-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, DucR1o+vB945m0o4ISVJaOEwbPgtYqp38Y/Vn0zmYHYF6GXx7f/KXPG7T9x67jKQ Za0mD100Cq4NKKYuVyRd3Q== 0000919574-95-000320.txt : 19950901 0000919574-95-000320.hdr.sgml : 19950901 ACCESSION NUMBER: 0000919574-95-000320 CONFORMED SUBMISSION TYPE: 485BPOS PUBLIC DOCUMENT COUNT: 6 FILED AS OF DATE: 19950830 EFFECTIVENESS DATE: 19950830 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: ALLIANCE PORTFOLIOS CENTRAL INDEX KEY: 0000812015 STANDARD INDUSTRIAL CLASSIFICATION: [] FISCAL YEAR END: 0430 FILING VALUES: FORM TYPE: 485BPOS SEC ACT: 1933 Act SEC FILE NUMBER: 033-12988 FILM NUMBER: 95569083 FILING VALUES: FORM TYPE: 485BPOS SEC ACT: 1940 Act SEC FILE NUMBER: 811-05088 FILM NUMBER: 95569084 BUSINESS ADDRESS: STREET 1: 1345 AVENUE OF THE AMERICAS STREET 2: C/O ALLIANCE CAPITAL MANAGEMENT LP CITY: NEW YORK STATE: NY ZIP: 10105 BUSINESS PHONE: 8008526860 MAIL ADDRESS: STREET 1: ALLIANCE CAPITAL MANAGEMENT LPA STREET 2: 1345 AVENUE OF THE AMERICAS 31ST FL CITY: NEW YORK STATE: NY ZIP: 10105 FORMER COMPANY: FORMER CONFORMED NAME: EQUITABLE FUNDS DATE OF NAME CHANGE: 19920703 485BPOS 1 As Filed with the Securities and Exchange Commission on August 30, 1995 Registration Nos. 33-12988 811-5088 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 __________________________________________ Form N-1A REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 Pre-Effective Amendment No. Post-Effective Amendment No. 17 X REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 Amendment No. 19 X __________________________________________ THE ALLIANCE PORTFOLIOS (Exact Name of Registrant as Specified in Charter) 1345 Avenue of the Americas, New York, New York 10019 (Address of Principal Executive Offices) 800-221-5672 (Registrant's Telephone Number, including Area Code) __________________________________________ EDMUND P. BERGAN, JR. Alliance Capital Management L.P. 1345 Avenue of the Americas New York, New York 10105 (Name and Address of Agent for Service) It is proposed that this filing will become effective (check appropriate box): ____ immediately upon filing pursuant to paragraph (b) _x__ on September 1, 1995, pursuant to paragraph (b) ____ 60 days after filing pursuant to paragraph (a)(i) ____ on (date) pursuant to paragraph (a)(i) ____ 75 days after filing pursuant to paragraph (a)(ii) ____ on (date) pursuant to paragraph (a)(ii) of Rule 485. If appropriate, check the following box: ___ this post-effective amendment designates a new effective date for a previously filed post-effective amendment Calculation of Registration Fee: Title of Securities Proposed Maximum Proposed Amount of Being Amount Being Offering Price Maximum Aggregate Registration Registered Registered Per Unit * Offering Price ** Fee __________ ____________ ________________ _________________ ____________ Common Stock $.00001 par value for each portfolio Conservative Investors 72,378 $11.31 $ 818,595 Short-Term U.S. Govt. Port. 247,686 $10.12 $2,506,580 ___________ Total $100.00 * Estimated solely for the purpose of determining the amount of the total registration fee based on the offering price per share of the Short-Term U.S. Government Portfolio and the Conservative Investors Portfolio of the Registrant's Common Stock on August 22, 1995. ** The calculation of the maximum aggregate offering price is made pursuant to Rule 24e-2(a) under the Investment Company Act of 1940 and is based on the following: the total amount of securities redeemed or repurchased by Alliance Conservative Investors Fund during the fiscal year ended April 30, 1995 was $16,730,717 of which $16,202,122 were previously used for reduction pursuant to Rule 24f-2 or Rule 24e-(a) and $528,595 of which is being so used for such reduction in this Amendment; and the total amount of securities redeemed or repurchased by Alliance Short-Term U.S. Government Fund during the period May 1, 1994 through August 31, 1994 was $7,040,956 of which $4,824,376 were previously used for reduction pursuant to Rule 24f-2 or Rule 24e-2(a) and $2,216,580 of which is being so used for such reduction in this Agreement. Cross Reference Sheet for Alliance Strategic Balanced Fund Alliance Conservative Investors Fund Alliance Growth Investors Fund Alliance Short-Term U.S. Government Fund Alliance Growth Fund _________________________________________________ ITEM NUMBER OF FORM N-1A PART A PROSPECTUS LOCATION OR CAPTION ___________________________ ______________________________ 1. Cover Page Front Cover Page 2. Synopsis Expense Information 3. Condensed Financial Financial Highlights Information 4. General Description General Information; of Registrant Description of The Funds 5. Management of the Trust Management of The Funds; Back Cover Page; General Information 5A. Management's Discussion of Not Applicable Fund Performance 6. Capital Stock and Other General Information; Dividends, Securities Distributions and Taxes 7. Purchase of Securities Purchase and Sale of Shares; Being Offered Purchase and Sale of Shares; Management of the Funds 8. Redemption or Repurchase Purchase and Sale of Shares 9. Legal Proceedings Not Applicable Cross Reference Sheet for Alliance Strategic Balanced Fund Alliance Conservative Investors Fund Alliance Growth Investors Fund Alliance Short-Term U.S. Government Fund Alliance Growth Fund ______________________________________________________________ STATEMENT OF ADDITIONAL ITEM NUMBER OF FORM N-1A INFORMATION LOCATION OR PART B CAPTION ___________________________ ________________________ 10. Cover Page Cover Page 11. Table of Contents Table of Contents 12. General Information and Not Applicable History 13. Investment Objectives and Investment Objectives and Policies Policies; Investment Techniques; Investment 14. Management of the Fund Management of the Trust 15. Control Persons and General Information Principal Holders of Securities 16. Investment Advisory and Management of the Trust; Other Services Expenses of the Funds 17. Brokerage Allocation and Portfolio Transactions; Other Services Expenses of the Funds 18. Capital Stock and Other General Information Securities 19. Purchase, Redemption and Purchase and Redemption Pricing of Securities Being of Shares; Net Asset Offered Value 20. Tax Status Dividends, Distribution and Taxes 21. Underwriters Expenses of the Funds; Purchase and Redemption of Shares 22. Calculation of General Information Performance Data 23. Financial Statements Financial Statements The following documents are incorporated herein by reference: 1. The Trust's Prospectus relating to the Alliance Short-Term U.S. Government Fund contained in Post-Effective Amendment No. 14 to the Trust's Registration Statement (File Nos. 33- 12988, 811-5088) filed on October 31, 1994; 2. The Trust's Prospectus relating to the Alliance Growth Fund and the Alliance Strategic Balanced Fund contained in Post- Effective Amendment No. 15 to the Trust's Registration Statement (File Nos. 33-12988, 811-5088) filed on January 27, 1995; and 3. The Trust's Statement of Additional Information (including the reports of independent accountants and financial statements contained therein), to the extent it relates to the Alliance Short-Term U.S. Government Fund, contained in Post-Effective Amendment No. 14 to the Trust's Registration Statement (File Nos. 33-12988, 811-5088) filed on October 31, 1994. 4. The Trust's Statement of Additional Information (including the reports of independent accountants and financial statements contained therein), relating to the Alliance Growth Fund and the Alliance Strategic Balanced Fund contained in Post-Effective Amendment No. 16 to the Trust's Registration Statement (File Nos. 33-12988, 811-5088) filed on June 1, 1995. Alliance - -------------------------------------------------------------------------------- Asset - -------------------------------------------------------------------------------- Allocation Funds - -------------------------------------------------------------------------------- P.O. Box 1520, Secaucus, New Jersey 07096-1520 Toll Free (800) 221-5672 For Literature: Toll Free (800) 227-4618 Prospectus and Application September 1, 1995 Alliance Growth Investors Fund Alliance Conservative Investors Fund Table of Contents Page The Funds at a Glance ................................... 2 Expense Information ..................................... 3 Financial Highlights .................................... 5 Description of the Funds ................................ 7 Purchase and Sale of Shares ............................. 11 Management of the Funds ................................. 13 Dividends, Distributions and Taxes ...................... 14 General Information ..................................... 15 Appendix A .............................................. A-1 Investment Adviser Alliance Capital Management L.P. 1345 Avenue Of The Americas New York, New York 10105 Alliance Growth Investors Fund ("Growth Investors Fund") and Alliance Conservative Investors Fund ("Conservative Investors Fund") use asset allocation strategies, and each Fund is designed with a view toward a particular "investor profile." The Growth Investors Fund seeks the highest total return consistent with Alliance's determination of reasonable risk by investing in a diversified mix of publicly traded equity and fixed-income securities. The Conservative Investors Fund seeks a high total return without, in the view of Alliance, undue risk to principal by investing in a diversified mix of publicly traded equity and fixed-income securities. Each Fund is a series of The Alliance Portfolios (the "Trust"), and is a diversified, open-end management investment company. This Prospectus offers only shares of Alliance Growth Investors Fund and Alliance Conservative Investors Fund. Shares of the Trust's other series, each of which has its own investment objective and policies, are offered by separate Prospectuses. This Prospectus sets forth concisely the information which a prospective investor should know about the Funds before investing. A "Statement of Additional Information" dated September 1, 1995, which provides further information regarding certain matters discussed in this Prospectus and other matters which may be of interest to some investors, has been filed with the Securities and Exchange Commission and is incorporated herein by reference. For a free copy, call or write Alliance Fund Services, Inc. at the address or the "Literature" telephone number shown above. The Funds offer three classes of shares which may be purchased at the investor's choice at a price equal to their net asset value (i) plus an initial sales charge imposed at the time of purchase (the "Class A shares"), (ii) with a contingent deferred sales charge imposed on most redemptions made within four years of purchase (the "Class B shares"), or (iii) without any initial or contingent deferred sales charge (the "Class C shares"). See "Purchase and Sale of Shares" and "Management of the Funds--Distribution Plans." An investment in the Funds is not a deposit or obligation of, or guaranteed or endorsed by, any bank and is not federally insured by the Federal Deposit Insurance Corporation, the Federal Reserve Board, or any other agency. Investors are advised to read this Prospectus carefully and to retain it for future reference. THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. [LOGO OF ALLIANCE MUTUAL FUNDS APPEARS HERE] (R)/SM These are registered marks used under licenses from the owner, Alliance Capital Management L.P. The Funds At A Glance The following summary is qualified in its entirety by the more detailed information contained inside this Prospectus. The Funds Seek to Provide . . . Growth Investors Fund: Highest total return with reasonable risk through investment in a mix of equity and fixed-income securities. Normally the Fund will hold approximately 70% of its total assets in equity securities. Conservative Investors Fund: High total return without undue risk to principal through investment in a mix of equity and fixed-income securities. Normally the Fund will hold approximately 70% of its total assets in fixed-income securities. The Funds Will Invest . . . Principally in publicly traded equity and fixed-income securities. The Trust's Investment Manager Is . . . Alliance Capital Management L.P. ("Alliance"), a global investment adviser providing diversified services to institutions and individuals through a broad line of investments including 103 mutual funds. Since 1971, Alliance has earned a reputation as a leader in the investment world, with over $135.8 billion in assets under management. Alliance provides investment management services to 29 of the FORTUNE 100 companies. Getting Started . . . Shares of the Funds are available through your financial represtative and most banks, insurance companies and brokerage firms nationwide. Shares can be purchased for a minimum initial investment of $250, and subsequent investments can be made for as little as $50. In addition, alliance offers several time and money savings services to investors. Be sure to ask you financial representative about: Automatic Reinvestment Automatic Investment Program Retirement Plans Dividend Direction Plans Auto Exchange Systematic Withdrawals A Choice of Purchase Plans Telephone Transactions 24 Hour Information [LOGO OF ALLIANCE MUTUAL FUNDS APPEARS HERE] (R)/SM These are registered marks used under licenses from the owner, Alliance Capital Management L.P. 2 - -------------------------------------------------------------------------------- Expense Information - -------------------------------------------------------------------------------- Shareholder Transaction Expenses are one of several factors to consider when you invest in a Fund. The following tables summarize your maximum transaction costs from investing in a Fund and estimated annual expenses for each class of shares. The examples following the tables show the cumulative expenses attributable to a hypothetical $1,000 investment in each class for the periods specified.
Conservative Investors Fund Class A Shares Class B Shares Class C Shares -------------- -------------- -------------- Shareholder Transaction Expenses Maximum sales charge imposed on purchases (as a percentage of offering price).......................... 4.25%(a) None None Sales charge imposed on dividend reinvestments.................... None None None Deferred sales charge (as a percentage of original purchase price or redemption proceeds, whichever is lower).................. None 4.0% during None the first year, decreasing 1.0% annually to 0% after the fourth year(b) Exchange fee...................................................... None None None Annual Fund Operating Expenses (as a percentage of average net assets) Management fees (after waiver)(c)................................. 0.32 0.32 0.32 Rule 12b-1 fees................................................... 0.30%(d) 1.00% 1.00% Other expenses (e)................................................ 0.78% 0.78% 0.78% ----- ----- ----- Total Fund operating expenses (after waiver) (f)....................... 1.40% 2.10% 2.10% ===== ===== =====
- -------------------------------------------------------------------------------- (a) Reduced for larger purchases. See "Purchase and Sale of Shares--How to Buy Shares"--page 11. (b) Class B shares automatically convert to Class A shares after eight years. See "Purchase and Sale of Shares--How to Buy Shares--Class B Shares--Deferred Sales Charge Alternative"--page 11. (c) Reflects the agreement of Alliance to waive management fees to the extent necessary to ensure that total Fund operating expenses do not exceed the amounts shown in the table above. In the absence of such agreement, management fees would have been .75%. (d) Reflects the amount to which the Principal Underwriter has currently undertaken to the Trustees to limit payments under the Fund's Class A Distribution Plan. (e) These expenses include a transfer agency fee payable to Alliance Fund Services, Inc., an affiliate of Alliance, based on a fixed dollar amount charged to the Fund for each shareholder's account. (f) Reflects the agreement of Alliance to limit total Fund operating expenses. In the absence of such agreement, total Fund operating expenses would have been 1.83%, 2.53% and 2.53%, respectively, for the Class A, Class B and Class C shares. Example
Cumulative Expenses Paid for the Period of: -------------------------------------------------- 1 Year 3 Years 5 Years 10 Years ------ ------ ------- -------- An investor would pay the following expenses on a $1,000 investment assuming (i) a 5% annual return throughout the periods and (ii) redemption at the end of the period: Class A.................................................. $56 $85 $116 $203 Class B.................................................. $61 $86 $113 $225(a) Class C.................................................. $21 $66 $113 $243 An investor would pay the following expenses on the same $1,000 investment assuming no redemption at the end of the period: Class A.................................................. $56 $85 $116 $203 Class B.................................................. $21 $66 $113 $225(a) Class C.................................................. $21 $66 $113 $243
(a) Assumes the Class B shares converted to Class A shares after eight years. See note (b) above. 3 GROWTH INVESTORS FUND
Class A Shares Class B Shares Class C Shares -------------- -------------- -------------- Shareholder Transaction Expenses Maximum sales charge imposed on purchases (as a percentage of offering price).......................... 4.25%(a) None None Sales charge imposed on dividend reinvestments.................... None None None Deferred sales charge (as a percentage of original purchase price or redemption proceeds, whichever is lower).................. None 4.0% during None the first year, decreasing 1.0% annually to 0% after the fourth year(b) Exchange fee...................................................... None None None Annual Fund Operating Expenses (as a percentage of average net assets) Management fees (after waiver)(c)................................. 0.18 0.18 0.18 Rule 12b-1 fees................................................... 0.30%(d) 1.00% 1.00% Other expenses (e)................................................ 0.92% 0.92% 0.92% ----- ----- ----- Total Fund operating expenses (after waiver and expense reimbursement)(f)................................................. 1.40% 2.10% 2.10% ===== ===== =====
- -------------------------------------------------------------------------------- (a) Reduced for larger purchases. See "Purchase and Sale of Shares--How to Buy Shares"--page 11. (b) As described herein, Class B shares will automatically convert to Class A shares after eight years. See "Purchase and Sale of Shares--How to Buy Shares--Class B Shares--Deferred Sales Charge Alternative"--page 11. (c) Reflects the agreement of Alliance to waive management fees to the extent necessary to ensure that total Fund operating expenses do not exceed the amounts shown in the table above. In the absence of such agreement, management fees would have been .75%. (d) Reflects the amount to which the Principal Underwriter has currently undertaken to the Trustees to limit payments under the Fund's Class A Distribution Plan. (e) These expenses include a transfer agency fee payable to Alliance Fund Services, Inc., an affiliate of Alliance, based on a fixed dollar amount charged to the Fund for each shareholder's account. (f) Reflects the agreement of Alliance to limit total Fund operating expenses. In the absence of such agreement, total Fund operating expenses would have been 1.97%, 2.67% and 2.67%, respectively, for the Class A, Class B and Class C shares. Example
Cumulative Expenses Paid for the Period of: ------------------------------------------------------- 1 Year 3 Years 5 Years 10 Years ------ ------- ------- -------- An investor would pay the following expenses on a $1,000 investment, assuming (i) a 5% annual return throughout the periods and (ii) redemption at the end of the period: Class A.............................................. $56 $85 $116 $203 Class B.............................................. $61 $86 $113 $225(a) Class C.............................................. $21 $66 $113 $243 An investor would pay the following expenses on the same $1,000 investment assuming no redemption at the end of the period: Class A.............................................. $56 $85 $116 $203 Class B.............................................. $21 $66 $113 $225(a) Class C.............................................. $21 $66 $113 $243
- -------------------------------------------------------------------------------- (a) Assumes the Class B shares converted to Class A shares after eight years. See note (b) above. The purpose of the foregoing tables is to assist the investor in understanding the various costs and expenses that an investor in a Fund will bear directly or indirectly. Long-term shareholders of a Fund may pay aggregate sales charges totalling more than the economic equivalent of the maximum initial sales charges permitted by the Rules of Fair Practice of the National Association of Securities Dealers, Inc. See "Management of the Funds--Distribution Plans." The examples set forth above assume reinvestment of all dividends and distributions and utilize a 5% annual rate of return as mandated by Securities and Exchange Commission (the "Commission") regulations. The examples should not be considered a representation of future expenses; actual expenses may be greater or less than those shown. 4 - -------------------------------------------------------------------------------- Financial Highlights - -------------------------------------------------------------------------------- Selected Data For a Share of Beneficial Interest Outstanding Throughout Each Period The information in the following tables, which pertains to the fiscal years indicated, has been audited by Price Waterhouse LLP, the Trust's independent accountants, whose report thereon appears in the Statement of Additional Information. The following information should be read in conjunction with the financial statements and related notes which are included in the Statement of Additional Information. Further information about a Fund's performance is contained in the Trust's annual report to shareholders which may be obtained without charge by contacting Alliance Fund Services, Inc. at the address or the "Literature" telephone number shown on the cover of this Prospectus. Prior to July 22, 1993, Equitable Capital Management Corporation ("Equitable Capital") served as the investment adviser to the Trust. On July 22, 1993, Alliance Capital Management L.P. acquired the business and substantially all of the assets of Equitable Capital and became the investment adviser to the Trust.
Growth Investors Fund Class A ----------------------------------------- May 4, Year Ended Year Ended 1992(a) April 30, April 30, To April 30, 1995 1994 1993 ------- ------- ------- Net asset value, beginning of period.................................. $ 11.61 $ 11.35 $10.00 ------- ------- ------- Income from Investment Operations: Net investment income................................................. .25* .12* .20* Net realized and unrealized gain on investments....................... .38 .39 1.43 ------- ------- ------- Net increase in net asset value from operations....................... .63 .51 1.63 ------- ------- ------- Less: Distributions Dividends from net investment income.................................. (.15) (.11) (.16) Distributions from net realized gains................................. (.01) (.14) (.12) ------- ------- ------- Total dividends and distributions..................................... (.16) (.25) (.28) ------- ------- ------- Net asset value, end of period........................................ $ 12.08 $ 11.61 $11.35 ======= ======= ======= Total Return Total investment return based on net asset value(b)................... 5.57% 4.46% 16.32% ======= ======= ======= Ratios/Supplemental Data: Net assets, end of year (000's omitted)............................... $22,189 $16,759 $3,503 Ratios to average net assets of: Expenses, net of waivers/reimbursements.......................... 1.40% 1.40% 1.40%(c) Expenses, before waivers/reimbursements.......................... 1.97% 2.33% 4.27%(c) Net investment income............................................ 2.32% 1.67% 1.91%(c) Portfolio turnover rate............................................... 134% 96% 114%
Growth Investors Fund Growth Investors Fund Class B Class C ---------------------------------------- ---------------------------- May 4, August 2, Year Ended Year Ended 1992(a) Year Ended 1993(d) April 30, April 30, To April 30, April 30, To April 30, 1995 1994 1993 1995 1994 ---------- ---------- ---------- ---------- ---------- Net asset value, beginning of period......................... $ 11.65 $ 11.41 $10.00 $11.65 $11.88 ------- ------- ------ ------ ------ Income from Investment Operations: Net investment income........................................ .17* .07* .07* .18* .08* Net realized and unrealized gain (loss) on investments....... .38 .37 1.45 .38 (.11) ------- ------- ------ ------ ------ Net increase (decrease) in net asset value from operations... .55 .44 1.52 .56 (.03) ------- ------- ------ ------ ------ Less: Distributions Dividends from net investment income......................... (.10) (.06) (.05) (.10) (.06) Distributions from net realized gains........................ (.01) (.14) (.06) (.01) (.14) ------- ------- ------ ------ ------ Total dividends and distributions............................ (.11) (.20) (.11) (.11) (.20) ------- ------- ------ ------ ------ Net asset value, end of period............................... $ 12.09 $ 11.65 $11.41 $12.10 $11.65 ======= ======= ====== ====== ====== Total Return Total investment return based on net asset value(b).......... 4.83% 3.84% 15.23% 4.91% (.26)% ======= ======= ====== ====== ====== Ratios/Supplemental Data: Net assets, end of year (000's omitted)...................... $43,328 $30,871 $7,999 $4,247 $3,280 Ratios to average net assets of: Expenses, net of waivers/reimbursements................. 2.10% 2.11% 2.15%(c) 2.10% 2.10%(c) Expenses, before waivers/reimbursements................. 2.67% 3.00% 4.48%(c) 2.66% 3.02%(c) Net investment income................................... 1.62% .95% 1.07%(c) 1.62% 1.04%(c) Portfolio turnover rate...................................... 134% 96% 114% 134% 96%
Please refer to the footnotes on page 6. 5
Conservative Investors Fund Class A -------------------------------------------- May 4, Year Ended Year Ended 1992(a) April 30, April 30, To April 30, 1995 1994 1993 ---------- ---------- ---------- Net asset value, beginning of period................................. $ 10.37 $ 10.79 $10.00 ------- ------- ------ Income from Investment Operations: Net investment income................................................ .48* .31* .39* Net realized and unrealized (loss) gain on investments............... (.02) (.26) .82 ------- ------- ------ Net increase in net asset value from operations...................... .46 .05 1.21 ------- ------- ------ Less: Distributions Dividends from net investment income................................. (.45) (.29) (.36) Distributions from net realized gains................................ -0- (.18) (.06) ------- ------- ------ Total dividends and distributions.................................... (.45) (.47) (.42) ------- ------- ------ Net asset value, end of period....................................... $ 10.38 $ 10.37 $10.79 ======= ======= ====== Total Return Total investment return based on net asset value(b).................. 4.65% .35% 12.25% ======= ======= ====== Ratios/Supplemental Data: Net assets, end of year (000's omitted).............................. $16,105 $15,595 $5,339 Ratios to average net assets of: Expenses, net of waivers/reimbursements......................... 1.40% 1.40% 1.40%(c) Expenses, before waivers/reimbursements......................... 1.83% 2.03% 3.45%(c) Net investment income........................................... 4.66% 3.43% 3.92%(c) Portfolio turnover rate.............................................. 248% 133% 84%
Conservative Conservative Investors Fund Investors Fund Class B Class C ------------------------------------------ --------------------------- May 4, August 2, Year Ended Year Ended 1992(a) Year Ended 1993(d) April 30, April 30, To April 30, April 30, To April 30, 1995 1994 1993 1995 1994 ---------- --------- ------- ------ -------- Net asset value, beginning of period...................... $ 10.47 $ 10.88 $10.00 $10.47 $11.12 ------- ------- ------ ------ ------ Income from Investment Operations: Net investment income..................................... .46* .24* .24* .46* .18* Net realized and unrealized gain (loss) on investments.... (.02) (.26) .89 (.01) (.50) ------- ------- ------ ------ ------ Net increase (decrease) in net asset value from operations .44 (.02) 1.13 .45 (.32) ------- ------- ------ ------ ------ Less: Distributions Dividends from net investment income...................... (.40) (.21) (.22) (.40) (.15) Distributions from net realized gains..................... -0- (.18) (.03) -0- (.18) ------- ------- ------ ------ ------ Total dividends and distributions......................... (.40) (.39) (.25) (.40) (.33) ------- ------- ------ ------ ------ Net asset value, end of period............................ $ 10.51 $ 10.47 $10.88 $10.52 $10.47 ======= ======= ====== ====== ====== Total Return Total investment return based on net asset value(b)....... 3.91% (.31)% 11.39% 4.01% (2.98)% ======= ======= ====== ====== ====== Ratios/Supplemental Data: Net assets, end of year (000's omitted)................... $30,542 $29,697 $9,210 $4,419 $4,375 Ratios to average net assets of: Expenses, net of waivers/reimbursements.............. 2.10% 2.11% 2.15%(c) 2.10% 2.10%(c) Expenses, before waivers/reimbursements.............. 2.52% 2.73% 3.95%(c) 2.52% 2.69%(c) Net investment income................................ 3.96% 2.72% 3.06%(c) 3.97% 2.94%(c) Portfolio turnover rate................................... 248% 133% 84% 248% 133% - ------------------------------------------------------------------------------------------------------------------------------------
* Net of fee waived and expenses reimbursed by Alliance. (a) Commencement of operations. (b) Total investment return is calculated assuming an initial investment made at the net asset value at the beginning of the period, reinvestment of all dividends and distributions at net asset value during the period, and redemption on the last day of the period. Initial sales charges or contingent deferred sales charges are not reflected in the calculation of total investment return. Total investment return calculated for a period of less than one year is not annualized. (c) Annualized. (d) Commencement of distribution. 6 - ------------------------------------------------------------------------------- Description Of The Funds - ------------------------------------------------------------------------------- Except for certain investment restrictions designated as fundamental in this Prospectus and the Statement of Additional Information, the investment objectives and policies of the Funds are not fundamental policies and may be changed by the Trustees without shareholder approval. However, the Trust will give shareholders contemporaneous notice of any change in a Fund's investment objective. There can be, of course, no assurance that the Funds will achieve their investment objectives. INVESTMENT OBJECTIVES AND POLICIES General. The Conservative Investors and Growth Investors Funds invest in a variety of fixed-income securities, money market instruments and equity securities, each pursuant to a different asset allocation strategy, as described below. The term "asset allocation" is used to describe the process of shifting assets among discrete categories of investments in an effort to adjust risk while producing desired return objectives. Portfolio management, therefore, will consist not only of specific securities selection but also of setting, monitoring and changing, when necessary, the asset mix. Each Fund has been designed with a view toward a particular "investor profile." The "conservative investor" has a relatively short-term investment bias, either because of a limited tolerance for market volatility or a short investment horizon. This investor is averse to taking risks that may result in principal loss, even though such aversion may reduce the potential for higher long-term gains and result in lower performance during periods of equity market strength. Consequently, the asset mix for the Conservative Investors Fund attempts to reduce volatility while providing modest upside potential. The "growth investor" has a longer-term investment horizon and is therefore willing to take more risks in an attempt to achieve long-term growth of principal. This investor wishes, in effect, to be risk conscious without being risk averse. The asset mix for the Growth Investors Fund should therefore provide for upside potential without excessive volatility. Alliance has established an asset allocation committee (the "Committee"), all the members of which are employees of Alliance, which is responsible for setting and continually reviewing the asset mix ranges of each Fund. The Committee generally meets at least twice each month. Under normal market conditions, the Committee is expected to change allocation ranges approximately three to five times per year. However, the Committee has broad latitude to establish the frequency, as well as the magnitude, of allocation changes within the guidelines established for each Fund. During periods of severe market disruption, allocation ranges may change frequently. It is also possible that in periods of stable and consistent outlook no change will be made. The Committee's decisions are based on and may be limited by a variety of factors, including liquidity, portfolio size, tax consequences and general market conditions, always within the context of the appropriate investor profile for each Fund. Consequently, asset mix decisions for the Conservative Investors Fund principally emphasize risk assessment of each asset class viewed over the shorter term, while decisions for the Growth Investors Fund are principally based on the longer term total return potential for each asset class. The Funds are permitted to use a variety of hedging techniques to attempt to reduce market, interest rate and currency risks. INVESTMENT POLICIES OF THE CONSERVATIVE INVESTORS FUND The investment objective of the Conservative Investors Fund is to achieve a high total return without, in the view of Alliance, undue risk of principal. The Conservative Investors Fund attempts to achieve its investment objective by allocating varying portions of its assets among investment grade, publicly traded fixed-income securities, money market instruments and publicly traded common stocks and other equity securities of United States and non-United States issuers. All fixed-income securities owned by the Fund will be of investment grade. This means that they will be in one of the top four rating categories assigned by Standard & Poor's Corporation ("S&P") or Moody's Investors Service, Inc. ("Moody's") or will be unrated securities of comparable quality as determined by Alliance. Securities in the fourth such rating category (rated Baa by Moody's or BBB by S&P) have speculative characteristics, and changes in economic conditions or other circumstances are more likely to lead to a weakened capacity to make principal and interest payments on such obligations than in the case of higher-rated securities. In the event that the rating of any security held by the Conservative Investors Fund falls below investment grade (or, in the case of an unrated security, Alliance determines that it is no longer of investment grade), the Fund will not be obligated to dispose of such security and may continue to hold the obligation if, in the opinion of Alliance, such investment is considered appropriate in the circumstances. For a description of the ratings referred to above, see Appendix A. Equity securities invested in by the Conservative Investors Fund will consist of common stocks and securities convertible into common stocks, such as convertible bonds, convertible preferred stocks and warrants, issued by companies with a favorable outlook for earnings and whose rate of growth is expected to exceed that of the United States' economy over time. The Conservative Investors Fund will at all times hold at least 40% of its total assets in investment grade fixed-income securities, each having a duration less than that of a 10-year Treasury bond (the "Fixed Income Core"). The duration of a fixed-income security is the weighted average maturity, expressed in years, of the present value of all future cash flows, including coupon payments and principal repayments. 7 The Conservative Investors Fund is generally expected to hold approximately 70% of its total assets in fixed-income securities (including the Fixed Income Core, cash and money market instruments) and 30% in equity securities. Actual asset mixes will be adjusted in response to economic and credit market cycles. The fixed-income asset class will always comprise at least 50%, but never more than 90%, of the Fund's total assets. The equity class will always comprise at least 10%, but never more than 50%, of the Fund's total assets. For temporary defensive purposes, the Fund may invest in money market instruments. INVESTMENT POLICIES OF THE GROWTH INVESTORS FUND The investment objective of the Growth Investors Fund is to achieve the highest total return consistent with Alliance's determination of reasonable risk. The Fund attempts to achieve its investment objective by allocating varying portions of its assets among a number of asset classes. Equity investments will include publicly traded common stocks and other equity securities of the type in which the Conservative Investors Fund may invest, but may also include equity securities issued by intermediate and small-sized companies with favorable growth prospects, companies in cyclical industries, companies whose securities are temporarily undervalued, companies in special situations and less widely known companies. Fixed-income investments will include investment grade fixed-income securities (including cash and money market instruments) and may include securities that are rated in the lower rating categories by recognized ratings agencies (i.e., Ba or lower by Moody's or BB or lower by S&P) or that are unrated but determined by Alliance to be of comparable quality. Lower rated fixed-income securities generally provide greater current income than higher rated fixed-income securities, but are subject to greater credit and market risk. The Fund will not invest more than 25% of its total assets in securities rated below investment grade, that is, securities rated Ba or lower by Moody's or BB or lower by S&P, or in unrated securities deemed to be of comparable quality by Alliance. For a description of the ratings referred to above, see Appendix A. For more information about the risks associated with investment in lower rated securities, see "High-Yield Securities" below. The Growth Investors Fund will at all times hold at least 40% of its total assets in publicly traded common stocks and other equity securities of the type purchased by the Conservative Investors Fund (the "Equity Core"). The Growth Investors Fund is generally expected to hold approximately 70% of its total assets in equity securities (including the Equity Core) and 30% in fixed-income securities (including cash and money market instruments). Actual asset mixes will be adjusted in response to economic and credit market cycles. The fixed-income asset class will always comprise at least 10%, but never more than 60%, of the Fund's total assets. The equity class will always comprise at least 40%, but never more than 90%, of the Fund's total assets. For temporary defensive purposes, the Fund may invest in money market instruments. ADDITIONAL INVESTMENT POLICIES AND TECHNIQUES APPLICABLE TO THE FUNDS Foreign Securities. Each Fund may invest without limit in securities of foreign issuers and securities which are not publicly traded in the United States, although the Conservative Investors Fund generally will not invest more than 15% of its total assets, and the Growth Investors Fund generally will not invest more than 30% of its total assets, in such securities. Such securities may involve certain special risks due to foreign economic, political, diplomatic and legal developments, including favorable or unfavorable changes in currency exchange rates, exchange control regulations (including currency blockage and costs), expropriation of assets or nationalization, confiscatory taxation, imposition of withholding taxes on dividend or interest payments, and possible difficulty in obtaining and enforcing judgments against foreign entities. Furthermore, issuers of foreign securities are subject to different, often less comprehensive, accounting, reporting and disclosure requirements than domestic issuers. The securities of some foreign companies and foreign securities markets are less liquid and at times more volatile than securities of comparable U.S. companies and U.S. securities markets, and foreign securities markets may be subject to less regulation than U.S. securities markets. The laws of some foreign countries may limit the Funds' ability to invest in certain issuers located in those countries. Foreign brokerage commissions and other fees are also generally higher than in the United States. There are also special tax considerations which apply to securities of foreign issuers and securities principally traded overseas. Foreign settlement procedures and trade regulations may involve certain risks (such as delay in payment or delivery of securities or in the recovery of the Funds' assets held abroad) and expenses not present in the settlement of domestic investments. The Growth Investors Fund may invest a portion of its assets in developing countries or in countries with new or developing capital markets. The risks noted above are generally intensified for these investments. These countries may have relatively unstable governments, economies based on only a few industries or securities markets that trade a small number of securities. Securities of issuers located in these countries tend to have volatile prices and may offer significant potential for loss as well as gain. The value of foreign investments measured in U.S. dollars will rise or fall because of decreases or increases, respectively, in the value of the U.S. dollar in comparison to the value of the currency in which the foreign investment is denominated. The Funds may buy or sell foreign currencies, options on foreign currencies, foreign currency futures contracts (and related options) and deal in forward foreign currency exchange contracts in connection with the purchase and sale of foreign investments. See the Statement of Additional Information. Non-Publicly Traded Securities. Each Fund may invest in securities which are not publicly traded, including securities sold pursuant to Rule 144A under the Securities Act of 1933 ("Rule 144A Securities"). The sale of these securities is 8 usually restricted under Federal securities laws, and market quotations may not be readily available. As a result, a Fund may not be able to sell these securities (other than Rule 144A Securities) unless they are registered under applicable Federal and state securities laws, or may have to sell them at less than fair market value. Investment in these securities is restricted to 5% of a Fund's total assets (not including for these purposes Rule 144A Securities, to the extent permitted by applicable law) and is also subject to the Funds' restriction against investing more than 15% of total assets in "illiquid" securities. To the extent permitted by applicable law, Rule 144A Securities will not be treated as "illiquid" for purposes of the foregoing restriction so long as such securities meet liquidity guidelines established by the Trust's Board of Trustees. For additional information see the Statement of Additional Information. Mortgage-Backed Securities. Each Fund may invest in mortgage-backed securities, including collateralized mortgage obligations or "CMOs." Interest and principal payments (including prepayments) on the mortgages underlying mortgage-backed securities are passed through to the holders of the mortgage- backed security. Prepayments occur when the mortgagor on an individual mortgage prepays the remaining principal before the mortgage's scheduled maturity date. As a result of the pass-through of prepayments of principal on the underlying securities, mortgage-backed securities are often subject to more rapid prepayment of principal than their stated maturity would indicate. Because the prepayment characteristics of the underlying mortgages vary, it is not possible to predict accurately the realized yield or average life of a particular issue of pass-through certificates. Prepayments are important because of their effect on the yield and price of the mortgage-backed securities. During periods of declining interest rates, such prepayments can be expected to accelerate and the Funds would be required to reinvest the proceeds at the lower interest rates then available. In addition, prepayments of mortgages which underlie securities purchased at a premium could result in capital losses. The Funds may also invest in derivative instruments, including certificates representing rights to receive payments of the interest only or principal only of mortgage-backed securities ("IO/PO Strips"). These securities may be more volatile than other types of securities. IO Strips involve the additional risk of loss of the entire remaining value of the investment if the underlying mortgages are prepaid. Adjustable Rate Securities. Each Fund may invest in adjustable rate securities. Adjustable rate securities are securities that have interest rates that are reset at periodic intervals, usually by reference to some interest rate index or market interest rate. Some adjustable rate securities are backed by pools of mortgage loans. Although the rate adjustment feature may act as a buffer to reduce sharp changes in the value of adjustable rate securities, these securities are still subject to changes in value based on changes in market interest rates or changes in the issuer's creditworthiness. Because the interest rate is reset only periodically, changes in the interest rate on adjustable rate securities may lag behind changes in prevailing market interest rates. Also, some adjustable rate securities (or the underlying mortgages) are subject to caps or floors that limit the maximum change in interest rate during a specified period or over the life of the security. Asset-Backed Securities. Each Fund may invest in asset backed securities which represent fractional interests in pools of leases, retail installment loans or revolving credit receivables, both secured and unsecured. These assets are generally held by a trust. Payments of principal and interest or interest only are passed through to certificate holders and may be guaranteed up to certain amounts by letters of credit issued by a financial institution affiliated or unaffiliated with the trustee or originator of the trust. Underlying automobile sales contracts or credit card receivables are subject to prepayment, which may reduce the overall return to certificate holders. Nevertheless, principal repayment rates tend not to vary much with interest rates and the short-term nature of the underlying car loans or other receivables tends to dampen the impact of any change in the prepayment level. Certificate holders may also experience delays in payment on the certificates if the full amounts due on underlying sales contracts or receivables are not realized by the trust because of unanticipated legal or administrative costs of enforcing the contracts or because of depreciation or damage to the collateral (usually automobiles) securing certain contracts, or other factors. If consistent with its investment objective and policies, the Funds may invest in other asset-backed securities that may be developed in the future. High-Yield Securities. The Growth Investors Fund may invest in high-yield, high-risk, fixed-income and convertible securities rated at the time of purchase Ba or lower by Moody's or BB or lower by S&P, or, if unrated, judged by Alliance to be of comparable quality ("High-Yield Securities"). The Growth Investors Fund will generally invest in securities with a minimum rating of Caa- by Moody's or CCC- by S&P or in unrated securities judged by Alliance to be of comparable quality. However, from time to time, the Fund may invest in securities rated in the lowest grades of Moody's (C) or S&P (D) or in unrated securities judged by Alliance to be of comparable quality, if Alliance determines that there are prospects for an upgrade or a favorable conversion into equity securities (in the case of convertible securities). Securities rated Ba or BB or lower (and comparable unrated securities) are commonly referred to as "junk bonds." Securities rated D by S&P are in default. For the fiscal year ended April 30, 1995, neither Fund invested in High-Yield Securities. As with other fixed-income securities, High-Yield Securities are subject to credit risk and market risk and their yields may fluctuate. Market risk relates to changes in a security's value as a result of changes in interest rates. Credit risk relates to the ability of the issuer to make payments of principal and interest. High-Yield Securities are subject to greater credit risk (and potentially greater incidences of default) than comparable higher- rated securities because issuers are more vulnerable to economic downturns, higher interest rates or adverse 9 issuer-specific developments. In addition, the prices of High-Yield Securities are generally subject to greater market risk, and therefore react more sharply to changes in interest rates. The value and liquidity of High-Yield Securities may be diminished by adverse publicity and investor perceptions. Because High-Yield Securities are frequently traded only in markets where the number of potential purchasers and sellers, if any, is limited, the ability of the Growth Investors Fund to sell High-Yield Securities at their fair value either to meet redemption requests or to respond to changes in the financial markets may be limited. Thinly traded High-Yield Securities may be more difficult to value accurately for the purpose of determining the Fund's net asset value. In addition, the values of such securities may be more volatile. Some High-Yield Securities in which the Growth Investors Fund may invest may be subject to redemption or call provisions that may limit increases in market value that might otherwise result from lower interest rates while increasing the risk that the Fund may be required to reinvest redemption or call proceeds during a period of relatively low interest rates. The credit ratings issued by Moody's and S&P, a description of which is included as Appendix A, are subject to various limitations. For example, while such ratings evaluate credit risk, they ordinarily do not evaluate the market risk of High-Yield Securities. In certain circumstances, the ratings may not reflect in a timely fashion adverse developments affecting an issuer. For these reasons, Alliance conducts its own independent credit analysis of High-Yield Securities. When the Growth Investors Fund invests in securities in the lower rating categories, the achievement of the Fund's goals is more dependent on Alliance's ability than would be the case if the Fund were investing in higher-rated securities. In the event that the credit rating of a High-Yield Security held by the Growth Investors Fund falls below its rating at the time of purchase (or, in the case of unrated securities, Alliance determines that the quality of such security has deteriorated since purchased by the Fund), the Fund will not be obligated to dispose of such security and may continue to hold the obligation if, in the opinion of Alliance, such investment is considered appropriate in the circumstances. Convertible Securities. Each Fund may invest in convertible securities. These securities normally provide a higher yield than the underlying stock but lower than a fixed-income security without the convertible feature. Also, the price of the convertible security will normally vary to some degree with changes in the price of the underlying stock although in some market conditions the higher yield tends to make the convertible security less volatile than the underlying common stock. In addition, the price of the convertible security will also vary to some degree inversely with interest rates. Convertible debt securities that are rated below BBB (S&P) or Baa (Moody's) or comparable unrated securities as determined by Alliance may share some or all of the risks of High-Yield Securities. For a description of these risks, see "High-Yield Securities" above. Zero-Coupon and Payment-in-Kind Bonds. The Funds may at times invest in so- called "zero-coupon" bonds and "payment-in-kind" bonds. Zero-coupon bonds are issued at a significant discount from their principal amount in lieu of paying interest periodically. Payment-in-kind bonds allow the issuer, at its option, to make current interest payments on the bonds either in cash or in additional bonds. Because zero-coupon and payment-in-kind bonds do not pay current interest in cash, their value is generally subject to greater fluctuation in response to changes in market interest rates than bonds which pay interest currently in cash. Both zero-coupon and payment-in-kind bonds allow an issuer to avoid the need to generate cash to meet current interest payments. Accordingly, such bonds may involve greater credit risks than bonds paying interest currently in cash. Even though such bonds do not pay current interest in cash, a Fund is nonetheless required to accrue interest income on such investments and to distribute such amounts at least annually to shareholders. Thus, a Fund could be required at times to liquidate other investments in order to satisfy its dividend requirements. Futures and Related Options. Each Fund may buy and sell stock index futures contracts ("index futures") and may buy options on index futures for hedging purposes and may buy and sell options on stock indices for hedging purposes or to earn additional income. The Funds may also, for hedging purposes, purchase and sell futures contracts, options thereon and options with respect to U.S. Treasury securities, including U.S. Treasury bills, notes and bonds. The use of futures and options involves certain special risks. Futures and options transactions involve costs and may result in losses. Certain risks arise because of the possibility of imperfect correlations between movements in the prices of futures and options and movements in the prices of the underlying stock index or security or of the securities in a Fund's portfolio that are the subject of a hedge. The successful use of the strategies described above further depends on Alliance's ability to forecast market movements correctly. Other risks arise from a Fund's potential inability to close out its futures or options positions. In addition there can be no assurance that a liquid secondary market will exist for any future or option at any particular time. Certain provisions of the Internal Revenue Code and certain regulatory requirements may limit the Funds' ability to engage in futures and options transactions. A more detailed explanation of futures and options transactions, including the risks associated with them, is included in the Statement of Additional Information. Options. A Fund may seek to increase current return by writing covered call and put options on securities it owns or in which it may invest. The Fund receives a premium from writing a call or put option, which increases the Fund's return if the option expires unexercised or is closed out at a net profit. When the Fund writes a call option, it gives up the opportunity to profit from any increase in the price of a security above the exercise price of the option; when it writes a put option, the Fund takes the risk that it will be required to purchase a security from the 10 option holder at a price above the current market price of the security. The Fund may terminate an option that it has written prior to its expiration by entering into a closing purchase transaction in which it purchases an option having the same terms as the option written. A Fund may also buy and sell put and call options for hedging purposes. A Fund may also from time to time buy and sell combinations of put and call options on the same underlying security to earn additional income. A Fund's use of these strategies may be limited by applicable law. Securities Loans, Repurchase Agreements and Forward Commitments. Each Fund may lend portfolio securities amounting to not more than 25% of its total assets and may enter into repurchase agreements on up to 25% of its total assets. These transactions must be fully collateralized at all times, but involve some risk to a Fund if the other party should default on its obligation and the Fund is delayed or prevented from recovering the collateral. Each Fund may also purchase securities for future delivery, which may increase its overall investment exposure and involves a risk of loss if the value of the securities declines prior to the settlement date. Portfolio Management. Alliance manages each Fund's portfolio by buying and selling securities to help attain its investment objective. The portfolio turnover rate for each Fund is included under "Financial Highlights." A high portfolio turnover rate will involve greater costs to a Fund (including brokerage commissions and transaction costs) and may also result in the realization of taxable capital gains, including short-term capital gains taxable at ordinary income rates. See "Dividends, Distributions and Taxes" below and "Portfolio Transactions" in the Statement of Additional Information. Certain Fundamental Investment Policies. The Funds have adopted certain fundamental investment policies which may not be changed without shareholder approval, including policies which provide that each Fund may not: (i) invest more than 5% of its total assets in the securities of any one issuer (other than U.S. Government securities and repurchase agreements relating thereto), although up to 25% of a Fund's total assets may be invested without regard to this restriction; or (ii) invest 25% or more of its total assets in the securities of any one industry. - ------------------------------------------------------------------------------- Purchase And Sale - ------------------------------------------------------------------------------- Of Shares - ------------------------------------------------------------------------------- HOW TO BUY SHARES You can purchase shares through broker-dealers, banks or other financial intermediaries, or directly through Alliance. The minimum initial investment is $250. The minimum for subsequent investments is $50. Investments of $25 or more are allowed under the automatic investment program and a 403(b)(7) retirement plan. Share certificates are issued only upon request. See the Statement of Additional Information and the Application for more information. The Funds offer the following classes of shares: Class A Shares--Initial Sales Charge Alternative You can purchase Class A shares at net asset value plus an initial sales charge, as follows:
Initial Sales Charge as % of Commission to Net Amount as % of Dealer/Agent as % Amount Purchased Invested Offering Price of Offering Price - ------------------------------------------------------------------------------- Less than $100,000 4.44% 4.25% 4.00% - ------------------------------------------------------------------------------- $100,000 to less than $250,000 3.36 3.25 3.00 - ------------------------------------------------------------------------------- $250,000 to less than $500,000 2.30 2.25 2.00 - ------------------------------------------------------------------------------- $500,000 to less than $1,000,000 1.78 1.75 1.50 - ------------------------------------------------------------------------------- $1,000,000 to less than $3,000,000 1.27 1.25 1.00 - ------------------------------------------------------------------------------- $3,000,000 to less than $5,000,000 0.76 0.75 0.50 - -------------------------------------------------------------------------------
On purchases of $5,000,000 or more, you pay no initial sales charge; Alliance may pay from its own resources to the dealer or agent a fee of up to .25 of 1%. Certain purchases of Class A shares may qualify for reduced or eliminated sales charges in accordance with the Funds' Combined Purchase Privilege, Cumulative Quantity Discount, Statement of Intention, Privilege for Certain Retirement Plans, Reinstatement Privilege and Sales at Net Asset Value programs. Consult the Application and the Statement of Additional Information. Class B Shares--Deferred Sales Charge Alternative You can purchase Class B shares at net asset value without an initial sales charge. However, you may pay a contingent deferred sales charge ("CDSC") if you redeem shares within four years after purchase. Shares obtained from dividend or distribution reinvestment are not subject to the CDSC. The amount of the CDSC (expressed as a percentage of the lesser of the current net asset value or original cost) will vary according to the number of years from the purchase of the Class B shares until the redemption of those shares, as follows:
CDSC Shares Purchased On or After Year Since Purchase November 19, 1993 - ------------------------------------------------------------------------------- First 4% Second 3% Third 2% Fourth 1% Thereafter None
The CDSC is deducted from the amount of the redemption and paid to Alliance Fund Distributors, Inc. ("AFD"). The CDSC will be waived on redemptions of shares following the death or disability of a shareholder or to meet certain qualified retirement plans. See the Statement of Additional Information. 11 Shares purchased before November 19, 1993 are subject to a different CDSC schedule. Class B shares are subject to higher distribution fees than Class A shares for a period of eight years (at which time they convert to Class A shares). The higher fees mean a higher expense ratio, so Class B shares pay correspondingly lower dividends and may have a lower net asset value than Class A shares. Class C Shares--Asset-Based Sales Charge Alternative You can purchase Class C shares without any initial sales charge or CDSC. The Funds will thus receive the full amount of your purchase, and you will receive the entire net asset value of your shares upon redemption. Class C shares incur higher distribution fees than Class A shares and do not convert to any other class of shares of the Funds. The higher fees mean a higher expense ratio, so Class C shares pay correspondingly lower dividends and may have a lower net asset value than Class A shares. How The Funds Value Their Shares The net asset value of each Class of shares of a Fund is calculated by dividing the value of the Fund's net assets allocable to that Class by the outstanding shares of that Class. Shares are valued each day the New York Stock Exchange ("Exchange") is open as of the close of regular trading (currently 4:00 p.m. Eastern time). The portfolio securities of a Fund are valued at their current market value determined on the basis of market quotations or, if such quotations are not readily available, by such other methods as the Trustees believe would accurately reflect fair market value. General The decision as to which Class is more beneficial to you depends on the amount and intended length of your investment. If you are making a large investment, thus qualifying for a reduced sales charge, you might consider Class A shares. If you are making a smaller investment, you might consider Class B shares because 100% of your purchase is invested immediately. If you are unsure of the length of your investment, you might consider Class C shares because there is no initial or contingent deferred sales charge. Consult your financial agent. There is no size limit on purchases of Class A shares. The maximum purchase of Class B shares is $250,000. The maximum purchase of Class C shares is $5,000,000. A Fund may refuse any order to purchase shares. In addition to the discount or commission paid to dealers, AFD will from time to time pay to dealers additional cash or other incentives that are conditioned upon the sale of a specified minimum dollar amount of shares of a Fund and/or other Alliance Mutual Funds. Such incentives will take the form of payment for attendance at seminars, lunches, dinners, sporting events or theater performances, or payment for travel, lodging and entertainment incurred in connection with travel by persons associated with a dealer and their immediate family members to urban or resort locations within or outside the United States. Such a dealer may elect to receive cash incentives of equivalent amount in lieu of such payments. HOW TO SELL SHARES You may "redeem," i.e., sell your shares to a Fund on any day the Exchange is open, either directly or though your financial intermediary. The price you will receive is the net asset value (less any applicable CDSC for Class B shares) next calculated after a Fund receives your request in proper form. Proceeds generally will be sent to you within seven days. However, for shares recently purchased by check, a Fund will not send proceeds until it is reasonably satisfied that the check has been collected (which may take up to 15 days). Selling Shares Through Your Broker A Fund must receive your broker's request before 4:00 p.m. Eastern time to receive that day's net asset value (less any applicable CDSC for Class B shares). Your broker is responsible for furnishing all necessary documentation to the Fund and may charge you for this service. Selling Shares Directly To A Fund Send a signed letter of instruction or stock power form to Alliance Fund Services, Inc. ("AFS") along with certificates, if any, that represent the shares you want to sell. For your protection, signatures must be guaranteed by a bank, a member firm of a national stock exchange or other eligible guarantor institution. Stock power forms are available from your financial intermediary, AFS, and many commercial banks. Additional documentation is required for the sale of shares by corporations, intermediaries, fiduciaries and surviving joint owners. For details contact: Alliance Fund Services P.O. Box 1520 Secaucus, NJ 07096-1520 1-800-221-5672 General The sale of shares is a taxable transaction for Federal tax purposes. Under unusual circumstances, the Funds may suspend redemptions or postpone payment for up to seven days or longer, as permitted by Federal securities law. The Funds reserve the right to close an account that through redemption has remained below $200 for 90 days. Shareholders will receive 60 days' written notice to increase the account value before the account is closed. SHAREHOLDER SERVICES AFS offers a variety of shareholder services. For more information about these services or your account, call AFS's toll-free number, 800-221-5672. Some services are described in the attached Application. A shareholder's manual explaining all available services will be provided upon request. To request a shareholder's manual, call 800-227-4618. During drastic economic or market developments, you might have difficulty in reaching AFS by telephone, in which event you should issue written instructions to AFS. AFS is not responsible for the authenticity of telephonic requests to purchase, sell or exchange shares. AFS will employ reasonable procedures to verify that telephone requests are genuine, and could be liable for losses resulting from unauthorized transactions if it failed to do 12 do so. Dealers and agents may charge a commission for handling telephonic requests. The telephone service may be suspended or terminated at any time without notice. HOW TO EXCHANGE SHARES You may exchange your investment in any Fund for shares of the same class of other Alliance Mutual Funds (which include AFD Exchange Reserves, a money market fund managed by Alliance). Exchanges of shares are made at the net asset values next determined, without sales or service charges. Exchanges may be made by telephone or written request. Class B shares will continue to age without regard to exchanges for purposes of conversion to Class A shares and for determining the CDSC, if any, upon redemption. After an exchange, your Class B shares will automatically convert to Class A shares in accordance with the conversion schedule applicable to the Class B shares of the Alliance Mutual Fund you originally purchased for cash ("original shares"). When redemption occurs, the CDSC applicable to the original shares is applied. Please read carefully the prospectus of the fund into which you are exchanging before submitting the request. Call AFS at 800-221-5672 to exchange by telephone shares not in certificate form. An exchange is a taxable capital transaction for Federal tax purposes. The exchange service may be changed, suspended, or terminated on 60 days' written notice. - ------------------------------------------------------------------------------- Management Of The Funds - ------------------------------------------------------------------------------- ADVISER Alliance, which is a Delaware limited partnership with principal offices at 1345 Avenue of the Americas, New York, New York 10105, has been retained under an investment advisory contract (the "Investment Advisory Contract") to provide investment advice and, in general, to conduct the management and investment programs of each Fund subject to the general supervision and control of the Trustees of the Trust. The employee of Alliance principally responsible for the Funds' investment program is Bruce W. Calvert, who has had such responsibility since April 1995. Mr. Calvert is the Vice Chairman and Chief Investment Officer of Alliance and has been associated with Alliance since 1973. Alliance is a leading international investment manager supervising client accounts with assets as of June 30, 1995 totalling more than $135.8 billion (of which more than $43 billion represents the assets of investment companies). Alliance's clients are primarily major corporate employee benefit funds, public employee retirement systems, investment companies, foundations and endowment funds. The 51 registered investment companies managed by Alliance comprising 103 separate investment portfolios currently have over one million shareholders. As of June 30, 1995, Alliance was retained as an investment manager of employee benefit fund assets for 29 of the Fortune 100 companies. Alliance Capital Management Corporation, the sole general partner of, and the owner of a 1% general partnership interest in, Alliance, is an indirect wholly-owned subsidiary of The Equitable Life Assurance Society of the United States, ("Equitable"), one of the largest life insurance companies in the United States, which is a wholly-owned subsidiary of The Equitable Companies Incorporated, a holding company controlled by AXA, a French insurance holding company. Certain information concerning the ownership and control of Equitable by AXA is set forth in the Statement of Additional Information under "Management of the Trust." Alliance provides investment advisory, administrative and clerical services, office space, and order placement facilities for each Fund and pays all compensation of the Trustees and officers of the Trust who are affiliated persons of Alliance. For its services, Alliance is entitled to receive a monthly fee from each Fund at an annual rate of 0.75% of such Fund's average daily net assets. However, Alliance has voluntarily agreed to waive its fees and bear certain expenses so that total expenses of each Fund do not exceed on an annual basis 1.40%, 2.10% and 2.10% of average net assets, respectively, for the Class A, Class B and Class C shares. DISTRIBUTION PLANS Rule 12b-1 adopted by the Commission under the Investment Company Act of 1940, as amended (the "1940 Act"), permits an investment company to directly or indirectly pay expenses associated with the distribution of its shares in accordance with a duly adopted and approved plan. The Trust has adopted a plan for each class of shares pursuant to Rule 12b-1 (each a "Plan" and collectively the "Plans"). Pursuant to the Plans, each Fund pays AFD a Rule 12b-1 distribution services fee, which may not exceed an annual rate of .50% of the Fund's aggregate average daily net assets attributable to the Class A shares, 1.00% of the Fund's aggregate average daily net assets attributable to the Class B shares and 1.00% of the Fund's aggregate average daily net assets attributable to the Class C shares, to compensate AFD for distribution services. The Trustees currently limit payments under the Class A Plan to .30% of each Fund's aggregate average daily net assets attributable to Class A shares. The Plans provide that a portion of the distribution services fee, in an amount not to exceed .25%, constitutes a service fee that AFD will use for personal service and/or the maintenance of shareholder accounts. Each Plan provides that AFD will use the distribution services fee received from a Fund for payments (i) to compensate broker-dealers or other persons for providing distribution assistance, (ii) to otherwise promote the sale of shares of that Fund and (iii) to compensate broker-dealers, depository institutions and other financial intermediaries for providing administrative, accounting and other services with respect to that Fund's shareholders. In this regard, some payments under the Plans are used to compensate financial intermediaries with 13 trail or maintenance commissions in an amount equal to .25%, annualized, with respect to Class A shares and Class B shares, and 1.00%, annualized, with respect to Class C shares, of the assets maintained in a Fund by their customers. Distribution services fees are accrued daily and paid monthly, and are charged as expenses of the Fund when accrued. The Plans also provide that Alliance may use its own resources to finance the distribution of the Funds' shares. The Funds are not obligated under the Plans to pay any distribution services fee in excess of the amounts set forth above. The purpose of the payments to AFD under the Plans is to compensate AFD for its distribution services with respect to the sale of the Funds' shares. Since AFD's compensation is not directly tied to its expenses, the amount of compensation received by it under the Plans during any year may be more or less than its actual expenses. For this reason, the Plans are characterized by the staff of the Commission as being of the "compensation" variety. In the event that a Plan is terminated or not continued, (i) no distribution services fees (other than current amounts accrued but not yet paid) would be owed by the Funds to AFD with respect to the relevant class and (ii) the Funds would not be obligated to pay AFD for any amounts expended by AFD not previously recovered by AFD from distribution services fees in respect of shares of such class or, in the case of Class B shares, recovered through deferred sales charges. Unreimbursed distribution expenses incurred as of April 30, 1995 with respect to the Class B shares of the Conservative Investors Fund amounted to approximately $1,129,165, or approximately 3.70% of the net assets represented by Class B shares on that date. Unreimbursed distribution expenses incurred as of April 30, 1995 with respect to the Class C shares of the Conservative Investors Fund amounted to approximately $124,599, or approximately 2.62% of the net assets represented by Class C shares on that date. Unreimbursed distribution expenses incurred as of April 30, 1995 with respect to the Class B shares of the Growth Investors Fund amounted to approximately $1,276,362, or approximately 2.95% of the net assets represented by Class B shares on that date. Unreimbursed distribution expenses incurred as of April 30, 1995 with respect to the Class C shares of the Growth Investors Fund amounted to approximately $196,425, or approximately 4.63% of the net assets represented by Class C shares on that date. The Plans are in compliance with rules of the National Association of Securities Dealers, Inc. which effectively limit the annual asset-based sales charges and service fees that a mutual fund may impose on a class of shares to .75% and .25%, respectively, of the average annual net assets attributable to that class. The rules also limit the aggregate of all initial, deferred and asset-based sales charges imposed with respect to a class of shares by a mutual fund that also charges a service fee to 6.25% of cumulative gross sales of shares of that class, plus interest at the prime rate plus 1% per annum. The Glass-Steagall Act and other applicable laws may limit the ability of a bank or other depository institution to become an underwriter or distributor of securities. However, in the opinion of the Trust's management, based on the advice of counsel, these laws do not prohibit such depository institutions from providing services for investment companies such as the administrative, accounting and other services referred to above. In the event that a change in these laws prevented a bank from providing such services, it is expected that other service arrangements would be made and that shareholders would not be adversely affected. The State of Texas requires that shares of the Funds may be sold in that state only by dealers or other financial institutions that are registered there as broker-dealers. - ------------------------------------------------------------------------------- Dividends, Distributions - ------------------------------------------------------------------------------- And Taxes - ------------------------------------------------------------------------------- DIVIDENDS AND DISTRIBUTIONS If you receive an income dividend or capital gains distribution in cash from a Fund, you may, within 30 days following the date of its payment, reinvest the dividend or distribution in additional shares of the Fund without charge by returning to Alliance, with appropriate instructions, the check representing such dividend or distribution. Thereafter, unless you otherwise specify, you will be deemed to have elected to reinvest all subsequent dividends and distributions in shares of the Fund. It is the intention of the Conservative Investors Fund to distribute net investment income quarterly and any net realized capital gains at least annually. It is the intention of the Growth Investors Fund to distribute any net investment income and any net realized capital gains at least annually. Distributions from net investment income, if any, are expected to be small. Distributions from net capital gains are made after applying any available loss carryovers. TAXES Each Fund intends to qualify to be taxed as a "regulated investment company" under the Internal Revenue Code. So long as a Fund distributes at least 90% of its income, qualification as a regulated investment company relieves that Fund of Federal income and excise taxes on that part of its taxable income including net capital gains which it pays out to its shareholders. Dividends out of net ordinary income and distributions of net short-term capital gains are taxable to the recipient shareholders as ordinary income. In the case of corporate shareholders, such dividends may be eligible for the dividends- received deduction, except that the amount eligible for the deduction is limited to the amount of qualifying dividends received by the Fund. A corporation's dividends-received deduction will be disallowed 14 unless the corporation holds shares in the Fund at least 46 days. Furthermore, the dividends-received deduction will be disallowed to the extent that a corporation's investment in shares of a Fund is financed with indebtedness. The excess of net long-term capital gains over the net short-term capital losses realized and distributed by each Fund to its shareholders as capital gains distributions is taxable to the shareholders as long-term capital gains, irrespective of the length of time a shareholder may have held his or her Fund shares. Long-term capital gains distributions are not eligible for the dividends-received deduction referred to above. Under current federal tax law, the amount of an income dividend or capital gains distribution declared by a Fund during October, November or December of a year to shareholders of record as of a specified date in such a month that is paid during January of the following year is includable in the prior year's taxable income of shareholders that are calendar year taxpayers. Any dividend or distribution received by a shareholder on shares of a Fund will have the effect of reducing the net asset value of such shares by the amount of such dividend or distribution. Furthermore, a dividend or distribution made shortly after the purchase of such shares by a shareholder, although in effect a return of capital to that particular shareholder, would be taxable to him or her as described above. Any loss realized on the sale of shares held six months or less will be a long-term capital loss to the extent of distribution with respect to such shares of net capital gain. A dividend or capital gains distribution with respect to shares of a Fund held by a tax-deferred or qualified plan, such as an individual retirement account, 403(b)(7) retirement plan or corporate pension or profit-sharing plan, will not be taxable to the plan. Distributions from such plans will be taxable to individual participants under applicable tax rules without regard to the character of the income earned by the qualified plan. - ----------------------------------------------------------------------------- General Information - ----------------------------------------------------------------------------- PORTFOLIO TRANSACTIONS Consistent with the Rules of Fair Practice of the National Association of Securities Dealers, Inc., and subject to seeking best price and execution, the Trust may consider sales of shares of the Funds as a factor in the selection of dealers to enter into portfolio transactions with the Funds. ORGANIZATION The Trust is a Massachusetts business trust organized on March 26, 1987. Prior to August 2, 1993, the Trust was known as The Equitable Funds, and the Growth Investors Fund and the Conservative Investors Fund were known as The Equitable Growth Investors Fund and The Equitable Conservative Investors Fund, respectively. The Trust is an open-end management investment company with an unlimited number of authorized shares of beneficial interest, which may, without shareholder approval, be divided into an unlimited number of series of such shares which, in turn, may be subdivided into an unlimited number of classes of shares. The Trust currently consists of five series of shares, two of which represent the Funds. Each Fund is divided into three classes of shares, designated Class A shares, Class B shares and Class C shares. The Trustees may, subject to any required approvals by the Commission, further divide each series into additional classes of shares which may be sold under conditions or with charges varying from those of the present classes of shares of each series. In addition, upon approval by the Commission, fees and expenses other than those described above may be allocated to any class of a series' shares. Shareholders are entitled to one vote for each share held and to vote in the election of Trustees and the termination of the Trust and on other matters submitted to meetings of shareholders. Shareholders of a series or a class thereof are entitled to vote only on matters which affect that series or that class, and shareholders of the series or a particular class of shares of the series which are affected generally vote together as a single class. The Trust is not required and does not presently intend to hold annual meetings of its shareholders for election of Trustees and ratification of the selection of auditors. Shareholders may remove Trustees from office by votes cast in person or by proxy at a meeting of shareholders or by written consent. The shares of each Fund are freely transferable, are entitled to distributions from the assets of the relevant Fund as declared by the Trustees, and, if a Fund were liquidated, would receive the net assets of the Fund attributable to the relevant class. The Trust may suspend the sale of shares of any Fund or class thereof at any time and may refuse any order to purchase shares. Shareholders could, under certain circumstances, be held personally liable for obligations of the Trust. However, the risk of a shareholder incurring financial loss on account of such liability is considered remote since it may arise only in very limited circumstances. See "Shareholder and Trustee Liability" under "General Information" in the Statement of Additional Information. REGISTRAR, TRANSFER AGENT AND DIVIDEND-DISBURSING AGENT AFS, an indirect wholly-owned subsidiary of Alliance, located at 500 Plaza Drive, Secaucus, New Jersey 07094, is the Trust's registrar, transfer agent and dividend-disbursing agent for a fee based upon the number of shareholder accounts maintained for the Trust. The transfer agency fee with respect to the Class B shares will be higher than the transfer agency fee with respect to the Class A shares or Class C shares. PRINCIPAL UNDERWRITER AFD, an indirect wholly-owned subsidiary of Alliance, located at 1345 Avenue of the Americas, New York, New York 10105, is the Principal Underwriter of the shares of the Trust. 15 PERFORMANCE INFORMATION From time to time the Funds advertise their "yield" and "total return." Yield and total return are computed separately for Class A, Class B and Class C shares of each Fund. A Fund's yield for any 30-day (or one-month) period is computed by dividing the net investment income per share earned during such period by the maximum public offering price per share on the last day of the period, and then annualizing such 30-day (or one-month) yield in accordance with a formula prescribed by the Commission which provides for compounding on a semi-annual basis. The Funds may also state in sales literature an "actual distribution rate" for each class which is computed in the same manner as yield except that actual income dividends declared per share during the period in question are substituted for net investment income per share. The actual distribution rate is computed separately for Class A, Class B and Class C shares of each Fund. Advertisements of total return disclose the average annual compounded total return for the recent one-year period and the life of the class. Total return for each such period is computed by finding, through the use of a formula prescribed by the Commission, the average annual compounded rate of return over the period that would equate an assumed initial amount invested to the value of the investment at the end of the period. For purposes of computing total return, income dividends and capital gains distributions paid on shares of the Funds are assumed to have been reinvested when paid and the maximum sales charges applicable to purchases and redemptions of Fund shares are assumed to have been paid. Each Fund will include performance data for each of its Class A, Class B and Class C shares in any advertisement or information including performance data of the Funds. These advertisements may quote performance rankings or ratings of the Funds as measured by financial publications or by independent organizations such as Lipper Analytical Services, Inc. and Morningstar, Inc. or compare the Funds' performance to various indices. ADDITIONAL INFORMATION This Prospectus and the Statement of Additional Information, which has been incorporated by reference herein, do not contain all the information set forth in the Registration Statement filed by the Trust with the Commission under the Securities Act of 1933. Copies of the Registration Statement may be obtained at a reasonable charge from the Commission or may be examined, without charge, at the offices of the Commission in Washington, D.C. This prospectus does not constitute an offering in any state in which such offering may not lawfully be made. 16 - ------------------------------------------------------------------------------- Appendix A - ------------------------------------------------------------------------------- RATINGS OF CORPORATE BONDS Descriptions of the bond ratings of Standard & Poor's Corporation are: AAA--Debt rated AAA has the highest rating assigned by Standard & Poor's. Capacity to pay interest and repay principal is extremely strong. AA--Debt rated AA has a very strong capacity to pay interest and repay principal and differs from the higher rated issues only in small degree. A--Debt rated A has a strong capacity to pay interest and repay principal although it is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than debt in higher rated categories. BBB--Debt rated BBB is regarded as having an adequate capacity to pay interest and repay principal. Whereas it normally exhibits adequate protection parameters, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity to pay interest and repay principal for debt in this category than for debt in higher rated categories. BB, B, CCC, CC or C--Debt rated BB, B, CCC, CC or C is regarded, on balance, as predominantly speculative with respect to the issuer's capacity to pay interest and repay principal in accordance with the terms of the obligation. While such debt will likely have some quality and protective characteristics, these are outweighed by large uncertainties or major risk exposures to adverse debt conditions. C1--The rating C1 is reserved for income bonds on which no interest is being paid. D--Debt rated D is in default and payment of interest and/or repayment of principal is in arrears. The ratings from AA to CC may be modified by the addition of a plus (+) or minus (-) sign to show relative standing within the major rating categories. Descriptions of the bond ratings of Moody's Investors Service, Inc. are as follows: Aaa--Bonds which are rated Aaa are judged to be of the best quality. They carry the smallest degree of investment risk and are generally referred to as "gilt edge." Interest payments are protected by a large or by an exceptionally stable margin, and principal is secure. While the various protective elements are likely to change, such changes as can be visualized are most unlikely to impair the fundamentally strong position of such issues. Aa--Bonds which are rated Aa are judged to be of high quality by all standards. Together with the Aaa group they comprise what are generally known as high grade bonds. They are rated lower than the best bonds because margins of protection may not be as large as in Aaa securities or fluctuation of protective elements may be of greater amplitude or there may be other elements present which make the long-term risks appear somewhat greater than the Aaa securities. A--Bonds which are rated A possess many favorable investment attributes and are to be considered as upper-medium-grade obligations. Factors giving security to principal and interest are considered adequate, but elements may be present which suggest a susceptibility to impairment some time in the future. Baa--Bonds which are rated Baa are considered as medium grade obligations, i.e., they are neither highly protected nor poorly secured. Interest payments and principal security appear adequate for the present, but certain protective elements may be lacking or may be characteristically unreliable over any great length of time. Such bonds lack outstanding investment characteristics and in fact have speculative characteristics as well. Ba--Bonds which are rated Ba are judged to have speculative elements; their future cannot be considered as well assured. Often the protection of interest and principal payments may be very moderate and thereby not well safeguarded during both good and bad times over the future. Uncertainty of position characterizes bonds in this class. B--Bonds which are rated B generally lack characteristics of the desirable investment. Assurance of interest and principal payments or of maintenance of other terms of the contract over any long period of time may be small. Caa--Bonds which are rated Caa are of poor standing. Such issues may be in default or there may be present elements of danger with respect to principal or interest. Ca--Bonds which are rated Ca represent obligations which are speculative to a high degree. Such issues are often in default or have other marked shortcomings. C--Bonds which are rated C are the lowest class of bonds and issues so rated can be regarded as having extremely poor prospects of ever attaining any real investment standing. Moody's applies modifiers to each rating classification from Aa through B to indicate relative ranking within its rating categories. The modifier "1" indicates that a security ranks in the higher end of its rating category; the modifier "2" indicates a mid-range ranking; and the modifier "3" indicates that the issue ranks in the lower end of its rating category. A-1 - -------------------------------------------------------------------------------- Alliance Subscription Application - -------------------------------------------------------------------------------- Alliance Asset Allocation Funds Conservative Investors Fund Growth Investors Fund - -------------------------------------------------------------------------------- Information And Instructions - -------------------------------------------------------------------------------- To Open Your New Alliance Account Please complete the application and mail it to: Alliance Fund Services, Inc., P.O. Box 1520, Secaucus, New Jersey 07096-1520 Signatures - Please Be Sure To Sign the Application (Section 7) If shares are registered in the name of: * an individual, the individual should sign. * joint tenants, both should sign. * a custodian for a minor, the custodian should sign. * a corporation or other organization, an authorized officer should sign (please indicate corporate office or title). * a trustee or other fiduciary, the fiduciary or fiduciaries should sign (please indicate capacity). Registration To ensure proper tax reporting to the IRS: * Individuals, Joint Tenants and Gift/Transfer to a Minor: - Indicate your name exactly as it appears on your social security card. * Trust/Other: - Indicate the name of the entity exactly as it appeared on the notice you received from the IRS when your Employer Identification number was assigned. Please Note: * Certain legal documents will be required from corporations or other organizations, executors and trustees, or if a redemption is requested by anyone other than the shareholder of record. If you have any questions concerning a redemption, contact the Fund at the number below. * In the case of redemptions or repurchases of shares recently purchased by check, redemption proceeds will not be made available until the Fund is reasonably assured that the check has cleared, normally up to 15 calendar days following the purchase date. If We Can Assist You In Any Way, Please Do Not Hesitate To Call Us At: 1-(800) 221-5672. Subscription Application - -------------------------------------------------------------------------------- Alliance Asset Allocation Funds: Alliance Conservative Investors Fund Alliance Growth Investors Fund (see instructions at the front of the application) - -------------------------------------------------------------------------------- 1.Your Account Registration (Please Print) - -------------------------------------------------------------------------------- [_] Individual or Joint Account /_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/ Owner's Name (First Name) (MI) (Last Name) /_/_/_/-/_/_/-/_/_/_/_/ Social Security Number (Required to open account) /_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/ Joint Owner's Name* (First Name ) (MI) (Last Name) *Joint Tenants with right of survivorship unless otherwise indicated [_] Gift/Transfer To A Minor /_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/ Custodian - One Name Only (First Name) (MI) (Last Name) /_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/ Minor's (First Name) (MI) (Last Name) /_/_/_/-/_/_/-/_/_/_/_/ Minor's Social Security Number (Required to open account) Under the State of __________ (Minor's Residence) Uniform Gifts/Transfer to Minor's Act [_] Trust Account /_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/ Name of Trustee /_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/ Name of Trust /_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/ Name of Trust (cont'd) /_/_/_/_/_/_/_/_/_/_/_/_/_/ /_/_/_/_/_/_/_/_/_/_/_/ Trust Dated Tax ID or Social Security Number (Required to open account) [_] Other /_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/ Name of Corporation, Partnership or other Entity /_/_/_/_/_/_/_/_/_/ Tax ID Number - -------------------------------------------------------------------------------- 2. Address - -------------------------------------------------------------------------------- /_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/ Street /_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/ City State Zip Code /_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/_/ If Non-U.S., Specify Country /_/_/_/-/_/_/_/-/_/_/_/_/ /_/_/_/-/_/_/_/-/_/_/_/_/ Daytime Phone Evening Phone I am a [_] U.S. Citizen [_] Non-Resident Alien [_] Resident Alien [_] Other _________________________ For Alliance Use Only - -------------------------------------------------------------------------------- 3. Initial Investment - -------------------------------------------------------------------------------- Minimum: $250; Maximum: Class B only - $250,000; Class C only - $5,000,000. Make all checks payable to The Alliance Conservative Investors Fund or Alliance Growth Investors Fund in which you are investing. I hereby subscribe for shares of the following Alliance Portfolio(s):
Class A Class B Class C (Initial Sales (Contingent Deferred (Asset-based Charge) Dollar Amount Sales Charge) Dollar Amount Sales Charge) Dollar Amount -------------- ------------- -------------------- ------------- ------------- ------------- [_] Conservative Investors Fund [_] (42) _____________ [_] (53) _____________ [_] (342) _____________ [_] Growth Investors Fund [_] (47) _____________ [_] (59) _____________ [_] (347) _____________
--------------------------- DEALER USE ONLY Wire Confirm No.: --------------------------- to be purchased with the enclosed check or draft for $ _______________ +No checkwriting available on these funds. - -------------------------------------------------------------------------------- 4. Reduced Charges (Class A Only) - -------------------------------------------------------------------------------- If you, your spouse or minor children own shares in other Alliance funds, you may be eligible for a reduced sales charge. Please list below any existing accounts to be considered and complete the Right of Accumulation section or the Statement of Intent section. __________________ ___________________ __________________ ___________________ Fund Account Number Fund Account Number A. Right of Accumulation [_] Please link the accounts listed above for Right of Accumulation privileges, so that this and future purchases will receive any discount for which they are eligible. B. Statement of Intent [_] I want to reduce my sales charge by agreeing to invest the following amount over a 13-month period: [_] $100,000 [_] $250,000 [_] $500,000 [_] $1,000,000 [_] $3,000,000 [_] $5,000,000 If the full amount indicated is not purchased within 13 months, I understand an additional sales charge must be paid from my account. ______________________ ________________ _____________________ _______________ Name on Account Account Number Name on Account Account Number - -------------------------------------------------------------------------------- 5. Distribution Options - -------------------------------------------------------------------------------- If no box is checked, all distributions will be reinvested in additional shares of the Fund Income Dividends: (elect one) [_] Reinvest dividends [_] Pay dividends in cash [_] Use Dividend Direction Plan Capital Gains Distribution: (elect one) [_] Reinvest capital gains [_] Pay capital gains in cash [_] Use Dividend Direction Plan
If you elect to receive your income dividends or capital gains distributions in cash, please enclose a preprinted voided check from the bank account you wish to have your dividends deposited into.** If you wish to utilize the Dividend Direction Plan, please designate the Alliance account you wish to have your dividends reinvested in: _____________________________________ _________________________________________ Fund Name Existing Account No. Special Distribution Instructions: [_] Please pay my distributions via check and send to the address indicated in Section 2. [_] Please mail my distributions to the person and/or address designated below: _____________________________________ _________________________________________ Name Address _____________________________________ __________________________ _____________ City State Zip - -------------------------------------------------------------------------------- 6. Shareholder Options - -------------------------------------------------------------------------------- A. Automatic Investment Program (AIP) ** I hereby authorize Alliance Fund Services, Inc. to draw on my bank account, on or about the ______ day of each month for a monthly investment in my Fund account in the amount of $____________ (minimum $25 per month). Please attach a preprinted voided check from the bank account you wish to use. NOTE: If your bank is not a member of the NACHA, your Alliance account will be credited on or about the 20th of each month. The Fund requires signatures of bank account owners exactly as they appear on bank records. _______________________________ _________ ________________________ _________ Individual Account Date Joint Account Date ** Your bank must be a member of the National Automated Clearing House Association (NACHA). B. Telephone Transactions You can call our toll-free number 1-800-221-5672 and instruct Alliance Fund Services, Inc. in a recorded conversation to purchase, redeem or exchange shares for your account. Purchase and redemption requests will be processed via electronic funds transfer (EFT) to and from your bank account. Instructions: * Review the information in the Prospectus about telephone transaction services. * Check the box next to the telephone transaction service(s) you desire. * If you select the telephone purchase or redemption privilege, you must write "VOID" across the face of a check from the bank account you wish to use and attach it to this application. Purchases and Redemptions via EFT** [_] I hereby authorize Alliance Fund Services, Inc. to effect the purchase and/or redemption of Fund shares for my account according to my telephone instructions or telephone instructions from my Broker/Agent, and to withdraw money or credit money for such shares via EFT from the bank account I have selected. The fund requires signatures of bank account owners exactly as they appear on bank records. ______________________________ ________ _______________________ _________ Individual Account Owner Date Joint Account Owner Date Telephone Exchanges and Redemptions by Check Unless I have checked one or both boxes below, these privileges will automatically apply, and by signing this application, I hereby authorize Alliance Fund Services, Inc. to act on my telephone instructions, or on telephone instructions from any person representing himself to be an authorized employee of a investment dealer or agent requesting a redemption or exchange on my behalf. (NOTE: Telephone exchanges may only be processed between accounts that have identical registrations.) Telephone redemption checks will only be mailed to the name and address of record; and the address must have no change within the last 30 days. The maximum telephone redemption amount is $25,000. This service can be enacted once every 30 days. [_] I do not elect the telephone exchange service. [_] I do not elect the telephone redemption by check service. C. Systematic Withdrawal Plan (SWP) ** In order to establish a SWP, an investor must own or purchase shares of the Fund having a current net asset value of at least: * $10,000 for monthly payments; * $5,000 for bi-monthly payments; * $4,000 for quarterly or less frequent payments [_] I authorize this service to begin in ___________, 19__, for the amount Month of $_______________($50.00 minimum) Frequency: (Please select one) [_] Monthly [_] Bi-Monthly [_] Quarterly [_] Annually [_] In the months circled: J F M A M J J A S O N D Please send payments to: (please select one) [_] My checking account. Select the date of the month on or about which you wish the EFT payments to be made: _______________. Please enclose a preprinted voided check to ensure accuracy. [_] My address of record designated in Section 2. [_] The payee and address specified below: _______________________________________ ____________________________________ Name of Payee Address _______________________________________ ______________________ ____________ City State Zip D. Auto Exchange [_] I authorize Alliance Fund Services, Inc. to initiate a monthly exchange for $____________ ($25.00 minimum) on the _________ day of the month, into the Alliance Fund noted below: Fund Name: ___________________________________________________ [_] Existing account number:__________________________________ [_] New account Shares exchanged will be redeemed at net asset value computed on the date of the month selected. (If the date selected is not a fund business day the transaction will be processed on the prior fund business day.) Certificates must remain unissued. - -------------------------------------------------------------------------------- 7. Shareholder Authorization This section MUST be completed - -------------------------------------------------------------------------------- I certify under penalty of perjury that the number shown in Section 1 of this form is my correct tax identification number or social security number and that I have not been notified that this account is subject to backup withholding. By selecting any of the above telephone privileges, I agree that neither the Fund nor its Investment Adviser, Principal Underwriter, Transfer Agent or other Fund Agent will be liable for any loss, injury, damage or expense as a result of acting upon telephone instructions purporting to be on my behalf, that the Fund reasonably believes to be genuine, and that neither the Fund nor any such party will be responsible for the authenticity of such telephone instructions. I understand that any or all of these privileges may be discontinued by me or the Fund at any time. I understand and agree that the Fund reserves the right to refuse any telephone instructions and that my investment dealer or agent reserves the right to refuse to issue any telephone instructions I may request. For non-residents only: Under penalties of perjury, I certify that to the best of my knowledge and belief, I qualify as a foreign person as indicated in Section 2. I am of legal age and capacity and have received and read the Prospectus and agree to its terms. _____________________________________ ____________________ Signature Date _____________________________________ ____________________ ___________________ Signature Date Acceptance Date: - -------------------------------------------------------------------------------- Dealer/Agent Authorization For selected Dealers or Agents ONLY. - -------------------------------------------------------------------------------- We hereby authorize Alliance Fund Services, Inc. to act as our agent in connection with transactions under this authorization form; and we guarantee the signature(s) set forth in Section 7, as well as the legal capacity of the shareholder. Dealer/Agent Firm ___________________ Authorized Signature ____________________ Representative First Name ___________ MI ___________ Last Name _______________ Representative Number __________________________________________________________ Branch Office Address __________________________________________________________ City ________________________________ State _________________ Zip Code _______ Branch Number _______________________ Branch Phone (___)_______________________ ** Your bank must be a member of the National Automated Clearing House Association (NACHA). 50620GEN-AAApp The payment of funds is authorized by the signature(s) appearing on the reverse side. If this card is signed by more than one person, all checks will require all signatures appearing on the reverse side unless a lesser number is indicated. If no indication is given, all checks will require all signatures. Each signatory guarantees the genuineness of the other signatures. The Bank is hereby appointed agent by the person(s) signing this card (the "Depositor[s]") and, as agent, is authorized and directed to present checks drawn on this checking account to Alliance __________________________________ ("the Fund") or its transfer agent as requests to redeem shares of "the Fund" registered in the name of the Depositor(s) in the amounts of such checks and to deposit the proceeds of such redemptions in this checking account. The Bank shall be liable only for its own negligence. The Depositor(s) agrees to be subject to the rules and regulations of the Bank pertaining to this checking account as amended from time to time. The Bank and "the Fund" reserve the right to change, modify or terminate this checking account and authorization at any time. Checks may not be for less than $500 or such other minimum amount as may from time to time be established by "the Fund" upon prior written notice to its shareholders. Shares purchases by check (including certified or cashier's check) will not be redeemed within 15 calendar days of such purchase by checkwriting or any other method of redemption. No checkwriting available on Alliance World Income and Alliance Corporate Bond. ENCLOSE THIS CARD WITH THE APPLICATION FORM SIGNATURE CARD NAME OF FUND: Class A or Class C Account # (if known) - -------------------------------------------------------------------------------- Account Name(s) As Registered - -------------------------------------------------------------------------------- Social Security Number - -------------------------------------------------------------------------------- Authorized Signature(s) -- for joint accounts, all owners, or their legal representatives, must sign this card. 1........................................................................... 2........................................................................... 3........................................................................... - -------------------------------------------------------------------------------- Check One Box [_] All the above signatures are required on checks written against this account. [_] Any one signature is acceptable on checks written against this account. [_] A combination of signatures is required (specify number). Subject to conditions printed on reverse side. STATE STREET BANK AND TRUST COMPANY 7 00250184.AA3 ALLIANCE CAPITAL [Need logo](R) 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 1, 1995 _________________________________________________________________ This Statement of Additional Information is not a prospectus and should be read in conjunction with the Funds' current Prospectus. A copy of the Funds' Prospectus may be obtained by contacting Alliance Fund Services, Inc. at the address or telephone numbers shown above. _________________________________________________________________ TABLE OF CONTENTS INVESTMENT POLICIES AND RESTRICTIONS............................2 ADDITIONAL INVESTMENT TECHNIQUES OF THE FUNDS..................12 INVESTMENT RESTRICTIONS........................................37 MANAGEMENT OF THE FUNDS........................................41 PORTFOLIO TRANSACTIONS.........................................48 EXPENSES OF THE FUNDS..........................................50 PURCHASE OF SHARES.............................................56 REDEMPTION AND REPURCHASE OF SHARES............................72 SHAREHOLDER SERVICES...........................................76 NET ASSET VALUE................................................82 DIVIDENDS, DISTRIBUTIONS AND TAXES.............................84 GENERAL INFORMATION............................................86 APPENDIX FINANCIAL STATEMENTS REPORT OF INDEPENDENT ACCOUNTANTS (R): This registered service mark used under license from the owner, Alliance Capital Management L.P. INVESTMENT POLICIES AND RESTRICTIONS The following investment policies and restrictions supplement and should be read in conjunction with the information set forth in the Prospectus of Alliance Conservative Investors Fund (the "Conservative Investors Fund") and Alliance Growth Investors Fund (the "Growth Investors Fund"), each a series of The Alliance Portfolios (the "Trust"), under the heading "Investment Objective and Policies." In addition to the investment techniques described in this section for each of the Funds, the Funds also may engage in the investment techniques described below under the sub-heading "Additional Investment Techniques of the Funds." Investment Objectives and Policies of the Conservative Investors and Growth Investors Fund General. The Conservative Investors and Growth Investors Funds invest in a variety of fixed-income securities, money market instruments and equity securities, each pursuant to a different asset allocation strategy, as described below. The term "asset allocation" is used to describe the process of shifting assets among discrete categories of investments in an effort to adjust risk while producing desired return objectives. Portfolio management, therefore, will consist not only of specific securities selection but also of setting, monitoring and changing, when necessary, the asset mix. Each Fund has been designed with a view toward a particular "investor profile." The "conservative investor" has a relatively short-term investment bias, either because of a limited tolerance for market volatility or a short investment horizon. This investor is averse to taking risks that may result in principal loss, even though such aversion may reduce the potential for higher long-term gains and result in lower performance during periods of equity market strength. Consequently, the asset mix for the Conservative Investors Fund attempts to reduce volatility while providing modest upside potential. The "growth investor" has a longer-term investment horizon and is therefore willing to take more risks in an attempt to achieve long-term growth of principal. This 2 investor wishes, in effect, to be risk conscious without being risk averse. The asset mix for the Growth Investors Fund should therefore provide for upside potential without excessive volatility. Alliance Capital Management L.P. (the "Adviser") has established an asset allocation committee (the "Committee"), all the members of which are employees of the Adviser, which is responsible for setting and continually reviewing the asset mix ranges of each Fund. The Committee generally meets at least twice each month. Under normal market conditions, the Committee is expected to change allocation ranges approximately three to five times per year. However, the Committee has broad latitude to establish the frequency, as well as the magnitude, of allocation changes within the guidelines established for each Fund. During periods of severe market disruption, allocation ranges may change frequently. It is also possible that in periods of stable and consistent outlook no change will be made. The Committee's decisions are based on and may be limited by a variety of factors, including liquidity, portfolio size, tax consequences and general market conditions, always within the context of the appropriate investor profile for each Fund. Consequently, asset mix decisions for the Conservative Investors Fund particularly emphasize risk assessment of each asset class viewed over the shorter term, while decisions for the Growth Investors Fund are principally based on the longer term total return potential for each asset class. The Funds are permitted to use a variety of hedging techniques to attempt to reduce market interest rate and currency risks. Investment Policies of the Conservative Investors Fund The investment objective of the Fund is to achieve a high total return without, in the view of the Adviser, undue risk of principal. The Fund attempts to achieve its investment objective by allocating varying portions of its assets among investment grade, publicly traded fixed-income securities, money market instruments and publicly traded common stocks and other equity securities of United States and non-United States issuers. 3 All fixed-income securities owned by the Fund will be of investment grade. This means that they will be in one of the top four rating categories assigned by Standard & Poor's Corporation or ("S&P") Moody's Investors Service, Inc. ("Moody's") or will be unrated securities of comparable quality as determined by the Adviser. Securities in the fourth such rating category (rated Baa by Moody's or BBB by S&P) have speculative characteristics, and changes in economic conditions or other circumstances are more likely to lead to a weakened capacity to make principal and interest payments on such obligations than in the case of higher- rated securities. In the event that the rating of any security held by the Fund falls below investment grade (or, in the case of an unrated security, the Adviser determines that it is no loner of investment grade), the Fund will not be obligated to dispose of such security and may continue to hold the obligation if, in the opinion of the Adviser, such investment is considered appropriate in the circumstances. For a description of the ratings referred to above, see Appendix A to this Statement of Additional Information. Equity securities invested in by the Fund will consist of common stocks and securities convertible into common stocks, such as convertible bonds, convertible preferred stocks and warrants, issued by companies with a favorable outlook for earnings and whose rate of growth is expected to exceed that of the United States' economy over time. The Fund will at all times hold at least 40% of its total assets in investment grade fixed- income securities, each having a duration less than that of a 10-year Treasury bond (the "Fixed Income Core"). The duration of a fixed-income security is the weighted average maturity, expressed in years of the present value of all future cash flows, including coupon payments and principal repayments. The Fund is generally expected to hold approximately 70% of its total assets in fixed- income securities (including the Fixed Income Core, cash and money market instruments) and 30% in equity securities. Actual asset mixes will be adjusted in response to economic and credit market cycles. The fixed-income asset class will always comprise at least 50%, but never more than 90%, of the Fund's total assets. The equity class will always comprise at least 10%, but never more than 50%, of the 4 Fund's total assets. For temporary defensive purposes, the Fund may invest in money market instruments. Investment Policies of the Growth Investors Fund The investment objective of the Fund is to achieve the highest total return consistent with the Adviser's determination of reasonable risk. The Fund attempts to achieve its investment objective by allocating varying portions of its assets among a number of asset classes. Equity investments will include publicly traded common stocks and other equity securities of the type in which the Conservative Investors Fund may invest but may also include equity securities issued by intermediate and small- sized companies with favorable growth prospects, companies in cyclical industries, companies whose securities are temporarily undervalued, companies in special situations and less widely known companies. Fixed-income investments will include investment grade fixed-income securities (including cash and money market instruments) and may include securities that are rated in the lower rating categories by recognized ratings agencies (i.e., Ba or lower by Moody's or BB or lower by S&P) or that are unrated but determined by the Adviser to be of comparable quality. Lower rated fixed-income securities generally provide greater current income than higher rated fixed- income securities, but are subject to greater credit and market risk. The Fund will not invest more than 25% of its total assets in securities rated below investment grade, that is, securities rated Ba or lower by Moody's or BB or lower by S&P, or in unrated securities deemed to be of comparable quality by the Adviser. For a description of the ratings referred to above, see Appendix A. For more information about the risks associated with investment in lower rated securities, see "High-Yield Securities" below. The Fund will at all times hold at least 40% of its total assets in publicly traded common stocks and other equity securities of the type purchased by the Conservative Investors Fund (the "Equity Core"). The Fund is generally expected to hold approximately 70% of its total assets in equity securities (including the Equity Core) and 30% in fixed-income securities (including cash and money market instruments). Actual asset mixes will be adjusted in response to economic and credit market cycles. The fixed-income asset class will always comprise at least 10%, but never more than 60%, of the Fund's total assets. The equity class will always comprise at least 40%, but never 5 more than 90%, of the Fund's total assets. For temporary defensive purposes, the Fund may invest in money market instruments. High-Yield Securities. The Fund may invest in high-yield, high-risk, fixed-income and convertible securities rated at the time of purchase Ba or lower by Moody's or BB or lower by S&P or, if unrated, judged by the Adviser to be of comparable quality ("High-Yield Securities"). The Fund will generally invest in securities with a minimum rating of Caa- by Moody's or CCC-by S&P or in unrated securities judged by the Adviser to be of comparable quality. However, from time to time, the Fund may invest in securities rated in the lowest grades of C by Moody's or D by S&P or in unrated securities judged by the Adviser to be of comparable quality, if the Fund's management determines that there are prospects for an upgrade or a favorable conversion into equity securities (in the case of convertible securities). Securities rated Ba or BB or lower (and comparable unrated securities) are commonly referred to as "junk bonds." Securities rated D by S&P are in default. During the fiscal year ended April 30, 1995, the Fund did not invest in any High-Yield Securities. As with other fixed-income securities, High-Yield Securities are subject to credit risk and market risk and their yields may fluctuate. Market risk relates to changes in a security's value as a result of changes in interest rates. Credit risk relates to the ability of the issuer to make payments of principal and interest. High-Yield Securities are subject to greater credit risk (and potentially greater incidences of default) than comparable higher-rated securities because issuers are more vulnerable to economic downturns, higher interest rates or adverse issuer-specific developments. In addition, the prices of High-Yield Securities are generally subject to greater market risk and therefore react more sharply to changes in interest rates. The value and liquidity of High-Yield Securities may be diminished by adverse publicity and investor perceptions. Because High-Yield Securities are frequently traded only in markets where the number of potential purchasers and sellers, if any, is limited, the ability of the Fund to sell High-Yield Securities at their fair value either to meet redemption requests or to respond to changes in the financial markets may be limited. Thinly traded High-Yield Securities may be more difficult to value accurately for the purpose of determining the Fund's net asset value. Also, because the market for certain High-Yield Securities is relatively new, that market may be particularly sensitive to an economic downturn or a general increase in 6 interest rates. In addition, under such circumstances the values of such securities may be more volatile. Some High-Yield Securities in which the Fund may invest may be subject to redemption or call provisions that may limit increases in market value that might otherwise result from lower interest rates while increasing the risk that the Fund may be required to reinvest redemption or call proceeds during a period of relatively low interest rates. The credit ratings issued by Moody's and S&P, a description of which is included as Appendix A to this Statement of Additional Information, are subject to various limitations. For example, while such ratings evaluate credit risk, they ordinarily do not evaluate the market risk of High-Yield Securities. In certain circumstances, the ratings may not reflect in a timely fashion adverse developments affecting an issuer. For these reasons, the Adviser conducts its own independent credit analysis of High-Yield Securities. When the Fund invests in securities in the lower rating categories, the achievement of the Fund's goals is more dependent on the Adviser's ability than would be the case if the Fund were investing in higher rated securities. In the event that the credit rating of a High-Yield Security held by the Fund falls below its rating at the time of purchase (or, in the case of unrated securities, the Adviser determines that the quality of such security has deteriorated since purchased by the Fund), the Fund will not be obligated to dispose of such security and may continue to hold the obligation if, in the opinion of the Adviser, such investment is considered appropriate in the circumstances. Securities rated Baa by Moody's or BBB by S&P or judged by the Adviser to be of comparable quality share some of the speculative characteristics of High-Yield Securities described above. Additional Investment Policies and Techniques Applicable to the Conservative Investors and Growth Investors Funds Mortgage-Backed Securities. Each Fund may invest in mortgage-backed securities, including collateralized mortgage obligations ("CMOs"). Interest and principal payments (including prepayments) on the mortgages underlying mortgage-backed securities are passed through to the holders of the mortgage- backed security. Prepayments occur when the mortgagor on an individual mortgage prepays the remaining principal before the 7 mortgage's scheduled maturity date. As a result of the pass- through of prepayments of principal on the underlying securities, mortgage-backed securities are often subject to more rapid prepayment of principal than their stated maturity would indicate. Because the prepayment characteristics of the underlying mortgages vary, it is not possible to predict accurately the realized yield or average life of a particular issue of pass-through certificates. Prepayments are important because of their effect on the yield and price of the mortgage- backed securities. During periods of declining interest rates, such prepayments can be expected to accelerate and the Fund would be required to reinvest the proceeds at the lower interest rates then available. In addition, prepayments of mortgages which underlie securities purchased at a premium could result in capital losses. Stripped Mortgage-Related Securities. The Fund may invest in stripped mortgage- related securities ("SMRS"). SMRS are derivative multi-class mortgage-related securities. SMRS may be issued by the United States 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 8 brokers or dealers, these securities were only recently developed. As a result, established trading markets have not yet developed and, accordingly, these securities may be illiquid. Adjustable Rate Securities. Each Fund may invest in adjustable rate securities. Adjustable rate securities are securities that have interest rates that are reset at periodic intervals, usually by reference to some interest rate index or market interest rate. Some adjustable rate securities are backed by pools of mortgage loans. Although the rate adjustment feature may act as a buffer to reduce sharp changes in the value of adjustable rate securities, these securities are still subject to changes in value based on changes in market interest rates or changes in the issuer's creditworthiness. Because the interest rate is reset only periodically, changes in the interest rate on adjustable rate securities may lag behind changes in prevailing market interest rates. Also, some adjustable rate securities (or the underlying mortgages) are subject to caps or floors that limit the maximum change in interest rate during a specified period or over the life of the security. Convertible Securities. Each Fund may invest in convertible securities. These securities normally provide a higher yield than the underlying stock but lower than a fixed-income security without the convertible feature. Also, the price of the convertible security will normally vary to some degree with changes in the price of the underlying stocks although in some market conditions the higher yield tends to make the convertible security less volatile than the underlying common stock. In addition, the price of the convertible security will also vary to some degree inversely with interest rates. Convertible debt securities that are rated below BBB by S&P or Baa by Moody's or comparable unrated securities as determined by the Adviser may share some or all of the risks of High-Yield Securities. For a description of these risks, see "High-Yield Securities" above. Zero-Coupon and Payment-in-Kind Bonds. Each Fund may at times invest in so-called "zero-coupon" bonds and "payment-in-kind" bonds. Zero-coupon bonds are issued at a significant discount from their principal amount in lieu of paying interest periodically. Payment-in-kind bonds allow the issuer, at its option, to make current interest payments on the bonds either in cash or in additional bonds. Because zero-coupon bonds do not pay current interest, their value is generally 9 subject to greater fluctuation in response to changes in market interest rates than bonds which pay interest currently. Both zero-coupon and payment-in-kind bonds allow an issuer to avoid the need to generate cash to meet current interest payments. Accordingly, such bonds may involve greater credit risks than bonds paying interest currently. Even though such bonds do not pay current interest in cash, the Fund is nonetheless required to accrue interest income on such investments and to distribute such amounts at least annually to shareholders. Thus, the Fund could be required at times to liquidate other investments in order to satisfy its dividend requirements. Foreign Currency Exchange Transactions. Each Fund may engage in foreign currency exchange transactions to protect against uncertainty in the level of future currency exchange rates. The Adviser expects to engage in foreign currency exchange transactions in connection with the purchase and sale of portfolio securities ("transaction hedging") and to protect against changes in the value of specific portfolio positions ("position hedging"). The Funds may engage in transaction hedging to protect against a change in foreign currency exchange rates between the date on which the Fund contracted to purchase or sell a security and the settlement date, or to "lock in" the U.S. dollar equivalent of a dividend or interest payment in a foreign 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. 10 For transactions hedging purposes, the Funds may also purchase and sell call and put options on foreign currency futures contracts and on foreign currencies. Each Fund may engage in position hedging to protect against a decline in value relative to the U.S. dollar of the currencies in which its portfolio securities are denominated or quoted (or an increase in value of a currency in which securities the Fund intends to buy are denominated, when the Fund holds cash or short-term investments). For position hedging purposes, each Fund may purchase or sell foreign currency futures contracts, foreign currency forward contracts, and options on foreign currency futures contracts and on foreign currencies. In connection with position hedging, the Funds may also purchase or sell foreign currency on a spot basis. A Fund's currency hedging transactions may call for the delivery of one foreign currency in exchange for another foreign currency and may at times not involve currencies in which its portfolio securities are then denominated. The Adviser will engage in such "cross hedging"activities when it believes that such transactions provide significant hedging opportunities for a Fund. Portfolio Management The Adviser manages each Fund's portfolio by buying and selling securities to help attain its investment objective. The portfolio turnover rate for each Fund is included under "Financial Highlights" in the Funds' Prospectus. A high portfolio turnover rate will involve greater costs to a Fund (including brokerage commissions and transaction costs) and may also result in the realization of taxable capital gains, including short-term capital gains taxable at ordinary income rates. See "Dividends, Distributions and Taxes" and "Portfolio Transactions" below. 11 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 United States Government, the obligation of the seller is not guaranteed by the U.S. Government and there is a risk that the seller may fail to repurchase the underlying security, whether because of the seller's bankruptcy or otherwise. In such event, the Funds would attempt to exercise their rights with respect to the underlying security, including possible disposition in the market. However, the Funds may be subject to various delays and risks of loss, including (a) possible declines in the value of the underlying security during the period while the Funds seek to enforce their rights thereto, (b) possible reduced levels of income and lack of access to income during this period and (c) inability to enforce rights and the expenses involved in the attempted enforcement. Non-Publicly Traded Securities As described in the Prospectus, each of the Funds may invest in securities which are not publicly traded, including securities sold pursuant to Rule 144A under the Securities Act of 1933 ("Rule 144A Securities"). The sale of these securities is usually restricted under Federal securities laws, and market quotations may not be readily available. As a result, a Fund may not be able to sell these securities (other than Rule 144A Securities) unless they are registered under applicable Federal and state securities laws, or may have to sell such securities at less than fair market value. Investment in these securities is 12 restricted to 5% of a Fund's total assets (excluding, to the extent permitted by applicable law, Rule 144A Securities) and is also subject to the restriction against investing more than 15% of total assets in "illiquid" securities. To the extent permitted by applicable law, Rule 144A Securities will not be treated as "illiquid" for purposes of the foregoing restriction so long as such securities meet the liquidity guidelines established by the Trust's Board of Trustees. Pursuant to these guidelines, the Adviser will monitor the liquidity of a Fund's investment in Rule 144A Securities. Foreign Securities Each Fund may invest without limit in securities of foreign issuers which are not publicly traded in the United States, although each Fund generally will not invest more than 15% of its total assets (30% in the case of the Growth Investors Fund) in such securities. Investment in foreign issuers or securities principally outside the United States may involve certain special risks due to foreign economic, political, diplomatic and legal developments, including favorable or unfavorable changes in currency exchange rates, exchange control regulations (including currency blockage), expropriation of assets or nationalization, confiscatory taxation, imposition of withholding taxes on dividend or interest payments, and possible difficulty in obtaining and enforcing judgments against foreign entities. Furthermore, issuers of foreign securities are subject to different, often less comprehensive, accounting, reporting and disclosure requirements than domestic issuers. The securities of some foreign companies and foreign securities markets are less liquid and at times more volatile than securities of comparable U.S. companies and U.S. securities markets, and foreign securities markets may be subject to less regulation than U.S. securities markets. The laws of some foreign countries may limit the Funds' abilities to invest in securities of certain issuers located in these countries. Foreign brokerage commissions and other fees are also generally higher than in the United States. There are also special tax considerations which apply to securities of foreign issuers and securities principally traded overseas. Foreign settlement procedures and trade regulations may involve certain risks (such as delay in payment or delivery of securities or in the recovery of the Fund's assets held abroad) and expenses not present in the settlement of domestic investments. The Fund may invest a portion of its assets in developing countries or in countries with new or developing capital markets. The risks noted above are generally intensified for these investments. These countries may have relatively unstable governments, economies based on only a few industries or securities markets that trade a small number of securities. 13 Securities of issuers located in these countries tend to have volatile prices and may offer significant potential for loss as well as gain. The value of foreign investments measured in U.S. dollars will rise or fall because of decreases or increases, respectively, in the value of the U.S. dollar in comparison to the value of the currency in which the foreign investment is denominated. The Fund may buy or sell foreign currencies, options on foreign currencies, foreign currency futures contracts (and related options) and deal in forward foreign currency exchange contracts in connection with the purchase and sale of foreign investments. See "Additional Investment Policies and Techniques Applicable to the Conservative Investors and Growth Investors Funds - Foreign Currency Exchange Transactions" above. Descriptions of Certain Money Market Securities in Which the Funds May Invest Certificates of Deposit, Bankers' Acceptances and Bank Time Deposits. Certificates of deposit are receipts issued by a bank in exchange for the deposit of funds. The issuer agrees to pay the amount deposited plus interest to the bearer of the receipt on the date specified on the certificate. The certificate usually can be traded in the secondary market prior to maturity. Bankers' acceptances typically arise from short-term credit arrangements designed to enable businesses to obtain funds to finance commercial transactions. Generally, an acceptance is a time draft drawn on a bank by an exporter or an importer to obtain a stated amount of funds to pay for specific merchandise. The draft is then "accepted" by another bank that, in effect, unconditionally guarantees to pay the face value of the instrument on its maturity date. The acceptance may then be held by the accepting bank as an earning asset or it may be sold in the secondary market at the going rate of discount for a specific maturity. Although maturities for acceptances can be as long as 270 days, most maturities are six months or less. Bank time deposits are funds kept on deposit with a bank for a stated period of time in an interest bearing account. At present, bank time deposits maturing in more than seven days are not considered by the Adviser to be readily marketable. Commercial Paper. Commercial paper consists of short-term (usually from 1 to 270 days) unsecured promissory 14 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. Asset-Backed Securities Each Fund may invest in asset-backed securities (unrelated to first mortgage loans) which represent fractional interests in pools of retail installment loans, leases or revolving credit receivables, both secured (such as Certificates for Automobile Receivables or "CARS") and unsecured (such as Credit Card Receivable Securities or "CARDS"). These assets are generally held by a trust and payments of principal and interest or interest only are passed through monthly or quarterly to certificate holders and may be guaranteed up to certain amounts by letters of credit issued by a financial institution affiliated or unaffiliated with the trustee or originator of the trust. 15 Like mortgages underlying mortgage-backed securities, underlying automobile sales contracts or credit card receivables are subject to prepayment, which may reduce the overall return to certificate holders. Nevertheless, principal repayment rates tend not to vary too much with interest rates, and the short-term nature of the underlying car loans or receivables tends to dampen the impact of any change in the prepayment level. Certificate holders may also experience delays in payment if the full amounts due on underlying sales contracts or receivables are not realized by the trust holding the obligations because of unanticipated legal or administrative costs of enforcing the contracts or because of depreciation or damage to the collateral (usually automobiles) securing certain contracts, or other factors. If consistent with their investment objectives and policies, the Funds may invest in other asset-backed securities that may be developed in the future. The staff of the Securities and Exchange Commission (the "SEC") is of the view that certain asset-backed securities may constitute investment companies under the Investment Company Act of 1940 (the "1940 Act"). The Funds intend to conduct their operations in a manner consistent with this view; therefore, the Funds generally may not invest more than 10% of their total assets in such securities without obtaining appropriate regulatory relief. Lending of Securities Each Fund may seek to increase its income by lending portfolio securities. Under present regulatory policies, including those of the Board of Governors of the Federal Reserve System and the SEC, such loans may be made only to member firms of the New York Stock Exchange (the"Exchange") and would be required to be secured continuously by collateral in cash, cash equivalents, or U.S. Treasury Bills maintained on a current basis at an amount at least equal to the market value of the securities loaned. A Fund would have the right to call a loan and obtain the securities loaned at any time on five days' notice. During the existence of a loan, a Fund would continue to receive the equivalent of the interest or dividends paid by the issuer on the securities loaned and would also receive compensation based on investment of the collateral. A Fund would not, however, have the right to vote any securities having voting rights during the existence of the loan but would call the loan in anticipation of an important vote to be taken among holders of the securities or of the giving or withholding of their consent on a material matter affecting the investment. As with other extensions of credit there are risks of delay in recovery or even loss of rights in the collateral should the borrower of the securities fail financially. However, the loans would be made only to firms 16 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. If the Adviser determines that a Fund should make securities loans, it is not intended that the value of the securities loaned would exceed 25% of the value of such Fund's total assets. 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 a Fund is required to create a segregated account with the Trust's custodian and to maintain in that account cash, U.S. Government securities or other liquid high-grade debt obligations in an amount equal to or greater than, on a daily basis, the amount of the Fund's forward commitments and when-issued or delayed delivery commitments. A Fund will enter into forward commitments and make commitments to purchase securities on a when-issued or delayed delivery basis only with the intention of actually acquiring the securities. However, a Fund may sell these securities before the settlement date if it is deemed advisable as a matter of investment strategy. Although neither of the Funds intends to make such purchases for speculative purposes and each Fund intends to adhere to the provisions of SEC policies, purchases of securities on such bases may involve more risk than other types of purchases. For example, by committing to purchase securities in the future, a Fund subjects itself to a risk of loss on such commitments as well as on its portfolio securities. Also, a Fund may have to sell assets which have been set aside in order to meet redemptions. In addition, if a Fund determines it is advisable as a matter of investment strategy to sell the forward commitment or "when-issued" or "delayed delivery" securities before delivery, that Fund may incur a gain or loss because of market fluctuations since the time the commitment to purchase 17 such securities was made. Any such gain or loss would be treated as a capital gain or loss and would be treated for tax purposes as such. When the time comes to pay for the securities to be purchased under a forward commitment or on a "when-issued" or "delayed delivery" basis, a Fund will meet its obligations from the then available cash flow or the sale of securities, or, although it would not normally expect to do so, from the sale of the forward commitment or "when-issued" or "delayed delivery" securities themselves (which may have a value greater or less than a Fund's payment obligation). Options Options on Securities. Each Fund intends to write only covered options. In addition to the methods of "cover" described in the Prospectus, each Fund may write call and put options and may purchase call and put options on securities. This means that so long as a Fund is obligated as the writer of a call option, it will own the underlying securities subject to the option or securities convertible into such securities without additional consideration (or for additional cash consideration held in a segregated account by the custodian). In the case of call options on U.S. Treasury Bills, a Fund might own U.S. Treasury Bills of a different series from those underlying the call 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 cash, U.S. Government securities or other liquid high-grade debt obligations having a value equal to or greater than the exercise price of the option. Effecting a closing transaction in the case of a written call option will permit a Fund to write another call option on the underlying security with either a different exercise price or expiration date or both, or in the case of a written put option will permit a Fund to write another put option to the extent that the exercise price thereof is secured by deposited cash or short-term securities. Such transactions permit a Fund to generate additional premium income, which will partially offset declines in the value of portfolio securities or increases in the cost of securities to be acquired. Also, effecting a closing transaction will permit the cash or proceeds from the concurrent sale of any securities subject to the option to be used for other investments by a Fund, provided that another option on such security is not written. If a Fund desires to sell a particular 18 security from its portfolio on which it has written a call option, it will effect a closing transaction in connection with the option prior to or concurrent with the sale of the security. A Fund will realize a profit from a closing transaction if the premium paid in connection with the closing of an option written by the Fund is less than the premium received from writing the option, or if the premium received in connection with the closing of an option purchased by the Fund is more than the premium paid for the original purchase. Conversely, a Fund will suffer a loss if the premium paid or received in connection with a closing transaction is more or less, respectively, than the premium received or paid in establishing the option position. Because increases in the market price of a call option will generally reflect increases in the market price of the underlying security, any loss resulting from the repurchase of a call option previously written by a Fund is likely to be offset in whole or in part by appreciation of the underlying security owned by the Fund. A Fund may purchase a security and then write a call option against that security or may purchase a security and concurrently write an option on it. The exercise price of the call a Fund determines to write will depend upon the expected price movement of the underlying security. The exercise price of a call option may be below ("in-the-money"), equal to ("at-the-money") or above ("out-of-the-money") the current value of the underlying security at the time the option is written. In-the-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 19 position or retain the option until it is exercised, at which time the Fund will be required to take delivery of the security at the exercise price; the Fund's return will be the premium received from the put option minus the amount by which the market price of the security is below the exercise price, which could result in a loss. Out-of-the-money put options may be written when it is expected that the price of the underlying security will decline moderately during the option period. In-the-money put options may be used when it is expected that the premiums received from writing the put option plus the appreciation in the market price of the underlying security up to the exercise price will be greater than the appreciation in the price of the underlying security alone. Each of the Funds may also write combinations of put and call options on the same security, known as "straddles," with the same exercise and expiration date. By writing a straddle, a Fund undertakes a simultaneous obligation to sell and purchase the same security in the event that one of the options is exercised. If the price of the security subsequently rises above the exercise price, the call will likely be exercised and the Fund will be required to sell the underlying security at a below market price. This loss may be offset, however, in whole or part, by the premiums received on the writing of the two options. Conversely, if the price of the security declines by a sufficient amount, the put will likely be exercised. The writing of straddles will likely be effective, therefore, only where the price of the security remains stable and neither the call nor the put is exercised. In those instances where one of the options is 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 in the underlying 20 security by the amount of the premium paid for the put option and by transaction costs. A Fund may purchase call options to hedge against an increase in the price of securities that the Fund anticipates purchasing in the future. If such increase occurs, the call option will permit the Fund to purchase the securities at the exercise price, or to close out the options at a profit. The premium paid for the call option plus any transaction costs will reduce the benefit, if any, realized by a Fund upon exercise of the option, and, unless the price of the underlying security rises sufficiently, the option may expire worthless to the Fund and the Fund will suffer a loss on the transaction to the extent of the premium paid. Options on Securities Indexes. Each Fund may write (sell) covered call and put options on securities indexes and purchase call and put options on securities indexes. A call option on a securities index is considered covered if, so long as a Fund is obligated as the writer of the call, the Fund holds in its portfolio securities the price changes of which are, in the option of the Adviser, expected to replicate substantially the movement of the index or indexes upon which the options written by the Fund are based. A put on a securities index written by a Fund will be considered covered if, so long as it is obligated as the writer of the put, the Fund segregates with its custodian cash, U.S. Government securities or other liquid high-grade debt obligations 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 value. By purchasing a put option on a securities index, a Fund will seek to offset a decline in the value of securities it owns through appreciation of the put option. If the value of a Fund's investments does not decline as anticipated, or if the value of the option does not increase, the Fund's loss will be limited to the premium paid for the option. The success of this strategy will largely depend on the accuracy of the correlation between the changes in value of the index and the changes in value of a Fund's security holdings. The purchase of call options on securities indexes may be used by a Fund to attempt to reduce the risk of missing a broad market advance, or an advance in an industry or market segment, at a time when the Fund holds uninvested cash or short-term debt securities awaiting investment. When purchasing call options for this purpose, a Fund will also bear the risk of losing all or a portion of the premium paid if the value of the 21 index does not rise. The purchase of call options on stock indexes when a Fund is substantially fully invested is a form of leverage, up to the amount of the premium and related transaction costs, and involves risks of loss and of increased volatility similar to those involved in purchasing calls on securities the Fund owns. Futures Contracts and Options on Futures Contracts Futures Contracts. Each Fund may enter into interest rate transactions with respect to futures contracts, index futures contracts and foreign currency futures contracts. (Unless otherwise specified, interest rate futures contracts, index futures contracts and foreign currency futures contracts are collectively referred to as "Futures Contracts.") Such investment strategies will be used as a hedge and not for speculation. Purchases or sales of stock or bond index futures contracts are used for hedging purposes to attempt to protect a Fund's current or intended investments from broad fluctuations in stock or bond prices. For example, a Fund may sell stock or bond index futures contracts in anticipation of or during a market decline to attempt to offset the decrease in market value of the Fund's portfolio securities that might otherwise result. If such decline occurs, the loss in value of portfolio securities may be offset, in whole or part, by gains on the futures position. When a Fund is not fully invested in the securities market and anticipates a significant market advance, it may purchase stock or bond index futures contracts in order to gain rapid market exposure that may, in part or entirely, offset increases in the cost of securities that the Fund intends to purchase. As such purchases are made, the corresponding positions in stock or bond index futures contracts will be closed out. Interest rate futures contracts are purchased or sold for hedging purposes to attempt to protect against the effects of interest rate changes on a Fund's current or intended investments in fixed income securities. For example, if a Fund owned long-term bonds and interest rates were expected to increase, that Fund might sell interest rate futures contracts. Such a sale would have much the same effect as selling some of the long-term bonds in that Fund's portfolio. However, since the futures market is more liquid than the cash market, the use of interest rate futures contracts as a hedging technique allows a Fund to hedge its interest rate risk without having to sell its portfolio securities. If interest rates did increase, the value 22 of the debt securities in the portfolio would decline, but the value of that Fund's interest rate futures contracts would be expected to increase at approximately the same rate, thereby keeping the net asset value of that Fund from declining as much as it otherwise would have. On the other hand, if interest rates were expected to decline, interest rate futures contracts could be purchased to hedge in anticipation of subsequent purchases of long-term bonds at higher prices. Because the fluctuations in the value of the interest rate futures contracts should be similar to those of long-term bonds, a Fund could protect itself against the effects of the anticipated rise in the value of long-term bonds without actually buying them until the necessary cash became available or the market had stabilized. At that time, the interest rate futures contracts could be liquidated and that Fund's cash reserves could then be used to buy long-term bonds on the cash market. Each Fund may purchase and sell foreign currency futures contracts for hedging purposes to attempt to protect its current or intended investments from fluctuations in currency exchange rates. Such fluctuations could reduce the dollar value of portfolio securities denominated in foreign currencies, or increase the cost of foreign-denominated securities to be acquired, even if the value of such securities in the currencies in which they are denominated remains constant. Each Fund may sell futures contracts on a foreign currency, for example, when it holds securities denominated in such currency and it anticipates a decline in the value of such currency relative to the dollar. In the event such decline occurs, the resulting adverse effect on the value of foreign-denominated securities may be offset, in whole or in part, by gains on the futures contracts. However, if the value of the foreign currency increases relative to the dollar, the Fund's loss on the foreign currency futures contract may or may not be offset by an increase in the value of the securities because a decline in the price of the security stated in terms of the foreign currency may be 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 23 which could reduce or eliminate the benefits of the reduced cost of portfolio securities to be acquired. The Funds may also engage in currency "cross hedging" when, in the opinion of the Adviser, the historical relationship among foreign currencies suggests that a Fund may achieve protection against fluctuations in currency exchange rates similar to that described above at a reduced cost through the use of a futures contract relating to a currency other than the U.S. dollar or the currency in which the foreign security is denominated. Such "cross hedging" is subject to the same risks as those described above with respect to an unanticipated increase or decline in the value of the subject currency relative to the dollar. Options on Futures Contracts. The writing of a call option on a Futures Contract constitutes a partial hedge against declining prices of the securities in the Fund's portfolio. If the futures price at expiration of the option is below the exercise price, a Fund will retain the full amount of the option premium, which provides a partial hedge against any decline that may have occurred in the Fund's portfolio holdings. The writing of a put option on a Futures Contract constitutes a partial hedge against increasing prices of the securities or other instruments required to be delivered under the terms of the Futures Contract. If the futures price at expiration of the put option is higher than the exercise price, a Fund will retain the full amount of the option premium, which provides a partial hedge against any increase in the price of securities which the Fund intends to purchase. If a put or call option a Fund has written is exercised, the Fund will incur a loss which will be reduced by the amount of the premium it receives. Depending on the degree of correlation between changes in the value of its portfolio securities and changes in the value of its options on futures positions, a Fund's losses from exercised options on futures may to some extent be reduced or increased by changes in the value of portfolio securities. 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 24 to the price of the put. Where it is projected that the value of securities to be acquired by a Fund will increase prior to acquisition, due to a market advance or changes in interest or exchange rates, a Fund could purchase call options on Futures Contracts, rather than purchasing the underlying Futures Contracts. If the market advances, the increased cost of securities to be purchased may be offset by a profit on the call. However, if the market declines, the Fund will suffer a loss equal to the price of the call, but the securities which the Fund intends to purchase may be less expensive. Forward Foreign Currency Exchange Contracts Each Fund may enter into forward foreign currency exchange contracts ("Forward Contracts") to attempt to minimize the risk to the Fund from adverse changes in the relationship between the U.S. dollar and foreign currencies. The Funds intend to enter into Forward Contracts for hedging purposes similar to those described above in connection with their transactions in foreign currency futures contracts. In particular, a Forward Contract to sell a currency may be entered into in lieu of the sale of a foreign currency futures contract where a Fund seeks to protect against an anticipated increase in the exchange rate for a specific currency which could reduce the dollar value of portfolio securities denominated in such currency. Conversely, a Fund may enter into a Forward Contract to purchase a given currency to protect against a projected increase in the dollar value of securities denominated in such currency which the Fund intends to acquire. A Fund also may enter into a Forward Contract in order to assure itself of a predetermined exchange rate in connection with a security denominated in a foreign currency. The Funds may engage in currency "cross hedging" when, in the opinion of the Adviser, the historical relationship among foreign currencies suggests that a Fund may achieve the same protection for a foreign security at a reduced cost through the use of a Forward Contract relating to a currency other than the U.S. dollar or the foreign currency in which the security is denominated. If a hedging transaction in Forward Contracts is successful, the decline in the value of portfolio securities or the increase in the cost of securities to be acquired may be 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. 25 Each Fund has established procedures consistent with SEC policies concerning purchases of foreign currency through Forward Contracts. Since those policies currently recommend that an amount of a Fund's assets equal to the amount of the purchase be held aside or segregated to be used to pay for the commitment, a Fund will always have cash, U.S. Government securities or other liquid, high-grade debt securities available sufficient to cover any commitments under these contracts or to limit any potential risk. Options on Foreign Currencies Each Fund may purchase and write options on foreign currencies for hedging purposes. For example, a decline in the dollar value of a foreign currency in which portfolio securities are denominated will reduce the dollar value of such securities, even if their value in the foreign currency remains constant. In order to protect against such diminutions in the value of portfolio securities, the Funds may purchase put options on the foreign currency. If the value of the currency does decline, the Fund will have the right to sell such currency for a fixed amount in dollars and will thereby offset, in whole or in part, the adverse effect on its portfolio which otherwise would have resulted. Conversely, where a rise in the dollar value of a currency in which securities to be acquired are denominated is projected, thereby increasing the cost of such securities, the Funds may purchase call options thereon. The purchase of such options could offset, at least partially, the effects of the adverse movements in exchange rates. As in the case of other types of options, however, the benefit to a Fund derived from purchases of foreign currency options will be reduced by the amount of the premium and related transaction costs. In addition, where currency exchange rates do not move in the direction or to the extent anticipated, a Fund could sustain losses on transactions in foreign currency options which would require it to forego a portion or all of the benefits of advantageous changes in such rates. Each Fund may write options on foreign currencies for the same types of hedging purposes or to increase return. For 26 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 will be offset by the amount of the premium received. Similarly, instead of purchasing a call option to hedge against an anticipated increase in the dollar cost of securities to be acquired, a Fund could write a put option on the relevant currency, which, if rates move in the manner projected, will expire unexercised and allow the Fund to hedge such increased cost up to the amount of the premium. As in the case of other types of options, however, the writing of a foreign currency option will constitute only a partial hedge up to the amount of the premium, and only if rates move in the expected direction. If this does not occur, the option may be exercised and the Fund will be required to purchase or sell the underlying currency at a loss which may not be offset by the amount of the premium. Through the writing of options on foreign currencies, a Fund also may be required to forego all or a portion of the benefits which might otherwise have been obtained from favorable movements in exchange rates. Risk Factors in Options, Futures and Forward Transactions Risk of Imperfect Correlation of Hedging Instruments With a Fund's Portfolio. The Funds' abilities effectively to hedge all or a portion of their portfolios through transactions in options, Futures Contracts, options on Futures Contracts, Forward Contracts and options on foreign currencies depend on the degree to which price movements in the underlying index or instrument correlate with price movements in the securities that are the subject of the hedge. In the case of futures and options based on an index, the portfolio will not duplicate the components of the index, and in the case of futures and options on fixed income securities, the portfolio securities which are being hedged may not be the same type of obligation underlying such contract. As a result, the correlation, to the extent it exists, probably will not be exact. It should be noted that stock index futures contracts or options based upon a narrower index of securities, such as those of a particular industry group, may present greater risk than options or futures based on a broad market index. This is due to the fact that a narrower index is more susceptible to rapid and 27 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. The risk of imperfect correlation, however, generally tends to diminish as the maturity date of the Futures Contract or expiration date of the option approaches. 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 28 a Fund writes a call option on a stock index, the securities used as "cover" may not match the composition of the index, and the Fund may not be fully covered. As a result, the Fund could suffer a loss on the call which is not entirely offset or offset at all by an increase in the value of the Fund's portfolio securities. The writing of options on securities, options on stock indexes or options on Futures Contracts constitutes only a partial hedge against fluctuations in the value of a Fund's portfolio. When a Fund writes an option, it will receive premium income in return for the holder's purchase of the right to acquire or dispose of the underlying security or future or, in the case of index options, cash. In the event that the price of such obligation does not rise sufficiently above the exercise price of the option, in the case of a call, or fall below the exercise price, in the case of a put, the option will not be exercised and the Fund will retain the amount of the premium, which will constitute a partial hedge against any decline that 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 29 terminated only by entering into a closing purchase or sale transaction. This requires a secondary market for such instruments on the exchange on which the initial transaction was entered into. While the Funds will enter into options or futures positions only if there appears to be a liquid secondary market therefor, there can be no assurance that such a market will exist for any particular contracts at any specific time. In that event, it may not be possible to close out a position held by a Fund, and the Fund could be required to purchase or sell the instrument underlying an option, make or receive a cash settlement or meet ongoing variation margin requirements. Under such circumstances, if the Fund has insufficient cash available to meet margin requirements, it may be necessary to liquidate portfolio securities at a time when it is disadvantageous to do so. The inability to close out options and futures positions, therefore, could have an adverse impact on the Funds' ability to effectively hedge their portfolios, and could result in trading losses. The liquidity of a secondary market in a Futures Contract or option thereon may be adversely affected by "daily price fluctuation limits," established by exchanges, which limit the amount of fluctuation in the price of a contract during a single trading day. Once the daily limit has been reached in the contract, no trades may be entered into at a price beyond the limit, thus preventing the liquidation of open futures or option positions and requiring traders to make additional margin deposits. Prices have in the past moved to the daily limit on a number of consecutive trading days. The trading of Futures Contracts and options (including options on Futures Contracts) is also subject to the risk of trading halts, suspensions, exchange or clearing house equipment failures, government intervention, insolvency of a brokerage firm or clearing house or other disruptions of normal trading activity, which could at times make it difficult or impossible to liquidate existing positions or to recover excess variation margin payments. The staff of the SEC has taken the position that over-the-counter options and the assets used as cover for over-the-counter options are illiquid securities, unless certain arrangements are made with the other party to the option contract, permitting the prompt liquidation of the option position. The Funds will enter into those special arrangements only with primary U.S. Government securities dealers recognized by the Federal Reserve Bank of New York ("primary dealers"). Under these special arrangements, the Trust will enter into 30 contracts with primary dealers which provide that each Fund has the absolute right to repurchase an option it writes at any time at a repurchase price which represents fair market value, as determined in good faith through negotiation between the parties, but which in no event will exceed a price determined pursuant to a formula contained in the contract. Although the specific details of the formula may vary between contracts with different primary dealers, the formula will generally be based on a multiple of the premium received by the Fund for writing the option, plus the amount, if any, by which the option is "in-the-money." The formula will also include a factor to account for the difference between the price of the security and the strike price of the option if the option is written out-of-the-money. Under such circumstances the Fund only needs to treat as illiquid that amount of the "cover" assets equal to the amount by which (i) the formula price exceeds (ii) any amount by which the market value of the security subject to the option exceeds the exercise price of the option (the amount by which the option is "in-the-money"). Although each agreement will provide that the Fund's repurchase price shall be determined in good faith (and that it shall not exceed the maximum determined pursuant to the formula), the formula price will not necessarily reflect the market value of the option written; therefore, the Fund might pay more to repurchase the option contract than the Fund would pay to close out a similar exchange-traded option. Margin. Because of low initial margin deposits made upon the opening of a futures position and the writing of an option, such transactions involve substantial leverage. As a result, relatively small movements in the price of the contract can result in substantial unrealized gains or losses. However, to the extent the Funds purchase or sell Futures Contracts and options on Futures Contracts and purchase and write options on securities and securities indexes for hedging purposes, any losses incurred in connection therewith should, if the hedging strategy is successful, be offset, in whole or in part, by increases in the value of securities held by the Fund or decreases in the prices of securities the Fund intends to acquire. When a Fund writes options on securities or options on stock indexes for other than hedging purposes, the margin requirements associated with such transactions could expose the Fund to greater risk. Trading and Position Limits. The exchanges on which futures and options are traded may impose limitations governing the maximum number of positions on the same side of the market and involving the same underlying instrument which may be held by a single investor, whether acting alone or in concert with others 31 (regardless of whether such contracts are held on the same or different exchanges or held or written in one or more accounts or through one or more brokers). In addition, the Commodity Futures Trading Commission (the "CFTC") and the various contract markets have established limits referred to as "speculative position limits" on the maximum net long or net short position which any person may hold or control in a particular futures or option contract. An exchange may order the liquidation of positions found to be in violation of these limits and may impose other sanctions or restrictions. The Adviser does not believe that these trading and position limits will have any adverse impact on the strategies for hedging the portfolios of the Funds. Risks of Options on Futures Contracts. The amount of risk a Fund assumes when it purchases an option on a Futures Contract is the premium paid for the option, plus related transaction costs. In order to profit from an option purchased, however, it may be necessary to exercise the option and to liquidate the underlying Futures Contract, subject to the risks of the availability of a liquid offset market described herein. The writer of an option on a Futures Contract is subject to the risks of commodity futures trading, including the requirement of initial and variation margin payments, as well as the additional risk that movements in the price of the option may not correlate with movements in the price of the underlying security, index, currency or Futures Contract. Risks of Forward Contracts, Foreign Currency Futures Contracts and Options Thereon, Options on Foreign Currencies and Over-the-Counter Options on Securities. Transactions in Forward Contracts, as well as futures and options on foreign currencies, are subject to all of the correlation, liquidity and other risks outlined above. In addition, however, such transactions are subject to the risk of governmental actions affecting trading in or the prices of currencies underlying such contracts, which could restrict or eliminate trading and could have a substantial adverse effect on the value of positions held by a Fund. In addition, the value of such positions could be adversely affected by a number of other complex political and economic factors applicable to the countries issuing the underlying currencies. Further, unlike trading in most other types of instruments, there is no systematic reporting of last sale information with respect to the foreign currencies underlying contracts thereon. As a result, the available information on which trading decisions will be based may not be as complete as the comparable data on which a Fund makes investment and trading decisions in connection with other transactions. Moreover, because the foreign currency market is a global, twenty-four hour 32 market, events could occur on that market which will not be reflected in the forward, futures or options markets until the following day, thereby preventing the Funds from responding to such events in a timely manner. Settlements of exercises of over-the-counter Forward Contracts or foreign currency options generally must occur within the country issuing the underlying currency, which in turn requires traders to accept or make delivery of such currencies in conformity with any United Sates or foreign restrictions and regulations regarding the maintenance of foreign banking relationships and fees, taxes or other charges. Unlike transactions entered into by the Funds in Futures Contracts and exchange-traded options, options on foreign currencies, Forward Contracts and over-the-counter options on securities and securities indexes are not traded on contract markets regulated by the CFTC or (with the exception of certain foreign currency options) the SEC. Such instruments are instead traded through financial institutions acting as market-makers, although foreign currency options are also traded on certain national securities exchanges, such as the Philadelphia Stock Exchange and the Chicago Board Options Exchange, subject to SEC regulation. In an over-the-counter trading environment, many of the protections afforded to exchange participants will not be available. For example, there are no daily price fluctuation limits, and adverse market movements could therefore continue to an unlimited extent over a period of time. Although the purchaser of an option cannot lose more than the amount of the premium plus related transaction costs, this entire amount could be lost. Moreover, the option writer could lose amounts substantially in excess of the initial investment, due to the margin and collateral requirements associated with such positions. In addition, over-the-counter transactions can be entered into only with a financial institution willing to take the opposite side, as principal, of a Fund's position unless the institution acts as broker and is able to find another counterparty willing to enter into the transaction with the Fund. Where no such counterparty is available, it will not be possible to enter into a desired transaction. There also may be no liquid secondary market in the trading of over-the-counter contracts, and a Fund could be required to retain options purchased or written, or Forward Contracts entered into, until exercise, expiration or maturity. This in turn could limit the Fund's ability to profit from open positions or to reduce losses experienced, and could result in greater losses. 33 Further, over-the-counter transactions are not subject to the guarantee of an exchange clearing house, and a Fund will therefore be subject to the risk of default by, or the bankruptcy of, the financial institution serving as its counterparty. A Fund will enter into an over-the-counter transaction only with parties whose creditworthiness has been reviewed and found satisfactory by the Adviser. Transactions in over-the-counter options on foreign currencies are subject to a number of conditions regarding the commercial purpose of the purchaser of such option. The Funds are not able to determine at this time whether or to what extent additional restrictions on the trading of over-the-counter options on foreign currencies may be imposed at some point in the future, or the effect that any such restrictions may have on the hedging strategies to be implemented by them. As discussed below, CFTC regulations require that a Fund not enter into transactions in commodity futures contracts or commodity option contracts for other than "bona fide" hedging purposes, unless the aggregate initial margin and premiums do not exceed 5% of the fair market value of the Fund's assets. Premiums paid to purchase over-the-counter options on foreign currencies, and margins paid in connection with the writing of such options, are required to be included in determining compliance with this requirement, which could, depending upon the existing positions in Futures Contracts and options on Futures Contracts already entered into by a Fund, limit the Fund's ability to purchase or write options on foreign currencies. Conversely, the existence of open positions in options on foreign currencies could limit the ability of the Fund to enter into desired transactions in other options or futures contracts. While Forward Contracts are not presently subject to regulation by the CFTC, the CFTC may in the future assert or be granted authority to regulate such instruments. In such event, the Fund's ability to utilize Forward Contracts in the manner set forth above could be restricted. Options on foreign currencies traded on national securities exchanges are within the jurisdiction of the SEC, as are other securities traded on such exchanges. As a result, many of the protections provided to traders on organized exchanges will be available with respect to such transactions. In particular, all foreign currency option positions entered into on a national securities exchange are cleared and guaranteed by the Options Clearing Corporation ("OCC"), thereby reducing the risk 34 of counterparty default. Further, a liquid secondary market in options traded on a national securities exchange may be more readily available than in the over-the-counter market, potentially permitting a Fund to liquidate open positions at a profit prior to exercise or expiration, or to limit losses in the event of adverse market movements. The purchase and sale of exchange-traded foreign currency options, however, is subject to the risks of the availability of a liquid secondary market described above, as well as the risks regarding adverse market movements, the margining of options written, the nature of the foreign currency market, possible intervention by governmental authorities and the effects of other political and economic events. In addition, exchange-traded options on foreign currencies involve certain risks not presented by the over-the-counter market. For example, exercise and settlement of such options must be made exclusively through the OCC, which has established banking relationships in applicable foreign countries for this purpose. As a result, if it determines that foreign governmental restrictions or taxes would prevent the orderly settlement of foreign currency option exercises, or would result in undue burdens on the OCC or its clearing member, the OCC may impose special procedures on exercise and settlement, such as technical changes in the mechanics of delivery of currency, the fixing of dollar settlement prices or prohibitions on exercise. Restrictions on the Use of Futures and Option Contracts Under applicable regulations, when a Fund enters into transactions in Futures Contracts and options on Futures Contracts other than for bona fide hedging purposes, that Fund maintains with its custodian in a segregated account cash, short-term U.S. Government securities or high quality United States dollar denominated money market instruments, which, together with any initial margin deposits, are equal to the aggregate market value of the Futures Contracts and options on Futures Contracts that it purchases. In addition, a Fund may not purchase or sell such instruments for other than bona fide hedging purposes if, immediately thereafter, the sum of the amount of initial margin deposits on such futures and options positions and premiums paid for options purchased would exceed 5% of the market value of the Fund's total assets. Each Fund has adopted the additional restriction that it will not enter into a Futures Contract if, immediately thereafter, the value of securities and other obligations underlying all such Futures Contracts would exceed 50% of the value of such Fund's total assets. Moreover, a Fund will not 35 purchase put and call options if as a result more than 10% of its total assets would be invested in such options. Economic Effects and Limitations Income earned by a Fund from its hedging activities will be treated as capital gain and, if not offset by net realized capital losses incurred by a Fund, will be distributed to shareholders in taxable distributions. Although gain from such transactions may hedge against a decline in the value of a Fund's portfolio securities, that gain, to the extent not offset by losses, will be distributed in light of certain tax considerations and will constitute a distribution of that portion of the value preserved against decline. No Fund will "over-hedge," that is, a Fund will not maintain open short positions in futures or options contracts if, in the aggregate, the market value of its open positions exceeds the current market value of its securities portfolio plus or minus the unrealized gain or loss on such open positions, adjusted for the historical volatility relationship between the portfolio and futures and options contracts. Each Fund's ability to employ the options and futures strategies described above will depend on the availability of liquid markets in such instruments. Markets in financial futures and related options are still developing. It is impossible to predict the amount of trading interest that may hereafter exist in various types of options or futures. Therefore no assurance can be given that a Fund will be able to use these instruments effectively for the purposes set forth above. The Funds' ability to use options, futures and forward contracts may be limited by tax considerations. In particular, tax rules might affect the length of time for which the Funds can hold such contracts and the character of the income earned on 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. 36 Future Developments The above discussion relates to each Fund's proposed use of Futures Contracts, options and options on Futures Contracts currently available. As noted above, the relevant markets and related regulations are evolving. In the event of future regulatory or market developments, each Fund may also use additional types of futures contracts or options and other investment techniques for the purposes set forth above. INVESTMENT RESTRICTIONS Except as described below and except as otherwise specifically stated in the Prospectus or this Statement of Additional Information, the investment policies of each Fund set forth in the Prospectus and in this Statement of Additional Information are not fundamental and may be changed without shareholder approval. The following is a description of restrictions on the investments to be made by the Funds, which restrictions may not be changed without the approval of a majority of the outstanding voting securities of the relevant Fund. Neither of the Funds will: (1) Borrow money in excess of 10% of the value (taken at the lower of cost or current value) of its total assets (not including the amount borrowed) at the time the borrowing is made, and then only from banks as a temporary measure to facilitate the meeting of redemption requests (not for leverage) which might otherwise require the untimely disposition of portfolio investments or pending settlement of securities transactions or for extraordinary or emergency purposes. (2) Underwrite securities issued by other persons except to the extent that, in connection with the disposition of its portfolio investments, it may be deemed to be an underwriter under certain federal securities laws. 37 (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 38 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 shortposition for the account of such Fund unless at all times when a short position is open it owns an equal amount of such securities or unless by virtue of its ownership of other securities it has at all such times a right to obtain securities (without payment of further consideration) equivalent in kind and amount to the securities sold, provided that if such right is conditional the sale is made upon equivalent conditions and further provided that no Fund will make such short sales with respect to securities having a value in excess of 5% of its total assets. (d) Write, purchase or sell any put or call option or any combination thereof, provided that this shall not prevent a Fund from writing, purchasing and selling puts, calls or combinations thereof with respect to securities, indexes of securities or foreign currencies, and with respect to Futures Contracts. (e) Purchase voting securities of any issuer if such purchase, at the time thereof, would cause more than 10% of the outstanding voting securities of such issuer to be held by such Fund; or purchase securities of any issuer if such purchase at the time thereof would cause more than 10% of any class of securities of such issuer to be held by such Fund. For this purpose all indebtedness of an issuer shall be deemed a single class and all preferred stock of an issuer shall be deemed a single class. (f) Invest in securities of any issuer if, to the knowledge of the Trust, officers and Trustees of the Trust and officers and directors of the Adviser who beneficially own more than 0.5% of the shares 39 of securities of that issuer together own more than 5%. (g) Purchase securities issued by any other registered 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 an open-end investment company will be consistent with the provisions of the 1940 Act. (h) Make investments for the purpose of exercising control or management. (i) Participate on a joint or joint and several basis in any trading account in securities. (j) Invest in interests in oil, gas, or other mineral exploration or development programs, although each Fund may purchase securities which are secured by such interests and may purchase securities of issuers which invest in or deal in oil, gas or other mineral exploration or development programs. (k) Purchase warrants, if, as a result, a Fund would have more than 5% of its total assets invested in warrants or more than 2% of its total assets invested in warrants which are not listed on the New York Stock Exchange or the American Stock Exchange. (l) Purchase commodities or commodity contracts, provided that this shall not prevent a Fund from entering into interest rate futures contracts, securities index futures contracts, foreign currency futures contracts, forward foreign currency exchange contracts and options (including options on any of the foregoing) to the extent such 40 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 Alliance Capital Management L.P. (the "Adviser"), a Delaware limited partnership with principal offices at 1345 Avenue of the Americas, New York, New York 10105, has been retained under an investment advisory agreement (the "Investment Advisory Contract") to provide investment advice and, in general, to conduct the management and investment program of the Trust under the supervision of the Trust's Board of Trustees. The Adviser is a leading international investment manager supervising client accounts with assets as of June 30, 1995 totaling more than $135.8 billion (of which more than $43 billion represents 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. The Adviser and its subsidiaries employ more than 1,400 employees who operate out of domestic offices and the overseas offices of subsidiaries in Bombay, Istanbul, London, Sydney, Tokyo, Toronto, Bahrain, Luxembourg and Singapore. The 51 registered investment companies comprising 103 separate investment portfolios managed by the Adviser currently have over one million shareholders. As of June 30, 1995 the Adviser was retained as an investment manager of employee benefit fund assets for 29 of the "Fortune 100" companies. 41 Alliance Capital Management Corporation ("ACMC"),1 the sole general partner of, and the owner of a 1% general partnership interest in, the Adviser, is an indirect wholly-owned subsidiary of The Equitable Life Assurance Society of the United States ("Equitable"), one of the largest life insurance companies in the United States and a wholly-owned subsidiary of The Equitable Companies Incorporated ("ECI"), a holding company controlled by AXA, a French insurance holding company. As of June 30, 1995, ACMC, Inc. and Equitable Capital Management Corporation, each a wholly-owned direct or indirect subsidiary of Equitable, owned in the aggregate approximately 59% of the issued and outstanding units representing assignments of beneficial ownership of limited partnership interests in the Adviser ("Units"), and approximately 33% and 8% of the Units were owned by the public and employees of the Adviser and its subsidiaries, respectively, including employees of the Adviser who serve as Trustees of the Trust. AXA owns approximately 60% of the outstanding voting shares of common stock of ECI. AXA is a member of a group of companies (the "AXA Group") that is the second largest insurance group in France and one of the largest insurance groups in Europe. Principally engaged in property and casualty insurance and life insurance in Europe and elsewhere in the world, the AXA Group is also involved in real estate operations and certain other financial services, including mutual fund management, lease financing services and brokerage services. Based on information provided by AXA, as of January 1, 1995, 42.3% of the voting shares (representing 54.7% of the voting power) of AXA were owned by Midi Participations, a French corporation that is a holding company. The voting shares of Midi Participations are in turn owned 60% by Finaxa, a French corporation that is a holding company, and 40% by subsidiaries of Assicurazioni Generali S.p.A., an Italian corporation ("Generali"), one of which, Belgica Insurance Holding S.A., a Belgian corporation, owned 34.1%. As of January 1, 1995, 62.1% of the voting shares (representing 75.7% of the voting power) of Finaxa were owned by five French mutual insurance companies (the "Mutuelles AXA") (one of which, AXA Assurances I.A.R.D. Mutuelle, owned 31.8% of the voting shares (representing 39.0% of the voting power)), and 26.5% of the voting shares (representing 16.6% of the voting power) of Finaxa were owned by Compagnie Financiere de Paribas, a _________________________ 1For purposes of this Statement of Additional Information, ACMC refers to Alliance Capital Management Corporation, the sole general partner of the Adviser, and to the predecessor general partner of the Adviser of the same name. 42 French financial institution engaged in banking and related activities. Including the shares owned by Midi Participations, as of January 1, 1995, the Mutuelles AXA directly or indirectly owned 51.3% of the voting shares (representing 65.8% of the voting power) of AXA. Acting as a group, the Mutuelles AXA control AXA, Midi Participations and Finaxa. The Mutuelles AXA have approximately 1.5 million policyholders. Investment Advisory Contract and Expenses The Adviser serves as investment manager and adviser of each of the Funds and furnishes continuously an investment program for each Fund and manages, supervises and conducts the affairs of each Fund. The Investment Advisory Contract also provides that the Adviser will furnish or pay the expenses of the Trust for office space, facilities and equipment, services of executive and other personnel of the Trust and certain administrative services. The Adviser is compensated for its services to the Funds at an annual rate of .75% of each Fund's average daily net assets. The Adviser has voluntarily undertaken until further notice to waive its fees in respect of each Fund and has agreed to bear certain expenses of the Class A, Class B and Class C shares of each Fund to the extent that expenses exceed an annual rate of 1.40% for Class A shares and 2.10% for Class B and Class C shares. The management fees for each Fund are higher than those paid by most mutual funds. The Investment Advisory Contract became effective on July 23, 1993. The Investment Advisory Contract replaced an earlier agreement (the "First Investment Advisory Contract") between the Trust and Equitable Capital Management Corporation ("Equitable Capital") or Equitable, as the case may be, with respect to the Funds. The First Investment Advisory Agreement terminated because of its technical assignment in connection with the transfer of substantially all of the assets comprising Equitable Capital's business to the Adviser and certain of its subsidiaries in exchange for newly issued limited partnership interests in the Adviser and the assumption by the Adviser and such subsidiaries of certain liabilities of Equitable Capital. Equitable Capital was compensated for its services as investment manager of the Funds at the same rates as are currently paid by the Funds to the Adviser. 43 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. Prior to July 23, 1993, Equitable Capital had served as investment adviser to the Conservative Investors Fund and the Growth Investors Fund since their inception. During the period May 1, 1994 through April 30, 1995, the Adviser earned $385,818 in management fees from the Conservative Investors Fund (an additional $217,650 in fees were waived) and $464,336 from the Growth Investors Fund (an additional $350,235 in fees were waived). During the period July 23, 1993 through the fiscal year ended April 30, 1994, the Adviser earned $202,051 in management fees from the Conservative Investors Fund (an additional $164,848 in fees were waived) and $173,868 from the Growth Investors Fund (an additional $215,813 in fees were waived). During the period May 1, 1993 to July 22, 1993, Equitable Capital earned $42,814 in management fees from the Conservative Investors Fund (an additional $31,138 in fees were waived) and $33,175 from the Growth Investors Fund (an additional $25,249 in fees were waived). During the period May 4, 1992 through the fiscal year ended April 30, 1993, Equitable Capital earned $739 in management fees from the Conservative Investors Fund (an additional $51,602 in fees were waived) and $0 from the Growth Investors Fund ($39,694 in fees were waived). The Investment Advisory Contract provides that it will continue in effect for two years from its date of execution and thereafter from year to year if its continuance is approved at least annually (i) by the Board of Trustees or by vote of a majority of the outstanding voting securities of the relevant Fund, and (ii) by vote of a majority of the Trustees who are not interested persons of the Adviser cast in person at a meeting called for the purpose of voting on such approval. Any amendment to the Investment Advisory Contract must be approved by vote of a majority of the outstanding voting securities of the relevant Fund and by vote of a majority of the Trustees who are not such interested persons, cast in person at a meeting called for the purpose of voting on such approval. The Investment Advisory Contract may be terminated without penalty by the Adviser, by vote of the Trustees or by vote of a majority of the outstanding voting securities of the relevant Fund upon sixty days' written notice, and it terminates automatically in the event of its 44 assignment. The Adviser controls the word "Alliance" in the names of the Trust and each Fund, and if Alliance should cease to be the investment manager of any Fund, the Trust and such Fund may be required to change their names and delete that word. The Investment Advisory Contract provides that Alliance shall not be subject to any liability in connection with the performance of its services thereunder in the absence of willful misfeasance, bad faith, gross negligence or reckless disregard of its obligations and duties. Trustees and Officers The Trustees and principal officers of the Trust, their ages as of the date of this Statement of Additional Information and their primary occupations during the past five years are set forth below. Trustees *John D. Carifa, 50, 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. Alberta B. Arthurs, 62, is the Director for Arts and Humanities for The Rockefeller Foundation. Her address is 1133 Avenue of the Americas, New York, New York 10036. Ruth Block, 64, was formerly an Executive Vice President and the Chief Insurance Officer of The Equitable Life Assurance Society of the United States. She is a Director of Ecolab Incorporated (specialty chemicals) and Amoco Corporation (oil and gas). Her address is Box 4653, Stamford, Connecticut 06903. Richard W. Couper, 72, is President Emeritus and Trustee of The Woodrow Wilson Fellowship Foundation and President Emeritus of the New York Public Library. His address is Box 345, Clinton, New York 13323-0345. Brenton W. Harries, 67, 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, 61, was formerly a partner at Orrick, Herrington & Sutcliffe and is currently of counsel to 45 that firm. His address is 599 Lexington Avenue, 26th Floor, New York, New York 10022. The Trust pays no compensation to its officers or to the Trustee listed above who is an interested person of the Trust. The Trustees who are not interested persons of the Trust receive an annual fee of $20,000 and a fee of $1,000 for each meeting of the Board of Trustees attended and $500 for each committee meeting of the Board of Trustees attended ($750 in the case of the chairman of the committee). Trustees are also reimbursed for any expenses incurred in attending meetings of the Board of Trustees. The aggregate compensation paid to each of the Trustees during the fiscal year ended April 30, 1995 and by all of the registered investment companies to which the Adviser provides investment advisory services (collectively, the "Alliance Fund Complex"), are set forth on the next page. Pension Total Retirement Compensation Aggregate Aggregate Benefits Estimated from the Compensation Compensation Accrued As Annual Alliance Fund from the from the Part of Benefits Complex, Conservative Growth Trust Upon Including Name Investors Investors Expenses Retirement the Trust ___________ ____________ ____________ __________ __________ ____________ John D. Carifa $ 0 $ 0 $ 0 $ 0 $ 0 Alberta B. Arthurs $ 4,800 $ 4,800 $ 0 $ 0 $ 26,500 Ruth Block $ 5,000 $ 5,000 $ 0 $ 0 $ 157,000 Richard W. Couper $ 5,000 $ 5,000 $ 0 $ 0 $ 27,500 Brenton W. Harries $ 5,000 $ 5,000 $ 0 $ 0 $ 25,000 Donald J. Robinson $ 5,000 $ 5,000 $ 0 $ 0 $ 27,000 ____________________ * The information in this column represents amounts actually paid during calendar year 1994. There are 103 investment companies in the Alliance Fund Complex. 46 Officers *John D. Carifa, President, see biography above. Edmund P. Bergan, Jr., 45, Clerk, is a Senior Vice President and General Counsel of Alliance Fund Distributors, Inc. His address is 1345 Avenue of the Americas, New York, New York 10105. Mark D. Gersten, 44, 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. Patrick J. Farrell, 35, Controller and Chief Accounting Officer, is a Vice President of Alliance Fund Services, Inc. His address is 500 Plaza Drive, Secaucus, New Jersey 07094. Kathleen A. Corbet, 35, Vice President, is, since July 23, 1993, a Senior Vice President of Alliance Capital Management Corporation, the general partner of Alliance Capital Management L.P. She is also Vice President of The Hudson River Trust. She was formerly Executive Vice President of Equitable Capital. Her address is 1345 Avenue of the Americas, New York, New York 10105. Franklin Kennedy III, 53, Vice President, is, since July 23, 1993, Senior Vice President of Alliance Capital Management Corporation, the general partner of Alliance Capital Management L.P. His address is 1345 Avenue of the Americas, New York, New York 10150. Barbara J. Krumsiek, 43, Vice President - Marketing, is, since July 23, 1993, a Senior Vice President of Alliance Fund Distributors, Inc. She was formerly an Investment Officer of Equitable, Senior Vice President of Equitable Capital and Vice President of Equitable Variable Life Insurance Company. Her address is 1345 Avenue of the Americas, New York, New York 10105. As of the date of this Statement of Additional Information, the Trust believes that the officers and Trustees of the Trust as a group owned beneficially less than 1.00% of the outstanding shares of any Fund or of the Trust as a whole. ___________________ * An "interested person" of the Trust, as defined by the 1940 Act. 47 The Trust undertakes to provide assistance to shareholders in communications concerning the removal of any Trustee of the Trust in accordance with Section 16 of the 1940 Act. PORTFOLIO TRANSACTIONS Under the general supervision of the Board of Trustees, the Adviser makes the Funds' portfolio decisions and determines the broker to be used in each specific transaction with the objective of negotiating a combination of the most favorable commission and the best price obtainable on each transaction (generally defined as best execution). When consistent with the objective of obtaining best execution, brokerage may be directed to persons or firms supplying investment information to the Adviser. Neither the Funds nor the Adviser have entered into agreements or understandings with any brokers regarding the placement of securities transactions because of research services they provide. To the extent that such persons or firms supply investment information to the Adviser for use in rendering investment advice to the Funds, such information may be supplied at no cost to the Adviser and, therefore, may have the effect of reducing the expenses of the Adviser in rendering advice to the Funds. While it is impossible to place an actual dollar value on such investment information, its receipt by the Adviser probably does not reduce the overall expenses of the Adviser to any material extent. The investment information provided to the Adviser is of the type described in Section 28(e) of the Securities Exchange Act of 1934, as amended, and is designed to augment the Adviser's own internal research and investment strategy capabilities. Research services furnished by brokers through which the Funds effect securities transactions are used by the Adviser in carrying out its investment management responsibilities with respect to all its clients' accounts. There may be occasions where the transaction cost charged by a broker may be greater than that which another broker may charge if it is determined in good faith that the amount of such transaction cost is reasonable in relation to the value of brokerage and research services provided by the executing broker. The Funds may deal in some instances in securities which are not listed on a national securities exchange but are traded in the over-the-counter market. They may also purchase listed securities through the third market. Where transactions are executed in the over-the-counter market or third market, the Funds will seek to deal with the primary market makers; but when necessary in order to obtain best execution, they will utilize the services of others. 48 Aggregate securities transactions for the Funds during the fiscal year ended April 30, 1995 were as follows: with respect to the Conservative Investors Fund, $207,531,166 and, in connection therewith, brokerage commissions of $3,758 (100%) were allocated to persons or firms supplying research information; and with respect to the Growth Investors Fund, $154,095,965 and, in connection therewith, brokerage commission of $143,563 (100%) were allocated to persons or firms supplying research information. Aggregate securities transactions for the Funds during the fiscal year ended April 30, 1994 were as follows: with respect to the Conservative Investors Fund, $92,313,848 and, in connection therewith, brokerage commissions of $10,178 (100%) were allocated to persons or firms supplying research information; and with respect to the Growth Investors Fund, $60,632,954 and, in connection therewith, brokerage commissions of $45,808 (100%) were allocated to persons or firms supplying research information. For the fiscal year ended April 30, 1995, the Conservative Investors Fund paid an aggregate of $3,758 in brokerage commissions; and the Growth Investors Fund paid an aggregate of $143,563 in brokerage commissions. For the fiscal year ended April 30, 1994, the Conservative Investors Fund paid an aggregate of $10,178 in brokerage commissions; and the Growth Investors Fund paid an aggregate of $45,808 in brokerage commissions. For the fiscal year ended April 30, 1993, the Conservative Investors Fund paid an aggregate of $2,650 in brokerage commissions; and the Growth Investors Fund paid an aggregate of $11,308 in brokerage commissions. The Funds may from time to time place orders for the purchase or sale of securities (including listed call options) with Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ") and with brokers which may have their transactions cleared or settled, or both, by the Pershing Division of DLJ, for which DLJ may receive a portion of the brokerage commission in accordance with the requirements of Section 11(a) of the Securities Exchange Act of 1934, as amended. 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 49 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. Pursuant to Section 11(a) of the Securities Exchange Act of 1934, as amended, DLJ and its affiliates are restricted as to the nature and extent of the brokerage services they may perform for the Funds. Consistent with such restrictions, DLJ and its affiliates may receive compensation relating to transactions in portfolio securities of the Funds. The Adviser may effect transactions in portfolio securities of the Funds through DLJ and through unaffiliated brokers for which the Pershing Division of DLJ provides clearance and settlement services and is compensated for such services. The brokerage transactions engaged in by the Funds with DLJ and its affiliates during the fiscal years ended April 30, 1993, April 30, 1994 and April 30, 1995 are set forth below: % of Fund's % of Fund's Amount of Aggregate Aggregate Fiscal Year Brokerage Brokerage Dollar Amount Ended Fund Commission Commissions of Transactions ___________ ____ __________ ___________ _______________ 1995 Growth Investors $33 0% 0% 1994 N.A. None None None 1993 N.A. None None None The annual portfolio turnover rates of the securities of the Conservative Investors Fund and the Growth Investors Fund for the year ended April 30, 1995 were 248% and 134%, respectively. 50 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 shares, Class B shares and Class C shares constitutes a service fee that the Principal Underwriter will use for personal service and/or the maintenance of shareholder accounts. The Plans also provide that the Adviser may use its own resources, which may include management fees received by the Adviser from the Trust or other investment companies which it 51 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 $47,590 and $58,355 with respect to the Class A shares of the Conservative Investors Fund and the Growth Investors Fund, respectively, during the fiscal year ended April 30, 1995. For services rendered by the Principal Underwriter and Equico Securities, Inc., the Trust's prior principal underwriter ("Equico"), in connection with the distribution of Class A shares pursuant to the Plan applicable to such shares, Equico received $3,700 and $2,574 with respect to the Class A shares of the Conservative Investors Fund and the Growth Investors Fund, respectively, during the fiscal year ended April 30, 1994; and 52 the Principal Underwriter received $26,447 and $21,336 with respect to the Class A shares of the Conservative Investors Fund and the Growth Investors Fund, respectively, during the fiscal year ended April 30, 1994. For services rendered by the Principal Underwriter in connection with the distribution of Class B shares pursuant to the Plan applicable to such shares, the Principal Underwriter received $307,217 and $385,615 with respect to the Class B shares of the Conservative Investors Fund and the Growth Investors Fund, respectively, during the fiscal year ended April 30, 1995. For services rendered by the Principal Underwriter and Equico in connection with the distribution of Class B shares pursuant to the Plan applicable to such shares, Equico received $29,317 and $24,700 with respect to the Class B shares of the Conservative Investors Fund and the Growth Investors Fund, respectively, during the fiscal year ended April 30, 1994; and the Principal Underwriter received $165,904 and $149,494 with respect to the Class B shares of the Conservative Investors Fund and the Growth Investors Fund, respectively, during the fiscal year ended April 30, 1994. For services rendered by the Principal Underwriter in connection with the distribution of Class C shares pursuant to the Plan applicable to such shares, the Principal Underwriter received $48,572 and $38,982 with respect to the Class C shares of the Conservative Investors Fund and the Growth Investors Fund, respectively, during the fiscal year ended April 30, 1995. For services rendered by the Principal Underwriter in connection with the distribution of Class C shares pursuant to the Plan applicable to such shares, the Principal Underwriter received $15,339 and $11,203 with respect to the Class C shares of the Conservative Investors Fund and the Growth Investors Fund, respectively, during the fiscal year ended April 30, 1994. The Principal Underwriter has informed the Trust that expenses incurred by it and costs allocated to it in connection with activities primarily intended to result in the sale of Class A, Class B, and Class C shares, respectively, were as follows for the periods indicated: 53 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, 1995) April 30, 1995) April 30, 1995) Advertising/Marketing $ 48,495 $ 86,624 $ 31,142 Printing and Mailing $ 4,659 $ 9,386 $ 4,680 of Prospectuses and Semi-Annual and Annual Reports to Other than Current Shareholders Compensation to $ 4,912 $ 12,603 $ 4,306 Underwriters Compensation to Dealers Compensation to Sales $ 83,269 $453,909 $ 73,404 Personnel Interest, Carrying and $ 0 $ 0 $ 0 Other Financing Charges Other (includes personnel $ 60,952 $ 68,437 $ 33,353 costs of those home office employees involved in the distribution effort and the travel-related expenses incurred by the marketing personnel conducting seminars) $202,287 $630,959 $146,885 ======== ======== ======== 54 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, 1995) April 30, 1995) April 30, 1995) Advertising/Marketing $ 57,874 $ 102,377 $19,893 Printing and Mailing $ 6,564 $ 10,755 $ 4,612 of Prospectuses and Semi-Annual and Annual Reports to Other than Current Shareholders Compensation to $ 7,063 $ 22,176 $ 3,529 Underwriters Compensation to Dealers Compensation to Sales $ 91,892 $ 787,483 $52,170 Personnel Interest, Carrying and $ 0 $ 0 $ 0 Other Financing Charges Other (includes personnel $ 79,141 $ 78,534 $18,467 costs of those home office employees involved in the distribution effort and the travel-related expenses incurred by the marketing personnel conducting seminars) $242,534 $1,001,325 $98,671 ======== ========== ======= Custodial Arrangements State Street Bank and Trust Company, 225 Franklin Street, Boston, MA, 02110 ("State Street Bank") is the Trust's custodian. 55 Transfer Agency Arrangements Alliance Fund Services, Inc., an indirect wholly-owned subsidiary of the Adviser, receives a transfer agency fee per account holder of the Funds, plus reimbursement for out-of- pocket expenses. PURCHASE OF SHARES The following information supplements that set forth in the Prospectus under the heading "Purchase and Sale of Shares -- How To Buy Shares." General Shares of the Funds are offered on a continuous basis at a price equal to their net asset value plus an initial sales charge at the time of purchase (the "initial sales charge alternative"), with a contingent deferred sales charge (the "deferred sales charge alternative"), or without any initial or contingent deferred sales charge (the "asset-based sales charge alternative"), as described below. Shares of the Funds are offered on a continuous basis through (i) investment dealers that are members of the National Association of Securities Dealers, Inc. and have entered into selected dealer agreements with the Principal Underwriter ("selected dealers"), (ii) depository institutions and other financial intermediaries or their affiliates, that have entered into selected agent agreements with the Principal Underwriter ("selected agents"), or (iii) the Principal Underwriter. The minimum for initial investments is $250; subsequent investments (other than reinvestments of dividends and capital gains distributions in shares) must be in the minimum amount of $50. As described under "Shareholder Services," the Funds offer an automatic investment program and a 403(b)(7) retirement plan which permit investments of $25 or more. The subscriber may use the Subscription Application found in the Prospectus for his or her initial investment. Sales personnel of selected dealers and agents distributing the Funds' shares may receive differing compensation for selling Class A, Class B 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. The Funds reserve the right to 56 suspend the sale of their shares to the public in response to conditions in the securities markets or for other reasons. The public offering price of shares of the Funds is their net asset value, plus, in the case of most purchases of Class A shares, a sales charge which will vary depending on the amount of the purchase, as shown in the table in the Prospectus. On each Fund business day on which a purchase or redemption order is received by a Fund and trading in the types of securities in which the Fund invests might materially affect the value of Fund shares, the per share net asset value is computed in accordance with the Trust's Agreement and Declaration of Trust and By-Laws as of the next close of regular trading on the New York Stock Exchange (the "Exchange") (currently 4:00 p.m. New York time) by dividing the value of the total assets attributable to a class, less its liabilities, by the total number of its shares then outstanding. 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 be lower than the per share net asset value of the Class A shares as a result of the daily expense accruals of the distribution and transfer agency fees applicable with respect to the Class B and Class C shares. Even under those circumstances, the per share net asset values of the three classes eventually will tend to converge immediately after the payment of dividends, which will differ by approximately the amount of the expense accrual differential among the classes. A Fund business day is any weekday, exclusive of national holidays on which the Exchange is closed and Good Friday. For purposes of this computation, the securities in a Fund's portfolio are valued at their current market value determined on the basis of market quotations or, if such quotations are not readily available, such other methods as the Trustees believe would accurately reflect fair market value. The Funds will accept unconditional orders for their shares to be executed at the public offering price equal to their net asset value next determined (plus applicable Class A sales charges). Orders received by the Principal Underwriter prior to the close of regular trading on the Exchange on each day the Exchange is open for trading are priced at the net asset value computed as of the close of regular trading on the Exchange on that day (plus applicable Class A sales charges). In the case of orders for purchase of shares placed through selected dealers or agents, the applicable public offering price will be the net asset value as so determined, but only if the selected dealer or agent receives the order prior to the close of regular trading on the Exchange and transmits it to the Principal Underwriter prior to its close of business that same day (normally 5:00 p.m. New 57 York time). The selected dealer or agent is responsible for transmitting such orders by 5:00 p.m. If the selected dealer or agent fails to do so, the investor's right to that day's closing price must be settled between the investor and the selected dealer or agent. If the selected dealer or agent receives the order after the close of regular trading on the Exchange, the price will be based on the net asset value determined as of the close of regular trading on the Exchange on the next day it is open for trading. Following the initial purchase of Fund shares, a shareholder may place orders to purchase additional shares by telephone if the shareholder has completed the appropriate portion of the Subscription Application or an "Autobuy" application obtained by calling the "Literature" telephone number shown on the cover of this Statement of Additional Information. 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. New York time on a Fund business day, the order to purchase shares is automatically placed the following Fund business day, and the applicable public offering price will be the public offering price determined as of the close of business on such following business day. Full and fractional shares are credited to a subscriber's account in the amount of his or her subscription. As a convenience to the subscriber, and to avoid unnecessary expense to the Fund, share certificates representing shares of the Fund are not issued except upon written request to the Fund by the shareholder or his or her authorized selected dealer or agent. This facilitates later redemption and relieves the shareholder of the responsibility for and inconvenience of lost or stolen certificates. No certificates are issued for fractional shares, although such shares remain in the shareholder's account on the books of the Fund. In addition to the discount or commission amount paid to dealers or agents, the Principal Underwriter from time to time pays additional cash bonuses or other incentives to dealers or agents, including Equico Securities, an affiliate of the Principal Underwriter, in connection with the sale of shares of the Funds. Such additional amounts may be utilized, in whole or in part, to provide additional compensation to registered representatives who sell shares of the Funds. On some occasions, such cash or other incentives will be conditioned upon the sale of a specified minimum dollar amount of the shares of a Fund and/or other Alliance Mutual Funds, as defined below, during a specific period of time. On some occasions, such cash or other incentives may take the form of payment for attendance at 58 seminars, meals, sporting events or theater performances, or payment incurred in connection with travel, lodging and entertainment by persons associated with a dealer or agent and their immediate family members to urban or resort locations within or outside the United States. Such dealer or agent may elect to receive cash incentives of equivalent amount in lieu of such payments. Alternative Purchase Arrangements Each Fund issues three classes of shares: Class A shares are sold to investors choosing the initial sales charge alternative, Class B shares are sold to investors choosing the deferred sales charge alternative, and Class C shares are sold to investors choosing the asset-based sales charge alternative. The three classes of shares each represent an interest in the same portfolio of investments of a 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 shares bear the expense of the contingent deferred sales charge, (ii) Class B shares and Class C shares each bear the expense of a higher distribution services fee and in the case of Class B shares, higher transfer agency costs, (iii) each class has exclusive voting rights with respect to 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, and (iv) only the Class B shares are subject to a conversion feature. Each class has different exchange privileges and certain different shareholder service options available. The alternative purchase arrangements permit an investor to choose the method of purchasing shares that is most beneficial given the amount of the purchase, the length of time the investor expects to hold the shares, and other circumstances. Investors should consider whether, during the anticipated life of their investment in a Fund, the accumulated distribution services fee and contingent deferred sales charges on Class B shares prior to conversion, or the accumulated distribution services fee 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. 59 Class C shares will normally not be suitable for the investor who qualifies to purchase Class A shares at net asset value. For this reason, the Principal Underwriter will reject any order for more than $5,000,000 for Class C shares. Class A shares are subject to a lower distribution services fee and, accordingly, pay correspondingly higher dividends per share than Class B shares or Class C shares. However, because initial sales charges are deducted at the time of purchase, most investors purchasing Class A shares would not have all their funds invested initially and, therefore, would initially own fewer shares. Investors not qualifying for reduced initial sales charges who expect to maintain their investment for an extended period of time might consider purchasing Class A shares because the accumulated continuing distribution charges on Class B shares or Class C shares may exceed the initial sales charge on Class A shares during the life of the investment. Again, however, such investors must weigh this consideration against the fact that, because of such initial sales charges, not all their funds will be invested initially. Other investors might determine, however, that it would be more advantageous to purchase Class B shares or Class C shares in order to have all their funds invested initially, although remaining subject to higher continuing distribution charges and, in the case of Class B shares, being subject to a contingent deferred sales charge. For example, based on current fees and expenses, an investor subject to the 4.25% initial sales charge would have to hold his or her investment approximately seven years for the Class C distribution services fee to exceed the initial sales charge plus the accumulated distribution services fee of Class A shares. In this example, an investor intending to maintain his or her investment for a longer period might consider purchasing Class A shares. This example does not take into account the time value of money, which further reduces the impact of the Class C distribution services fees on the investment, fluctuations in net asset value or the effect of different performance assumptions. Those investors who prefer to have all of their funds invested initially but may not wish to retain Fund shares for the period during which Class B shares are subject to a contingent deferred sales charge may find it more advantageous to purchase Class C shares. 60 On an ongoing basis, the Trustees of the Trust, pursuant to their fiduciary duties under the 1940 Act and state laws will seek to ensure that no such conflict arises. Initial Sales Charge Alternative--Class A Shares The public offering price of Class A shares for purchasers choosing the initial sales charge alternative is the net asset value plus a sales charge, as set forth in the Prospectus. With respect to purchases of $1,000,000 or more, Class A shares redeemed within one year of purchase will be subject to a contingent deferred sales charge equal to 1% of the lesser of the cost of the shares being redeemed or their net asset value at the time of redemption. Accordingly, no sales charge will be imposed on increases in net asset value above the initial purchase price. In addition, no charge will be assessed on shares derived from reinvestment of dividends or capital gains distributions. The contingent deferred sales charge on Class A shares will be waived on certain redemptions, and such charge will be applied to redemptions of shares by shareholders who hold both Class A and Class B shares, as described below under "Deferred Sales Charge Alternative -- Class B Shares." Proceeds from the contingent deferred sales charge on Class A shares are paid to the Principal Underwriter and are used by the Principal Underwriter to defray the expenses of the Principal Underwriter related to providing distribution-related services to the Funds in connection with sales of Class A shares, such as the payment of compensation to selected dealers and agents for selling Class A Shares. With respect to purchases of $5,000,000 or more made through selected dealers or agents, the Adviser may, pursuant to the Rule 12b-1 Plans described above, pay such dealers or agents from its own resources a fee of up to 1% of the amount invested to compensate such dealers or agents for their distribution assistance in connection with such purchases. Shares issued pursuant to the automatic reinvestment of income dividends or capital gains distributions are not subject to any sales charges. 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 61 indicated in the table in the Prospectus. The Principal Underwriter may, however, elect to reallow the entire sales charge to selected dealers and agents for all sales with respect to which orders are placed with the Principal Underwriter. A selected dealer who receives a reallowance in excess of 90% of such a sales charge may be deemed to be an "underwriter" under the Securities Act of 1933, as amended. Set forth below is an example of the method of computing the offering price of the Class A shares. The example assumes a purchase of Class A shares of the Conservative Investors Fund and of the Growth Investors Fund aggregating less than $100,000 subject to the schedule of sales charges set forth in the Prospectus at a price based upon the net asset value of Class A shares of the Fund on April 30, 1995. Conservative Investors Fund Net Asset Value per Class A Share at April 30, 1995 $ 10.38 Per Share Sales Charge - 4.25% of offering price (4.44% of net asset value per share) $ 0.46 Class A Per Share Offering Price to the Public $ 10.84 = ===== Growth Investors Fund Net Asset Value per Class A Share at April 30, 1995 $ 12.08 Per Share Sales Charge - 4.25% of offering price (4.44% of net asset value per share) $ 0.54 Class A Per Share Offering Price to the Public $ 12.62 = ===== 62 Any investor choosing the initial sales charge alternative may under certain circumstances be entitled to pay a reduced initial sales charge or no initial sales charge (but may nevertheless be subject in most cases to a contingent deferred sales charge). The circumstances under which such an investor may pay a reduced initial sales charge or no initial sales charge are described below. Combined Purchase Privilege. Certain persons may qualify for the sales charge reductions indicated in the schedule of such charges shown in the Prospectus by combining purchases of shares of a Fund into a single "purchase," if the resulting "purchase" totals at least $100,000. The term "purchase" refers to: (i) a single purchase by an individual, or to concurrent purchases, which in the aggregate are at least equal to the prescribed amounts, by an individual, his or her spouse and their children under the age of 21 years purchasing shares of a Fund for his, her or their own account(s); (ii) a single purchase by a trustee or other fiduciary purchasing shares for a single trust, estate or single fiduciary account although more than one beneficiary is involved; or (iii) a single purchase for the employee benefit plans of a single employer. The term "purchase" also includes purchases by any "company," as that term is defined in the 1940 Act, but does not include purchases by any such company which has not been in existence for at least six months or which has no purpose other than the purchase of shares of a Fund or shares of other registered investment companies at a discount. The term "purchase" does not include purchases by any group of individuals whose sole organizational nexus is that the participants therein are credit card holders of a company, policy holders of an insurance company, customers of either a bank or broker-dealer or clients of an investment adviser. A "purchase" may also include shares, purchased at the same time through a single selected dealer or agent, of any other "Alliance Mutual Fund." Currently, the Alliance Mutual Funds include: ACM Institutional Reserves, Inc. AFD Exchange Reserves, Inc. The Alliance Fund, Inc. Alliance All-Asia Investment Fund, Inc. Alliance Balanced Shares, Inc. Alliance Bond Fund, Inc. - Corporate Bond Portfolio - U.S. Government Portfolio Alliance Capital Reserves - Alliance Capital Reserves Portfolio - Alliance Money Reserves Alliance Counterpoint Fund Alliance Developing Markets Fund, Inc. 63 Alliance Global Dollar Government Fund, Inc. Alliance Global Small Cap Fund, Inc. Alliance Government Reserves - Alliance Government Reserves Portfolio - Alliance Treasury Reserves Portfolio Alliance Growth and Income Fund, Inc. Alliance Income Builder Fund, Inc. Alliance International Fund Alliance Money Market Fund Alliance Mortgage Securities Income Fund, Inc. Alliance Mortgage Strategy Trust, 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 Municipal Trust - Connecticut - California - General - New Jersey - New York - Virginia Alliance New Europe Fund, Inc. Alliance North American Government Income Trust, Inc. Alliance Premier Growth Fund, Inc. Alliance Quasar Fund, Inc. Alliance Short-Term Multi-Market Trust, Inc. Alliance Technology Fund, Inc. Alliance Utility Income Fund, Inc. Alliance Variable Products Series Fund, Inc. - Global Bond Portfolio - Premier Growth Portfolio - Growth Portfolio - Growth & Income Portfolio - International Portfolio - Money Market Portfolio - Short-Term Multi-Market - Total Return Portfolio 64 - U.S. Government/High Grade Securities Portfolio - North American Government Income Portfolio - Global Dollar Government Portfolio - Utility Income Portfolio - Conservative Investors Portfolio - Growth Investors Portfolio - Worldwide Privatization Portfolio Alliance World Income Trust, Inc. Alliance Worldwide Privatization Fund, Inc. Fiduciary Management Associates - Growth Portfolio The Hudson River Trust - Aggressive Stock Portfolio - Balanced Portfolio - Common Stock Portfolio - Conservative Investors Portfolio - Global Portfolio - Growth & Income Portfolio - Growth Investors Portfolio - High Yield Portfolio - Intermediate Government Securities - Money Market Portfolio - Quality Bond Portfolio - Equity Index Portfolio The Alliance Fund, Inc. The Alliance Portfolios - The Alliance Growth Fund - The Alliance Conservative Investors Fund - The Alliance Growth Investors Fund - The Alliance Strategic Balanced Fund - The Alliance Short-Term U.S. Government Fund Prospectuses for the Alliance Mutual Funds may be obtained without charge by contacting Alliance Fund Services, Inc. at the address or the "Literature" telephone number shown on the front cover of this Statement of Additional Information. 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 65 (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 sales charge for the $100,000 purchase would be at the rate applicable to a single $300,000 purchase of shares of the Fund. To qualify for the Combined Purchase Privilege or to obtain the Cumulative Quantity Discount on a purchase through a selected dealer or agent, the investor or selected dealer or agent must provide the Principal Underwriter with sufficient information to verify that each purchase qualifies for the privilege or discount. Statement of Intention. Class A investors may also obtain the reduced initial sales charges shown in the Prospectus by means of a written Statement of Intention, which expresses the investor's intention to invest not less than $100,000 within a period of 13 months in Class A shares (or Class A, Class B 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 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 be necessary to invest only a total of $60,000 during the following 13 months in shares of the Fund or any other Alliance Mutual Fund to qualify for the initial 66 sales charge on the total amount being invested, i.e., the initial sales charge applicable to an investment of $100,000. The Statement of Intention is not a binding obligation upon the investor to purchase the full amount indicated. The minimum initial investment under a Statement of Intention is 5% of such amount. Shares purchased with the first 5% of such amount will be held in escrow (while remaining registered in the name of the investor) to secure payment of the higher initial sales charge applicable to the shares actually purchased if the full amount indicated is not purchased, and such escrowed shares will be involuntarily redeemed to pay the additional sales charge, if necessary. Dividends on escrowed shares, whether paid in cash or reinvested in additional Fund shares, are not subject to escrow. When the full amount indicated has been purchased, the escrow will be released. To the extent that an investor purchases more than the dollar amount indicated on the Statement of Intention and qualifies for a further reduced sales charge, the initial sales charge will be adjusted for the entire amount purchased at the end of the 13-month period. The difference in the initial sales charge will be used to purchase additional shares of a Fund subject to the rate of sales charge applicable to the actual amount of the aggregate purchases. Investors wishing to enter into a Statement of Intention in conjunction with their initial investment in Class A shares of a Fund should complete the appropriate portion of the Subscription Application found in the Prospectus while current Class A shareholders desiring to do so can obtain a form of Statement of Intention by contacting Alliance Fund Services, Inc. at the address or telephone numbers shown on the cover of this Statement of Additional Information. Certain Retirement Plans. Multiple participant payroll deduction retirement plans may also purchase shares of a Fund or any other Alliance Mutual Fund at a reduced initial sales charge on a monthly basis during the 13-month period following such a plan's initial purchase. The initial sales charge applicable to such initial purchase of shares of a Fund will be that normally applicable, under the schedule of the initial sales charges set forth in the Prospectus, 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 current month's purchase multiplied by the number of months (including the current month) remaining in the 13-month period, and (ii) the total purchase previously made during the 13-month 67 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 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 such reinvestment is made within 30 calendar days after the redemption or repurchase date. Shares are sold to a reinvesting shareholder at the net asset value next determined as described above. A reinstatement pursuant to this privilege will not cancel the redemption or repurchase transaction; therefore, any gain or loss so realized will be recognized for Federal tax purposes except that no loss will be recognized to the extent that the proceeds are reinvested in shares of the Fund. The reinstatement privilege may be used by the shareholder only once, irrespective of the number of shares redeemed or repurchased, except that the privilege may be used without limit in connection with transactions whose sole purpose is to transfer a shareholder's interest in a Fund to his or her individual retirement account or other qualified retirement plan account. Investors may exercise the reinstatement privilege by written request sent to a Fund at the address shown on the cover of this Statement of Additional Information. Sales at Net Asset Value. The Funds may sell their Class A shares at net asset value (i.e., without any initial sales charge), and without any contingent deferred sales charge to certain categories of investors including: (i) investment advisory clients of the Adviser or its affiliates; (ii) officers and present or former Trustees of the Trust; present or former directors and trustees of other investment companies managed by the Adviser; present or retired full-time employees of the Adviser; officers, directors and present or retired full-time employees of ACMC, the Principal Underwriter, Alliance Fund Services, Inc. and their affiliates; officers, directors and present and full-time employees of selected dealers or agents; or the spouse, sibling, direct ancestor or direct descendant (collectively "relatives") of any such person; or any trust, individual retirement account or retirement plan account for the benefit of any such person or relative; or the estate of any such person or relative, if such shares are purchased for investment purposes (such shares may not be resold except to the relevant Fund); (iii) certain employee benefit plans for employees of the Adviser, the Principal Underwriter, Alliance Fund Services, Inc. and their affiliates; and (iv) persons participating in a fee- 68 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. Deferred Sales Charge Alternative--Class B Shares Investors choosing the deferred sales charge alternative purchase Class B shares at the public offering price equal to the net asset value per share of the Class B shares on the date of purchase without the imposition of a sales charge at the time of purchase. The Class B shares are sold without an initial sales charge so that the Funds will receive the full amount of the investor's purchase payment. Proceeds from the contingent deferred sales charge on the Class B shares are paid to the Principal Underwriter and are used by the Principal Underwriter to defray the expenses of the Principal Underwriter related to providing distribution-related services to the Funds in connection with the sale of the Class B shares, such as the payment of compensation to selected dealers and agents for selling Class B shares. The combination of the contingent deferred sales charge and the distribution services fee enables the Funds to sell Class B shares without a sales charge being deducted at the time of purchase. The higher distribution services fee incurred by Class B shares will cause such shares to have a higher expense ratio and to pay lower dividends than those related to Class A shares. Contingent Deferred Sales Charge. Class B shares which are redeemed within four years of purchase will be subject to a contingent deferred sales charge at the rates set forth below charged as a percentage of the dollar amount subject thereto. The charge will be assessed on an amount equal to the lesser of the cost of the shares being redeemed or their net asset value at the time of redemption. Accordingly, no sales charge will be imposed on increases in net asset value above the initial purchase price. In addition, no charge will be assessed on shares derived from reinvestment of dividends or capital gains distributions. To illustrate, assume that an investor purchased 100 Class B shares at $10 per share (at a cost of $1,000) and in the second year after purchase the net asset value per share is $12 69 and, during such time, the investor has acquired 10 additional Class B shares upon dividend reinvestment. If at such time the investor makes his or her first redemption of 50 Class B shares (proceeds of $600), 10 Class B shares will not be subject to charge because of dividend reinvestment. With respect to the remaining 40 Class B shares, the charge is applied only to the original cost of $10 per share and not to the increase in net asset value of $2 per share. Therefore, $400 of the $600 redemption proceeds will be charged at a rate of 3.0% (the applicable rate in the second year after purchase, as set forth below). The amount of the contingent deferred sales charge, if any, will vary depending on the number of years from the time of payment for the purchase of Class B shares until the time of redemption of such shares. Contingent Deferred Sales Charge as a % of Dollar Amount ________________________________________________________ Shares Purchased On or After Years since Shares Purchased August 2, 1993 Shares Purchased Purchase Before but Before On or After Subject to Change August 2, 1993 November 19, 1993 November 19, 1993 _________________ ________________ _________________ _________________ First 5.00% 3.00% 4.00% Second 4.00% 2.00% 3.00% Third 3.00% 1.00% 2.00% Fourth 1.00% 1.00% 1.00% Fifth None None None Sixth None None None In determining the contingent deferred sales charge applicable to a redemption, it will be assumed that the redemption is first of any Class A shares in the shareholder's Fund account that are not subject to a contingent deferred sales 70 charge, second of Class B shares held for over four years and third of Class A shares that are subject to a contingent deferred sales charge held shortest during the one-year period during which such shares are subject to the sales charge, as the case may be. When Class B shares acquired in an exchange are redeemed, the applicable contingent deferred sales charge and conversion schedules will be the schedules that applied to Class B shares of the Alliance Mutual Fund originally purchased by the shareholder at the time of their purchase. The contingent deferred sales charges on Class A shares and Class B shares are 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 and (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. Conversion Feature. Class B shares will automatically convert to Class A shares on the tenth Fund business day in the month following the month in which the eighth anniversary date of the acceptance of the purchase order for the Class B shares occurs and such shares will no longer be subject to a higher distribution services fee. Such conversions will be on the basis of the relative net asset values of the two classes, without the imposition of any sales load, fee or other charge. The purpose of the conversion feature is to reduce the distribution services fee paid by holders of Class B shares that have been outstanding long enough for the Principal Underwriter to have been compensated for distribution expenses incurred in the sale of such shares. See "Shareholder Services -- Exchange Privilege." For purposes of conversion to Class A shares, Class B shares purchased through the reinvestment of dividends and distributions paid in respect of Class B shares in a shareholder's account will be considered to be held in a separate sub-account. Each time any Class B shares in the shareholder's account (other than those in the sub-account) convert to Class A shares, an equal pro-rata portion of the Class B shares in the sub-account will also convert to Class A. 71 The conversion of Class B shares to Class A shares is subject to the continuing availability of an opinion of counsel to the effect that (i) the assessment of the higher distribution services fee and transfer agency costs with respect to Class B shares does not result in a Fund's dividends or distributions constituting "preferential dividends" under the Code, and (ii) the conversion of Class B shares to Class A shares does not constitute a taxable event under federal income tax law. The conversion of Class B shares to Class A shares may be suspended if such an opinion is no longer available at the time such conversion is to occur. In that event, no further conversions of Class B shares would occur, and shares might continue to be subject to the higher distribution services fee for an indefinite period. Asset-Based Sales Charge Alternative--Class C Shares Investors choosing the asset-based sales charge alternative purchase Class C shares at the public offering price equal to the net asset value per share of the Class C shares on the date of purchase without the imposition of a sales charge either at the time of purchase or upon redemption. Class C shares are sold without an initial sales charge so that a Fund will receive the full amount of the investor's purchase payment and 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. Class C shares do not convert to any other class of shares and incur higher distribution services fees than Class A shares, and will thus have a higher expense ratio and pay correspondingly lower dividends than Class A shares. REDEMPTION AND REPURCHASE OF SHARES The following information supplements that set forth in the Funds' Prospectus under the heading "Purchase and Sale of Share--How to Sell Shares." 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 72 next computed following the receipt of shares tendered for redemption in proper form. Except for any contingent deferred sales charge which may be applicable to Class A shares or Class B 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. The right of redemption may not be suspended or the date of payment upon redemption postponed for more than seven days after shares are tendered for redemption, except for any period during which the Exchange is closed (other than customary weekend and holiday closings) or during which the SEC determines that trading thereon is restricted, or for any period during which an emergency (as determined by the SEC) exists as a result of which disposal by a Fund of securities owned by it is not reasonably practicable or as a result of which it is not reasonably practicable for a Fund fairly to determine the value of its net assets, or for such other periods as the Securities and Exchange Commission may by order permit for the protection of security holders of a Fund. Payment of the redemption price may be made either in cash or in portfolio securities (taken at their value used in determining the redemption price), or partly in cash and partly in portfolio securities. However, payments will be made wholly in cash unless economic conditions exist which would make such a practice detrimental to the best interests of the Funds. The Trust has filed a formal election with the SEC pursuant to which the Trust will only effect a redemption in portfolio securities where the particular shareholder of record is redeeming more than $250,000 or 1% of a Fund's total net assets, whichever is less, during any 90-day period. In the opinion of the Trust's management, however, the amount of a redemption request would have to be significantly greater than $250,000 or 1% of total net assets before a redemption wholly or partly in portfolio securities would be made. If payment for shares redeemed is made wholly or partly in portfolio securities, brokerage costs may be incurred by the investor in converting the securities to cash. The value of a shareholder's shares on redemption or repurchase may be more or less than the cost of such shares to the shareholder, depending upon the market value of a Fund's portfolio securities at the time of such redemption or repurchase. Redemption proceeds on Class A shares and Class B shares will reflect the deduction of the contingent deferred sales charge, if any. Payment (either in cash or in portfolio securities) received by a shareholder upon redemption or repurchase of his shares, assuming the shares constitute capital assets in his hands, will result in long-term or short-term 73 capital gains (or loss) depending upon the shareholder's holding period and basis in respect of the shares redeemed. To redeem shares of a Fund for which no share certificates have been issued, the registered owner or owners should forward a letter to the Fund containing a request for redemption. The signature or signatures on the letter must be guaranteed by an institution that is an "eligible guarantor" as defined in Rule 17Ad-15 under the Securities Exchange Act of 1934, as amended. Telephone Redemption By Electronic Funds Transfer. Requests for redemption of shares for which no share certificates have been issued can also be made by telephone at (800) 221-5672 by a shareholder who has completed the appropriate portion of the Subscription Application or, in the case of an existing shareholder, an "Autosell" application obtained from Alliance Fund Services, Inc. A telephone redemption request must be for at least $500 and may not exceed $100,000, and must be made between 9:00 a.m. and 4:00 p.m. New York 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 as noted below, each Fund shareholder is eligible to request redemption, once in any 30-day period, of Fund shares by telephone at (800) 221-5672 before 4:00 p.m. New York time on a Fund business day in an amount not exceeding $25,000. Proceeds of such redemptions are remitted by check to the shareholder's address of record. Telephone redemption by check is not available with respect to shares (i) for which certificates have been issued, (ii) held in nominee or "street name" accounts, (iii) purchased within 15 calendar days prior to the redemption request, (iv) held by a shareholder who has changed his or her address of record within the preceding 30 calendar days or (v) held in any retirement plan account. A shareholder otherwise eligible for telephone redemption by check may cancel the privilege by written instruction to Alliance Fund Services, Inc., or by checking the appropriate box on the Subscription Application found in the Prospectus. General. During periods of drastic economic or market developments, such as the market break of October 1987, it is possible that shareholders would have difficulty in reaching Alliance Fund Services, Inc. by telephone (although no such difficulty was apparent at any time in connection with the 1987 market break). If a shareholder were to experience such difficulty, the shareholder should issue written instructions to 74 Alliance Fund Services, Inc. at the address shown on the cover of this Statement of Additional Information. The Funds reserve the right to suspend or terminate their telephone redemption service at any time without notice. Neither the Funds nor the Adviser, the Principal Underwriter or Alliance Fund Services, Inc. will be responsible for the authenticity of telephone requests for redemptions that a Fund reasonably believes to be genuine. Alliance Fund Services, Inc. will employ reasonable procedures in order to verify that telephone requests for redemptions are genuine, including, among others, recording such telephone instructions and causing written confirmations of the resulting transactions to be sent to shareholders. If Alliance Fund Services, Inc. did not employ such procedures, it could be liable for losses arising from unauthorized or fraudulent telephone instructions. Selected dealers or agents may charge a commission for handling telephone requests for redemptions. To redeem shares of the Funds represented by share certificates, the investor should forward the appropriate share certificate or certificates, endorsed in blank or with blank stock powers attached, to the relevant Fund with the request that the shares represented thereby, or a specified portion thereof, be redeemed. The stock assignment form on the reverse side of each share certificate surrendered to the Fund for redemption must be signed by the registered owner or owners exactly as the registered name appears on the face of the certificate or, alternatively, a stock power signed in the same manner may be attached to the share certificate or certificates or, where tender is made by mail, separately mailed to the relevant Fund. The signature or signatures on the assignment form must be guaranteed in the manner described above. Repurchase The Funds may repurchase shares through the Principal Underwriter or selected dealers or agents. The repurchase price will be the net asset value next determined after the Principal Underwriter receives the request (less the contingent deferred sales charge, if any, with respect to the Class A shares and Class B shares), except that requests placed through selected dealers or agents before the close of regular trading on the Exchange on any day will be executed at the net asset value determined as of such close of regular trading on that day if received by the Principal Underwriter prior to its close of business on that day (normally 5:00 p.m. New York time). The selected dealer or agent is responsible for transmitting the request to the Principal Underwriter by 5:00 p.m. If the selected dealer or agent fails to do so, the shareholder's right to receive that day's closing price must be settled between the shareholder and the dealer or agent. A shareholder may offer 75 shares of a Fund to the Principal Underwriter either directly or through a selected dealer or agent. Neither the Funds nor the Principal Underwriter charges a fee or commission in connection with the repurchase of shares (except for the contingent deferred sales charge, if any, with respect to Class A shares and Class B shares). Normally, if shares of the Funds are offered through a 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 at least 60 days after at least 30 days' written notice to the shareholder subsequent to such period. No contingent deferred sales charge will be deducted from the proceeds of this redemption. In the case of a redemption or repurchase of shares of the Funds recently purchased by check, redemption proceeds will not be made available until the relevant Fund is reasonably assured that the check has cleared, normally up to 15 calendar days following the purchase date. SHAREHOLDER SERVICES The following information supplements that set forth in the Funds' Prospectus under the heading "Purchase and Sale of Shares--Shareholder Services." The shareholder services set forth below are applicable to all three classes of shares of the Funds. Automatic Investment Program Investors may purchase shares of the Funds through an automatic investment program utilizing "pre-authorized check" drafts drawn on the investor's own bank account. Under such a program, pre-authorized monthly drafts for a fixed amount (at least $25) are used to purchase shares through the selected dealer or selected agent designated by the investor at the public offering price next determined after the Principal Underwriter receives the proceeds from the investor's bank. Drafts may be made in paper form or, if the investor's bank is a member of the NACHA, in electronic form. If made in paper form, the draft is normally made on the 20th day of each month, or the next business 76 day thereafter. If made in electronic form, drafts can be made on or about a date each month selected by the shareholder. Investors wishing to establish an automatic investment program in connection with their initial investment should complete the appropriate portion of the Subscription Application found in the Prospectus. Current shareholders should contact Alliance Fund Services, Inc. at the address or telephone numbers shown on the cover of this Statement of Additional Information to establish an automatic investment program. Exchange Privilege Class A shareholders can exchange their Class A shares for Class A shares of any other Alliance Mutual Fund that offers Class A shares without the payment of any sales or service charges. Class A shareholders may also exchange their Class A shares for shares of any of the ten Alliance Cash Management Funds: Alliance Capital Reserves, Alliance Money Reserves, Alliance Government Reserves, Alliance Treasury Reserves and the General, California, Connecticut, New Jersey and New York Portfolios of Alliance Municipal Trust, all of which are money market funds, and Alliance World Income Trust, Inc., a short-term global income fund. For purposes of applying any applicable contingent deferred sales charge upon the newly acquired Class A shares, the period of time that the Class A shares surrendered in the exchange have been held is added to the period of time the newly acquired shares have been held. Prospectuses for each Alliance Mutual Fund and Alliance Cash Management Fund (each an "Alliance Fund") may be obtained by contacting Alliance Fund Services, Inc. at the address shown on the cover of this Statement of Additional Information or by telephone at (800) 227- 4618 or, in Illinois, (800) 227-4170. Class B shareholders of the Funds can exchange their Class B shares ("original Class B shares") for Class B shares of any other Alliance Mutual Fund that offers Class B shares ("new Class B shares") without the payment of any contingent deferred sales or service charges. For purposes of computing both the time remaining before the new Class B shares convert to Class A shares of that fund and the contingent deferred sales charge payable upon disposition of the new Class B shares, the period of time for which the original Class B shares have been held is added to the period of time for which the new Class B shares have been held. 77 Class C shareholders of the Funds can exchange their Class C shares for Class C shares of any other Alliance Mutual Fund that offers Class C shares. All exchanges are subject to the minimum investment requirements and any other applicable terms set forth in the prospectus for the Alliance 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 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 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 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 or agent, are authorized to make telephone requests for exchanges unless Alliance Fund Services, Inc. receives written instruction to the contrary from the shareholder, or the shareholder declines the privilege by checking the appropriate box on the Subscription Application found in the Prospectus. Such telephone requests cannot be accepted with respect to shares then represented by share certificates. Shares acquired pursuant to a telephone request for exchange will be held under the same account registration as the shares redeemed through such exchange. Eligible shareholders desiring to make an exchange should telephone Alliance Fund Services, Inc. with their account number and other details of the exchange at (800) 221-5672 between 9:00 a.m. and 4:00 p.m., New York time, on a Fund business day as defined above. Telephone requests for exchange received before 4:00 p.m. New York time on a Fund business day will be processed as of the close of business on that day. During periods of drastic economic or market developments, such as the market break of October 1987, it is possible that shareholders would have difficulty in reaching Alliance Fund Services, Inc. by telephone (although no such difficulty was apparent at any time in connection with the 1987 market break). If a shareholder were to experience such difficulty, the 78 shareholder should issue written instructions to Alliance Fund Services, Inc. at the address shown on the cover of this Statement of Additional Information. A shareholder may elect to initiate a monthly "Auto Exchange" whereby a specified dollar amount's worth of his or her Fund shares (minimum $25) is automatically exchanged for shares of another Alliance Mutual Fund. Auto Exchange transactions normally occur on the 12th day of each month, or the Fund business day prior thereto. Neither the Alliance Funds nor the Adviser, the Principal Underwriter or Alliance Fund Services, Inc. will be responsible for the authenticity of telephone requests for exchanges that a Fund reasonably believes to be genuine. Alliance Fund Services, Inc. will employ reasonable procedures in order to verify that telephone requests for exchanges are genuine, including, among others, recording such telephone instructions and causing written confirmations of the resulting transactions to be sent to shareholders. If Alliance Fund Services, Inc. did not employ such procedures, it could be liable for losses arising from unauthorized or fraudulent telephone instructions. Selected dealers or agents may charge a commission for handling telephone requests for exchanges. The exchange privilege is available only in states where shares of the Alliance Mutual Funds being acquired may be legally sold. Each Alliance Mutual Fund reserves the right, at any time on 60 days' notice to its shareholders to modify, restrict or terminate the exchange privilege. Retirement Plans The Funds may be a suitable investment vehicle for part or all of the assets held in various types of retirement plans, such as those listed below. The Funds have available forms of such plans pursuant to which investments can be made in a Fund and other Alliance Mutual Funds. Persons desiring information concerning these plans should contact Alliance Fund Services, Inc. at the "Literature" telephone number on the cover of this Statement of Additional Information, or write to: Alliance Fund Services, Inc. Retirement Plans P.O. Box 1520 Secaucus, New Jersey 07096-1520 79 Individual Retirement Account ("IRA"). Individuals who receive compensation, including earnings from self-employment, are entitled to establish and make contributions to an IRA. Taxation of the income and gains paid to an IRA by a Fund is deferred until distribution from the IRA. An individual's eligible contribution to an IRA will be deductible if neither the individual nor his or her spouse is an active participant in an employer-sponsored retirement plan. If the individual or his or her spouse is an active participant in an employer-sponsored retirement plan, the individual's contributions to an IRA may be deductible, in whole or in part, depending on the amount of the adjusted gross income of the individual and his or her spouse. Employer-Sponsored Qualified Retirement Plans. Sole proprietors, partnerships and corporations may sponsor qualified money purchase pension and profit-sharing plans, including Section 401(k) plans ("qualified plans"), under which annual tax- deductible contributions are made within prescribed limits based on compensation paid to participating individuals. If the aggregate net asset value of shares of the Alliance Mutual Funds held by a qualified plan investing through the Alliance Premier Retirement Program reaches $5 million on or before December 15 in any year, all Class B shares or Class C shares of the Fund held by such plan can be exchanged, without any sales charge, for Class A shares of such Fund shortly before the end of the calendar year in which the $5 million level is attained. The Fund waives any contingent deferred sales charge applicable to redemptions of Class B shares by qualified plans investing through the Alliance Premier Retirement Program. Simplified Employee Pension Plan ("SEP"). Sole proprietors, partnerships and corporations may sponsor a SEP under which they make annual tax-deductible contributions to an IRA established by each eligible employee within prescribed limits based on employee compensation. 403(b)(7) Retirement Plan. Certain tax-exempt organizations and public educational institutions may sponsor retirements plans under which an employee may agree that monies deducted from his or her compensation (minimum $25 per pay period) may be contributed by the employer to a custodial account established for the employee under the plan. The Alliance Plans Division of Frontier Trust Company, a subsidiary of The Equitable Life Assurance Society of the United States, which serves as custodian or trustee under the retirement plan prototype forms available from the Funds, charges certain 80 nominal fees for establishing an account and for annual maintenance. A portion of these fees is remitted to Alliance Fund Services, Inc. as compensation for its services to the retirement plan accounts maintained with a Fund. Distributions from retirement plans are subject to certain Code requirements in addition to normal redemption procedures. For additional information please contact Alliance Fund Services, Inc. Dividend Direction Plan A shareholder who already maintains, in addition to his or her Class A, Class B or Class C Fund account, 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 Alliance Fund Services, Inc. at the address or the "Literature" telephone number shown on the cover of this Statement of Additional Information. Investors wishing to establish a dividend direction plan in connection with their initial investment should complete the appropriate section of the Subscription Application found in the Prospectus. Current shareholders should contact Alliance Fund Services, Inc. to establish a dividend direction plan. Systematic Withdrawal Plan 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. 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. 81 A systematic withdrawal plan may be terminated at any time by the shareholder or the relevant Fund. Withdrawal payments will not automatically end when a shareholder's account reaches a certain minimum level. Therefore, redemptions of shares under the plan may reduce or even liquidate a shareholder's account and may subject the shareholder to a Fund's involuntary redemption provisions. See "How to Sell Shares -- General." Purchases of additional shares concurrently with withdrawals are undesirable because of sales charges when purchases are made. While an occasional lump-sum investment may be made by a shareholder of Class A shares who is maintaining a systematic withdrawal plan, such investment should normally be an amount equivalent to three times the annual withdrawal or $5,000, whichever is less. For Class A shareholders, Class B shareholders that purchased their Class B shares under a retirement plan and Class C shareholders, payments under a systematic withdrawal plan may be made by check or electronically via the Automated Clearing House ("ACH") network. Investors wishing to establish a systematic withdrawal plan in conjunction with their initial investment in shares of a Fund should complete the appropriate portion of the Subscription Application found in the Prospectus, while current Fund shareholders desiring to do so can obtain an application form by contacting Alliance Fund Services, Inc. at the address or the "Literature" telephone number shown on the cover of this Statement of Additional Information. Statements and Reports Each shareholder receives semi-annual and annual reports which include a portfolio of investments, financial statements and, in the case of the annual report, the report of the Trust's independent auditors, Price Waterhouse LLP, as well as a confirmation of each purchase and redemption. By contacting his or her broker or Alliance Fund Services, Inc., a shareholder can arrange for copies of his or her account statements to be sent to another person. NET ASSET VALUE The net asset value of a share of each class is the quotient obtained by dividing the value, as of such closing, of the net assets of the Fund allocable to that class (i.e., the value of the assets of the Fund allocated to that class less the liabilities of the Fund allocated to that class, including expenses payable or accrued) by the total number of shares of such class then outstanding at such closing. 82 For purposes of this computation, readily marketable portfolio securities, including open short positions, listed on the Exchange are valued at the last sale price reflected on the consolidated tape at the close of the Exchange on the business day as of which such value is being determined. If there has been no sale on such day, then the security is valued at the mean of the closing bid and asked prices on such day. If no bid and asked prices are quoted on such day, then the security is valued by such method as the Board of Trustees of the Trust shall determine in good faith to reflect its fair market value. Securities not listed on the Exchange but listed on other national securities exchanges or admitted to trading on the National Association of Securities Dealers Automatic Quotations, Inc. ("NASDAQ") National List ("List") are valued in like manner. Portfolio securities traded on more than one national securities exchange are valued at the last sale price on the business day as of which such value is being determined as reflected on the tape at the close of the exchange representing the principal market for such securities. Securities traded only in the over-the-counter market, excluding those admitted to trading on the List, are valued at the mean of the current bid and asked prices therefor as reported by NASDAQ or, in the case of securities not quoted by NASDAQ, the National Quotation Bureau or such other comparable sources as the Board of Trustees of the Trust deems appropriate to reflect the fair market value thereof. Call options written or purchased by a Fund are valued at the last sale price and put options purchased by a Fund are valued at the last sale price. Readily marketable fixed-income securities may be valued on the basis of prices provided by a pricing 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 83 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. DIVIDENDS, DISTRIBUTIONS AND TAXES Each Fund intends to qualify for tax treatment as a "regulated investment company" under the Internal Revenue Code for each taxable year. In order to qualify as a regulated investment company, each Fund must, among other things, (1) derive at least 90% of its gross income from dividends, interest, payments with respect to securities loans, and gains from the sale or other disposition of stock or securities, foreign currencies or other income (including gains from options, futures or forward contracts) derived with respect to its business of investing in stock, securities or currencies, (2) derive less than 30% of its gross income from the sale or other disposition of stock, securities, options, futures, forward contracts, and certain foreign currencies (or options, futures, or forward contracts on foreign currencies held for less than three months), and (3) diversify its holdings so that at the end of each quarter of its taxable year (i) at least 50% of the market value of the Fund's assets is represented by cash or cash items, U.S. Government Securities, securities of other regulated investment companies, and other securities limited, in respect of any one issuer, to an amount not greater than 5% of the value of the Fund's assets and 10% of the outstanding voting securities of such issuer, and (ii) not more than 25% of the value of its assets is invested in the securities of any one issuer (other than U.S. Government Securities or the securities of other regulated investment companies) or of two or more issuers that the Fund controls and that are engaged in the same, similar, or related trades or businesses. These requirements may restrict the degree to which the Fund may engage in short-term trading and limit the range of the Fund's investments. If a Fund qualifies as a regulated investment company, it will not be subject to federal income tax on the part of its income distributed to shareholders, provided the Fund distributes during its taxable year at least (a) 90% of its taxable net investment income 84 (generally, dividends, interest, certain other income, and the excess, if any, of net short- term capital gain over net long- term loss), and (b) 90% of the excess of (i) its tax-exempt interest income less (ii) certain deductions attributable to that income. Each Fund intends to make sufficient distributions to shareholders to meet this requirement. Investors should consult their own counsel for a complete understanding of the requirements the Funds must meet to qualify for such treatment. The information set forth in the Prospectus and the following discussion relates solely to Federal income taxes on dividends and distributions by a Fund and assumes that each Fund qualifies as a regulated investment company. Investors should consult their own counsel for further details and for the application of state and local tax laws to his or her particular situation. Dividends out of net ordinary income and distributions of net short-term capital gains are taxable to shareholders as ordinary income. The dividends-received deduction for corporations should also be applicable to a Fund's dividends of net investment income. The amount of such dividends and distributions eligible for the dividends-received deduction is limited to the amount of dividends from domestic corporations received by a Fund during the fiscal year. Furthermore, provisions of the tax law disallow the dividends-received deduction to the extent a corporation's investment in shares of a Fund is financed with indebtedness. The excess of net long-term capital gains over the net short-term capital losses realized and distributed by a Fund to its shareholders as capital gains distributions will not be taxable to the Fund but will be taxable to the shareholders as long-term capital gains, irrespective of the length of time a shareholder may have held his Fund shares. Capital gains distributions are not eligible for the dividends-received deduction referred to above. Any dividend or distribution received by a shareholder on shares of the Fund shortly after the 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. 85 For Federal income tax purposes, when equity call options which a Fund has written expire unexercised, the premiums received by the Fund give rise to short-term capital gains at the time of expiration. When a call written by a Fund is exercised, the selling price or purchase price of stock is increased by the amount of the premium, and the gain or loss on the sale of stock becomes long-term or short-term depending on the holding period of the stock. There may be short-term gains or losses associated with closing purchase transactions. Each Fund is required to withhold and remit to the U.S. Treasury 31% of all dividend income paid to any shareholder account for which an incorrect or no taxpayer identification number has been provided or where the Fund is notified that the shareholder has under-reported income in the past (or the shareholder fails to certify that he or she is not subject to such withholding). In addition, the Fund will be required to withhold and remit to the U.S. Treasury 31% of the amount of the proceeds of any redemption of shares of a shareholder account for which an incorrect or no taxpayer identification number has been provided. The foregoing discussion relates only to U.S. Federal income tax law as it affects U.S. shareholders. The effects of Federal income tax law on non-U.S. shareholders may be substantially different. Foreign investors should consult their counsel for further information as to the U.S. tax consequences of receipt of income from a Fund. GENERAL INFORMATION Description of the Trust The Trust is organized as a Massachusetts business trust under the laws of The Commonwealth of Massachusetts by an Agreement and Declaration of Trust ("Declaration of Trust") dated March 26, 1987, a copy of which is on file with the Secretary of State of The Commonwealth of Massachusetts. The Trust is a "series" company as described in Rule 18f-2 under the 1940 Act, 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 86 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 Fund and each class of shares thereof, certain expenses may be legally chargeable against the assets of all Funds or a particular class of shares thereof. The Declaration of Trust provides for the perpetual existence of the Trust. The Trust or any Fund, however, may be terminated at any time by vote of at least a majority of the outstanding shares of each Fund affected. The Declaration of Trust further provides that the Trustees may also terminate the Trust upon written notice to the shareholders. Capitalization Except as noted below under "Shareholder and Trustee Liability," all shares of the Funds when duly issued will be fully paid and non-assessable. Set forth below is certain information as to all persons who owned of record or beneficially 5% or more of any class of the Funds' outstanding shares at August 15, 1995 87 Names and Addresses % of Class ___________________ __________ Conservative Investors Fund - Class A Alliance Plan Div/FTC C/F Jack S. Hoffman IRA Rollover Account.......................... 6% 224 Windsor Drive Mineral Wells, WV 26250-9623 Growth Investors Fund - Class A Trust for Profit Sharing Plan for Employees of ACM L.P. ................ 8% 1345 Avenue of the Americas New York, NY 10105-0302 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, 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 88 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. 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 89 executed by the Trust or the Trustees. The Declaration of Trust provides for indemnification out of a Fund's property for all loss and expense of any shareholder of that Fund held liable on account of being or having been a shareholder. Thus, the risk of a shareholder incurring financial loss on account of shareholder liability is limited to circumstances in which the Fund of which he was a shareholder would be unable to meet its obligations. The Declaration of Trust further provides that the Trustees will not be liable for errors of judgment or mistakes of fact or law. However, nothing in the Declaration of Trust protects a Trustee against any liability to which the Trustee would otherwise be subject by reason of willful misfeasance, bad faith, gross negligence, or reckless disregard of the duties involved in the conduct of his office. The By-Laws of the Trust provide for indemnification by the Trust of the Trustees and the officers of the Trust but no such person may be indemnified against any liability to the Trust or the Trust's shareholders to which he would otherwise be subject by reason of willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of his office. Counsel Legal matters in connection with the issuance of the shares of the Funds offered hereby are passed upon by Ropes & Gray, One International Place, Boston, Massachusetts 02110. Independent Accountants The financial statements of the Conservative Investors Fund and Growth Investors Fund for the fiscal year ended April 30, 1995, 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. 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-, 90 five-and ten-year periods (or the life of a Fund or class, if shorter). Total return for each such period is computed by finding, through the use of a formula prescribed by the SEC, the average annual compounded rate of return over such period that would equate an assumed initial amount invested to the value of such investment at the end of the period. For purposes of computing total return, income dividends and capital gains distributions paid on shares of a Fund are assumed to have been reinvested when received and the maximum sales charge applicable to purchases of Fund shares is assumed to have been paid. A Fund will include performance data for each of the Class A, Class B and Class C shares in any advertisement or information including performance data of the Fund. The average annual compounded total return for Class A shares of the Conservative Investors and Growth Investors Funds was 4.65% and 5.57%, respectively, for the one-year period ended April 30, 1995. The average annual compounded total return for Class A shares of the Conservative Investors and Growth Investors Funds was 5.66% and 8.68%, respectively, for the period May 4, 1992 (commencement of distribution of Class A shares) through April 30, 1995. The average annual compounded total return for Class B shares of the Conservative Investors and Growth Investors Funds was 3.91% and 4.83%, respectively, for the one year period ended April 30, 1995. The average annual compounded total return for Class B shares of the Conservative Investors and Growth Investors Funds was 4.90% and 7.88%, respectively, for the period May 4, 1992 (commencement of distribution of Class B shares) through April 30, 1995. The average annual compounded total return for Class C shares of the Conservative Investors and Growth Investors Funds was 4.01% and 4.91% respectively, for the one-year period ended April 30, 1995. The average annual compounded total return for Class C shares of the Conservative Investors and Growth Investors Funds was 0.52% and 2.62%, respectively, for the period August 2, 1992 (commencement of distribution of Class C shares) through April 30, 1995. A Fund's total return is not fixed and will fluctuate in response to prevailing market conditions or as a function of the type and quality of the securities in the Fund's portfolio and the Fund's expenses. Total return information is useful in reviewing the Fund's performance but such information may not provide a basis for comparison with bank deposits or other investments which pay a fixed return for a stated period of time. An investor's principal invested in the Fund is not fixed and will fluctuate in response to prevailing market conditions. 91 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. 92 00250184.AA3 APPENDIX A 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. 1 B-- Bonds which are rated B generally lack characteristics of the desirable investment. Assurance of interest and principal payments or of maintenance of other terms of the contract over any long period of time may be small. Caa-- Bonds which are rated Caa are of poor standing. Such issues may be in default of there may be present elements of danger with respect to principal or interest. Ca-- Bonds which are rated Ca represent obligations which are speculative to a high degree. Such issues are often in default or have other marked shortcomings. C-- Bonds which are rated C are the lowest class of bonds and issues so rated can be regarded as having extremely poor prospects of ever attaining any real investment standing. Moody's applies modifiers to each rating classification from Aa through B to indicate relative ranking within its rating categories. The modifier "1" indicates that a security ranks in the higher end of its rating category; the modifier "2" indicates a mid-range ranking; and the modifier "3" indicates that the issue ranks in the lower end of its rating category. Descriptions of the bond ratings of Standard & Poor's Corporation are as follows: AAA-- Debt rated AAA has the highest rating assigned by Standard & Poor's. Capacity to pay interest and repay principal is extremely strong. AA-- Debt rated AA has a very strong capacity to pay interest and repay principal and differs from the higher rated issues only in small degree. A-- Debt rated A has a strong capacity to pay interest and repay principal although it is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than debt in higher rated categories. BBB-- Debt rated BBB is regarded as having an adequate capacity to pay interest and repay principal. Whereas it normally exhibits adequate protection parameters, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity to pay interest and repay principal for debt in this category than for debt in higher rated categories. BB, B, CCC, CC, or C -- Debt rated BB, B, CCC, CC or C is regarded, on balance, as predominantly speculative with respect to the issuer's capacity to pay interest and repay 2 principal in accordance with the terms of the obligation. While such debt will likely have some quality and protective characteristics, these are outweighed by large uncertainties or major risk exposures to adverse debt conditions. C1-- The rating C1 is reserved for income bonds on which no interest is being paid. D-- Debt rated D is in default and payment of interest and/or repayment of principal is in arrears. The ratings from AAA to CC may be modified by the addition of a plus (+) or minus (-) sign to show relative standing within the major rating categories. 3 00250184.AA3 PORTFOLIO OF INVESTMENTS APRIL 30, 1995 ALLIANCE GROWTH INVESTORS FUND - ------------------------------------------------------------------------------- COMPANY SHARES VALUE - ------------------------------------------------------------------------------- COMMON STOCKS & OTHER INVESTMENTS-60.9% UNITED STATES INVESTMENTS-54.0% CONSUMER NONCYCLICALS-19.1% BEVERAGES-0.8% Coca-Cola Co. 10,000 $581,250 BROADCASTING-2.0% Capital Cities ABC, Inc. 11,000 929,500 Central European Media Enterprises Ltd. 1,400 17,150 Comcast Corp., Cl. A 30,000 470,625 1,417,275 COMPUTERS-0.5% COMPAQ Computer Corp. 8,000 304,000 DRUGS-3.3% Merck & Co., Inc. 25,000 1,071,875 Pfizer, Inc. 14,000 1,212,750 2,284,625 ENTERTAINMENT & LEISURE-0.6% Walt Disney Co. 8,000 443,000 FOOD-1.8% IBP, Inc. 28,000 1,036,000 Kellogg Co. 3,000 190,500 1,226,500 HOSPITAL SUPPLIES & SERVICES-4.0% Columbia HCA Healthcare Corp. 6,000 252,000 Medtronic, Inc. 19,000 1,413,125 U.S. Healthcare, Inc. 6,700 178,387 United Healthcare Corp. 26,300 953,375 2,796,887 SOAPS & TOILETRIES-2.4% Gillette Co. 20,000 1,640,000 TOBACCO-3.7% Philip Morris Cos., Inc. 30,000 $2,032,500 UST, Inc. 20,000 562,500 2,595,000 13,288,537 TECHNOLOGY-10.5% COMPUTERS-0.5% cisco Systems, Inc.* 8,000 318,500 ELECTRONICS-4.8% Applied Materials, Inc.* 10,000 617,500 Linear Technology Corp. 10,000 593,750 Molex, Inc. 17,000 646,000 Motorola, Inc. 20,000 1,137,500 Silicon Graphics, Inc.* 10,000 375,000 3,369,750 OFFICE EQUIPMENT-0.9% Oracle Systems Corp. 20,000 608,750 SEMI-CONDUCTORS & RELATED-0.4% Intel Corp. 3,000 307,313 TELECOMMUNICATIONS-3.9% ADC Telecommunications, Inc. 20,000 660,000 Air-Touch Communications, Inc.* 20,000 537,500 Andrew Corp.* 15,000 744,375 AT&T Corp. 10,000 507,500 MCI Communications Corp. 12,000 260,250 2,709,625 7,313,938 CREDIT SENSITIVE-5.9% BANKS-3.4% Bank of New York Co., Inc. 40,000 1,315,000 Citicorp 14,000 649,250 First Bank System, Inc. 11,000 445,500 2,409,750 FINANCIAL SERVICES-0.1% Dean Witter, Discover & Co. 1,800 76,275 9 PORTFOLIO OF INVESTMENTS (CONTINUED) ALLIANCE GROWTH INVESTORS FUND - ------------------------------------------------------------------------------- COMPANY SHARES VALUE - ------------------------------------------------------------------------------- INSURANCE-2.4% AFLAC, Inc. 20,000 $825,000 American International Group, Inc. 3,000 320,250 General Reinsurance Corp. 4,000 509,500 1,654,750 4,140,775 CONSUMER CYCLICALS-5.3% AUTO RELATED-0.5% Cooper Tire & Rubber 15,000 367,500 AUTO & TRUCKS-0.5% AutoZone, Inc.* 15,000 346,875 BUSINESS SERVICES-0.4% Browning Ferris Industries, Inc. 8,000 264,000 HOTELS & RESTAURANTS-0.2% Wendy's International, Inc. 10,000 170,000 MISCELLANEOUS-0.7% Hasbro, Inc. 15,000 476,250 RESTAURANTS & LODGING-1.6% Marriot International Inc. 14,000 504,000 McDonald's Corp. 17,000 595,000 1,099,000 RETAIL - GENERAL-1.4% May Department Stores Co. 12,000 435,000 Office Depot, Inc.* 24,000 546,000 981,000 3,704,625 CAPITAL GOODS-3.9% ELECTRICAL EQUIPMENT-2.4% General Electric Co. 30,000 1,680,000 INDUSTRIAL MACHINERY-0.6% Tyco International, Ltd. 8,000 $420,000 MACHINERY-0.9% Deere & Co. 8,000 656,000 2,756,000 BASIC MATERIALS-3.8% CHEMICALS-2.0% Hercules, Inc. 15,000 748,125 Morton International, Inc. 20,000 620,000 1,368,125 MINING & METALS-1.3% Aluminum Co. of America 20,000 897,500 PAPER-0.5% International Paper Co. 5,000 385,000 2,650,625 ENERGY-2.4% OIL - DOMESTIC-1.1% Phillips Petroleum Co. 22,000 770,000 XCL, Ltd.* 5,000 2,500 772,500 PIPELINES-1.3% Enron Corp. 26,000 884,000 1,656,500 GENERAL BUSINESS-1.2% BUSINESS SERVICES-1.2% Manpower Inc. 10,000 333,750 Paychex, Inc. 11,000 524,563 858,313 BUSINESS SERVICES-1.1% PROFESSIONAL SERVICES-1.1% Reynolds & Reynolds Co., Cl. A 30,000 795,000 10 ALLIANCE GROWTH INVESTORS FUND - ------------------------------------------------------------------------------- COMPANY SHARES VALUE - ------------------------------------------------------------------------------- DIVERSIFIED-0.5% Allied-Signal, Inc. 9,000 $356,625 BASIC INDUSTRIES-0.3% CHEMICALS-0.3% Union Carbide Corp. 5,000 160,000 Total United States Investments (cost $34,369,869) 37,680,938 FOREIGN INVESTMENTS-6.9% ARGENTINA-0.0% YPF S.A. (ADS) 500 10,125 Oil & Gas Exploration AUSTRALIA-0.2% AAPC, Ltd. 15,000 7,964 Food Services & Lodging Ampolex, Ltd.* 9,000 25,987 Oil - International Biron Corp., Ltd. 10,000 5,091 Mining & Metals Brambles Industries, Ltd. 1,000 9,863 Trucking & Shipping Diamond Ventures, Ltd.* 30,000 3,710 Mining & Metals Gwalia Consolidated, Ltd. 15,000 20,183 Mining & Metals MacMahon Holdings. Ltd.* 25,000 7,819 Building & Construction Westralian Sands 10,000 23,056 Miscellaneous 103,673 AUSTRIA-0.1% Ams Austria Mikros 500 49,672 Miscellaneous Vae Eisenbahnsyst 100 9,000 Electrical Equipment 58,672 BELGIUM-0.1% Solvay Et Cie S.A. 70 38,030 Chemicals Tessenderlo Chemie 100 $35,226 Chemicals 73,256 CANADA-0.8% AIT Advanced Technology Corp. 3,000 28,961 Printing, Publishing & Broadcasting BCE Inc. 500 15,813 Telecommunications Cinar Films, Inc.* 4,000 30,156 Leisure Related Maax, Inc. 1,500 12,688 Household Furniture & Appliances MacMillan Bloedel, Ltd. 1,000 12,963 Building Materials & Forest Products Magna International, Inc. 10,000 346,250 Machinery Miramar Mining Corp.* 1,000 5,149 Mining & Metals Nelvana Ltd.* 3,000 27,306 Leisure Related Orbit Oil & Gas Ltd.* 10,000 8,605 Oil-International Prime Resources Group, Inc.* 2,000 13,791 Mining & Metals Royal Plastics Group Ltd.(a) 5,000 53,324 Building & Construction 555,006 CHILE-0.0% Banco Osornoy La Un (ADR) 1,000 12,000 Banks Empresas Telex Chile S.A. (ADR) 2,000 15,750 Utility-Telephone Enersis S.A. (ADR)* 500 14,000 Utility-Electric 41,750 11 PORTFOLIO OF INVESTMENTS (CONTINUED) ALLIANCE GROWTH INVESTORS FUND - ------------------------------------------------------------------------------- COMPANY SHARES VALUE - ------------------------------------------------------------------------------- DENMARK-0.0% Tele Danmark As 500 $26,090 Utility - Telephone FINLAND-0.3% Aamulehti Yhtymae OY-II 2,000 40,366 Printing, Publishing & Broadcasting Coflexip S.A. (ADR) 1,088 32,776 Oil-Supplies & Construction Enso-Gutzeit OY 6,000 54,072 Forest Products Nokia AB OY Corp. pfd. 800 32,668 Telecommunications Tamro Yhtymae OY AB 4,000 21,028 Hospital Supplies & Services 180,910 FRANCE-0.1% Ecco Travail Temporary 500 33,273 Miscellaneous Lafarge Coppee S.A. 300 23,382 Building & Construction 56,655 GERMANY-0.5% Bayer Motoren Werk pfd. 54 19,866 Auto & Trucks Bayer Motoren Werke AG 200 49,196 Auto & Trucks Dresdner Bank AG 100 27,736 Banks Fag Kugelfischer 30 3,809 Machinery Fielmann AG pfd.* 1,000 40,900 Auto & Trucks Gea AG 60 19,693 Machinery Hach AG pfd. 50 21,532 Auto & Trucks Mannesmann AG (ADR) 100 27,122 Telecommunications Plettac AG 50 31,018 Building & Construction Sgl Carbon 1,700 $67,813 Chemical - Specialty Veba AG 50 18,611 Utility-Electric 327,296 HONG KONG-0.3% Asia Pacific Resources Holding Ltd. 3,300 25,988 Paper Dao Heng Bank Group, Ltd.* 5,000 12,789 Banks Hong Kong and China Gas Co., Ltd. warrants expiring 12/31/95* 300 32 Utility-Gas Hong Kong Land Holdings 15,000 28,200 Real Estate Hopewell Holdings 35,000 24,868 Real Estate HSBC Holdings Plc.* 1,000 11,594 Banks International Bank Of Asia 30,000 13,661 Banks Jardine International Motor 10,000 10,205 Auto Related Paul Y-ITC Construction Holdings, Inc.* 50,000 7,751 Building & Construction Sing Tao Holdings, Ltd. 20,000 13,047 Printing, Publishing & Broadcasting 148,135 INDIA-0.0% Gujarat Narmada Vy Fertilizers (GDR) (a) 1,000 8,908 Basic material Shiram Indl. Enterprises, Ltd.* 2,400 21,600 Food Shiram Indl. Enterprises, Ltd. warrants expiring 4/01/96* 800 200 Food 30,708 12 ALLIANCE GROWTH INVESTORS FUND - ------------------------------------------------------------------------------- COMPANY SHARES VALUE - ------------------------------------------------------------------------------- IRELAND-0.2% Allied Irish Bank 7,082 $32,796 Banks Aran Energy 50,000 36,007 Energy Crean James 5,000 18,785 Food Heiton Holdings Plc. ord. 23,571 25,989 Building & Construction Irish Continental Group 4,500 28,299 Trucking & Shipping Ryan Hotels Plc 50,000 22,460 Food Services & Lodging 164,336 ITALY-0.1% Industrie Natuzzi S.p.A., (ADS) 1,000 37,375 Household Products La Rinascente S.p.A 3,000 16,612 Retail-General Stet Societa Finanziaria Telfonica S.p.A. 6,000 17,104 Utility-Telephone 71,091 JAPAN-2.5% Akita Bank 3,150 27,176 Banks Asahi Diamond Industria 2,000 29,749 Machinery Bunkyodo Co. 300 10,353 Retail - General Canon, Inc. 3,000 49,622 Office Equipment Chodai Co. 1,000 34,509 Building & Construction Chuoh Pack Ind. Co., Ltd. 1,000 7,378 Paper Daiichi Corp. 1,200 26,703 Retail - General Daikin Manufacturing Co. 1,000 17,374 Auto Related Dainippon Ink & Chemical, Inc. 2,000 $9,996 Chemicals DDI Corp. 5 44,029 Telecommunications Denki Kagaku Kogyo 5,000 23,145 Chemicals Eiden Sakakiya Co. 1,000 13,566 Conglomerates Eyeful Home Technology 1,000 18,564 Building & Construction Familymart Co. 300 14,280 Business Services Fuji Electronics 1,000 24,514 Electronics Fukuda Corp. 1,000 9,972 Building & Construction Hachijuni Bank 1,000 12,733 Banks Hitachi Metals, Ltd. 4,000 48,551 Soaps & Toiletries Innotech Corp. 300 9,996 Electronics Ishiguro Homa Corp. 1,000 19,040 Retail - General Kaneshita Construction 2,000 29,036 Building & Construction Kawasaki Kisen 1,000 3,582 Trucking & Shipping Kawasaki Steel Co.* 2,000 8,092 Steel Keihanshin Real Estate 2,000 16,089 Real Estate Keyence Corp. 400 42,649 Machinery Kinden Corp. 1,000 19,873 Building & Construction Koa Fire & Marine 8,000 53,597 International Mabuchi Motor Co. 500 33,022 Auto Related Matsuyadenki Co. 1,000 10,948 Retail - General 13 PORTFOLIO OF INVESTMENTS (CONTINUED) ALLIANCE GROWTH INVESTORS FUND - ------------------------------------------------------------------------------- Minebea Co., Ltd. 2,000 $14,827 Auto Related Ministop Co. 1,000 22,015 Miscellaneous Mitsubishi Bank 1,000 24,514 Banks Mitsubishi Motors Corp. 2,000 18,587 Auto & Trucks Mitsui Petrochemical Ind. 2,000 18,944 Chemicals Murata Mfg Co., Ltd. 1,000 40,221 Electronics Namura Shipbuildng 1,000 5,950 Industrial Machinery National House Industrial 1,000 20,468 Building & Construction New Oji Paper Co., Ltd.* 4,000 44,743 Paper Nichiha Corp. 1,000 18,921 Building Materials & Forest Products Nikon Corp. 1,000 8,520 Electronics Nippon Electric Glass 1,100 19,504 Industrial Machinery Nippon Sanso Corp. 7,000 37,068 Chemicals Nippon Steel Corp. 2,000 7,949 Steel Nippon Yakin Kogyo 1,000 5,831 Soaps & Toiletries Noritz Corp. 2,000 40,697 Household Furniture & Appliances Omron Corp. 1,000 19,635 Electrical Equipment Oriental Construction 1,000 20,706 Building & Related P S Corp. 1,300 25,680 Building & Construction Promise Co. 200 8,734 Miscellaneous Ricoh Elemex Corp. 1,000 $13,090 Office Equipment Rohm Co. 1,000 46,290 Electric Santen Pharmaceutical Co. 1,100 27,881 Hospital Supplies & Services Sato Corp. 1,110 22,983 Retail - General Sekichu Company 1,000 17,850 Retail - General Sekisui Chemical Co. 2,000 24,990 Chemicals Sharp Corp. 1,000 16,422 Household Furniture & Appliances Showa Shell Sekiyu 1,000 12,733 Miscellaneous SMC Corp. 600 31,772 Industrial Machinery Sotoh Co. 1,000 15,470 Apparel & Textile Takara Shuzo Co. 1,000 8,175 Food, Beverages & Tobacco Takeda Chemical Industries 1,000 13,328 Chemicals TDK Corp. 1,000 45,695 Electronics Toda Corp. 2,000 21,420 Building & Construction Toho Bank 4,000 31,891 Banks Tokyo Broadcasting 3,000 48,194 Broadcasting Tokyo Electron, Ltd. 1,000 31,177 Electronics Tokyo Ohka Kogyo 1,000 31,177 Electronics Toppan Printing Co., Ltd. 3,000 43,553 Printing, Publishing & Broadcasting Wesco Investments, Ltd. 1,200 36,413 Building & Construction 14 ALLIANCE GROWTH INVESTORS FUND - ------------------------------------------------------------------------------- COMPANY SHARES VALUE - ------------------------------------------------------------------------------- Xebio Co. 300 $10,567 Retail - General Yamanouchi Pharmaceudical 2,000 44,981 Hospital Supplies & Services York Benimaru Co. 1,000 39,507 Household Products 1,727,211 KOREA-0.0% Yukong, Ltd.*(a) 700 7,350 Oil - International MALAYSIA-0.1% C.I. Holdings Berhad 4,000 14,401 Building Materials & Forest Products Hock Hua Bank Berhad 5,000 14,260 Banks Kim Hin Ind. Berhad 750 191 Building & Construction Malaysian Assurance 15,000 48,847 Insurance 77,699 MEXICO-0.0% Groupo Finance Delaware Norte 4,000 5,178 Banks Grupo Industrial Durango S.A. de C V (ADR)* 2,000 16,000 Forest Products 21,178 NETHERLANDS-0.4% AKZO N.V. 300 34,792 Chemicals Asm Lithography Hl 1,100 30,475 Electronics KLM 1,500 45,616 Auto & Trucks Kon Ptt Nederland (a) 2,000 69,712 Utility - Telephone Polygram N.V. 500 28,220 Leisure Related Ver Ned Uitgevers 300 $33,554 Printing, Publishing & Broadcasting Wolters Kluwer N.V. 300 24,412 Printing, Publishing & Broadcasting 266,781 NORWAY-0.1% Norsk Hydro AS 500 20,345 Oil - International Tomra Systems AS 12,000 44,109 Environmental Control Western Bulk Shipping AS 2,500 12,239 Trucking & Shipping Wilrig AS 2,000 15,570 Transportation 92,263 PHILIPPINES-0.0% Banco Latinoamericano De Exp 1,000 31,000 Banks SINGAPORE-0.1% Elec. & Eltek Int'l Co., Ltd. 5,000 6,400 Electronics Hong Leong Finance, Ltd. 5,000 15,859 Financial Services Keppel Corp.. Ltd. 2,000 16,218 Machinery Overseas Union Bank, Ltd. 2,600 15,020 Banks 53,497 SPAIN-0.3% Acerinox S.A. 210 24,049 Mining & Metals Banco Popular Espanol 200 27,322 Banks Centros Commerciales Continente S.A.* 2,000 35,411 Retail-General Corporacion Mapfre 1,000 43,858 International 15 PORTFOLIO OF INVESTMENTS (CONTINUED) ALLIANCE GROWTH INVESTORS FUND - ------------------------------------------------------------------------------- COMPANY SHARES VALUE - ------------------------------------------------------------------------------- Repsol S.A. 1,000 $31,837 Miscellaneous Telefonica de Espana 1,000 12,223 Utility - Telephone Viscofan Envolturas Celulosi 1,000 13,198 Foods 187,898 SWEDEN-0.2% Astra Corp. Series A 1,000 29,180 Drugs Autoliv AB (ADR)* (a) 700 31,456 Auto Related Electrolux AB 500 25,532 Household Products Kalmar Industries AB* (a) 2,000 27,390 Machinery SSAB Svenskt Stal AB-B Free 500 22,023 Mining & Metals Volvo AB 1,000 18,788 Auto & Trucks 154,369 SWITZERLAND-0.1% BBC Brown Boveri AG 25 24,664 Miscellaneous Schweizerischer Bankverein 30 9,866 Banks 34,530 TAIWAN-0.0% Taiwan Fund, Inc. 800 17,200 Mutual Fund-Diversified UNITED KINGDOM-0.4% British Steel N.E. 5,000 13,598 Mining & Metals Chloride Group Plc.* 40,000 12,552 Building & Related SHARES OR PRINCIPAL AMOUNT COMPANY (000) VALUE - ------------------------------------------------------------------------------- Filtronic Comtek 20,000 $78,854 Telecommunications Hanson PLC 10,000 38,059 Conglomerates Johnson Matthey Plc. 1,000 8,779 Mining & Metals Powerscreen International 7,000 31,542 Environmental Control Tate & Lyle 5,000 34,841 Food United Newspapers Plc. 2,068 16,474 Printing, Publishing & Broadcasting WPP Group 15,000 26,794 Professional Services Zeneca Group Plc. 3,000 43,607 Chemicals 305,100 Total Foreign Investments (cost $4,693,766) 4,823,779 Total Common Stocks & Other Investments (cost $39,063,635) 42,504,717 LONG TERM DEBT SECURITIES-29.8% BASIC MATERIALS-0.9% Georgia Pacific 8.25%, 3/01/23 $ 675 650,207 CREDIT SENSITIVE-0.7% General Instrument Corp. 5.00%, 6/15/00 300 447,375 MISCELLANEOUS-0.9% Boskalis Westminister 5.25%, 6/01/00 80 45,873 Italy (Republic of) 6.875%, 9/27/23 700 576,793 622,666 16 ALLIANCE GROWTH INVESTORS FUND - ------------------------------------------------------------------------------- PRINCIPAL AMOUNT COMPANY (000) VALUE - ------------------------------------------------------------------------------- MORTGAGE BACKED SECURITIES-6.4% Federal National Mortgage Association 8.00%, 4/01/25 $2,348 $2,342,000 Government National Mortgage Association 7.00%, 12/15/23 807 763,490 7.00%, 4/15/25 1,428 1,351,688 4,457,178 RETAIL-0.7% Lowe's Cos., Inc. 3.00%, 7/22/03 360 468,450 US GOVERNMENT-20.2% U.S. Treasury Bonds 7.50%, 11/15/24 1,690 1,712,714 7.625%, 2/15/25 425 439,412 U.S. Treasury Notes 7.125%, 9/30/99 2,170 2,190,680 7.25%, 2/15/98 3,650 3,700,187 7.50%, 2/15/05 2,400 2,473,872 7.75%, 12/31/99 2,200 2,274,250 7.875%, 11/15/04 1,250 1,318,363 14,109,478 SHARES OR PRINCIPAL AMOUNT COMPANY (000) VALUE - ------------------------------------------------------------------------------- Total Long Term Debt Securities (cost $20,503,891) $20,755,354 SHORT-TERM DEBT SECURITIES-9.2% Federal Home Loan Mortgage Corp. 6.00%, 6/15/95 $ 250 248,125 5.85%, 5/02/95 6,200 6,199,328 Total Short-Term Debt Securities (amortized cost $6,447,453) 6,447,453 INVESTMENT IN AFFILIATED ISSUERS-0.1% FRANCE-0.1% Axa Insurance (cost $49,921) 1,000 52,747 TOTAL INVESTMENTS-100.0% (cost $66,064,900) 69,760,271 Other assets less liabilities-0.0% 2,732 NET ASSETS-100% $69,763,003 * Non-income producing. (a) Securities are exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At April 30, 1995, these securities amounted to $198,140 or 0.3% of net assets. Glossary of Terms: ADR - American Depository Receipt ADS - American Depository Security GDR - Global Depository Receipt See notes to financial statements. 17 PORTFOLIO OF INVESTMENTS APRIL 30, 1995 ALLIANCE CONSERVATIVE INVESTORS FUND - ------------------------------------------------------------------------------- COMPANY SHARES VALUE - ------------------------------------------------------------------------------- COMMON STOCKS & OTHER INVESTMENTS-16.1% CONSUMER NONCYCLICALS-4.9% BEVERAGES-0.6% Coca-Cola Co. 5,000 $290,625 DRUGS-0.9% Merck & Co., Inc. 4,000 171,500 Pfizer, Inc. 3,000 259,875 431,375 ENTERTAINMENT & LEISURE-0.2% Walt Disney Co. 2,000 110,750 FOOD-0.5% IBP, Inc. 7,000 259,000 HOSPITAL SUPPLIES & SERVICES-1.0% Columbia HCA Healthcare Corp. 1,000 42,000 Medtronic, Inc. 4,000 297,500 Schering-Plough Corp. 1,000 75,375 U.S. Healthcare, Inc. 1,400 37,275 United Healthcare Corp. 2,200 79,750 531,900 SOAPS & TOILETRIES-0.6% Gillette Co. 4,000 328,000 TOBACCO-1.1% Philip Morris Cos., Inc. 6,000 406,500 UST, Inc. 5,000 140,625 547,125 2,498,775 CREDIT SENSITIVE-3.8% BANKS-1.3% Bank of New York Co., Inc. 15,000 493,125 Citicorp 2,000 92,750 First Bank System, Inc. 2,000 81,000 666,875 FINANCIAL SERVICES-0.3% American Express Co. 4,000 $139,000 Dean Witter, Discover & Co. 200 8,475 147,475 INSURANCE-1.3% AFLAC, Inc. 10,000 412,500 American International Group, Inc. 1,000 106,750 General Reinsurance Corp. 1,000 127,375 646,625 UTILITY - TELEPHONE-0.9% Ameritech Corp. 6,000 270,000 AT & T Corp. 4,000 203,000 473,000 1,933,975 BASIC MATERIALS-1.7% ALUMINUM-0.3% Aluminum Co. of America 4,000 179,500 CHEMICALS-0.9% Hercules, Inc. 6,000 299,250 Morton International, Inc. 4,000 124,000 Union Carbide Corp. 1,000 32,000 455,250 PAPER-0.5% International Paper Co. 3,000 231,000 865,750 ENERGY-1.4% OIL-0.8% Amoco Corp. 1,000 65,625 Mobil Corp. 2,000 189,750 Phillips Petroleum Co. 5,000 175,000 430,375 RAILROADS-0.1% Conrail, Inc. 1,000 54,625 UTILITY - GAS-0.5% Enron Corp. 5,000 170,000 18 ALLIANCE CONSERVATIVE INVESTORS FUND - ------------------------------------------------------------------------------- COMPANY SHARES VALUE - --------------------------------------------------------------------------- NIPSCO Industries, Inc. 2,000 $64,500 234,500 719,500 CAPITAL GOODS-1.3% ELECTRICAL-1.0% General Electric Co. 9,000 504,000 MACHINERY-0.3% Deere & Co. 2,000 164,000 668,000 CONSUMER CYCLICALS-1.2% AUTO & TRUCKS-0.2% General Motors Corp. Cl.E 1,000 43,250 Magna International, Inc. 1,000 34,625 77,875 PHOTO & OPTICAL-0.2% Eastman Kodak Co. 2,000 115,000 RESTAURANTS & LODGING-0.3% McDonald's Corp. 4,000 140,000 Wendy's International, Inc. 2,000 34,000 174,000 RETAIL - GENERAL-0.5% Gap, Inc. 2,000 63,750 Hasbro, Inc. 2,000 63,500 May Department Stores Co. 4,000 145,000 272,250 639,125 BUSINESS SERVICES-0.8% ENVIRONMENTAL CONTROL-0.1% Browning Ferris Industries, Inc. 2,000 66,000 PRINTING, PUBLISHING & BROADCASTING-0.4% Capital Cities ABC, Inc. 2,000 169,000 PROFESSIONAL SERVICES-0.3% Reynolds & Reynolds Co. 6,000 159,000 394,000 SHARES OR PRINCIPAL AMOUNT COMPANY (000) VALUE - --------------------------------------------------------------------------- TECHNOLOGY-0.8% COMPAQ Computer Corp. 1,000 $38,000 Molex, Inc. 4,000 152,000 Motorola, Inc. 4,000 227,500 417,500 DIVERSIFIED-0.2% Allied Signal, Inc. 2,000 79,250 Total Common Stocks & Other Investments (cost $7,368,404) 8,215,875 LONG-TERM DEBT SECURITIES-76.5% CREDIT SENSITIVE-10.2% General Motors Acceptance Corp. 1.00%, 10/15/02 $ 1,300 1,366,703 Georgia Pacific Corp. 8.25%, 3/01/23 1,300 1,252,251 Italy (Republic of) 6.875%, 9/27/23 1,300 1,071,187 Premier Auto Trust 7.15%, 2/04/99 1,500 1,498,594 5,188,735 MORTGAGE BACKED SECURITIES-15.5% Federal National Mortgage Association 8.00%, 4/01/25 1,272 1,268,583 Government National Mortgage Association 7.00%, 4/15/23 266 251,485 7.00%, 6/15/23 281 265,550 7.00%, 2/15/24 2,455 2,324,090 7.00%, 4/15/25 2,142 2,027,531 7.50%, 11/15/23 1,844 1,798,605 7,935,844 U.S. GOVERNMENT-50.8% U.S. Treasury Bonds 7.50%, 11/15/24 2,290 2,320,778 7.625%, 2/15/25 2,150 2,222,907 19 PORTFOLIO OF INVESTMENTS (CONTINUED) ALLIANCE CONSERVATIVE INVESTORS FUND - ------------------------------------------------------------------------------- PRINCIPAL AMOUNT COMPANY (000) VALUE - ------------------------------------------------------------------------------- U.S.Treasury Notes 7.125%, 9/30/99 $ 3,100 $3,129,543 7.25%, 2/15/98 6,400 6,488,000 7.50%, 2/15/05 1,900 1,958,482 7.75%, 12/31/99 7,850 8,114,937 7.875%, 11/15/04 1,600 1,687,504 25,922,151 Total Long-Term Debt Securities (cost $38,673,950) 39,046,730 SHORT-TERM DEBT SECURITIES-6.4% Federal Home Loan Mortgage Corp. 5.85%, 5/01/95 (amortized cost $3,300,000) $ 3,300 $3,300,000 TOTAL INVESTMENTS-99.0% (cost $49,342,354) 50,562,605 Other assets less liabilities-1.0% 503,477 NET ASSETS-100% $51,066,082 See notes to financial statements. 20 STATEMENTS OF ASSETS AND LIABILITIES ALLIANCE GROWTH INVESTORS AND APRIL 30, 1995 CONSERVATIVE INVESTORS FUNDS - ------------------------------------------------------------------------------- GROWTH CONSERVATIVE INVESTORS INVESTORS FUND FUND ------------ ------------ ASSETS Investments in securities, at value (cost $66,064,900 and $49,342,354, respectively) $69,760,271 $50,562,605 Cash -0- 57,452 Receivable for investment securities and foreign currency sold 2,311,201 1,167,574 Interest and dividends receivable 382,880 618,292 Receivable for shares of beneficial interest sold 137,454 29,285 Receivable due from Adviser 56,927 7,819 Deferred organization expenses 19,500 19,500 Total assets 72,668,233 52,462,527 LIABILITIES Due to custodian 17,959 -0- Payable for investment securities and foreign currency purchased 2,684,029 1,260,321 Distribution fee payable 44,201 30,910 Payable for shares of beneficial interest redeemed 43,264 13,783 Accrued expenses 115,777 91,431 Total liabilities 2,905,230 1,396,445 NET ASSETS $69,763,003 $51,066,082 COMPOSITION OF NET ASSETS Shares of beneficial interest, at par $58 $49 Additional paid-in capital 67,071,359 53,045,931 Undistributed net investment income 593,778 498,475 Accumulated net realized loss on investments and foreign currency transactions (1,597,594) (3,698,418) Net unrealized appreciation of investments and other assets less liabilities 3,695,402 1,220,045 $69,763,003 $51,066,082 CALCULATION OF MAXIMUM OFFERING PRICE CLASS A SHARES Net asset value and redemption price per share ($22,188,537/1,837,412 and $16,104,549 / 1,551,155 shares of beneficial interest issued and outstanding, respectively) $12.08 $10.38 Sales charge-4.25% of public offering price .54 .46 Maximum offering price $12.62 $10.84 CLASS B SHARES Net asset value and offering price per share ($43,327,596/ 3,584,279 and $30,542,458 / 2,905,089 shares of beneficial interest issued and outstanding, respectively) $12.09 $10.51 CLASS C SHARES Net asset value, redemption and offering price per share ($4,246,870 / 351,116 and $4,419,075 / 420,130 shares of beneficial interest issued and outstanding, respectively) $12.10 $10.52 See notes to financial statements. 21 STATEMENTS OF OPERATIONS ALLIANCE GROWTH INVESTORS AND YEAR ENDED APRIL 30, 1995 CONSERVATIVE INVESTORS FUNDS - ------------------------------------------------------------------------------- GROWTH ONSERVATIVE INVESTORS INVESTORS FUND FUND ------------ ------------ INVESTMENT INCOME Interest $1,773,462 $2,967,732 Dividends 531,825 150,365 Total income 2,305,287 3,118,097 EXPENSES Advisory fee 464,336 385,818 Distribution fee - Class A 58,355 47,590 Distribution fee - Class B 385,615 307,217 Distribution fee - Class C 38,982 48,572 Custodian 159,361 97,921 Transfer agency 140,054 95,859 Audit and legal 89,198 68,225 Registration 57,106 60,125 Printing 46,913 25,609 Trustees' fees 27,000 27,000 Amortization of organization expenses 10,950 10,950 Miscellaneous 36,558 12,010 Total expenses 1,514,428 1,186,896 Less: expenses waived and assumed by adviser (See Note B) (350,235) (217,650) Net expenses 1,164,193 969,246 Net investment income 1,141,094 2,148,851 REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY Net realized loss on investments and options transactions (1,748,900) (3,216,833) Net realized gain on foreign currency transactions 69,737 -0- Net change in unrealized depreciation of investments 3,951,748 3,119,273 Net change in unrealized depreciation of foreign currency denominated assets and liabilities 10,287 -0- Net gain (loss) on investments 2,282,872 (97,560) NET INCREASE IN NET ASSETS FROM OPERATIONS $3,423,966 $2,051,291 See notes to financial statements. 22 STATEMENTS OF CHANGES IN NET ASSETS ALLIANCE GROWTH INVESTORS AND CONSERVATIVE INVESTORS FUNDS - ------------------------------------------------------------------------------- GROWTH INVESTORS FUND CONSERVATIVE INVESTORS FUND ------------------------- --------------------------- YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED APRIL 30, APRIL 30, APRIL 30, APRIL 30, 1995 1994 1995 1994 ----------- ----------- ----------- ----------- INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS Net investment income $1,141,094 $313,765 $2,148,851 $929,682 Net realized gain (loss) on investments and foreign currency transactions (1,679,163) 121,229 (3,216,833) (47,183) Net change in unrealized appreciation(depreciation) of investments and foreign currency denominated assets and liabilities 3,962,035 (702,808) 3,119,273 (2,208,179) Net increase (decrease) in net assets from operations 3,423,966 (267,814) 2,051,291 (1,325,680) DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM: Net investment income Class A (254,436) (72,572) (685,964) (289,744) Class B (345,858) (80,463) (1,045,681) (387,379) Class C (35,052) (4,770) (168,380) (32,066) Net realized gain on investments Class A (22,749) (74,093) -0- (184,501) Class B (46,345) (159,336) -0- (334,032) Class C (4,697) (3,179) -0- (23,205) TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST Net increase 16,138,284 40,069,758 1,247,586 37,695,255 Total increase 18,853,113 39,407,531 1,398,852 35,118,648 NET ASSETS Beginning of year 50,909,890 11,502,359 49,667,230 14,548,582 End of year (including undistributed net investment income of $593,778, $168,135, $498,475 and $249,649, respectively) $69,763,003 $50,909,890 $51,066,082 $49,667,230 See notes to financial statements. 23 NOTES TO FINANCIAL STATEMENTS ALLIANCE GROWTH INVESTORS AND APRIL 30, 1995 CONSERVATIVE INVESTORS FUNDS - ------------------------------------------------------------------------------- NOTE A: SIGNIFICANT ACCOUNTING POLICIES Alliance Growth Investors Fund and Conservative Investors Fund (the 'Funds'), two series of The Alliance Portfolios (the 'Trust'), are registered under the Investment Company Act of 1940, as diversified, open-end investment companies. Prior to August 2, 1993, the Trust was known as The Equitable Funds, and the Funds were known as The Equitable Growth Investors Fund and Conservative Investors Fund. Prior to August 2, 1993, each Fund offered two classes of shares Class A and Class B. On August 2, 1993, the Board of Trustees approved the creation of a third class of shares, Class C Shares. The Funds offer Class A, Class B and Class C shares. Class A shares are sold with a front-end sales charge of up to 4.25%. Class B shares are sold with a contingent deferred sales charge which declines from 4% to zero depending on the period of time the shares are held. Shares purchased before August 2, 1993 and redeemed within six years of purchase are subject to different rates than shares purchased after that date. Class C shares are sold without an initial or contingent deferred sales charge. All three classes of shares have identical voting, dividend, liquidation and other rights, except that each class bears different distribution expenses and has exclusive voting rights with respect to its distribution plan. The following is a summary of significant accounting policies followed by the Funds. 1. SECURITY VALUATION Portfolio securities traded on national securities exchanges are valued at the last sales price or, if no sale occurred, at the mean of the bid and asked price at the regular close of the New York Stock Exchange. Securities traded on the over-the-counter market are valued at the mean of the closing bid and asked price. Securities for which current market quotations are not readily available (including investments which are subject to limitations as to their sale) are valued at their fair value as determined in good faith by the Board of Trustees. The Board of Trustees has further determined that the value of certain portfolio debt securities, other than temporary investments in short-term securities, be determined by reference to valuations obtained from a pricing service. Restricted securities are valued at fair value as determined by the Board of Trustees. Securities which mature in 60 days or less are valued at amortized cost, which approximates market value. The ability of issuers of debt securities held by the Funds to meet their obligations may be affected by economic developments in a specific industry or region. 2. CURRENCY TRANSLATION Assets and liabilities denominated in foreign currencies are translated into U.S. dollars at the mean of the quoted bid and asked price of the respective currency against the U.S. dollar on the valuation date. Purchases and sales of portfolio securities are translated at the rates of exchange prevailing when such securities were acquired or sold. Income and expenses are translated at rates of exchange prevailing when earned or accrued. Net realized gain on foreign currency transactions of $69,737 for Growth Investors Fund, represents net foreign exchange gains and losses from holdings of foreign currencies, currency gains or losses realized between the trade and settlement dates on security transactions, and the difference between the amounts of dividends and foreign taxes recorded on the Fund's books and the U.S. dollar equivalent amounts actually received or paid. Net unrealized currency gains and losses from valuing foreign currency denominated assets and liabilities at fiscal year end exchange rates are reflected as a component of unrealized appreciation on investments and foreign currency denominated assets and liabilities. 3. ORGANIZATION EXPENSES Organization expenses of approximately $50,000 for each Fund have been deferred and are being amortized on a straight-line basis through May, 1997. 4. OPTION WRITING When the Fund writes an option, an amount equal to the premium received by the Fund is recorded as a liability and is subsequently adjusted to the current market value of the option written. Premiums received from writing options which expire unexercised are recorded by the Funds on the expiration date as realized gains. The difference between the premiun and the amount paid on effecting a closing purchase transaction, including brokerage commissions, is also treated as a realized gain, or if the premium is less than the amount paid for the closing purchase transaction, as a realized loss. If a call option is exercised, the premium is added to the proceeds from the sale in determining whether the Fund has realized a gain or loss. As a writer of options, the Fund bears 24 ALLIANCE GROWTH INVESTORS AND CONSERVATIVE INVESTORS FUNDS - ------------------------------------------------------------------------------- the risk of unfavorable changes in the price of the financial instruments underlying the options. 5. TAXES It is the Fund's policy to meet the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute all of its investment company taxable income and net realized gains, if applicable, to shareholders. Therefore, no provisions for federal income or excise taxes are required. 6. INVESTMENT INCOME AND SECURITY TRANSACTIONS Dividend income is recorded on the ex-dividend date. Interest income is accrued daily. Security transactions are accounted for on the date securities are purchased or sold. Security gains and losses are determined on the identified cost basis. The Fund accretes discounts and amortizes premiums as adjustments to interest income. 7. DIVIDENDS AND DISTRIBUTIONS Dividends and distributions to shareholders are recorded on the ex-dividend date. 8. INCOME AND EXPENSES All income earned and expenses incurred by a Fund are borne on a pro-rata basis by each outstanding class of shares, based on the proportionate interest in the Fund represented by the shares of such Class, except that each Funds' Class B and Class C shares bear higher distribution and transfer agent fees. Expenses attributable to a single Fund are charged to that Fund. Expenses of the Trust are charged to each Fund in proportion to net assets. NOTE B: ADIVSORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES Prior to July 22, 1993 Equitable Capital Management Corporation (Equitable Capital) served as the investment adviser to the Trust. On July 22, 1993, Alliance Capital Management, L.P. (Alliance) acquired the business and substantially all of the assets of Equitable Capital and became the investment adviser to the Trust. Under the terms of an investment advisory agreement, the Funds pays Alliance an advisory fee at an annual rate of .75% of the Fund's average daily net assets. Under the old agreement the fee charged was the same. Such a fee is accrued daily and paid monthly. The Investment Adviser has agreed, under the terms of the investment advisory agreement, to voluntarily waive its fees and bear certain expenses so that total expenses do not exceed on an annual basis 1.40%, 2.10% and 2.10% of average net assets, respectively, for the Class A, Class B and Class C shares. Prior to August 2, 1993, the annual rate for Class B shares was 2.15%. For the year ended April 30, 1995, such reimbursement amounted to $350,235 and $217,650 for the Growth Investors and Conservative Investors Fund, respectively. In addition to these voluntary arrangements, the Investment Adviser will reduce its compensation, to the extent that expenses of the Funds for any fiscal year (not including any distribution expenses paid by the Funds) exceed the lowest applicable expense limitation prescribed by any state in which the Fund's shares are qualified for sale. The Funds believe that the most restrictive expense ratio limitation imposed by any state in which the Funds has qualified its shares for sale is 2.5% of the first $30 million of the Fund's average daily net assets, 2% of the next $70 million of its average daily net assets and 1.5% of its average daily net assets in excess of $100 million. The Funds have a Services Agreement with Alliance Fund Services, Inc. (a wholly-owned subsidiary of the Adviser) to provide personnel and facilities to perform transfer agency services for the Funds. Compensation under this agreement amounted $97,970 and $58,940 for the Growth Investors and Conservative Investors Funds, respectively for the year ended April 30, 1995. Alliance Fund Distributors, Inc. (a wholly-owned subsidiary of the Adviser) serves as the Distributor of the Fund's shares. The Distributor received front-end sales charges of $12,658 from the sale of Class A shares and $111,820 in contingent deferred sales charges imposed upon redemptions by shareholders of Class B shares for the year ended April 30, 1995 for the Growth Investors Fund. The Distributor also received front-end sales charges of $6,497 from the sale of Class A shares and $131,358 in contingent deferred sales charges imposed upon redemptions by shareholders of Class B shares for the year ended April 30, 1995 for the Conservative Investors Fund. 25 NOTES TO FINANCIAL STATEMENTS (CONTINUED) ALLIANCE GROWTH INVESTORS AND CONSERVATIVE INVESTORS FUNDS - ------------------------------------------------------------------------------- Brokerage commissions paid on securities transactions for the year ended April 30, 1995 amounted to $143,563 and $3,758 for the Growth Investors and Conservative Investors Funds, respectively, of which $33 was paid to brokers utilizing the services of the Pershing Division of Donaldson, Lufkin & Jenrette Securities Corp. ('DLJ'), an affiliate of the Adviser, nor to DLJ directly. Trustees's fees and expenses payable included amounts owed to one of the Trustees under the deferred compensation plan. NOTE C: DISTRIBUTION SERVICES AGREEMENT The Funds have adopted a Distribution Services Agreement (the 'Agreement') pursuant to Rule 12b-1 under the Investment Company Act of 1940. Under the Agreement, the Funds pay a distribution fee to the Distributor at an annual rate of up to .50% of each Fund's average daily net assets attributable to Class A shares and 1% of the average daily net assets attributable to both Class B and Class C shares. Prior to August 2, 1993, Equico Securities served as distributor to the Funds. The Funds paid a distribution fee to the distributor at an annual rate of .25% of each Fund's average daily net assets attributable to Class A shares. The Trustees currently limit payments under the Class A plan to .30% of the Fund's aggregate average daily net assets attributable to Class A shares. The Agreement provides that the Distributor will use such payments in their entirety for distribution assistance and promotional activities. The Distributor has incurred expenses in excess of the distribution costs reimbursed by the Growth Investors Fund in the amount of $1,129,165 and $124,579 for Class B and C shares, respectively. The Distributor has also incurred expenses in excess of the distribution costs reimbursed by the Conservative Investors Fund in the amount of $1,276,362 and $196,425, respectively and for the Class B and Class C shares, respectively; such costs may be recovered from each Fund in future periods so long as the Agreement is in effect. In accordance with the Agreement, there is no provision for recovery of unreimbursed distribution costs, incurred by the Distributor, beyond the current fiscal year for Class A shares. The Agreement also provides that the Adviser may use its own resources to finance the distribution of each Fund's shares. NOTE D: INVESTMENT TRANSACTIONS Purchases and sales of investment securities (excluding short-term investments) for the Growth Investors Fund aggregated $91,295,274 and $62,800,691, respectively, for the year ended April 30, 1995. There were purchases of $34,604,273 and sales of $24,810,074 of U.S. Government and government agency obligations for the year ended April 30, 1995. At April 30, 1995, the cost of securities for federal income tax purposes for the Growth Investors Fund was $66,095,352. Accordingly gross unrealized appreciation of investments was $4,788,910 and gross unrealized depreciation of investments was $1,123,991 resulting in net unrealized appreciation of $3,664,919. The Growth Investors Fund enters into forward exchange currency contracts in order to hedge its exposure to changes in foreign currency exchange rates on its foreign portfolio holdings. A forward exchange currency contract is a commitment to purchase or sell a foreign currency at a future date at a negotiated forward rate. The gain or loss arising from the difference between the original contracts and the closing of such contracts is included in net realized gain or loss from foreign currency transactions. Fluctuations in the value of forward exchange currency contracts are recorded for financial reporting purposes as unrealized gains or losses by the Fund. Risks may arise from the potential inability of a counter-party to meet the terms of a contract and from unanticipated movements in the value of a foreign currency relative to the U.S. dollar. At April 30, 1995, there were no outstanding forward exchange currency contracts. Purchases and sales of investment securities (excluding short-term investments) for the Conservative Investors Fund aggregated $108,535,724 and $98,995,442, respectively, for the year ended April 30, 1995. There were purchases of $73,553,555 and sales of $58,226,588 of U.S. Government and government agency obligations for the year ended April 30, 1995. At April 30, 1995, the cost of securities for federal income tax purposes for the Con- 26 ALLIANCE GROWTH INVESTORS AND CONSERVATIVE INVESTORS FUNDS - ------------------------------------------------------------------------------- servative Investors Fund was $49,536,512. Accordingly gross unrealized appreciation of investments was $1,284,394 and gross unrealized depreciation of investments was $258,301 resulting in net unrealized appreciation of $1,026,093. NOTE E: SHARES OF BENEFICIAL INTEREST There is an unlimited number of $0.00001 par value shares of beneficial interest authorized divided into three classes, designated Class A, Class B and Class C shares for both Funds. Transactions in shares of beneficial interest were as follows: ALLIANCE GROWTH INVESTORS FUND ---------------------------------------------------- SHARES AMOUNT ------------------------ -------------------------- YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED APRIL 30, APRIL 30, APRIL 30, APRIL 30, 1995 1994 1995 1994 ---------- ------------ ------------ ------------ CLASS A Shares sold 878,301 1,224,513 $10,219,392 $14,527,190 Shares issued in reinvestment of dividends and distributions 23,903 12,123 266,999 143,134 Shares redeemed (508,295) (101,933) (5,946,807) (1,218,333) Net increase 393,909 1,134,703 $4,539,584 $13,451,991 CLASS B Shares sold 1,384,786 2,121,895 $16,126,761 $25,302,089 Shares issued in reinvestment of dividends and distributions 33,860 20,028 379,230 237,891 Shares redeemed (485,135) (192,181) (5,718,545) (2,290,398) Net increase 933,511 1,949,742 $10,787,446 $23,249,582 ALLIANCE GROWTH INVESTORS FUND ----------------------------------------------------- SHARES AMOUNT ------------------------- -------------------------- AUGUST 2, AUGUST 2, YEAR ENDED 1993* TO YEAR ENDED 1993* TO APRIL 30, APRIL 30, APRIL 30, APRIL 30, 1995 1994 1995 1994 ----------- ------------ ------------ ------------ CLASS C Shares sold 188,858 337,111 $2,197,932 $4,037,220 Shares issued in reinvestment of dividends and distributions 3,451 670 38,687 7,927 Shares redeemed (122,670) (56,304) (1,425,365) (676,962) Net increase 69,639 281,477 $811,254 $3,368,185 27 NOTES TO FINANCIAL STATEMENTS (CONTINUED) ALLIANCE GROWTH INVESTORS AND CONSERVATIVE INVESTORS FUNDS - ------------------------------------------------------------------------------- ALLIANCE CONSERVATIVE INVESTORS FUND ----------------------------------------------------- SHARES AMOUNT ------------------------- -------------------------- YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED APRIL 30, APRIL 30, APRIL 30, APRIL 30, 1995 1994 1995 1994 ----------- ------------ ------------ ------------ Class A Shares sold 548,552 1,189,333 $5,617,109 $13,031,463 Shares issued in reinvestment of dividends and distributions 65,422 40,811 656,166 442,601 Shares redeemed (566,559) (221,331) (5,791,900) (2,381,952) Net increase 47,415 1,008,813 $481,375 $11,092,112 CLASS B Shares sold 798,920 2,302,220 $8,264,467 $25,384,220 Shares issued in reinvestment of dividends and distributions 94,772 62,734 960,854 687,832 Shares redeemed (825,918) (374,172) (8,495,394) (4,077,813) Net increase 67,774 1,990,782 $729,927 $21,994,239 ALLIANCE CONSERVATIVE INVESTORS FUND ------------------------------------------------------ SHARES AMOUNT -------------------------- -------------------------- AUGUST 2, AUGUST 2, YEAR ENDED 1993* TO YEAR ENDED 1993* TO APRIL 30, APRIL 30, APRIL 30, APRIL 30, 1995 1994 1995 1994 ------------ ------------ ------------ ------------ CLASS C Shares sold 224,223 510,177 $2,320,546 $5,606,322 Shares issued in reinvestment of dividends and distributions 15,711 4,767 159,243 51,975 Shares redeemed (237,610) (97,138) (2,443,423) (1,049,393) Net increase 2,324 417,806 $36,366 $4,608,904 NOTE F: RECLASSIFICATION OF COMPONENTS OF NET ASSETS In accordance with Statement of Position 93-2 Determination, Disclosure, and Financial Statement Presentation of Income, Capital Gain and Return of Capital Distributions by Investment Companies, permanent book and tax differences relating to shareholder distributions have been reclassified to additional paid-in capital. During the current period the accumulated undistributed net investment income was charged and accumulated undistributed net realized gains was credited for $80,105 for Alliance Growth Investors Fund. Net investment income, net realized gains and net assets were not affected by this change. NOTE G: TAXES Capital and currency losses incurred after October 31 within the Fund's fiscal year are deemed to arise on the first business day of the following fiscal year. The Alliance Growth Investors Fund incurred and elected to defer post October currency losses of $71,562 and capital losses of $447,337. The Alliance Conservative Investors Fund incurred and elected to defer post October capital losses of $812,541. At April 30, 1995, the Alliance Growth Investors Fund and Conservative Investors Fund had net capital loss carryovers of approximately $1,120,000 and $2,692,000, respectively. Such losses will be available to offset capital gains arising through April 30, 2003. To the extent that any net capital loss carryover or post-October loss is used to offset future capital gains, it is probable that the gains so offset will not be distributed to shareholders. * Commencement of distribution. 28 FINANCIAL HIGHLIGHTS ALLIANCE GROWTH INVESTORS FUND - ------------------------------------------------------------------------------- SELECTED DATA FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING THROUGHOUT EACH PERIOD CLASS A -------------------------------- YEAR YEAR MAY 4, ENDED ENDED 1992(A) TO APRIL 30, APRIL 30, APRIL 30, 1995 1994 1993 --------- -------- ---------- Net asset value, beginning of period $11.61 $11.35 $10.00 INCOME FROM INVESTMENT OPERATIONS Net investment income .25* .12* .20* Net realized and unrealized gain on investments .38 .39 1.43 Net increase in net asset value from operations .63 .51 1.63 LESS: DISTRIBUTIONS Dividends from net investment income (.15) (.11) (.16) Distributions from net realized gains (.01) (.14) (.12) Total dividends and distributions (.16) (.25) (.28) Net asset value, end of period $12.08 $11.61 $11.35 TOTAL RETURN Total investment return based on net asset value (b) 5.57% 4.46% 16.32% RATIOS/SUPPLEMENTAL DATA Net assets, end of year (000's omitted) $22,189 $16,759 $3,503 Ratios to average net assets of: Expenses, net of waivers/reimbursements 1.40% 1.40% 1.40%(c) Expenses, before waivers/reimbursements 1.97% 2.33% 4.27%(c) Net investment income 2.32% 1.67% 1.91%(c) Portfolio turnover rate 134% 96% 114%
CLASS B CLASS C --------------------------------- ----------------------- YEAR YEAR MAY 4, YEAR AUGUST 2, ENDED ENDED 1992(A) TO ENDED 1993(D) TO APRIL 30, APRIL 30, APRIL 30, APRIL 30, APRIL 30, 1995 1994 1993 1995 1994 -------- -------- ---------- -------- ----------- Net asset value, beginning of period $11.65 $11.41 $10.00 $11.65 $11.88 INCOME FROM INVESTMENT OPERATIONS Net investment income .17* .07* .07* .18* .08* Net realized and unrealized gain (loss) on investments .38 .37 1.45 .38 (.11) Net increase (decrease) in net asset value from operations .55 .44 1.52 .56 (.03) LESS: DISTRIBUTIONS Dividends from net investment income (.10) (.06) (.05) (.10) (.06) Distributions from net realized gains (.01) (.14) (.06) (.01) (.14) Total dividends and distributions (.11) (.20) (.11) (.11) (.20) Net asset value, end of period $12.09 $11.65 $11.41 $12.10 $11.65 TOTAL RETURN Total investment return based on net asset value (b) 4.83% 3.84% 15.23% 4.91% (.26)% RATIOS/SUPPLEMENTAL DATA Net assets, end of year (000's omitted) $43,328 $30,871 $7,999 $4,247 $3,280 Ratios to average net assets of: Expenses, net of waivers/reimbursements 2.10% 2.11% 2.15%(c) 2.10% 2.10%(c) Expenses, before waivers/reimbursements 2.67% 3.00% 4.48%(c) 2.66% 3.02%(c) Net investment income 1.62% .95% 1.07%(c) 1.62% 1.04%(c) Portfolio turnover rate 134% 96% 114% 134% 96%
See footnote summary on page 31. 29 FINANCIAL HIGHLIGHTS (CONTINUED) ALLIANCE CONSERVATIVE INVESTORS FUND - ------------------------------------------------------------------------------- SELECTED DATA FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING THROUGHOUT EACH PERIOD CLASS A -------------------------------- YEAR YEAR MAY 4, ENDED ENDED 1992(A) TO APRIL 30, APRIL 30, APRIL 30, 1995 1994 1993 --------- -------- ---------- Net asset value, beginning of period $10.37 $10.79 $10.00 INCOME FROM INVESTMENT OPERATIONS Net investment income .48* .31* .39* Net realized and unrealized gain (loss) on investment (.02) (.26) .82 Net increase in net asset value from operations .46 .05 1.21 LESS: DISTRIBUTIONS Dividends from net investment income (.45) (.29) (.36) Distributions from net realized gains -0- (.18) (.06) Total dividends and distributions (.45) (.47) (.42) Net asset value, end of period $10.38 $10.37 $10.79 TOTAL RETURN Total investment return based on net asset value (b) 4.65% .35% 12.25% RATIOS/SUPPLEMENTAL DATA Net assets, end of year (000's omitted) $16,105 $15,595 $5,339 Ratios to average net assets of: Expenses, net of waivers/reimbursements 1.40% 1.40% 1.40%(c) Expenses, before waivers/reimbursements 1.83% 2.03% 3.45%(c) Net investment income 4.66% 3.43% 3.92%(c) Portfolio turnover rate 248% 133% 84%
CLASS B CLASS C --------------------------------- ----------------------- YEAR YEAR MAY 4, YEAR AUGUST 2, ENDED ENDED 1992(A) TO ENDED 1993(D) TO APRIL 30, APRIL 30, APRIL 30, APRIL 30, APRIL 30, 1995 1994 1993 1995 1994 -------- -------- ---------- -------- ----------- Net asset value, beginning of period $10.47 $10.88 $10.00 $10.47 $11.12 INCOME FROM INVESTMENT OPERATIONS Net investment income .46* .24* .24* .46* .18* Net realized and unrealized gain (loss) on investments (.02) (.26) .89 (.01) (.50) Net increase (decrease) in net asset value from operations .44 (.02) 1.13 .45 (.32) LESS: DISTRIBUTIONS Dividends from net investment income (.40) (.21) (.22) (.40) (.15) Distributions from net realized gains -0- (.18) (.03) -0- (.18) Total dividends and distributions (.40) (.39) (.25) (.40) (.33) Net asset value, end of period $10.51 $10.47 $10.88 $10.52 $10.47 TOTAL RETURN Total investment return based on net asset value (b) 3.91% (.31)% 11.39% 4.01% (2.98)% RATIOS/SUPPLEMENTAL DATA Net assets, end of year (000's omitted) $30,542 $29,697 $9,210 $4,419 $4,375 Ratios to average net assets of: Expenses, net of waivers/reimbursements 2.10% 2.11% 2.15%(c) 2.10% 2.10%(c) Expenses, before waivers/reimbursements 2.52% 2.73% 3.95%(c) 2.52% 2.10%(c) Net investment income 3.96% 2.72% 3.06%(c) 3.97% 2.94%(c) Portfolio turnover rate 248% 133% 84% 248% 133%
See footnote summary on page 31. 30 ALLIANCE GROWTH INVESTORS AND CONSERVATIVE INVESTORS FUNDS - ------------------------------------------------------------------------------- FOOTNOTE SUMMARY * Net of fee waived and expenses reimbursed by Adviser. (a) Commencement of operations. (b) Total investment return is calculated assuming an initial investment made at the net asset value at the beginning of the period, reinvestment of all dividends and distributions at net asset value during the period, and redemption on the last day of the period. Initial sales charges or contingent deferred sales charges are not reflected in the calculation of total investment return. Total investment return calculated for a period of less than one year is not annualized. (c) Annualized. (d) Commencement of distribution. Prior to July 22, 1993, Equitable Capital Management Corporation (Equitable Capital) served as the investment adviser to the Trust. On July 22, 1993, Alliance Capital Management L.P. acquired the business and substantially all of the assets of Equitable Capital and became the investment adviser to the Trust. 31 REPORT OF INDEPENDENT ACCOUNTANTS ALLIANCE GROWTH INVESTORS AND CONSERVATIVE INVESTORS FUNDS - ------------------------------------------------------------------------------- TO THE BOARD OF TRUSTEES AND SHAREHOLDERS OF ALLIANCE GROWTH INVESTORS FUND AND ALLIANCE CONSERVATIVE INVESTORS FUND In our opinion, the accompanying statements of assets and liabilities, including the portfolios of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Alliance Growth Investors Fund and Alliance Conservative Investors Fund (separately managed portfolios constituting part of The Alliance Portfolios, hereafter referred to as the 'Funds') at April 30, 1995, the results of each of their operations for the year then ended, the changes in each of their net assets for each of the two years in the period then ended and the financial highlights for each of the periods presented, in conformity with generally accepted accounting principles. These financial statements and financial highlights (hereafter referred to as 'financial statements') are the responsibility of the Funds' management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at April 30, 1995 by correspondence with the custodian and brokers and the application of alternative auditing procedures where confirmations from brokers were not received, provide a reasonable basis for the opinion expressed above. PRICE WATERHOUSE LLP New York, New York June 22, 1995 32 4 00250184.AA3 C. OTHER INFORMATION ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS: (a) Financial Statements: For financial statements, which are part of this Registration Statement see "Financial Highlights" in the Prospectuses and "Financial Statements" in the Statements of Additional Information. (b) Exhibits: 1. Agreement and Declaration of Trust (previously filed with Pre-Effective Amendment No. 1 to the Registrant's Registration Statement on July 8, 1987); Amendment No. 1 to Agreement and Declaration of Trust (previously filed with Pre- Effective Amendment No. 1 to the Registrant's Registration Statement on July 8, 1987); Amendment No. 2 to Agreement and Declaration of Trust (previously filed with Post-Effective Amendment No. 11 to the Registrant's Registration Statement on June 28, 1993). 2. By-Laws (previously filed with Post-Effective Amendment No. 1 to the Registrant's Registration Statement on April 29, 1988); Amendment to By- Laws dated October 16, 1991 (previously filed with Post Effective Amendment No. 9 to the Registrant's Registration Statement on August 31, 1992). 3. Not applicable. 4(a). Specimen Share Certificate with respect to (a) The Equitable Growth Fund; (b) The Equitable Balanced Fund; (c) The Equitable Government Securities Fund; (d) The Equitable Tax Exempt Fund; (e) The Equitable Growth and Income Fund; and (f) The Equitable Short- Term World Income Fund (previously filed with Post- Effective Amendment No. 6 to the Registrant's Registration Statement on February 8, 1991). 4(b). Specimen Share Certificate with respect to (a) The Equitable Aggressive Growth Fund; (b) The Equitable Short-Term U.S. Government Fund; (c) The Equitable Conservative Investors Fund; and (d) The Equitable Growth Investors Fund (previously filed with Post Effective Amendment No. 9 to the Registrant's Registration Statement on August 31, 1992). 4(c). Portions of the Registrant's Agreement and Declaration of Trust and By-Laws pertaining to shareholders' rights (previously filed with Post Effective Amendment No. 11 to the Registrant's Registration Statement on June 28, 1993). 4(d). Specimen Share Certificate with respect to Class C shares of (a) Alliance Conservative Investors Fund and (b) Alliance Growth Investors Fund - filed herewith. 5(a). Form of Investment Advisory Agreement between the Registrant and Alliance Capital Management L.P. (previously filed with Post-Effective Amendment No. 11 to the Registrant's Registration Statement on June 28, 1993). 6(a). Form of Distribution Services Agreement between the Registrant and Alliance Fund Distributors, Inc. (previously filed with Post-Effective Amendment No. 11 to the Registrant's Registration Statement on June 28, 1993). 6(b). Form of Selected Dealers Agreement between Alliance Fund Distributors, Inc. and selected dealers offering shares of the Registrant (previously filed with Post- Effective Amendment No. 11 to the Registrant's Registration Statement on June 28~ 1993). 6(c). Form of Selected Agents Agreement between Alliance Fund Distributors, Inc. and selected agents making available shares of the Registrant (previously filed with Post-Effective Amendment No. 11 to the Registrant's Registration Statement on June 28, 1993). 7. Not applicable. 8. Custodian Agreement between the Registrant and State Street Bank and Trust Company (previously filed with Post-Effective Amendment No. 2 to the 2 Registrant's Registration Statement on November 21, 1988). 9(a). Transfer Agent Agreement between the Registrant and State Street Bank and Trust Company (previously filed with Post-Effective Amendment No. 4 to the Registrant's Registration Statement on June 29, 1989). 9(b). Accounting Agreement between Equitable Capital Management Corporation and State Street Bank and Trust Company concerning (a) The Equitable Growth Fund; (b) The Equitable Balanced Fund; (c) The Equitable Government Securities Fund; and (d) The Equitable Tax Exempt Fund (previously filed with Post-Effective Amendment No. 4 to the Registrants Registration Statement on June 29, 1989). 9(c). Transfer Agent Agreement between the Registrant and State Street Bank and Trust Company - filed herewith. 10(a). Opinion and Consent of Counsel (previously filed with Post-Effective Amendment No. 9 to the Registrant's Registration Statement on August 31, 1992). 10(b). Opinion and Consent of Counsel - filed herewith. 11. Consent of Independent Accountants - filed herewith. 12. Not applicable. 13. Investment Letter of The Equitable Life Assurance Society of the United States (previously filed with Pre-Effective Amendment No. 2 to the Registrant's Registration Statement on October 19, 1987). 14. Not applicable. 15(a). Amended and Restated Distribution Plan applicable to the Registrant's Class A shares (previously filed with Post-Effective Amendment No. 11 to the Registrant's Registration Statement on June 28, 1993). 3 15(b). Amended and Restated Distribution Plan applicable to the Registrant's Class B shares (previously filed with Post-Effective Amendment No. 11 to the Registrant's Registration Statement on June 28, 1993). 15(c). Form of Distribution Plan applicable to the Registrant's Class C shares (previously filed with Post-Effective Amendment No. 11 to the Registrant's Registration Statement on June 28, 1993). 16. Schedule for computation of performance quotations - (previously filed with Post- Effective Amendment No. 15 to the Registrant's Registration Statement on January 27, 1995). 17. Financial Data Schedule - filed herewith. ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT As of August 25, 1995, the Registrant, The Alliance Portfolios, believes that no person is directly or indirectly controlled by or under common control with the Registrant. ITEM 26. NUMBER OF HOLDERS OF SECURITIES (as of August 15, 1995) (1) (2) NUMBER OF RECORD TITLE OF CLASS HOLDERS ______________ _________ Class A shares of beneficial interest of Alliance Growth Fund 22,165 Class B shares of beneficial interest of Alliance Growth Fund 102,509 Class C shares of beneficial interest of 4 Alliance Growth Fund 10,477 Class A shares of beneficial interest of Alliance Strategic Balanced Fund 1,006 Class B shares of beneficial interest of Alliance Strategic Balanced Fund 3,326 Class C shares of beneficial interest of Alliance Strategic Balanced Fund 248 Class A shares of beneficial interest of Alliance Short-Term U.S. Government Fund 135 Class B shares of beneficial interest of Alliance Short-Term U.S. Government Fund 288 Class C shares of beneficial interest of Alliance Short-Term U.S. Government Fund 150 Class A shares of beneficial interest of Alliance Growth Investors Fund 2,078 Class B shares of beneficial interest of Alliance Growth Investors Fund 4,587 Class C shares of beneficial interest of Alliance Growth Investors Fund 484 Class A shares of beneficial interest of Alliance Conservative Investors Fund 1,014 5 Class B shares of beneficial interest of Alliance Conservative Investors Fund 2,203 Class C shares of beneficial interest of Alliance Conservative Investors Fund 389 ITEM 27. INDEMNIFICATION Paragraph (n) of Section 3, Article IV of the Registrant's Agreement and Declaration of Trust provides in relevant part that the Trustees of the Trust have the power: "(n) To purchase and pay for entirely out of Trust property such insurance as they may deem necessary or appropriate for the conduct of the business, including without limitation, insurance policies insuring the assets of the Trust and payment of distributions and principal on its portfolio investments, and insurance policies insuring the Shareholders, Trustees, officers, employees, agents, investment advisers or managers, principal underwriters, or independent contractors of the Trust individually against all claims and liabilities of every nature arising by reason of holding, being or having held any such office or position, or by reason of any action alleged to have been taken or omitted by any such person as Shareholder, Trustee, officer, employee, agent, investment adviser or manager, principal underwriter, or independent contractor, including any action taken or omitted that may be determined to constitute negligence, whether or not the Trust would have the power to indemnify such person against such liability;" Section 2 of Article VII of the Registrant's Agreement and Declaration of Trust provides in relevant part: "Limitation of Liability Section 2. The Trustees shall not be responsible or liable in any event for any neglect or wrongdoing of any officer, agent, employee, manager or principal underwriter of the Trust, nor shall any Trustee be responsible for the act or omission of any other Trustee, but nothing herein contained shall protect any Trustee against any liability to which he or she would otherwise be subject by reason of willful misfeasance, bad faith, gross 6 negligence or reckless disregard of the duties involved in the conduct of his or her office." Article VIII of the Registrant's Agreement and Declaration of Trust provides in relevant part: ARTICLE VIII INDEMNIFICATION "Section 1. The Trust shall indemnify each of its Trustees and officers (including persons who serve at the Trust's request as directors, officers or trustees of another organization in which the Trust has any interest as a shareholder, creditor or otherwise) (hereinafter referred to as a "Covered Person") against all liabilities and expenses, including but not limited to amounts paid in satisfaction of judgments, in compromise or as fines and penalties, and counsel fees reasonably incurred by any Covered Person in connection with the defense or disposition of any action, suit or other proceeding, whether civil or criminal, before any court or administrative or legislative body, in which such Covered Person may be or may have been involved as a party or otherwise or with which such Covered Person may be or may have been threatened, while in office or thereafter, by reason of being or having been such a Covered Person except with respect to any matter as to which such Covered Person shall have been finally adjudicated in any such action, suit or other proceeding to be liable to the Trust or its Shareholders by reason of wilful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of such Covered Person's office. Expenses, including counsel fees so incurred by any such Covered Person (but excluding amounts paid in satisfaction of judgments, in compromise or as fines or penalties), shall be paid from time to time by the Trust in advance of the final disposition of any such action, suit or proceeding upon receipt of an undertaking by or on behalf of such Covered Person to repay amounts so paid to the Trust if it is ultimately determined that indemnification of such expenses is not authorized under this Article, provided, however, that either (a) such Covered Person shall have provided appropriate security for such undertaking, (b) the Trust shall be insured against losses arising from any such advance payments or (c) either a majority of the disinterested Trustees acting on the matter (provided that a majority of the disinterested Trustees then in office act on the matter), or independent legal counsel in a written opinion, shall have determined, based upon a review of readily available facts (as 7 opposed to a full trial type inquiry) that there is reason to believe that such Covered Person will be found entitled to indemnification under this Article. "Section 2. As to any matter disposed of (whether by a compromise payment, pursuant to a consent decree or otherwise) without an adjudication by a court, or by any other body before which the proceeding was brought, that such Covered Person is liable to the Trust or its Shareholders by reason of wilful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of his or her office, indemnification shall be provided if (a) approved as in the best interests of the Trust, after notice that it involves such indemnification, by at least a majority of the disinterested Trustees acting on the matter (provided that a majority of the disinterested Trustees then in office act on the matter) upon a determination, based upon a review of readily available facts (as opposed to a full trial type inquiry) that such Covered Person is not liable to the Trust or its Shareholders by reason or wilful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of his or her office, or (b) there has been obtained an opinion in writing of independent legal counsel, based upon a review of readily available facts (as opposed to a full trial type inquiry) to the effect that such indemnification would not protect such Person against any liability to the Trust to which he would otherwise be subject by reason of wilful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of his office. Any approval pursuant to this Section shall not prevent the recovery from any Covered Person in accordance with this Section as indemnification if such Covered Person is subsequently adjudicated by a Court of competent jurisdiction to have been liable to the Trust or its Shareholders by reason or wilful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of such Covered Person's office. Section 3. The right of indemnification hereby provided shall not be exclusive of or affect any other rights to which such Covered Person may be entitled. As used in this Article VIII, the term "Covered Person" shall include such person's heirs, executors and administrators and a "disinterested Trustee" is a Trustee who is not an "interested person" of the Trust as defined in Section 2(a)(19) of the Investment Company Act of 1940, as amended, (or who has been exempted from being an "interested person" by any rule, regulation or 8 order of the Commission) and against whom none of such actions, suits or other proceedings or another action, suit or proceeding on the same or similar grounds is then or has been pending. Nothing contained in this Article shall affect any rights to indemnification to which personnel of the Trust, other than Trustees or officers, and other persons may be entitled by contract or otherwise under law, nor the power of the Trust to purchase and maintain liability insurance on behalf of any such person. Section 2 of Article IX of the Registrant's Agreement and Declaration of Trust provides in relevant part: "TRUSTEE'S GOOD FAITH ACTION, EXPERT ADVICE, NO BOND OR SURETY Section 2. The exercise by the Trustees of their powers and discretions hereunder shall be binding upon everyone interested. A Trustee shall be liable for his or her own willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of the office of Trustee, and for nothing else, and shall not be liable for errors of judgment or mistakes of fact or law. The Trustees may take advice of counsel or other experts with respect to the meaning and operation of this Declaration of Trust, and shall be under no liability for any act or omission in accordance with such advice or for failing to follow such advice. The Trustees shall not be required to give any bond as such, nor any surety if a bond is required." The form of Investment Advisory Agreement between the Registrant and Alliance Capital Management L.P. provides that Alliance Capital Management L.P. will not be liable under such agreement for any mistake of judgment or in any event whatsoever except for lack of good faith and that nothing therein shall be deemed to protect, or purport to protect, Alliance Capital Management L.P. against any liability to the Registrant or its shareholders to which it would otherwise be subject by reason or willful misfeasance, bad faith or gross negligence in the performance of its duties thereunder, or by reason or reckless disregard of its obligations or duties thereunder. The form of Distribution Services Agreement between the Registrant and Alliance Fund Distributors, Inc. provides that the Registrant will indemnify, defend and hold Alliance Fund Distributors, Inc., and any person who controls it within the meaning of Section 15 of the Investment Company Act of 1940, free and harmless 9 from and against any and all claims, demands, liabilities and expenses which Alliance Fund Distributors, Inc. or any controlling person may incur arising out of or based upon any alleged untrue statement of a material fact contained in Registrant's Registration Statement, Prospectus or Statement of Additional Information or arising out of, or based upon, any alleged omission to state a material fact required to be stated in any one of the foregoing or necessary to make the statements in any one of the foregoing not misleading, provided that nothing therein shall be so construed as to protect Alliance Fund Distributors, Inc. against any liability to Registrant or its security holders to which it would otherwise be subject by reason or willful misfeasance, bad faith or gross negligence in the performance of its duties thereunder, or by reason of reckless disregard of its obligations or duties thereunder. The foregoing summaries are qualified by the entire text of Registrant's Agreement and Declaration of Trust, the Advisory Agreement between the Registrant and Alliance Capital Management L.P., the Advisory Agreements between the Registrant and Equitable Capital Management Corporation and the Distribution Services Agreement between the Registrant and Alliance Fund Distributors, Inc. The Registrant participates in a joint directors and officers liability policy for the benefit of its Trustees and officers. Insofar as indemnification for liabilities arising under the Securities Act of 1933 (the "Act") may be permitted to Trustees, Officers and controlling persons of the Trust pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission, such indemnification is against public policy as expressed in the act, and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Trust of expenses incurred or paid by a Trustee, Officer or controlling person of the Trust in the successful defense of any action, suit or proceeding) is asserted by such Trustee, Officer or controlling person in connection with the securities being registered, the Trust will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification 10 by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. ITEM 28. BUSINESS AND OTHER CONNECTIONS OF ADVISER. The descriptions of Alliance Capital Management L.P. under the captions "Management of the Trust" in the Prospectus and in the Statement of Additional Information constituting Parts A and B, respectively, of this Registration Statement are incorporated by reference herein. Alliance Capital Management L.P. acts as investment adviser to, in addition to Registrant, the following investment companies: ACM Government Income Fund, Inc. ACM Government Opportunity Fund, Inc. ACM Government Securities Fund, Inc. ACM Government Spectrum Fund, Inc. ACM Managed Dollar Income Fund, Inc. ACM Managed Income Fund, Inc. ACM Municipal Securities Income Fund, Inc. ACM Institutional Reserves, Inc. AFD Exchange Reserves, Inc. Alliance All-Asia Investment Fund, Inc. Alliance All-Market Advantage Fund, Inc. Alliance Balanced Shares, Inc. Alliance Bond Fund, Inc. Alliance Capital Reserves Alliance Counterpoint Fund Alliance Developing Markets Fund, Inc. Alliance Global Dollar Government Fund, Inc. Alliance Global Environment Fund, Inc. Alliance Global Small Cap Fund, Inc. Alliance Government Reserves Alliance Growth and Income Fund, Inc. Alliance Income Builder Fund, Inc. Alliance International Fund Alliance Money Market Fund Alliance Mortgage Securities Income Fund, Inc. Alliance Mortgage Strategy Trust, Inc. Alliance Multi-Market Strategy Trust, Inc. Alliance Municipal Income Fund II Alliance Municipal Income Fund, Inc. Alliance Municipal Trust Alliance New Europe Fund, Inc. Alliance North American Government Income Trust, Inc. Alliance Premier Growth Fund, Inc. Alliance Quasar Fund, Inc. Alliance Short-Term Multi-Market Trust, Inc. 11 Alliance Technology Fund, Inc. Alliance Utility Income Fund, Inc. Alliance Variable Products Series Fund, Inc. Alliance World Dollar Government Fund, Inc. Alliance World Dollar Government Fund II, Inc. Alliance World Income Trust, Inc. Alliance Worldwide Privatization Fund, Inc. Fiduciary Management Associates The Hudson River Trust The Alliance Fund, Inc. The Global Privatization Fund, Inc. The Austria Fund, Inc. The Korean Investment Fund, Inc. The Southern Africa Fund, Inc. The Spain Fund, Inc. The information as to the directors and executive officers of Alliance Capital Management Corporation, the general partner of Alliance Capital Management L.P., set forth in Alliance Capital Management L.P.'s Form ADV filed with the Securities and Exchange Commission on April 21, 1988 (File No. 801-32361) and amended through the date hereof, is incorporated by reference. ITEM 29. PRINCIPAL UNDERWRITERS (a) Alliance Fund Distributors, Inc., the Registrant's Principal Underwriter in connection with the sale of shares of the Registrant, also acts as principal Underwriter or Distributor for the following investment companies: ACM Institutional Reserves, Inc. AFD Exchange Reserves Alliance All-Asia Investment Fund, Inc. Alliance Balanced Shares, Inc. Alliance Bond Fund, Inc. Alliance Capital Reserves Alliance Counterpoint Fund Alliance Developing Markets Fund, Inc. Alliance Global Dollar Government Fund, Inc. Alliance Global Small Cap Fund, Inc. Alliance Government Reserves Alliance Growth and Income Fund, Inc. Alliance Income Builder Fund, Inc. Alliance International Fund Alliance Mortgage Securities Income Fund, Inc. Alliance Mortgage Strategy Trust, Inc. Alliance Multi-Market Strategy Trust, Inc. Alliance Municipal Income Fund, Inc. Alliance Municipal Income Fund II 12 Alliance Municipal Trust Alliance New Europe Fund, Inc. Alliance North American Government Income Trust, Inc. Alliance Premier Growth Fund, Inc. Alliance Quasar Fund, Inc. Alliance Short-Term Multi-Market Trust, Inc. Alliance Technology Fund, Inc. Alliance Utility Income Fund, Inc. Alliance Variable Products Series Fund, Inc. Alliance World Income Trust, Inc. Alliance Worldwide Privatization Fund, Inc. Fiduciary Management Associates The Alliance Fund, Inc. Alliance Technology Fund, Inc. The Hudson River Trust (b) The following are the Directors and Officers of Alliance Fund Distributors, Inc., the principal place of business of which is 1345 Avenue of the Americas, New York, New York, 10105. POSITIONS AND POSITION AND OFFICES OFFICES NAME WITH UNDERWRITER WITH REGISTRANT ____ ____________________ _______________ Michael J. Laughlin Chairman Robert L. Errico President Kimberly A. Baumgardner Senior Vice President Edmund P. Bergan, Senior Vice President, Secretary Jr. Secretary & General Counsel Daniel J. Dart Senior Vice President Byron M. Davis Senior Vice President Geoffrey L. Hyde Senior Vice President Barbara J. Krumsiek Senior Vice President Stephen R. Laut Senior Vice President Dusty W. Paschall Senior Vice President Antonios G. 13 Poleondakis Senior Vice President Gregory K. Shannahan Senior Vice President Joseph F. Sumanski Senior Vice President James P. Syrett Senior Vice President Peter J. Szabo Senior Vice President Richard A. Winge Senior Vice President Warren W. Babcock III Vice President Benji A. Baer Vice President Kenneth F. Barkoff Vice President William P. Beanblossom Vice President Jack C. Bixler Vice President Casimir F. Bolanowski Vice President Kevin T. Cannon Vice President Leo H. Cook Vice President Richard W. Dabney Vice President Mark J. Dunbar Vice President Linda A. Finnerty Vice President William C. Fisher Vice President Robert M. Frank Vice President Gerard J. Friscia Vice President Andrew L. Gangolf Vice President Mark D. Gersten Vice President Treasurer and Chief Financial Officer Joseph W. Gibson Vice President Troy L. Glawe Vice President 14 James E. Gunter Vice President Alan Halfenger Vice President George R. Hrabovsky Vice President Robert H. Joseph Vice President & Treasurer Richard D. Keppler Vice President Sheila M. Lamb Vice President Donna M. Lamback Vice President Thomas Leavitt, III Vice President James M. Liptrot Vice President Christopher J. MacDonald Vice President Daniel D. McGinley Vice President Maura A. McGrath Vice President Matthew P. Mintzer Vice President Nicole M. Nolan-Keister Vice President Robert T. Pigozzi Vice President James J. Posch Vice President Robert E. Powers Vice President Domenick Pugliese Vice President Bruce W. Reitz Vice President Dennis A. Sanford Vice President Raymond S. Sclafani Vice President William J. Strott, Jr. Vice President Richard E. Tambourine Vice President Nicholas K. Willett Vice President 15 Neil B. Wood Vice President Emilie D. Wrapp Vice President Maria L. Carreras Assistant Vice President Sarah A. Chodera Assistant Vice President John W. Cronin Assistant Vice President Sohaila S. Farsheed Assistant Vice President Leon M. Fern Assistant Vice President William B. Hanigan Assistant Vice President Vicky M. Hayes Assistant Vice President Daniel M. Hazard Assistant Vice President John C. Hershock Assistant Vice President James J. Hill Assistant Vice President Kalen H. Holliday Assistant Vice President Thomas K. Intoccia Assistant Vice President Edward W. Kelly Assistant Vice President Patrick Look Assistant Vice President Michael F. Mahoney Assistant Vice President Renate S. Mars Assistant Vice President Shawn P. McClain Assistant Vice President Thomas F. Monnerat Assistant Vice President Joanna D. Murray Assistant Vice President Jeanette M. Nardella Assistant Vice President Carol H. Rappa Assistant Vice President Karen C. Satterberg Assistant Vice President Robert M. Smith Assistant Vice President Joseph T. Tocyloski Assistant Vice President 16 Mark R. Manley Assistant Secretary (c) Not applicable. ITEM 30. LOCATION OF ACCOUNTS AND RECORDS. The accounts, books and other documents required to be maintained by Section 31(a) of the Investment Company Act of 1940 and the Rules thereunder are maintained as follows: journals, ledgers, securities records and other original records are maintained principally at the offices of Alliance Fund Services, Inc., 500 Plaza Drive, Secaucus, New Jersey 07094 and at the offices of State Street Bank and Trust Company, the Registrant's Custodian, 225 Franklin Street, Boston, Massachusetts 02110. All other records so required to be maintained are maintained at the offices of Alliance Capital Management L.P., 1345 Avenue of the Americas, New York, New York 10105. ITEM 31. MANAGEMENT SERVICES. Not applicable. ITEM 32. UNDERTAKINGS. Not applicable. 17 ******************** NOTICE A copy of the Agreement and Declaration of Trust of The Alliance Portfolios (the "Trust") is on file with the Secretary of State of The Commonwealth of Massachusetts and notice is hereby given that this Registration Statement has been executed on behalf of the Trust by an officer of the Trust as an officer and by its Trustees as trustees and not individually and the obligations of or arising out of this Registration Statement are not binding upon any of the Trustees, officers or shareholder individually but are binding only upon the assets and property of the Trust. 18 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, as amended, and the Investment Company Act of 1940, as amended, the Registrant certifies that it meets all of the requirements for effectiveness of this Amendment to its Registration Statement pursuant to Rule 485(b) under the Securities Act of 1933 and has duly caused this Amendment to its Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of New York and State of New York, on the 25th day of August, 1995. THE ALLIANCE PORTFOLIOS by /s/ John D. Carifa ___________________ John D. Carifa Chairman and President Pursuant to the requirements of the Securities Act of 1933, as amended, this Amendment to the Registration Statement has been signed below by the following persons in the capacities and on the dates indicated: SIGNATURE TITLE DATE _________ _____ ____ 1) Principal Executive Officer /s/ John D. Carifa Chairman and August 25, 1995 __________________ President John D. Carifa 2) Principal Financial and Accounting Officer /s/ Mark D. Gersten Treasurer and Chief August 25, 1995 ___________________ Financial Officer Mark D. Gersten 19 ALL OF THE TRUSTEES Alberta B. Arthurs Ruth Block John D. Carifa Richard W. Couper Brenton W. Harries Donald J. Robinson by \s\ Edmund P. Bergan. Jr. August 25, 1995 _________________________ (Attorney-in-fact) Edmund P. Bergan, Jr. 20 EXHIBIT INDEX EXHIBIT SEQUENTIAL NO. DESCRIPTION PAGE NO. _______ ___________ __________ 4(d). Specimen Share Certificates 9(c). Transfer Agent Agreement 10(b). Opinion and Consent of Counsel 11. Consent of Independent Accountants 17. Financial Data Schedules 21 00250184.AA3 EX-99.B4 2 Exhibit 4(d) ------------- Alliance Capital [logo] Number Shares Alliance Conservative Investors Fund CERTIFICATE FOR CLASS C SHARES OF BENEFICIAL INTEREST, PAR VALUE $.00001 PER SHARE ACCOUNT No. ALPHA CODE CUSIP 01877F 85 6 SEE REVERSE FOR CERTAIN DEFINITIONS THIS CERTIFIES THAT is the registered holder of FULLY PAID AND NON-ASSESSABLE, CLASS C SHARES OF BENEFICIAL INTEREST, PAR VALUE $.00001 PER SHARE, IN - ---- ALLIANCE CONSERVATIVE INVESTORS FUND - CLASS C SHARES ----- under, in accordance with, and subject to all the provisions of, an Agreement and Declaration of Trust dated March 26, 1987, amended April 21, 1993, a copy of which has been filed with the Secretary of the commonwealth of Massachusetts, to all of which provisions, as the same may be in effect from time to time, the holder and every transferee and assignee hereof agrees by the acceptance of this share certificate. This certificate is not valid until countersigned by the Transfer Agent. IN WITNESS WHEREOF, the Trustees under said Agreement and Declaration of Trust, acting not individually, but as such Trustees, have caused to be affixed to this certificate the facsimile Seal of the Trust and the facsimile signature of two duly authorized officers of the Trust, acting not individually, but as such officers. Dated: [Seal of the Alliance Portfolios, 1987 Massachusetts Trust] /s/ Edmund P. Bergan Jr. /s/ David H. Dievler Secretary Chairman of the Trustees Countersigned TRANSFER AGENT BY Alliance Fund Services Inc. Authorized Signature R. Used under license from the owner Alliance Capital Management L.P. 00250184.AA8 Exhibit 4(d) ------------- Alliance Capital [logo] Number Shares Alliance Growth Investors Fund CERTIFICATE FOR CLASS C SHARES OF BENEFICIAL INTEREST, PAR VALUE $.00001 PER SHARE ACCOUNT No. ALPHA CODE CUSIP 01877F 88 0 SEE REVERSE FOR CERTAIN DEFINITIONS THIS CERTIFIES THAT is the registered holder of FULLY PAID AND NON-ASSESSABLE, CLASS C SHARES OF BENEFICIAL INTEREST, PAR VALUE $.00001 PER SHARE, IN ---- ALLIANCE GROWTH INVESTORS FUND - CLASS C SHARES ----- under, in accordance with, and subject to all the provisions of, an Agreement and Declaration of Trust dated March 26, 1987, amended April 21, 1993, a copy of which has been filed with the Secretary of the commonwealth of Massachusetts, to all of which provisions, as the same may be in effect from time to time, the holder and every transferee and assignee hereof agrees by the acceptance of this share certificate. This certificate is not valid until countersigned by the Transfer Agent. IN WITNESS WHEREOF, the Trustees under said Agreement and Declaration of Trust, acting not individually, but as such Trustees, have caused to be affixed to this certificate the facsimile Seal of the Trust and the facsimile signature of two duly authorized officers of the Trust, acting not individually, but as such officers. Dated: [Seal of the Alliance Portfolios, 1987 Massachusetts Trust] /s/ Edmund P. Bergan Jr. /s/ David H. Dievler Secretary Chairman of the Trustees Countersigned TRANSFER AGENT BY Alliance Fund Services Inc. Authorized Signature R. Used under license from the owner Alliance Capital Management L.P. 00250184.AA8 EX-99.B9 3 ALLIANCE FUND SERVICES, INC. TRANSFER AGENCY AGREEMENT AGREEMENT, dated as of August 2, 1993, between THE ALLIANCE PORTFOLIOS, a Massachusetts business trust and an open- end investment company registered with the Securities and Exchange Commission (the "SEC") under the Investment Company Act of 1940 (the "Investment Company Act"), having its principal place of business at 1345 Avenue of Americas, New York, New York 10105 (the "Fund"), and ALLIANCE FUND SERVICES, INC., a Delaware corporation registered with the SEC as a transfer agent under the Securities Exchange Act of 1934, having its principal place of business at 500 Plaza Drive, Secaucus, New Jersey 07094 ("Fund Services"), provides as follows: WHEREAS, Fund Services has agreed to act as transfer agent to the Fund for the purpose of recording the transfer, issuance and redemption of shares of each series of the common stock or shares of beneficial interest, as applicable, of the Fund ("Shares" or "Shares of a Series"), transferring the Shares, disbursing dividends and other distributions to shareholders of the Fund, and performing such other services as may be agreed to pursuant hereto; NOW THEREFORE, for and in consideration of the mutual covenants and agreements contained herein, the parties do hereby agree as follows: SECTION 1. The Fund hereby appoints Fund Services as its transfer agent, dividend disbursing agent and shareholderservicing agent for the Shares, and Fund Services agrees to act in such capacities upon the terms set forth in this Agreement. Capitalized terms used in this Agreement and not otherwise defined shall have the meanings assigned to them in SECTION 30. SECTION 2. (a) The Fund shall provide Fund Services with copies of the following documents: (1) Specimens of all forms of certificates for Shares; (2) Specimens of all account application forms and other documents relating to Shareholders' accounts; (3) Copies of each Prospectus; (4) Specimens of all documents relating to withdrawal plans instituted by the Fund, as described in SECTION 16; and (5) Specimens of all amendments to any of the foregoing documents. (b) The Fund shall furnish to Fund Services a supply of blank Share Certificates for the Shares and, from time to time, will renew such supply upon Fund Services' request. Blank Share Certificates shall be signed manually or by facsimile signatures of officers of the Fund authorized to sign by law or pursuant to the by-laws of the Fund and, if required by Fund Services, shall bear the Fund's seal or a facsimile thereof. 2 SECTION 3. Fund Services shall make original issues of Shares in accordance with SECTIONS 13 and 14 and the Prospectus upon receipt of (i) Written Instructions requesting the issuance, (ii) a certified copy of a resolution of the Fund's Board ofDirectors or Trustees authorizing the issuance, (iii) necessary funds for the payment of any original issue tax applicable to such Shares, and (iv) an opinion of the Fund's counsel as to the legality and validity of the issuance, which opinion may provide that it is contingent upon the filing by the Fund of an appropriate notice with the SEC, as required by Rule 24f-2 of the Investment Company Act, as amended from time to time. SECTION 4. Transfers of Shares shall be registered and, subject to the provisions of SECTION 10 in the case of Shares evidenced by Share Certificates, new Share Certificates shall be issued by Fund Services upon surrender of outstanding Share Certificates in the form deemed by Fund Services to be properly endorsed for transfer, which form shall include (i) all necessary endorsers' signatures guaranteed by a member firm of a national securities exchange or a domestic commercial bank or through other procedures mutually agreed to between the Fund and Fund Services, (ii) such assurances as Fund Services may deem necessary to evidence the genuineness and effectiveness of each endorsement and (iii) satisfactory evidence of compliance with all applicable laws relating to the payment or collection of taxes. 3 SECTION 5. Fund Services shall forward Share Certificates in "non-negotiable" form by first-class or registered mail, or by whatever means Fund Services deems equally reliable and expeditious. While in transit to the addressee, all deliveries of Share Certificates shall be insured by Fund Services as it deems appropriate. Fund Services shall not mail Share Certificates in "negotiable" form, unless requested in writing by the Fund and fully indemnified by the Fund to Fund Services' satisfaction. SECTION 6. In registering transfers of Shares, Fund Services may rely upon the Uniform Commercial Code as in effect from time to time in the State in which the Fund is incorporated or organized or, if appropriate, in the State of New Jersey; provided, that Fund Services may rely in addition or alternatively on any other statutes in effect in the State of New Jersey or in the state under the laws of which the Fund is incorporated or organized that, in the opinion of Fund Services' counsel, protect Fund Services and the Fund from liability arising from (i) not requiring complete documentation in connection with an issuance or transfer, (ii) registering a transfer without an adverse claim inquiry, (iii) delaying registration for purposes of an adverse claim inquiry or (iv) refusing registration in connection with an adverse claim. SECTION 7. Fund Services may issue new Share Certificates in place of those lost, destroyed or stolen, upon 4 receiving indemnity satisfactory to Fund Services; and may issue new Share Certificates in exchange for, and upon surrender of, mutilated Share Certificates as Fund Services deems appropriate. SECTION 8. Unless otherwise directed by the Fund, Fund Services may issue or register Share Certificates reflecting the signature, or facsimile thereof, of an officer who has died,resigned or been removed by the Fund. The Fund shall file promptly with Fund Services' approval, adoption or ratification of such action as may be required by law or by Fund Services. SECTION 9. Fund Services shall maintain customary stock registry records for Shares of each Series noting the issuance, transfer or redemption of Shares and the issuance and transfer of Share Certificates. Fund Services may also maintain for Shares of each Series an account entitled "Unissued Certificate Account," in which Fund Services will record the Shares, and fractions thereof, issued and outstanding from time to time for which issuance of Share Certificates has not been requested. Fund Services is authorized to keep records for Shares of each Series containing the names and addresses of record of Shareholders, and the number of Shares, and fractions thereof, from time to time owned by them for which no Share Certificates are outstanding. Each Shareholder will be assigned a single account number for Shares of each Series, even though Shares for which Certificates have been issued will be accounted for separately. 5 SECTION 10. Fund Services shall issue Share Certificates for Shares only upon receipt of a written request from a Shareholder and as authorized by the Fund. If Shares are purchased or transferred without a request for the issuance of a Share Certificate, Fund Services shall merely note on its stock registry records the issuance or transfer of the Shares and fractions thereof and credit or debit, as appropriate, the Unissued Certificate Account and the respective Shareholders' accounts with the Shares. Whenever Shares, and fractions thereof, owned by Shareholders are surrendered for redemption, Fund Services may process the transactions by making appropriate entries in the stock transfer records, and debiting the Unissued Certificate Account and the record of issued Shares outstanding; it shall be unnecessary for Fund Services to reissue Share Certificates in the name of the Fund. SECTION 11. Fund Services shall also perform the usual duties and function required of a stock transfer agent for a corporation, including but not limited to (i) issuing Share Certificates as treasury Shares, as directed by Written Instructions, and (ii) transferring Share Certificates from one Shareholder to another in the usual manner. Fund Services may rely conclusively and act without further investigation upon any list, instruction, certification, authorization, Share Certificate or other instrument or paper reasonably believed by it in good faith to be genuine and unaltered, and to have been 6 signed, countersigned or executed or authorized by a duly- authorized person or persons, or by the Fund, or upon the advice of counsel for the Fund or for Fund Services. Fund Services may record any transfer of Share Certificates which it reasonably believes in good faith to have been duly authorized, or may refuse to record any transfer of Share Certificates if, in good faith, it reasonably deems such refusal necessary in order toavoid any liability on the part of either the Fund or Fund Services. SECTION 12. Fund Services shall notify the Fund of any request or demand for the inspection of the Fund's share records. Fund Services shall abide by the Fund's instructions for granting or denying the inspection; provided, however, Fund Services may grant the inspection without such instructions if it is advised by its counsel that failure to do so will result in liability to Fund Services. SECTION 13. Fund Services shall observe the following procedures in handling funds received: (a) Upon receipt at the office designated by the Fund of any check or other order drawn or endorsed to the Fund or otherwise identified as being for the account of the Fund, and, in the case of a new account, accompanied by a new account application or sufficient information to establish an account as provided in the Prospectus, Fund Services shall stamp the transmittal document accompanying such check or other order with 7 the name of the Fund and the time and date of receipt and shall forthwith deposit the proceeds thereof in the custodial account of the Fund. (b) In the event that any check or other order for the purchase of Shares is returned unpaid for any reason, Fund Services shall, in the absence of other instructions from the Fund, advise the Fund of the returned check and prepare such documents and information as may be necessary to cancel promptlyany Shares purchased on the basis of such returned check and any accumulated income dividends and capital gains distributions paid on such Shares. (c) As soon as possible after 4:00 p.m., Eastern time or at such other times as the Fund may specify in Written or Oral Instructions for any Series (the "Valuation Time") on each Business Day Fund Services shall obtain from the Fund's Adviser a quotation (on which it may conclusively rely) of the net asset value, determined as of the Valuation Time on that day. On each Business Day Fund Services shall use the net asset value(s) determined by the Fund's Adviser to compute the number of Shares and fractional Shares to be purchased and the aggregate purchase proceeds to be deposited with the Custodian. As necessary but no more frequently than daily (unless a more frequent basis is agreed to by Fund Services), Fund Services shall place a purchase order with the Custodian for the proper number of Shares and fractional Shares to be purchased and promptly thereafter shall 8 send written confirmation of such purchase to the Custodian and the Fund. SECTION 14. Having made the calculations required by SECTION 13, Fund Services shall thereupon pay the Custodian the aggregate net asset value of the Shares purchased. The aggregate number of Shares and fractional Shares purchased shall then be issued daily and credited by Fund Services to the Unissued Certificate Account. Fund Services shall also credit each Shareholder's separate account with the number of Sharespurchased by such Shareholder. Fund Services shall mail written confirmation of the purchase to each Shareholder or the Shareholder's representative and to the Fund if requested. Each confirmation shall indicate the prior Share balance, the new Share balance, the Shares for which Stock Certificates are outstanding (if any), the amount invested and the price paid for the newly-purchased Shares. SECTION 15. Prior to the Valuation Time on each Business Day, as specified in accordance with SECTION 13, Fund Services shall process all requests to redeem Shares and, with respect to each Series, shall advise the Custodian of (i) the total number of Shares available for redemption and (ii) the number of Shares and fractional Shares requested to be redeemed. Upon confirmation of the net asset value by the Fund's Adviser, Fund Services shall notify the Fund and the Custodian of the redemption, apply the redemption proceeds in accordance with 9 SECTION 16 and the Prospectus, record the redemption in the stock registry books, and debit the redeemed Shares from the Unissued Certificates Account and the individual account of the Shareholder. In lieu of carrying out the redemption procedures described in the preceding paragraph, Fund Services may, at the request of the Fund, sell Shares to the Fund as repurchases from Shareholders, provided that the sale price is not less than the applicable redemption price. The redemption procedures shall then be appropriately modified. SECTION 16. Fund Services will carry out the following procedures with respect to Share redemptions: (a) As to each request received by the Fund from or on behalf of a Shareholder for the redemption of Shares, and unless the right of redemption has been suspended as contemplated by the Prospectus, Fund Services shall, within seven days after receipt of such redemption request, either (i) mail a check in the amount of the proceeds of such redemption to the person designated by the Shareholder or other person to receive such proceeds or, (ii) in the event redemption proceeds are to be wired through the Federal Reserve Wire System or by bank wire pursuant to procedures described in the Prospectus, cause such proceeds to be wired in Federal funds to the bank or trust company account designated by the Shareholder to receive such proceeds. Funds Services shall also prepare and send a confirmation of such 10 redemption to the Shareholder. Redemptions in kind shall be made only in accordance with such Written Instructions as Fund Services may receive from the Fund. The requirements as to instruments of transfer and other documentation, the determination of the appropriate redemption price and the time of payment shall be as provided in the Prospectus, subject to such additional requirements consistent therewith as may be established by mutual agreement between the Fund and Fund Services. In the case of a request for redemption that does not comply in all respects with the requirements for redemption, Fund Services shall promptly so notify the Shareholder and shalleffect such redemption at the price in effect at the time of receipt of documents complying with such requirements. Fund Services shall notify the Fund's Custodian and the Fund on each Business Day of the amount of cash required to meet payments made pursuant to the provisions of this paragraph and thereupon the Fund shall instruct the Custodian to make available to Fund Services in timely fashion sufficient funds therefor. (b) Procedures and standards for effecting and accepting redemption orders from Shareholders by telephone or by such check writing service as the Fund may institute may be established by mutual agreement between Fund Services and the Fund consistent with the Prospectus. (c) For purposes of redemption of Shares that have been purchased by check within fifteen (15) days prior to receipt of 11 the redemption request, the Fund shall provide Fund Services with Written Instructions concerning the time within which such requests may be honored. (d) Fund Services shall process withdrawal orders duly executed by Shareholders in accordance with the terms of any withdrawal plan instituted by the Fund and described in the Prospectus. Payments upon such withdrawal orders and redemptions of Shares held in withdrawal plan accounts in connection with such payments shall be made at such times as the Fund may determine in accordance with the Prospectus. (e) The authority of Fund Services to perform its responsibilities under SECTIONS 15 and 16 with respect to theShares of any Series shall be suspended if Fund Services receives notice of the suspension of the determination of the net asset value of the Series. SECTION 17. Upon the declaration of each dividend and each capital gains distribution by the Fund's Board of Directors or Trustees, the Fund shall notify Fund Services of the date of such declaration, the amount payable per Share, the record date for determining the Shareholders entitled to payment, the payment and the reinvestment date price. SECTION 18. Upon being advised by the Fund of the declaration of any income dividend or capital gains distribution on account of its Shares, Fund Services shall compute and prepare for the Fund records crediting such distributions to 12 Shareholders. Fund Services shall, on or before the payment date of any dividend or distribution, notify the Fund and the Custodian of the estimated amount required to pay any portion of a dividend or distribution which is payable in cash, and thereupon the Fund shall, on or before the payment date of such dividend or distribution, instruct the Custodian to make available to Fund Services sufficient funds for the payment of such cash amount. Fund Services will, on the designated payment date, reinvest all dividends in additional shares and promptly mail to each Shareholder at his address of record a statement showing the number of full and fractional Shares (rounded to three decimal places) then owned by the Shareholder and the net asset value of such Shares; provided, however, that if aShareholder elects to receive dividends in cash, Fund Services shall prepare a check in the appropriate amount and mail it to the Shareholder at his address of record within five (5) business days after the designated payment date, or transmit the appropriate amount in Federal funds in accordance with the Shareholder's agreement with the Fund. SECTION 19. Fund Services shall prepare and maintain for the Fund records showing for each Shareholder's account the following: A. The name, address and tax identification number of the Shareholder; 13 B. The number of Shares of each Series held by the Shareholder; C. Historical information including dividends paid and date and price for all transactions; D. Any stop or restraining order placed against such account; E. Information with respect to the withholding of any portion of income dividends or capital gains distributions as are required to be withheld under applicable law; F. Any dividend or distribution reinvestment election, withdrawal plan application, and correspondence relating to the current maintenance of the account; G. The certificate numbers and denominations of any Share Certificates issued to the Shareholder; and H. Any additional information required by Fund Services to perform the services contemplated by this Agreement. Fund Services agrees to make available upon request by the Fund or the Fund's Adviser and to preserve for the periods prescribed in Rule 31a-2 of the Investment Company Act any records related to services provided under this Agreement and required to be maintained by Rule 31a-1 of that Act, including: (i) Copies of the daily transaction register for each Business Day of the Fund; (ii) Copies of all dividend, distribution and reinvestment blotters; 14 (iii) Schedules of the quantities of Shares of each Series distributed in each state for purposes of any state's laws or regulations as specified in Oral or Written Instructions given to Fund Services from time to time by the Fund or its agents; and (iv) Such other information, including Shareholder lists, and statistical information as may be agreed upon from time to time by the Fund and Fund Services. SECTION 20. Fund Services shall maintain those records necessary to enable the Fund to file, in a timely manner, form N- SAR (Semi-Annual Report) or any successor report required by the Investment Company Act or rules and regulations thereunder. SECTION 21. Fund Services shall cooperate with the Fund's independent public accountants and shall take reasonable action to make all necessary information available to such accountants for the performance of their duties. SECTION 22. In addition to the services described above, Fund Services will perform other services for the Fund as may be mutually agreed upon in writing from time to time, which may include preparing and filing Federal tax forms with the Internal Revenue Service, and, subject to supervisory oversight by the Fund's Adviser, mailing Federal tax information to Shareholders, mailing semi-annual Shareholder reports, preparing the annual list of Shareholders, mailing notices of Shareholders' meetings, proxies and proxy statements and tabulating proxies. Fund Services shall answer the inquiries of certain Shareholders 15 related to their share accounts and other correspondence requiring an answer from the Fund. Fund Services shall maintain dated copies of written communications from Shareholders, and replies thereto. SECTION 23. Nothing contained in this Agreement is intended to or shall require Fund Services, in any capacity hereunder, to perform any functions or duties on any day other than a Business Day. Functions or duties normally scheduled to be performed on any day which is not a Business Day shall be performed on, and as of, the next Business Day, unless otherwise required by law. SECTION 24. For the services rendered by Fund Services as described above, the Fund shall pay to Fund Services an annualized fee at a rate to be mutually agreed upon from time to time. Such fee shall be prorated for the months in which this Agreement becomes effective or is terminated. In addition, theFund shall pay, or Fund Services shall be reimbursed for, all out-of-pocket expenses incurred in the performance of this Agreement, including but not limited to the cost of stationery, forms, supplies, blank checks, stock certificates, proxies and proxy solicitation and tabulation costs, all forms and statements used by Fund Services in communicating with Shareholders of the Fund or especially prepared for use in connection with its services hereunder, specific software enhancements as requested by the Fund, costs associated with maintaining withholding 16 accounts (including non-resident alien, Federal government and state), postage, telephone, telegraph (or similar electronic media) used in communicating with Shareholders or their representatives, outside mailing services, microfiche/microfilm, freight charges and off-site record storage. It is agreed in this regard that Fund Services, prior to ordering any form in such supply as it estimates will be adequate for more than two years' use, shall obtain the written consent of the Fund. All forms for which Fund Services has received reimbursement from the Fund shall be the property of the Fund. SECTION 25. Fund Services shall not be liable for any taxes, assessments or governmental charges that may be levied or assessed on any basis whatsoever in connection with the Fund or any Shareholder, excluding taxes assessed against Fund Services for compensation received by it hereunder. SECTION 26. (a) Fund Services shall at all times act in good faith and with reasonable care in performing the services to be provided by it under this Agreement, but shall not be liable for any loss or damage unless such loss or damage is caused by the negligence, bad faith or willful misconduct of Fund Services or its employees or agents. (b) The Fund shall indemnify and hold Fund Services harmless from all loss, cost, damage and expense, including reasonable expenses for counsel, incurred by it resulting from 17 any claim, demand, action or suit in connection with the performance of its duties hereunder, or as a result of acting upon any instruction reasonably believed by it to have been properly given by a duly authorized officer of the Fund, or upon any information, data, records or documents provided to Fund Services or its agents by computer tape, telex, CRT data entry or other similar means authorized by the Fund; provided that this indemnification shall not apply to actions or omissions of Fund Services in cases of its own bad faith, willful misconduct or negligence, and provided further that if in any case the Fund may be asked to indemnify or hold Fund Services harmless pursuant to this Section, the Fund shall have been fully and promptly advised by Fund Services of all material facts concerning the situation in question. The Fund shall have the option to defend Fund Services against any claim which may be the subject of this indemnification, and in the event that the Fund so elects it willso notify Fund Services, and thereupon the Fund shall retain competent counsel to undertake defense of the claim, and Fund Services shall in such situations incur no further legal or other expenses for which it may seek indemnification under this paragraph. Fund Services shall in no case confess any claim or make any compromise in any case in which the Fund may be asked to indemnify Fund Services except with the Fund's prior written consent. Without limiting the foregoing: 18 (i) Fund Services may rely upon the advice of the Fund or counsel to the Fund or Fund Services, and upon statements of accountants, brokers and other persons believed by Fund Services in good faith to be expert in the matters upon which they are consulted. Fund Services shall not be liable for any action taken in good faith reliance upon such advice or statements; (ii) Fund Services shall not be liable for any action reasonably taken in good faith reliance upon any Written Instructions or certified copy of any resolution of the Fund's Board of Directors or Trustees, including a Written Instruction authorizing Fund Services to make payment upon redemption of Shares without a signature guarantee; provided, however, that upon receipt of a Written Instruction countermanding a prior Instruction that has not been fully executed by Fund Services, Fund Services shall verify the content of the second Instruction and honor it, to the extent possible. Fund Services may rely upon the genuineness of any such document, or copy thereof,reasonably believed by Fund Services in good faith to have been validly executed; (iii) Fund Services may rely, and shall be protected by the Fund in acting, upon any signature, instruction, request, letter of transmittal, certificate, opinion of counsel, statement, instrument, report, notice, consent, order, or other paper or document reasonably believed by it in good faith to be 19 genuine and to have been signed or presented by the purchaser, the Fund or other proper party or parties; and (d) Fund Services may, with the consent of the Fund, subcontract the performance of any portion of any service to be provided hereunder, including with respect to any Shareholder or group of Shareholders, to any agent of Fund Services and may reimburse the agent for the services it performs at such rates as Fund Services may determine; provided that no such reimbursement will increase the amount payable by the Fund pursuant to this Agreement; and provided further, that Fund Services shall remain ultimately responsible as transfer agent to the Fund. SECTION 27. The Fund shall deliver or cause to be delivered over to Fund Services (i) an accurate list of Shareholders, showing each Shareholder's address of record, number of Shares of each Series owned and whether such Shares are represented by outstanding Share Certificates or by non- certificated Share accounts and (ii) all Shareholder records, files, and other materials necessary or appropriate for proper performance of the functions assumed by Fund Services under thisAgreement (collectively referred to as the "Materials"). The Fund shall indemnify Fund Services and hold it harmless from any and all expenses, damages, claims, suits, liabilities, actions, demands and losses arising out of or in connection with any error, omission, inaccuracy or other deficiency of such Materials, or out of the failure of the Fund to provide any 20 portion of the Materials or to provide any information in the Fund's possession needed by Fund Services to knowledgeably perform its functions; provided the Fund shall have no obligation to indemnify Fund Services or hold it harmless with respect to any expenses, damages, claims, suits, liabilities, actions, demands or losses caused directly or indirectly by acts or omissions of Fund Services or the Fund's Adviser. SECTION 28. This Agreement may be amended from time to time by a written supplemental agreement executed by the Fund and Fund Services and without notice to or approval of the Shareholders; provided this Agreement may not be amended in any manner which would substantially increase the Fund's obligations hereunder unless the amendment is first approved by the Fund's Board of Directors or Trustees, including a majority of the Directors or Trustees who are not a party to this Agreement or interested persons of any such party, at a meeting called for such purpose, and thereafter is approved by the Fund's Shareholders if such approval is required under the Investment Company Act or the rules and regulations thereunder. The parties hereto may adopt procedures as may be appropriate or practicalunder the circumstances, and Fund Services may conclusively rely on the determination of the Fund that any procedure that has been approved by the Fund does not conflict with or violate any requirement of its Articles of Incorporation 21 or Declaration of Trust, By-Laws or Prospectus, or any rule, regulation or requirement of any regulatory body. SECTION 29. The Fund shall file with Fund Services a certified copy of each operative resolution of its Directors or Trustees authorizing the execution of Written Instructions or the transmittal of Oral Instructions and setting forth authentic signatures of all signatories authorized to sign on behalf of the Fund and specifying the person or persons authorized to give Oral Instructions on behalf of the Fund. Such resolution shall constitute conclusive evidence of the authority of the person or persons designated therein to act and shall be considered in full force and effect, with Fund Services fully protected in acting in reliance therein, until Fund Services receives a certified copy of a replacement resolution adding or deleting a person or persons authorized to give Written or Oral Instructions. If the officer certifying the resolution is authorized to give Oral Instructions, the certification shall also be signed by a second officer of the Fund. SECTION 30. The terms, as defined in this Section, whenever used in this Agreement or in any amendment or supplement hereto, shall have the meanings specified below, insofar as the context will allow. (a) Business Day: Any day on which the Fund is open for business as described in the Prospectus. 22 (b) Custodian: The term Custodian shall mean the Fund's current custodian or any successor custodian acting as such for the Fund. (c) Fund's Adviser: The term Fund's Adviser shall mean Alliance Capital Management L.P. or any successor thereto who acts as the investment adviser or manager of the Fund. (d) Oral Instructions: The term Oral Instructions shall mean an authorization, instruction, approval, item or set of data, or information of any kind transmitted to Fund Services in person or by telephone, vocal telegram or other electronic means, by a person or persons reasonably believed in good faith by Fund Services to be a person or persons authorized by a resolution of the Board of Directors or Trustees of the Fund to give Oral Instructions on behalf of the Fund. Each Oral Instruction shall specify whether it is applicable to the entire Fund or a specific Series of the Fund. (e) Prospectus: The term Prospectus shall mean a prospectus and related statement of additional information forming part of a currently effective registration statement under the Investment Company Act and, as used with the respect to Shares or Shares of a Series, shall mean the prospectuses and related statements of additional information covering the Shares or Shares of the Series. (f) Securities: The term Securities shall mean bonds, debentures, notes, stocks, shares, evidences of indebtedness, and 23 other securities and investments from time to time owned by the Fund. (g) Series: The term Series shall mean any series of Shares of the common stock or of beneficial interest of the Fund that the Fund may establish from time to time. (h) Share Certificates: The term Share Certificates shall mean the stock certificates or certificates representing shares of beneficial interest for the Shares. (i) Shareholders: The term Shareholders shall mean the registered owners from time to time of the Shares, as reflected on the stock registry records of the Fund. (j) Written Instructions: The term Written Instructions shall mean an authorization, instruction, approval, item or set of data, or information of any kind transmitted to Fund Services in original writing containing original signatures, or a copy of such document transmitted by telecopy, including transmission of such signature, or other mechanical or documentary means, at the request of a person or persons reasonably believed in good faith by Fund Services to be a person or persons authorized by a resolution of the Board of Directors or Trustees of the Fund to give Written Instruction shall specify whether it is applicable to the entire Fund or a specific Series of the Fund. SECTION 31. Fund Services shall not be liable for the loss of all or part of any record maintained or preserved by it 24 pursuant to this Agreement or for any delays or errors occurring by reason of circumstances beyond its control, including but not limited to acts of civil or military authorities, national emergencies, fire, flood or catastrophe, acts of God, insurrection, war, riot, or failure of transportation, communication or power supply, except to the extent that Fund Services shall have failed to use its best efforts to minimize the likelihood of occurrence of such circumstances or to mitigate any loss or damage to the Fund caused by such circumstances. SECTION 32. The Fund may give Fund Services sixty (60) days and Fund Services may give the Fund (90) days written notice of the termination of this Agreement, such termination to take effect at the time specified in the notice. Upon notice of termination, the Fund shall use its best efforts to obtain a successor transfer agent. If a successor transfer agent is not appointed within ninety (90) days after the date of the notice of termination, the Board of Directors or Trustees of the Fund shall, by resolution, designate the Fund as its own transfer agent. Upon receipt of written notice from the Fund of the appointment of the successor transfer agent and upon receipt of Oral or Written Instructions Fund Services shall, upon request of the Fund and the successor transfer agent and upon payment of Fund Services reasonable charges and disbursements, promptly transfer to the successor transfer agent the original or copiesof all books and records maintained by Fund Services hereunder and 25 cooperate with, and provide reasonable assistance to, the successor transfer agent in the establishment of the books and records necessary to carry out its responsibilities hereunder. SECTION 33. Any notice or other communication required by or permitted to be given in connection with this Agreement shall be in writing, and shall be delivered in person or sent by first-class mail, postage prepaid, to the respective parties. Notice to the Fund shall be given as follows until further notice: The Alliance Portfolios 1345 Avenue of the Americas New York, New York 10105 Attention: Clerk Notice to Fund Services shall be given as follows until further notice: Alliance Fund Services, Inc. 500 Plaza Drive Secaucus, New Jersey 07094 SECTION 34. The Fund represents and warrants to Fund Services that the execution and delivery of this Agreement by the undersigned officer of the Fund has been duly and validly authorized by resolution of the Fund's Board of Directors or Trustees. Fund Services represents and warrants to the Fund that the execution and delivery of this Agreement by the undersigned officer of Fund Services has also been duly and validly authorized. SECTION 35. This Agreement may be executed in more than one counterpart, each of which shall be deemed to be an original, 26 and shall become effective on the last date of signature below unless otherwise agreed by the parties. Unless sooner terminated pursuant to SECTION 32, this Agreement will continue until July 31, 1994 and will continue in effect thereafter for successive 12 month periods only if such continuance is specifically approved at least annually by the Board of Directors or Trustees or by a vote of the stockholders of the Fund and in either case by a majority of the Board of Directors or Trustees who are not parties to this Agreement or interested persons of any such party, at a meeting called for the purpose of voting on this Agreement. SECTION 36. This Agreement shall extend to and shall bind the parties hereto and their respective successors and assigns; provided, however, that this Agreement shall not be assignable by the Fund without the written consent of Fund Services or by Fund Services without the written consent of the Fund, authorized or approved by a resolution of the Fund's Board of Directors or Trustees. Notwithstanding the foregoing, either party may assign this Agreement without the consent of the other party so long as the assignee is an affiliate, parent or subsidiary of the assigning party and is qualified to act under the Investment Company Act, as amended from time to time. SECTION 38. This Agreement shall be governed by the laws of the State of New Jersey. 27 WITNESS the following signatures: THE ALLIANCE PORTFOLIOS BY: /s/ Barbara J. Krumsiek ___________________________ Barbara J. Krumsiek TITLE:Vice President-Marketing _________________________ ALLIANCE FUND SERVICES, INC. BY: /s/ George Hrabovsky ___________________________ George Hrabovsky TITLE: President __________________________ 28 00250184.AA9 EX-99.B10 4 ROPES & GRAY One International Place Boston, Massachusetts 02110 (617)951-7000 August 24, 1995 The Alliance Portfolios (the "Trust") 1345 Avenue of the Americas New York, New York 10105 Ladies and Gentlemen: You have informed us that you propose to offer and sell from time to time 72,378 shares of beneficial interest, $.00001 par value per share, of the Alliance Conservative Investors Fund and 247,686 shares of beneficial interest, $.00001 par value per share (collectively, the "Shares") of the Alliance Short-Term U.S. Government Fund, each a portfolio series (a "Fund"), of The Alliance Portfolios (the "Trust"), for cash or securities at the net asset value per share, which Shares are in addition to your shares of beneficial interest which you have previously offered and sold or which you are currently offering. We have examined copies of your Agreement and Declaration of Trust as on file at the office of the Secretary of State of The Commonwealth of Massachusetts. We are familiar with the actions taken by your Trustees to authorize the issue and sale from time to time of your shares of beneficial interest. We have assumed that upon the issuance of the Shares, the Trust will receive the net asset value thereof, which in all cases will at least be equal to the par value thereof. We have also examined a copy of your Bylaws and such other documents as we have deemed necessary for the purposes of this opinion. We assume that appropriate action will be taken to register or qualify the sale of the Shares under any applicable state and federal laws regulating offerings and sales of securities. Based upon the foregoing, we are of the opinion that: 1. The Trust is a legally organized and validly existing voluntary association with transferable shares of beneficial interest under the laws of The Commonwealth of Massachusetts and is authorized to issue an unlimited number of shares of beneficial interest. 2. Upon the issue of any of the Shares referred to in the first paragraph hereof for cash or securities at net asset value, and the receipt of the appropriate consideration thereof, such Shares so issued will be validly issued, fully paid and nonassessable by the Trust. The Trust is an entity of the type commonly known as a "Massachusetts business trust." Under Massachusetts law, shareholders could, under certain circumstances, be held personally liable for the obligations of the Trust. However, the Agreement and 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 its Trustees. The Agreement and Declaration of Trust provides for indemnification out of the property of a Fund for all loss and expense of any shareholder of such Fund solely by reason of his 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 itself would be unable to meet its obligations. We understand that this opinion is to be used in connection with the registration of the Shares for offering and sale pursuant to the Securities Act of 1933, as amended, and the provisions of Rule 24e-2 under the Investment Company Act of 1940, as amended. We consent to the filing of this opinion with and as a part of Post-Effective No. 17 to your Registration Statement on Form N-1A. Very truly yours, /s/ Ropes & Gray Ropes & Gray 2 00250184.AA4 EX-99.B11 5 CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the use in the Statement of Additional Information constituting part of this Post-Effective Amendment No. 17 to the registration statement on Form N-1A (the "Registration Statement") of our report dated June 22, 1995, relating to the financial statements and financial highlights of Alliance Growth Investors Fund and Alliance Conservative Investors Fund, which appears in such Statement of Additional Information, and to the incorporation by reference of our report into the Prospectus which constitutes part of this Registration Statement. We also consent to the references to us under the headings "Statements and Reports" and "Independent Accountants" in such Statement of Additional Information and to the reference to us under the heading "Financial Highlights" in such Prospectus. We also consent to the incorporation by reference of our report dated September 24, 1994 relating to the financial statements and financial highlights of Alliance Strategic Balanced Fund, our report dated October 14, 1994 relating to the financial statements and financial highlights of Alliance Short-Term U.S. Government Fund and our report dated December 21, 1994 relating to the financial statements and financial highlights of Alliance Growth Fund into this Registration Statement and to the references to us under the headings "Statements and Reports" and "Independent Accountants" in such Statement of Additional Information and to the reference to us under the heading "Financial Highlights" in such Prospectus. /s/ PRICE WATERHOUSE LLP 1177 Avenue of the Americas New York, New York August 25, 1995 00250184.AB1 EX-27 6 WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
6 4 GROWTH INVESTORS FUND YEAR APR-30-1995 APR-30-1995 66064900 69760271 2751008 19500 0 72668233 2684029 221201 2905230 58 67071359 5772807 4375748 593778 0 0 (1597594) 0 3962035 69763003 531825 1773462 0 1514428 1141094 (1679163) 0 3423966 0 635346 73791 0 28544085 13090717 684916 16138284 168135 75255 0 0 4643368 0 1514428 0 0 0 0 0 0 0 0 0 0 0 2
6 [NUMBER] 5 CONSERVATIVE INVESTORS FUND YEAR APR-30-1995 APR-30-1995 [INVESTMENTS-AT-COST] 49342354 [INVESTMENTS-AT-VALUE] 50562605 [RECEIVABLES] 1822970 [ASSETS-OTHER] 76952 [OTHER-ITEMS-ASSETS] 0 [TOTAL-ASSETS] 52462527 [PAYABLE-FOR-SECURITIES] 1260321 [SENIOR-LONG-TERM-DEBT] 0 [OTHER-ITEMS-LIABILITIES] 136124 [TOTAL-LIABILITIES] 1396445 [SENIOR-EQUITY] 49 [PAID-IN-CAPITAL-COMMON] 53045931 [SHARES-COMMON-STOCK] 4876374 [SHARES-COMMON-PRIOR] 4758861 [ACCUMULATED-NII-CURRENT] 498475 [OVERDISTRIBUTION-NII] 0 [ACCUMULATED-NET-GAINS] (3698418) [OVERDISTRIBUTION-GAINS] 1220045 [ACCUM-APPREC-OR-DEPREC] 51066082 [NET-ASSETS] 150365 [DIVIDEND-INCOME] 2967732 [INTEREST-INCOME] 0 [OTHER-INCOME] 1186896 [EXPENSES-NET] 2148851 [NET-INVESTMENT-INCOME] (3216833) [REALIZED-GAINS-CURRENT] 2051291 [APPREC-INCREASE-CURRENT] 0 [NET-CHANGE-FROM-OPS] 1900025 [EQUALIZATION] 0 [DISTRIBUTIONS-OF-INCOME] 0 [DISTRIBUTIONS-OF-GAINS] 0 [DISTRIBUTIONS-OTHER] 0 [NUMBER-OF-SHARES-SOLD] 16202122 [NUMBER-OF-SHARES-REDEEMED] 16730717 [SHARES-REINVESTED] 1776263 [NET-CHANGE-IN-ASSETS] 1398852 [ACCUMULATED-NII-PRIOR] 249649 [ACCUMULATED-GAINS-PRIOR] 0 [OVERDISTRIB-NII-PRIOR] 0 [OVERDIST-NET-GAINS-PRIOR] (481585) [GROSS-ADVISORY-FEES] 3858186 3 [INTEREST-EXPENSE] 0 [GROSS-EXPENSE] 1186896 [AVERAGE-NET-ASSETS] 0 0 [PER-SHARE-NII] 0 [PER-SHARE-GAIN-APPREC] 0 [PER-SHARE-DIVIDEND] 0 [PER-SHARE-DISTRIBUTIONS] 0 [RETURNS-OF-CAPITAL] 0 [PER-SHARE-NAV-END] 0 [EXPENSE-RATIO] 0 [AVG-DEBT-OUTSTANDING] 0 [AVG-DEBT-PER-SHARE] 0 4 00250184.ab3
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