<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 2, 1997
_____________________________________________________________
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 the "For
Literature" telephone numbers shown above.
TABLE OF CONTENTS
INVESTMENT POLICIES AND RESTRICTIONS.........................
ADDITIONAL INVESTMENT TECHNIQUES OF THE FUNDS................
INVESTMENT RESTRICTIONS......................................
MANAGEMENT OF THE FUNDS......................................
PORTFOLIO TRANSACTIONS.......................................
EXPENSES OF THE FUNDS........................................
PURCHASE OF SHARES...........................................
REDEMPTION AND REPURCHASE OF SHARES..........................
SHAREHOLDER SERVICES.........................................
NET ASSET VALUE..............................................
DIVIDENDS, DISTRIBUTIONS AND TAXES...........................
GENERAL INFORMATION..........................................
FINANCIAL STATEMENTS.........................................
REPORT OF INDEPENDENT ACCOUNTANTS ...........................
APPENDIX..................................................A-1
<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."
Stripped Mortgage-Related Securities. Each 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
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.
2
<PAGE>
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. Alliance Capital Management L.P. (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
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
3
<PAGE>
engage in such "cross hedging" activities when it believes that
such transactions provide significant hedging opportunities for a
Fund.
_____________________________________________________________
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 incur various expenses in the
attempted enforcement and may be subject to various delays and
risks of loss, including (a) possible declines in the value of
the underlying security, (b) possible reduced levels of income
and lack of access to and (c) possible inability to enforce
rights.
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.
4
<PAGE>
Bankers' acceptances typically arise from short-term
credit arrangements designed to enable businesses to obtain funds
to finance commercial transactions. Generally, an acceptance is
a time draft drawn on a bank by an exporter or an importer to
obtain a stated amount of funds to pay for specific merchandise.
The draft is then "accepted" by another bank that, in effect,
unconditionally guarantees to pay the face value of the
instrument on its maturity date. The acceptance may then be held
by the accepting bank as an earning asset or it may be sold in
the secondary market at the going rate of discount for a specific
maturity. Although maturities for acceptances can be as long as
270 days, most maturities are six months or less.
Bank time deposits are funds kept on deposit with a bank
for a stated period of time in an interest bearing account. At
present, bank time deposits maturing in more than seven days are
not considered by the Adviser to be readily marketable.
Commercial Paper. Commercial paper consists of short-
term (usually from 1 to 270 days) unsecured promissory notes
issued by entities in order to finance their current operations.
Variable Notes. Variable amount master demand notes and
variable amount floating rate notes are obligations that permit
the investment of fluctuating amounts by a Fund at varying rates
of interest pursuant to direct arrangements between a Fund, as
lender, and the borrower. Master demand notes permit daily
fluctuations in the interest rate while the interest rate under
variable amount floating rate notes fluctuates on a weekly basis.
These notes permit daily changes in the amounts borrowed. The
Funds have the right to increase the amount under these notes at
any time up to the full amount provided by the note agreement, or
to decrease the amount, and the borrower may repay up to the full
amount of the note without penalty. Because these types of notes
are direct lending arrangements between the lender and the
borrower, it is not generally contemplated that such instruments
will be traded and there is no secondary market for these notes.
Master demand notes are redeemable (and, thus, immediately
repayable by the borrower) at face value, plus accrued interest,
at any time. Variable amount floating rate notes are subject to
next-day redemption 14 days after the initial investment therein.
With both types of notes, therefore, the Funds' right to redeem
depends on the ability of the borrower to pay principal and
interest on demand. In connection with both types of note
arrangements, the Funds consider earning power, cash flow and
other liquidity ratios of the issuer. These notes, as such, are
not typically rated by credit rating agencies. Unless they are
so rated, a Fund may invest in them only if at the time of an
investment the issuer has an outstanding issue of unsecured debt
rated Aa or better by Moody's or AA or better by S&P, Fitch, or
Duff & Phelps.
5
<PAGE>
Asset-Backed Securities
The Funds may invest in asset-backed securities
(unrelated to first mortgage loans), which represent fractional
interests in pools of retail installment loans, leases or
revolving credit receivables, both secured (such as Certificates
for Automobile Receivables or "CARS") and unsecured (such as
Credit Card Receivable Securities or "CARDS").
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
The Funds may seek to increase income by lending
portfolio securities. Under present regulatory policies,
including those of the Board of Governors of the Federal Reserve
System and the SEC, such loans may be made only to member firms
of the New York Stock Exchange (the "Exchange") and would be
required to be secured continuously by collateral in cash, cash
equivalents, or U.S. Treasury Bills maintained on a current basis
at an amount at least equal to the market value of the securities
loaned. A Fund would have the right to call a loan and obtain
the securities loaned at any time on five days' notice. During
the existence of a loan, a Fund would continue to receive the
equivalent of the interest or dividends paid by the issuer on the
securities loaned and would also receive compensation based on
investment of the collateral. A Fund would not, however, have
the right to vote any securities having voting rights during the
existence of the loan but would call the loan in anticipation of
an important vote to be taken among holders of the securities or
of the giving or withholding of their consent on a material
matter affecting the investment. As with other extensions of
credit there are risks of delay in recovery or even loss of
rights in the collateral should the borrower of the securities
fail financially. However, the loans would be made only to firms
deemed by the Adviser to be of good standing, and when, in the
judgment of the Adviser, the consideration that can be earned
currently from securities loans of this type justifies the
attendant risk. 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.
6
<PAGE>
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
"delayed delivery" basis), it does not pay for the securities
until they are received, and the 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, in the opinion of the Adviser, 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 basis 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).
7
<PAGE>
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
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 may 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
8
<PAGE>
security, any loss resulting from the repurchase of a call option
previously written by a Fund is likely to be offset in whole or
in part by appreciation of the underlying security owned by the
Fund.
A Fund may purchase a security and then write a call
option against that security or may purchase a security and
concurrently write an option on it. The exercise price of the
call a Fund determines to write will depend upon the expected
price movement of the underlying security. The exercise price of
a call option may be below ("in-the- money"), equal to ("at-the-
money") or above ("out-of-the- money") the current value of the
underlying security at the time the option is written. In-the-
money call options may be used when it is expected that the price
of the underlying security will decline moderately during the
option period. Out-of-the-money call options may be written when
it is expected that the premiums received from writing the call
option plus the appreciation in the market price of the
underlying security up to the exercise price will be greater than
the appreciation in the price of the underlying security alone.
If the call options are exercised in such transactions, a Fund's
maximum gain will be the premium received by it for writing the
option, adjusted upwards or downwards by the difference between
the Fund's purchase price of the security and the exercise price.
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
9
<PAGE>
same exercise and expiration date. By writing a straddle, a Fund
undertakes a simultaneous obligation to sell and purchase the
same security in the event that one of the options is exercised.
If the price of the security subsequently rises above the
exercise price, the call will likely be exercised and the Fund
will be required to sell the underlying security at a below
market price. This loss may be offset, however, in whole or
part, by the premiums received on the writing of the two options.
Conversely, if the price of the security declines by a sufficient
amount, the put will likely be exercised. The writing of
straddles will likely be effective, therefore, only where the
price of the security remains stable and neither the call nor the
put is exercised. In those instances where one of the options is
exercised, the loss on the purchase or sale of the underlying
security may exceed the amount of the premiums received.
By writing a call option, a Fund limits its opportunity
to profit from any increase in the market value of the underlying
security above the exercise price of the option. By writing a
put option, a Fund assumes the risk that it may be required to
purchase the underlying security for an exercise price above its
then current market value, resulting in a capital loss unless the
security subsequently appreciates in value. Where options are
written for hedging purposes, such transactions constitute only a
partial hedge against declines in the value of portfolio
securities or against increases in the value of securities to be
acquired, up to the amount of the premium.
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
10
<PAGE>
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 option, 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 option 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 option, the
Fund maintains with its custodian in a segregated account liquid
assets having a value equal to or greater than the exercise price
of the option.
A Fund may also purchase put options on securities
indexes to hedge its investments against a decline in the value
of portfolio securities. 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 call options on
securities the Fund owns.
Futures Contracts and Options on Futures Contracts
Futures Contracts. Each Fund may enter into interest
rate futures contracts, index futures contracts and foreign
currency futures contracts. (Unless otherwise specified,
interest rate futures contracts, index futures contracts and
foreign currency futures contracts are collectively referred to
as "Futures Contracts.") Such investment strategies will be used
as a hedge and not for speculation.
Purchases or sales of stock or bond index futures
contracts are used for hedging purposes to attempt to protect a
11
<PAGE>
Fund's current or intended investments from broad fluctuations in
stock or bond prices. For example, a Fund may sell stock or bond
index futures contracts in anticipation of or during a market
decline to attempt to offset the decrease in market value of the
Fund's portfolio securities that might otherwise result. If such
decline occurs, the loss in value of portfolio securities may be
offset, in whole or part, by gains on the futures position. When
a Fund is not fully invested in the securities market and
anticipates a significant market advance, it may purchase stock
or bond index futures contracts in order to gain rapid market
exposure that may, in part or entirely, offset increases in the
cost of securities that the Fund intends to purchase. As such
purchases are made, the corresponding positions in stock or bond
index futures contracts will be closed out.
Interest rate futures contracts are purchased or sold
for hedging purposes to attempt to protect against the effects of
interest rate changes on a Fund's current or intended investments
in fixed income securities. For example, if a Fund owned long-
term bonds and interest rates were expected to increase, that
Fund might sell interest rate futures contracts. Such a sale
would have much the same effect as selling some of the long-term
bonds in that Fund's portfolio. However, since the futures
market is more liquid than the cash market, the use of interest
rate futures contracts as a hedging technique allows a Fund to
hedge its interest rate risk without having to sell its portfolio
securities. If interest rates were to 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
12
<PAGE>
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
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
13
<PAGE>
the option premium, which provides a partial hedge against any
increase in the price of securities which the Fund intends to
purchase. If a put or call option a Fund has written is
exercised, the Fund will incur a loss which will be reduced by
the amount of the premium it receives. Depending on the degree
of correlation between changes in the value of its portfolio
securities and changes in the value of its options on futures
positions, a Fund's losses from exercised options on futures may
to some extent be reduced or increased by changes in the value of
portfolio securities.
The Funds may purchase options on Futures Contracts for
hedging purposes instead of purchasing or selling the underlying
Futures Contracts. For example, where a decrease in the value of
portfolio securities is anticipated as a result of a projected
market-wide decline or changes in interest or exchange rates, a
Fund could, in lieu of selling futures contracts, purchase put
options thereon. In the event that such decrease occurs, it may
be offset, in whole or part, by a profit on the option. If the
market decline does not occur, the Fund will suffer a loss equal
to the price of the put. Where it is projected that the value of
securities to be acquired by a Fund will increase prior to
acquisition, due to a market advance or changes in interest or
exchange rates, a Fund could purchase call options on Futures
Contracts, rather than purchasing the underlying Futures
Contracts. If the market advances, the increased cost of
securities to be purchased may be offset by a profit on the call.
However, if the market declines, the Fund will suffer a loss
equal to the price of the call, but the securities which the Fund
intends to purchase may be less expensive.
Forward Foreign Currency Exchange Contracts
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
14
<PAGE>
currency. The Funds may engage in currency "cross hedging" when,
in the opinion of the Adviser, the historical relationship among
foreign currencies suggests that a Fund may achieve the same
protection for a foreign security at a reduced cost through the
use of a Forward Contract relating to a currency other than the
U.S. dollar or the foreign currency in which the security is
denominated.
If a hedging transaction in Forward Contracts is
successful, the decline in the value of portfolio securities or
the increase in the cost of securities to be acquired may be
offset, at least in part, by profits on the Forward Contract.
Nevertheless, by entering into such Forward Contracts, a Fund may
be required to forego all or a portion of the benefits which
otherwise could have been obtained from favorable movements in
exchange rates.
Each Fund has established procedures consistent with SEC
policies concerning purchases of foreign currency through Forward
Contracts. Accordingly, a Fund will segregate liquid assets in
an amount least equal to the Fund's obligations under any Forward
Contracts.
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 could 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
15
<PAGE>
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
decline occurs, the option will most likely not be exercised, and
the diminution in value of portfolio securities could 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
16
<PAGE>
the fact that a narrower index is more susceptible to rapid and
extreme fluctuations as a result of changes in the value of a
small number of securities.
The trading of futures and options entails the
additional risk of imperfect correlation between movements in the
futures or option price and the price of the underlying index or
instrument. The anticipated spread between the prices may be
distorted due to the differences in the nature of the markets,
such as differences in margin requirements, the liquidity of such
markets and the participation of speculators in the futures
market. In this regard, trading by speculators in futures and
options has in the past occasionally resulted in market
distortions, which may be difficult or impossible to predict,
particularly near the expiration of such contracts.
The trading of options on Futures Contracts also entails
the risk that changes in the value of the underlying Futures
Contract will not be fully reflected in the value of the option.
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
17
<PAGE>
portfolio. When a Fund writes an option, it will receive premium
income in return for the holder's purchase of the right to
acquire or dispose of the underlying security or future or, in
the case of index options, cash. In the event that the price of
such obligation does not rise sufficiently above the exercise
price of the option, in the case of a call, or fall below the
exercise price, in the case of a put, the option will not be
exercised and the Fund will retain the amount of the premium,
which will constitute a partial hedge against any decline that
may have occurred in the Fund's portfolio holdings, or against
the increase in the cost of the instruments to be acquired.
When the price of the underlying obligation moves
sufficiently in favor of the holder to warrant exercise of the
option, however, and the option is exercised, the Fund will incur
a loss which may only be partially offset by the amount of the
premium the Fund received. Moreover, by writing an option, a
Fund may be required to forego the benefits which might otherwise
have been obtained from an increase in the value of portfolio
securities or a decline in the value of securities to be
acquired.
In the event of the occurrence of any of the foregoing
adverse market events, a Fund's overall return may be lower than
if it had not engaged in the transactions described above.
With respect to the writing of straddles on securities,
a Fund incurs the risk that the price of the underlying security
will not remain stable, that one of the options written will be
exercised and that the resulting loss will not be offset by the
amount of the premiums received. Such transactions, therefore,
while creating an opportunity for increased return by providing a
Fund with two simultaneous premiums on the same security,
nonetheless involve additional risk, because the Fund may have an
option exercised against it regardless of whether the price of
the security increases or decreases.
Potential Lack of a Liquid Secondary Market. Prior to
exercise or expiration, a futures or option position can be
terminated only by entering into a closing purchase or sale
transaction. This requires a secondary market for such
instruments on the exchange on which the initial transaction was
entered into. While the Funds will enter into options or futures
positions only if there appears to be a liquid secondary market
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
18
<PAGE>
to meet margin requirements, it may be necessary to liquidate
portfolio securities at a time when, in the opinion of the
Adviser, it is disadvantageous to do so. The inability to close
out options and futures positions, therefore, could have an
adverse impact on the Funds' ability to effectively hedge their
portfolios, and could result in trading losses.
The liquidity of a secondary market in a Futures
Contract or option thereon may be adversely affected by "daily
price fluctuation limits," established by exchanges, which limit
the amount of fluctuation in the price of a contract during a
single trading day. Once the daily limit has been reached in the
contract, no trades may be entered into at a price beyond the
limit, thus preventing the liquidation of open futures or option
positions and requiring traders to make additional margin
deposits. Prices of some Futures Contracts 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
19
<PAGE>
which (i) the formula price exceeds (ii) any amount by which the
market value of the security subject to the option exceeds the
exercise price of the option (the amount by which the option is
"in-the-money"). Although each agreement will provide that the
Fund's repurchase price shall be determined in good faith (and
that it shall not exceed the maximum determined pursuant to the
formula), the formula price will not necessarily reflect the
market value of the option written; therefore, the Fund might pay
more to repurchase the option contract than the Fund would pay to
close out a similar exchange-traded option.
Margin. Because of low initial margin deposits made
upon the opening of a futures position and the writing of an
option, such transactions involve substantial leverage. As a
result, relatively small movements in the price of the contract
can result in substantial unrealized gains or losses. However,
to the extent the Funds purchase or sell Futures Contracts and
options on Futures Contracts and purchase and write options on
securities and securities indexes for hedging purposes, any
losses incurred in connection therewith should, if the hedging
strategy is successful, be offset, in whole or in part, by
increases in the value of securities held by the Fund or
decreases in the prices of securities the Fund intends to
acquire. When a Fund writes options on securities or options on
stock indexes for other than hedging purposes, the margin
requirements associated with such transactions could expose the
Fund to greater risk.
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.
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
20
<PAGE>
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 States 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
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
21
<PAGE>
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 total 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
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.
22
<PAGE>
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 the OCC 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 a segregated liquid assets account
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.
23
<PAGE>
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 in part on the
availability of liquid markets in such instruments. Markets in
financial futures and related options are still developing. It
is impossible to predict the amount of trading interest that may
hereafter exist in various types of options or futures.
Therefore no assurance can be given that a Fund will be able to
use these instruments effectively for the purposes set forth
above.
The Funds' ability to use options, futures and forward
contracts may be limited by tax considerations. In particular,
tax rules might affect the length of time for which the Funds can
hold such contracts and the character of the income earned on
such contracts. In addition, differences between each Fund's
book income (upon the basis of which distributions are generally
made) and taxable income arising from its hedging activities may
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. Furthermore,
in certain circumstances use of options, futures and forward
contracts that substantially eliminate risk of loss and the
24
<PAGE>
opportunity for gain in an "appreciated financial position" will
accelerate gain to the Funds.
Future Developments
The above discussion relates to each Fund's proposed use
of Futures Contracts, Forward 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 the fundamental
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.
25
<PAGE>
(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
26
<PAGE>
connection therewith are not considered
pledges or other encumbrances.
(b) Purchase securities on margin, except that
each Fund may obtain such short-term credits
as may be necessary for the clearance of
purchases and sales of securities, and except
that each Fund may make margin payments in
connection with Futures Contracts, Options on
Futures Contracts, options, Forward Contracts
or options on foreign currencies.
(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
27
<PAGE>
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 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,
28
<PAGE>
foreign currency futures contracts, forward
foreign currency exchange contracts and
options (including options on any of the
foregoing) to the extent such action is
consistent with such Fund's investment
objective and policies.
(m) Purchase additional securities in excess of 5%
of the value of its total assets until all of
a Fund's outstanding borrowings (as permitted
and described in Restriction No. 1 above) have
been repaid.
Whenever any investment restriction states a maximum
percentage of a Fund's assets which may be invested in any
security or other asset, it is intended that such maximum
percentage limitation be determined immediately after and as a
result of such Fund's acquisition of such securities or other
assets. Accordingly, any later increase or decrease beyond the
specified limitation resulting from a change in value or net
asset value will not be considered a violation of such percentage
limitation.
_____________________________________________________________
MANAGEMENT OF THE FUNDS
_____________________________________________________________
Adviser
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,
1997 of more than $199.3 billion (of which more than $71 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. As of June 30, 1997, the
Adviser was returned as an investment manager of employee benefit
fund assets for 29 of the FORTUNE 100 companies. As of that
date, the Adviser and its subsidiaries employed approximately
1,450 employees who operated out of five domestic offices and the
offices of subsidiaries in Bombay, Istanbul, London, Paris, Sao
Paolo, Sydney, Tokyo, Toronto, Bahrain, Luxembourg and Singapore.
29
<PAGE>
The 54 registered investment companies comprising 116 separate
investment portfolios managed by the Adviser currently have more
than two million shareholders.
Alliance Capital Management Corporation, the sole
general partner of, and the owner of a 1% general partnership
interest in, the Adviser, is an indirect wholly- owned subsidiary
of The Equitable Life Assurance Society of the United States
("Equitable"), one of the largest life insurance companies in the
United States and a wholly-owned subsidiary of The Equitable
Companies Incorporated ("ECI"), a holding company controlled by
AXA-UAP, a French insurance holding company. As of March 1,
1997, 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 58%
of the issued and outstanding units representing assignments of
beneficial ownership of limited partnership interests in the
Adviser ("Units"). As of March 1, 1997, approximately 33% and 9%
of the Units were owned by the public and employees of the
Adviser and its subsidiaries, respectively, including an employee
of the Adviser who serves as a Director of the Fund.
As of March 1, 1997, AXA-UAP and its subsidiaries owned
60.7% of the issued and outstanding shares of the capital stock
of ECI. ECI is a public company with shares traded on the
Exchange. AXA-UAP, a French company, is the holding company for
an international group of insurance and related financial
services companies. AXA-UAP's insurance operations include
activities in life insurance, property and casualty insurance and
reinsurance. The insurance operations are diverse geographically
with activities principally in Western Europe, North America and
the Asia/Pacific area. AXA-UAP is also engaged in asset
management, investment banking, securities trading, brokerage,
real estate and other financial services activities principally
in the United States, as well as in Western Europe and the
Asia/Pacific area.
Based on information provided by AXA-UAP, on March 1,
1997, 22.5% of the issued ordinary shares (representing 33.0% of
the voting power) of AXA-UAP were controlled directly and
indirectly by Finaxa, a French holding company. As of March 1,
1997, 61.4% of the shares (representing 72.0% of the voting
power) of Finaxa were owned by four French mutual insurance
companies (the "Mutuelles AXA") (one of which, AXA Assurances
I.A.R.D. Mutuelle, owned 34.9% of the shares, representing 40.0%
of the voting power), and 23.7% of the shares of Finaxa
(representing 14.6% of the voting power) were owned by Banque
Paribas, a French bank ("Paribas"). Including the ordinary
shares owned by Finaxa, on March 1, 1997, the Mutuelles AXA
directly or indirectly controlled 26.0% of the issued ordinary
30
<PAGE>
shares (representing 38.1% of the voting power) of AXA-UAP.
Acting as a group, the Mutuelles AXA control AXA-UAP and Finaxa.
In November 1996, AXA offered (the "Exchange Offer") to
acquire 100% of the ordinary shares ("UAP Shares") of FF10 each
of Compagnie UAP, a societe anonyme organized under the laws of
France ("UAP"), in exchange for ordinary shares ("Shares") and
Certificates of Guaranteed Value ("Certificates") of AXA. Each
UAP shareholder that tendered UAP Shares in the Exchange Offer
received two Shares and two Certificates for every five UAP
Shares so tendered. On January 24, 1997, AXA acquired 91.37% of
the outstanding UAP Shares. AXA-UAP currently intends to merge
(the "Merger") with UAP at some future date in 1997. It is
anticipated that approximately 11,706,826 additional Shares will
be issued in connection with the Merger to UAP shareholders who
did not tender UAP Shares in the Exchange Offer. If the Merger
had been completed at March 1, 1997, Finaxa would have
beneficially owned (directly and indirectly) approximately 21.7%
of the Shares (representing approximately 32.0% of the voting
power), and the Mutuelles AXA would have controlled (directly or
indirectly through their interest in Finaxa) 25.1% of the issued
ordinary shares (representing 36.8% of the voting power) of AXA-
UAP. On January 17, 1997, AXA announced its intention to redeem
its outstanding 6% Bonds (the "Bonds"). Between February 14,
1997 and May 14, 1997, holders of the Bonds has the option to
convert each Bond into 5.15 Shares. On May 15, 1997, each Bond
still outstanding was redeemed into cash at FF1,285 plus FF9.29
accrued interest. Finaxa converted the Bonds it had owned into
2,153,308 Shares. After giving effect to the conversion of all
outstanding Bonds into Shares and to the Merger as if it had been
completed at March 1, 1997, Finaxa would have beneficially owned
(directly and indirectly) approximately 21.4% of the Shares
(representing 31.3% of the voting power), and the Mutuelles AXA
would have controlled (directly or indirectly through their
interest in Finaxa) 24.7% of the issued ordinary shares
(representing 36.0% of the voting power) of AXA-UAP.
INVESTMENT ADVISORY CONTRACT AND EXPENSES
The Adviser serves as investment manager and adviser of
each of the Funds and continuously furnishes 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 the
Conservative Investors Fund and has agreed to bear certain
31
<PAGE>
expenses of the Class A, Class B, Class C shares of each Fund to
the extent that expenses exceed an annual rate of 1.40% for
Class A shares 2.10% for Class B and Class C shares. Effective
December 12, 1996, the Adviser has discontinued the advisory fee
waiver on the Growth Investors Fund. 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 with respect to the
Funds. The First Investment Advisory Contract 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, 1998 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 16, 1997.
During the period May 1, 1996 through April 30, 1997,
the Adviser earned $363,977 in management fees from the
Conservative Investors Fund (an additional $245,071 in fees were
waived) and $723,109 from the Growth Investors Fund (an
additional $167,543 in fees were waived). 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).
32
<PAGE>
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 to delete the word
"Alliance" from their names.
The Investment Advisory Contract provides that the
Adviser 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,1 52, 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.
Ruth Block, 66, 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
_________________________
1An "interested person" of the Trust, as defined by the 1940
Act.
33
<PAGE>
Incorporated (specialty chemicals) and Amoco Corporation (oil and
gas). Her address is Box 4653, Stamford, Connecticut 06903.
Richard W. Couper, 74, 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.
William H. Foulk, Jr., 64, is an Investment Adviser and
an Independent Consultant. He was formerly Senior Manager of
Barrett Associates, Inc., a registered investment adviser, with
which he had been associated since prior to 1991. His address is
2 Hekma Road, Greenwich, Connecticut 06831.
Brenton W. Harries, 69, 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, 63, was formerly a partner at
Orrick, Herrington & Sutcliffe and is currently counsel to that
firm. His address is 666 Fifth Avenue, 19th Floor, New York, New
York 10103.
Officers
*John D. Carifa, President, see biography above.
Edmund P. Bergan, Jr., 47, 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, 46, 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, 32, 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, 50, Vice President, is the Vice
Chairman and Chief Investment Officer of Alliance Capital
Management Corporation, the general partner of the Adviser. His
address is 1345 Avenue of the Americas, New York, New York 10105.
Kathleen A. Corbet, 37, Vice President, is an Executive
Vice President of Alliance Capital Management Corporation, the
general partner of the Adviser. Prior thereto, she was employed
by Equitable Capital since prior to 1992. Her address is 1345
Avenue of the Americas, New York, New York 10105.
34
<PAGE>
Wayne D. Lyski, 55, Vice President, is Executive Vice
President of Alliance Capital Management Corporation, the general
partner of the Adviser. His address is 1345 Avenue of the
Americas, New York, New York 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, 1997, the aggregate
compensation paid to each of the Trustees during calendar year
1996 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.
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
Ruth Block $5,632 $5,632 $157,500 40
John D. Carifa $ -- $ -- $ -- 52
Richard W. Couper $5,600 $5,600 $85,000 2
William H. Foulk $2,808 $2,808 $140,574 33
Brenton W. Harries $5,800 $5,800 $86,000. 2
Donald J. Robinson $5,427 $5,427 $137,250 41
____________________________
* As of June 30, 1997 there were 116 investment companies or
portfolios thereof in the Alliance Fund Complex.
As of August 15, 1997, 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
35
<PAGE>
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
Funds. While it is impossible to place an actual dollar value on
such investment information, the Adviser believes that its
receipt by 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.
36
<PAGE>
Aggregate securities transactions for the Funds during
the fiscal year ended April 30, 1997 were as follows: with
respect to the Conservative Investors Fund, $68,744,431 and, in
connection therewith, brokerage commissions of $52,669 (100%)
were allocated to persons or firms supplying research
information; and with respect to the Growth Investors Fund,
$179,271,861 and, in connection therewith, brokerage commissions
of $280,483 (100%) were allocated to persons or firms supplying
research information. 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.
For the fiscal year ended April 30, 1997, the
Conservative Investors Fund paid an aggregate of $52,669 in
brokerage commissions; and the Growth Investors Fund paid an
aggregate of $280,483 in brokerage commissions.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.
The extent to which commissions that will be charged by
broker-dealers selected by the Funds may reflect an element of
value for research cannot presently be determined. To the extent
that research services of value are provided by broker-dealers
with or through whom the Funds place portfolio transactions, the
Adviser may be relieved of expenses which it might otherwise
bear. Research services furnished by broker-dealers could be
useful and of value to the Adviser in servicing its other clients
as well as the Funds; on the other hand, certain research
services obtained by the Adviser as a result of the placement of
portfolio brokerage of other clients could be useful and of value
to it in servicing the Funds. Consistent with the Conduct Rules
of the National Association of Securities Dealers, Inc. and
37
<PAGE>
subject to seeking best execution, the Funds may consider sales
of shares of the Funds or other investment companies managed by
the Adviser as a factor in the selection of broker-dealers to
execute portfolio transactions for the Funds.
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 commissions. 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,
1995, April 30, 1996 and April 30, 1997, are set forth below:
% of Fund's
% of Fund's Aggregate
Fiscal Amount Aggregate Dollar
Year Brokerage Brokerage Amount of
Ended Fund Commission Commissions Transactions
April 30, 1997 Growth
Investors $ 50 0.02% 0%
April 30, 1997 Conservative
Investors 123 0.23% 0%
The annual portfolio turnover rates of the Conservative
Investors Fund and the Growth Investors Fund for the fiscal years
ended April 30, 1997 and April 30, 1996 were 174% and 267% for
Conservative Investors and 133% and 209% for Growth Investors,
respectively.
38
<PAGE>
_____________________________________________________________
EXPENSES OF THE FUNDS
_____________________________________________________________
In addition to the payments to the Adviser under the
Investment Advisory Contract described above, the Trust pays
certain other costs including (a) brokerage and commission
expenses, (b) federal, state and local taxes, including issue and
transfer taxes incurred by or levied on a Fund, (c) interest
charges on borrowing, (d) fees and expenses of registering the
shares of the Funds under the appropriate federal securities laws
and of qualifying shares of the Funds under applicable state
securities laws including expenses attendant upon renewing and
increasing such registrations and qualifications, (e) expenses of
printing and distributing the Funds' prospectuses and other
reports to shareholders, (f) costs of proxy solicitations,
(g) transfer agency fees described below, (h) charges and
expenses of the Trust's custodian, (i) compensation of the
Trust's officers, Trustees and employees who do not devote any
part of their time to the affairs of the Adviser or its
affiliates, (j) costs of stationery and supplies, and (k) such
promotional expenses as may be contemplated by the Distribution
Services Agreement described below.
Distribution Arrangements
Rule 12b-1 adopted by the SEC under the 1940 Act permits
an investment company to directly or indirectly pay expenses
associated with the distribution of its shares in accordance with
a duly adopted and approved plan. The Trust has adopted a plan
for each class of shares of the Funds pursuant to Rule 12b-1
(each a "Plan" and collectively the "Plans"). Pursuant to the
Plans, each Fund pays Alliance Fund Distributors, Inc. (the
"Principal Underwriter") a Rule 12b-1 distribution services fee
which may not exceed an annual rate of .50% of a Fund's aggregate
average daily net assets attributable to the Class A shares,
1.00% of a Fund's aggregate average daily net assets attributable
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, Class B 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
39
<PAGE>
other investment companies which it manages and the Adviser's
past profits, to finance the distribution of the Funds' shares.
Each Plan may be terminated with respect to the class of
shares of any Fund to which the Plan relates by vote of a
majority of the Trustees who are not "interested persons" of the
Trust and who have no direct or indirect financial interest in
the operation of the Plans or in any agreement related to the
Plans (the "Qualified Trustees"), or by vote of a majority of the
outstanding voting securities of that class. Each Plan may be
amended by vote of the Trustees, including a majority of the
Qualified Trustees, cast in person at a meeting called for that
purpose. Any change in a Plan that would materially increase the
distribution costs to the class of shares of any Fund to which
the Plan relates requires approval by the affected class of
shareholders of that Fund. The Trustees review quarterly a
written report of such distribution costs and the purposes for
which such costs have been incurred with respect to each Fund's
Class A, Class B and Class C shares. For so long as the Plans
are in effect, selection and nomination of those Trustees who are
not interested persons of the Trust shall be committed to the
discretion of such disinterested persons.
The Plans may be terminated with respect to any Fund or
class of shares thereof at any time on 60 days' written notice
without payment of any penalty by the Principal Underwriter or by
vote of a majority of the outstanding voting securities of that
Fund or that class (as appropriate) or by vote of a majority of
the Qualified Trustees.
The Plans will continue in effect with respect to each
Fund and each class of shares thereof for successive one- year
periods, provided that each such continuance is specifically
approved (i) by the vote of a majority of the Qualified Trustees
and (ii) by the vote of a majority of the entire Board of
Trustees cast in person at a meeting called for that purpose.
For services rendered by the Principal Underwriter in
connection with the distribution of Class A shares pursuant to
the Plan applicable to such shares, the Principal Underwriter
received $39,343 and $87,204 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, 1997. 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
40
<PAGE>
applicable to such shares, the Principal Underwriter received
$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 in
connection with the distribution of Class B shares pursuant to
the Plan applicable to such shares, the Principal Underwriter
received $304,539 and $613,255 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, 1997 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 in
connection with the distribution of Class C shares pursuant to
the Plan applicable to such shares, the Principal Underwriter
received $49,620 and $60,207 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, 1997. 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.
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:
41
<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, 1997) April 30, 1997) April 30, 1997)
Advertising/
Marketing $ 35,433 $ 52,099 $13,564
Printing and
Mailing of
Prospectuses
and Semi-Annual
and Annual
Reports to Other
than Current
Shareholders $ 4,492 $ 10,087 $ 2,863
Compensation to
Underwriters $ 67,316 $ 91,373 $22,816
Compensation to
Dealers $ 46,563 $169,878 $52,407
Compensation to
Sales Personnel $ 7,851 $ 4,035 $ 1,026
Interest, Carrying or
Other Financing
Charges $ -0- $ 39,028 $ 1,601
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) $ 67,161 $102,053 $ 27,149
Total $228,816 $468,553 $121,426
======== ======== ========
42
<PAGE>
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, 1997) April 30, 1997) April 30, 1997)
Advertising/
Marketing $ 29,544 $ 65,301 $ 17,127
Printing and
Mailing of
Prospectuses
and Semi-Annual
and Annual Reports
to Other than
Current Share-
holders $ 8,070 $ 16,187 $ 4,314
Compensation to
Underwriters $ 52,666 $117,218 $ 31,216
Compensation
to Dealers $ 72,457 $434,418 $ 69,993
Compensation to
Sales Personnel $ 12,934 $ 9,300 $ 3,333
Interest,
Carrying or
Other Financing
Charges $ -0- $ 78,701 $ 2,277
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) $ 80,200 $134,212 $ 34,611
TOTAL $255,871 $855,337 $162,871
======== ======== ========
43
<PAGE>
Custodial Arrangements
State Street Bank and Trust Company, 225 Franklin
Street, Boston, MA, 02110 ("State Street Bank") is the Trust's
custodian.
Transfer Agency Arrangements
Alliance Fund Services, Inc. ("AFS"), an indirect
wholly-owned subsidiary of the Adviser, receives a transfer
agency fee per account holder of each of the Class A, Class B and
Class C shares of the Trust, plus reimbursement for out-of-pocket
expenses. The transfer agency fee with respect to the Class B
and Class C shares is higher than the transfer agency fee with
respect to the Class A shares, reflecting the additional 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 "Class A shares"), with a
contingent deferred sales charge (the "Class B shares"), without
any initial sales charge, as long as the shares are held for one
year or more, without any contingent deferred sales charge (the
"Class C shares"),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"), and (iii) the Principal
Underwriter.
The minimum for initial investments for any class of
shares 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
44
<PAGE>
Services," the Funds offer an automatic investment program and a
403(b)(7) retirement plan which permit investments of $25 or
more. The subscriber may use the Subscription Application found
in the Prospectus for his or her initial investment. Sales
personnel of selected dealers and agents distributing the Funds'
shares may receive differing compensation for selling Class A,
Class B or Class C shares.
Investors may purchase shares of the Funds in the United
States either through selected dealers or agents or directly
through the Principal Underwriter. Shares may also be sold in
foreign countries where permissible. The Funds may refuse any
order for the purchase of shares for any reason. 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.
Investors may purchase shares of the Funds through
selected dealers, agents or financial representatives directly
through the Principal Underwriter. Sales personnel of selected
dealers and agents distributing the Funds' shares may receive
differing compensation for selling Class A, Class B or Class C
shares.
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 Class A shares, a
sales charge which will vary depending on the amount of the
purchase alternative chosen by the investor, as shown in the
table in the Prospectus under "Purchase and Sales of Shares." 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. A Fund business day is any day on which the
Exchange is open for trading.
The respective per share net asset values of the
Class A, Class B and Class C shares are expected to be
substantially the same. Under certain circumstances, however, the
per share net asset values of the Class B and Class C shares may
45
<PAGE>
be lower than the per share net asset value of the Class A
shares, as a result of the differential daily expense accruals of
the 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.
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, if applicable, Class A
sales charges) as described below. Orders received by the
Principal Underwriter prior to the close of regular trading on
the Exchange on each day the Exchange is open for trading are
priced at the net asset value computed as of the close of regular
trading on the Exchange on that day (plus, if 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 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. Eastern time. If the selected dealer,
agent or financial representative, as applicable, fails to do so,
the investor's right to purchase shares at 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, as
applicable, either 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, both of which may be obtained by calling the "For
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 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
46
<PAGE>
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,
agent or financial representative. This facilitates later
redemption and relieves the shareholder of the responsibility for
and inconvenience of lost or stolen certificates. No
certificates are issued for fractional 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
Securities, Inc. an affiliate of the Principal Underwriter
("Equico", 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 incurred in
connection with travel taken 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 and Class C 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 that borne by
Class A shares, (iii) Class B and Class C shares bear higher
transfer agency costs than those borne by Class A shares,
(iv) each class has exclusive voting rights with respect to
47
<PAGE>
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 to Class A
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, 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.
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 law, will seek to ensure that no such conflict arises.
Alternative Retail Purchase Arrangements -- Class A, Class B and
Class C Shares
The alternative purchase arrangements available with
respect to Class A shares, Class B shares and Class C shares
permit an investor to choose the method of purchasing shares that
is most beneficial given the amount of the purchase, the length
of time the investor expects to hold the shares, and other
circumstances. Investors should consider whether, during the
anticipated life of their investment in the Funds, 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 $1,000,000 for Class C shares.
Class A shares are subject to a lower distribution
services fee and, accordingly, pay correspondingly higher
dividends per share than Class B shares or Class C shares.
However, because initial sales charges are deducted at the time
of purchase, investors purchasing Class A shares would not have
all their funds invested initially and, therefore, would
48
<PAGE>
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 on Class A shares 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 on 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.
Class A Shares
The public offering price of Class A shares is the net
asset value plus a sales charge, as set forth below:
49
<PAGE>
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. In
determining the contingent deferred sales charge applicable to a
redemption of Class A shares, it will be assumed that the
redemption is, first, of any shares that are not subject to a
contingent deferred sales charge (for example, because an initial
sales charge was paid with respect to the shares, or they have
been held beyond the period during which the charge applies or
were acquired upon the reinvestment of dividends or
distributions) and, second, of shares held longest during the
time they are subject to the sales charge. 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
50
<PAGE>
dealers or agents from its own resources a fee of up to 1% of the
amount invested to compensate such dealers or agents for their
distribution assistance in connection with such purchases.
No initial sales charge is imposed on Class A shares
issued (i) pursuant to the automatic reinvestment of income
dividends or capital gains distributions, or (ii) in exchange for
Class A shares of other Alliance Mutual Funds (as that term is
defined under "Combined Purchase Privilege" below), except that
an initial sales charge will be imposed on Class A shares issued
in exchange for Class A shares of AFD Exchange Reserves ("AFDER")
that were purchased for cash without the payment of an initial
sales charge and without being subject to a contingent deferred
sales charge. The 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 above. In this regard, the Principal
Underwriter may elect to reallow the entire sales charge to
selected dealers and agents for all sales with respect to which
orders are placed with the Principal Underwriter. A selected
dealer or agent 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, 1997:
Conservative Investors Fund
Net Asset Value per Class A Share
at April 30, 1997: $11.31
Per Share Sales Charge - 4.25%
of offering price (4.42% of net
asset value per share) $ .50
______
Class A Per Share Offering
Price to the Public $11.81
======
51
<PAGE>
Growth Investors Fund
Net Asset Value per Class A Share
at April 30, 1997 $13.12
Per Share Sales Charge - 4.25%
of offering price (4.42% of net
asset value per share) $ .58
______
Class A Per Share Offering
Price to the Public $13.70
======
Investors choosing the initial sales charge alternative
may under certain circumstances be entitled to pay (i) no 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 investors may pay a reduced
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 two 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.
52
<PAGE>
Alliance Balanced Shares, Inc.
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 Greater China '97 Fund, Inc.
Alliance Growth and Income Fund, Inc.
Alliance High Yield 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 Real Estate Investment Fund, Inc.
Alliance/Regent Sector Opportunity 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 Conservative Investors Fund
-Alliance Growth Fund
-Alliance Growth Investors Fund
-Alliance Strategic Balanced Fund
-Alliance Short-Term U.S. Government Fund
53
<PAGE>
Prospectuses for the Alliance Mutual Funds may be
obtained without charge by contacting AFS at the address or the
"For Literature" telephone number shown on the front cover of
this Statement of Additional Information.
Cumulative Quantity Discount (Right of Accumulation).
An investor's purchase of additional Class A shares of a Fund may
qualify for a Cumulative Quantity Discount. The applicable sales
charge will be based on the total of:
(i) the investor's current purchase;
(ii) the net asset value (at the close of business on
the previous day) of (a) all Class A, Class B and
Class C shares of the Fund held by the investor
and (b) all shares of any other Alliance Mutual
Fund held by the investor; and
(iii) the net asset value of all shares described in
paragraph (ii) owned by another shareholder
eligible to combine his or her purchase with that
of the investor into a single "purchase" (see
above).
For example, if an investor owned shares of an Alliance
Mutual Fund worth $200,000 at their then current net asset value
and, subsequently, purchased Class A shares of the Fund worth an
additional $100,000, the initial sales charge for the $100,000
purchase would be at the rate 2.25% applicable to a single
$300,000 purchase of shares of the Fund, rather than the 3.25%
rate.
To qualify for the Combined Purchase Privilege or to
obtain the Cumulative Quantity Discount on a purchase through a
selected dealer or agent, the investor or selected dealer or
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 and/or
Class C shares) of a Fund or any other Alliance Mutual Fund.
Each purchase of shares under a Statement of Intention will be
made at the public offering price or prices applicable at the
time of such purchase to a single transaction of the dollar
amount indicated in the Statement of Intention. At the
investor's option, a Statement of Intention may include purchases
of shares of a Fund or any other Alliance Mutual Fund made not
54
<PAGE>
more than 90 days prior to the date that the investor signs the
Statement of Intention; however, the 13-month period during which
the Statement of Intention is in effect will begin on the date of
the earliest purchase to be included.
Investors qualifying for the Combined Purchase Privilege
described above may purchase shares of the Alliance Mutual Funds
under a single Statement of Intention. For example, if at the
time an investor signs a Statement of Intention to invest at
least $100,000 in Class A shares of a Fund, the investor and the
investor's spouse each purchase shares of the Fund worth $20,000
(for a total of $40,000), it will only be necessary to invest
only a total of $60,000 during the following 13 months in shares
of the Fund or any other Alliance Mutual Fund to qualify for the
3.25% sales charge on the total amount being invested, the 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 shares will be
registered in the name of the investor) to secure payment of the
higher initial sales charge applicable to the shares actually
purchased if the full amount indicated is not purchased, and such
escrowed shares will be involuntarily redeemed to pay the
additional sales charge, if necessary. Dividends on escrowed
shares, whether paid in cash or reinvested in additional Fund
shares, are not subject to escrow. When the full amount
indicated has been purchased, the escrow will be released. To
the extent that an investor purchases more than the dollar amount
indicated on the Statement of Intention and qualifies for a
further reduced sales charge, the initial sales charge will be
adjusted for the entire amount purchased at the end of the 13-
month period. The difference in the initial sales charge will be
used to purchase additional shares of a Fund subject to the rate
of the initial sales charge applicable to the actual amount of
the aggregate purchases.
Investors wishing to enter into a Statement of Intention
in conjunction with their initial investment in Class A shares of
a Fund should complete the appropriate portion of the
Subscription Application found in the Prospectus while current
Class A shareholders desiring to do so can obtain a form of
Statement of Intention by contacting AFS 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
55
<PAGE>
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
purchase will be that normally applicable, under such schedule,
to an investment equal to the sum of (i) the total purchases
previously made during the 13-month period and (ii) the current
month's purchase multiplied by the number of months (including
the current month) remaining in 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 reinvestment 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 within 30 calendar days
after the redemption or repurchase transaction. 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
management 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; the Principal Underwriter, AFS and
their affiliates; officers and directors of ACMC, the Principal
56
<PAGE>
Underwriter, AFS and their affiliates; officers, directors and
present and full-time employees of selected dealers or agents;
the spouse, sibling, direct ancestor or direct descendant
(collectively "relatives") of any such person; any trust,
individual retirement account or retirement plan account for the
benefit of any such person or relative; or the estate of any such
person or relative, if such shares are purchased for investment
purposes (such shares may not be resold except to the relevant
Fund); (iii) the Adviser, Principal Underwriter, AFS and their
affiliates; certain employee benefit plans for employees of the
Adviser, the Principal Underwriter, AFS and their affiliates;
(iv) registered investment advisers or other financial
intermediaries who charge a management, consulting or other fee
for their service and who purchase shares through a broker or
agent approved by the Principal Underwriter and clients of such
registered investment advisers or financial intermediaries whose
accounts are linked to the master account of such investment
advisor or financial intermediary on the books of such approved
broker or agent; (v) 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; (vi) 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 (vii) 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 may 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
57
<PAGE>
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 that
are redeemed within four years of purchase will be subject to a
contingent deferred sales charge at the rates set forth below.
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 between the date
of payment for the purchase of Class B shares and the date of
redemption of such shares.
58
<PAGE>
Contingent Deferred Sales Charge as a % of Dollar Amount
Shares
Purchased Shares
On or After Purchased
Years since Shares August 2, 1993 On or
Purchase Purchased but Before After
Subject to Before November 19, November 19,
Change August 2, 1993 1993 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
Thereafter None .50% None
In determining the contingent deferred sales charge
applicable to a redemption of Class b, it will be assumed that
the redemption consists first, of any shares were acquired upon
the reinvestment of dividends or distributions and, second, of
shares held longest during the time they are subject to the sales
charge. When shares acquired in an exchange are redeemed, the
applicable contingent deferred sales charge and conversion
schedules will be the schedules that applied at the time of
purchase of shares originally purchased by the shareholder.
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
59
<PAGE>
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
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 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 may 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, as long as the
shares are held for at least one year, 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, without
a contingent deferred sales charge so that the investor will
receive as proceeds upon redemption the entire net asset value of
his or her Class C shares. The Class C distribution services fee
enables a Fund to sell Class C shares without either an initial
or contingent deferred sales charge, 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
and transfer agency costs than Class A shares. Class C share
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
60
<PAGE>
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 the types of
redemptions with respect to which a Class B contingent deferred
sales charge would be waived (see above under "--Class B
Shares"), 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."
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 those
paid with respect to Class A shares.
_____________________________________________________________
REDEMPTION AND REPURCHASE OF SHARES
_____________________________________________________________
The following information supplements that set forth in
the Funds' Prospectus under the heading "Purchase and Sale of
Shares--How to Sell Shares."
Redemption
Subject only to the limitations described below, the
Funds will redeem the shares tendered to them, as described
below, at a redemption price equal to their net asset value as
next computed following the receipt of shares tendered for
redemption in proper form. Except for any contingent deferred
sales charge which may be applicable to Class A, Class B and
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
61
<PAGE>
after shares are tendered for redemption, except for any period
during which the Exchange is closed (other than customary weekend
and holiday closings) or during which the SEC determines that
trading thereon is restricted, or for any period during which an
emergency (as determined by the SEC) exists as a result of which
disposal by a Fund of securities owned by it is not reasonably
practicable or as a result of which it is not reasonably
practicable for a Fund fairly to determine the value of its net
assets, or for such other periods as the SEC 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 will reflect the deduction of
the applicable contingent deferred sales charge, if applicable.
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, may result in
capital gains or losses, the nature of which depends 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 which may make such redemption requests, without
limit, 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 found in
the Prospectus or, in the case of an existing shareholder, an
"Autosell" application obtained from AFS 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
62
<PAGE>
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
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 AFS, or by checking the
appropriate box on the Subscription Application found in the
Prospectus.
TELEPHONE REDEMPTIONS--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 AFS 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
AFS 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 nor AFS will be responsible for the authenticity of
telephone requests for redemptions that a Fund reasonably
believes to be genuine. AFS 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 AFS 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.
63
<PAGE>
The signature or signatures on the assignment form must be
guaranteed in the manner described above.
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),
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 the
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. Eastern time. 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 selected 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).
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 consecutive
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.
64
<PAGE>
_____________________________________________________________
SHAREHOLDER SERVICES
_____________________________________________________________
The following information supplements that set forth in
the Funds' Prospectus under the heading "Purchase and Sale of
Shares--Shareholder Services." The shareholder services set
forth below are applicable to all classes of shares unless
otherwise indicated.
Automatic Investment Program
Investors may purchase shares of the Funds through an
automatic investment program utilizing Electronic Funds Transfers
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 agent
designated by the investor at the public offering price next
determined after the Principal Underwriter receives the proceeds
from the investor's bank. 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 AFS 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 the Adviser).
In addition, (i) present officers and full-time employees of the
Adviser, (ii) present Directors or Trustees of any Alliance
Mutual Fund and (iii) certain employee benefit plans for
employees of the Adviser, the Principal Underwriter, AFS and
their affiliates may exchange Class A shares of any Alliance
Mutual Fund for Advisor Class shares of any other Alliance Mutual
Fund, including 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.
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
65
<PAGE>
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 AFS
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 AFS with their account number and other details
of the exchange at (800) 221-5672 before 4:00 p.m. Eastern time,
on a Fund business day as defined above. Telephone requests for
exchanges received before 4:00 p.m. Eastern time on a Fund
business day will be processed as of the close of business on
66
<PAGE>
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 AFS
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 AFS 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 worth of his or her
Fund shares (minimum $25) is automatically exchanged for shares
of another Alliance Mutual Fund. Auto Exchange transactions
normally occur on the 12th day of each month, or the Fund
business day prior thereto.
None of the Alliance Mutual Funds, the Adviser, the
Principal Underwriter or AFS will be responsible for the
authenticity of telephone requests for exchanges that a Fund
reasonably believes to be genuine. AFS 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 AFS 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 legally be
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 AFS at the "For Literature"
telephone number on the cover of this Statement of Additional
Information, or write to:
67
<PAGE>
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. The minimum
initial investment requirement may be waived with respect to
certain of these qualified plans.
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
retirement plans under which an employee may agree that monies
deducted from his or her compensation (minimum $25 per pay
period) may be contributed by the employer to a custodial account
established for the employee under the plan.
68
<PAGE>
The Alliance Plans Division of Frontier Trust Company, a
subsidiary of The Equitable Life Assurance Society of the United
States, which serves as custodian or trustee under the retirement
plan prototype forms available from the Funds, charges certain
nominal fees for establishing an account and for annual
maintenance. A portion of these fees is remitted to AFS 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 AFS at the
address or "For Literature" telephone number shown on the cover
of this Statement of Additional Information.
Dividend Direction Plan
A shareholder who already maintains, in addition to his
or her Class A, Class B or Class C Fund accounts, a Class A,
Class B or Class C account with one or more other Alliance Mutual
Funds may direct that income dividends and/or capital gains paid
on his or her Class A, Class B or Class C Fund shares be
automatically reinvested, in any amount, without the payment of
any sales or service charges, in shares of the same class of such
other Alliance Mutual Fund(s). Further information can be
obtained by contacting AFS at the address or the "For 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 AFS 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
69
<PAGE>
below, any applicable contingent deferred sales charge. Shares
acquired with reinvested dividends and distributions will be
liquidated first to provide such withdrawal payments and
thereafter other shares will be liquidated to the extent
necessary, and depending upon the amount withdrawn, the
investor's principal may be depleted. A systematic withdrawal
plan may be terminated at any time by the shareholder or the
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 imposed 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 AFS at the address or the "For Literature"
telephone number shown on the cover of this Statement of
Additional Information.
CDSC Waiver for Class B Shares and Class C Shares.
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 or Class C shares in a shareholder's account may
be redeemed free of any contingent deferred sales charge.
With respect to Class B shares, the waiver applies only
with respect to shares acquired after July 1, 1995. Class B
shares that are not subject to a contingent deferred sales charge
(such as shares acquired with reinvested dividends or
distributions) will be redeemed first and will count toward the
foregoing limitations. Remaining Class B shares that are held
the longest will be redeemed next. Redemptions of Class B shares
in excess of the foregoing limitations will be subject to any
otherwise applicable contingent deferred sales charge.
With respect to Class C shares, shares held the longest
will be redeemed first and will count toward the foregoing
70
<PAGE>
limitations. Redemptions in excess of those limitations will be
subject to any otherwise applicable contingent deferred sales
charge.
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 AFS, 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 the close of
regular trading on the Exchange (currently 4:00 p.m. Eastern
time), of the net assets of the Fund represented by that class
(i.e., the value of the assets of the Fund allocated to that
class less the liabilities of the Fund allocated to that class,
including expenses payable or accrued) by the total number of
shares of such class then outstanding at such closing.
For purposes of this computation, readily marketable
portfolio securities, including open short positions, listed on
the Exchange are valued at the last sale price reflected on the
consolidated tape at the close of the Exchange on the business
day as of which such value is being determined. If there has
been no sale on such day, then the security is valued at the mean
of the closing bid and asked prices on such day. If no bid and
asked prices are quoted on such day, then the security is valued
by such method as the Board of Trustees of the Trust shall
determine in good faith to reflect its fair market value.
Securities not listed on the Exchange but listed on other
national securities exchanges or admitted to trading on the
National Association of Securities Dealers Automatic Quotations,
Inc. ("NASDAQ") National List ("List") are valued in like manner.
Portfolio securities traded on more than one national
securities exchange are valued at the last sale price on the
business day as of which such value is being determined as
reflected on the tape at the close of the exchange representing
the principal market for such securities. Securities traded only
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
71
<PAGE>
of securities not quoted by NASDAQ, the National Quotation Bureau
or such other comparable sources as the Board of Trustees of the
Trust deems appropriate to reflect the fair market value thereof.
Call options written or purchased by a Fund are valued at the
last sale price and put options purchased by a Fund are valued at
the last sale price. Readily marketable fixed- income securities
may be valued on the basis of prices provided by a pricing
service when such prices are believed by the Adviser to reflect
the fair market value of such securities. The prices provided by
a pricing service take into account institutional size trading in
similar groups of securities and any developments related to
specific securities. U.S. Government Securities and other debt
instruments having 60 days or less remaining until maturity are
stated at amortized cost if their original maturity was 60 days
or less, or by amortizing their fair value as of the 61st day
prior to maturity if their original term to maturity exceeded 60
days (unless in either case the Board of Trustees of the Trust
determines that this method does not represent fair value). All
other assets, including restricted securities of a Fund, are
valued in such manner as the Board of Trustees of the Trust in
good faith deems appropriate to reflect their fair market value.
The Trustees may suspend the determination of a Fund's
net asset value (and the offering and sales of shares), subject
to the rules of the SEC and other governmental rules and
regulations, at a time when: (1) the Exchange is closed, other
than customary weekend and holiday closings, (2) an emergency
exists as a result of which it is not reasonably practicable for
a Fund to dispose of securities owned by it or to determine
fairly the value of its net assets, or (3) for the protection of
shareholders, the SEC by order permits a suspension of the right
of redemption or a postponement of the date of payment on
redemption.
The assets belonging to the Class A shares, the Class B
shares and the Class C shares will be invested together in a
single portfolio. The net asset value of each class will be
determined separately by subtracting the accrued expenses and
liabilities allocated to that class from the assets belonging to
that class pursuant to a multi-class plan adopted by the Trust
pursuant to Rule 18f-3 under the 1940 Act.
72
<PAGE>
_____________________________________________________________
DIVIDENDS, DISTRIBUTIONS AND TAXES
_____________________________________________________________
UNITED STATES FEDERAL INCOME TAXATION OF DIVIDENDS AND
DISTRIBUTIONS
_____________________________________________________________
General. Each Fund intends to qualify for tax treatment
as a "regulated investment company" under the Internal Revenue
Code of 1986, as amended, 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,
and (2) diversify its holdings so that at the end of each quarter
of its taxable year, the following two conditions are met: (i) at
least 50% of the market value of the Fund's assets is represented
by cash or cash items, U.S. Government Securities, securities of
other regulated investment companies, and other securities
limited, in respect of any one issuer, to an amount not greater
than 5% of the value of the Fund's assets and 10% of the
outstanding voting securities of such issuer, and (ii) not more
than 25% of the value of its assets is invested in the securities
of any one issuer (other than U.S. Government Securities or the
securities of other regulated investment companies) or of two or
more issuers that the Fund controls and that are engaged in the
same, similar, or related trades or businesses. These
requirements may 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 capital 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.
In addition, if a Fund fails to distribute in a calendar
year substantially all of its ordinary income for such year and
substantially all of its capital gain net income for the one-year
73
<PAGE>
period ending October 31 (or later if the Fund is permitted so to
elect and so elects), plus any retained amount from the prior
year, the Fund will be subject to a 4% excise tax on the
undistributed amounts. A dividend paid to shareholders by a Fund
in January of a year generally is deemed to have been paid by the
Fund on December 31 of the preceding year, if the dividend was
declared and payable to shareholders of record on a date in
October, November or December of that preceding year. The Funds
intend generally to make distributions sufficient to avoid
imposition of the 4% excise tax.
The information set forth in the Funds' 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, but only to the extent so designated by
the Fund. The amount of such dividends and distributions that
may be designated by the Fund as 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 dividends-
received deduction shall also be disallowed with respect to a
dividend unless the corporate shareholder held its shares on the
ex-dividend date and for at least 45 more days during the 90-day
period surrounding the ex-dividend date.
Pursuant to the Taxpayer Relief Act of 1997, two
different tax rates apply to net capital gains (that is, the
excess of net gains from capital assets held for more than one
year ("long-term capital assets") over net losses from capital
assets held for not more than one year ("short-term capital
assets")). One rate (generally 28%) applies to net gains on
capital assets held for more than one year but not more than 18
months ("mid-term gains") and a second, preferred rate (generally
20%) applies to the balance of such net capital gains ("adjusted
net capital gains"). Distributions of net capital gains will be
treated in the hands of shareholders as mid-term gains to the
extent designated by a Fund as deriving from net gains from
assets held for more than one year but not more than 18 months,
and the balance will be treated as adjusted net capital gains.
Distributions of mid-term gains and adjusted net capital gains
74
<PAGE>
will be taxable to shareholders as such, regardless of how long a
shareholder has held the shares in a Fund.
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
(even if received shortly after the purchase of such shares by
him or her) will have the effect of reducing the net asset value
of such shares by the amount of such dividend or distribution. A
loss on the sale of shares held for less than six months will be
treated as a long-term capital loss for federal income tax
purposes to the extent of any capital gain distribution made with
respect to such shares.
Dividends and distributions are taxable in the manner
described above regardless of whether they are paid to the
shareholder in cash or are reinvested in additional shares of a
Fund.
For federal income tax purposes, when equity call
options which a Fund has written expire unexercised, the premiums
received by the Fund give rise to short-term capital gains at the
time of expiration. When a call written by a Fund is exercised,
the selling price or purchase price of stock is increased by the
amount of the premium, and the nature of the gain or loss on the
sale of stock depends upon 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 investing in a Fund.
75
<PAGE>
_____________________________________________________________
GENERAL INFORMATION
_____________________________________________________________
Description of the Trust
The Trust is organized as a Massachusetts business trust
under the laws of The Commonwealth of Massachusetts by an
Agreement and Declaration of Trust ("Declaration of Trust") dated
March 26, 1987, a copy of which is on file with the Secretary of
State of The Commonwealth of Massachusetts. The Trust is a
"series" company as described in Rule 18f-2 under the 1940 Act,
having five separate portfolios, each of which is represented by
a separate series of shares. In addition to the Funds, the other
portfolios of the Trust are 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 and Class C shares of each Fund and all
income, earnings, profits, losses and proceeds therefrom, subject
only to the rights of creditors, are allocated to, and constitute
the underlying assets of, the appropriate class of that Fund.
The underlying assets of each Fund and each class of shares
thereof are segregated and are charged with the expenses with
respect to that Fund and that class and with a share of the
general expenses of the Trust. While the expenses of the Trust
are allocated to the separate books of account of each Series and
each class of shares thereof, certain expenses may be legally
chargeable against the assets of all Series 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.
76
<PAGE>
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, 1997:
Names and Addresses % of Class
Conservative Investors Fund - Class C
Alliance Plan Div/FTC
Howard E. Seufer IRA
Rollover Account
115 Park metta Extension
Waverly, WY 26184-9738 6.79%
Growth Investors Fund - Class C
Merrill Lynch
For the Sole Benefit of ITS/
Customers
Attn: Fund Administration
4800 Deer Lake Drive East 3rd Floor
Jacksonville, FL 32246-6486 8.54%
Voting Rights
As summarized in the Prospectus, shareholders are
entitled to one vote for each full share held (with fractional
votes for fractional shares held) and will vote (to the extent
provided herein) in the election of Trustees and the termination
of the Trust or a Fund and on other matters submitted to the vote
of shareholders.
The By-Laws of the Trust provide that the shareholders
of any particular series or class shall not be entitled to vote
on any matters as to which such series or class is not affected.
Except with respect to matters as to which the Trustees have
determined that only the interests of one or more particular
series or classes are affected or as required by law, all of the
shares of each series or class shall, on matters as to which such
series or class is entitled to vote, vote with other series or
classes so entitled as a single class. Notwithstanding the
foregoing, with respect to matters which would otherwise be voted
on by two or more series or classes as a single class, the
Trustees may, in their sole discretion, submit such matters to
the shareholders of any or all such series or classes,
77
<PAGE>
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.
78
<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 or she 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 or her 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 or she would otherwise be subject by
reason of willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of his
or her office.
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, 1997, 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.
79
<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 and Class C shares. Such advertisements disclose a
Fund's average annual compounded total return for recent one-,
five- and ten-year periods (or the life of a Fund or class, if
shorter). Total return for each such period is computed by
finding, through the use of a formula prescribed by the SEC, the
average annual compounded rate of return over such period that
would equate an assumed initial amount invested to the value of
such investment at the end of the period. For purposes of
computing total return, income dividends and capital gains
distributions paid on shares of a Fund are assumed to have been
reinvested when received and the maximum sales charge applicable
to purchases of Fund shares is assumed to have been paid.
The average annual compounded total return for Class A
shares of the Conservative Investors and Growth Investors Funds
was 3.35% and 2.19%, respectively, for the one-year period ended
April 30, 1997. The average annual compounded total return for
Class A shares of the Conservative Investors and Growth Investors
Funds was 6.56% and 10.20%, respectively, for the period May 4,
1992 (commencement of distribution of Class A shares) through
April 30, 1997. The average annual compounded total return for
Class B shares of the Conservative Investors and Growth Investors
Funds was 3.10% and 2.25%, respectively, for the one year period
ended April 30, 1997. The average annual compounded total return
for Class B shares of the Conservative Investors and Growth
Investors Funds was 6.72% and 10.37%, respectively, for the
period May 4, 1992 (commencement of distribution of Class B
shares) through April 30, 1997. The average annual compounded
total return for Class C shares of the Conservative Investors and
Growth Investors Funds was 6.10% and 5.04% respectively, for the
one-year period ended April 30, 1997. The average annual
compounded total return for Class C shares of the Conservative
Investors and Growth Investors Funds was 5.18% and 8.64%,
respectively, for the period August 2, 1993 (commencement of
distribution of Class C shares) through April 30, 1997.
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.
80
<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.
81
<PAGE>
ALLIANCE GROWTH INVESTORS FUND AND ALLIANCE CONSERVATIVE INVESTORS FUND
ANNUAL REPORT
APRIL 30, 1997
ALLIANCE CAPITAL
PORTFOLIO OF INVESTMENTS
APRIL 30, 1997 ALLIANCE GROWTH INVESTORS FUND
_______________________________________________________________________________
COMPANY SHARES U.S. $ VALUE
- -------------------------------------------------------------------------
COMMON STOCKS & OTHER INVESTMENTS-68.6%
UNITED STATES INVESTMENTS-45.0%
CONSUMER NONCYCLICALS-11.5%
APPAREL & TEXTILE-0.5%
Reebok International, Ltd. 13,050 $ 499,163
BEVERAGES-0.9%
Coca-Cola Co. 14,000 890,750
BIOTECHNOLOGY-1.3%
Biogen, Inc. (a) 9,450 302,400
Centocor, Inc. (a) 25,323 712,209
GelTex Pharmaceuticals, Inc. (a) 12,400 204,600
Medimmune, Inc. (a) 2,900 37,700
------------
1,256,909
BROADCASTING-0.3%
Tele-Communications, Inc.-
Liberty Media Cl.A (a) 15,850 298,178
COSMETICS-0.5%
Gillette Co. 5,680 482,800
DRUGS, HOSPITAL SUPPLIES &
MEDICAL SERVICES-3.6%
Boston Scientific Corp. (a) 9,331 450,221
Compdent Corp. (a) 1,500 24,188
Jones Medical Industries, Inc. 1,700 59,925
Medtronic, Inc. 6,048 418,824
Merck & Co., Inc. 13,860 1,254,330
National Surgery Centers, Inc. (a) 1,800 54,000
Oxford Health Plans, Inc. (a) 3,500 230,562
PacifiCare Health Systems, Inc. Cl.B (a) 2,450 196,612
Pfizer, Inc. 7,250 696,000
Premier Research Worldwide, Ltd. (a) 800 7,700
Rotech Medical Corp. (a) 2,900 45,675
------------
3,438,037
ENTERTAINMENT & LEISURE-1.5%
Carnival Corp. Cl.A 4,900 180,688
Time Warner, Inc. 10,400 468,000
Walt Disney Co. 9,770 801,140
------------
1,449,828
FOOD-0.8%
Campbell Soup Co. 9,340 477,507
Nabisco Holdings Corp. Cl.A 6,365 244,257
United Natural Foods, Inc. (a) 3,200 49,600
------------
771,364
HOUSEHOLD PRODUCTS-0.7%
Colgate-Palmolive Co. 4,790 531,690
Silgan Holdings, Inc. (a) 4,100 108,650
------------
640,340
PRINTING & PUBLISHING-0.4%
New York Times Co. Cl.A 8,900 384,925
TOBACCO-0.9%
Philip Morris Cos., Inc. 20,400 803,250
MISCELLANEOUS-0.1%
Interim Services, Inc. (a) 1,200 46,500
------------
10,962,044
TECHNOLOGY-9.4%
AEROSPACE & DEFENSE-0.9%
Boeing Co. 2,100 207,113
General Dynamics Corp. 4,500 320,625
United Technologies Corp. 4,800 363,000
------------
890,738
11
PORTFOLIO OF INVESTMENTS (CONTINUED) ALLIANCE GROWTH INVESTORS FUND
_______________________________________________________________________________
COMPANY SHARES U.S. $ VALUE
- -------------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT-0.3%
Sterling Commerce, Inc. (a) 1 $ 26
Tellabs, Inc. (a) 7,500 299,062
------------
299,088
COMPUTER HARDWARE-0.5%
COMPAQ Computer Corp. (a) 5,000 426,875
COMPUTER NETWORKING SOFTWARE-1.1%
Cisco Systems, Inc. (a) 15,650 809,888
Netscape Communications Corp. (a) 5,200 140,725
Network General Corp. (a) 1,600 22,000
------------
972,613
COMPUTER PERIPHERALS-0.4%
Seagate Technology, Inc. (a) 8,200 376,175
COMPUTER SERVICES-0.3%
First Data Corp. 9,200 317,400
COMPUTER SOFTWARE-1.6%
3D Labs, Inc., Ltd. (a) 1,700 39,950
HMT Technology Corp. (a) 2,900 31,900
Insight Enterprises, Inc. (a) 1,800 42,750
Microsoft Corp. (a) 4,200 510,300
Oracle Systems Corp. (a) 18,250 725,437
Spectrum Holobyte, Inc. (a) 2,200 13,475
Sterling Software, Inc. (a) 1,600 48,800
Systemsoft Corp. (a) 3,400 25,925
Universal Outdoor Holdings, Inc. (a) 1,700 46,325
------------
1,484,862
ELECTRICAL EQUIPMENT-1.0%
General Electric Co. 8,500 942,437
Harman International Industries, Inc. New 900 34,425
------------
976,862
ELECTRONICS-0.0%
General Instrument Corp. (a) 1 23
Kent Electronics Corp. (a) 1,500 37,500
------------
37,523
MEDICAL PRODUCTS-0.1%
Enterprise Systems, Inc. (a) 2,600 60,450
SEMI-CONDUCTORS & RELATED-2.5%
Altera Corp. (a) 15,522 769,309
Intel Corp. 8,831 1,352,247
National Semiconductor Corp. (a) 2,000 50,000
Teradyne, Inc. (a) 7,500 245,625
------------
2,417,181
TELECOMMUNICATIONS-0.7%
Frontier Corp. 6,500 103,188
Teleport Communications Group, Inc. Cl.A (a) 5,000 142,500
WorldCom, Inc. (a) 19,970 479,280
------------
724,968
------------
8,984,735
FINANCE-9.4%
BANKS-0.9%
Chase Manhattan Corp. 6,500 602,062
First Union Corp. 3,300 277,200
------------
879,262
12
ALLIANCE GROWTH INVESTORS FUND
_______________________________________________________________________________
COMPANY SHARES U.S. $ VALUE
- -------------------------------------------------------------------------
BROKERAGE & MONEY MANAGEMENT-1.3%
Hambrecht & Quist Group, Inc. (a) 2,800 $ 46,550
Merrill Lynch & Co., Inc. 12,460 1,186,815
------------
1,233,365
FINANCIAL SERVICES-2.0%
American Express Co. 10,300 678,512
Beneficial Corp. 6,000 384,000
Dean Witter, Discover & Co. 19,400 742,050
Firstplus Financial Group, Inc. (a) 2,100 46,463
------------
1,851,025
INSURANCE-2.8%
Loews Corp. 3,000 275,625
NAC Re Corp. 14,000 542,500
Penncorp Financial Group, Inc. 10,300 354,063
TIG Holdings, Inc. 14,000 388,500
Travelers Group, Inc. 19,380 1,073,167
------------
2,633,855
MUTUAL FUND-0.1%
Morgan Stanley Asia Pacific Fund 13,334 130,007
REAL ESTATE-0.2%
American General Hospitality Corp. 1,300 32,012
Innkeepers USA Trust 4,300 60,200
JP Realty, Inc. 2,000 50,750
Macerich Co. 1,900 49,400
------------
192,362
MISCELLANEOUS-2.1%
MBNA Corp. 27,150 895,950
MGIC Investment Corp. 8,000 650,000
PMI Group, Inc. 9,600 490,800
------------
2,036,750
------------
8,956,626
ENERGY-5.4%
DOMESTIC PRODUCTS-0.7%
Apache Corp. 11,500 391,000
Brown (Tom), Inc. (a) 7,500 136,875
Murphy Oil Corp. 4,000 174,000
------------
701,875
INTERNATIONAL-0.7%
Texaco, Inc. 6,100 643,550
OIL & GAS SERVICES-3.6%
BJ Services Co. (a) 14,250 671,531
Costilla Energy, Inc. (a) 5,700 68,400
Halliburton Co. 4,500 317,813
KCS Energy, Inc. 2,400 78,000
Nabors Industries, Inc. (a) 26,000 487,500
Noble Drilling Corp. (a) 17,300 300,588
Parker Drilling Co. (a) 12,500 96,875
Rowan Cos, Inc. (a) 4,900 88,200
Schlumberger, Ltd. 3,500 387,625
Transocean Offshore, Inc. 14,500 879,062
------------
3,375,594
UTILITY / ELECTRIC-0.3%
FPL Group, Inc. 6,400 285,600
MISCELLANEOUS-0.1%
Superior Services, Inc. (a) 3,500 77,000
Ultramar Diamond
Shamrock 1,640 52,685
------------
129,685
------------
5,136,304
BASIC INDUSTRIES-3.1%
CONTAINERS-0.3%
Aptargroup, Inc. 200 8,000
Crown Cork & Seal Co., Inc. 4,800 262,800
------------
270,800
13
PORTFOLIO OF INVESTMENTS (CONTINUED) ALLIANCE GROWTH INVESTORS FUND
_______________________________________________________________________________
COMPANY SHARES U.S. $ VALUE
- -------------------------------------------------------------------------
ENVIRONMENTAL CONTROL-1.4%
United States Filter Corp. (a) 2,400 $ 72,900
United Waste Systems, Inc. (a) 2,500 84,375
USA Waste Services, Inc. (a) 14,900 487,975
WMX Technologies, Inc. 24,000 705,000
------------
1,350,250
MACHINERY-0.8%
Allied-Signal, Inc. 8,600 621,350
Comverse Technology, Inc. (a) 3,900 153,075
------------
774,425
MINING & METALS-0.6%
Century Aluminum Co. 4,000 66,000
Gibraltar Steel Corp. (a) 2,900 71,050
Kaiser Aluminum Corp. (a) 29,800 320,350
Olympic Steel, Inc. (a) 800 12,450
Reynolds Metals Co. 400 27,150
Steel Dynamics, Inc. (a) 3,000 58,500
------------
555,500
------------
2,950,975
CONSUMER CYCLICALS-2.8%
AIRLINES-0.3%
Northwest Airlines Corp. Cl.A (a) 6,500 253,500
RAILROAD TRANSPORTATION-0.9%
Genesee & Wyoming, Inc. Cl.A (a) 2,400 68,100
Hub Group, Inc. Cl.A (a) 1,400 37,100
Union Pacific Corp. 11,200 714,000
------------
819,200
RESTAURANTS & LODGING-0.8%
Host Marriott Corp. (a) 21,700 377,038
La Quinta Inns, Inc. 15,550 340,156
------------
717,194
RETAIL -FOOD & DRUGS-0.1%
Rite Aid Corp. 3,000 138,000
RETAIL-GENERAL-0.6%
Circuit City Stores, Inc. (a) 9,450 141,750
Dayton Hudson Corp. 9,700 436,500
Ugly Duckling Corp. (a) 3,000 42,375
------------
620,625
TRANSPORTATION & SHIPPING-0.0%
Knightsbridge Tankers, Ltd. 2,200 50,050
MISCELLANEOUS-0.1%
Equity Corp. International (a) 2,700 58,050
------------
2,656,619
CONSUMER MANUFACTURING-1.6%
APPLIANCES-1.0%
Sunbeam Corp., Inc. 29,200 927,100
AUTO & RELATED-0.6%
Federal Mogul Corp. 9,600 265,200
Republic Waste Industries, Inc. (a) 11,500 285,344
------------
550,544
------------
1,477,644
BASIC MATERIALS-1.4%
CHEMICALS-1.0%
Crompton & Knowles Corp. 6,600 143,550
Cytec Industries, Inc. (a) 6,600 248,325
Freeport McMoran, Inc. 8,000 234,000
Monsanto Co. 5,000 213,750
Polymer Group, Inc. (a) 3,200 40,800
------------
880,425
14
ALLIANCE GROWTH INVESTORS FUND
_______________________________________________________________________________
COMPANY SHARES U.S. $ VALUE
- -------------------------------------------------------------------------
ENGINEERING & CONSTRUCTION-0.4%
Martin Marietta Materials, Inc. 14,600 $ 397,850
------------
1,278,275
MULTI INDUSTRY-0.4%
Corestaff, Inc. (a) 2,800 48,650
Petco Animal Supplies, Inc. (a) 3,100 66,263
U.S. Industries, Inc. (a) 7,300 263,712
------------
378,625
Total United States Investments
(cost $35,380,038) 42,781,847
FOREIGN INVESTMENTS-23.6%
AUSTRALIA-0.3%
Coca Cola Amatil Ltd. 6,042 69,071
Mayne Nickless, Ltd. 5,000 30,999
Qantas Airways, Ltd. 7,000 14,548
WMC, Ltd. 9,281 55,007
Woolworths Ltd. 47,434 139,827
------------
309,452
BELGIUM-0.2%
Delhaize-Le Lion, S.A. 1,150 57,741
Kredietbank, N.V. 300 116,853
------------
174,594
CANADA-0.4%
Cognos, Inc (a) 2,000 50,750
Gulf Canada Resources, Ltd. (a) 29,200 237,250
Philip Environmental, Inc (a) 5,500 86,625
------------
374,625
CHINA-0.1%
Guangshen Railway Ltd. (ADR) (a) 2,000 47,500
DENMARK-0.1%
Den Danske Bank 1,200 103,783
FINLAND-1.1%
Huhtamaki Group 1,510 $ 65,477
Nokia AB OY Corp. pfd. 1,180 73,608
Nokia Corp. Cl.A (ADR) 9,750 630,094
Orion-Yhtmae OY Cl.B 3,010 113,271
Rauma OY 107 2,202
Rautaruukki OY 6,382 55,961
UPM-Kymmene Corp. 2,800 64,072
Valmet Corp. 4,100 69,300
------------
1,073,985
FRANCE-1.9%
Bouygues 1,015 95,126
Cie Bancaire 384 50,661
Generale des Eaux 1,165 162,280
GTM Entrepose, S.A. 815 49,083
Legris Ind., S.A. 1,620 75,497
Michelin 1,740 97,218
Promodes 110 37,110
SEITA 4,000 142,414
SGS-Thomson Microelectronics N.V., Ltd. (a) 650 50,116
Societe Centrale des Assurances
Generales de France 4,890 159,104
Societe Des Immeubles 567 35,750
Societe Francaise d'Invetissements
Immobiliers et de Gestion 500 38,636
Societe Generale 490 54,906
Societe Nacionale Elf Aquitaine 2,670 258,926
Technip, S.A. 950 100,428
Total, S.A. Cl.B 3,594 298,038
Unibail, S.A. 760 73,571
Usinor Sacilor 4,200 63,470
------------
1,842,334
15
PORTFOLIO OF INVESTMENTS (CONTINUED) ALLIANCE GROWTH INVESTORS FUND
_______________________________________________________________________________
COMPANY SHARES U.S. $ VALUE
- -------------------------------------------------------------------------
GERMANY-1.5%
Bayer A.G. 5,270 $ 209,668
Continental A.G. 7,900 173,802
Henkel KGaA pfd. 2,150 116,699
Hornbach Holding A.G. pfd. 1,180 75,632
KSB A.G.-Vorzug pfd. 300 59,072
Merck KG 1,200 47,604
Preussag A.G. 280 71,868
Schmalbach Lubeca A.G. 1,180 258,921
Suedzucker A.G. 142 67,523
Veba A.G. 5,110 263,201
Volkswagen A.G. 120 76,291
------------
1,420,281
HONG KONG-0.3%
Asia Satellite Telephone 2,000 5,073
Citic Pacific, Ltd. 10,000 54,089
Dao Heng Bank Group, Ltd. 4,000 19,002
First Pacific Co., Ltd. 33,208 39,653
Hong Kong & China Gas Co., Ltd. 17,280 27,438
Hysan Development Co., Ltd. 6,000 16,575
New World Development Co., Ltd. 4,000 23,081
Swire Pacific, Ltd. Cl.A 5,000 38,566
Television Broadcasts of Hong Kong, Ltd. 14,000 57,471
Varitronix International, Ltd. 1,000 1,394
Wharf Holdings 7,000 26,477
------------
308,819
INDIA-0.2%
Bajaj Auto, Ltd. (GDR) (b) 2,200 70,950
Industrial Credit & Investment Corp. of
India, Ltd. GDR (b) 2,000 19,800
State Bank of India (GDR) (b) 2,100 50,610
Videsh Sanchar Nigam, Ltd. (a)(b) 1,300 25,669
------------
167,029
INDONESIA-0.1%
Pt Indosat 32,000 88,230
Telekomunikasi Indiana Cl.B 27,000 39,167
------------
127,397
IRELAND-0.3%
Allied Irish Banks 18,000 128,251
Saville Systems Ireland Plc (ADR) (a) 1,200 49,350
Smurfit (Jefferson) Group Plc 23,000 57,003
------------
234,604
ITALY-0.6%
Ente Nazionale Idrocarburi 20,200 102,524
IMI LNV 11,200 95,406
Industrie Natuzzi S.p.A. (ADR) 1,900 42,275
Montedison S.p.A 86,000 56,306
Parmalat Finanziaria S.p.A. 25,160 36,590
Telecom Italia 73,400 193,127
------------
526,228
JAPAN-7.4%
77th Bank 14,000 114,704
Advantest 200 11,108
Amano Corp. 1,000 9,375
Canon, Inc. 10,000 237,129
Credit Saison Co., Ltd. 9,000 173,002
Dai Nippon Printing Co., Ltd. 5,000 90,204
Daiichi Pharmaceutical Co. 9,000 144,641
Daikin Industries, Ltd. 17,000 133,525
Daito Trust Construction Co., Ltd. 16,700 168,401
16
ALLIANCE GROWTH INVESTORS FUND
_______________________________________________________________________________
COMPANY SHARES U.S. $ VALUE
- -------------------------------------------------------------------------
DDI Corp. 41 $ 272,289
East Japan Railway Co. 21 90,826
Fuji Photo Film, Co. 4,000 152,834
Fujitec Co., Ltd. 13,000 132,115
Furukawa Co., Ltd. 26,000 84,595
Hirose Electric Co. 4,000 218,695
Hitachi Chemical 12,000 81,301
Honda Motor Co. 5,000 155,198
Hoya Corp. 5,000 229,251
Ishikawajima-Harima Heavy Industries 20,000 74,526
Japan Tobacco, Inc. 26 165,707
Kamigumi Co., Ltd. 5,000 24,737
Kokuyo 8,000 173,947
Kuraray Co., Ltd. 13,000 114,704
Long-Term Credit Bank of Japan 28,000 75,220
Makita Corp. 11,000 150,786
Matsushita Electric Works 5,000 50,813
Mitsubishi Heavy Industries, Ltd. 16,000 105,629
National House Industrial Co. 5,000 59,085
NGK Insulators 12,000 105,881
NGK Spark Plug Co. 9,000 90,046
Nintendo Corp., Ltd. 1,200 87,730
Nisshin Steel Co., Ltd. 34,000 84,374
Onward Kashiyama Co., Ltd. 9,000 115,571
Pioneer Electronic Corp. 8,000 143,065
Rohm Co. 5,000 387,600
Sankyo Co. 6,000 160,712
Santen Pharmaceutical Co. 2,000 35,924
Sekisui Chemical Co., Ltd. 9,000 86,501
Seven-Eleven Japan Co., Ltd. 4,000 253,673
Shimano Industrial Co. 5,000 84,295
Shiseido Co., Ltd. 8,000 114,704
Sumitomo Electric Industries 5,000 67,751
Sumitomo Rubber Industries 17,000 111,159
Taisho Pharmaceutical Co. 8,000 197,897
Takeda Chemical Industries 4,000 92,331
Takuma Co., Ltd. 8,000 86,974
TDK Corp. 4,000 288,337
Toagosei Co., Ltd. 39,000 145,019
Toda Corp. 29,000 155,355
Tokyo Steel Mfg. 3,000 32,142
Toyoda Automatic Loom Works 8,000 143,696
Toyota Motor Corp. 9,000 260,921
Yamaguchi Bank 8,000 106,511
Yamanouchi Pharmaceutical Co., Ltd. 7,000 149,447
------------
7,081,963
KOREA-0.1%
Korea Electric Power Corp. (ADR) 2,000 34,000
SK Telecom Co., Ltd. (ADR) 6,180 58,710
------------
92,710
LUXEMBOURG-0.1%
Millicom International Cellular, S.A. (a) 1,500 68,250
MALAYSIA-0.2%
AMMB Holdings Berhad 6,000 39,908
Malakoff Berhad 7,000 27,880
Malayan Bank Berhad 4,000 39,828
Resorts World Berhad 16,000 58,945
------------
166,561
NETHERLANDS-1.3%
AKZO Nobel N.V. 1,870 240,913
Fortis Amev N.V. 6,760 255,022
Hunter Douglas N.V. 1,600 130,575
17
PORTFOLIO OF INVESTMENTS (CONTINUED) ALLIANCE GROWTH INVESTORS FUND
_______________________________________________________________________________
COMPANY SHARES U.S. $ VALUE
- -------------------------------------------------------------------------
Internationale Nederlanden Groep N.V. 6,210 $ 243,836
Koninklijke Hoogovens N.V. 2,400 109,634
Koninklijke KNP BT 3,400 67,012
Stork N.V. 1,100 47,370
Vendex International N.V. 2,020 95,904
------------
1,190,266
NEW ZEALAND-0.1%
Fletcher Challenge, Ltd. 12,196 16,825
Lion Nathan, Ltd. 15,000 36,083
Telecom Corp. of New Zealand, Ltd. 12,000 53,823
------------
106,731
NORWAY-0.3%
Bergesen D.Y. AS Cl.A 6,500 134,177
Den Norske Bank 19,000 68,570
Orkla ASA 1,100 92,217
------------
294,964
PHILIPPINES-0.0%
Manila Electric Co. Cl.B 3,900 24,255
Philippine Commercial International Bank 1,000 12,325
------------
36,580
RUSSIA-0.1%
Tatneft (ADR) (a)(b) 600 44,970
SINGAPORE-0.3%
Development Bank of Singapore 1,000 11,883
Overseas Union Banking Corp., Ltd. 8,400 55,129
Overseas- Chinese Banking Corp., Ltd. 6,600 77,057
Singapore Airlines, Ltd. 1,000 8,843
Singapore Press Holdings, Ltd. 5,000 92,573
------------
245,485
SPAIN-0.7%
Banco Bilbao Vizcaya 2,400 161,527
Banco Santander, S.A. 1,200 90,284
Repsol, S.A. 1,980 83,016
Tabacalera, S.A. Series A 2,320 116,472
Telefonica de Espana 7,200 184,426
------------
635,725
SWEDEN-0.3%
AB Astra Series A 4,100 167,769
Sparbanken Sverige AB Cl.A 4,220 75,312
------------
243,081
SWITZERLAND-1.1%
Baloise Holdings, Ltd. 51 107,598
Ciba-Geigy A.G. 2,113 182,044
Holderbank Financiere Glarus A.G. 145 112,825
Nestle, S.A. 93 112,930
Novartis A.G. (ADR) 233 306,957
Schindler Holding A.G.
Chf100 Regd 40 47,487
Participating Certificate 42 50,858
SMH A.G. Neuenburg 420 55,559
Zurich Versicherungsgesellschaft 286 93,904
------------
1,070,162
THAILAND-0.1%
Bangkok Bank Public Co., Ltd. 2,000 18,528
Thai Farmers Bank Co. 10,000 60,484
warrants, expiring 9/15/02 250 182
------------
79,194
UNITED KINGDOM-4.7%
Anglian Water Plc 16,400 181,543
BAA Plc 12,600 104,353
Barclays Plc 3,630 67,481
Bass Plc 10,900 140,622
BG Plc 24,000 69,238
Boots Co. 9,500 106,856
18
ALLIANCE GROWTH INVESTORS FUND
_______________________________________________________________________________
COMPANY SHARES U.S. $ VALUE
- -------------------------------------------------------------------------
BPB Plc 13,200 $ 71,028
British Aerospace 6,370 135,350
British Petroleum Co. Plc 12,980 148,944
British Telecommunications Plc 23,800 174,353
Cable & Wireless 14,100 108,578
Carlton Communications Plc 17,500 143,517
Compass Group Plc 18,200 199,404
Doncasters Plc (ADR) (a) 3,200 72,000
Energy Group (a) 5,622 44,648
General Accident 5,500 78,132
Granada Group Plc 11,000 158,849
Holliday Chemical Holdings Plc 20,600 50,415
Kingfisher Plc 9,800 106,100
Ladbroke Group Plc 57,200 213,225
PowerGen Plc 13,800 144,486
Royal & Sun Alliance Insurance Group Plc 11,150 87,827
Rugby Group Plc 67,750 122,982
Scottish & Newcastle Plc 13,000 140,746
Scottish Power 18,500 112,139
Shell Transportation and Trading Co. 5,190 91,771
Siebe Plc 8,930 132,141
Smithkline Beecham Plc 4,000 322,500
TI Group Plc 14,390 123,376
Tomkins Plc 53,900 232,373
Unilever Plc 2,290 60,164
United Assurance Group Plc 7,790 62,118
United News Media Plc 12,220 149,334
Vodafone Group Plc 24,820 111,026
Whitbread 12,000 149,757
------------
4,417,376
Total Foreign Investments
(cost $21,099,822) 22,484,649
Total Common Stocks & Other Investments
(cost $56,479,860) 65,266,496
------------
PRINCIPAL
AMOUNT
(000) U.S. $ VALUE
- -------------------------------------------------------------------------
U.S. GOVERNMENT & AGENCIES-17.3%
Federal Home Loan Bank
7.00%, 9/01/11 $ 987 $ 979,529
Federal National MortgageAssn.
6.50%, 1/01/11 97 94,737
6.50%, 5/01/11 1,883 1,829,638
7.00%, 5/01/26 1,055 1,023,960
Government National Mortgage Assn.
7.50%, 1/15/27 848 840,544
8.00%, 1/15/27 1,976 2,002,220
U.S. Treasury Bond
6.625%, 2/15/27 2,045 1,962,239
U.S. Treasury Notes
5.75%, 8/15/03 935 892,925
6.125%, 8/31/98 3,750 3,751,162
6.375%, 5/15/99 2,000 2,002,820
6.50%, 8/15/05 845 832,460
6.875%, 5/15/06 300 302,532
Total U.S. Government & Agencies
(cost $16,567,105) 16,514,766
YANKEE BONDS-1.4%
Deutsche Bank Financial, Inc.
6.70%, 12/13/06 650 624,201
Ras Laffan Liquefied Natural Gas
8.294%, 3/15/14 (b) 650 660,780
Total Yankee Bonds
(cost $1,298,046) 1,284,981
CORPORATE DEBT OBLIGATIONS-1.3%
FINANCIAL-1.3%
Dime Capital Trust I Ser. A
9.33%, 5/06/27 600 600,750
19
PORTFOLIO OF INVESTMENTS (CONTINUED) ALLIANCE GROWTH INVESTORS FUND
_______________________________________________________________________________
PRINCIPAL
AMOUNT
(000) U.S. $ VALUE
- -------------------------------------------------------------------------
Ford Motor Credit Co.
6.125%, 1/09/06 $ 650 $ 599,638
Sumitomo Bank International
.75%, 5/31/01 (c) JPY 9,000 74,403
Total Corporate Debt Obligations
(cost $1,275,746) 1,274,791
SHORT-TERM DEBT SECURITIES-10.4%
Student Loan Marketing Assn.
5.28%, 5/01/97
(amortized cost $9,900,000) $9,900 $ 9,900,000
TOTAL INVESTMENTS -99.0%
(cost $85,520,757) 94,241,034
Other assets less liabilities-1.0% 954,171
NET ASSETS-100% $95,195,205
(a) Non-income producing security.
(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, 1997,
these securities amounted to $872,779 or 0.9% of net assets.
(c) Japanese holding.
Glossary of Terms:
ADR - American depository receipt
GDR - Global depository receipt
See notes to financial statements.
20
PORTFOLIO OF INVESTMENTS
APRIL 30, 1997 ALLIANCE CONSERVATIVE INVESTORS FUND
_______________________________________________________________________________
COMPANY SHARES U.S. $ VALUE
- -------------------------------------------------------------------------
COMMON STOCKS & OTHER INVESTMENTS-29.4%
UNITED STATES INVESTMENTS-21.7%
CONSUMER NONCYCLICALS-6.4%
APPAREL & TEXTILE-0.3%
Reebok International, Ltd. 3,984 $ 152,388
BEVERAGES-0.6%
Coca-Cola Co. 4,200 267,225
BIOTECHNOLOGY-0.6%
Biogen, Inc. (a) 2,764 88,448
Centocor, Inc. (a) 3,691 103,809
GelTex Pharmaceuticals, Inc. (a) 3,000 49,500
------------
241,757
COSMETICS-0.3%
Gillette Co. 1,765 150,025
DRUGS, HOSPITAL SUPPLIES &
MEDICAL SERVICES-2.2%
Boston Scientific Corp. (a) 2,835 136,789
Medtronic, Inc. 1,579 109,346
Merck & Co., Inc. 3,200 289,600
Oxford Health Plans, Inc. (a) 1,500 98,812
PacifiCare Health Systems, Inc. Cl.B (a) 1,200 96,300
Pfizer, Inc. 2,300 220,800
------------
951,647
ENTERTAINMENT & LEISURE-0.7%
Carnival Corp. Cl.A 1,400 51,625
Time Warner, Inc. 1,500 67,500
Walt Disney Co. 2,433 199,506
------------
318,631
FOOD-0.5%
Campbell Soup Co. 3,080 157,465
Nabisco Holdings Corp. Cl.A 1,450 55,644
------------
213,109
HOUSEHOLD PRODUCTS-0.4%
Colgate-Palmolive Co. 1,585 175,935
PRINTING & PUBLISHING-0.2%
New York Times Co. Cl.A 2,300 99,475
TOBACCO-0.6%
Philip Morris Cos., Inc. 6,150 242,156
------------
2,812,348
TECHNOLOGY-4.9%
AEROSPACE & DEFENSE-0.5%
Boeing Co. 500 49,312
General Dynamics Corp. 1,000 71,250
United Technologies Corp. 1,400 105,875
------------
226,437
COMMUNICATIONS EQUIPMENT-0.2%
Tellabs, Inc. (a) 1,700 67,788
COMPUTER HARDWARE-0.3%
COMPAQ Computer Corp. (a) 1,550 132,331
COMPUTER NETWORKING SOFTWARE-0.5%
Cisco Systems, Inc. (a) 3,550 183,712
Netscape Communications Corp. (a) 1,550 41,947
------------
225,659
COMPUTER PERIPHERALS-0.1%
Seagate Technology, Inc. (a) 1,200 55,050
21
PORTFOLIO OF INVESTMENTS (CONTINUED) ALLIANCE CONSERVATIVE INVESTORS FUND
_______________________________________________________________________________
COMPANY SHARES U.S. $ VALUE
- -------------------------------------------------------------------------
COMPUTER SERVICES-0.2%
First Data Corp. 2,800 $ 96,600
COMPUTER SOFTWARE-0.7%
Microsoft Corp. (a) 1,200 145,800
Oracle Systems Corp. (a) 4,150 164,963
------------
310,763
ELECTRICAL EQUIPMENT-0.6%
General Electric Co. 2,300 255,012
SEMI-CONDUCTORS & RELATED-1.3%
Altera Corp. (a) 4,453 220,702
Intel Corp. 2,080 318,500
National Semiconductor Corp. (a) 1,000 25,000
Teradyne, Inc. (a) 500 16,375
------------
580,577
TELECOMMUNICATIONS-0.5%
Tele-Communications, Inc.-
Liberty Media Cl.A (a) 4,850 91,241
Teleport Communications
Group, Inc. Cl.A (a) 1,500 42,750
WorldCom, Inc. (a) 3,825 91,800
------------
225,791
------------
2,176,008
FINANCE-3.8%
BANKS-0.4%
Chase Manhattan Corp. 1,100 101,888
First Union Corp. 1,000 84,000
------------
185,888
BROKERAGE & MONEY MANAGEMENT-0.4%
Merrill Lynch & Co., Inc. 1,700 161,925
FINANCIAL SERVICES-1.0%
American Express Co. 3,200 210,800
Dean Witter, Discover & Co. 5,700 218,025
------------
428,825
INSURANCE-1.0%
Penncorp Financial Group, Inc. 3,000 103,125
Travelers Group, Inc. 6,106 338,120
------------
441,245
MISCELLANEOUS-1.0%
MBNA Corp. 8,250 272,250
MGIC Investment Corp. 1,000 81,250
PMI Group, Inc. 1,700 86,912
------------
440,412
------------
1,658,295
ENERGY-2.3%
DOMESTIC PRODUCTS-0.3%
Apache Corp. 2,500 85,000
Brown (Tom), Inc. (a) 1,000 18,250
Murphy Oil Corp. 600 26,100
------------
129,350
INTERNATIONAL-0.4%
Texaco, Inc. 1,800 189,900
OIL & GAS SERVICES-1.4%
BJ Services Co. (a) 3,600 169,650
Halliburton Co. 1,000 70,625
Nabors Industries, Inc. (a) 5,600 105,000
Noble Drilling Corp. (a) 2,200 38,225
Parker Drilling Co. (a) 2,000 15,500
Transocean Offshore, Inc. 3,200 194,000
------------
593,000
UTILITY / ELECTRIC-0.2%
FPL Group, Inc. 2,200 98,175
------------
1,010,425
22
ALLIANCE CONSERVATIVE INVESTORS FUND
_______________________________________________________________________________
COMPANY SHARES U.S. $ VALUE
- -------------------------------------------------------------------------
CONSUMER CYCLICALS-1.4%
AIRLINES-0.2%
Northwest Airlines Corp. Cl.A (a) 2,100 $ 81,900
RAILROAD TRANSPORTATION-0.4%
Union Pacific Corp. 3,200 204,000
RESTAURANTS & LODGING-0.4%
Host Marriott Corp. (a) 3,600 62,550
La Quinta Inns, Inc. 4,850 106,094
------------
168,644
RETAIL-GENERAL-0.4%
Circuit City Stores, Inc. (a) 2,300 34,500
Dayton Hudson Corp. 3,200 144,000
------------
178,500
------------
633,044
BASIC INDUSTRIES-1.4%
CONTAINERS-0.2%
Crown Cork & Seal Co., Inc. 1,300 71,175
ENVIRONMENTAL CONTROL-0.6%
USA Waste Services, Inc. (a) 4,300 140,825
WMX Technologies, Inc. 4,100 120,437
------------
261,262
MACHINERY-0.4%
Allied-Signal, Inc. 2,800 202,300
MINING & METALS-0.2%
Kaiser Aluminum Corp. (a) 8,450 90,837
Reynolds Metals Co. 100 6,788
------------
97,625
------------
632,362
CONSUMER MANUFACTURING-0.9%
APPLIANCES-0.6%
Sunbeam Corp., Inc. 8,300 263,525
AUTO & RELATED-0.3%
Federal Mogul Corp. 2,200 60,775
Republic Waste Industries, Inc. (a) 3,150 78,159
------------
138,934
------------
402,459
MULTI INDUSTRY-0.4%
U.S. Industries, Inc. (a) 5,300 191,463
BASIC MATERIALS-0.2%
CHEMICALS-0.2%
Cytec Industries, Inc. (a) 500 18,813
Freeport McMoran, Inc. 1,500 43,875
------------
62,688
Total United States Investments
(cost $7,844,022) 9,579,092
FOREIGN INVESTMENTS-7.7%
AUSTRALIA-0.0%
Woolworths Ltd. 8,173 24,093
BELGIUM-0.1%
Delhaize-Le Lion S.A. 170 8,536
Kredietbank, N.V. 40 15,580
------------
24,116
CANADA-0.2%
Gulf Canada Resources, Ltd. (a) 8,600 69,875
DENMARK-0.0%
Den Danske Bank 200 17,297
FINLAND-0.1%
Huhtamaki Group 400 17,345
Orion-Yhtymae OY Cl.B 500 18,816
Rautaruukki OY 1,045 9,163
Valmet Corp. 600 10,141
------------
55,465
23
PORTFOLIO OF INVESTMENTS (CONTINUED) ALLIANCE CONSERVATIVE INVESTORS FUND
_______________________________________________________________________________
COMPANY SHARES U.S. $ VALUE
- -------------------------------------------------------------------------
FRANCE-0.6%
Bouygues 20 $ 1,875
Generale des Eaux 247 34,406
GTM Entrepose, S.A. 250 15,056
Michelin 250 13,968
Promodes 20 6,747
SEITA 600 21,362
Societe Centrale des Assurances
Generales de France 700 22,776
Societe Generale 110 12,326
Societe Nacionale Elf Aquitaine 450 43,639
Technip, S.A. 150 15,857
Total, S.A. Cl.B 582 48,263
Usinor Sacilor 1,200 18,134
------------
254,409
GERMANY-0.5%
Adidas A.G. 70 7,296
Bayer A.G. 780 31,032
Continental A.G. 1,200 26,400
Henkel KGaA, pfd. 250 13,570
Hornbach Holding A.G., pfd. 220 14,101
Merck KG 350 13,884
Preussag A.G. 40 10,267
Schmalbach Lubeca A.G. 230 50,468
Veba A.G. 700 36,055
Volkswagen A.G. 30 19,073
------------
222,146
HONG KONG-0.2%
Asia Satellite Telephone 3,000 7,610
Dao Heng Bank Group, Ltd. 7,000 33,254
Hong Kong and China Gas Co., Ltd. 2,160 3,429
Swire Pacific, Ltd., Cl.A 5,000 38,566
Varitronix International, Ltd. 12,000 16,730
------------
99,589
INDIA-0.1%
Bajaj Auto, Ltd. (GDR) (b) 500 $ 16,125
Videsh Sanchar Nigam, Ltd. (a)(b) 500 9,873
------------
25,998
INDONESIA-0.1%
PT Indosat (ADR) 800 22,000
Ramayana Lestari (a) 1,500 3,642
------------
25,642
IRELAND-0.1%
Allied Irish Banks 6,000 42,750
Smurfit (Jefferson) Group Plc. 3,400 8,427
------------
51,177
ITALY-0.2%
IMI LNV 2,000 17,037
Montedison S.p.A. 22,000 14,404
Parmalat Finanziaria S.p.A. 3,790 5,511
Telecom Italia 12,000 31,574
------------
68,526
JAPAN-2.3%
77th Bank 1,000 8,193
Canon, Inc. 5,000 118,565
Credit Saison Co., Ltd. 1,000 19,223
Daiichi Pharmaceutical Co. 1,000 16,071
Daikin Industries, Ltd. 1,000 7,854
Daito Trust Construction Co., Ltd. 1,000 10,084
DDI Corp. 2 13,282
Ezaki Glico Co. 3,300 25,998
Fuji Photo Film, Co. 1,000 38,209
Fujitec Co., Ltd. 2,000 20,325
Furukawa Co., Ltd. 1,000 3,254
Hirose Electric Co. 1,000 54,674
Hitachi Chemical 1,000 6,775
Honda Motor Co. 1,000 31,040
Hoya Corp. 1,000 45,850
24
ALLIANCE CONSERVATIVE INVESTORS FUND
_______________________________________________________________________________
COMPANY SHARES U.S. $ VALUE
- -------------------------------------------------------------------------
Ishikawajima-Harima Heavy Industries 1,000 $ 3,726
Japan Tobacco, Inc. 2 12,747
Kokuyo 1,000 21,743
Kuraray Co., Ltd. 1,000 8,823
Long-Term Credit Bank of Japan 2,000 5,373
Makita Corp. 2,000 27,416
Matsushita Electric Works 2,000 20,325
Mitsubishi Heavy Industries, Ltd. 1,000 6,602
National House Industrial Co. 1,000 11,817
NGK Insulators 1,000 8,823
NGK Spark Plug Co. 1,000 10,005
Onward Kashiyama Co., Ltd. 1,000 12,841
Pioneer Electronic Corp. 1,000 17,883
Rohm Co. 1,000 77,520
Sankyo Co. 1,000 26,785
Sekisui Chemical Co., Ltd. 1,000 9,611
Seven Eleven Japan Co., Ltd. 1,000 63,418
Shimano Industrial, Co. 1,000 16,859
Shiseido Co., Ltd. 2,000 28,676
Sumitomo Electric Industries 2,000 27,101
Sumitomo Rubber Industries 1,000 6,539
Taisho Pharmaceutical Co. 1,000 24,737
Takuma Co., Ltd. 1,000 10,872
TDK Corp. 1,000 72,084
Toagosei Co., Ltd. 2,000 7,437
Toda Corp. 2,000 10,714
Toyoda Automatic Loom Works 1,000 17,962
Toyota Motor Corp. 1,000 28,991
Yamaguchi Bank 1,000 13,314
------------
1,030,141
KOREA-0.1%
SK Telecom Co., Ltd. (ADR) 4,635 44,032
MALAYSIA-0.1%
Berjaya Sports Toto Berhad 7,000 33,455
Resorts World Berhad 9,000 33,157
------------
66,612
NETHERLANDS-0.4%
AKZO Nobel N.V. 300 38,649
Fortis Amev N.V. 1,000 37,725
Hunter Douglas N.V. 200 16,322
Internationale Nederlanden Groep N.V. 1,075 42,210
Koninklijke Hoogovens N.V. 400 18,272
Koninklijke KNP BT 500 9,855
Stork N.V. 200 8,613
Vendex International N.V. 300 14,243
------------
185,889
NEW ZEALAND-0.1%
Telecom Corp. of New Zealand, Ltd. 8,000 35,882
NORWAY-0.1%
Bergesen D.Y. AS Cl.A 950 19,610
Den Norske Bank 4,000 14,436
Orkla ASA 160 13,414
------------
47,460
RUSSIA-0.0%
Tatneft (ADR) (a)(b) 100 7,495
SINGAPORE-0.1%
Overseas-Chinese Banking Corp., Ltd. 2,200 25,686
25
PORTFOLIO OF INVESTMENTS (CONTINUED) ALLIANCE CONSERVATIVE INVESTORS FUND
_______________________________________________________________________________
COMPANY SHARES U.S. $ VALUE
- -------------------------------------------------------------------------
SPAIN-0.2%
Banco Bilbao Vizcaya 350 $ 23,556
Banco Santander, S.A. 200 15,048
Tabacalera, S.A. Series A 350 17,571
Telefonica de Espana 1,100 28,176
------------
84,351
SWEDEN-0.1%
AB Astra Series A 600 24,551
Sparbanken Sverige AB Cl.A 900 16,062
------------
40,613
SWITZERLAND-0.5%
Baloise Holdings, Ltd. 20 42,195
Ciba-Geigy A.G. 308 26,536
Holderbank Fianciere Glarus A.G. 20 15,562
Nestle, S.A. 30 36,429
Novartis A.G. (ADR) 38 50,062
Schindler Holding A.G. 20 23,743
Zurich Versicherungsgesellschaft 60 19,700
------------
214,227
THAILAND-0.0%
Bangkok Bank Public Co., Ltd. 2,000 18,528
UNITED KINGDOM-1.5%
Anglian Water Plc 2,800 30,995
BAA Plc 10,000 82,820
Bass Plc 1,500 19,352
BG Plc 3,500 10,097
Boots Co. 1,500 16,872
British Aerospace 1,000 21,248
British Petroleum Co. Plc 1,800 20,655
British Telecommunications Plc 3,500 25,640
Cable & Wireless 2,000 15,401
Carlton Communications Plc 2,500 20,502
Compass Group Plc 2,900 31,773
Energy Group (a) 1,000 7,942
SHARES OR
PRINCIPAL
AMOUNT
COMPANY (000) U.S. $ VALUE
- -------------------------------------------------------------------------
General Accident 800 $ 11,365
Granada Group Plc 2,000 28,882
Kingfisher Plc 1,500 16,240
Ladbroke Group Plc 5,000 18,639
PowerGen Plc 1,800 18,846
Royal & Sun Alliance Insurance Group Plc 2,000 15,754
Rugby Group Plc 11,840 21,492
Scottish & Newcastle Plc 2,000 21,653
Scottish Power 5,000 30,308
Siebe Plc 1,300 19,237
Tesco Plc 8,000 46,418
Tomkins Plc 8,000 34,489
United Assurance Group
Plc 1,300 10,366
Convertible deferred 8,400 545
United News Media Plc 1,000 12,220
Vodafone Group Plc 3,500 15,656
Whitbread 2,000 24,960
------------
650,367
Total Foreign Investments
(cost $3,261,126) 3,389,616
Total Common Stocks & Other Investments
(cost $11,105,148) 12,968,708
U.S. GOVERNMENT & AGENCIES-54.0%
Federal Home Loan Bank
7.00%, 9/01/11 $ 1,551 1,539,260
Federal National Mortgage Assn.
6.50%, 6/01/11 3,809 3,702,402
7.00%, 5/01/26 1,582 1,535,941
Government National Mortgage Assn.
8.00%, 1/15/27 3,001 3,041,347
U.S. Treasury Bond
6.625%, 2/15/27 3,585 3,439,915
26
ALLIANCE CONSERVATIVE INVESTORS FUND
_______________________________________________________________________________
PRINCIPAL
AMOUNT
(000) U.S. $ VALUE
- -------------------------------------------------------------------------
U.S. Treasury Notes
5.75%, 8/15/03 $ 1,000 $ 955,000
6.375%, 5/15/99 3,000 3,004,230
6.875%, 5/15/06 1,450 1,462,238
7.875%, 4/15/98 5,000 5,086,700
Total U.S. Government & Agencies
(cost $23,839,922) 23,767,033
YANKEEBONDS-6.2%
Deutsche Bank Financial, Inc.
6.70%, 12/13/06 900 864,279
Quebec Province Canada
7.125%, 2/09/24 (c) 950 872,109
St. George Bank, Ltd.
7.15%, 10/15/05 (b) 1,000 982,080
Total Yankee Bonds
(cost $2,752,625) 2,718,468
CORPORATE DEBT OBLIGATIONS-5.6%
FINANCIAL-3.4%
Premier Auto Trust
7.15%, 2/04/99 1,500 1,507,500
TRANSPORTATION-2.2%
Erac USA Finance Co.
6.95%, 3/01/04 (b) 1,000 980,260
Total Corporate Debt Obligations
(cost $2,494,703) 2,487,760
SHORT-TERM DEBT SECURITIES-4.1%
Student Loan Marketing Assn.
5.28%, 5/01/97
(amortized cost $1,800,000) 1,800 1,800,000
TOTAL INVESTMENTS -99.3%
(cost $41,992,398) 43,741,969
Other assets less liabilities-0.7% 304,795
NET ASSETS-100% $44,046,764
(a) Non-income producing security.
(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, 1997,
these securities amounted to $1,995,833 or 4.5% of net assets.
(c) Country of origin--Canada.
Glossary of Terms:
ADR - American depository receipt
GDR - Global depository receipt
See notes to financial statements.
27
STATEMENTS OF ASSETS AND LIABILITIES ALLIANCE GROWTH INVESTORS AND
APRIL 30, 1997 CONSERVATIVE INVESTORS FUNDS
_______________________________________________________________________________
GROWTH CONSERVATIVE
INVESTORS FUND INVESTORS FUND
-------------- --------------
ASSETS
Investments in securities, at value(cost
$85,520,757 and $41,992,398, respectively) $94,241,034 $43,741,969
Cash, at value (cost $315,662 and
$105,434, respectively) 315,602 106,060
Receivable for investment securities
and foreign currency sold 1,276,775 199,651
Interest and dividends receivable 318,469 347,356
Receivable for shares of beneficial
interest sold 211,823 57,677
Total assets 96,363,703 44,452,713
LIABILITIES
Payable for investment securities and
foreign currency purchased 684,178 51,065
Payable for shares of beneficial
interest redeemed 230,137 185,516
Distribution fee payable 61,476 29,402
Advisory fee payable 57,702 11,049
Accrued expenses 135,005 128,917
Total liabilities 1,168,498 405,949
NET ASSETS $95,195,205 $44,046,764
COMPOSITION OF NET ASSETS
Shares of beneficial interest, at par $ 73 $ 39
Additional paid-in capital 86,248,857 41,518,186
Undistributed net investment income 379,445 216,263
Accumulated net realized gain (loss) on
investments and foreign currency transactions (148,332) 564,735
Net unrealized appreciation of
investments and foreign currency
denominated assets and liabilities 8,715,162 1,747,541
$95,195,205 $44,046,764
CALCULATION OF MAXIMUM OFFERING PRICE
CLASS A SHARES
Net asset value and redemption price per share
($27,453,411 / 2,091,931 and $11,859,586 /
1,048,877 shares of beneficial interest
issued and outstanding, respectively) $13.12 $11.31
Sales charge--4.25% of public offering price .58 .50
Maximum offering price $13.70 $11.81
CLASS B SHARES
Net asset value and offering price per share
($61,708,552 / 4,706,967 and $28,037,476 /
2,440,961 shares of beneficial interest
issued and outstanding, respectively) $13.11 $11.49
CLASS C SHARES
Net asset value, and offering price per share
($6,033,242 / 459,830 and $4,149,702 /
361,129 shares of beneficial interest issued
and outstanding, respectively) $13.12 $11.49
See notes to financial statements.
28
STATEMENTS OF OPERATIONS ALLIANCE GROWTH INVESTORS AND
YEAR ENDED APRIL 30, 1997 CONSERVATIVE INVESTORS FUNDS
_______________________________________________________________________________
GROWTH CONSERVATIVE
INVESTORS FUND INVESTORS FUND
-------------- --------------
INVESTMENT INCOME
Interest $ 1,739,186 $ 2,251,317
Dividends (net of foreign tax withheld
of $55,187 and $12,966, respectively) 846,715 204,980
Total income 2,585,901 2,456,297
EXPENSES
Advisory fee 723,109 363,977
Distribution fee - Class A 87,204 39,343
Distribution fee - Class B 613,255 304,539
Distribution fee - Class C 60,207 49,620
Custodian 237,190 137,206
Transfer agency 187,510 90,432
Audit and legal 66,873 67,596
Printing 64,688 30,725
Registration 63,140 47,364
Trustees' fees 30,000 30,000
Amortization of organization expenses 8,520 8,520
Miscellaneous 14,014 9,617
Total expenses 2,155,710 1,178,939
Less: expenses waived and assumed by
adviser (See Note B) (167,543) (245,071)
Less: expense offset arrangement (See Note B) (13,706) (6,533)
Net expenses 1,974,461 927,335
Net investment income 611,440 1,528,962
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS AND FOREIGN CURRENCY
Net realized gain on investments transactions 3,043,266 608,550
Net realized loss on foreign currency
transactions (58,057) (14,568)
Net change in unrealized appreciation
of investments 2,367,604 1,321,365
Net change in unrealized appreciation
(depreciation) of foreign currency
denominated assets and liabilities (5,822) 41
Net gain on investments 5,346,991 1,915,388
NET INCREASE IN NET ASSETS FROM OPERATIONS $ 5,958,431 $ 3,444,350
See notes to financial statements.
29
STATEMENTS OF CHANGES IN NET ASSETS ALLIANCE GROWTH INVESTORS AND
CONSERVATIVE INVESTORS FUNDS
_______________________________________________________________________________
GROWTH INVESTORS FUND CONSERVATIVE INVESTORS FUND
------------------------- -------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
APR. 30,1997 APR. 30,1996 APR. 30,1997 APR. 30,1996
----------- ----------- ----------- -----------
INCREASE (DECREASE)
IN NET ASSETS FROM
OPERATIONS
Net investment income $ 611,440 $ 1,154,487 $ 1,528,962 $ 2,033,580
Net realized gain
on investments and
foreign currency
transactions 2,985,209 13,079,485 593,982 4,671,618
Net change in
unrealized
appreciation
(depreciation) of
investments and
foreign currency
denominated assets
and liabilities 2,361,782 2,657,978 1,321,406 (793,910)
Net increase in net
assets from
operations 5,958,431 16,891,950 3,444,350 5,911,288
DIVIDENDS AND
DISTRIBUTIONS TO
SHAREHOLDERS FROM:
Net investment income
Class A (345,352) (510,038) (516,046) (740,336)
Class B (444,447) (687,510) (967,390) (1,250,244)
Class C (43,458) (64,858) (154,474) (194,637)
Net realized gain
on investments
Class A (3,066,309) (1,147,583) (278,463) -0-
Class B (7,140,766) (2,234,313) (644,643) -0-
Class C (698,222) (210,790) (100,968) -0-
TRANSACTIONS IN SHARES
OF BENEFICIAL INTEREST
Net increase
(decrease) 4,473,662 14,701,805 (8,201,003) (3,326,752)
Total increase
(decrease) (1,306,461) 26,738,663 (7,418,637) 399,319
NET ASSETS
Beginning of year 96,501,666 69,763,003 51,465,401 51,066,082
End of year
(including
undistributed net
investment income
of $435,992,
$657,809, $230,831
and $339,779,
respectively) $95,195,205 $96,501,666 $44,046,764 $51,465,401
See notes to financial statements.
30
NOTES TO FINANCIAL STATEMENTS ALLIANCE GROWTH INVESTORS AND
APRIL 30, 1997 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% for purchases not exceeding
$1,000,000. 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 of 1%. Class B shares are currently 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 purchased on or after
July 1, 1996 are subject to a contingent deferred sales charge of 1% on
redemptions made within the first year after purchase. 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 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 investment
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 April 30,
1997 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 were amortized on a straight-line basis through April, 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 any, to
shareholders. Therefore, no provisions for federal income or excise taxes are
required.
5. INVESTMENT INCOME AND INVESTMENT TRANSACTIONS
Dividend income is recorded on the ex-dividend date. Interest income is accrued
daily. Investment transactions are accounted for on the date securities are
purchased or sold. Investment gains and losses are determined on the identified
cost basis. The Fund accretes discounts and amortizes premiums as adjustments
to interest income.
31
ALLIANCE GROWTH INVESTORS AND
NOTES TO FINANCIAL STATEMENTS (CONTINUED) CONSERVATIVE INVESTORS FUNDS
_______________________________________________________________________________
6. DIVIDENDS AND DISTRIBUTIONS
Dividends and distributions to shareholders are recorded on the ex-dividend
date and are determined in accordance with income tax regulations.
For federal income tax purposes, the Fund's distributions of income and capital
gains are subject to recharacterization, which may include a tax return of
capital, at the end of the year to reflect the final investment results for
that year.
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 Fund's
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
As of April 30, 1997, the funds reclassified certain components of net assets.
On the Growth Investors Fund the reclassification resulted in a credit to
accumulated undistributed net realized loss and additional paid in capital of
$54,501 and $2,046 respectively, and a debit to accumulated net investment
income of $56,547. On the Conservative Investors Fund, the reclassification
resulted in a credit to accumulated net realized gains and a debit to
accumulated net investment income of $14,568. These reclassifications were the
result of permanent book and tax differences. Net assets on the Funds were not
affected by these changes.
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 "Adviser") an advisory fee at an annual rate of
.75% of each Fund's average daily net assets. Such fee is accrued daily and
paid monthly. The Adviser has agreed 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. Effective December 12, 1996, the Adviser has
discontinued the advisory fee waiver on the Growth Investors Fund. Prior to
August 2, 1993, the annual rate for Class B shares was 2.15%. For the year
ended April 30, 1997, such reimbursement amounted to $167,543 and $245,071 for
the Growth Investors and Conservative Investors Funds, respectively.
The Funds have a Transfer Agency 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 to $130,318 and $55,108 for the Growth Investors Fund and
Conservative Investors Fund, respectively, for the year ended April 30, 1997.
In addition, for the year ended April 30, 1997, fund expenses were reduced by
$13,706 and $6,533 for the Growth Investors Fund and the Conservative Investors
Fund, respectively, under expense offset arrangements with Alliance Fund
Services. Transfer Agency fees reported in the statement of operation exclude
these credits.
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 $5,562 from the sale of Class A shares and $73,418
and $2,115 in contingent deferred sales charges imposed upon redemptions by
shareholders of Class B and Class C shares, respectively, for the year ended
April 30, 1997 for the Growth Investors Fund. The Distributor also received
front-end sales charges of $2,911 from the sale of Class A shares and $55,085
and $2,494 in contingent deferred sales charges imposed upon redemptions by
shareholders of Class B and Class C shares, respectively, for the year ended
April 30, 1997 for the Conservative Investors Fund.
Brokerage commissions paid on investment transactions for the year ended April
30, 1997 amounted to $280,483 and $52,669 for the Growth Investors and
Conservative Investors Funds, respectively, of which $50 and $123,
respectively, was paid to Donaldson, Lufkin & Jenrette Securities Corp.
("DLJ"), an affiliate of the Adviser.
32
ALLIANCE GROWTH INVESTORS AND
CONSERVATIVE INVESTORS FUNDS
_______________________________________________________________________________
Accrued expenses includes amounts owed to two of the Trustees under a deferred
compensation plan of $30,782 and $30,305 for the Growth Investors and
Conservative Investors Funds, respectively.
NOTE C: DISTRIBUTION PLANS
The Funds have adopted a Plan for each class of shares of the Funds pursuant to
Rule 12b-1 under the Investment Company Act of 1940 (each a "Plan" and
collectively the "Plans"). Under the Plans, 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 the Class A shares and 1% of the average daily net
assets attributable to Class B and Class C shares. The Trustees currently limit
payments under the Class A plan to .30% of each Fund's average daily net assets
attributable to Class A shares. The Plans provide that the Distributor will use
such payments in their entirety for distribution assistance and promotional
activities.
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
the Distributor under the Plans is to compensate the Distributor for its
distribution services with respect to the sale of each Fund's shares. Since the
Distributor's compensation is not directly tied to its expenses, the amount of
compensation received by it under the Plan 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 "compensation" Plans.
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 the Distributor with respect to the relevant class and
(ii) the Funds would not be obligated to pay the Distributor for any amounts
expended by the Distributor not previously recovered by the Distributor from
distribution services fees in respect of shares of such class or, in the case
of Class B shares, recovered through deferred sales charges.
The Plans 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
and U.S. government securities) for the Growth Investors Fund aggregated
$84,090,302 and $95,181,559, respectively, for the year ended April 30, 1997.
There were purchases of $35,222,404 and sales of $31,796,729 of U.S. government
and government agency obligations for the year ended April 30, 1997. At April
30, 1997, the cost of securities for federal income tax purposes for the Growth
Investors Fund was $85,651,184. Accordingly gross unrealized appreciation of
investments was $10,933,505 and gross unrealized depreciation of investments
was $2,343,655 resulting in net unrealized appreciation of $8,589,850 excluding
foreign currency.
Purchases and sales of investment securities (excluding short-term investments
and U.S. government securities) for the Conservative Investors Fund aggregated
$30,883,911 and $37,860,520, respectively, for the year ended April 30, 1997.
There were purchases of $47,476,977 and sales of $48,134,479 of U.S. government
and government agency obligations for the year ended April 30, 1997. At April
30, 1997, the cost of securities for federal income tax purposes for the
Conservative Investors Fund was $42,013,499. Accordingly gross unrealized
appreciation of investments was $2,272,398 and gross unrealized depreciation of
investments was $543,928 resulting in net unrealized appreciation of $1,728,470
excluding foreign currency.
The Alliance Growth Investors and Conservative Investors Funds incurred and
elected to defer post October currency losses of $55,508 and $14,097,
respectively, and capital losses of $117,597 and zero, respectively, for the
year ended April 30, 1997. To the extent that any post October loss is used to
offset future capital gains, it is probable that these gains will not be
distributed to shareholders.
The Growth Investors and Conservative Investors Funds enter into forward
exchange currency contracts in order to hedge exposure to changes in foreign
currency exchange rates on foreign portfolio holdings. A forward
33
ALLIANCE GROWTH INVESTORS AND
NOTES TO FINANCIAL STATEMENTS (CONTINUED) CONSERVATIVE INVESTORS FUNDS
_______________________________________________________________________________
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 Funds. The Fund's custodian will place and maintain cash not available for
investment or other liquid high quality debt securities in a separate account
of the Fund having a value equal to the aggregate amount of the Fund's
commitments under forward exchange currency contracts entered into with respect
to position hedges. Risks may arise from the potential inability of a
counterparty to meet the terms of a contract and from unanticipated movements
in the value of a foreign currency relative to the U.S. dollar. At April 30,
1997, there were no outstanding forward exchange currency contracts for 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,
1997 1996 1997 1996
------------ ------------ -------------- --------------
CLASS A
Shares sold 416,498 623,012 $ 5,723,360 $ 8,468,283
Shares issued in
reinvestment of
dividends and
distributions 255,265 118,202 3,305,692 1,591,818
Shares converted
from Class B 88,258 -0- 1,193,716 -0-
Shares redeemed (842,362) (404,354) (11,968,491) (5,500,086)
Net increase
(decrease) (82,341) 336,860 $ (1,745,723) $ 4,560,015
CLASS B
Shares sold 772,493 1,018,816 $ 10,626,034 $13,829,306
Shares issued in
reinvestment of
dividends and
distributions 564,549 208,357 7,322,203 2,814,302
Shares converted
to Class A (88,353) -0- (1,193,716) -0-
Shares redeemed (802,824) (550,350) (11,040,599) (7,476,785)
Net increase 445,865 676,823 $ 5,713,922 $ 9,166,823
CLASS C
Shares sold 187,433 186,320 $ 2,572,550 $ 2,552,601
Shares issued in
reinvestment of
dividends and
distributions 51,785 19,358 672,170 261,545
Shares redeemed (199,231) (136,951) (2,739,257) (1,839,179)
Net increase 39,987 68,727 $ 505,463 $ 974,967
34
ALLIANCE GROWTH INVESTORS AND
CONSERVATIVE INVESTORS FUNDS
_______________________________________________________________________________
ALLIANCE CONSERVATIVE INVESTORS FUND
-----------------------------------------------------------
SHARES AMOUNT
--------------------------- ------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
APRIL 30, APRIL 30, APRIL 30, APRIL 30,
1997 1996 1997 1996
------------ ------------ -------------- --------------
CLASS A
Shares sold 155,230 246,346 $ 1,741,912 $ 2,737,109
Shares issued in
reinvestment of
dividends and
distributions 66,216 62,621 747,524 692,313
Shares converted
from Class B 41,333 -0- 468,493 -0-
Shares redeemed (484,981) (589,043) (5,464,450) (6,511,415)
Net decrease (222,202) (280,076) $(2,506,521) $(3,081,993)
CLASS B
Shares sold 378,962 518,473 $ 4,341,413 $ 5,839,933
Shares issued in
reinvestment of
dividends and
distributions 130,177 102,379 1,495,849 1,150,234
Shares converted
to Class A (40,723) -0- (468,493) -0-
Shares redeemed (856,038) (697,358) (9,795,661) (7,823,066)
Net decrease (387,622) (76,506) $(4,426,892) $ (832,899)
CLASS C
Shares sold 98,699 170,526 $ 1,120,987 $ 1,931,267
Shares issued in
reinvestment of
dividends and
distributions 20,142 16,002 231,457 179,841
Shares redeemed (228,588) (135,782) (2,620,034) (1,522,968)
Net increase(decrease) (109,747) 50,746 $(1,267,590) $ 588,140
35
FINANCIAL HIGHLIGHTS ALLIANCE GROWTH INVESTORS FUND
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING THROUGHOUT EACH
PERIOD
<TABLE>
<CAPTION>
CLASS A
-----------------------------------------------------------------
MAY 4,
YEAR ENDED APRIL 30, 1992(A)
--------------------------------------------------- TO APRIL 30,
1997 1996 1995 1994 1993
------------ ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $14.08 $12.08 $11.61 $11.35 $10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income (b) .16(c) .10 .25 .12 .20
Net realized and unrealized gain on
investments .76 2.75 .38 .39 1.43
Net increase in net asset value from
operations .92 2.85 .63 .51 1.63
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (.19) (.26) (.15) (.11) (.16)
Distributions from net realized gains (1.69) (.59) (.01) (.14) (.12)
Total dividends and distributions (1.88) (.85) (.16) (.25) (.28)
Net asset value, end of period $13.12 $14.08 $12.08 $11.61 $11.35
TOTAL RETURN
Total investment return based on net
asset value (d) 6.69% 23.87% 5.57% 4.46% 16.32%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $27,453 $30,608 $22,189 $16,759 $3,503
Ratios to average net assets of:
Expenses, net of waivers/reimbursements 1.55% 1.40% 1.40% 1.40% 1.40%(f)
Expenses, before waivers/reimbursements 1.73%(e) 1.65% 1.97% 2.33% 4.27%(f)
Net investment income 1.14% 2.02% 2.32% 1.67% 1.91%(f)
Portfolio turnover rate 133% 209% 134% 96% 114%
Average commission rate (g) $.0435 -- -- -- --
</TABLE>
See footnote summary on page 41.
36
ALLIANCE GROWTH INVESTORS FUND
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING THROUGHOUT EACH
PERIOD
<TABLE>
<CAPTION>
CLASS B
-----------------------------------------------------------------
MAY 4,
YEAR ENDED APRIL 30, 1992(A)
--------------------------------------------------- TO APRIL 30,
1997 1996 1995 1994 1993
------------ ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $14.08 $12.09 $11.65 $11.41 $10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income (b) .06(c) .06 .17 .07 .07
Net realized and unrealized gain on
investments .77 2.70 .38 .37 1.45
Net increase in net asset value from
operations .83 2.76 .55 .44 1.52
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (.11) (.18) (.10) (.06) (.05)
Distributions from net realized gains (1.69) (.59) (.01) (.14) (.06)
Total dividends and distributions (1.80) (.77) (.11) (.20) (.11)
Net asset value, end of period $13.11 $14.08 $12.09 $11.65 $11.41
TOTAL RETURN
Total investment return based on net
asset value (d) 5.98% 23.06% 4.83% 3.84% 15.23%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $61,709 $59,978 $43,328 $30,871 $7,999
Ratios to average net assets of:
Expenses, net of waivers/reimbursements 2.26% 2.10% 2.10% 2.11% 2.15%(f)
Expenses, before waivers/reimbursements 2.44%(e) 2.35% 2.67% 3.00% 4.48%(f)
Net investment income .42% 1.15% 1.62% .95% 1.07%(f)
Portfolio turnover rate 133% 209% 134% 96% 114%
Average commission rate (g) $.0435 -- -- -- --
</TABLE>
See footnote summary on page 41.
37
FINANCIAL HIGHLIGHTS (CONTINUED) ALLIANCE GROWTH INVESTORS FUND
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING THROUGHOUT EACH
PERIOD
<TABLE>
<CAPTION>
CLASS C
----------------------------------------------------
AUGUST 2,
YEAR ENDED APRIL 30, 1993(H)
-------------------------------------- TO APRIL 30,
1997 1996 1995 1994
------------ ----------- ----------- ------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $14.09 $12.10 $11.65 $11.88
INCOME FROM INVESTMENT OPERATIONS
Net investment income (b) .06(c) .06 .18 .08
Net realized and unrealized gain (loss)
on investments .77 2.70 .38 (.11)
Net increase (decrease) in net asset
value from operations .83 2.76 .56 (.03)
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (.11) (.18) (.10) (.06)
Distributions from net realized gains (1.69) (.59) (.01) (.14)
Total dividends and distributions (1.80) (.77) (.11) (.20)
Net asset value, end of period $13.12 $14.09 $12.10 $11.65
TOTAL RETURN
Total investment return based on net
asset value (d) 5.97% 23.04% 4.91% (.26)%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $6,033 $5,915 $4,247 $3,280
Ratios to average net assets of:
Expenses, net of waivers/reimbursements 2.26% 2.10% 2.10% 2.10%(f)
Expenses, before waivers/reimbursements 2.43%(e) 2.36% 2.66% 3.02%(f)
Net investment income .42% 1.15% 1.62% 1.04%(f)
Portfolio turnover rate 133% 209% 134% 96%
Average commission rate (g) $.0435 -- -- --
</TABLE>
See footnote summary on page 41.
38
ALLIANCE CONSERVATIVE INVESTORS FUND
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING THROUGHOUT EACH
PERIOD
<TABLE>
<CAPTION>
CLASS A
-----------------------------------------------------------------
MAY 4,
YEAR ENDED APRIL 30, 1992(A)
--------------------------------------------------- TO APRIL 30,
1997 1996 1995 1994 1993
------------ ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $11.14 $10.38 $10.37 $10.79 $10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income (b) .41(c) .51 .48 .31 .39
Net realized and unrealized gain (loss)
on investment .46 .80 (.02) (.26) .82
Net increase in net asset value
from operations .87 1.31 .46 .05 1.21
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (.45) (.55) (.45) (.29) (.36)
Distributions from net realized gains (.25) -0- -0- (.18) (.06)
Total dividends and distributions (.70) (.55) (.45) (.47) (.42)
Net asset value, end of period $11.31 $11.14 $10.38 $10.37 $10.79
TOTAL RETURN
Total investment return based on net
asset value (d) 7.90% 12.69% 4.65% .35% 12.25%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $11,860 $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% 1.40%(f)
Expenses, before waivers/reimbursements 1.90%(e) 1.73% 1.83% 2.03% 3.45%(f)
Net investment income 3.66% 4.43% 4.66% 3.43% 3.92%(f)
Portfolio turnover rate 174% 267% 248% 133% 84%
Average commission rate (g) $.0428 -- -- -- --
</TABLE>
See footnote summary on page 41.
39
FINANCIAL HIGHLIGHTS (CONTINUED) ALLIANCE CONSERVATIVE INVESTORS FUND
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING THROUGHOUT EACH
PERIOD
<TABLE>
<CAPTION>
CLASS B
-----------------------------------------------------------------
MAY 4,
YEAR ENDED APRIL 30, 1992(A)
--------------------------------------------------- TO APRIL 30,
1997 1996 1995 1994 1993
------------ ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $11.31 $10.51 $10.47 $10.88 $10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income (b) .34(c) .43 .46 .24 .24
Net realized and unrealized gain
(loss) on investments .46 .82 (.02) (.26) .89
Net increase (decrease) in net asset
value from operations .80 1.25 .44 (.02) 1.13
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (.37) (.45) (.40) (.21) (.22)
Distributions from net realized gains (.25) -0- -0- (.18) (.03)
Total dividends and distributions (.62) (.45) (.40) (.39) (.25)
Net asset value, end of period $11.49 $11.31 $10.51 $10.47 $10.88
TOTAL RETURN
Total investment return based on
net asset value (d) 7.10% 11.95% 3.91% (.31)% 11.39%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $28,037 $31,979 $30,542 $29,697 $9,210
Ratios to average net assets of:
Expenses, net of waivers/reimbursements 2.10% 2.10% 2.10% 2.11% 2.15%(f)
Expenses, before waivers/reimbursements 2.61%(e) 2.44% 2.52% 2.73% 3.95%(f)
Net investment income 2.96% 3.72% 3.96% 2.72% 3.06%(f)
Portfolio turnover rate 174% 267% 248% 133% 84%
Average commission rate (g) $.0428 -- -- -- --
</TABLE>
See footnote summary on page 41.
40
ALLIANCE CONSERVATIVE INVESTORS FUND
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING THROUGHOUT EACH
PERIOD
<TABLE>
<CAPTION>
CLASS C
----------------------------------------------------
AUGUST 2,
YEAR ENDED APRIL 30, 1993(H)
-------------------------------------- TO APRIL 30,
1997 1996 1995 1994
------------ ----------- ----------- ------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $11.31 $10.52 $10.47 $11.12
INCOME FROM INVESTMENT OPERATIONS
Net investment income (b) .34(c) .41 .46 .18
Net realized and unrealized gain (loss)
on investments .46 .83 (.01) (.50)
Net increase (decrease) in net asset
value from operations .80 1.24 .45 (.32)
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (.37) (.45) (.40) (.15)
Distributions from net realized gains (.25) -0- -0- (.18)
Total dividends and distributions (.62) (.45) (.40) (.33)
Net asset value, end of period $11.49 $11.31 $10.52 $10.47
TOTAL RETURN
Total investment return based on
net asset value (d) 7.10% 11.84% 4.01% (2.98)%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $4,150 $5,326 $4,419 $4,375
Ratios to average net assets of:
Expenses, net of waivers/reimbursements 2.10% 2.10% 2.10% 2.10%(f)
Expenses, before waivers/reimbursements 2.60%(e) 2.45% 2.52% 2.69%(f)
Net investment income 2.96% 3.71% 3.97% 2.94%(f)
Portfolio turnover rate 174% 267% 248% 133%
Average commission rate (g) $.0428 -- -- --
</TABLE>
(a) Commencement of operations.
(b) Net of fees waived and expenses reimbursed by Adviser and expense offset
arrangements with the transfer agent.
(c) Based on average shares outstanding.
(d) Total investment return is calculated assuming an initial investment made
at the net asset value at the beginning of the period, reinvestment of all
dividends and distributions at net asset value during the period, and
redemption on the last day of the period. Initial sales charges or contingent
deferred sales charges are not reflected in the calculation of total investment
return. Total investment return calculated for a period of less than one year
is not annualized.
(e) For the year ended April 30, 1997, the Growth Investors Fund and the
Conservative Investors Fund benefited from an expense offset arrangement with
the transfer agent. Had such expense offsets not been in effect, the ratios of
expenses before waiver/reimbursements to average net assets would have been
1.74%, 2.45% and 2.45% for Class A, B, and C shares of the Growth Investors
Funds, respectively, and 1.91%, 2.62% and 2.61% for Class A, B and C shares of
the Conservative Investors Fund, respectively.
(f) Annualized.
(g) For fiscal years beginning on or after September 1, 1995, a fund is
required to disclose its average commission per share for trades on which
commissions are charged.
(h) 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.
41
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, 1997, 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, 1997 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 16, 1997
42
<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
<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 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.
Descriptions of the bond ratings of Standard & Poor's
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
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.
C-3
00250184.AV0
