbach Holding A.G. pfd. 750 48,011
Building & Related
KL Schanz Beck 150 22,830
Engineering & Construction
KSB A.G. - Vorzug, Pfd. 300 34,195
Machinery
Deutsche Lufthansa A.G. 400 63,440
Airlines
Schmalbach Lubeca A.G. 400 70,808
Containers & Packaging
Suedzucker A.G. 150 70,841
Household Products
Veba A.G. 2,800 139,186
Utility/Electric
-----------
775,317
HONG KONG-0.1%
Hong Kong & China Gas Co., Ltd. (b) 24,000 39,403
Electric & Gas Utility
Hutchison Whampoa, Ltd. 4,000 24,821
Conglomerates
Paul Y-ITC Construction Holdings, Inc.
warrants expiring 3/31/97* 5,000 103
warrants expiring 3/31/98* 5,000 120
Diversified
Swire Pacific, Ltd. Cl.A 6,000 51,192
Conglomerates
-----------
115,639
IRELAND-0.1%
Irish Life Plc. 18,900 73,564
Insurance
Saville Systems Ireland Plc. (ADR)* 1,500 40,875
Computer Software
-----------
114,439
14
ALLIANCE GROWTH INVESTORS FUND
_______________________________________________________________________________
COMPANY SHARES VALUE
- -------------------------------------------------------------------------
ITALY-0.3%
Ente Nazionale Idrocarburi 17,000 $ 73,463
Oil Services
Industrie Natuzzi S.p.A. (ADS) 1,300 67,600
Household Products
La Rinascente S.p.A. 11,000 76,127
Retail
Telecom Italia S.p.A. 40,000 81,562
Telephone Utility
-----------
298,752
JAPAN-6.8%
Amano Corp. 6,000 85,464
Diversified
Asahi Glass Co. 10,000 121,409
Building Materials
Bank of Tokyo, Ltd. 7,000 161,943
Banks
Canon, Inc. 5,000 99,422
Office Equipment
Chiba Bank, Ltd. 4,000 36,136
Banks
Chodai Co., Ltd. 1,000 36,805
Building & Construction
Dai Nippon Printing Co., Ltd. 4,000 75,331
Printing & Publishing
Daifuku Co., Ltd. 4,000 63,094
Industrial Machinery
Daito Trust Construction Co., Ltd. 5,000 74,088
Construction
Daiwa Securities Co., Ltd. 2,000 30,782
Brokerage & Money Management
DDI Corp. 22 189,073
Telecommunications
East Japan Railway Co. 18 96,190
Railroad Transportation
Eisai Co., Ltd. 3,000 59,366
Drugs, Hospital Supplies & Medical Services
Fuji Photo Film Co. 6,000 186,989
Photo & Optical
Furukawa Co., Ltd. 6,000 32,121
Electric & Gas Utility
Hirose Electric Co. 2,000 123,512
Miscellaneous
Hokkaido Takushoku Bank Ltd. 9,000 26,069
Banks
Honda Motor Co. 3,000 68,544
Auto & Related
House Foods Industry 2,000 40,151
Financial
Hoya Corp. 4,000 141,485
Miscellaneous Technology
Ishikawajima-Harima Heavy, Ind. 6,000 29,826
Aerospace
Ito - Yokado Co., Ltd. 1,000 58,984
Retail-General
Japan Securities Finance 6,000 95,215
Brokerage & Money Management
Kamigumi Co., Ltd. 4,000 41,298
Engineering & Construction
Kandenko Co., Ltd. 4,000 54,682
Homebuilders
Kao Corp. 7,000 93,686
Household Products
Kirin Brewery Co., Ltd. 4,000 52,005
Beverages
Kokuyo 1,000 27,723
Miscellaneous
Kuraray Co., Ltd. 7,000 80,971
Textile Products
15
PORTFOLIO OF INVESTMENTS (CONTINUED) ALLIANCE GROWTH INVESTORS FUND
_______________________________________________________________________________
COMPANY SHARES VALUE
- -------------------------------------------------------------------------
Long-Term Credit Bank of Japan 3,000 $ 26,012
Banks
Mabuchi Motor Co. 1,000 61,565
Miscellaneous
Maeda Road Construction Corp. 2,000 36,710
Engineering & Construction
Matsushita Electric Works 5,000 56,881
Building & Related
Matsushita Electric Industrial Co., Ltd. 8,000 141,485
Appliances
Mitsubishi Heavy Industries, Ltd. 8,000 71,431
Industrial Machinery
Mitsubishi Materials Corp. 5,000 30,113
Mining & Metals
Mitsubishi Oil Co. 7,000 63,037
Oil & Gas Services
Mitsui Marine & Fire Insurance Co. 7,000 59,357
Insurance
Mitsui Trust and Banking Co., Ltd. 16,000 192,725
Banks
Mori Seiki Co. 1,000 22,848
Industrial Machinery
National House Industrial Co. 2,000 35,371
Building & Construction
New Oji Paper Co., Ltd. 1,000 9,244
Paper
NGK Insulators 3,000 34,128
Engineering & Construction
Nikko Securities Co., Ltd. 5,000 63,572
Brokerage & Money Management
Nintendo Corp., Ltd. 1,000 77,243
Retail - Toys
Nippon Express Co., Ltd. 6,000 $62,521
Trucking
Nippon Light Metal Co. 6,000 39,004
Mining & Metals
Nippon Paper Industries Co. 5,000 36,614
Paper
Nippon Steel Co. 14,000 50,590
Mining & Metals
Nissen Co. 100 1,740
Retail
Nisshin Steel Co., Ltd. 29,000 128,082
Mining & Metals
NKK Corp. 20,000 62,712
Mining & Metals
Nomura Securities Co., Ltd. 6,000 130,778
Investment Companies
NTT Data Communications Systems 3 104,966
Communications Equipment
Osaka Gas Co. 15,000 60,083
Gas & Pipeline Utilities
Rohm Co. 5,000 318,340
Communications Equipment
Sakura Bank 22,000 258,687
Banks
Sankyo Co. 1,000 24,282
Drugs, Hospital Supplies & Medical Services
Seven-Eleven Japan Co., Ltd. 4,000 283,352
Retail-General
Shimano, Inc. 3,000 61,087
Miscellaneous
Shimizu Corp. 5,000 57,359
Homebuilders
Shiseido Co., Ltd. 5,000 63,094
Cosmetics
Sony Music Entertainment Japan 700 37,943
Entertainment & Leisure
16
ALLIANCE GROWTH INVESTORS FUND
_______________________________________________________________________________
COMPANY SHARES VALUE
- -------------------------------------------------------------------------
Sumitomo Electric Industries 4,000 $ 57,359
Electrical Equipment
Sumitomo Marine & Fire 6,000 57,129
Insurance Co.
Sumitomo Realty and Development Co., Ltd. 8,000 64,395
Real Estate
Sumitomo Rubber Industries 2,000 18,183
Auto & Related
Taisho Pharmaceutical Co. 3,000 65,676
Drugs, Hospital Supplies & Medical Services
Takeda Chemical Industries 2,000 34,606
Drugs
Toagosei Co., Ltd. 3,000 16,777
Chemicals
Tokai Bank 7,000 89,671
Banks
Tokyo Electric Power Co. 6,000 163,472
Electric Utilities
Tokyo Gas Co., Ltd. 28,000 110,014
Gas & Pipeline Utilities
Tokyo Marine and Fire Insurance Co., Ltd. 14,000 192,725
Insurance
Tokyo Steel Mfg. 6,000 121,027
Metals & Mining
Tostem Corp. 3,000 93,208
Building & Related
Tokyo Kanetsu 5,000 27,437
Machinery
Toyota Motor Corp. 9,000 205,631
Auto & Trucks
UBE Industries, Ltd. 6,000 24,722
Mining & Metals
Yakult Honsha Co. 3,000 44,166
Food
Yamanouchi Pharmaceutical Co., Ltd. 3,000 71,125
Drugs, Hospital Supplies & Medical Services
Yamazaki Baking Co., Ltd. 3,000 61,374
Food
-----------
6,564,017
MALAYSIA-0.2%
Kim Hin Industry Berhad warrents,
expiring 5/30/98* 750 529
Building & Construction
Malayan Bank Berhad 5,000 48,731
Banks
Resorts World Berhad 10,000 60,562
Entertainment & Leisure
Telekom Malaysia Berhad 6,000 56,552
Telephone Utility
-----------
166,374
NETHERLANDS-0.5%
AKZO Nobel N.V. 1,010 117,298
Chemicals
Fortis Amev N.V. 1,900 135,722
Insurance
Internationale Nederlanden Groep N.V. 1,800 138,979
Insurance
Koninklijke KNP BT N.V. 2,100 50,125
Paper & Forest Products
Koninklijke Nedlloyd Groep N.V. 3,000 65,830
Shipping
Opg Apoth Cooperative 240 6,784
Drugs
-----------
514,738
NEW ZEALAND-0.1%
Telecom Corp. of New Zealand, Ltd. 13,000 55,190
Telephone Utility
17
PORTFOLIO OF INVESTMENTS (CONTINUED) ALLIANCE GROWTH INVESTORS FUND
_______________________________________________________________________________
COMPANY SHARES VALUE
- -------------------------------------------------------------------------
NORWAY-0.2%
Bergesen D.Y. AS Cl.A. 3,000 $ 53,884
Transportation
Christiana Bank OG Kreditkasse 25,500 55,506
Banks
First Olsen Tanker 12,000 82,197
Transportation
-----------
191,587
SINGAPORE-0.1%
Overseas-Chinese Banking Corp., Ltd. 4,000 54,915
Banks
Overseas Union Banking Corp., Ltd. 400 3,102
Banks
Singapore Press Holdings, Ltd. 2,000 37,843
Printing & Publishing
-----------
95,860
SOUTH KOREA-0.0%
Yukong, Ltd. GDS 22 214
Oil-International
SPAIN-0.3%
BCO Intercon 750 78,891
Banks
Repsol, S.A. 2,100 77,017
Energy
Tabacalera, S.A. Series A 1,650 75,236
Tobacco
Uralita, S.A. 2,200 21,619
Building & Related
-----------
252,763
SWEDEN-0.3%
AB Astra Series A 2,200 97,809
Drugs, Hospital Supplies & Medical Services
Electrolux AB Series B 1,200 60,517
Appliances
Marieberg Tidings Series A 3,000 70,337
Printing & Publishing
Stora Kopparbergs Series B 5,700 76,486
Paper & Forest Products
-----------
305,149
SWITZERLAND-0.6%
Baloise Holdings, Ltd. 40 85,857
Diversified
Ciba-Geigy A.G. 240 278,544
Chemicals
Forbo Holdings A.G. 200 83,602
Building & Related
Nestle, S.A. 125 139,034
Food
-----------
587,037
UNITED KINGDOM-2.1%
Anglian Water Plc. 10,000 87,159
Utilities
B.A.T. Industries Plc. 20,000 151,137
Tobacco
British Airways Plc. 8,000 62,502
Airlines
British Land Co. Plc. 12,600 81,844
Real Estate
British Telecommunications Plc. 11,000 60,357
Telecom Equipment
British Vita 13,100 40,623
Chemicals
BTR Plc. 30,000 144,513
Conglomerates
Enterprise Oil Plc. 12,000 80,837
Oil & Gas Services
General Electric Co. Plc. 20,000 107,933
Electrical Equipment
18
ALLIANCE GROWTH INVESTORS FUND
_______________________________________________________________________________
COMPANY SHARES VALUE
- -------------------------------------------------------------------------
Glaxo Holdings 5,000 $ 60,628
Drugs, Hospital Supplies & Medical Services
Grand Metropolitan Plc. 19,000 124,989
Food
Hazlewood Foods Plc. 16,000 24,326
Food
Hepworth Plc. 21,200 96,219
Building Materials
Holliday Chemical Holdings Plc. 12,000 25,109
Chemicals
Lex Service Plc. 6,000 32,967
Miscellaneous
Marley Plc. 25,000 54,945
Homebuilders
McBride Plc.* 13,800 27,006
Household Products
Mowlem (John) & Co. Plc. 32,000 45,762
Construction
National Power Plc. 6,920 58,387
Electric Utilities
Royal Bank of Scotland Group Plc. 9,000 70,247
Banks
Rugby Group Plc. 45,000 86,708
Building & Related
Sainsbury (J.) Plc. 18,300 100,825
Retail-Food/Drug
Tate & Lyle Plc. 13,800 100,026
Food Processing
The Peninsular & Oriental Steam Navigation Co. 10,000 78,730
Transportation
Vodafone Group Plc. 31,000 123,897
Telecommunication Equipment
SHARES OR
PRINCIPAL
AMOUNT
COMPANY (000) VALUE
- -------------------------------------------------------------------------
Wimpey (George) Plc. 53,200 $ 115,321
Homebuilders
-----------
2,042,997
Total Foreign Investments
(cost $13,891,002) 14,444,297
Total Common Stocks & Other Investments
(cost $64,050,174) 70,700,785
LONG-TERM DEBT SECURITIES-16.8%
CREDIT SENSITIVE-2.9%
Chase Manhattan Corp.
6.25%, 1/15/06 $ 500 463,265
Commercial Credit Group, Inc.
6.125%, 12/01/05 500 461,869
General Instrument Corp.
5.00%, 6/15/00 300 415,875
Prudential Insurance Co. of America
8.10%, 7/15/15(a) 850 835,873
Time Warner Entertainment Co.
8.375%, 3/15/23 650 635,173
-----------
2,812,055
MORTGAGE BACKED SECURITIES-4.6%
Federal National Mortgage Association
6.50%, 6/01/11 2,100 2,033,703
7.00%, 5/01/26 1,800 1,735,308
Government National Mortgage Association
7.50%, 1/15/26 668 660,519
-----------
4,429,530
19
PORTFOLIO OF INVESTMENTS (CONTINUED) ALLIANCE GROWTH INVESTORS FUND
_______________________________________________________________________________
PRINCIPAL
AMOUNT
(000) VALUE
- -------------------------------------------------------------------------
U.S. TREASURY SECURITIES-9.3%
U.S. Treasury Bonds
6.00%, 2/15/26 $1,405 $ 1,248,469
U.S. Treasury Notes
6.50%, 8/15/05 545 537,506
6.75%, 4/30/00 1,050 1,063,944
7.25%, 2/15/98 6,000 6,120,960
-----------
8,970,879
Total Long-Term Debt Securities
(cost $16,510,401) 16,212,464
SHORT-TERM DEBT SECURITIES-8.6%
Federal Home Loan Bank
5.18%, 5/28/96 5,000 4,980,574
Federal Home Loan Mortgage Corp.
5.30%, 5/01/96 3,300 3,300,000
Total Short-Term Debt Securities
(amortized cost $8,280,575) 8,280,574
TOTAL INVESTMENTS -98.6%
(cost $88,841,150) 95,193,823
Other assets less liabilities-1.4% 1,307,843
NET ASSETS-100% $96,501,666
* 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 April 30, 1996,
these securities amounted to $835,873 or 0.9% of net assets.
(b) Warrants attached, expiring 9/30/97.
Glossary of Terms:
ADR - American Depository Receipt
GDR - Global Depository Receipt
See notes to financial statements.
20
PORTFOLIO OF INVESTMENTS
APRIL 30, 1996 ALLIANCE CONSERVATIVE INVESTORS FUND
_______________________________________________________________________________
COMPANY SHARES VALUE
- -------------------------------------------------------------------------
COMMON STOCKS & OTHER INVESTMENTS-31.5%
UNITED STATES INVESTMENTS-24.2%
CONSUMER NONCYCLICALS-7.3%
BEVERAGES-0.5%
PepsiCo, Inc. 3,200 $ 203,200
Whitman Corp. 2,100 53,025
-----------
256,225
BIOTECHNOLOGY-0.6%
Amgen, Inc.* 3,750 215,625
Centocor, Inc.* 2,000 80,000
-----------
295,625
BROADCASTING-0.3%
Tele-Communications, Inc. Liberty Media Cl.A* 5,200 142,350
COSMETICS-0.3%
Gillette Co. 3,000 162,000
ENTERTAINMENT & LEISURE-0.4%
Walt Disney Co. 3,333 206,646
FOOD PROCESSING-0.2%
Nabisco Holdings Corp. Cl.A 3,350 102,594
DRUGS, MEDICAL, HOSPITAL SUPPLIES & SERVICES-2.3%
Amsco International, Inc.* 2,000 29,000
Baxter International, Inc. 3,000 132,750
Columbia/HCA Healthcare Corp. 2,500 132,813
Merck & Co., Inc. 4,000 242,000
Pfizer, Inc. 3,000 206,625
U.S. Healthcare, Inc. 1,000 52,125
United Healthcare Corp. 3,000 175,500
Value Health, Inc.* 5,500 160,187
Warner-Lambert Co. 750 83,813
-----------
1,214,813
HOUSEHOLD PRODUCTS-0.4%
Colgate-Palmolive Co. 2,610 $199,991
TIRE & RUBBER-1.0%
Goodyear Tire & Rubber Co. 10,000 521,250
TOBACCO-1.3%
Loews Corp. 1,000 76,250
Philip Morris Cos., Inc. 6,300 567,787
644,037
-----------
3,745,531
TECHNOLOGY-6.4%
AEROSPACE & DEFENSE-0.2%
Boeing Co. 1,000 82,125
COMMUNICATIONS EQUIPMENT-0.7%
DSC Communications Corp.* 3,900 122,850
Motorola, Inc. 1,825 111,781
Scientific-Atlanta, Inc. 6,250 115,625
-----------
350,256
COMPUTER HARDWARE-0.6%
Ceridian Corp.* 3,500 167,125
Digital Equipment Corp.* 500 29,875
Hewlett-Packard Co. 1,100 116,463
-----------
313,463
COMPUTER NETWORKING SOFTWARE-1.0%
3Com Corp.* 5,500 253,687
Bay Networks, Inc.* 1,500 47,250
cisco Systems, Inc. 4,400 228,250
-----------
529,187
COMPUTER PERIPHERALS-0.1%
Seagate Technology* 1,250 72,500
COMPUTER SERVICES-0.8%
First Data Corp. 2,500 190,000
General Motors Corp. Cl.E 3,500 197,313
-----------
387,313
21
PORTFOLIO OF INVESTMENTS (CONTINUED) ALLIANCE CONSERVATIVE INVESTORS FUND
_______________________________________________________________________________
COMPANY SHARES VALUE
- -------------------------------------------------------------------------
COMPUTER SOFTWARE-1.1%
Informix Corp.* 10,000 $ 263,750
Microsoft Corp.* 100 11,338
Oracle Systems Corp.* 6,450 217,687
Sterling Software, Inc.* 650 50,537
-----------
543,312
ELECTRICAL EQUIPMENT-0.4%
General Electric Co. 3,000 232,500
SEMI-CONDUCTOR COMPONENTS-0.4%
Altera Corp.* 4,000 211,000
SEMI-CONDUCTORS & RELATED-0.3%
Intel Corp. 2,000 135,500
TELECOMMUNICATIONS-0.7%
Air-Touch Communications, Inc.* 3,500 109,375
Mobilemedia Corp. Cl.A* 2,500 50,000
TCI Group Series A* 5,800 110,925
Telephone and Data Systems, Inc. 2,000 93,000
-----------
363,300
TELEPHONE UTILITY-0.1%
MCI Communications Corp. 2,500 73,594
-----------
3,294,050
CREDIT SENSITIVE-3.4%
BANKS-0.9%
Chase Manhattan Corp. 3,000 206,625
First Union Corp. 4,000 246,000
-----------
452,625
BROKERAGE & MONEY MANAGEMENT-0.3%
Merrill Lynch & Co., Inc. 2,600 156,975
INSURANCE-1.8%
Aetna Life & Casualty Co. 750 53,438
General Reinsurance Corp. 1,500 214,312
MGIC Investment Corp. 1,500 81,375
PMI Group, Inc. 1,500 63,750
TIG Holdings, Inc. 2,000 60,750
Transatlantic Holdings, Inc. 1,000 65,500
Travelers Group, Inc. 6,000 369,000
-----------
908,125
MISCELLANEOUS-0.4%
MBNA Corp. 7,000 198,625
U.S. Industries, Inc.* 1,500 31,500
-----------
230,125
-----------
1,747,850
BASIC INDUSTRIES-3.0%
APPLIANCES-0.1%
Black & Decker Corp. 800 32,200
BUILDING MATERIALS-0.0%
American Standard Cos., Inc* 600 16,950
CHEMICALS-1.1%
Freeport McMoran, Inc. 2,000 73,000
Hercules, Inc. 800 48,400
IMC Global, Inc. 1,000 36,875
Monsanto Co. 2,150 325,725
Olin Corp. 750 66,375
-----------
550,375
CONTAINERS & PACKAGING-0.2%
Crown Cork & Seal Co., Inc. 2,000 94,250
ENGINEERING & CONSTRUCTION-0.3%
Martin Marietta Materials, Inc. 4,200 96,075
United Dominion Industries Ltd. 2,500 60,000
-----------
156,075
22
ALLIANCE CONSERVATIVE INVESTORS FUND
_______________________________________________________________________________
COMPANY SHARES VALUE
- -------------------------------------------------------------------------
ENVIRONMENTAL CONTROL-0.5%
WMX Technologies, Inc. 6,600 $ 229,350
MACHINERY-0.5%
Allied-Signal, Inc. 2,700 156,937
Coltec Industries, Inc.* 4,000 52,000
Giddings & Lewis, Inc. 3,400 63,113
-----------
272,050
MINING & METALS-0.3%
Aluminum Co. of America 2,350 146,581
-----------
1,497,831
CONSUMER CYCLICALS-2.1%
AIRLINES-0.2%
Delta Airlines, Inc 750 60,281
Northwest Airlines Corp. Cl.A* 1,000 45,500
-----------
105,781
AUTO & RELATED-0.2%
Magna International, Inc. 2,230 103,416
PHOTO & OPTICAL-0.3%
Eastman Kodak Co. 1,950 149,175
RESTAURANTS & LODGING-0.7%
ITT Corp.* 2,600 158,275
McDonald's Corp. 4,300 205,863
-----------
364,138
RETAIL-GENERAL-0.3%
Federated Department Stores, Inc.* 1,000 33,375
Fingerhut Cos., Inc. 2,000 25,500
Lowes Cos., Inc. 2,800 90,650
-----------
149,525
RETAIL-FOOD/DRUG-0.1%
Revco D.S. Inc.* 3,000 70,875
RETAIL-TOYS-0.0%
Hasbro, Inc. 500 18,375
TRANSPORTATION-0.1%
Xtra Corp. 1,300 59,150
MISCELLANEOUS-0.2%
First Brands Corp. 3,000 79,500
-----------
1,099,935
BUSINESS SERVICES-0.4%
PRINTING, PUBLISHING & BROADCASTING-0.4%
Cablevision Systems Corp. Cl.A* 2,000 99,750
Cox Communications, Inc. Cl.A* 1,000 20,500
Viacom, Inc. Cl.B* 2,562 105,042
-----------
225,292
ENERGY-1.6%
OIL & GAS-1.4%
Atlantic Richfield Co. 1,000 117,750
BJ Services Co.* 600 23,025
Exxon Corp. 4,300 365,500
Louisiana Land & Exploration Co. 1,500 81,188
Mobil Corp. 900 103,500
Schlumberger, Ltd. 200 17,650
-----------
708,613
UTILITY/ELECTRIC-0.2%
Houston Industries, Inc. 5,800 123,975
-----------
1,057,880
Total United States Investments
(cost $11,716,538) 12,443,077
FOREIGN INVESTMENTS-7.3%
AUSTRALIA-0.1%
National Australia Bank, Ltd. 4,200 37,678
Banks
23
PORTFOLIO OF INVESTMENTS (CONTINUED) ALLIANCE CONSERVATIVE INVESTORS FUND
_______________________________________________________________________________
COMPANY SHARES VALUE
- -------------------------------------------------------------------------
FINLAND-0.2%
Nokia Corp. (ADR) 3,100 $ 112,762
Communications Equipment
FRANCE-0.7%
Bouygues 700 71,118
Home Builders
Generale des Eaux 1,100 119,632
Diversified
Societe Television Francaise 700 75,859
Printing, Publishing & Broadcasting
Total, S.A., Cl.B 1,600 108,586
Energy
-----------
375,195
GERMANY-0.7%
Bayer A.G. 400 128,813
Chemicals
Deutsche Bank A.G. 2,100 100,645
Banks
Veba A.G. 2,400 119,302
Utility/Electric
-----------
348,760
HONG KONG-0.2%
Hong Kong & China Gas Co., Ltd. (a) 18,000 29,552
Electric & Gas Utility
Hutchison Whampoa, Ltd. 5,000 31,026
Conglomerates
Swire Pacific, Ltd. Cl. A 4,000 34,128
Conglomerates
-----------
94,706
JAPAN-2.9%
Canon, Inc. 6,000 119,306
Office Equipment
Fuji Bank Ltd. 5,000 109,459
Banks
Fuji Photo Film Co. 4,000 124,660
Photo & Optical
Hitachi, Ltd. 8,000 86,420
Electrical Equipment
Honda Motor Co. 5,000 114,239
Auto & Related
Ito-Yokado Co., Ltd. 2,000 117,968
Retailing-General
Kirin Brewery Co., Ltd. 8,000 104,010
Beverages
Matsushita Electric Industrial Co., Ltd. 6,000 106,114
Appliances
Nomura Securities Co., Ltd. 5,000 108,981
Investment Companies
Sakura Bank 9,000 105,827
Banks
Seven-Eleven Japan Co., Ltd. 1,000 70,838
Retail-General
Tokyo Electric Power Co. 3,000 81,736
Electric Utilities
Tokyo Marine and Fire Insurance Co., Ltd. 9,000 123,895
Insurance
Toyota Motor Corp. 5,000 114,239
Auto & Trucks
-----------
1,487,692
MALAYSIA-0.2%
Resorts World Berhad 8,000 48,450
Entertainment & Leisure
Telekom Malaysia Berhad 4,000 37,701
Telephone Utility
86,151
24
ALLIANCE CONSERVATIVE INVESTORS FUND
_______________________________________________________________________________
COMPANY SHARES VALUE
- -------------------------------------------------------------------------
NETHERLANDS-0.4%
AKZO Nobel N.V. 600 $ 69,682
Chemicals
Internationale Nederlanden Groep N.V. 1,700 131,257
Insurance
-----------
200,939
NEW ZEALAND-0.1%
Telecom Corp. of New Zealand, Ltd. 10,400 44,152
Telephone Utility
SINGAPORE-0.0%
Overseas-Chinese Banking Corp., Ltd. 2,000 27,458
Banks
SOUTH KOREA-0.1%
Korea Mobile Telecom Corp. 1,500 83,625
Telephone Utility
SWITZERLAND-0.6%
Ciba-Geigy A.G. 100 116,060
Chemicals
Nestle, S.A. 100 111,228
Food
Sandoz A.G. 75 81,910
Drugs
-----------
309,198
UNITED KINGDOM-1.1%
B.A.T. Industries Plc. 12,000 90,682
Tobacco
British Telecommunications Plc. 16,000 87,792
Telecom Equipment
BTR Plc. 22,000 105,976
Conglomerates
Glaxo Holdings 7,000 84,879
Drugs Hospital Supplies & Medical Services
Grand Metropolitan Plc. 16,000 105,254
Food
Smithkline Beecham* 8,152 86,514
Drugs
-----------
561,097
Total Foreign Investments
(cost $3,595,168) 3,769,413
Total Common Stocks & Other Investments
(cost $15,311,706) 16,212,490
SHARES OR
PRINCIPAL
AMOUNT
(000) VALUE
- -------------------------------------------------------------------------
LONG-TERM DEBT SECURITIES-62.2%
CREDIT SENSITIVE-13.6%
Chase Manhattan Corp.
6.25%, 1/15/06 $1,200 1,111,836
Commercial Credit Group, Inc.
6.125%, 12/01/05 900 831,363
Premier Auto Trust
7.15%, 2/04/99 1,500 1,518,750
Prudential Insurance Co. of America
8.10%, 7/15/15(b) 1,450 1,425,901
St. George Bank, Ltd.
7.15%, 10/15/05 1,000 971,840
Time Warner Entertainment Co.
8.375%, 3/15/23 1,150 1,123,769
-----------
6,983,459
MORTGAGE BACKED SECURITIES-16.3%
Federal National Mortgage Association
6.50%, 6/01/11 4,040 3,912,457
7.00%, 4/01/26 3,300 3,181,398
Government National Mortgage Association
7.50%, 1/15/26 1,312 1,296,574
-----------
8,390,429
25
PORTFOLIO OF INVESTMENTS (CONTINUED) ALLIANCE CONSERVATIVE INVESTORS FUND
_______________________________________________________________________________
PRINCIPAL
AMOUNT
(000) VALUE
- -------------------------------------------------------------------------
U.S. TREASURY SECURITIES-32.3%
U.S. Treasury Bond
6.00%, 2/15/26 $2,475 $ 2,199,260
U.S. Treasury Notes
5.50%, 11/15/98 750 738,518
6.50%, 8/15/05 520 512,850
6.75%, 4/30/00 2,000 2,026,560
7.25%, 2/15/98 8,500 8,671,360
7.75%, 12/31/99 2,350 2,456,478
-----------
16,605,026
Total Long-Term Debt Securities
(cost $32,451,492) 31,978,914
SHORT-TERM DEBT SECURITIES-6.0%
Federal Home Loan Mortgage Corp.
5.30%, 5/01/96
(amortized cost $3,100,000) 3,100 3,100,000
TOTAL INVESTMENTS -99.7%
(cost $50,863,198) 51,291,404
Other assets less liabilities-0.3% 173,997
NET ASSETS-100% $51,465,401
* Non-income producing security.
(a) Warrants attached, expiring 9/30/97.
(b) 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, 1996,
these securities amounted to $1,425,901 or 2.8% of net assets.
Glossary:
ADR - American Depository Receipt
See notes to financial statements.
26
STATEMENTS OF ASSETS AND LIABILITIES ALLIANCE GROWTH INVESTORS AND
APRIL 30, 1996 CONSERVATIVE INVESTORS FUNDS
_______________________________________________________________________________
GROWTH CONSERVATIVE
INVESTORS INVESTORS
FUND FUND
------------- -----------
ASSETS
Investments in securities, at value (cost
$88,841,150 and $50,863,198, respectively) $ 95,193,823 $51,291,404
Cash at value (cost $82,759 and $160,158
respectively) 81,317 160,142
Receivable for investment securities and
foreign currency sold 5,704,410 5,196,735
Interest and dividends receivable 274,580 422,795
Receivable for shares of beneficial interest sold 259,926 79,363
Deferred organization expenses 8,520 8,520
Receivable due from Adviser -0- 5,606
Total assets 101,522,576 57,164,565
LIABILITIES
Payable for investment securities and foreign
currency purchased 4,740,789 5,476,675
Distribution fee payable 60,498 32,150
Payable for shares of beneficial interest redeemed 55,956 79,366
Advisory fee payable 48,007 -0-
Accrued expenses 115,660 110,973
Total liabilities 5,020,910 5,699,164
NET ASSETS $ 96,501,666 $51,465,401
COMPOSITION OF NET ASSETS
Shares of beneficial interest, at par $ 69 $ 46
Additional paid-in capital 81,773,153 49,719,182
Undistributed net investment income 657,809 339,779
Accumulated net realized gain on investments
and foreign currency transactions 7,717,255 980,259
Net unrealized appreciation of investments and
foreign currency denominated assets and
liabilities 6,353,380 426,135
$96,501,666 $51,465,401
CALCULATION OF MAXIMUM OFFERING PRICE
CLASS A SHARES
Net asset value and redemption price per share
($30,608,449/2,174,272 and $14,160,707/1,271,079
shares of beneficial interest issued and
outstanding, respectively) $14.08 $11.14
Sales charge-4.25% of public offering price .62 .49
Maximum offering price $14.70 $11.63
CLASS B SHARES
Net asset value and offering price per share
($59,978,243/4,261,102 and $31,978,874/2,828,583
shares of beneficial interest issued and
outstanding, respectively) $14.08 $11.31
CLASS C SHARES
Net asset value, redemption and offering price per
share ($5,914,974/419,843 and $5,325,820/470,876
shares of beneficial interest issued and
outstanding, respectively) $14.09 $11.31
See notes to financial statements.
27
STATEMENTS OF OPERATIONS ALLIANCE GROWTH INVESTORS AND
YEAR ENDED APRIL 30, 1996 CONSERVATIVE INVESTORS FUNDS
_______________________________________________________________________________
GROWTH CONSERVATIVE
INVESTORS INVESTORS
FUND FUND
------------ -----------
INVESTMENT INCOME
Interest $ 2,021,304 $2,814,820
Dividends (net of foreign tax withheld of
$13,968 and $2,991, respectively) 714,512 198,278
Total income 2,735,816 3,013,098
EXPENSES
Advisory fee 632,516 387,903
Distribution fee - Class A 81,307 45,690
Distribution fee - Class B 523,545 316,700
Distribution fee - Class C 48,786 48,204
Custodian 162,026 97,162
Transfer agency 155,203 82,228
Registration 61,777 45,427
Audit and legal 45,879 62,667
Printing 40,004 20,001
Trustees' fees 27,000 27,000
Amortization of organization expenses 10,980 10,980
Miscellaneous 6,383 10,413
Total expenses 1,795,406 1,154,375
Less: expenses waived and assumed by adviser
(See Note B) (214,077) (174,857)
Net expenses 1,581,329 979,518
Net investment income 1,154,487 2,033,580
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
AND FOREIGN CURRENCY
Net realized gain on investments 12,907,537 4,678,677
Net realized gain (loss) on foreign currency
transactions 171,948 (7,059)
Net change in unrealized appreciation
(depreciation) of investments 2,657,302 (792,045)
Net change in unrealized appreciation
(depreciation) of foreign currency
denominated assets and liabilities 676 (1,865)
Net gain on investments 15,737,463 3,877,708
NET INCREASE IN NET ASSETS FROM OPERATIONS $16,891,950 $5,911,288
See notes to financial statements.
28
ALLIANCE GROWTH INVESTORS AND
STATEMENTS OF CHANGES IN NET ASSETS CONSERVATIVE INVESTORS FUNDS
_______________________________________________________________________________
<TABLE>
<CAPTION>
GROWTH INVESTORS FUND CONSERVATIVE INVESTORS FUND
-------------------------- --------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
APRIL 30, APRIL 30, APRIL 30, APRIL 30,
1996 1995 1996 1995
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS
Net investment income $ 1,154,487 $ 1,141,094 $ 2,033,580 $ 2,148,851
Net realized gain (loss) on investments
and foreign currency transactions 13,079,485 (1,679,163) 4,671,618 (3,216,833)
Net change in unrealized appreciation
(depreciation) of investments and foreign
currency denominated assets and liabilities 2,657,978 3,962,035 (793,910) 3,119,273
Net increase in net assets from operations 16,891,950 3,423,966 5,911,288 2,051,291
DIVIDENDS AND DISTRIBUTIONS TO
SHAREHOLDERS FROM:
Net investment income
Class A (510,038) (254,436) (740,336) (685,964)
Class B (687,510) (345,858) (1,250,244) (1,045,681)
Class C (64,858) (35,052) (194,637) (168,380)
Net realized gain on investments
Class A (1,147,583) (22,749) -0- -0-
Class B (2,234,313) (46,345) -0- -0-
Class C (210,790) (4,697) -0- -0-
TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST
Net increase (decrease) 14,701,805 16,138,284 (3,326,752) 1,247,586
Total increase 26,738,663 18,853,113 399,319 1,398,852
NET ASSETS
Beginning of year 69,763,003 50,909,890 51,066,082 49,667,230
End of year (including undistributed net
investment income of $657,809, $593,778,
$339,779 and $498,475 respectively) $96,501,666 $69,763,003 $51,465,401 $51,066,082
</TABLE>
See notes to financial statements.
29
NOTES TO FINANCIAL STATEMENTS ALLIANCE GROWTH INVESTORS AND
APRIL 30, 1996 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.
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 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 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 such 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 (loss) on foreign currency transactions for Growth Investors
and Conservative Investors Funds represents net foreign exchange gains and
losses from holdings of foreign currencies, 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 each of 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. TAXES
It is each Fund's policy to meet the requirements of the Internal Revenue Code
applicable to regulated investment companies and to distribute all of its
investment company taxable income and net realized gains, if applicable, to
shareholders. Therefore, no provisions for federal income or excise taxes are
required.
5. INVESTMENT INCOME AND SECURITY TRANSACTIONS
Dividend income is recorded on the ex-dividend date. Interest income is accrued
daily. Security transactions are accounted for on the date securities are
purchased or sold. Security gains and losses are determined on the identified
cost basis. The Fund accretes discounts and amortizes premiums as adjustments
to interest income.
6. DIVIDENDS AND DISTRIBUTIONS
Dividends and distributions to shareholders are recorded on the ex-dividend
date.
30
ALLIANCE GROWTH INVESTORS AND
CONSERVATIVE INVESTORS FUNDS
_______________________________________________________________________________
7. INCOME AND EXPENSES
All income earned and expenses incurred by the Fund are borne on a pro-rata
basis by each outstanding class of shares, based on the proportionate interest
in the Fund represented by the shares of such Class, except that each Funds'
Class B and Class C shares bear higher distribution and in the case of Class B
higher 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.
8. 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
Distribution by Investment Companies, permanent book and tax difference
relating to shareholder distributions have been reclassified to additional
paid-in capital. As of April 30, 1996, accumulated net investment income was
credited and accumulated undistributed net realized gains was charged for
$171,950 for Alliance Growth Investors Fund. For Alliance Conservative
Investors Fund, accumulated net investment income was charged and accumulated
undistributed net realized gains was credited for $7,059 as of April 30, 1996.
Net investment income, net realized gains and net assets were not affected by
this change.
NOTE B: ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Under the terms of an investment advisory agreement, the Funds pay Alliance
Capital Management L.P., the Investment Adviser 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 of both funds. Prior to August 2, 1993, the annual rate for
Class B shares was 2.15%. For the year ended April 30, 1996, such reimbursement
amounted to $214,077 and $174,857 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' shares are qualified for sale is 2.5% of the first $30 million of the
Funds' 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 $116,346 and $56,656 for the Growth Investors and
Conservative Investors Funds, respectively, for the year ended April 30, 1996.
Alliance Fund Distributors, Inc. (a wholly-owned subsidiary of the Adviser)
serves as the Distributor of each Fund's shares. The Distributor received
front-end sales charges of $9,704 from the sale of Class A shares and $92,064
in contingent deferred sales charges imposed upon redemptions by shareholders
of Class B shares for the year ended April 30, 1996 for the Growth Investors
Fund. The Distributor also received front-end sales charges of $4,538 from the
sale of Class A shares and $86,866 in contingent deferred sales charges imposed
upon redemptions by shareholders of Class B shares for the year ended April 30,
1996 for the Conservative Investors Fund.
Brokerage commissions paid on securities transactions for the year ended April
30, 1996 amounted to $386,197 and $75,237 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 include amounts owed to two of the Trustees under a deferred
compensation plan of $24,399 and $19,366 for the Growth Investors and
Conservative Investors Funds, respectively.
31
ALLIANCE GROWTH INVESTORS AND
NOTES TO FINANCIAL STATEMENTS (CONTINUED) CONSERVATIVE INVESTORS FUNDS
_______________________________________________________________________________
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 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
$2,178,212 and $187,335 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 $1,579,573 and $297,417, 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 $165,177,093 and $157,144,113,
respectively, for the year ended April 30, 1996. There were purchases of
$43,784,447 and sales of $49,387,634 of U.S. Government and government agency
obligations for the year ended April 30, 1996. At April 30, 1996, the cost of
securities for federal income tax purposes for the Growth Investors Fund was
$88,972,110. Accordingly gross unrealized appreciation of investments was
$7,699,434 and gross unrealized depreciation of investments was $1,477,721
resulting in net unrealized appreciation of $6,221,713 excluding foreign
currency.
The Growth Investors and Conservative Investors Funds enter 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 the value of a
foreign currency relative to the U.S. dollar. At April 30, 1996, there were no
outstanding forward exchange currency contracts for Growth Investors and
Conservative Investors Funds.
Purchases and sales of investment securities (excluding short-term investments)
for the Conservative Investors Fund aggregated $128,824,354 and $131,386,952,
respectively, for the year ended April 30, 1996. There were purchases of
$79,594,985 and sales of $89,084,847 of U.S. Government and government agency
obligations for the year ended April 30, 1996. At April 30, 1996, the cost of
securities for federal income tax purposes for the Conservative Investors Fund
was $50,900,373. Accordingly gross unrealized appreciation of investments was
$1,222,950 and gross unrealized depreciation of investments was $831,919
resulting in net unrealized appreciation of $391,031 excluding foreign currency.
32
ALLIANCE GROWTH INVESTORS AND
CONSERVATIVE INVESTORS FUNDS
_______________________________________________________________________________
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,
1996 1995 1996 1995
------------ ------------ -------------- --------------
CLASS A
Shares sold 623,012 878,301 $ 8,468,283 $10,219,392
Shares issued in
reinvestment of
dividends and
distributions 118,202 23,903 1,591,818 266,999
Shares redeemed (404,354) (508,295) (5,500,086) (5,946,807)
Net increase 336,860 393,909 $ 4,560,015 $ 4,539,584
CLASS B
Shares sold 1,018,816 1,384,786 $13,829,306 $16,126,761
Shares issued in
reinvestment of
dividends and
distributions 208,357 33,860 2,814,302 379,230
Shares redeemed (550,350) (485,135) (7,476,785) (5,718,545)
Net increase 676,823 933,511 $ 9,166,823 $10,787,446
CLASS C
Shares sold 186,320 188,858 $ 2,552,601 $ 2,197,932
Shares issued in
reinvestment of
dividends and
distributions 19,358 3,451 261,545 38,687
Shares redeemed (136,951) (122,670) (1,839,179) (1,425,365)
Net increase 68,727 69,639 $ 974,967 $ 811,254
33
ALLIANCE GROWTH INVESTORS AND
NOTES TO FINANCIAL STATEMENTS (CONTINUED) 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,
1996 1995 1996 1995
------------ ------------ -------------- --------------
CLASS A
Shares sold 246,346 548,552 $ 2,737,109 $ 5,617,109
Shares issued in
reinvestment of
dividends and
distributions 62,621 65,422 692,313 656,166
Shares redeemed (589,043) (566,559) (6,511,415) (5,791,900)
Net increase(decrease) (280,076) 47,415 $(3,081,993) $ 481,375
CLASS B
Shares sold 518,473 798,920 $ 5,839,933 $ 8,264,467
Shares issued in
reinvestment of
dividends and
distributions 102,379 94,772 1,150,234 960,854
Shares redeemed (697,358) (825,918) (7,823,066) (8,495,394)
Net increase(decrease) (76,506) 67,774 $ (832,899) $ 729,927
CLASS C
Shares sold 170,526 224,223 $ 1,931,267 $ 2,320,546
Shares issued in
reinvestment of
dividends and
distributions 16,002 15,711 179,841 159,243
Shares redeemed (135,782) (237,610) (1,522,968) (2,443,423)
Net increase 50,746 2,324 $ 588,140 $ 36,366
34
FINANCIAL HIGHLIGHTS ALLIANCE GROWTH INVESTORS FUND
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING THROUGHOUT EACH
PERIOD
<TABLE>
<CAPTION>
CLASS A
------------------------------------------------------
YEAR ENDED APRIL 30, MAY 4,1992(A)
--------------------------------------- TO APRIL 30,
1996 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 .10* .25* .12* .20*
Net realized and unrealized gain on
investments 2.75 .38 .39 1.43
Net increase in net asset value from
operations 2.85 .63 .51 1.63
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (.26) (.15) (.11) (.16)
Distributions from net realized gains (.59) (.01) (.14) (.12)
Total dividends and distributions (.85) (.16) (.25) (.28)
Net asset value, end of period $14.08 $12.08 $11.61 $11.35
TOTAL RETURN
Total investment return based on net
asset value (b) 23.87% 5.57% 4.46% 16.32%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $30,608 $22,189 $16,759 $3,503
Ratios to average net assets of:
Expenses, net of waivers/reimbursements 1.40% 1.40% 1.40% 1.40%(c)
Expenses, before waivers/reimbursements 1.65% 1.97% 2.33% 4.27%(c)
Net investment income 2.02% 2.32% 1.67% 1.91%(c)
Portfolio turnover rate 209% 134% 96% 114%
</TABLE>
See footnote summary on page 40.
35
FINANCIAL HIGHLIGHTS (CONTINUED) ALLIANCE GROWTH INVESTORS FUND
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING THROUGHOUT EACH
PERIOD
<TABLE>
<CAPTION>
CLASS B
-----------------------------------------------------
YEAR ENDED APRIL 30, MAY 4,1992(A)
--------------------------------------- TO APRIL 30,
1996 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 .06* .17* .07* .07*
Net realized and unrealized gain on
investments 2.70 .38 .37 1.45
Net increase in net asset value from
operations 2.76 .55 .44 1.52
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (.18) (.10) (.06) (.05)
Distributions from net realized gains (.59) (.01) (.14) (.06)
Total dividends and distributions (.77) (.11) (.20) (.11)
Net asset value, end of period $14.08 $12.09 $11.65 $11.41
TOTAL RETURN
Total investment return based on net
asset value (b) 23.06% 4.83% 3.84% 15.23%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $59,978 $43,328 $30,871 $7,999
Ratios to average net assets of:
Expenses, net of waivers/reimbursements 2.10% 2.10% 2.11% 2.15%(c)
Expenses, before waivers/reimbursements 2.35% 2.67% 3.00% 4.48%(c)
Net investment income 1.15% 1.62% .95% 1.07%(c)
Portfolio turnover rate 209% 134% 96% 114%
</TABLE>
See footnote summary on page 40.
36
ALLIANCE GROWTH INVESTORS FUND
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING THROUGHOUT EACH
PERIOD
CLASS C
-----------------------------------
AUGUST. 2,
YEAR ENDED APRIL 30, 1993(D) TO
---------------------- APRIL 30,
1996 1995 1994
--------- ----------- -----------
Net asset value, beginning of period $12.10 $11.65 $11.88
INCOME FROM INVESTMENT OPERATIONS
Net investment income .06* .18* .08*
Net realized and unrealized gain (loss)
on investments 2.70 .38 (.11)
Net increase (decrease) in net asset
value from operations 2.76 .56 (.03)
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (.18) (.10) (.06)
Distributions from net realized gains (.59) (.01) (.14)
Total dividends and distributions (.77) (.11) (.20)
Net asset value, end of period $14.09 $12.10 $11.65
TOTAL RETURN
Total investment return based on net
asset value (b) 23.04% 4.91% (.26)%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $5,915 $4,247 $3,280
Ratios to average net assets of:
Expenses, net of waivers/reimbursements 2.10% 2.10% 2.10%(c)
Expenses, before waivers/reimbursements 2.36% 2.66% 3.02%(c)
Net investment income .13% 1.62% 1.04%(c)
Portfolio turnover rate 209% 134% 96%
See footnote summary on page 40.
37
FINANCIAL HIGHLIGHTS (CONTINUED) ALLIANCE CONSERVATIVE INVESTORS FUND
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING THROUGHOUT EACH
PERIOD
<TABLE>
<CAPTION>
CLASS A
-----------------------------------------------------
YEAR ENDED APRIL 30, MAY 4,1992(A)
--------------------------------------- TO APRIL 30,
1996 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 .51* .48* .31* .39*
Net realized and unrealized gain (loss)
on investment .80 (.02) (.26) .82
Net increase in net asset value from
operations 1.31 .46 .05 1.21
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (.55) (.45) (.29) (.36)
Distributions from net realized gains -0- -0- (.18) (.06)
Total dividends and distributions (.55) (.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) 12.69% 4.65% .35% 12.25%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $14,161 $16,105 $15,595 $5,339
Ratios to average net assets of:
Expenses, net of waivers/reimbursements 1.40% 1.40% 1.40% 1.40%(c)
Expenses, before waivers/reimbursements 1.73% 1.83% 2.03% 3.45%(c)
Net investment income 4.43% 4.66% 3.43% 3.92%(c)
Portfolio turnover rate 267% 248% 133% 84%
</TABLE>
See footnote summary on page 40.
38
ALLIANCE CONSERVATIVE INVESTORS FUND
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING THROUGHOUT EACH
PERIOD
<TABLE>
<CAPTION>
CLASS B
----------------------------------------------------
YEAR ENDED APRIL 30, MAY 4,1992(A)
--------------------------------------- TO APRIL 30,
1996 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 .43* .46* .24* .24*
Net realized and unrealized gain (loss)
on investments .82 (.02) (.26) .89
Net increase (decrease) in net asset
value from operations 1.25 .44 (.02) 1.13
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (.45) (.40) (.21) (.22)
Distributions from net realized gains -0- -0- (.18) (.03)
Total dividends and distributions (.45) (.40) (.39) (.25)
Net asset value, end of period $11.31 $10.51 $10.47 $10.88
TOTAL RETURN
Total investment return based on net
asset value (b) 11.95% 3.91% (.31)% 11.39%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $31,979 $30,542 $29,697 $9,210
Ratios to average net assets of:
Expenses, net of waivers/reimbursements 2.10% 2.10% 2.11% 2.15%(c)
Expenses, before waivers/reimbursements 2.44% 2.52% 2.73% 3.95%(c)
Net investment income 3.72% 3.96% 2.72% 3.06%(c)
Portfolio turnover rate 267% 248% 133% 84%
</TABLE>
See footnote summary on page 40.
39
FINANCIAL HIGHLIGHTS (CONTINUED) ALLIANCE CONSERVATIVE INVESTORS FUND
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING THROUGHOUT EACH
PERIOD
CLASS C
---------------------------------
AUGUST 2,
YEAR ENDED APRIL 30, 1993(D) TO
-------------------- APRIL 30,
1996 1995 1994
--------- --------- -----------
Net asset value, beginning of period $10.52 $10.47 $11.12
INCOME FROM INVESTMENT OPERATIONS
Net investment income .41* .46* .18*
Net realized and unrealized gain (loss)
on investments .83 (.01) (.50)
Net increase (decrease) in net asset
value from operations 1.24 .45 (.32)
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (.45) (.40) (.15)
Distributions from net realized gains -0- -0- (.18)
Total dividends and distributions (.45) (.40) (.33)
Net asset value, end of period $11.31 $10.52 $10.47
TOTAL RETURN
Total investment return based on net
asset value (b) 11.84% 4.01% (2.98)%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $5,326 $4,419 $4,375
Ratios to average net assets of:
Expenses, net of waivers/reimbursements 2.10% 2.10% 2.10%(c)
Expenses, before waivers/reimbursements 2.45% 2.52% 2.69%(c)
Net investment income 3.71% 3.97% 2.94%(c)
Portfolio turnover rate 267% 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.
40
ALLIANCE GROWTH INVESTORS AND
REPORT OF INDEPENDENT ACCOUNTANTS 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, 1996, 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, 1996 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 24, 1996
41
<PAGE>
APPENDIX
DESCRIPTION OF CORPORATE BOND RATINGS
Description 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 bond because margins of protection may
not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other
elements present which make the long-term risks appear somewhat
greater than the Aaa securities.
A-- Bonds which are rated A possess many favorable
investment attributes and are to be considered as upper-medium-
grade obligations. Factors giving security to principal and
interest are considered adequate, but elements may be present
which suggest a susceptibility to impairment some time in the
future.
Baa-- Bonds which are rated Baa are considered as medium
grade obligations, i.e., they are neither highly protected nor
poorly secured. Interest payments and principal security appear
adequate for the present, but certain protective elements may be
lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as
well.
Ba-- Bonds which are rated Ba are judged to have
speculative elements; their future cannot be considered as well
assured. Often the protection of interest and principal payments
may be very moderate and thereby not well safeguarded during both
good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B-- Bonds which are rated B generally lack
characteristics of the desirable investment. Assurance of
A-1
<PAGE>
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 of there may be present elements of
danger with respect to principal or interest.
Ca-- Bonds which are rated Ca represent obligations
which are speculative to a high degree. Such issues are often in
default or have other marked shortcomings.
C-- Bonds which are rated C are the lowest class of
bonds and issues so rated can be regarded as having extremely
poor prospects of ever attaining any real investment standing.
Moody's applies modifiers to each rating classification from Aa
through B to indicate relative ranking within its rating
categories. The modifier "1" indicates that a security ranks in
the higher end of its rating category; the modifier "2" indicates
a mid-range ranking; and the modifier "3" indicates that the
issue ranks in the lower end of its rating category.
Descriptions of the bond ratings of Standard & Poor's
Corporation are as follows:
AAA-- Debt rated AAA has the highest rating assigned by
Standard & Poor's. Capacity to pay interest and repay principal
is extremely strong.
AA-- Debt rated AA has a very strong capacity to pay
interest and repay principal and differs from the higher rated
issues only in small degree.
A-- Debt rated A has a strong capacity to pay interest
and repay principal although it is somewhat more susceptible to
the adverse effects of changes in circumstances and economic
conditions than debt in higher rated categories.
BBB-- Debt rated BBB is regarded as having an adequate
capacity to pay interest and repay principal. Whereas it
normally exhibits adequate protection parameters, adverse
economic conditions or changing circumstances are more likely to
lead to a weakened capacity to pay interest and repay principal
for debt in this category than for debt in higher rated
categories.
BB, B, CCC, CC, or C -- Debt rated BB, B, CCC, CC or C
is regarded, on balance, as predominantly speculative with
respect to the issuer's capacity to pay interest and repay
principal in accordance with the terms of the obligation. While
such debt will likely have some quality and protective
A-2
<PAGE>
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 AAA to CC may be modified by the addition of a
plus (+) or minus (-) sign to show relative standing within the
major rating categories.
A-3
00250184.AJ8
