ALLIANCE QUASAR FUND, INC.
ANNUAL REPORT
SEPTEMBER 30, 1996
LETTER TO SHAREHOLDERS ALLIANCE QUASAR FUND, INC.
_______________________________________________________________________________
November 4, 1996
Dear Shareholder:
While gains during the past six months have not been as strong as those for the
first half of the Fund's fiscal year, Alliance Quasar Fund's investment returns
have continued to surpass those of its benchmark indices. Shown below are the
Fund's total returns for the most recent six- and twelve-month periods ended
September 30, 1996, based on the net asset values of each class of shares. For
comparison, we've also shown returns for the S&P 500 Stock Index, a common
measure of the broad stock market, and for the Russell 2000 Index, which
measures the performance of small-cap U.S. stocks.
TOTAL RETURN
PERIODS ENDED SEPTEMBER 30, 1996
6-MONTH PERIOD 12-MONTH PERIOD
-------------- ---------------
ALLIANCE QUASAR FUND
Class A 8.85% 42.42%
Class B 8.38 41.48
Class C 8.55 41.46
S&P 500 STOCK INDEX 7.71 20.32
RUSSELL 2000 INDEX 5.36 13.13
ADDITIONAL INVESTMENT RESULTS APPEAR ON PAGE 3. THE S&P AND RUSSELL INDICES ARE
UNMANAGED.
On page four, we've also provided a chart that shows the performance of a
hypothetical $10,000 investment in Alliance Quasar Fund over a 10-year period.
THE FISCAL YEAR IN REVIEW
Throughout the past year, the Fund has benefited from many of the investment
strategies implemented in 1995. We continued to underweight technology holdings
relative to the Fund's benchmark, the Russell 2000 Index, during most of the
past year. Not until the general sell-off of technology issues in July did we
increase our technology stake to approximately 15-17% of net assets, the
highest level since July 1995.
The Fund continued to overweight energy holdings relative to the benchmark,
with energy issues accounting for 11% of net assets at the time of this report.
Within the energy sector, we continue to see rising daily rates for offshore
drilling rigs. At the same time, the worldwide shortage of offshore drilling
rigs is becoming increasingly apparent to the investment community. After
strong performance in 1995, drilling companies have been the best performing
equity sector to-date in 1996. We continue to like Diamond Offshore Drilling,
Rowan Companies, and Noble Drilling. We also believe the outlook for the U.S.
refining business is positive and have increased our exposure to Diamond
Shamrock.
The Fund has also benefited from an overweight position in the lodging sector.
We began amassing this stake, which currently accounts for 7% of the
portfolio's holdings, in late 1995. We see a tremendous room shortage relative
to demand in the high-end segment of this business, and we particularly favor
Host Marriott. In addition, we have purchased holdings in three companies which
offer business and leisure travelers accommodations on an extended basis. While
the average stay in these facilities is six weeks, approximately a quarter of
all guests stay at least six months. Holdings servicing this new and rapidly
expanding market are: Extended Stay America, Suburban Lodges of America, and
Studio Plus Hotels.
Footwear and apparel companies have continued to report strong earnings.
Holdings in Nine West Group and Timberland have added to the Fund's gains.
Trends favoring casual wear have likewise benefited our positions in Tommy
Hilfiger and Jones Apparel Group.
With oil at $25 per barrel, the airline industry has suffered and our exposure
in this area has hurt performance during the last several months. Nevertheless,
we continue to own Continental Airlines, Alaska Air Group, and America West
Airlines. Airplanes are flying with record average passenger loads--71% for the
year-to-date period compared with 66% in 1995. Last year was the first time in
several years airlines were generally profitable, and we believe we are in the
second year of a positive, multi-year cycle for the industry. Airlines are
using their cash flow to pay down debt and restructure their balance sheets. As
demand outpaces capacity growth, pricing power is increasing. This contrasts
sharply with past cycles when airlines used profits to buy more planes and
increase capacity in order to maximize revenue growth, only to erode their
pricing power.
1
ALLIANCE QUASAR FUND, INC.
_______________________________________________________________________________
MARKET AND ENVIRONMENT OUTLOOK
The market continues to benefit from modest economic growth and modest
inflation. Companies reporting better-than-average earnings are gaining
attention in the marketplace, driving market valuations higher.
Looking forward, our outlook for the U.S. economy and equities remains
positive. However, an increase in interest rates would put some pressure on
price/earnings ratios, which means that stocks with higher P/Es could become
vulnerable. As a result, we continue to focus on the underlying earnings of
each company, working to avoid the risk of unsustainable valuations.
We remain enthusiastic about the growth potential of small-cap stocks. After
underperforming large-cap stocks in 1994, 1995, and 1996 year-to-date, we
believe that small-cap stocks offer very attractive valuations on a relative
basis. We are hopeful that the relative value of small-cap issues will soon be
recognized in the marketplace.
Thank you for your continued interest in Alliance Quasar Fund. We look forward
to reporting to you on future market activity and Fund investment results.
Sincerely,
Alden M. Stewart
President
Randall E. Hasse
Vice President and Portfolio Manager
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, GUARANTEED OR ENDORSED
BY, ANY BANK; FURTHER, SUCH SHARES ARE NOT FEDERALLY INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY.
SHARES OF THE FUND INVOLVE INVESTMENT RISKS, INCLUDING THE POSSIBLE LOSS OF
PRINCIPAL.
2
INVESTMENT OBJECTIVE AND POLICIES ALLIANCE QUASAR FUND, INC.
_______________________________________________________________________________
Alliance Quasar Fund seeks growth of capital by pursuing aggressive investment
policies. Quasar Fund invests primarily in a diversified portfolio of equity
securities of any company and industry and in any type of security which is
believed to offer possibilities for capital appreciation.
INVESTMENT RESULTS
AVERAGE ANNUAL TOTAL RETURN AS OF SEPTEMBER 30, 1996
CLASS A SHARES
WITHOUT WITH
SALES CHARGE SALES CHARGE
------------ ------------
. One Year +42.42% +36.38%
. Five Years +16.60% +15.59%
. Ten Years +13.13% +12.64%
CLASS B SHARES
WITHOUT WITH
SALES CHARGE SALES CHARGE
------------ ------------
. One Year +41.48% +37.48%
. Five Years +15.69% +15.69%
. Since Inception* +16.85% +16.85%
CLASS C SHARES
WITHOUT WITH
SALES CHARGE SALES CHARGE
------------ ------------
. One Year +41.46% +40.46%
. Since Inception* +23.37% +23.37%
The average annual total returns reflect investment of dividends and/or capital
gains distributions in additional shares--with and without the effect of the
4.25% maximum front-end sales charge for Class A or applicable contingent
deferred sales charge for Class B (4% year 1, 3% year 2, 2% year 3, 1% year 4);
Class C shares purchased prior to July 1, 1996, are not subject to front-end or
contingent deferred sales charges. 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. Past performance does not guarantee
future results. Investment return and principal value will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than their original
cost.
* Inception: 9/17/90, Class B; 5/3/93, Class C.
3
ALLIANCE QUASAR FUND, INC.
_______________________________________________________________________________
ALLIANCE QUASAR FUND
GROWTH OF A $10,000 INVESTMENT:
9/30/86 TO 9/30/96
$44,000
$39,000
$34,000
$29,000
$24,000
$19,000
$14,000
$9,000
S&P 500
QUASAR FUND
CLASS A: $32,881
RUSSELL 2000
9/30/86
9/30/96
This chart illustrates the total value of a hypothetical $10,000 investment in
Alliance Quasar Fund Class A shares (after deducting the maximum 4.25% sales
charge) with dividends and capital gains reinvested. Past performance is not
indicative of future results.
For comparison, we've shown the unmanaged Russell 2000 and S&P 500 Stock
Indices. The S&P 500 Stock Index is a common measure of the broad U.S. stock
market while the Russell 2000 Index measures small-cap stock performance.
Returns for the indices do not reflect expenses or sales charges, which have
been deducted from the Fund's return.
Quasar Fund
S&P 500
Russell 2000
4
TEN LARGEST HOLDINGS
SEPTEMBER 30, 1996 ALLIANCE QUASAR FUND, INC.
_______________________________________________________________________________
COMPANY VALUE PERCENT OF NET ASSETS
- -------------------------------------------------------------------------------
Nine West Group, Inc. $12,162,850 3.3%
Telephone and Data Systems, Inc. 10,171,175 2.7
USA Waste Services, Inc. 9,765,000 2.6
Host Marriott Corp. 9,268,400 2.5
Diamond Offshore Drilling, Inc. 9,098,980 2.5
Rowan Cos., Inc. 8,982,837 2.4
Republic Industries, Inc. 7,960,500 2.2
Office Max, Inc. 7,512,400 2.0
Diamond Shamrock, Inc. 7,432,650 2.0
Millicom International Cellular, S.A. 6,690,138 1.8
$89,044,930 24.0%
MAJOR PORTFOLIO CHANGES
SIX MONTHS ENDED SEPTEMBER 30, 1996
SHARES
-----------------------------
PURCHASES BOUGHT HOLDINGS 9/30/96
- ----------------------------------------------------------------------------
Applix, Inc. 153,000 153,000
Crompton & Knowles Corp. 221,400 221,400
Designer Holdings, Ltd. 174,200 174,200
Diamond Shamrock, Inc. 132,800 238,800
Harman International Industries, Inc. New 96,800 96,800
Host Marriott Corp. 339,000 639,200
Polymer Group, Inc. 235,200 235,200
Republic Industries, Inc. 274,500 274,500
Team Rental Group, Inc. 322,100 322,100
Telephone and Data Systems, Inc. 101,400 252,700
SALES SOLD HOLDINGS 9/30/96
- -------------------------------------------------------------------------------
Gucci Group N.V. 50,500 -0-
Healthsouth Corp. 266,759 -0-
Infinity Broadcasting Corp. Cl.A 64,900 -0-
JLG Industries, Inc. 62,200 -0-
Nautica Enterprises, Inc. 60,075 -0-
Physio-Control International Corp. 218,700 -0-
USAir Group, Inc. 205,800 -0-
Veterinary Centers of America, Inc. 129,700 -0-
Williams-Sonoma, Inc. 84,800 -0-
Wisconsin Central Transport Corp. 39,900 -0-
5
PORTFOLIO OF INVESTMENTS
SEPTEMBER 30, 1996 ALLIANCE QUASAR FUND, INC.
_______________________________________________________________________________
COMPANY SHARES VALUE
- -------------------------------------------------------------------------
COMMON STOCKS92.7%
CONSUMER PRODUCTS & SERVICES27.2%
ADVERTISING2.0%
HA-LO Industries, Inc. * 112,850 $ 3,272,650
Outdoor Systems, Inc. * 87,200 4,098,400
------------
7,371,050
AIRLINES2.4%
Alaska Air Group, Inc. * 106,200 2,270,025
America West Airlines, Inc. * 287,900 3,382,825
Continental Airlines, Inc. * 144,600 3,235,425
------------
8,888,275
APPAREL4.0%
Designer Holdings, Ltd. * 174,200 4,550,975
Jones Apparel Group, Inc. * 44,200 2,817,750
Timberland Co. * 89,000 1,824,500
Tommy Hilfiger Corp. * 95,000 5,628,750
------------
14,821,975
COMMERCIAL SERVICES1.3%
TeleSpectrum Worldwide, Inc. * 252,100 4,915,950
ENTERTAINMENT & LEISURE0.5%
Heritage Media Corp. * 97,300 1,836,538
RESTAURANTS & LODGING6.6%
Doubletree Corp. * 50,500 2,013,688
Extended Stay America, Inc. * 177,200 3,632,600
Host Marriott Corp. * 639,200 9,268,400
Interstate Hotels Co. * 79,300 2,190,662
La Quinta Inns, Inc. 127,250 2,481,375
Studio Plus Hotels, Inc. * 164,900 2,720,850
Suburban Lodges of America, Inc. * 109,000 2,289,000
------------
24,596,575
RETAILING7.5%
Cross-Continent Auto Retailers, Inc. * 82,700 1,902,100
Industrie Natuzzi S.p.A. (ADR) (a) 88,400 4,110,600
Marker International * 214,700 2,093,325
Nine West Group, Inc. * 224,200 12,162,850
Office Max, Inc. * 536,600 7,512,400
------------
27,781,275
OTHER2.9%
Equity Corp. International * 80,600 2,559,050
Loewen Group, Inc. (b) 148,000 6,197,500
Stewart Enterprises, Inc. 54,750 1,847,812
------------
10,604,362
------------
100,816,000
TECHNOLOGY25.6%
COMPUTER PERIPHERALS3.1%
Lexmark International Group, Inc. * 126,400 2,575,400
Western Digital Corp. * 88,300 3,543,037
Xircom, Inc. * 320,700 5,211,375
------------
11,329,812
COMPUTER SOFTWARE & SERVICES8.6%
Applix, Inc. * 153,000 4,016,250
Business Objects, S.A. (ADR) *(c) 130,900 2,519,825
Comverse Technology, Inc. * 88,000 3,421,000
DST Systems, Inc. * 65,500 2,096,000
Exabyte Corp. * 200,700 3,010,500
IDT Corp. * 189,600 3,175,800
Integrated Systems, Inc. * 82,700 2,729,100
Network General Corp. * 158,000 3,614,250
Radius, Inc. * 2,785 4,526
Sterling Software, Inc. * 47,600 3,635,450
Storage Technology Corp. * 98,000 3,711,750
------------
31,934,451
6
ALLIANCE QUASAR FUND, INC.
_______________________________________________________________________________
COMPANY SHARES VALUE
- -------------------------------------------------------------------------
ELECTRONICS4.7%
BMC Industries, Inc. 117,200 $ 3,354,850
Cable Design Technologies Corp. * 77,200 3,088,000
Harman International Industries, Inc. 96,800 4,719,000
Kent Electronics Corp. * 32,700 711,225
Uniphase Corp. * 66,500 2,809,625
VLSI Technology, Inc. * 174,800 2,840,500
------------
17,523,200
TELECOMMUNICATIONS9.2%
Advanced Fibre Communications * 10,100 252,500
Andrew Corp. * 55,550 2,770,556
ICG Communications, Inc. * 167,692 3,521,532
Millicom International Cellular, S.A. *(d) 165,700 6,690,138
Premisys Communications, Inc. * 83,700 3,075,975
Telephone and Data Systems, Inc. 252,700 10,171,175
United States Cellular Corp. * 123,300 3,729,825
Westell Technologies, Inc. * 86,400 3,823,200
------------
34,034,901
------------
94,822,364
BASIC INDUSTRIES22.6%
CHEMICALS3.5%
Crompton & Knowles Corp. 221,400 3,625,425
Cytec Industries, Inc. * 153,600 5,971,200
Polymer Group, Inc. * 235,200 3,292,800
------------
12,889,425
ENGINEERING & CONSTRUCTION0.8%
EMCOR Group, Inc. * 192,700 2,914,588
ENVIRONMENTAL CONTROL7.2%
Allied Waste Industries, Inc. * 264,200 2,443,850
Republic Industries, Inc. * 274,500 7,960,500
United Waste Systems, Inc. * 187,700 6,522,575
USA Waste Services, Inc. * 310,000 9,765,000
------------
26,691,925
FOREST PRODUCTS0.8%
Buckeye Cellulose Corp. * 107,600 2,797,600
METAL HARDWARE5.0%
AK Steel Holding Corp. 61,900 2,537,900
Alumax, Inc. * 109,600 3,671,600
Century Aluminum Co. 222,700 3,284,825
Gibraltar Steel Corp. * 49,700 1,118,250
Kaiser Aluminum Corp. * 181,300 2,107,612
Olympic Steel, Inc. * 49,700 1,335,688
Titanium Metals Corp. * 104,300 3,024,700
Uranium Resources, Inc. * 126,200 1,640,600
------------
18,721,175
SURFACE TRANSPORTATION & SHIPPING2.8%
Team Rental Group, Inc. * 322,100 6,119,900
Xtra Corp. 104,700 4,436,662
------------
10,556,562
TEXTILE PRODUCTS2.5%
Mohawk Industries, Inc. * 232,200 5,950,125
Unifi, Inc. 118,000 3,245,000
------------
9,195,125
------------
83,766,400
ENERGY10.5%
OIL & GAS SERVICES10.5%
Diamond Offshore Drilling, Inc. * 165,436 9,098,980
Diamond Shamrock, Inc. 238,800 7,432,650
Global Marine, Inc. * 108,400 1,707,300
7
PORTFOLIO OF INVESTMENTS (CONTINUED) ALLIANCE QUASAR FUND, INC.
_______________________________________________________________________________
COMPANY (000) VALUE
- -------------------------------------------------------------------------
KCS Energy, Inc. 104,100 $ 3,708,563
Noble Drilling Corp. * 393,200 5,947,150
Reading & Bates Corp. * 85,000 2,305,625
Rowan Cos., Inc. * 482,300 8,982,837
------------
39,183,105
HEALTH CARE3.9%
BIOTECHNOLOGY2.7%
Centocor, Inc. * 84,200 2,989,100
GelTex Pharmaceuticals, Inc. * 194,000 3,880,000
Medimmune, Inc. * 84,000 1,197,000
Neurex Corp. * 98,400 1,881,900
------------
9,948,000
DRUGS, HOSPITAL SUPPLIES &
MEDICAL SERVICES1.2%
Algos Pharmaceutical Corp. * 129,900 1,818,600
National Surgery Centers, Inc. * 93,150 2,608,200
------------
4,426,800
------------
14,374,800
FINANCIAL SERVICES2.9%
FINANCE1.7%
First Merchants Acceptance Corp. * 91,000 1,820,000
Oxford Resources Corp. * 205,400 4,390,425
------------
6,210,425
SHARES OR
PRINCIPAL
AMOUNT VALUE
- -------------------------------------------------------------------------
INSURANCE1.2%
Riscorp, Inc. * 63,000 $ 1,094,625
Twentieth Century Industries, Inc. * 200,800 3,539,100
------------
4,633,725
------------
10,844,150
Total Common Stocks
(cost $303,344,714) 343,806,819
SHORT-TERM DEBT SECURITIES8.4%
Federal Home Loan Bank
5.70%, 10/01/96 $15,000 15,000,000
Federal Home Loan Mortgage Corp.
5.20%, 11/04/96 10,000 9,950,889
Federal National Mortgage Association
5.20%, 10/11/96 6,000 5,991,333
Total Short-Term Debt Securities
(amortized cost $30,942,222) 30,942,222
TOTAL INVESTMENTS101.1%
(cost $334,286,936) 374,749,041
Other assets less liabilities(1.1%) (3,919,851)
NET ASSETS100% $370,829,190
* Non-income producing security.
(a) Country of origin - Italy.
(b) Country of origin - Canada.
(c) Country of origin - France.
(d) Country of origin - Luxembourg.
Glossary:
ADR - American Depository Receipt
See notes to financial statements.
8
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 1996 ALLIANCE QUASAR FUND, INC.
_______________________________________________________________________________
ASSETS
Investments in securities, at value (cost $334,286,936) $374,749,041
Cash 1,248,343
Receivable for investment securities sold 6,849,116
Receivable for capital stock sold 3,617,138
Dividends receivable 4,514
Total assets 386,468,152
LIABILITIES
Payable for investment securities purchased 12,830,185
Payable for capital stock redeemed 1,506,567
Advisory fee payable 922,321
Distribution fee payable 141,294
Accrued expenses 238,595
Total liabilities 15,638,962
NET ASSETS $370,829,190
COMPOSITION OF NET ASSETS
Shares of capital stock, at par $ 27,257
Additional paid-in capital 268,704,655
Accumulated net realized gain 61,636,073
Net unrealized appreciation of investments and other assets 40,461,205
$370,829,190
CALCULATION OF MAXIMUM OFFERING PRICE
CLASS A SHARES
Net asset value and redemption price per share ($229,797,744/
8,231,151 shares of capital stock issued and outstanding) $27.92
Sales charge--4.25% of public offering price 1.24
Maximum offering price $29.16
CLASS B SHARES
Net asset value and offering price per share ($112,489,994/
4,305,385 shares of capital stock issued and outstanding) $26.13
CLASS C SHARES
Net asset value and offering price per share ($28,541,452/
1,091,974 shares of capital stock issued and outstanding) $26.14
See notes to financial statements.
9
STATEMENT OF OPERATIONS
YEAR ENDED SEPTEMBER 30, 1996 ALLIANCE QUASAR FUND, INC.
_______________________________________________________________________________
INVESTMENT INCOME
Interest $1,217,757
Dividends (net of foreign taxes withheld of $3,114) 418,721 $ 1,636,478
EXPENSES
Advisory fee 2,780,297
Distribution fee - Class A 391,879
Distribution fee - Class B 444,826
Distribution fee - Class C 111,435
Transfer agency 421,758
Custodian 143,695
Administrative 139,001
Audit and legal 133,321
Registration 95,782
Printing 61,932
Directors' fees 36,999
Miscellaneous 36,414
Total expenses 4,797,339
Net investment loss (3,160,861)
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain on investments 65,887,574
Net change in unrealized appreciation of investments 13,713,401
Net gain on investments 79,600,975
NET INCREASE IN NET ASSETS FROM OPERATIONS $76,440,114
See notes to financial statements.
10
STATEMENTS OF CHANGES IN NET ASSETS ALLIANCE QUASAR FUND, INC.
_______________________________________________________________________________
YEAR ENDED YEAR ENDED
SEPTEMBER 30, SEPTEMBER 30,
1996 1995
------------- -------------
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS
Net investment loss $ (3,160,861) $ (1,726,740)
Net realized gain on investments 65,887,574 34,342,023
Net change in unrealized appreciation of
investments 13,713,401 7,569,209
Net increase in net assets from operations 76,440,114 40,184,492
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net realized gain on investments
Class A (29,221,160) (23,368,345)
Class B (3,571,423) (2,216,109)
Class C (875,215) (172,655)
CAPITAL STOCK TRANSACTIONS
Net increase (decrease) 163,177,466 (20,139,054)
Total increase (decrease) 205,949,782 (5,711,671)
NET ASSETS
Beginning of year 164,879,408 170,591,079
End of year $370,829,190 $164,879,408
See notes to financial statements.
11
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1996 ALLIANCE QUASAR FUND, INC.
_______________________________________________________________________________
NOTE A: SIGNIFICANT ACCOUNTING POLICIES
Alliance Quasar Fund, Inc. (the "Fund"), is registered under the Investment
Company Act of 1940 as a diversified open-end management investment company.
The Fund offers Class A, Class B, and Class C shares. Class A shares are sold
with a front-end sales charge of up to 4.25%. Class B shares are sold with a
contingent deferred sales charge which declines from 4% to zero depending on
the period of time the shares are held. Class B shares will automatically
convert to Class A shares eight years after the end of the calendar month of
purchase. 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 Fund.
1. SECURITY VALUATION
Portfolio securities traded on a national securities exchange are valued at the
last reported sales price, or, if no sale occurred, at the mean of the bid and
asked price at the regular close of the New York Stock Exchange.
Over-the-counter securities not traded on national securities exchanges are
valued at the mean of the closing bid and asked price. Securities which mature
in 60 days or less are valued at amortized cost which approximates market
value, unless this method does not represent fair value. 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 Directors.
2. TAXES
It is the Fund's policy to meet the requirements of the Internal Revenue Code
applicable to regulated investment companies and to distribute all of its
investment company taxable income and net realized gains, if any, to
shareholders. Therefore, no provisions for federal income or excise taxes are
required.
3. INVESTMENT INCOME AND SECURITY TRANSACTIONS
Dividend income is recorded on the ex-dividend date. Interest income is accrued
daily. Security transactions are accounted for on the date the securities are
purchased or sold. Security gains and losses are determined on the identified
cost basis.
4. DIVIDENDS AND DISTRIBUTIONS
Dividends and distributions to shareholders are recorded on the ex-dividend
date and are determined in accordance with income tax regulations.
5. RECLASSIFICATION OF NET ASSETS
As the Fund may not utilize net investment losses in future periods for tax
purposes, the Fund reclassified net investment losses of $3,160,861 to
accumulated net realized gain at September 30, 1996. This reclassification had
no effect on net assets.
NOTE B: ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Under the terms of an investment advisory agreement, the Fund pays Alliance
Capital Management L.P. (the "Adviser"), an advisory fee at a quarterly rate
equal to .25 of 1% (approximately 1% on an annual basis) of the net assets of
the Fund valued on the last business day of the previous quarter. The Adviser
has agreed, under the terms of the investment advisory agreement, to reimburse
the Fund to the extent that its aggregate expenses (exclusive of interest,
taxes, brokerage, distribution fees and extraordinary expenses) exceed the
limits prescribed by any state in which the Fund's shares are qualified for
sale. The Adviser believes that the most restrictive expense ratio limitation
imposed by any state is 2.5% of the first $30 million of its average daily net
assets, 2% of the next $70 million of its average daily net assets and 1.5% of
its average daily net assets in excess of $100 million. No reimbursement was
required for the year ended September 30, 1996. Pursuant to the advisory
agreement, the Fund paid $139,001 to the Adviser representing the cost of
certain legal and accounting services provided to the Fund by the Adviser for
the year ended September 30, 1996.
12
ALLIANCE QUASAR FUND, INC.
_______________________________________________________________________________
The Fund compensates Alliance Fund Services, Inc. (a wholly-owned subsidiary of
the Adviser) in accordance with a Services Agreement for providing personnel
and facilities to perform transfer agency services for the Fund. Such
compensation amounted to $318,752 for the year ended September 30, 1996.
Alliance Fund Distributors, Inc. (a wholly-owned subsidiary of the Adviser)
serves as the Distributor of the Fund's shares. The Distributor received
front-end sales charges of $85,854 from the sales of Class A shares and $12,206
in contingent deferred sales charges imposed upon redemption by shareholders of
Class B for the year ended September 30, 1996. The amount of contingent
deferred sales charge imposed upon redemptions by shareholders of Class C
shares for the period from July 1, 1996 to September 30, 1996 was $5,124.
Brokerage commissions paid on securities transactions for the year ended
September 30, 1996 amounted to $979,002, none of which was paid to affiliated
brokers.
NOTE C: DISTRIBUTION SERVICES AGREEMENT
The Fund has adopted a Distribution Services Agreement (the "Agreement")
pursuant to Rule 12b-1 under the Investment Company Act of 1940. Under the
Agreement, the Fund pays a distribution fee to the Distributor at an annual
rate of up to 0.30% of the Fund's average daily net assets attributable to the
Class A shares and 1% of the average daily net assets attributable to both
Class B and C shares. Such fee is accrued daily and paid monthly. The Agreement
provides that the Distributor will use such payments in their entirety for
distribution assistance and promotional activities. The Distributor has
incurred expenses in excess of the distribution costs reimbursed by the Fund in
the amount of $3,754,485 and $408,356 for Class B and Class C shares,
respectively; such costs may be recovered from the Fund in future periods, so
long as the Agreement is in effect. In accordance with the Agreement, there is
no provision for recovery of unreimbursed distribution costs incurred by the
Distributor beyond the current fiscal year for Class A shares. The Agreement
also provides that the Adviser may use its own resources to finance the
distribution of the Fund's shares.
NOTE D: INVESTMENT TRANSACTIONS
Purchases and sales of investment securities, (excluding short-term investments
and U.S. Government Securities), aggregated $488,231,934 and $377,644,340,
respectively, for the year ended September 30, 1996. At September 30, 1996, the
cost of securities for federal income tax purposes was $334,814,514.
Accordingly, gross unrealized appreciation of investments was $49,357,326 and
gross unrealized depreciation of investments was $9,422,799, resulting in net
unrealized appreciation of $39,934,527.
13
NOTES TO FINANCIAL STATEMENTS (CONTINUED) ALLIANCE QUASAR FUND, INC.
_______________________________________________________________________________
NOTE E: CAPITAL STOCK
There are 150,000,000 shares of $.002 par value capital stock authorized,
divided into three classes, designated Class A, Class B and Class C shares.
Each class consists of 50,000,000 authorized shares. Transactions in capital
stock were as follows:
SHARES AMOUNT
--------------------------- ------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
1996 1995 1996 1995
------------ ------------ -------------- --------------
Shares sold 5,471,871 3,338,142 $136,248,579 $ 67,549,983
Shares issued in
reinvestment of
distributions 1,253,727 1,152,408 25,952,159 19,717,689
Shares converted
from Class B 23,945 -0- 625,453 -0-
Shares redeemed (4,589,604) (5,282,536) (113,607,805) (108,851,637)
Net increase
(decrease) 2,159,939 (791,986) $ 49,218,386 $(21,583,965)
CLASS B
Shares sold 4,441,473 1,011,429 $109,239,019 $ 19,591,440
Shares issued in
reinvestment of
distributions 171,932 103,261 3,349,236 1,694,515
Shares converted to
Class A (25,549) -0- (625,453) -0-
Shares redeemed (1,003,450) (1,027,961) (23,478,495) (20,017,278)
Net increase 3,584,406 86,729 $ 88,484,307 $ 1,268,677
CLASS C
Shares sold 2,062,696 207,104 $ 49,417,709 $ 4,321,456
Shares issued in
reinvestment of
distributions 16,499 8,223 321,569 135,017
Shares redeemed (1,057,147) (201,051) (24,264,505) (4,280,239)
Net increase 1,022,048 14,276 $ 25,474,773 $ 176,234
14
FINANCIAL HIGHLIGHTS ALLIANCE QUASAR FUND, INC.
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH YEAR
<TABLE>
<CAPTION>
CLASS A
-------------------------------------------------------------
YEAR ENDED SEPTEMBER 30,
-------------------------------------------------------------
1996 1995 1994 1993 1992
---------- ------------ ---------- ---------- -----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $24.16 $22.65 $24.43 $19.34 $21.27
INCOME FROM INVESTMENT OPERATIONS
Net investment loss (.25) (.22)(a) (.60) (.41) (.24)
Net realized and unrealized gain (loss)
on investments 8.82 5.59 (.36) 6.38 (1.53)
Net increase (decrease) in net asset
value from operations 8.57 5.37 (.96) 5.97 (1.77)
LESS: DISTRIBUTIONS
Distributions from net realized gains (4.81) (3.86) (.82) (.88) (.16)
Net asset value, end of year $27.92 $24.16 $22.65 $24.43 $19.34
TOTAL RETURN
Total investment return based on net
asset value (b) 42.42% 30.73% (4.05)% 31.58% (8.34)%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000's omitted) $229,798 $146,663 $155,470 $228,874 $252,140
Ratio of expenses to average net assets 1.79% 1.83% 1.67% 1.65% 1.62%
Ratio of net investment loss to average
net assets (1.11)% (1.06)% (1.15)% (1.00)% (.89)%
Portfolio turnover rate 168% 160% 110% 102% 128%
Average commission rate (c) $.0596 -- -- -- --
</TABLE>
See footnote summary on page 17.
15
FINANCIAL HIGHLIGHTS (CONTINUED) ALLIANCE QUASAR FUND, INC.
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH YEAR
<TABLE>
<CAPTION>
CLASS B
-------------------------------------------------------------
YEAR ENDED SEPTEMBER 30,
-------------------------------------------------------------
1996 1995 1994 1993 1992
---------- ------------ ---------- ---------- -----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $23.03 $21.92 $23.88 $19.07 $21.14
INCOME FROM INVESTMENT OPERATIONS
Net investment loss (.20) (.37)(a) (.53) (.18) (.39)
Net realized and unrealized gain (loss)
on investments 8.11 5.34 (.61) 5.87 (1.52)
Net increase (decrease) in net asset
value from operations 7.91 4.97 (1.14) 5.69 (1.91)
LESS: DISTRIBUTIONS
Distributions from net realized gains (4.81) (3.86) (.82) (.88) (.16)
Net asset value, end of year $26.13 $23.03 $21.92 $23.88 $19.07
TOTAL RETURN
Total investment return based on net
asset value (b) 41.48% 29.78% (4.92)% 30.53% (9.05)%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000's omitted) $112,490 $16,604 $13,901 $16,779 $9,454
Ratio of expenses to average net assets 2.62% 2.65% 2.50% 2.46% 2.42%
Ratio of net investment loss to average
net assets (1.96)% (1.88)% (1.98)% (1.81)% (1.67)%
Portfolio turnover rate 168% 160% 110% 102% 128%
Average commision rate (c) $.0596 -- -- -- --
</TABLE>
See footnote summary on page 17.
16
ALLIANCE QUASAR FUND, INC.
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
CLASS C
--------------------------------------------------
MAY 3,1993(D)
YEAR ENDED SEPTEMBER 30, TO
------------------------------------ SEPTEMBER 30,
1996 1995 1994 1993
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $23.05 $21.92 $23.88 $20.33
INCOME FROM INVESTMENT OPERATIONS
Net investment loss (.20) (.37)(a) (.36) (.10)
Net realized and unrealized gain (loss)
on investments 8.10 5.36 (.78) 3.65
Net increase (decrease) in net asset
value from operations 7.90 4.99 (1.14) 3.55
LESS: DISTRIBUTIONS
Distributions from net realized gains (4.81) (3.86) (.82) -0-
Net asset value, end of period $26.14 $23.05 $21.92 $23.88
TOTAL RETURN
Total investment return based on net
asset value (b) 41.46% 29.87% (4.92)% 17.46%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $28,541 $1,611 $1,220 $118
Ratio of expenses to average net assets 2.61% 2.64% 2.48% 2.49%(e)
Ratio of net investment loss to average
net assets (1.94)% (1.76)% (1.96)% (1.90)%(e)
Portfolio turnover rate 168% 160% 110% 102%
Average commission rate (c) $.0596 -- -- --
</TABLE>
(a) Based on average shares outstanding.
(b) Total investment return is calculated assuming an initial investment made
at the net asset value at the beginning of the period, reinvestment of all
dividends and distributions at net asset value during the period, and
redemption on the last day of the period. Initial sales charge or contingent
deferred sales charge is not reflected in the calculation of total investment
return. Total investment return calculated for periods of less than one year is
not annualized.
(c) For fiscal years beginning on or after September 1, 1995, a fund is
required to disclose its average commission rate per share for trades on which
commissions are charged.
(d) Commencement of distribution.
(e) Annualized.
17
REPORT OF ERNST & YOUNG LLP
INDEPENDENT AUDITORS ALLIANCE QUASAR FUND, INC.
_______________________________________________________________________________
TO THE SHAREHOLDERS AND BOARD OF DIRECTORS ALLIANCE QUASAR FUND, INC.
We have audited the accompanying statement of assets and liabilities of
Alliance Quasar Fund, Inc., including the portfolio of investments, as of
September 30, 1996, and the related statement of operations for the year then
ended, the statement of changes in net assets for each of the two years in the
period then ended, and the financial highlights for each of the periods
indicated therein. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
September 30, 1996, by correspondence with the custodian and brokers. An audit
also
includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Alliance Quasar Fund, Inc. at September 30, 1996, the results of its operations
for the year then ended, the changes in its net assets for each of the two
years in the period then ended, and the financial highlights for each of the
indicated periods, in conformity with generally accepted accounting principles.
New York, New York
November 1, 1996
18
ALLIANCE QUASAR FUND, INC.
_______________________________________________________________________________
BOARD OF DIRECTORS
JOHN D. CARIFA, CHAIRMAN
RUTH BLOCK (1)
DAVID H. DIEVLER (1)
JOHN H. DOBKIN (1)
WILLIAM H. FOULK, JR. (1)
DR. JAMES M. HESTER (1)
CLIFFORD L. MICHEL (1)
DONALD J. ROBINSON (1)
OFFICERS
ALDEN M. STEWART, PRESIDENT
THOMAS BARDONG, VICE PRESIDENT
RANDALL E. HAASE, VICE PRESIDENT
DANIEL V. PANKER, VICE PRESIDENT
TIMOTHY D. RICE, VICE PRESIDENT
EDMUND P. BERGAN, JR., SECRETARY
MARK D. GERSTEN, TREASURER & CHIEF FINANCIAL OFFICER
VINCENT S. NOTO, CONTROLLER
CUSTODIAN
STATE STREET BANK & TRUST COMPANY
225 Franklin Street
Boston, MA 02110
DISTRIBUTOR
ALLIANCE FUND DISTRIBUTORS, INC.
1345 Avenue of the Americas
New York, NY 10105
LEGAL COUNSEL
SEWARD & KISSEL
One Battery Park Plaza
New York, NY 10004
TRANSFER AGENT
ALLIANCE FUND SERVICES, INC.
P.O. Box 1520
Secaucus, NJ 07096-1520
Toll-free 1-(800) 221-5672
INDEPENDENT AUDITORS
ERNST & YOUNG LLP
787 Seventh Avenue
New York, NY 10019
(1) Member of the Audit Committee.
19
ALLIANCE QUASAR FUND, INC.
1345 Avenue of the Americas
New York, NY 10105
(800) 221-5672
ALLIANCE CAPITAL
INVESTING WITHOUT THE MYSTERY
THIS REPORT IS INTENDED SOLELY FOR DISTRIBUTION TO CURRENT SHAREHOLDERS
OF THE FUND.
R THESE REGISTERED SERVICE MARKS USED UNDER LICENSE FROM THE OWNER,
ALLIANCE CAPITAL MANAGEMENT L.P.
QSRAR
