ALLIANCE QUASAR FUND
SEMI-ANNUAL REPORT
MARCH 31, 1999
ALLIANCE CAPITAL
LETTER TO SHAREHOLDERS ALLIANCE QUASAR FUND
_______________________________________________________________________________
May 28, 1999
Dear Shareholder,
This report contains investment results and market commentary for Alliance
Quasar Fund (the "Fund") for the semi-annual reporting period ended March 31,
1999.
INVESTMENT RESULTS
The Fund underperformed its unmanaged small cap benchmark, the Russell 2000
Growth Stock Index, for both the six- and 12-month periods ended March 31,
1999. During these six- and 12-month periods, the Fund's Class A shares
returned 9.07% and -22.66%, respectively, while the Russell 2000 Growth Stock
Index returned 10.00% and -16.26%, respectively. As the performance of the
Standard & Poor's (S&P) 500 Stock Index has become dominated to an
unprecedented degree by its large cap stocks, we believe that it is no longer
an appropriate benchmark for the Fund, which, of course, focuses almost
entirely on small cap stocks. Accordingly, it is now more appropriate that the
Russell 2000 Growth Stock Index constitutes the Fund's only benchmark.
The Fund underperformed its benchmark during the period under review primarily
due to the following three reasons. First, growth stocks with cyclical exposure
performed poorly during the third quarter of 1998. Secondly, our timing in both
selling and buying stocks in the Fund's portfolio was often too early. And
finally, we generally avoided investing in technology stocks in general, and
internet stocks in particular. These three factors and their effect on the
Fund's performance are explained in more detail in the "Market Commentary"
section of this report.
INVESTMENT RESULTS*
As of March 31, 1999
TOTAL RETURN
6 MONTHS 12 MONTHS
---------- -----------
ALLIANCE QUASAR FUND
Class A 9.07% -22.66%
Class B 8.67% -23.26%
Class C 8.71% -23.21%
RUSSELL 2000 GROWTH STOCK INDEX 10.00% -16.26%
* THE FUND'S INVESTMENT RESULTS REPRESENT TOTAL RETURNS AND ARE BASED ON THE
NET ASSET VALUE OF EACH CLASS OF SHARES AS OF MARCH 31, 1999. TOTAL RETURNS FOR
ADVISOR CLASS SHARES WILL DIFFER DUE TO DIFFERENT EXPENSES ASSOCIATED WITH THAT
CLASS. ALL FEES AND EXPENSES RELATED TO THE OPERATION OF THE FUND HAVE BEEN
DEDUCTED, BUT NO ADJUSTMENT HAS BEEN MADE FOR SALES CHARGES THAT MAY APPLY WHEN
SHARES ARE PURCHASED OR REDEEMED. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE
RESULTS.
THE RUSSELL 2000 GROWTH STOCK INDEX IS A CAPITALIZATION-WEIGHTED INDEX
THAT INCLUDES 2,000 OF THE SMALLEST STOCKS REPRESENTING APPROXIMATELY 11% OF
THE U.S. EQUITY MARKET. AN INVESTOR CANNOT INVEST DIRECTLY IN AN INDEX.
ADDITIONAL INVESTMENT RESULTS CAN BE FOUND ON PAGE 4.
MARKET COMMENTARY
Over the last year, we believe that there were three major reasons that led to
the Fund's underperformance relative to its benchmark.
First, growth stocks with cyclical exposure did not do well during the third
quarter. In general, many investors felt at the time that there was a
possibility for a recession in 1999. If that were the case, their earnings
outlook would deteriorate. Specifically, the airline sector and the rental car
sector, two fundamentally strong industries showing tremendous profitability,
lost nearly two years' worth of stock performance during the third quarter
alone. The losses suffered by these industries were caused when investors
shifted out of these types of stocks and into groups of stocks that had more
positive momentum (price and volume trends).
Secondly, in retrospect we underestimated the amount of momentum that was
evident in investors' minds when they bought and sold stocks. In many cases, it
appears
1
ALLIANCE QUASAR FUND
_______________________________________________________________________________
that we bought our new ideas too early, and when we sold our older names based
on valuation, this sell decision was also made too far in advance. In other
words, valuations took longer to be realized when the buy decision was made.
Conversely, the momentum investors carried our stocks to higher valuations
after we sold them, as the valuations they were willing to pay for these stocks
were simply higher than the valuations we thought they were worth.
Third, while we like to think of ourselves as leading edge investors looking
for that next great idea, we were unwilling to take a huge overweighting in the
technology sector and, more specifically, we essentially avoided investing in
internet stocks altogether. In most cases, these stocks have yet to demonstrate
the ability to earn a single penny in earnings and, in some cases, we believe
probably never will. Despite this, these stocks have performed exceptionally
well, defying all logical valuation criteria. In our opinion, these stocks were
overpriced a year ago when 1998 began, and they are even more overpriced now in
1999. We simply believe that when investors start looking at fundamentals and
valuations as opposed to hype and momentum, these stocks will come back to
reality.
As a result of these three factors and after a very strong first half in 1998,
the Fund underperformed substantially in the third quarter. Although the Fund's
relative performance improved considerably in the six months ended March 31,
1999, it still underperformed its benchmark for the entire year.
FUND STRATEGY
Our basic investment strategy remains unchanged. We continue to adjust the
Fund's composition to reflect our perception of those smaller, highly
competitive companies that will, in our judgment, exhibit long-term price
appreciation through superior earnings growth.
INVESTMENTS
On the growth side, the Fund's holdings continue to include several positions
in the retail and apparel sectors. Companies in these sectors have continued to
report earnings per share (EPS) gains of typically between 20% and 30%, with
price to earnings (P/E) ratios between 12 and 18 times earnings. After not
participating in the strong equity market in 1997, consumer stocks came back in
the second half of 1998 and into 1999. These included Tommy Hilfiger Corp.,
Tiffany & Co., and Men's Wearhouse Inc. In addition, we think that the jewelry
segment offers excellent opportunities. We believe the prospects for both Zale
Corp. and Movado Group, Inc. look quite promising.
We are always looking for companies that have market share leadership, strong
franchises, and dominant positions within their respective industry. Within the
leisure category, these would include Bally Total Fitness Holding Corp., which,
with over four million members, is the largest health club provider in the
U.S., and Premier Parks, Inc., the largest amusement park operator after The
Walt Disney Company. In the consumer manufacturing category, this would include
Monaco Coach Corp., one of the largest manufacturers of recreational vehicles
in the U.S.
In the turnaround category, we believe that the sports retailing industry has
seen its worst days and that both Venator Group, Inc. and Sports Authority,
Inc. should benefit. As the industry becomes more rational, the aggressive
expansion in square footage seen over the last five years has essentially come
to a halt. In addition, Nike, Inc. is seeing its business turning. These
factors, as well as the Olympics being only a year away, should help both of
these sports retailers see a turn in their business.
Within healthcare, the Fund's holdings continue to include positions in the
biotechnology sector as well as the service sector. Specifically, its holdings
include positions in GelTex Pharmaceuticals, Inc. and Human Genome Sciences,
Inc., two later-stage biotechnology companies, as well as Synetic, Inc., an
intranet healthcare provider, and Orthodontic Centers of America, Inc., the
leading operator of orthodontic centers in the U.S.
Within the Real Estate sector, we believe that real estate investment trust
(REIT) stocks have come under a lot of pressure as investors focus more on
momentum growth and less on yield. There are several well-run companies
yielding over 10% with internal growth of 10% to 12%. Therefore, about 6% of
the Fund is invested in REITs. The Fund currently holds positions in Chelsea
GCA Realty, Inc., Taubman Centers, Inc., and Glenborough Realty Trust, Inc.
2
ALLIANCE QUASAR FUND
_______________________________________________________________________________
On the cyclical side, we continue to favor the airline industry. We have been
bullish on this group since 1995. We believe that 1999 should mark the fifth
consecutive year of profitability for the industry after a period of losses
from 1990 to 1994. Furthermore, this industry is more fundamentally sound than
at any point since World War II, with load factors of over 70% for four years
in a row--levels never attained before by this industry.
During past good periods of business, carriers took their excess cash flow and
bought more planes. However, this only added to their existing capacity and
took away their pricing power. Today, the carriers are using their cash flow to
pay down debt, buy back stock, and restructure their balance sheets. As demand
outpaces capacity growth, pricing power should continue to increase, allowing
carriers to maximize both revenues and earnings. Thus, the Fund's holdings
continue to include positions in America West Holdings Corp., Alaska Air Group,
Inc., and Atlas Air, Inc.
In addition, we like the rental car industry and have positions in Budget
Group, Inc. and Dollar Thrifty Automotive Group, Inc. This industry has gone
through a major change in ownership from the auto manufacturers to financial
entrepreneurs. We are now seeing real pricing power, better yield management,
greater inventory efficiencies, and as a result, a higher level of
profitability. We believe these companies have strong fundamentals that are not
yet being recognized in the marketplace.
Within the technology sector, the Fund's holdings currently include positions
in CheckFree Corp., an online banking company, and DBT Online, Inc., a database
management company. The Fund is currently underweight in the technology sector
relative to the small-cap benchmark for the sector.
INVESTMENT OUTLOOK
1998 marks the fifth consecutive year in which large cap stocks, as measured by
the S&P 500, outperformed small cap stocks, as measured by the Russell 2000
Index. During this five year period (on an annualized basis), the S&P 500 was
up 24.1%, considerably outperforming the Russell 2000 Index, which was up
11.9%. After underperforming large cap stocks in each consecutive year from
1994 to 1998, small cap stocks continued to underperform into 1999. In the
first quarter of 1999 alone, the Russell 2000 was down 1.68%, while the S&P 500
was up 4.98%, for a total difference of 6.66% between the two indexes. In our
view, it is obvious that the majority of the money coming into the equity
markets is going into the S&P 500 and other select large caps, while generally
avoiding the other 90% of stocks altogether. Regardless, the current valuations
for small cap stocks are extremely attractive and small cap stocks are now
trading at all-time low historical valuations relative to large cap stocks. All
we can say is that we are extremely excited about the Fund as we enter the new
year. We firmly believe that when the turn for small cap stocks does occur, the
Fund will be extremely well positioned to fully participate.
Thank you for your continued interest in the Alliance Quasar Fund. We look
forward to reporting to you on future market activity and investment results.
Sincerely,
Alden M. Stewart
Chairman and President
Randall E. Haase
Senior Vice President
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.
3
INVESTMENT OBJECTIVE AND POLICIES ALLIANCE QUASAR FUND
_______________________________________________________________________________
The Quasar Fund seeks growth of capital by pursuing aggressive investment
policies. While it invests primarily in the equity securities of
small-capitalization companies, it may invest in any type of securities issues
by any company in any industry that we believe to offer possibilities for
capital appreciation. The Fund may also pursue investment opportunities outside
of the United States.
INVESTMENT RESULTS
NAV AND SEC AVERAGE ANNUAL TOTAL RETURNS AS OF MARCH 31, 1999
CLASS A SHARES
WITHOUT WITH
SALES CHARGE SALES CHARGE
------------ ------------
One Year -22.66% -25.94%
Five Years 14.45% 13.45%
10 Years 9.96% 9.48%
CLASS B SHARES
WITHOUT WITH
SALES CHARGE SALES CHARGE
------------ ------------
One Year -23.26% -26.18%
Five Years 13.57% 13.57%
Since Inception* (a) 12.29% 12.29%
CLASS C SHARES
WITHOUT WITH
SALES CHARGE SALES CHARGE
------------ ------------
One Year -23.21% -23.94%
Five Years 13.59% 13.59%
Since Inception* 13.79% 13.79%
The Fund's investment results represent average annual total returns. The NAV
and SEC returns reflect reinvestment of dividends and/or capital gains
distributions in additional shares without (NAV) and with (SEC) 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);
and for Class C shares (1% year 1). Returns for Class A shares do not reflect
the imposition of the 1 year 1% contingent deferred sales charge for accounts
over $1,000,000. Total return for Advisor Class shares will differ due to
different expenses associated with that class.
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.
(a) Assumes conversion of class b shares into class a shares after eight years.
4
TEN LARGEST HOLDINGS
MARCH 31, 1999 (UNAUDITED) ALLIANCE QUASAR FUND
_______________________________________________________________________________
PERCENT OF
COMPANY VALUE NET ASSETS
- -------------------------------------------------------------------------------
Premier Parks, Inc. $ 79,297,800 5.0%
Legg Mason, Inc. 66,866,319 4.3
Tiffany & Co. 63,074,050 4.0
Alaska Air Group, Inc. 59,598,250 3.8
Mohawk Industries, Inc. 49,779,000 3.2
Chelsea GCA Realty, Inc. 47,022,337 3.0
Group 1 Automotive, Inc. 37,730,456 2.4
CheckFree Corp. 37,595,457 2.4
Taubman Centers, Inc. 34,206,900 2.2
Bethlehem Steel Corp. 33,286,275 2.1
$ 508,456,844 32.4%
MAJOR PORTFOLIO CHANGES
SIX MONTHS ENDED MARCH 31, 1999 (UNAUDITED)
_______________________________________________________________________________
SHARES*
- -------------------------------------------------------------------------------
HOLDINGS
PURCHASES BOUGHT 3/31/99
- -------------------------------------------------------------------------------
BJ's Wholesale Club, Inc. 667,400 667,400
Chelsea GCA Realty, Inc. 390,000 1,686,900
Legg Mason, Inc. 1,419,700 1,984,900
Novoste Corp. 648,100 648,100
Pinnicle Holdings, Inc. 1,109,100 1,109,100
SFX Entertainment, Inc. 479,200 479,200
Tekelec, Inc. 1,050,300 1,050,300
Venator Group, Inc. 2,435,500 3,942,100
Whole Foods Market, Inc. 289,000 289,000
Zale Corp. 725,600 725,600
HOLDINGS
SALES SOLD 3/31/99
- -------------------------------------------------------------------------------
America West Holdings Corp. C1.B 608,100 1,365,400
Bethlehem Steel Corp. 2,161,400 4,034,700
Centocor, Inc. 987,500 -0-
Comverse Technology, Inc. 363,100 -0-
Insight Enterprises, Inc. 587,900 -0-
MedImmune, Inc. 255,300 208,100
Pacific Sunwear of California, Inc. 842,300 -0-
Tommy Hilfiger Corp. 407,600 225,600
Uniphase Corp. 261,600 -0-
Young Broadcasting, Inc. C1.A 478,200 -0-
* Adjusted for stock splits.
5
PORTFOLIO OF INVESTMENTS
MARCH 31, 1999 (UNAUDITED) ALLIANCE QUASAR FUND
_______________________________________________________________________________
COMPANY SHARES VALUE
- -------------------------------------------------------------------------
COMMON STOCKS-97.9%
CONSUMER PRODUCTS & SERVICES-51.9%
ADVERTISING-0.3%
Merkert American Corp. (a) 410,600 $ 4,465,275
AIRLINES-6.6%
Alaska Air Group, Inc. (a) 1,254,700 59,598,250
America West Holdings
Corp. Cl.B (a) 1,365,400 26,027,938
Atlas Air, Inc. (a) 341,600 9,842,350
Mesa Air Group, Inc. (a) 1,343,000 8,393,750
----------------
103,862,288
APPAREL-1.0%
Tommy Hilfiger Corp. (a) 225,600 15,538,200
BUSINESS SERVICES-4.8%
Carriage Services,
Inc. Cl.A (a) 721,900 10,918,738
Central Garden & Pet Co. (a) 518,400 8,748,000
Century Business Services,
Inc. (a) 1,716,122 18,770,084
FirstService Corp. (a) 874,000 11,416,625
TeleSpectrum Worldwide,
Inc. (a) 3,021,000 25,867,312
----------------
75,720,759
ENTERTAINMENT & LEISURE-10.9%
Bally Total Fitness Holding
Corp. (a) 795,700 18,997,337
Cinar Corp. (a) 629,200 14,471,600
Premier Parks, Inc. (a) 2,128,800 79,297,800
SFX Entertainment, Inc. 479,200 30,938,350
Sunterra Corp. (a) 2,603,900 25,388,025
Vistana, Inc. (a) 180,400 2,525,600
----------------
171,618,712
RESTAURANTS & LODGING-1.5%
Florida Panthers Holdings,
Inc. Cl.A (a) 926,700 7,181,925
MeriStar Hospitality Corp. 910,700 16,563,356
----------------
23,745,281
RETAILING-26.2%
BJ's Wholesale Club, Inc. (a) 667,400 17,644,387
Budget Group, Inc. Cl.A (a) 2,270,000 27,807,500
Circuit City Stores, Inc. -
CarMax Group (a) 2,893,100 11,391,581
Dollar Thrifty Automotive
Group, Inc. (a) 1,396,900 24,096,525
Furniture Brands International,
Inc. (a) 490,100 10,843,463
Group 1 Automotive, Inc. (a) 1,536,100 37,730,456
Industrie Natuzzi SpA
(ADR) (Italy) 1,509,000 24,898,500
Men's Wearhouse, Inc. (a) 923,250 26,658,844
Movado Group, Inc. 767,600 19,190,000
Sports Authority, Inc. (a) 2,768,400 20,243,925
Stage Stores, Inc. (a) 2,207,900 16,007,275
Tiffany & Co. 843,800 63,074,050
Trans World Entertainment
Corp. (a) 883,100 9,714,100
Tweeter Home Entertainment
Group, Inc. (a) 221,600 7,146,600
United Rentals, Inc. (a) 1,122,700 31,996,950
Venator Group, Inc. (a) 3,942,100 27,841,081
Whole Foods Market, Inc. (a) 289,000 9,934,375
Zale Corp. (a) 725,600 24,806,450
----------------
411,026,062
MISCELLANEOUS-0.6%
Cash America International,
Inc. 744,300 9,582,863
----------------
815,559,440
TECHNOLOGY-15.1%
COMMUNICATION EQUIPMENT-2.0%
Com21, Inc. (a) 269,100 7,063,875
Pinnicle Holdings, Inc. (a) 1,109,100 16,775,137
Tekelec, Inc. (a) 1,050,300 7,680,319
----------------
31,519,331
COMPUTER SOFTWARE & SERVICES-6.0%
CheckFree Corp. (a) 883,300 37,595,457
DBT Online, Inc. (a) 1,122,400 27,919,700
Harbinger Corp. (a) 799,720 5,398,110
IMRglobal Corp. (a) 496,100 8,805,775
Micromuse, Inc. (a) 33,800 1,554,800
Transaction Systems
Architects, Inc. Cl.A (a) 367,200 13,219,200
----------------
94,493,042
NETWORKING SOFTWARE-1.5%
Apex PC Solutions, Inc. (a) 1,694,400 23,615,700
6
ALLIANCE QUASAR FUND
_______________________________________________________________________________
COMPANY SHARES VALUE
- -------------------------------------------------------------------------
SEMI-CONDUCTOR EQUIPMENT-0.7%
Conexant Systems, Inc. (a) 157,400 $ 4,358,013
MKS Instruments, Inc. (a) 472,100 6,314,337
----------------
10,672,350
TELECOMMUNICATIONS-2.9%
GST Telecommunications,
Inc. (a) 1,058,000 11,571,875
ICG Communications,
Inc. (a) 688,200 13,764,000
Millicom International
Cellular, SA (a)
(Luxembourg) 786,200 20,441,200
----------------
45,777,075
MISCELLANEOUS-2.0%
Engineering Animation,
Inc. (a) 213,900 9,010,537
Excalibur Technologies
Corp. (a) 752,700 9,832,144
Harman International
Industries, Inc. 309,900 11,388,825
Ziff-Davis, Inc. 32,000 1,152,000
----------------
31,383,506
----------------
237,461,004
FINANCIAL SERVICES-10.8%
BROKERAGE & MONEY MANAGEMENT-4.3%
Legg Mason, Inc. 1,984,900 66,866,319
INSURANCE-0.7%
Reinsurance Group of America,
Inc. 337,050 11,417,569
REAL ESTATE-5.8%
Chelsea GCA Realty, Inc. 1,686,900 47,022,337
Glenborough Realty
Trust, Inc. 579,800 9,856,600
Taubman Centers, Inc. 2,792,400 34,206,900
----------------
91,085,837
----------------
169,369,725
BASIC INDUSTRIES-10.0%
BUILDING & RELATED-0.1%
Associated Materials, Inc. 178,200 1,893,375
METAL HARDWARE-2.1%
Bethlehem Steel Corp. (a) 4,034,700 33,286,275
TEXTILE PRODUCTS-3.2%
Mohawk Industries, Inc. (a) 1,659,300 49,779,000
TRANSPORTATION & SHIPPING-4.6%
Carey International, Inc. (a) 1,244,700 20,226,375
Consolidated Freightways
Corp. (a) 2,802,100 32,924,675
Teekay Shipping Corp. 1,133,700 18,706,050
----------------
71,857,100
----------------
156,815,750
HEALTH CARE-6.8%
BIOTECHNOLOGY-3.0%
GelTex Pharmaceuticals,
Inc. (a) 1,326,600 18,655,312
Human Genome Sciences,
Inc. (a) 27,000 936,563
MedImmune, Inc. (a) 208,100 12,316,919
Novoste Corp. (a) 648,100 15,554,400
----------------
47,463,194
DRUGS, HOSPITAL SUPPLIES & MEDICAL
SERVICES-3.8%
Aradigm Corp. (a) 917,800 8,374,925
Orthodontic Centers of
America, Inc. (a) 828,700 13,052,025
St. Jude Medical, Inc. (a) 366,400 8,931,000
Synetic, Inc. (a) 393,800 22,003,575
Veterinary Centers of
America, Inc. (a) 482,900 6,820,962
----------------
59,182,487
----------------
106,645,681
ENERGY-1.8%
OIL & GAS SERVICES-1.8%
Southern Union Co. 1,449,897 27,366,806
CONSUMER MANUFACTURING-1.5%
AUTO & RELATED-1.5%
Monaco Coach Corp. (a) 1,040,475 23,995,955
Total Common Stocks
(cost $1,560,719,869) 1,537,214,361
7
PORTFOLIO OF INVESTMENTS (CONTINUED) ALLIANCE QUASAR FUND
_______________________________________________________________________________
PRINCIPAL
AMOUNT
COMPANY (000) VALUE
- -------------------------------------------------------------------------
SHORT-TERM INVESTMENT-2.3%
U.S. GOVERNMENT & AGENCIES-2.3%
Federal Home Loan
Mortgage Corp.
4.82%, 4/01/99
(amortized cost
$36,400,000) $ 36,400 $ 36,400,000
TOTAL INVESTMENTS-100.2%
(cost $1,597,119,869) 1,573,614,361
Other assets less
liabilities-(0.2%) (2,397,394)
NET ASSETS-100% $ 1,571,216,967
(a) Non-income producing security.
Glossary:
ADR - American Depositary Receipt
See notes to financial statements.
8
STATEMENT OF ASSETS AND LIABILITIES
MARCH 31, 1999 (UNAUDITED) ALLIANCE QUASAR FUND
_______________________________________________________________________________
ASSETS
Investments in securities, at value
(cost $1,597,119,869) $ 1,573,614,361
Cash 75,304
Receivable for investment securities sold 13,892,334
Dividends receivable 2,516,550
Receivable for capital stock sold 2,514,169
Other assets 105,202
Total assets 1,592,717,920
LIABILITIES
Payable for investment securities purchased 13,378,361
Advisory fee payable 3,903,260
Payable for capital stock redeemed 3,002,797
Distribution fee payable 819,123
Accrued expenses 397,412
Total liabilities 21,500,953
NET ASSETS $ 1,571,216,967
COMPOSITION OF NET ASSETS
Shares of capital stock, at par $ 143,048
Additional paid-in capital 1,777,235,972
Accumulated net investment loss (8,697,027)
Accumulated net realized loss on investment
transactions (173,958,370)
Net unrealized depreciation of investments and
other assets (23,506,656)
$ 1,571,216,967
CALCULATION OF MAXIMUM OFFERING PRICE
CLASS A SHARES
Net asset value and redemption price per share
($540,632,206 / 23,263,567 shares of capital stock
issued and outstanding) $23.24
Sales charge--4.25% of public offering price 1.03
Maximum offering price $24.27
CLASS B SHARES
Net asset value and offering price per share
($629,718,222 / 30,169,667 shares of capital stock
issued and outstanding) $20.87
CLASS C SHARES
Net asset value and offering price per share
($185,632,333 / 8,886,378 shares of capital stock
issued and outstanding) $20.89
ADVISOR CLASS SHARES
Net asset value, redemption and offering price per share
($215,234,206 / 9,204,565 shares of capital stock
issued and outstanding) $23.38
See notes to financial statements.
9
STATEMENT OF OPERATIONS
SIX MONTHS ENDED MARCH 31, 1999 (UNAUDITED) ALLIANCE QUASAR FUND
_______________________________________________________________________________
INVESTMENT INCOME
Dividends $ 6,289,652
Interest 1,663,993 $ 7,953,645
EXPENSES
Advisory fee 8,597,531
Distribution fee - Class A 728,502
Distribution fee - Class B 3,352,429
Distribution fee - Class C 1,003,702
Transfer agency 2,294,556
Registration 272,142
Printing 218,232
Custodian 143,920
Administrative 60,500
Audit and legal 56,423
Directors' fees 14,500
Miscellaneous 33,182
Total expenses 16,775,619
Less: expense offset arrangement
(see Note B) (125,277)
Net expenses 16,650,342
Net investment loss (8,696,697)
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized loss on investment transactions (162,444,022)
Net change in unrealized depreciation of
investments and other assets 321,881,716
Net gain on investments 159,437,694
NET INCREASE IN NET ASSETS FROM OPERATIONS $ 150,740,997
See notes to financial statements.
10
STATEMENT OF CHANGES IN NET ASSETS ALLIANCE QUASAR FUND
_______________________________________________________________________________
SIX MONTHS ENDED YEAR ENDED
MARCH 31, 1999 SEPTEMBER 30,
(UNAUDITED) 1998
---------------- ----------------
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS
Net investment loss $ (8,696,697) $ (14,960,472)
Net realized gain (loss) on investment
transactions (162,444,022) 79,606,746
Net change in unrealized appreciation
(depreciation) of investments and
other assets 321,881,716 (516,425,096)
Net increase (decrease) in net assets
from operations 150,740,997 (451,778,822)
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net realized gain on investments
Class A (22,823,517) (17,164,110)
Class B (32,223,342) (24,996,773)
Class C (9,594,700) (7,133,144)
Advisor Class (9,530,738) (2,825,501)
CAPITAL STOCK TRANSACTIONS
Net increase 17,284,640 868,194,847
Total increase 93,853,340 364,296,497
NET ASSETS
Beginning of year 1,477,363,627 1,113,067,130
End of period $ 1,571,216,967 $ 1,477,363,627
See notes to financial statements.
11
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1999 (UNAUDITED) ALLIANCE QUASAR FUND
_______________________________________________________________________________
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, Class C and Advisor Class 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 may 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. Class B shares will automatically
convert to Class A shares eight years after the end of the calendar month of
purchase. Class C shares are subject to a contingent deferred sales charge of
1% on redemptions made within the first year after purchase. Advisor Class
shares are sold without an initial or contingent deferred sales charge and are
not subject to ongoing distribution expenses. Advisor Class shares are offered
to investors participating in fee-based programs and to certain retirement plan
accounts. All four 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 financial statements have been prepared in conformity
with generally accepted accounting principles which require management to make
certain estimates and assumptions that affect the reported amounts of assets
and liabilities in the financial statements and amounts of income and expenses
during the reporting period. Actual results could differ from those estimates.
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 generally
valued at the last reported sales price or if no sale occurred, at the mean of
the closing bid and asked prices on that day. Securities traded in the
over-the-counter market, including securities traded on a national securities
exchange whose primary market is believed to be over-the-counter, are valued at
the mean of the current bid and asked prices. Readily marketable debt
securities are valued at the last sales price. Securities which mature in 60
days or less are valued at amortized cost, unless this method does not
represent fair value. Securities for which current market quotations are not
readily available are valued at their fair value as determined in good faith
by, or in accordance with procedures adopted by, the Board of Directors. Fixed
income securities may be valued on the basis of prices obtained from a pricing
service when such prices are believed to reflect the fair market value of such
securities.
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 INVESTMENT TRANSACTIONS
Dividend income is recorded on the ex-dividend date. Interest income is accrued
daily. Investment transactions are accounted for on the date the securities are
purchased or sold. The fund accretes discounts as adjustments to income.
Investment gains and losses are determined on the identified cost basis.
4. 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 net assets of such class, except that the Fund's
Class B and Class C shares bear higher distribution and transfer agent fees
than Class A shares and the Advisory Class shares have no distribution fees.
5. DIVIDENDS AND DISTRIBUTIONS
Dividends and distributions to shareholders are recorded on the ex-dividend
date.
Income dividends and capital gains distributions are determined in accordance
with federal tax regulations and may differ from those determined in accordance
with generally accepted accounting principles. To the extent these differences
are permanent, such amounts are reclassified within the capital accounts based
on their federal tax basis treatment; temporary differences, do not require
such reclassification.
12
ALLIANCE QUASAR FUND
_______________________________________________________________________________
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% (approximately 1% on an annual basis) of the net assets of the
Fund valued on the last business day of the previous quarter.
Pursuant to the advisory agreement, the Fund paid $60,500 to the Adviser
representing the cost of certain legal and accounting services provided to the
Fund by the Adviser for the six months ended March 31, 1999.
The Fund compensates Alliance Fund Services, Inc., a wholly-owned subsidiary of
the Adviser, under a Transfer Agency Agreement for providing personnel and
facilities to perform transfer agency services for the Fund. Such compensation
amounted to $1,562,420 for the six months ended March 31, 1999.
In addition, for the six months ended March 31, 1999, the Fund's expenses were
reduced by $125,277 under an expense offset arrangement with Alliance Fund
Services. Transfer agency fees reported in the statement of operation exclude
these credits.
Alliance Fund Distributors, Inc. (the "Distributor"), a wholly-owned subsidiary
of the Adviser, serves as the Distributor of the Fund's shares. The Distributor
received front-end sales charges of $63,785 from the sales of Class A shares
and $17,619, $1,309,352 and $83,391 in contingent deferred sales charges
imposed upon redemptions by shareholders of Class A, Class B and Class C
shares, respectively, for the six months ended March 31, 1999.
Brokerage commissions paid on investment transactions for the six months ended
March 31, 1999 amounted to $3,032,899, none of which was paid to Donaldson,
Lufkin & Jenrette Securities Corp., an affiliate of the Adviser.
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 .30% of the Fund's average daily net assets attributable to Class
A shares and 1% of the average daily net assets attributable to both Class B
and Class C shares. There is no distribution fee on the Advisor Class shares.
The fees are 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
$28,723,266 and $2,053,367 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 $784,084,312 and $818,690,777,
respectively, for the six months ended March 31, 1999. There were no purchases
or sales of U.S. government and government agency obligations for the six
months ended March 31, 1999.
At March 31, 1999, the cost of investments for federal income tax purposes was
$1,615,559,313. Accordingly, gross unrealized appreciation of investments was
$200,000,284 and gross unrealized depreciation of investments was $241,945,236,
resulting in net unrealized depreciation of $41,944,952.
13
NOTES TO FINANCIAL STATEMENTS (CONTINUED) ALLIANCE QUASAR FUND
_______________________________________________________________________________
NOTE E: CAPITAL STOCK
There are 12,000,000,000 shares of $.002 par value capital stock authorized,
divided into four classes, designated Class A, Class B, Class C and Advisor
Class shares. Each class consists of 3,000,000,000 authorized shares.
Transactions in capital stock were as follows:
<TABLE>
<CAPTION>
SHARES AMOUNT
----------------------------- -------------------------------------
SIX MONTHS ENDED YEAR ENDED SIX MONTHS ENDED YEAR ENDED
MARCH 31, 1999 SEPTEMBER 30, MARCH 31, 1999 SEPTEMBER 30,
(UNAUDITED) 1998 (UNAUDITED) 1998
------------ ------------ ----------------- -----------------
<S> <C> <C> <C> <C>
CLASS A
Shares sold 44,655,717 43,817,026 $ 1,040,245,914 $ 1,244,246,754
Shares issued in
reinvestment of
distributions 905,268 571,457 20,223,740 15,988,123
Shares converted
from Class B 119,633 165,256 2,874,684 4,647,898
Shares redeemed (44,649,036) (35,561,736) (1,047,501,109) (1,011,637,305)
Net increase 1,031,582 8,992,003 $ 15,843,229 $ 253,245,470
CLASS B
Shares sold 6,822,230 18,286,351 $ 143,491,847 $ 482,762,932
Shares issued in
reinvestment of
distributions 1,502,464 923,019 30,212,928 23,536,952
Shares converted
to Class A (132,803) (181,899) (2,874,684) (4,647,898)
Shares redeemed (9,012,108) (6,112,452) (190,052,351) (154,925,238)
Net increase
(decrease) (820,217) 12,915,019 $ (19,222,260) $ 346,726,748
CLASS C
Shares sold 8,248,453 11,956,015 $ 173,813,114 $ 308,470,104
Shares issued in
reinvestment of
distributions 445,535 260,405 8,968,640 6,642,958
Shares redeemed (8,832,066) (8,416,893) (187,299,498) (213,847,794)
Net increase
(decrease) (138,078) 3,799,527 $ (4,517,744) $ 101,265,268
ADVISOR CLASS
Shares sold 7,004,500 9,129,797 $ 156,897,650 $ 259,655,427
Shares issued in
reinvestment of
distributions 413,259 95,462 9,281,785 2,676,749
Shares redeemed (6,038,974) (3,452,506) (140,998,020) (95,374,815)
Net increase 1,378,785 5,772,753 $ 25,181,415 $ 166,957,361
</TABLE>
NOTE F: BANK BORROWING
A number of open-end mutual funds managed by the Adviser, including the Fund,
participate in a $750 million revolving credit facility (the "Facility")
intended to provide short-term financing if necessary, subject to certain
restrictions, in connection with abnormal redemption activity. Commitment fees
related to the Facility are paid by the participating funds and are included in
miscellaneous expenses in the statement of operations. The Fund did not utilize
the Facility during the six months ended March 31, 1999.
14
FINANCIAL HIGHLIGHTS ALLIANCE QUASAR FUND
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
CLASS A
------------------------------------------------------------------------------
SIX MONTHS
ENDED
MARCH 31, YEAR ENDED SEPTEMBER 30,
1999 ---------------------------------------------------------------
(UNAUDITED) 1998 1997 1996 1995 1994
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of year $22.27 $30.37 $27.92 $24.16 $22.65 $24.43
INCOME FROM INVESTMENT OPERATIONS
Net investment loss (.08)(a) (.17)(a) (.24)(a) (.25) (.22)(a) (.60)
Net realized and unrealized gain (loss)
on investment transactions 2.06 (6.70) 6.80 8.82 5.59 (.36)
Net increase (decrease) in net asset
value from operations 1.98 (6.87) 6.56 8.57 5.37 (.96)
LESS: DISTRIBUTIONS
Distributions from net realized gains (1.01) (1.23) (4.11) (4.81) (3.86) (.82)
Net asset value, end of period $23.24 $22.27 $30.37 $27.92 $24.16 $22.65
TOTAL RETURN
Total investment return based on net
asset value (b) 9.07% (23.45)% 27.81% 42.42% 30.73% (4.05)%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $540,632 $495,070 $402,081 $229,798 $146,663 $155,470
Ratio of expenses to average net assets 1.67%(c)(d) 1.61%(c) 1.67% 1.79% 1.83% 1.67%
Ratio of net investment loss to average
net assets (.69)%(d) (.59)% (.91)% (1.11)% (1.06)% (1.15)%
Portfolio turnover rate 49% 109% 135% 168% 160% 110%
</TABLE>
See footnote summary on page 18.
15
FINANCIAL HIGHLIGHTS (CONTINUED) ALLIANCE QUASAR FUND
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
CLASS B
------------------------------------------------------------------------------
SIX MONTHS
ENDED
MARCH 31, YEAR ENDED SEPTEMBER 30,
1999 ---------------------------------------------------------------
(UNAUDITED) 1998 1997 1996 1995 1994
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of year $20.17 $27.83 $26.13 $23.03 $21.92 $23.88
INCOME FROM INVESTMENT OPERATIONS
Net investment loss (.15)(a) (.36)(a) (.42)(a) (.20) (.37)(a) (.53)
Net realized and unrealized gain (loss)
on investment transactions 1.86 (6.07) 6.23 8.11 5.34 (.61)
Net increase (decrease) in net asset
value from operations 1.71 (6.43) 5.81 7.91 4.97 (1.14)
LESS: DISTRIBUTIONS
Distributions from net realized gains (1.01) (1.23) (4.11) (4.81) (3.86) (.82)
Net asset value, end of period $20.87 $20.17 $27.83 $26.13 $23.03 $21.92
TOTAL RETURN
Total investment return based on net
asset value (b) 8.67% (24.03)% 26.70% 41.48% 29.78% (4.92)%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $629,718 $625,147 $503,037 $112,490 $16,604 $13,901
Ratio of expenses to average net assets 2.44%(c)(d) 2.39%(c) 2.51% 2.62% 2.65% 2.50%
Ratio of net investment loss to average
net assets (1.47)%(d) (1.36)% (1.73)% (1.96)% (1.88)% (1.98)%
Portfolio turnover rate 49% 109% 135% 168% 160% 110%
</TABLE>
See footnote summary on page 18.
16
ALLIANCE QUASAR FUND
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
CLASS C
------------------------------------------------------------------------------
SIX MONTHS
ENDED
MARCH 31, YEAR ENDED SEPTEMBER 30,
1999 ---------------------------------------------------------------
(UNAUDITED) 1998 1997 1996 1995 1994
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of year $20.18 $27.85 $26.14 $23.05 $21.92 $23.88
INCOME FROM INVESTMENT OPERATIONS
Net investment loss (.15)(a) (.35)(a) (.42)(a) (.20) (.37)(a) (.36)
Net realized and unrealized gain (loss)
on investment transactions 1.87 (6.09) 6.24 8.10 5.36 (.78)
Net increase (decrease) in net asset
value from operations 1.72 (6.44) 5.82 7.90 4.99 (1.14)
LESS: DISTRIBUTIONS
Distributions from net realized gains (1.01) (1.23) (4.11) (4.81) (3.86) (.82)
Net asset value, end of period $20.89 $20.18 $27.85 $26.14 $23.05 $21.92
TOTAL RETURN
Total investment return based on net
asset value (b) 8.71% (24.05)% 26.74% 41.46% 29.87% (4.92)%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $185,632 $182,110 $145,494 $28,541 $1,611 $1,220
Ratio of expenses to average net assets 2.43%(c)(d) 2.38%(c) 2.50% 2.61% 2.64% 2.48%
Ratio of net investment loss to average
net assets (1.45)%(d) (1.35)% (1.72)% (1.94)% (1.76)% (1.96)%
Portfolio turnover rate 49% 109% 135% 168% 160% 110%
</TABLE>
See footnote summary on page 18.
17
FINANCIAL HIGHLIGHTS (CONTINUED) ALLIANCE QUASAR FUND
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
ADVISOR CLASS
------------------------------------
SIX MONTHS OCTOBER 2,
ENDED 1996(E)
MARCH 31, YEAR ENDED TO
1999 SEPTEMBER 30, SEPTEMBER 30,
(UNAUDITED) 1998 1997
------------- ------------- -------------
<S> <C> <C> <C>
Net asset value, beginning of period $22.37 $30.42 $27.82
INCOME FROM INVESTMENT OPERATIONS
Net investment loss (a) (.05) (.09) (.17)
Net realized and unrealized gain (loss)
on investment transactions 2.07 (6.73) 6.88
Net increase (decrease) in net asset
value from operations 2.02 (6.82) 6.71
LESS: DISTRIBUTIONS
Distributions from net realized gains (1.01) (1.23) (4.11)
Net asset value, end of period $23.38 $22.37 $30.42
TOTAL RETURN
Total investment return based on net
asset value (b) 9.22% (23.24)% 28.47%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $215,234 $175,037 $62,455
Ratio of expenses to average net assets 1.40%(c)(d) 1.38%(c) 1.58%(d)
Ratio of net investment loss to average
net assets (.41)%(d) (.32)% (.74)%(d)
Portfolio turnover rate 49% 109% 135%
</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 charges or contingent
deferred sales charges are not reflected in the calculation of total investment
return. Total investment return calculated for a period of less than one year
is not annualized.
(c) Ratios reflect expenses grossed up for expense offset arrangement with the
Transfer Agent. For the six months ended March 31, 1999, and the year ended
September 30, 1998, the ratios of expenses to average net assets were 1.66% and
1.60% for Class A shares, 2.43% and 2.38% for Class B shares, 2.42% and 2.37%
for Class C shares and 1.39% and 1.37% for Advisor Class shares, respectively.
(d) Annualized.
(e) Commencement of distribution.
18
ALLIANCE QUASAR FUND
_______________________________________________________________________________
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
KATHLEEN A. CORBET, SENIOR VICE PRESIDENT
RANDALL E. HAASE, SENIOR VICE PRESIDENT
THOMAS J. BARDONG, 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
1345 Avenue of the Americas
New York, NY 10105
(800) 221-5672
ALLIANCE CAPITAL
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.
QSRSR
