<DOCUMENT>
<TYPE>N-30D
<SEQUENCE>1
<FILENAME>edg7756.txt
<DESCRIPTION>ALLIANCE HIGH YIELD FUND
<TEXT>
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HIGH YIELD FIXED INCOME
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Alliance High Yield Fund
Semi-Annual Report
February 28, 2002
[GRAPHIC OMITTED]
Alliance Capital [LOGO](R)
The Investment Professional's Choice
<PAGE>
Investment Products Offered
---------------------------
o Are Not FDIC Insured
o May Lose Value
o Are Not Bank Guaranteed
---------------------------
This shareholder report must be preceded or accompanied by the Fund's prospectus
for individuals who are not current shareholders of the Fund.
Alliance Fund Distributors, Inc., the principal underwriter of the Alliance
mutual funds and an affiliate of Alliance Capital Management L.P., the manager
of the funds, is a member of the NASD.
<PAGE>
----------------------
LETTER TO SHAREHOLDERS
----------------------
LETTER TO SHAREHOLDERS
April 15, 2002
Dear Shareholder:
This report provides the performance, investment strategy and outlook for
Alliance High Yield Fund (the "Fund") for the semi-annual reporting period ended
February 28, 2002.
Investment Objective and Policies
This open-end fund seeks to provide investors with a high total return by
maximizing current income and, to the extent consistent with that objective,
capital appreciation. The Fund invests primarily in a diversified mix of high
yield (below investment-grade) fixed income securities, commonly known as "junk
bonds".
Investment Performance
The following table provides performance for the Fund as well as its benchmark,
as represented by the Credit Suisse First Boston High Yield Index, for the six-
and 12-month periods ended February 28, 2002.
INVESTMENT RESULTS*
Periods Ended February 28, 2002
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Total Returns
6 Months 12 Months
--------------------------------------------------------------------------------
Alliance High Yield Fund
Class A -2.06% -7.34%
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Class B -2.56% -8.02%
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Class C -2.56% -8.15%
--------------------------------------------------------------------------------
Credit Suisse First Boston High Yield Index -0.78% -0.96%
--------------------------------------------------------------------------------
* The Fund's investment results represent total returns for the periods
shown and are based on the net asset value (NAV) for each class of shares
as of February 28, 2002. All fees and expenses related to the operation of
the Fund have been deducted, but no adjustment has been made for sales
charges that may apply when shares are purchased or redeemed. Total
returns for Advisor Class shares will vary due to different expenses
associated with this class. Returns for the Fund include the reinvestment
of any distributions paid during each period. Past performance is no
guarantee of future results.
The unmanaged Credit Suisse First Boston High Yield Index is a measure of
lower-rated, fixed-income, non-convertible, U.S. dollar-denominated
securities meeting certain criteria developed by Credit Suisse, designed
to enable the index to reflect the high yield market. An investor cannot
invest directly in an index, and its results are not indicative of any
particular investment, including Alliance High Yield Fund.
Additional investment results appear on pages 6-10.
The Fund underperformed the Credit Suisse First Boston High Yield (CSFBHY) Index
for the six- and 12-month periods ended February 28, 2002. However, the Fund
outperformed the Lipper High Yield Fund Index for both the six- and 12-month
periods, ranking in the 52nd percentile, as compared to its peer group for the
6-month period. The Fund's style of investing has historically emphasized
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ALLIANCE HIGH YIELD FUND o 1
<PAGE>
----------------------
LETTER TO SHAREHOLDERS
----------------------
higher-yielding, single B-rated securities. This approach negatively impacted
performance during both periods under review. Single B-rated securities tend to
underperform double B-rated securities during periods of high volatility and
market uncertainty.
The Fund's above-market exposure to the wireless telecommunications and electric
utilities sectors was the main contributor to underperformance. The Fund's
holdings in the energy sector also detracted from performance. The decline in
demand and pricing for energy coupled with the volatility in the aftermath of
the Enron debacle put significant pressure on energy companies such as Calpine
Corp. and AES Corp. We reduced the Fund's exposure to these two issuers during
this period.
Given the reduced growth rates in subscriber additions after September 11 for
most wireless service providers such as AT&T affiliates Triton PCS, Inc.,
Dobson/Sygnet Communications and American Cellular Corp, and to a lesser extent
Nextel Communications, all wireless issuers saw major pressure on bond prices.
Notwithstanding the increased volatility and risk in this sector, we remain
confident in the long-term prospects of these issuers as bond investors.
While the Fund's exposure to the wireless telecommunications sector contributed
to its underperformance, specific security selection in telecommunications
enhanced performance. The Fund benefited from a selection of the best credits in
wireless/wireline, however, this was offset by an overweighted position in
wireless. Finally, the Fund's security selection in consumer products and
services also enhanced performance.
Market Review
Global economic growth continued to decelerate in the second half of 2001. U.S.
economic growth continued to decelerate early in the reporting period due to
declining business investment and lower equity valuations. The terrorist attacks
on September 11 further exacerbated the already ailing economy. However,
aggressive fiscal and monetary policy responses prevented a deeper and more
prolonged recession. Economic data at the end of the period began to point to
signs of an economic recovery as growth returned. The job loss rate has improved
as new jobs were added in February for the first time in seven months.
The high yield market, as represented by the CSFBHY Index, returned
-0.78% for the six-month period ended February 28, 2002. Issuers took advantage
of the funding window as the U.S. Federal Reserve aggressively lowered interest
rates. However, weakness in the equity market and negative performance in the
telecommunications and technology sectors weakened the overall performance of
the high yield market. Investors reacted to the September 11 attacks by selling
high yield securities. Default rates remained high throughout the six-month
period, reflecting the low financial flexibility of highly leveraged companies.
Early in 2002, the default rates peaked in
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2 o ALLIANCE HIGH YIELD FUND
<PAGE>
----------------------
LETTER TO SHAREHOLDERS
----------------------
January with $15.1 billion in defaulted bonds. By the end of February, defaults
totaled $18.3 billion, raising the trailing 12-month default rate of the high
yield market to 10.79%. The default rate for the Fund was below 2%. For the
six-month period, higher rated securities outperformed as investors sought
higher quality issuers. Within the CSFBHY Index, double B and single B-rated
securities outperformed triple C-rated securities, returning 2.25%, 1.28% and
-4.08%, respectively.
Investment Strategy
During the period under review, we continued to reposition the Fund. We
completed our exit of and/or reduced the Fund's exposure to many of the
developmental credits in the wireline telecommunications sector and cyclical
credits in the automotive, metals and general industrial sectors. In their
place, we purchased more defensive issuers in the cable, lodging, mobile
communications and services sectors. We continued to diversify the Fund over a
greater number of issuers to reduce volatility and stabilize returns. We
increased the Fund's weighting in high quality single B-rated issuers because we
believe the majority of high yield returns in 2002 will be from coupon income
and not spread compression.
During the reporting period, we continued to decrease the Fund's exposure to
many issuers in the wireline sector that we believed had flawed business
strategies and/or inadequate funding positions to build out their respective
networks. These issues included Global Crossing Holdings Ltd., Level 3
Communications, McLeod USA and Williams Communications. We also reduced the
Fund's exposure to the utility sector with the partial sale of Calpine Corp. and
AES Corp.
We continued to increase the Fund's exposure to the services, cable, lodging,
mobile communications and packaging sectors. Within the services sector, we
increased the Fund's position in funeral and cemetery companies such as Service
Corp. of America, and added Alderwoods Group (formerly Loewen Group). In cable,
we either maintained or increased the Fund's holdings in Charter Communications
Holdings, Adelphia Communications and Mediacom Broadband LLC. In lodging, we
increased or added a number of issuers given the markets' overselling of this
sector after September 11. These issuers included Meristar Hospitality and
Extended Stay America. Given their positive credit outlook, we also added Sealed
Air Corp. and Riverwood International Corp., two specialty packaging companies.
Outlook
The high yield market continues to build momentum into 2002 as the economy
recovers. We believe this sector should outperform relative to other fixed
income sectors. Nonetheless, there are conflicting trends on both the macro and
microeconomic fronts.
On the macroeconomic front, all U.S. indicators point to higher growth than
previously expected, with the manufacturing sector finally showing signs of
recovery. The inventory rebuild process is providing a boost to manufacturing,
which is expected to last at least a few
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ALLIANCE HIGH YIELD FUND o 3
<PAGE>
----------------------
LETTER TO SHAREHOLDERS
----------------------
quarters. The U.S. consumer's continued propensity to spend remains a source of
strength in this period of corporate retrenchment and layoffs. Alan Greenspan's
testimony to Congress on March 19 of this year painted a picture of moderate
expectations for economic growth during the recovery phase, suggesting that the
risk of interest rates rising in the short run remains contained. Finally, the
default environment promises to be more moderate, with Moody's prediction of
lower default rates this year.
On the microeconomic front, investors are concerned about the impact of possible
legislative and regulatory initiatives arising from the Enron debacle. Of
particular interest to fixed income investors is the prospect of restrictions on
the use of Special Purpose Entities (SPEs) to create off-balance sheet leverage
and changes in certain accounting methods for smoothing the volatility of
earnings, revenue recognition, options and pensions costs. However well
justified such reforms may prove to be as matters of policy, they could
nonetheless tend to impair, in particular, high yield valuations in such key
sectors as telecommunications and utilities.
We believe that valuations are modestly attractive, with market aggregate
spreads at 52-week highs (if one excludes widening caused by September 11).
However, these market averages reveal less than they should about the barbelled
nature of spreads. The consumer-related sectors and a number of cyclical sectors
remain relatively tight, with the higher spreads resident mostly in the select
deep cyclical industrials, utilities, wireless and cable sectors.
Investors in high yield naturally need to focus not only on the specifics of the
macroeconomy that relate to the companies in which they invest, but also to
security selection, which remains critical. The Fund should be well positioned
for a gradual economic recovery given its overweighting in strong single B-rated
issuers and undervalued sectors like wireless telecommunications, cable and
chemicals.
The main risk to the Fund's strategy is its underweighting in the riskier triple
C-rated part of the market, as we have chosen not to reach for yield in this
uncertain economic timeframe. However, if the economy recovers faster than
expected, this area of the market will begin to outperform, requiring us to
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4 o ALLIANCE HIGH YIELD FUND
<PAGE>
----------------------
LETTER TO SHAREHOLDERS
----------------------
reconsider the Fund's position. We also note that technicals remain strong due
to lower-than-expected supply and robust demand from both mutual funds and
institutional investors.
Thank you for your continued interest and investment in the Alliance High Yield
Fund. We look forward to reporting its progress to you in the future.
Sincerely,
/s/ John D. Carifa
John D. Carifa
Chairman and President
/s/ Gregory Dube
Gregory Dube
Senior Vice President
/s/ Michael A. Snyder
Michael A. Snyder
Vice President
[PHOTO] John D. Carifa
[PHOTO] Gregory Dube
[PHOTO] Michael A. Snyder
Gregory Dube and Michael Snyder, Portfolio Managers, have over 39 years of
combined experience.
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ALLIANCE HIGH YIELD FUND o 5
<PAGE>
------------------
PERFORMANCE UPDATE
------------------
PERFORMANCE UPDATE
ALLIANCE HIGH YIELD FUND
GROWTH OF A $10,000 INVESTMENT
4/30/97* TO 2/28/02
[MOUNTAIN GRAPH OMITTED]
[The following table was depicted as a mountain chart in the printed material.]
Credit Suisse First Boston High Yield Index: $11,487
Alliance High Yield Fund Class A: $9,773
Alliance High CS First Boston
Yield Fund High Yield Index
----------------------------------------------------------------------
4/30/1997 $9,579 $10,000
2/28/1998 $12,417 $11,275
2/28/1999 $11,807 $11,145
2/29/2000 $11,471 $11,453
2/28/2001 $10,774 $11,598
2/28/2002 $9,983 $11,487
This chart illustrates the total value of an assumed $10,000 investment in
Alliance High Yield Fund Class A shares (from 4/30/97* to 2/28/02) as compared
to the performance of an appropriate broad-based index. The chart reflects the
deduction of the maximum 4.25% sales charge from the initial $10,000 investment
in the Fund and assumes the reinvestment of dividends and capital gains.
Performance for Class B, Class C and Advisor Class shares will vary from the
results shown above due to differences in expenses charged to these classes.
Past performance is not indicative of future results, and is not representative
of future gain or loss in capital value or dividend income.
The unmanaged Credit Suisse First Boston High Yield (CSFBHY) Index is a measure
of lower-rated, fixed-income, non-convertible, U.S. dollar-denominated
securities meeting certain criteria developed by Credit Suisse designed to
enable the index to reflect the high yield market. An investor cannot invest
directly in an index, and its results are not indicative of any particular
investment, including Alliance High Yield Fund.
When comparing Alliance High Yield Fund to the index shown above, you should
note that no charges or expenses are reflected in the performance of the index.
* Closest month-end after Fund's Class A share inception date of 4/22/97.
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6 o ALLIANCE HIGH YIELD FUND
<PAGE>
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PERFORMANCE UPDATE
------------------
PERFORMANCE UPDATE
ALLIANCE HIGH YIELD FUND
HISTORY OF RETURNS
YEARLY PERIODS ENDED 2/28
[BAR CHART OMITTED]
Alliance High Yield Fund - Yearly Periods Ended 2/28
Alliance High Credit Suisse First Boston
Yield Fund High Yield Index
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2/28/98* 29.63% 12.75%
2/28/99 -4.91% -1.15%
2/29/00 -2.85% 2.76%
2/28/01 -6.08% 1.27%
2/28/02 -7.34% -0.96%
Past performance is no guarantee of future results. The Fund's investment
results represent total returns for Class A shares and are based on the net
asset value (NAV). Total returns for Class B, Class C and Advisor Class shares
will vary due to different expenses associated with these classes. All fees and
expenses related to the operation of the Fund have been deducted, but no
adjustment has been made for sales charges that may apply when shares are
purchased or redeemed. Returns for the Fund include the reinvestment of any
distributions paid during each period.
The unmanaged Credit Suisse First Boston High Yield (CSFBHY) Index is a measure
of the lower-rated, fixed-income, non-convertible, U.S. dollar-denominated
securities meeting certain criteria developed by Credit Suisse designed to
enable the index to reflect the high yield market.
The index reflects no fees or expenses. An investor cannot invest directly in an
index, and its results are not indicative of any specific investment, including
Alliance High Yield Fund.
* The Fund's return for the period ended 2/28/98 is from the Fund's
inception date of 4/22/97 through 2/28/98. The benchmark's return for the
period ended 2/28/98 is from 4/30/97 through 2/28/98.
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ALLIANCE HIGH YIELD FUND o 7
<PAGE>
-----------------
PORTFOLIO SUMMARY
-----------------
PORTFOLIO SUMMARY
February 28, 2002 (unaudited)
INCEPTION DATES PORTFOLIO STATISTICS
Class A Shares Net Assets ($mil): $541.0
4/22/97
Class B Shares
4/22/97
Class C Shares
4/22/97
INDUSTRY/SECTOR BREAKDOWN
12.0% Cable
11.3% Mobile Communications
8.7% Service
6.8% Chemicals
5.9% Paper/Packaging
5.7% Financial
5.2% Hotels/Lodging
4.1% Media
3.6% Consumer Manufacturing
3.6% Healthcare [PIE CHART OMITTED]
3.3% Gaming
3.3% Building/Real Estate
3.2% General Industrial
2.8% Utility
2.3% Supermarkets and Drugs
2.1% Metals/Mining
2.1% Technology
2.0% Energy
2.0% Fixed Communications
5.9% Other
4.1% Short-Term
All data as of February 28, 2002. The Fund's industry/sector breakdown is
expressed as a percentage of total investments and may vary over time. "Other"
represents less than 2.0% weightings in Automotive, Sovereign, Leisure,
Aerospace/Defense, Oil & Gas and Food/Beverage.
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8 o ALLIANCE HIGH YIELD FUND
<PAGE>
-----------------
PORTFOLIO SUMMARY
-----------------
PORTFOLIO SUMMARY
February 28, 2002 (unaudited)
COUNTRY BREAKDOWN
84.8% United States
7.4% Great Britain
2.2% Mexico
1.8% Canada
1.1% Luxembourg
1.0% South Korea [PIE CHART OMITTED]
0.6% Bahamas
0.6% Russia
0.4% Cayman Islands
0.1% Norway
All data as of February 28, 2002. The Fund's country breakdown is expressed as a
percentage of total investments and may vary over time.
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ALLIANCE HIGH YIELD FUND o 9
<PAGE>
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INVESTMENT RESULTS
------------------
INVESTMENT RESULTS
AVERAGE ANNUAL TOTAL RETURNS AS OF FEBRUARY 28, 2002
CLASS A
--------------------------------------------------------------------------------
Without Sales Charge With Sales Charge
1 Year -7.34% -11.25%
Since Inception* 0.85% -0.03%
SEC Yield** 10.29%
CLASS B
--------------------------------------------------------------------------------
Without Sales Charge With Sales Charge
1 Year -8.02% -11.34%
Since Inception* 0.16% 0.16%
SEC Yield** 9.93%
CLASS C
--------------------------------------------------------------------------------
Without Sales Charge With Sales Charge
1 Year -8.15% -8.98%
Since Inception* 0.15% 0.15%
SEC Yield** 9.93%
SEC AVERAGE ANNUAL TOTAL RETURNS (WITH SALES CHARGES)
AS OF THE MOST RECENT QUARTER-END (March 31, 2002)
Class A Class B Class C
--------------------------------------------------------------------------------
1 Year -7.11% -7.17% -4.57%
Since Inception* 0.26% 0.44% 0.44%
The Fund's investment results represent average annual total returns. The
returns reflect reinvestment of dividends and/or capital gains distributions in
additional shares without and with the effect of the 4.25% maximum front-end
sales charge for Class A or applicable contingent deferred sales charge for
Class B (4% year 1, 3% year 2, 2% year 3, 1% year 4); and for Class C shares (1%
year 1). Returns for Class A shares do not reflect the imposition of the 1 year,
1% contingent deferred sales charge for accounts over $1,000,000. Total returns
for Advisor Class shares will vary due to different expenses associated with
this class.
The Fund can invest in foreign securities, including emerging markets, which may
magnify fluctuations due to changes in foreign exchange rates and the
possibility of substantial volatility due to political and economic
uncertainties in foreign countries.
Past performance does not guarantee future results. Investment return and
principal value will fluctuate so that an investor's shares, when redeemed, may
be worth more or less than their original cost.
* Inception date: 4/22/97 for all share classes.
** SEC yields are based on SEC guidelines and are calculated on 30 days ended
February 28, 2002.
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10 o ALLIANCE HIGH YIELD FUND
<PAGE>
------------------------
PORTFOLIO OF INVESTMENTS
------------------------
PORTFOLIO OF INVESTMENTS
February 28, 2002 (unaudited)
Principal
Amount
(000) U.S. $ Value
--------------------------------------------------------------------------------
CORPORATE DEBT OBLIGATIONS-89.2%
Aerospace/Defense-0.7%
Sequa Corp.
9.00%, 8/01/09 ........................... $ 3,810 $ 3,762,375
-----------
Automotive-1.7%
Advance Stores Co, Inc.
10.25%, 4/15/08(a) ....................... 2,490 2,614,500
Arvinmeritor
8.75%, 3/01/12 ........................... 1,635 1,679,962
Collins & Aikman Products
10.75%, 12/31/11(a) ...................... 1,920 1,848,000
Dura Operating Corp.
Series D
9.00%, 5/01/09 ........................... 3,225 3,096,000
-----------
9,238,462
-----------
Building/Real Estate-3.2%
D.R. Horton, Inc.
8.00%, 2/01/09 ........................... 1,130 1,146,950
10.50%, 4/01/05 .......................... 2,980 3,218,400
LNR Property Corp.
10.50%, 1/15/09 .......................... 4,460 4,616,100
Series B
9.375%, 3/15/08 .......................... 1,500 1,507,500
Meritage Corp.
9.75%, 6/01/11 ........................... 2,625 2,782,500
Schuler Homes
10.50%, 7/15/11 .......................... 3,960 4,276,800
-----------
17,548,250
-----------
Cable-9.7%
Adelphia Communications
10.25%, 6/15/11 .......................... 430 445,050
10.875%, 10/01/10 ........................ 7,310 7,785,150
Series B
9.25%, 10/01/02 .......................... 500 511,250
Charter Communications Holdings
10.00%, 5/15/11(a) ....................... 450 433,125
10.75%, 10/01/09 ......................... 13,080 13,145,400
11.75%, 5/15/11 .......................... 10,595 6,171,587
12.125%, 1/15/12(a)(b) ................... 275 151,250
Echostar DBS Corp.
9.375%, 2/01/09 .......................... 10,250 10,583,125
GCI, Inc.
9.75%, 8/01/07 ........................... 2,000 1,950,000
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ALLIANCE HIGH YIELD FUND o 11
<PAGE>
------------------------
PORTFOLIO OF INVESTMENTS
------------------------
Principal
Amount
(000) U.S. $ Value
--------------------------------------------------------------------------------
Innova S de R. L
12.875%, 4/01/07 ......................... $6,790 $ 6,399,575
Mediacom Broadband LLC
11.00%, 7/15/13 .......................... 4,635 5,098,500
-----------
52,674,012
-----------
Chemicals-6.7%
Airgas, Inc.
9.125%, 10/01/11 ......................... 2,345 2,473,975
Avecia Group Plc
11.00%, 7/01/09 .......................... 7,480 7,741,800
Compass Minerals Group
10.00%, 8/15/11(a) ....................... 610 643,550
Ferro Corp.
9.125%, 1/01/09 .......................... 1,455 1,510,731
Georgia Gulf Corp.
10.375%, 11/01/07 ........................ 3,855 4,124,850
Huntsman ICI Chemicals
10.125%, 7/01/09 ......................... 5,050 4,469,250
Lyondell Chemical Co.
10.875%, 5/01/09 ......................... 3,560 3,390,900
Series A
9.625%, 5/01/07 .......................... 3,500 3,578,750
Series B
9.875%, 5/01/07 .......................... 3,500 3,561,250
OM Group, Inc.
9.25%, 12/15/11(a) ....................... 2,200 2,282,500
Resolution Performance
13.50%, 11/15/10 ......................... 2,300 2,587,500
-----------
36,365,056
-----------
Consumer Manufacturing-3.5%
Collins & Aikman Floorcover
9.75%, 2/15/10(a) ........................ 1,270 1,314,450
Dyersburg Corp.
Series B
9.75%, 9/01/07(c)(d) ..................... 2,000 80,000
Jostens, Inc.
12.75%, 5/01/10 .......................... 5,000 5,575,000
Pennzoil-Quaker State
10.00%, 11/01/08(a) ...................... 1,920 2,064,000
Playtex Products, Inc.
9.375%, 6/01/11 .......................... 1,460 1,554,900
Remington Product Co. LLC
Series D
11.00%, 5/15/06 .......................... 5,065 4,203,950
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12 o ALLIANCE HIGH YIELD FUND
<PAGE>
------------------------
PORTFOLIO OF INVESTMENTS
------------------------
Principal
Amount
(000) U.S. $ Value
--------------------------------------------------------------------------------
Sealy Mattress Co.
9.875%, 12/15/07(a) ...................... $ 2,705 $ 2,725,287
St. John Knits International, Inc.
12.50%, 7/01/09 .......................... 1,250 1,293,750
-----------
18,811,337
-----------
Energy-2.0%
EOTT Energy Partners
11.00%, 10/01/09 ......................... 2,235 1,866,225
Grey Wolf, Inc.
8.875%, 7/01/07 .......................... 1,270 1,276,350
Pride Petroleum Services, Inc.
9.375%, 5/01/07 .......................... 1,340 1,400,300
Range Resources Corp.
8.75%, 1/15/07 ........................... 1,600 1,592,000
South Point Energy
9.825%, 5/30/19(a) ....................... 2,060 1,524,400
Statia Terminals
Series B
11.75%, 11/15/03 ......................... 2,000 2,070,000
Tesoro Petroleum Corp.
Series B
9.625%, 11/01/08 ......................... 1,080 1,085,400
Transtexas Gas Corp.
Series D
13.75%, 12/31/02(c)(d) ................... 3,000 -0-
-----------
10,814,675
-----------
Financial-4.9%
Chohung Bank
11.875%, 4/01/10(a)(e) ................... 3,500 4,019,400
Finova Group, Inc.
7.50%, 11/15/09 .......................... 12,377 4,455,720
Hanvit Bank
12.75%, 3/01/10(a)(e) .................... 825 965,240
Intertek Finance Plc
Series B
10.25%, 11/01/06 ......................... 4,960 4,984,800
Istar Financial, Inc.
8.75%, 8/15/08 ........................... 2,650 2,668,410
Markel Capital Trust I
Series B
8.71%, 1/01/46 ........................... 1,190 838,495
Nationwide CSN Trust
9.875%, 2/15/25(a) ....................... 6,000 6,360,000
PXRE Capital Trust I
8.85%, 2/01/27 ........................... 2,095 1,215,100
Williams Scotsman, Inc.
9.875%, 6/01/07(a) ....................... 895 886,050
-----------
26,393,215
-----------
--------------------------------------------------------------------------------
ALLIANCE HIGH YIELD FUND o 13
<PAGE>
------------------------
PORTFOLIO OF INVESTMENTS
------------------------
Principal
Amount
(000) U.S. $ Value
--------------------------------------------------------------------------------
Fixed Communications-0.7%
Allegiance Telecom, Inc.
12.875%, 5/15/08 ......................... $5,000 $ 1,475,000
Econophone, Inc.
13.50%, 7/15/07(c)(d) .................... 3,600 -0-
Time Warner Telecom, Inc.
10.125%, 2/01/11 ......................... 3,425 2,174,875
-----------
3,649,875
-----------
Food & Beverage-0.3%
Del Monte Corp.
Series B
9.25%, 5/15/11 ........................... 875 914,375
Dimon, Inc.
Series B
9.625%, 10/15/11 ......................... 615 648,825
-----------
1,563,200
-----------
Gaming-3.3%
Argosy Gaming Co.
9.00%, 9/01/11 ........................... 1,645 1,756,037
Boyd Gaming Corp.
9.25%, 8/01/09 ........................... 2,775 2,927,625
Mandalay Resort Group
Series B
10.25%, 8/01/07 .......................... 2,405 2,600,406
MGM Grand, Inc.
9.75%, 6/01/07 ........................... 1,900 2,068,625
Mohegan Tribal
8.375%, 7/01/11 .......................... 2,895 2,981,850
Park Place Entertainment
9.375%, 2/15/07 .......................... 5,000 5,381,250
-----------
17,715,793
-----------
General Industrial-3.1%
Amtrol, Inc.
10.625%, 12/31/06 ........................ 3,445 2,790,450
Applied Extrusion Technology
Series B
10.75%, 7/01/11 .......................... 3,380 3,565,900
Aqua Chemical, Inc.
11.25%, 7/01/08 .......................... 4,250 3,400,000
Flowserve Corp.
12.25%, 8/15/10 .......................... 2,293 2,602,555
Pacific Aerospace & Electronics, Inc.
11.25%, 8/01/05(c)(d) .................... 1,850 185,000
Russell-Stanley Holdings, Inc.
9.00%, 11/30/08(a)(f) .................... 1,067 799,980
Transdigm, Inc.
10.375%, 12/01/08 ........................ 3,500 3,552,500
-----------
16,896,385
-----------
--------------------------------------------------------------------------------
14 o ALLIANCE HIGH YIELD FUND
<PAGE>
------------------------
PORTFOLIO OF INVESTMENTS
------------------------
Principal
Amount
(000) U.S. $ Value
--------------------------------------------------------------------------------
Healthcare-3.6%
Concentra Operating Corp.
13.00%, 8/15/09 .......................... $6,475 $ 7,316,750
Hanger Orthopedic Group
10.375%, 2/15/09(a) ...................... 1,180 1,215,400
Iasis Healthcare Corp.
13.00%, 10/15/09 ......................... 6,205 6,080,900
Triad Hospitals Holdings, Inc.
Series B
11.00%, 5/15/09 .......................... 1,620 1,818,450
Unilab Finance Corp.
12.75%, 10/01/09 ......................... 1,250 1,450,000
Vanguard Health Systems
9.75%, 8/01/11 ........................... 1,350 1,417,500
-----------
19,299,000
-----------
Hotels/Lodging-5.1%
Extended Stay America
9.875%, 6/15/11 .......................... 4,335 4,551,750
Felcor Lodging LP
8.50%, 6/01/11 ........................... 1,158 1,172,475
9.50%, 9/15/08 ........................... 1,845 1,941,862
Host Marriott LP
9.50%, 1/15/07(a) ........................ 2,995 3,159,725
Series G
9.25%, 10/01/07 .......................... 4,155 4,321,200
Intrawest Corp.
9.75%, 8/15/08 ........................... 1,000 1,015,000
10.50%, 2/01/10 .......................... 2,535 2,636,400
Meristar Hospitality
9.125%, 1/15/11(a) ....................... 1,550 1,540,312
10.50%, 6/15/09(a) ....................... 2,110 2,207,587
Sun International Hotels
8.875%, 8/15/11 .......................... 3,345 3,353,362
Vail Resorts, Inc.
8.75%, 5/15/09(a) ........................ 1,540 1,570,800
-----------
27,470,473
-----------
Leisure-1.1%
Premier Parks
9.75%, 6/15/07 ........................... 2,725 2,837,406
10.00%, 4/01/08(b) ....................... 795 743,325
Regal Cinemas, Inc.
9.375%, 2/01/12(a) ....................... 1,000 1,037,500
Six Flags, Inc.
9.50%, 2/01/09 ........................... 1,250 1,281,250
-----------
5,899,481
-----------
Media-4.0%
Allbritton Communications
Series B
9.75%, 11/30/07 .......................... 1,315 1,400,475
American Media Operation
10.25%, 5/01/09(a) .......................... 1,250 1,275,000
--------------------------------------------------------------------------------
ALLIANCE HIGH YIELD FUND o 15
<PAGE>
------------------------
PORTFOLIO OF INVESTMENTS
------------------------
Principal
Amount
(000) U.S. $ Value
--------------------------------------------------------------------------------
Fox Family Worldwide, Inc.
9.25%, 11/01/07 .......................... $ 4,250 $ 4,568,750
10.25%, 11/01/07 ......................... 2,720 2,944,400
Goss Graphic Systems, Inc.
12.25%, 11/19/05(c)(d) ................... 4,482 -0-
Intermedia Communication
Series B
11.25%, 7/15/07(b) ....................... 1,000 960,000
Lin Holdings Corp.
10.00%, 3/01/08(b) ....................... 5,200 4,576,000
Paxson Communication
10.75%, 7/15/08 .......................... 4,375 4,746,875
Sinclair Broadcast Group
8.75%, 12/15/11(a) ....................... 1,260 1,323,000
-----------
21,794,500
-----------
Metals/Minerals-2.1%
Commonwealth Aluminum
10.75%, 10/01/06 ......................... 390 391,950
Golden Northwest Aluminum
12.00%, 12/15/06 ......................... 1,500 909,375
Ormet Corp.
11.00%, 8/15/08(a) ....................... 2,500 1,587,500
P&L Coal Holdings, Inc.
Series B
8.875%, 5/15/08 .......................... 738 788,737
Series B
9.625%, 5/15/08 .......................... 3,224 3,473,860
Republic Technology, Inc.
13.75%, 7/15/09(c) ....................... 15,000 1,050,000
United States Steel LLC
10.75%, 8/01/08(a) ....................... 3,055 2,993,900
-----------
11,195,322
-----------
Mobile Communications-10.1%
American Cellular Corp.
9.50%, 10/15/09 .......................... 4,055 3,304,825
Dobson/Sygnet Communications
12.25%, 12/15/08 ......................... 5,545 5,240,025
Iridium LLC/Capital Corp.
Series B
14.00%, 7/15/05(c) ....................... 14,500 942,500
Microcell Telecommunication
Series B
14.00%, 6/01/06(b) ....................... 4,550 3,116,750
Nextel Communications
9.95%, 2/15/08(b) ........................ 1,495 825,987
10.65%, 9/15/07 .......................... 11,505 7,276,913
Nextel Partners, Inc.
11.00%, 3/15/10 .......................... 4,350 2,707,875
12.50%, 11/15/09(a) ...................... 1,395 892,800
--------------------------------------------------------------------------------
16 o ALLIANCE HIGH YIELD FUND
<PAGE>
------------------------
PORTFOLIO OF INVESTMENTS
------------------------
Principal
Amount
(000) U.S. $ Value
--------------------------------------------------------------------------------
Price Communications Wire
Series B
9.125%, 12/15/06 ......................... $ 375 $ 380,625
PTC International Finance
11.25%, 12/01/09 ......................... 5,435 5,842,625
Rural Cellular Corp.
9.75%, 1/15/10(a) ........................ 3,235 2,636,525
Telecorp PCS, Inc.
10.625%, 7/15/10 ......................... 4,025 4,568,375
11.625%, 4/15/09(b) ...................... 6,050 5,354,250
Tritel PCS, Inc.
10.375%, 1/15/11 ......................... 2,975 3,369,188
12.75%, 5/15/09(b) ....................... 2,095 1,833,125
Triton PCS, Inc.
8.75%, 11/15/11 .......................... 1,765 1,632,625
11.00%, 5/01/08(b) ....................... 4,860 4,155,300
Voicestream Wireless Co.
10.375%, 11/15/09 ........................ 336 371,280
-----------
54,451,593
-----------
Oil & Gas-0.5%
Northern Offshore ASA
Series B
10.00%, 5/15/05 .......................... 1,175 746,125
Petrobras International Finance Co.
9.125%, 2/01/07(a) ....................... 1,900 1,923,750
-----------
2,669,875
-----------
Paper/Packaging-5.8%
Crown Paper Co.
11.00%, 9/01/05(c) ....................... 6,225 -0-
Doman Industries, Ltd.
12.00%, 7/01/04 .......................... 1,615 1,526,175
Owens-Brockway Glass
8.875%, 2/15/09(a) ....................... 8,200 8,384,500
Packaging Corp. of America
9.625%, 4/01/09 .......................... 2,000 2,215,000
Plainwell, Inc.
Series B
11.00%, 3/1/08(c)(d) ..................... 5,000 50,000
Plastipak Holdings
10.75%, 9/01/11(a) ....................... 3,925 4,239,000
Riverwood International Corp.
10.625%, 8/01/07 ......................... 2,335 2,492,613
10.875%, 4/01/08 ......................... 375 390,938
Sealed Air Corp.
8.75%, 7/01/08(a) ........................ 3,280 3,441,212
9.25%, 2/01/08 ........................... 3,400 3,655,000
9.75%, 2/01/11 ........................... 4,625 5,041,250
-----------
31,435,688
-----------
--------------------------------------------------------------------------------
ALLIANCE HIGH YIELD FUND o 17
<PAGE>
------------------------
PORTFOLIO OF INVESTMENTS
------------------------
Principal
Amount
(000) U.S. $ Value
--------------------------------------------------------------------------------
Service-8.6%
Alderwoods Group
11.00%, 1/02/07 .......................... $ 1,490 $ 1,504,900
12.25%, 1/02/09 .......................... 2,925 3,085,875
Allied Waste North American
8.50%, 12/01/08(a) ....................... 2,405 2,453,100
Series B
10.00%, 8/01/09 .......................... 16,340 16,707,650
Avis Group Holdings, Inc.
11.00%, 5/01/09 .......................... 7,000 7,595,000
Coinmach Corp.
9.00%, 2/01/10(a) ........................ 1,300 1,352,000
Iron Mountain, Inc.
8.625%, 4/01/13 .......................... 785 824,250
Service Corp. International
6.00%, 12/15/05 .......................... 4,265 3,849,163
6.30%, 3/15/03(e) ........................ 615 605,775
6.50%, 3/15/08 ........................... 2,910 2,546,250
7.70%, 4/15/09 ........................... 1,990 1,840,750
Stewart Enterprises
10.75%, 7/01/08 .......................... 2,185 2,398,038
URS Corp.
Series B
12.25%, 5/01/09 .......................... 1,700 1,740,375
-----------
46,503,126
-----------
Sovereign-1.6%
Russian Federation
5.00%, 3/31/30(a)(e) ..................... 4,745 3,149,494
United Mexican States
11.375%, 9/15/16 ......................... 4,165 5,379,098
-----------
8,528,592
-----------
Supermarkets & Drugs-2.2%
Fleming Companies, Inc.
Series B
10.50%, 12/01/14 ......................... 2,595 2,595,000
Ingles Markets, Inc.
8.875%, 12/01/11(a) ...................... 70 70,000
Pathmark Stores
8.75%, 2/01/12(a) ........................ 700 728,000
Pueblo Xtra International
9.50%, 8/01/03 ........................... 3,677 1,158,255
Series C
9.50%, 8/01/03 ........................... 818 257,670
Rite Aid Corp.
11.25%, 7/01/08 .......................... 4,340 3,189,900
Stater Brothers Holdings, Inc.
10.75%, 8/15/06 .......................... 3,750 3,937,500
-----------
11,936,325
-----------
--------------------------------------------------------------------------------
18 o ALLIANCE HIGH YIELD FUND
<PAGE>
------------------------
PORTFOLIO OF INVESTMENTS
------------------------
Shares or
Principal
Amount
(000) U.S. $ Value
--------------------------------------------------------------------------------
Technology-2.0%
Fairchild Semiconductor
10.125%, 3/15/07 ......................... $ 2,500 $ 2,612,500
10.375%, 10/01/07 ........................ 1,000 1,065,000
10.50%, 2/01/09 .......................... 1,350 1,464,750
Filtronic Plc
10.00%, 12/01/05 ......................... 5,720 5,720,000
------------
10,862,250
------------
Utility-2.7%
AES Corp.
8.875%, 2/15/11 .......................... 1,985 1,290,250
9.375%, 9/15/10 .......................... 350 229,250
9.50%, 6/01/09 ........................... 2,545 1,692,425
Calpine Corp.
8.50%, 5/01/08 ........................... 1,705 1,228,954
Mission Energy Holding
13.50%, 7/15/08 .......................... 5,500 5,582,500
PG&E National Energy
10.375%, 5/16/11 ......................... 3,300 3,371,947
PSEG Energy Holdings
9.125%, 2/10/04 .......................... 1,500 1,491,054
------------
14,886,380
------------
Total Corporate Debt Obligations
(cost $530,757,995) ...................... 482,365,240
------------
NON-CONVERTIBLE
PREFERRED STOCKS-4.5%
Broadwing Communications
Series B
12.50%, 8/15/09 .......................... 2,750 1,381,875
CSC Holdings, Inc.
Series H
11.75%, 10/01/07 ......................... 14,800 1,531,800
Series M
11.125%, 4/01/08 ......................... 95,877 9,851,394
Global Crossing Holdings Ltd.
10.50%, 12/01/08(f) ...................... 31,575 8,210
Harborside Healthcare
13.50%, 8/01/10(f)(g) .................... -0- 4
Intermedia Communication
Series B
13.50%, 3/31/09(f) ....................... 5,559 5,336,947
Nextel Communications
Series E
11.125%, 2/15/10(f) ...................... 11,428 3,085,621
Sinclair Capital
11.625%, 3/15/09 ......................... 3,950 395,988
--------------------------------------------------------------------------------
ALLIANCE HIGH YIELD FUND o 19
<PAGE>
------------------------
PORTFOLIO OF INVESTMENTS
------------------------
Shares or
Principal
Amount
(000) U.S. $ Value
--------------------------------------------------------------------------------
Sovereign REIT
Series A
12.00%, 8/29/49(a) ....................... 2,830 $ 3,035,175
XO Communications, Inc.
14.00%, 2/01/09(f) ....................... 1 -0-
-----------
Total Non-Convertible Preferred Stocks
(cost $36,724,286) ....................... 24,627,014
-----------
CONVERTIBLE BOND-0.4%
Nextel Communications
5.25%, 1/15/10
(cost $3,118,928) ........................ $ 4,875 2,480,156
-----------
CONVERTIBLE PREFERRED
STOCKS-0.2%
Earthwatch, Inc.
Series C
8.50%, 3/31/09(a)(f) ..................... 31,582 6,316
Ford Motor Co Capital Trust II
6.50%, 1/15/07 ........................... 17,700 935,091
-----------
Total Convertible Preferred Stocks
(cost $892,895) .......................... 941,407
-----------
COMMON STOCKS-0.1%
Goss Holdings, Inc. Cl. B(d)(h) ............. 104,541 -0-
Metal Management, Inc.(h) ................... 229,184 355,235
Phase Metrics, Inc.(d)(h) ................... 216,818 75,886
Russell-Stanley Holding, Inc.(d)(h) ......... 160,000 -0-
Safelite Glass Corp. Cl. B(d)(h) ............ 25,161 29,187
Safelite Realty Corp.(d)(h) ................. 1,698 1,970
-----------
Total Common Stocks
(cost $6,212,199) ........................ 462,278
-----------
WARRANTS-0.0%(h)
Chesapeake Energy Corp.
Warrants, expiring 9/01/04 ............... 14,000 -0-
Warrants, expiring 1/01/03 ............... 4,767 -0-
Concentric Network
Warrants, expiring 12/15/07(a) ........... 1,000 10
Glasstech, Inc.
Warrants, expiring 6/30/04 ............... 750 -0-
Harborside Healthcare
Warrants, expiring 8/01/09 ............... 10 10
Jostens, Inc.
Warrants, expiring 5/01/10 ............... 4,000 81,000
Metronet Communications
Warrants, expiring 8/15/07(a) ............ 1,500 67,500
--------------------------------------------------------------------------------
20 o ALLIANCE HIGH YIELD FUND
<PAGE>
------------------------
PORTFOLIO OF INVESTMENTS
------------------------
Shares or
Principal
Amount
(000) U.S. $ Value
--------------------------------------------------------------------------------
Pliant Corp.
Warrants, expiring 6/01/10(a) ............ 200 $ 450
Safelite Glass Corp. Cl. B
Warrants, expiring 6/10/02 ............... 102,772 -0-
Versatel Telecom BV
Warrants, expiring 5/15/08 ............... 4,500 45
------------
Total Warrants (cost $186,192) .............. 149,015
------------
SHORT-TERM INVESTMENTS-4.0%
Time Deposits-4.0%
Bank of New York
1.56%, 3/01/02 ........................... $ 500 500,000
Dresdner Kleinwort Benson, N.A. LLC
1.84%, 3/01/02 ........................... 21,000 21,000,000
------------
Total Short-Term Investments
(cost $21,500,000) ....................... 21,500,000
-----------
Total Investments-98.4%
(cost $599,392,495) ...................... 532,525,110
Other assets less liabilities-1.6% .......... 8,446,831
------------
Net Assets-100% ............................. $540,971,941
============
(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 February 28,
2002, these securities amounted to $78,922,288 or 14.6% of net assets.
(b) Indicates a security that has a zero coupon that remains in effect until a
predetermined date at which time the stated coupon rate becomes effective.
(c) Security is in default and is non-income producing.
(d) Illiquid security, valued at fair market value (see Note A).
(e) Variable rate coupon, rate shown as of February 28, 2002.
(f) Pay-In-Kind (PIK) quarterly payments.
(g) Held 0.12 shares at February 28, 2002.
(h) Non-income producing security.
See notes to financial statements.
--------------------------------------------------------------------------------
ALLIANCE HIGH YIELD FUND o 21
<PAGE>
---------------------------------
STATEMENT OF ASSETS & LIABILITIES
---------------------------------
STATEMENT OF ASSETS & LIABILITIES
February 28, 2002 (unaudited)
Assets
Investments in securities, at value
(cost $599,392,495) ..................................... $ 532,525,110
Cash ....................................................... 94,728
Receivable for investment securities sold .................. 24,673,896
Interest receivable ........................................ 11,269,113
Receivable for capital stock sold .......................... 1,115,819
Deferred organization expenses ............................. 7,969
-------------
Total assets ............................................... 569,686,635
-------------
Liabilities
Payable for investment securities purchased ................ 24,942,477
Payable for capital stock redeemed ......................... 1,676,012
Dividends payable .......................................... 1,198,125
Advisory fee payable ....................................... 315,129
Distribution fee payable ................................... 313,061
Accrued expenses ........................................... 269,890
-------------
Total liabilities .......................................... 28,714,694
-------------
Net Assets ................................................. $ 540,971,941
=============
Composition of Net Assets
Capital stock, at par ...................................... $ 89,551
Additional paid-in capital ................................. 891,040,205
Distributions in excess of net investment income ........... (4,598,600)
Accumulated net realized loss on investments
and foreign currency transactions ....................... (278,691,830)
Net unrealized depreciation of investments ................. (66,867,385)
-------------
$ 540,971,941
=============
Calculation of Maximum Offering Price
Class A Shares
Net asset value and redemption price per share
($69,964,842 / 11,584,014 shares of capital stock
issued and outstanding) ................................. $6.04
Sales charge--4.25% of public offering price ............... .27
-----
Maximum offering price ..................................... $6.31
=====
Class B Shares
Net asset value and offering price per share
($317,297,303 / 52,536,093 shares of capital stock
issued and outstanding) ................................. $6.04
=====
Class C Shares
Net asset value and offering price per share
($62,296,353 / 10,310,724 shares of capital stock
issued and outstanding).................................. $6.04
=====
Advisor Class Shares
Net asset value, redemption and offering price per share
($91,413,443 / 15,119,935 shares of capital stock
issued and outstanding) ................................. $6.05
=====
See notes to financial statements.
--------------------------------------------------------------------------------
22 o ALLIANCE HIGH YIELD FUND
<PAGE>
-----------------------
STATEMENT OF OPERATIONS
-----------------------
STATEMENT OF OPERATIONS
Six Months Ended February 28, 2002 (unaudited)
Investment Income
Interest ..................................... $27,439,669
Dividends .................................... 1,310,097 $ 28,749,766
-----------
Expenses
Advisory fee ................................. 1,941,253
Distribution fee--Class A .................... 113,885
Distribution fee--Class B .................... 1,642,752
Distribution fee--Class C .................... 309,992
Transfer agency .............................. 413,688
Custodian .................................... 114,239
Printing ..................................... 98,277
Registration ................................. 75,649
Administrative ............................... 66,900
Audit and legal .............................. 58,539
Amortization of organization expenses ........ 28,327
Directors' fees .............................. 10,945
Miscellaneous ................................ 12,186
-----------
Total expenses ............................... 4,886,632
------------
Net investment income ........................ 23,863,134
------------
Realized and Unrealized Gain (Loss)
on Investments
Net realized loss on investment
transactions .............................. (37,509,034)
Net change in unrealized
appreciation/depreciation
of investments ............................ 174,297
------------
Net loss on investments ...................... (37,334,737)
------------
Net Decrease in Net Assets From
Operations ................................ $(13,471,603)
============
See notes to financial statements.
--------------------------------------------------------------------------------
ALLIANCE HIGH YIELD FUND o 23
<PAGE>
----------------------------------
STATEMENT OF CHANGES IN NET ASSETS
----------------------------------
STATEMENT OF CHANGES IN NET ASSETS
Six Months
Ended
February 28, Year Ended
2002 August 31,
(unaudited) 2001
============= =============
Increase (Decrease) in Net Assets
from Operations
Net investment income .................... $ 23,863,134 $ 53,800,164
Net realized loss on investment and
foreign currency transactions ......... (37,509,034) (137,883,927)
Net change in unrealized
appreciation/depreciation of
investments and foreign currency
denominated assets and liabilities .... 174,297 24,686,825
------------- -------------
Net decrease in net assets from
operations ............................ (13,471,603) (59,396,938)
Dividends and Distributions to
Shareholders from:
Net investment income
Class A ............................... (3,873,667) (7,962,161)
Class B ............................... (15,711,422) (35,359,513)
Class C ............................... (2,958,840) (6,621,537)
Advisor Class ......................... (2,625,742) (923,841)
Tax return of capital
Class A ............................... -0- (1,709,082)
Class B ............................... -0- (7,589,939)
Class C ............................... -0- (1,421,316)
Advisor Class ......................... -0- (198,303)
Capital Stock Transactions
Net increase ............................. 50,377,368 63,402,094
------------- -------------
Total increase (decrease) ................ 11,736,094 (57,780,536)
Net Assets
Beginning of period ...................... 529,235,847 587,016,383
------------- -------------
End of period ............................ $ 540,971,941 $ 529,235,847
============= =============
See notes to financial statements.
--------------------------------------------------------------------------------
24 o ALLIANCE HIGH YIELD FUND
<PAGE>
-----------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
NOTES TO FINANCIAL STATEMENTS
February 28, 2002 (unaudited)
NOTE A
Significant Accounting Policies
Alliance High Yield Fund, Inc. (the "Fund") was incorporated in the state of
Maryland on December 19, 1996 as a diversified, open-end management investment
company. The Fund offers Class A, Class B, Class C and Advisor Class shares.
Class A shares are sold with a front-end sales charge of up to 4.25% for
purchases not exceeding $1,000,000. With respect to purchases of $1,000,000 or
more, Class A shares redeemed within one year of purchase may be subject to a
contingent deferred sales charge of 1%. Class B shares are currently sold with a
contingent deferred sales charge which declines from 4% to zero depending on the
period of time the shares are held. Class B shares will automatically convert to
Class A shares eight years after the end of the calendar month of purchase.
Class C shares are subject to a contingent deferred sales charge of 1% on
redemptions made within the first year after purchase. Advisor Class shares are
sold without an initial or contingent deferred sales charge and are not subject
to ongoing distribution expenses. Advisor Class shares are offered principally
to investors participating in fee based programs and to certain retirement plan
accounts. All four classes of shares have identical voting, dividend,
liquidation and other rights, except that each class bears different
distribution expenses and has exclusive voting rights with respect to its
distribution plan, if any. The financial statements have been prepared in
conformity with accounting principles generally accepted in the United States,
which require management to make certain estimates and assumptions that affect
the reported amounts of assets and liabilities in the financial statements and
amounts of income and expenses during the reporting period. Actual results could
differ from those estimates. The following is a summary of significant
accounting policies followed by the Fund.
1. Security Valuation
Portfolio securities traded on a national securities exchange or on a foreign
securities exchange (other than foreign securities exchanges whose operations
are similar to those of the United States over-the-counter market) are generally
valued at the last reported sale price or, if there was no sale on such day, the
last bid price quoted on such day. If no bid prices are quoted, then the
security is valued at the mean of the bid and asked prices as obtained on that
day from one or more dealers regularly making a market in that security.
Securities traded on the over-the-counter market, securities listed on a foreign
securities exchange whose operations are similar to the United States
over-the-counter market and securities listed on a national securities exchange
whose primary market is believed to be over-the-counter are valued at the mean
of the closing bid and asked prices provided by two or more dealers regularly
making a market in such securities. U.S. government securities and other debt
securities which mature in 60 days or less are valued at amortized cost unless
this method does not represent fair value. Securities for which market
quotations are not readily available are valued at fair value as determined in
good faith by, or in accordance with procedures approved by, the Board of
Directors. Fixed income securities may be valued on the basis of prices provided
--------------------------------------------------------------------------------
ALLIANCE HIGH YIELD FUND o 25
<PAGE>
-----------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
by a pricing service when such prices are believed to reflect the fair market
value of such securities. Mortgage backed and asset backed securities may be
valued at prices obtained from a bond pricing service or at a price obtained
from one or more of the major broker/dealers in such securities. In cases where
broker/dealer quotes are obtained, the Adviser may establish procedures whereby
changes in market yields or spreads are used to adjust, on a daily basis, a
recently obtained quoted bid price on a security.
2. Currency Translation
Assets and liabilities denominated in foreign currencies and commitments under
forward exchange currency contracts are translated into U.S. dollars at the mean
of the quoted bid and asked price of such currencies against the U.S. dollar.
Purchases and sales of portfolio securities are translated into U.S. dollars at
the rates of exchange prevailing when such securities were acquired or sold.
Income and expenses are translated into U.S. dollars at rates of exchange
prevailing when accrued.
Net realized foreign exchange gains and losses represent foreign exchange gains
and losses from sales and maturities of debt securities and forward currency
exchange contracts, holding of foreign currencies, exchange gains or losses
realized between the trade and settlement dates on security transactions, and
the difference between the amounts of dividends, interest and foreign taxes
receivable 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 period end exchange rates
are reflected as a component of net unrealized appreciation or depreciation of
investments and foreign currency denominated assets and liabilities.
3. Taxes
It is the Fund's policy to meet the requirements of the Internal Revenue Code
applicable to regulated investment companies and to distribute all of its
investment company taxable income and net realized gains, if any, to
shareholders. Therefore, no provisions for federal income or excise taxes are
required.
4. Organization Expenses
Organization costs of $285,600 have been deferred and are being amortized on a
straight-line basis through April 2002.
5. Investment Income and Investment Transactions
Interest income is accrued daily. Dividend income is recorded on ex-dividend
date. Investment transactions are accounted for on the date the securities are
purchased or sold. Investment gains and losses are determined on the identified
cost basis. The Fund accretes discount as an adjustment to interest income.
6. Income and Expenses
All income earned and expenses incurred by the Fund are borne on a pro-rata
basis by each settled class of shares, based on the proportionate interest in
the Fund represented by the shares of such class, except that each
--------------------------------------------------------------------------------
26 o ALLIANCE HIGH YIELD FUND
<PAGE>
-----------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
class's transfer agent fees and distribution fees, if any, are charged only
against the assets of that class.
7. Dividends and Distributions
Dividends and distributions to shareholders are recorded on the ex-dividend
date. Income dividends and capital gains distributions are determined in
accordance with federal tax regulations and may differ from those determined in
accordance with accounting principles generally accepted in the United States.
To the extent these differences are permanent, such amounts are reclassified
within the capital accounts based on their federal tax basis treatment;
temporary differences do not require such reclassification.
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
8. Change in Accounting Principle
As required, effective September 1, 2001, the Fund has adopted the provisions of
the AICPA Audit and Accounting Guide, Audits of Investments Companies, and began
amortizing premium on debt securities for financial statement reporting purposes
only. This change has no impact on the net assets of the Fund. Prior to
September 1, 2001, the Fund did not amortize premiums on debt securities.
The cumulative effect of this accounting change resulted in a $296,564 decrease
in cost of investments and a corresponding $296,564 decrease in net unrealized
depreciation, based on investments owned by the Fund on September 1, 2001.
The effect of this change for the period ended February 28, 2002, was to
decrease net investment income by $196,781, decrease net unrealized depreciation
of investments by $157,307 and decrease net realized loss on investments by
$39,474. The statement of changes in net assets and financial highlights for
prior periods have not been restated to reflect the change in accounting
principle.
NOTE B
Advisory Fee and Other Transactions with Affiliates
Under the terms of an investment advisory agreement, the Fund pays Alliance
Capital Management L.P. (the "Adviser") an advisory fee at an annual rate of .75
of 1% of the average daily net assets of the Fund. Such fee is accrued daily and
paid monthly.
The Fund compensates Alliance Global Investor Services, Inc., (AGIS), a
wholly-owned subsidiary of the Adviser under a Transfer Agency Agreement for
providing personnel and facilities to perform transfer agency services for the
Fund. Such compensation amounted to $298,643 for the six months ended February
28, 2002.
For the six months ended February 28, 2002, the Fund's expenses were reduced by
$1,975 under an expense offset arrangement with AGIS.
Alliance Fund Distributors, Inc. (the "Distributor"), a wholly-owned subsidiary
of the Adviser, serves as the distributor of the Fund's shares. The Distributor
has advised the Fund that it received front-end sales charges of $9,900 from the
sale of Class A shares, and $435,326 and $10,578 in contingent deferred sales
charges imposed upon redemptions by shareholders of Class B and Class C shares,
respectively,
--------------------------------------------------------------------------------
ALLIANCE HIGH YIELD FUND o 27
<PAGE>
-----------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
for the six months ended February 28, 2002.
NOTE C
Distribution Services Agreement
The Fund has adopted a Distribution Services Agreement (the "Agreement")
pursuant to Rule 12b-1 under the Investment Company Act of 1940. Under the
Agreement, the Fund pays distribution and servicing fees to the Distributor at
an annual rate of up to .30 of 1% of the Fund's average daily net assets
attributable to Class A shares and 1% of the Fund's average daily net assets
attributable to the Class B and Class C shares. There are no distribution and
servicing fees on the Advisor Class shares. The fees are accrued daily and paid
monthly. The Agreement provides that the Distributor will use such payments in
their entirety for distribution assistance and promotional activities. The
Distributor has advised the Fund that it has incurred expenses in excess of the
distribution costs reimbursed by the Fund in the amount of $25,933,845 and
$1,494,550, for Class B and Class C shares, respectively; such costs may be
recovered from the Fund in future periods so long as the Agreement is in effect.
In accordance with the Agreement, there is no provision for recovery of
unreimbursed distribution costs, incurred by the Distributor, beyond the current
fiscal year for Class A shares. The Agreement also provides that the Adviser may
use its own resources to finance the distribution of the Fund's shares.
NOTE D
Investment Transactions
Purchases and sales of investment securities (excluding short-term investments
and U.S. government obligations) aggregated $221,172,151 and $156,146,166,
respectively, for the six months ended February 28, 2002. There were no
purchases or sales of U.S. government or government agency obligations for the
six months ended February 28, 2002.
At February 28, 2002, the cost of investments for federal income tax purposes
was substantially the same as the cost for financial reporting purposes.
Accordingly, gross unrealized appreciation of investments was $23,335,744 and
gross unrealized depreciation of investments was $90,203,129, resulting in net
unrealized depreciation of $66,867,385.
At August 31, 2001, the Fund had a capital loss carryforward of $123,290,163 of
which $7,232,173 expires in the year 2007, $46,562,845 expires in the year 2008,
and $69,495,145 expires in the year 2009.
Capital losses and foreign currency losses incurred after October 31
("post-October" losses) within the taxable year are deemed to arise on the first
business day of the Fund's next taxable year. The Fund incurred and will elect
to defer net capital and currency losses of $116,296,355 and $1,278,926,
respectively, during the fiscal year 2001. These carryover losses may be used to
offset future gains. To the extent they are so used, future gains will not be
distributed to shareholders until they exceed available loss carryovers.
--------------------------------------------------------------------------------
28 o ALLIANCE HIGH YIELD FUND
<PAGE>
-----------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
1. Forward Exchange Currency Contracts
The 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, to hedge certain firm purchase and sale commitments denominated in
foreign currencies and for investment purposes. 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
realized gains or losses on 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.
The Fund's custodian will place and maintain liquid assets in a separate account
of the Fund having a value at least equal to the aggregate amount of the Fund's
commitments under forward exchange currency contracts entered into with respect
to position hedges.
Risks may arise from the potential inability of a counterparty to meet the terms
of a contract and from unanticipated movements in the value of foreign
currencies relative to the U.S. dollar.
At February 28, 2002, the Fund had no outstanding forward foreign exchange
currency contracts.
NOTE E
Capital Stock
There are 12,000,000,000 shares of $.001 par value capital stock authorized,
divided into four classes, designated Class A, Class B, Class C and Advisor
Class shares. Each class consists of 3,000,000,000 authorized shares.
Transactions in capital stock were as follows:
<TABLE>
<CAPTION>
-------------------------------------- ----------------------------------------
Shares Amount
-------------------------------------- ----------------------------------------
Six Months Ended Six Months Ended
February 28, 2002 Year Ended February 28, 2002 Year Ended
(unaudited) August 31, 2001 (unaudited) August 31, 2001
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A
Shares sold 4,548,849 11,115,964 $ 28,064,371 $ 77,575,094
---------------------------------------------------------------------------------------------------------
Shares issued in
reinvestment of
dividends and
distributions 291,528 537,612 1,788,126 3,767,836
------------------------------------------------------------------------------------
Shares converted
from Class B 253,510 119,365 1,561,562 831,097
---------------------------------------------------------------------------------------------------------
Shares redeemed (5,527,420) (10,082,594) (34,004,958) (69,880,689)
---------------------------------------------------------------------------------------------------------
Net increase
(decrease) (433,533) 1,690,347 $ (2,590,899) $ 12,293,338
=========================================================================================================
</TABLE>
--------------------------------------------------------------------------------
ALLIANCE HIGH YIELD FUND o 29
<PAGE>
-----------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
<TABLE>
<CAPTION>
-------------------------------------- ----------------------------------------
Shares Amount
-------------------------------------- ----------------------------------------
Six Months Ended Six Months Ended
February 28, 2002 Year Ended February 28, 2002 Year Ended
(unaudited) August 31, 2001 (unaudited) August 31, 2001
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class B
Shares sold 5,618,300 16,212,402 $ 34,648,258 $ 115,658,240
---------------------------------------------------------------------------------------------------------
Shares issued in
reinvestment of
dividends and
distributions 920,787 1,831,420 5,646,495 12,835,428
---------------------------------------------------------------------------------------------------------
Shares converted
to Class A (253,388) (119,330) (1,561,562) (831,097)
---------------------------------------------------------------------------------------------------------
Shares redeemed (8,567,253) (15,121,241) (52,626,866) (106,858,112)
---------------------------------------------------------------------------------------------------------
Net increase
(decrease) (2,281,554) 2,803,251 $(13,893,675) $ 20,804,459
=========================================================================================================
Class C
Shares sold 2,097,044 4,951,047 $ 12,967,118 $ 35,486,281
---------------------------------------------------------------------------------------------------------
Shares issued in
reinvestment of
dividends and
distributions 213,555 438,522 1,309,753 3,070,376
---------------------------------------------------------------------------------------------------------
Shares redeemed (2,366,786) (4,879,445) (14,492,139) (35,030,340)
---------------------------------------------------------------------------------------------------------
Net increase
(decrease) (56,187) 510,124 $ (215,268) $ 3,526,317
=========================================================================================================
Advisor Class
Shares sold 10,885,856 214,775 $ 67,269,115 $ 1,901,987
---------------------------------------------------------------------------------------------------------
Shares issued in
reinvestment of
dividends and
distributions 402,875 13,317 2,471,069 116,567
---------------------------------------------------------------------------------------------------------
Shares redeemed (438,326) (302,822) (2,662,974) (2,701,558)
---------------------------------------------------------------------------------------------------------
Net increase
(decrease) 10,850,405 (74,730) $ 67,077,210 $ (683,004)
=========================================================================================================
</TABLE>
NOTE F
Bank Borrowing
A number of open-end mutual funds managed by the Adviser, including the Fund,
participate in a $750 million revolving credit facility (the "Facility")
intended to provide short-term financing if necessary, subject to certain
restrictions in connection with abnormal redemption activity. Commitment fees
related to the Facility are paid by the participating funds and are included in
miscellaneous expenses in the statement of operations. The Fund did not utilize
the Facility during the six months ended February 28, 2002.
--------------------------------------------------------------------------------
30 o ALLIANCE HIGH YIELD FUND
<PAGE>
--------------------
FINANCIAL HIGHLIGHTS
--------------------
FINANCIAL HIGHLIGHTS
Selected Data For A Share Of Common Stock Outstanding Throughout Each Period
<TABLE>
<CAPTION>
----------------------------------------------------------------------------
Class A
----------------------------------------------------------------------------
Six Months
Ended April 22,
February 28, Year Ended August 31, 1997(b) to
2002(a) --------------------------------------------- August 31,
(unaudited) 2001 2000 1999 1998 1997
----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period ........... $ 6.49 $ 8.10 $ 9.47 $ 10.76 $11.17 $10.00
----------------------------------------------------------------------------
Income from Investment
Operations
Net investment income(c) ........ .30 .76 .92 1.02 1.03 .37
Net realized and unrealized
gain (loss) on investments
and foreign currency
transactions .................. (.43) (1.50) (1.26) (1.08) (.27) 1.15
----------------------------------------------------------------------------
Net increase (decrease) in net
asset value from operations ... (.13) (.74) (.34) (.06) .76 1.52
----------------------------------------------------------------------------
Less: Dividends and
Distributions
Dividends from net investment
income ........................ (.32) (.72) (.98) (1.02) (1.02) (.35)
Distributions in excess of net
investment income ............. -0- -0- -0- (.05) (.01) -0-
Tax return of capital ........... -0- (.15) (.05) (.01) -0- -0-
Distributions from net realized
gains on investments .......... -0- -0- -0- (.15) (.14) -0-
----------------------------------------------------------------------------
Total dividends and distributions (.32) (.87) (1.03) (1.23) (1.17) (.35)
----------------------------------------------------------------------------
Net asset value, end of period .. $ 6.04 $ 6.49 $ 8.10 $ 9.47 $ 10.76 $11.17
============================================================================
Total Return
Total investment return based
on net asset value(d) ........ (2.06)% (9.39)% (3.79)% (.58)% 6.42% 15.33%
Ratios/Supplemental Data
Net assets, end of period
(000's omitted) ............... $69,965 $78,053 $83,645 $102,400 $43,960 $5,889
Ratio to average net assets:
Expenses, net of
waivers/reimbursements ...... 1.38%(e) 1.34% 1.33% 1.31% 1.43% 1.70%(e)
Expenses, before
waivers/reimbursements ...... 1.38%(e) 1.34% 1.33% 1.31% 1.46% 3.11%(e)
Net investment income, net of
waivers/reimbursements ...... 9.74%(e) 10.62% 10.92% 10.21% 8.89% 8.04%(e)
Portfolio turnover rate ......... 32% 98% 102% 182% 311% 73%
</TABLE>
See footnote summary on page 35.
--------------------------------------------------------------------------------
ALLIANCE HIGH YIELD FUND o 31
<PAGE>
--------------------
FINANCIAL HIGHLIGHTS
--------------------
Selected Data For A Share Of Common Stock Outstanding Throughout Each Period
<TABLE>
<CAPTION>
----------------------------------------------------------------------------
Class B
----------------------------------------------------------------------------
Six Months
Ended April 22,
February 28, Year Ended August 31, 1997(b) to
2002(a) --------------------------------------------- August 31,
(unaudited) 2001 2000 1999 1998 1997
----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period ......... $ 6.50 $ 8.10 $ 9.46 $ 10.75 $ 11.17 $ 10.00
----------------------------------------------------------------------------
Income from Investment
Operations
Net investment income(c) ...... .28 .70 .86 .95 .96 .31
Net realized and unrealized
gain (loss) on investments
and foreign currency
transactions ................ (.45) (1.48) (1.26) (1.08) (.28) 1.19
----------------------------------------------------------------------------
Net increase (decrease) in
net asset value from
operations .................. (.17) (.78) (.40) (.13) .68 1.50
----------------------------------------------------------------------------
Less: Dividends and
Distributions
Dividends from net
investment income ........... (.29) (.68) (.91) (.95) (.95) (.33)
Distributions in excess of
net investment income ....... -0- -0- -0- (.05) (.01) -0-
Tax return of capital ......... -0- (.14) (.05) (.01) -0- -0-
Distributions from net realized
gains on investments ........ -0- -0- -0- (.15) (.14) -0-
----------------------------------------------------------------------------
Total dividends and
distributions ............... (.29) (.82) (.96) (1.16) (1.10) (.33)
----------------------------------------------------------------------------
Net asset value,
end of period ............... $ 6.04 $ 6.50 $ 8.10 $ 9.46 $ 10.75 $ 11.17
============================================================================
Total Return
Total investment return based
on net asset value(d) ...... (2.56)% (9.94)% (4.40)% (1.26)% 5.69% 15.07%
Ratios/Supplemental Data
Net assets, end of period
(000's omitted) ............. $317,297 $356,062 $421,105 $527,337 $269,426 $43,297
Ratio to average net assets:
Expenses, net of
waivers/reimbursements .... 2.10%(e) 2.06% 2.04% 2.03% 2.13% 2.40%(e)
Expenses, before
waivers/reimbursements .... 2.10%(e) 2.06% 2.04% 2.03% 2.16% 3.85%(e)
Net investment income, net of
waivers/reimbursements .... 9.04%(e) 9.97% 10.21% 9.52% 8.18% 7.19%(e)
Portfolio turnover rate ....... 32% 98% 102% 182% 311% 73%
</TABLE>
See footnote summary on page 35.
--------------------------------------------------------------------------------
32 o ALLIANCE HIGH YIELD FUND
<PAGE>
--------------------
FINANCIAL HIGHLIGHTS
--------------------
Selected Data For A Share Of Common Stock Outstanding Throughout Each Period
<TABLE>
<CAPTION>
----------------------------------------------------------------------------
Class C
----------------------------------------------------------------------------
Six Months
Ended April 22,
February 28, Year Ended August 31, 1997(b) to
2002(a) --------------------------------------------- August 31,
(unaudited) 2001 2000 1999 1998 1997
----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period ......... $ 6.50 $ 8.10 $ 9.47 $ 10.75 $ 11.17 $10.00
----------------------------------------------------------------------------
Income from Investment
Operations
Net investment income(c) ...... .28 .70 .86 .95 .96 .32
Net realized and unrealized
gain (loss) on investments
and foreign currency
transactions ................ (.45) (1.48) (1.27) (1.07) (.28) 1.18
----------------------------------------------------------------------------
Net increase (decrease) in
net asset value from
operations .................. (.17) (.78) (.41) (.12) .68 1.50
----------------------------------------------------------------------------
Less: Dividends and
Distributions
Dividends from net
investment income ........... (.29) (.68) (.91) (.95) (.95) (.33)
Distributions in excess of
net investment income ....... -0- -0- -0- (.05) (.01) -0-
Tax return of capital ......... -0- (.14) (.05) (.01) -0- -0-
Distributions from net realized
gains on investments ........ -0- -0- -0- (.15) (.14) -0-
----------------------------------------------------------------------------
Total dividends and
distributions ............... (.29) (.82) (.96) (1.16) (1.10) (.33)
----------------------------------------------------------------------------
Net asset value,
end of period ............... $ 6.04 $ 6.50 $ 8.10 $ 9.47 $ 10.75 $11.17
============================================================================
Total Return
Total investment return based
on net asset value(d) ...... (2.56)% (9.94)% (4.51)% (1.16)% 5.69% 15.07%
Ratios/Supplemental Data
Net assets, end of period
(000's omitted) ............. $62,296 $67,360 $79,826 $99,927 $48,337 $7,575
Ratio to average net assets:
Expenses, net of
waivers/reimbursements .... 2.08%(e) 2.04% 2.03% 2.02% 2.13% 2.40%(e)
Expenses, before
waivers/reimbursements .... 2.08%(e) 2.04% 2.03% 2.02% 2.16% 3.84%(e)
Net investment income, net of
waivers/reimbursements .... 9.04%(e) 9.97% 10.23% 9.54% 8.17% 7.24%(e)
Portfolio turnover rate ....... 32% 98% 102% 182% 311% 73%
</TABLE>
See footnote summary on page 35.
--------------------------------------------------------------------------------
ALLIANCE HIGH YIELD FUND o 33
<PAGE>
--------------------
FINANCIAL HIGHLIGHTS
--------------------
Selected Data For A Share Of Common Stock Outstanding Throughout Each Period
<TABLE>
<CAPTION>
----------------------------------------------------------------------------
Advisor Class
----------------------------------------------------------------------------
Six Months
Ended April 22,
February 28, Year Ended August 31, 1997(b) to
2002(a) --------------------------------------------- August 31,
(unaudited) 2001 2000 1999 1998 1997
----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period ......... $ 6.50 $ 8.10 $ 9.47 $10.76 $11.17 $10.00
----------------------------------------------------------------------------
Income from Investment
Operations
Net investment income(c) ...... .30 .70 .95 1.06 1.11 .40
Net realized and unrealized
gain (loss) on investments
and foreign currency
transactions ................ (.42) (1.40) (1.27) (1.09) (.32) 1.13
----------------------------------------------------------------------------
Net increase (decrease) in
net asset value from
operations .................. (.12) (.70) (.32) (.03) .79 1.53
----------------------------------------------------------------------------
Less: Dividends and
Distributions
Dividends from net
investment income ........... (.33) (.74) (1.00) (1.06) (1.05) (.36)
Distributions in excess of
net investment income ....... -0- -0- -0- (.04) (.01) -0-
Tax return of capital ......... -0- (.16) (.05) (.01) -0- -0-
Distributions from net realized
gains on investments ........ -0- -0- -0- (.15) (.14) -0-
----------------------------------------------------------------------------
Total dividends and
distributions ............... (.33) (.90) (1.05) (1.26) (1.20) (.36)
----------------------------------------------------------------------------
Net asset value,
end of period ............... $ 6.05 $ 6.50 $ 8.10 $ 9.47 $10.76 $11.17
============================================================================
Total Return
Total investment return based
on net asset value(d) ...... (1.90)% (8.96)% (3.47)% (.28)% 6.68% 15.44%
Ratios/Supplemental Data
Net assets, end of period
(000's omitted) ............. $91,413 $27,762 $2,441 $3,564 $2,256 $ 321
Ratio to average net assets:
Expenses, net of
waivers/reimbursements .... 1.08%(e) 1.04% 1.01% 1.03% 1.14% 1.40%(e)
Expenses, before
waivers/reimbursements .... 1.08%(e) 1.04% 1.01% 1.03% 1.16% 2.82%(e)
Net investment income, net of
waivers/reimbursements .... 9.80%(e) 10.92% 11.20% 10.58% 9.25% 8.20%(e)
Portfolio turnover rate ....... 32% 98% 102% 182% 311% 73%
</TABLE>
See footnote summary on page 35.
--------------------------------------------------------------------------------
34 o ALLIANCE HIGH YIELD FUND
<PAGE>
--------------------
FINANCIAL HIGHLIGHTS
--------------------
(a) As required, effective September 1, 2001, the Fund has adopted the
provisions of the AICPA Audit and Accounting Guide, Audits of Investment
Companies, and began amortizing premium on debt securities for financial
statement reporting purposes only. The effect of this change for the six
months ended February 28, 2002 was to decrease net investment income per
share by $.003, decrease net realized and unrealized gain and loss per
share by $.003 for Class A, and by $.002 for Class B, C and the Advisor
Class, and decrease the ratio of net investment income to average net
assets from 9.82% to 9.74% for Class A, from 9.12% to 9.04% for Class B,
from 9.12% to 9.04% for Class C and from 9.88% to 9.80% for Advisor Class
on an annualized basis. Per share ratios and supplemental data for periods
prior to September 1, 2001 have not been restated to reflect this change
in presentation.
(b) Commencement of operations.
(c) Based on average shares outstanding.
(d) Total investment return is calculated assuming an initial investment made
at the net asset value at the beginning of the period, reinvestment of all
dividends and distributions at net asset value during the period, and
redemption on the last day of the period. Initial sales charge or
contingent deferred sales charge is not reflected in the calculation of
total investment return. Total investment return calculated for a period
of less than one year is not annualized.
(e) Annualized.
--------------------------------------------------------------------------------
ALLIANCE HIGH YIELD FUND o 35
<PAGE>
----------------------------
GLOSSARY OF INVESTMENT TERMS
----------------------------
GLOSSARY OF INVESTMENT TERMS
benchmark
A standard by which a fund's performance can be measured. A benchmark is usually
an unmanaged index, such as the Standard & Poor's 500 Stock Index or the Lehman
Brothers Aggregate Bond Index.
bond
Bonds are issued by governments or corporations when they need to raise cash.
Bonds are sold, or issued, to investors and have a maturity date, which is the
date the issuer is obligated to repay the investor for the principal, or face
amount, of the bond. Bonds also pay interest until maturity. Bonds are also
called fixed-income securities.
earnings
Revenues minus cost of sales, operating expenses and taxes, over a given period
of time. Earnings are often the most important determinant of a company's stock
price.
index
A compilation of securities of similar types of companies that is used to
measure the investment performance of securities within that specific market. An
index is often used as a benchmark for a mutual fund. An investor cannot invest
directly in an index.
sector
A group of securities that are similar with respect to maturity, type, rating,
industry and/or coupon. Refers to a distinct part of the economy, for example,
the technology sector.
yield
The rate of return on an asset, usually referring to dividend or interest
payments, expressed as a percentage of current market price.
--------------------------------------------------------------------------------
36 o ALLIANCE HIGH YIELD FUND
<PAGE>
----------------
ALLIANCE CAPITAL
----------------
ALLIANCE CAPITAL
The Investment Professional's Choice
Alliance Capital is a leading global investment management firm with
approximately $455 billion in assets under management. In recognition of our
far-reaching investment capabilities, Alliance Capital has been selected by
employee benefit plans for 41 of the FORTUNE 100 companies and public retirement
funds in 43 states as well as by hundreds of foundations, endowments and foreign
institutions. By sharing this institutional money management experience with
millions of mutual fund investors as well, Alliance stands out as a "manager of
choice" for thousands of investment professionals around the world.
At Alliance Capital, we place a premium on investment research. We carefully
select securities based on our proprietary research, conducted by over 640
investment professionals in 36 cities and 19 countries. Our commitment to this
process means that our mutual fund shareholders have their portfolios managed by
the same experienced analysts and portfolio managers who manage the pension
funds of some of America's largest institutional investors.
All information on Alliance Capital is as of 12/31/01.
--------------------------------------------------------------------------------
ALLIANCE HIGH YIELD FUND o 37
<PAGE>
--------------------------------
ALLIANCE CAPITAL AT YOUR SERVICE
--------------------------------
ALLIANCE CAPITAL AT YOUR SERVICE
At Alliance Capital, shareholder satisfaction is among our top priorities. That
is why we provide our shareholders with a wide variety of products and
time-saving services.
o Automatic Reinvestment
You may choose to reinvest fund dividend and capital-gains distributions
automatically at no charge.
o Automatic Investment Program
Build your investment account by having money automatically transferred
from your bank account on a regular basis.
o Dividend Direction Plans
You may cross-invest dividends from one fund into the same class of shares
in any other fund without incurring a sales charge--a good way to
diversify your assets.
o Auto Exchange
You may choose to automatically exchange money from one Alliance Capital
fund to another on a regular basis. This can be a good way to dollar cost
average*, helping you to invest with discipline.
o Systematic Withdrawals
Regular checks for specified amounts can be sent to you or to your
brokerage or bank account.
o E-Statements and Electronic Delivery
Sign up to view your quarterly mutual fund, retirement or
CollegeBoundfund(SM) account statements online, rather than wait to
receive paper copies in the mail. You may also sign up for electronic
delivery of your legal documents so you can receive your semi-annual and
annual shareholder reports, prospectuses and prospectus supplements
online. It's easy, convenient and saves you time and storage space. Sign
up today at www.alliancecapital.com. Simply go to Individual Investor,
U.S., Account Access.
o A Choice of Purchase Plans
Most funds are available in A, B, and C Class shares. Many funds are also
available in Advisor Class shares.
o Telephone Transaction
Purchases, transfers and redemptions can be made by calling (800)
221-5672. Our knowledgeable representatives are available to assist you
Monday through Friday from 8:30 a.m. to 8:00 p.m. Eastern Standard Time.
o Alliance Answer: 24-Hour Information
For your convenience, our computerized audio response system is available
to you 24-hours a day by calling (800) 251-0539. Using any touch tone
phone, you can hear share prices, get account balances, review details of
your last transaction, obtain dividend information, order statements/
checkbooks, review fund objectives, and Watchlist information, order
additional copies of statements and request additional year-end tax forms
(available from February 1 to May 31).
o The Alliance Advance
A quarterly newsletter discussing investment strategies, economic news and
other mutual fund matters.
o Our Website at www.alliancecapital.com gives you a broad perspective of
Alliance Capital. You can reach Alliance mutual fund and account
information more directly from www.investor.alliancecapital.com. Either
way, you'll have access to extensive Alliance fund data, answers to
frequently asked questions, and financial planning tools and calculators.
* Dollar cost averaging does not assure a profit nor protect against loss in
a declining market. Since this strategy involves continuous investments in
securities, regardless of fluctuating prices, investors should consider
their financial ability to invest during periods of low price levels.
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38 o ALLIANCE HIGH YIELD FUND
<PAGE>
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BOARD OF DIRECTORS
------------------
BOARD OF DIRECTORS
John D. Carifa, Chairman and President
Ruth Block(1)
David H. Dievler(1)
John H. Dobkin(1)
William H. Foulk, Jr.(1)
Clifford L. Michel(1)
Donald J. Robinson(1)
OFFICERS
Kathleen A. Corbet, Senior Vice President
Gregory Dube, Senior Vice President
Michael A. Snyder, Vice President
Edmund P. Bergan, Jr., Secretary
Mark D. Gersten, Treasurer & Chief Financial Officer
Vincent S. Noto, Controller
Custodian
The Bank of New York
One Wall Street
New York, NY 10286
Principal Underwriter
Alliance Fund Distributors, Inc.
1345 Avenue of the Americas
New York, NY 10105
Legal Counsel
Seward & Kissel LLP
One Battery Park Plaza
New York, NY 10004
Independent Auditors
Ernst & Young LLP
787 Seventh Avenue
New York, NY 10019
Transfer Agent
Alliance Global Investor Services, Inc.
P.O. Box 1520
Secaucus, NJ 07096-1520
Toll-Free (800) 221-5672
(1) Member of the Audit Committee.
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ALLIANCE HIGH YIELD FUND o 39
<PAGE>
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ALLIANCE CAPITAL FAMILY OF FUNDS
--------------------------------
ALLIANCE CAPITAL FAMILY OF FUNDS
U.S. Stock Funds
Growth & Income Fund
Growth Fund
Health Care Fund
Mid-Cap Growth Fund*
Premier Growth Fund
Quasar Fund
Technology Fund
Global & International Stock Funds
All-Asia Investment Fund
Global Small Cap Fund
Greater China '97 Fund
International Fund
International Premier Growth Fund
The Korean Investment Fund
New Europe Fund
Worldwide Privatization Fund
AllianceBernstein Value Funds
Disciplined Value Fund
Global Value Fund
International Value Fund
Real Estate Investment Fund
Small CapValue Fund
Utility Income Fund
Value Fund
Select Investor Series
Biotechnology Portfolio
Premier Portfolio
Small Cap Growth Portfolio
Technology Portfolio
Asset Allocation Funds
Balanced Shares
Conservative Investors Fund
Growth Investors Fund
Taxable Bond Funds
Americas Government Income Trust**
Corporate Bond Portfolio
Emerging Market Debt Fund***
Global Strategic Income Trust
High Yield Fund
Multi-Market Strategy Trust
Quality Bond Portfolio
U.S. Government Portfolio
Tax-Exempt Bond Funds
National
Intermediate Diversified
Insured National
Arizona
California
Intermediate California
Insured California
Florida
Massachusetts
Michigan
Minnesota
New Jersey
New York
Intermediate New York
Ohio
Pennsylvania
Virginia
Closed-End Funds
All-Market Advantage Fund
The Austria Fund
ACM Income Fund
ACM Government Opportunity Fund
ACM Managed Dollar Income Fund
ACM Managed Income Fund
ACM Municipal Securities Income Fund
California Municipal Income Fund
National Municipal Income Fund
New York Municipal Income Fund
The Southern Africa Fund
The Spain Fund
World Dollar Government Fund
World Dollar Government Fund II
Alliance also offers AFD Exchange Reserves, which serves as the money market
fund exchange vehicle for the Alliance mutual funds.
To obtain a prospectus for any Alliance Capital fund, call your investment
professional, or call Alliance at (800) 227-4618.
* The Alliance Fund changed its name to Alliance Mid-Cap Growth Fund on
February 1, 2002.
** Alliance North American Government Income Trust changed its name to
Alliance Americas Government Income Trust on March 1, 2002.
*** Alliance Global Dollar Government Fund changed its name to Alliance
Emerging Market Debt Fund on March 1, 2002.
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40 o ALLIANCE HIGH YIELD FUND
<PAGE>
Alliance High Yield Fund
1345 Avenue of the Americas
New York, NY 10105
(800) 221-5672
Alliance Capital [LOGO](R)
The Investment Professional's Choice
(R) These registered service marks used under license from the owner, Alliance
Capital Management L.P.
HIYSR0202
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