This is filed pursuant to Rule 497(e).
Files Nos. 333-37177 and 811-08403
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ALLIANCE
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INSTITUTIONAL FUNDS
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P.O. Box 1520, Secaucus, New Jersey 07096-1520
Toll Free (800) 221-5672
For Literature: Toll Free (800) 227-4618
Prospectus and Application
November 14, 1997
-Alliance Premier Growth Institutional Fund
-Alliance Quasar Institutional Fund
-Alliance Real Estate Investment
Institutional Fund
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Table of Contents Page
The Funds at a Glance ..................................................... 2
Expense Information ....................................................... 3
Glossary .................................................................. 4
Description of the Funds .................................................. 5
Investment Objectives and Policies ..................................... 5
Additional Investment Practices ........................................ 7
Certain Fundamental Investment Policies ................................ 12
Risk Considerations .................................................... 13
Purchase and Sale of Shares ............................................... 15
Management of the Funds ................................................... 17
Dividends, Distributions and Taxes ........................................ 20
Conversion Feature ........................................................ 21
General Information ....................................................... 22
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Adviser
Alliance Capital Management L.P.
1345 Avenue Of The Americas
New York, New York 10105
Alliance Institutional Funds, Inc. (the "Company") provides a selection of
equity investment alternatives to institutional and other investors through
qualifying programs who seek capital growth or high total return. The Company is
an open-end management investment company structured as a series fund with
multiple investment portfolios (each such portfolio is hereinafter referred to
as a "Fund"). The Company currently is comprised of three Funds, Alliance
Premier Growth Institutional Fund, Alliance Quasar Institutional Fund, and
Alliance Real Estate Investment Institutional Fund.
This Prospectus sets forth concisely the information which a prospective
investor should know about the Company and each Fund before investing. A
"Statement of Additional Information" for each Fund which provides further
information regarding certain matters discussed in this Prospectus and other
matters which may be of interest to some investors has been filed with the
Securities and Exchange Commission and is incorporated herein by reference. For
a free copy, call or write Alliance Fund Services, Inc. at the indicated address
or call the "For Literature" telephone number shown above.
Each Fund offers two classes of shares which may be purchased through this
Prospectus at net asset value without any initial or contingent deferred sales
charges. Class I shares are not subject to any ongoing distribution expenses
while Class II shares are subject to an ongoing distribution fee. The minimum
initial investment in the Company is $2 million, which may be invested in any
one or more of the Funds. See "Purchase and Sale of Shares."
An investment in these securities is not a deposit or obligation of, or
guaranteed or endorsed by, any bank and is not federally insured by the Federal
Deposit Insurance Corporation, the Federal Reserve Board or any other agency.
Investors are advised to read this Prospectus carefully and to retain it for
future reference.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
[LOGO] Alliance(R)
Investing without the Mystery.(SM)
(R)/SM These are registered marks used under licenses from the owner, Alliance
Capital Management L.P.
<PAGE>
The Funds At A Glance
The following summary is qualified in its entirety by the more detailed
information contained in this Prospectus.
The Funds' Investment Adviser Is . . .
Alliance Capital Management L.P. ("Alliance"), a global investment manager
providing diversified services to institutions and individuals through a broad
line of investments including more than 100 mutual funds. Since 1971, Alliance
has earned a reputation as a leader in the investment world with over $217
billion in assets under management as of September 30, 1997. Alliance provides
investment management services to employee benefit plans for 28 of the FORTUNE
100 companies.
Premier Growth Institutional Fund
Seeks . . . Long-term growth of capital by investing in the equity securities of
a limited number of large, carefully selected, high-quality American companies
from a relatively small universe of intensively researched companies.
Invests Principally in . . . A diversified portfolio of equity securities that,
in the judgment of Alliance, are likely to achieve superior earnings growth.
Normally, approximately 40 companies will be represented in the Fund's
investment portfolio. The Fund's investments in 25 of these companies most
highly regarded at any point in time by Alliance will usually constitute
approximately 70% of the Fund's net assets.
Quasar Institutional Fund
Seeks . . . Growth of capital by pursuing aggressive investment policies.
Invests Principally in . . . A diversified portfolio of equity securities of any
company and industry and in any type of security which is believed to offer
possibilities for capital appreciation.
Real Estate Investment Institutional Fund
Seeks . . . Total return on its assets from long-term growth of capital and from
income.
Invests Principally in . . . A diversified portfolio of equity securities of
issuers that are primarily engaged in or related to the real estate industry.
Distributions
Real Estate Investment Institutional Fund intends to make distributions
quarterly, in March, June, September and December. These distributions may
include ordinary income and capital gain (each which is taxable) and a return of
capital (which is generally non-taxable). See "Dividends, Distributions and
Taxes."
A Word About Risk . . .
The price of the shares of the Funds will fluctuate as the daily prices of the
individual securities in which they invest fluctuate, so that your shares, when
redeemed, may be worth more or less than their original cost. While the Funds
invest principally in common stocks and other equity securities, in order to
achieve their investment objectives the Funds may at times use certain types of
investment derivatives, such as options, futures, forwards and swaps. These
involve risks different from, and, in certain cases, greater than, the risks
presented by more traditional investments. An investment in the Real Estate
Investment Institutional Fund is subject to certain risks associated with the
direct ownership of real estate industry in general, including possible declines
in the value of real estate, general and local economic conditions,
environmental problems and changes in interest rates. These risks are fully
discussed in this Prospectus.
Getting Started . . .
Shares of the Funds are available through your financial representative. The
minimum initial investment in the Company is $2 million, which may be invested
in any one or more of the Funds. Investments made through fee-based or
"wrap-fee" programs will satisfy the minimum initial investment requirement if
the fee-based or wrap fee program, as a whole, invests at least $2 million in
one or more of the Funds. There is no minimum for subsequent investments.
Class I shares may be purchased and held solely (i) through accounts established
under a fee-based program sponsored and maintained by a registered broker-dealer
or other financial intermediary and approved by the Alliance Fund Distributors,
Inc., each Fund's principal underwriter (the "Distributor" or "AFD"), (ii)
through employee benefit plans, including defined contribution and defined
benefit plans ("Employee Plans"), that have at least $10 million in assets,
(iii) by investment advisory clients of, and certain other persons associated
with, Alliance and its affiliates or the Funds, and (iv) through registered
investment advisers or other financial intermediaries who charge a management,
consulting or other fee for their service and who purchase shares through a
broker or agent approved by the Distributor, and clients of such registered
investment advisers or financial intermediaries whose accounts are linked to the
master account of such investment adviser or financial intermediary on the books
of such approved broker or agent. A shareholder's Class I shares will
automatically convert to Class II shares of the same Fund under certain
circumstances. See "Conversion Feature--Conversion to Class II Shares." Class II
shares may be purchased and held solely (i) by investors participating in
wrap-fee or other similar programs offered by registered broker-dealers or other
financial intermediaries that meet certain requirements established by the
Distributor, and (ii) Employee Plans that have at least $10 million in assets.
For more detailed information about who may purchase and hold the shares of each
Fund see the Fund's Statement of Additional Information. Fee-based and other
programs may impose different requirements with respect to investment in the
shares of the Funds than described above. For detailed information about
purchasing and selling shares, see "Purchase and Sale of Shares."
[LOGO] Alliance(R)
Investing without the Mystery.(SM)
(R)/SM These are registered marks used under licenses from the owner, Alliance
Capital Management L.P.
2
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EXPENSE INFORMATION
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Shareholder Transaction Expenses are one of several factors to consider when you
invest in a Fund. The following table summarizes your maximum transaction costs
from investing in the shares of each Fund and estimated annual expenses for each
class of shares of each Fund. For each Fund, the "Examples" to the right of the
table below show the cumulative expenses attributable to a hypothetical $1,000
investment in shares for the periods specified.
Maximum sales charge imposed on purchases ......................... None
Sales charge imposed on dividend reinvestments .................... None
Deferred sales charge ............................................. None
Exchange fee ...................................................... None
<TABLE>
<CAPTION>
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Operating Expenses Examples
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Premier Growth
Institutional Fund Class I Class II Class I Class II
-------- --------- --------- ----------
<S> <C> <C> <C> <C> <C>
Management fees(a) .90% .90% After 1 year $ 9 $ 13
12b-1 fees None .30% After 3 years $ 29 $ 41
Other expenses (b) .00% .10%
---- ----
Total fund
operating expenses (c)(d) .90% 1.30%
==== ====
<CAPTION>
Quasar Institutional Fund Class I Class II Class I Class II
-------- --------- --------- ----------
<S> <C> <C> <C> <C> <C>
Management fees 1.00% 1.00% After 1 year $ 12 $ 16
12b-1 fees None .30% After 3 years $ 38 $ 50
Other expenses (b) .20% .30%
---- ----
Total fund
operating expenses (c)(d) 1.20% 1.60%
==== ====
<CAPTION>
Real Estate Investment
Institutional Fund Class I Class II Class I Class II
-------- --------- --------- ----------
<S> <C> <C> <C> <C> <C>
Management fees .90% .90% After 1 year $ 10 $ 14
12b-1 fees None .30% After 3 years $ 32 $ 44
Other expenses (b) .10% .20%
---- ----
Total fund
operating expenses (c)(d) 1.00% 1.40%
==== ====
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</TABLE>
(a) Reflects the undertaking of Alliance to waive management fees to the extent
necessary to ensure that total fund operating expenses for each class do
not exceed the amount shown above. In the absence of such an undertaking,
management fees would have been 1.00% for Premier Growth Institutional
Fund.
(b) These expenses include a transfer agency fee payable Alliance Fund
Services, Inc., an affiliate of Alliance. Reflects the undertaking of
Alliance to reimburse the Fund to the extent necessary to ensure that total
fund operating expenses for each class do not exceed the amount shown
above. In the absence of such an undertaking, it is estimated that other
expenses would have been, for Class I and Class II, respectively .97% and
1.05% for Premier Growth Institutional Fund, .97% and 1.05% for Quasar
Institutional Fund and .97% and 1.05% for Real Estate Investment
Institutional Fund.
(c) Reflects the undertaking of Alliance to limit the total Fund operating
expenses. In the absence of such an undertaking, it is estimated that total
fund operating expenses would have been, for Class I and Class II,
respectively 1.87% and 2.25% for Premier Growth Institutional Fund, 1.97%
and 2.35% for Quasar Institutional Fund and 1.87% and 2.25% for Real Estate
Investment Institutional Fund.
(d) The expense information does not reflect any charges or expenses imposed by
your financial representative or your employee benefit plan.
The purpose of the foregoing table is to assist the investor in understanding
the various costs and expenses that an investor in the Fund will bear directly
or indirectly. Long-term shareholders of the Fund may pay aggregate sales
charges totaling more than the economic equivalent of the maximum initial sales
charges permitted by the Conduct Rules of the National Association of Securities
Dealers, Inc. See "Management of the Fund--Distribution Services Agreement." The
Rule 12b-1 fee for the Class II shares comprises a service fee not exceeding
.25% of the aggregate average daily net assets of the Fund attributable to the
class and an asset-based sales charge equal to the remaining portion of the Rule
12b-1 fee. "Other Expenses" are based on estimated amounts for the Fund's
current fiscal year. The Example set forth above assumes reinvestment of all
dividends and distributions and utilizes a 5% annual rate of return as mandated
by Securities and Exchange Commission regulations. THE EXAMPLE SHOULD NOT BE
CONSIDERED REPRESENTATIVE OF PAST OR FUTURE EXPENSES; ACTUAL EXPENSES MAY BE
GREATER OR LESS THAN THOSE SHOWN.
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GLOSSARY
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The following terms are frequently used in this Prospectus.
Equity securities are (i) common stocks, partnership interests, business trust
shares and other equity or ownership interests in business enterprises, and (ii)
securities convertible into, and rights and warrants to subscribe for the
purchase of, such stocks, shares and interests.
Debt securities are bonds, debentures, notes, bills, repurchase agreements,
loans, other direct debt instruments and other fixed, floating and variable rate
debt obligations, but do not include convertible securities.
Fixed-income securities are debt securities and dividend-paying preferred stocks
and include floating rate and variable rate instruments.
Convertible securities are fixed-income securities that are convertible into
common stock.
U.S. Government securities are securities issued or guaranteed by the United
States Government, its agencies or instrumentalities.
Foreign government securities are securities issued or guaranteed, as to payment
of principal and interest, by governments, quasi-governmental entities,
governmental agencies or other governmental entities.
Moody's is Moody's Investors Service, Inc.
S&P is Standard & Poor's Ratings Services.
Duff & Phelps is Duff & Phelps Credit Rating Co.
Fitch is Fitch Investors Service, L.P.
Prime commercial paper is commercial paper rated Prime 1 by Moody's or A-1 or
higher by S&P or, if not rated, issued by companies that have an outstanding
debt issue rated Aa or higher by Moody's or AA or higher by S&P.
Qualifying bank deposits are certificates of deposit, bankers' acceptances and
interest-bearing savings deposits of banks having total assets of more than $1
billion and which are members of the Federal Deposit Insurance Corporation.
Rule 144A securities are securities that may be resold pursuant to Rule 144A
under the Securities Act of 1933, as amended (the "Securities Act").
Depositary receipts include American Depositary Receipts ("ADRs"), Global
Depositary Receipts ("GDRs") and other types of depositary receipts.
Commission is the Securities and Exchange Commission.
1940 Act is the Investment Company Act of 1940, as amended.
Code is the Internal Revenue Code of 1986, as amended.
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DESCRIPTION OF THE FUNDS
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Except as noted, (i) the Funds' investment objectives are "fundamental" and
cannot be changed without shareholder vote, and (ii) the Funds' investment
policies are not fundamental and thus can be changed without a shareholder vote.
No Fund will change a non-fundamental objective or policy without notifying its
shareholders. There is no guarantee that any Fund will achieve its investment
objective.
INVESTMENT OBJECTIVES AND POLICIES
Alliance Premier Growth Institutional Fund
Alliance Premier Growth Institutional Fund ("Premier Growth Fund") seeks
long-term growth of capital by investing predominantly in the equity securities
of a limited number of large, carefully selected, high-quality U.S. companies
that are judged likely to achieve superior earnings growth. Normally, about 40
companies will be represented in the Fund's portfolio, with the 25 most highly
regarded of these companies usually constituting approximately 70% of the Fund's
net assets. The Fund is thus atypical from most equity mutual funds in its focus
on a relatively small number of intensively researched companies and is designed
for those seeking to accumulate capital over time with less volatility than that
associated with investment in smaller companies.
As a matter of fundamental policy, the Fund normally invests at least 85% of its
total assets in the equity securities of U.S. companies. These are companies (i)
organized under U.S. law that have their principal office in the U.S., and (ii)
the equity securities of which are traded principally in the U.S.
Alliance's investment strategy for the Fund emphasizes stock selection and
investment in the securities of a limited number of issuers. Alliance relies
heavily upon the fundamental analysis and research of its large internal
research staff, which generally follows a primary research universe of more than
600 companies that have strong management, superior industry positions,
excellent balance sheets and superior earnings growth prospects. An emphasis is
placed on identifying companies whose substantially above average prospective
earnings growth is not fully reflected in current market valuations.
In managing the Fund, Alliance seeks to utilize market volatility judiciously
(assuming no change in company fundamentals), striving to capitalize on
apparently unwarranted price fluctuations, both to purchase or increase
positions on weakness and to sell or reduce overpriced holdings. The Fund
normally remains nearly fully invested and does not take significant cash
positions for market timing purposes. During market declines, while adding to
positions in favored stocks, the Fund becomes somewhat more aggressive,
gradually reducing the number of companies represented in its portfolio.
Conversely, in rising markets, while reducing or eliminating fully valued
positions, the Fund becomes somewhat more conservative, gradually increasing the
number of companies represented in its portfolio. Alliance thus seeks to gain
positive returns in good markets while providing some measure of protection in
poor markets.
Alliance expects the average market capitalization of companies represented in
the Fund's portfolio normally to be in the range, or in excess, of the average
market capitalization of companies comprising the "S&P 500" (the Standard &
Poor's 500 Composite Stock Price Index, a widely recognized unmanaged index of
market activity).
The Fund, which is diversified under the 1940 Act, may also: (i) invest up to
20% of its net assets in convertible securities of companies whose common stocks
are eligible for purchase by it; (ii) invest up to 5% of its net assets in
rights or warrants; (iii) invest up to 15% of its total assets in securities of
foreign issuers whose common stocks are eligible for purchase by it; (iv)
purchase and sell exchange-traded index options and stock index futures
contracts; and (v) write covered exchange-traded call options on common stocks,
unless as a result, the amount of its securities subject to call options would
exceed 15% of its total assets, and purchase and sell exchange-traded call and
put options on common stocks written by others, but the total cost of all
options held by the Fund (including exchange-traded index options) may not
exceed 10% of its total assets. For additional information on the use, risks and
costs of these policies and practices see "Additional Investment Practices." The
Fund will not write put options.
Alliance Quasar Institutional Fund
Alliance Quasar Institutional Fund ("Quasar Fund") seeks growth of capital by
pursuing aggressive investment policies. It invests for capital appreciation and
only incidentally for current income. The selection of securities based on the
possibility of appreciation cannot prevent loss in value. Moreover, because the
Fund's investment policies are aggressive, an investment in the Fund is risky
and investors who want assured income or preservation of capital should not
invest in the Fund.
The Fund invests in any company and industry and in any type of security with
potential for capital appreciation. It invests in well-known and established
companies and in new and unseasoned companies. When selecting securities,
Alliance considers the economic and political outlook, the values of specific
securities relative to other investments, trends in the determinants of
corporate profits and management capability and practices.
The Fund invests principally in equity securities, but it also invests to a
limited degree in non-convertible bonds and preferred stocks. The Fund invests
in listed and unlisted U.S. and foreign securities. The Fund periodically
invests in special situations, which occur when the securities of a company are
expected to appreciate due to a development particularly or uniquely applicable
to that company and regardless of general business conditions or movements of
the market as a whole.
The Fund, which is diversified under the 1940 Act, may also: (i) invest in
restricted securities and in other assets having no ready market, but not more
than 10% of its total assets may
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be invested in such securities or assets; (ii) make short sales of securities
"against the box," but not more than 15% of its net assets may be deposited on
short sales; and (iii) write call options and purchase and sell put and call
options written by others. For additional information on the use, risks and
costs of these policies and practices see "Additional Investment Practices."
Alliance Real Estate Investment Institutional Fund
Alliance Real Estate Investment Institutional Fund ("Real Estate Investment
Fund") seeks a total return on its assets from long-term growth of capital and
from income principally through investing in a portfolio of equity securities of
issuers that are primarily engaged in or related to the real estate industry.
Under normal circumstances, at least 65% of the Fund's total assets will be
invested in equity securities of real estate investment trusts ("REITs") and
other real estate industry companies. A "real estate industry company" is a
company that derives at least 50% of its gross revenues or net profits from the
ownership, development, construction, financing, management or sale of
commercial, industrial or residential real estate or interests therein. The
equity securities in which the Fund will invest for this purpose consist of
common stock, shares of beneficial interest of REITs and securities with common
stock characteristics, such as preferred stock or convertible securities ("Real
Estate Equity Securities").
The Fund may invest up to 35% of its total assets in (a) securities that
directly or indirectly represent participations in, or are collateralized by and
payable from, mortgage loans secured by real property ("Mortgage-Backed
Securities"), such as mortgage pass-through certificates, real estate mortgage
investment conduit ("REMIC") certificates and collateralized mortgage
obligations ("CMOs") and (b) short-term investments. These instruments are
described below. The risks associated with the Fund's transactions in REMICs,
CMOs and other types of mortgage-backed securities, which are considered to be
derivative securities, may include some or all of the following: market risk,
leverage and volatility risk, correlation risk, credit risk and liquidity and
valuation risk. See "Risk Considerations" for a description of these and other
risks.
As to any investment in Real Estate Equity Securities, Alliance's analysis will
focus on determining the degree to which the company involved can achieve
sustainable growth in cash flow and dividend paying capability. Alliance
believes that the primary determinant of this capability is the economic
viability of property markets in which the company operates and that the
secondary determinant of this capability is the ability of management to add
value through strategic focus and operating expertise. The Fund will purchase
Real Estate Equity Securities when, in the judgment of Alliance, their market
price does not adequately reflect this potential. In making this determination,
Alliance will take into account fundamental trends in underlying property
markets as determined by proprietary models, site visits conducted by
individuals knowledgeable in local real estate markets, price-earnings ratios
(as defined for real estate companies), cash flow growth and stability, the
relationship between asset value and market price of the securities, dividend
payment history, and such other factors which Alliance may determine from time
to time to be relevant. Alliance will attempt to purchase for the Fund Real
Estate Equity Securities of companies whose underlying portfolios are
diversified geographically and by property type. The Fund may invest without
limitation in shares of REITs. REITs are pooled investment vehicles which invest
primarily in income producing real estate or real estate related loans or
interests. REITs are generally classified as equity REITs, mortgage REITs or a
combination of equity and mortgage REITs. Equity REITs invest the majority of
their assets directly in real property and derive income primarily from the
collection of rents. Equity REITs can also realize capital gains by selling
properties that have appreciated in value. Mortgage REITs invest the majority of
their assets in real estate mortgages and derive income from the collection of
interest payments. Similar to investment companies such as the Fund, REITs are
not taxed on income distributed to shareholders provided they comply with
several requirements of the Code. The Fund will indirectly bear its
proportionate share of expenses incurred by REITs in which the Fund invests in
addition to the expenses incurred directly by the Fund.
Investment Process for Real Estate Equity Securities
Real Estate Investment Fund's investment strategy with respect to Real Estate
Equity Securities is based on the premise that property market fundamentals are
the primary determinant of growth underlying the success of Real Estate Equity
Securities. Value added management will further distinguish the most attractive
Real Estate Equity Securities. The Fund's research and investment process is
designed to identify those companies with strong property fundamentals and
strong management teams. This process is comprised of real estate market
research, specific property inspection and securities analysis.
The universe of property-owning real estate industry firms consists of
approximately 130 companies of sufficient size and quality to merit
consideration for investment by the Fund. In implementing the Fund's research
and investment process, Alliance will avail itself of the consulting services of
CB Commercial Real Estate Group, Inc. ("CBC"), a publicly held company and the
largest real estate services company in the United States, comprised of real
estate brokerage, property and facilities management, and real estate finance
and investment advisory activities (CBC in August of 1997 acquired Koll
Management Services ("Koll"), which previously provided these consulting
services to Alliance). In 1996, CBC (and Koll, on a combined basis) completed
25,000 sale and lease transactions, managed over 4,100 client properties,
created over $3.5 billion in mortgage originations, and completed over 2,600
appraisal and consulting assignments. In addition, they advised and managed for
institutions over $4 billion in real estate investments. As consultant to
Alliance, CBC provides access to its proprietary model, REIT o Score, that
analyzes the approximately 12,000 properties owned by these companies. Using
proprietary databases and algorithms, CBC analyzes local market rent, expense,
and occupancy trends, market specific transaction pricing, demographic and
economic trends, and leading indicators of real estate supply such as building
permits. Over 650 asset-type specific geographic markets are
6
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analyzed and ranked on a relative scale by CBC in compiling its REIT o Score
database. The relative attractiveness of these real estate industry companies is
similarly ranked based on the composite rankings of the properties they own. See
"Management of the Fund--Consultant to Adviser" for more information about CBC.
Once the universe of real estate industry companies has been distilled through
the market research process, CBC's local market presence provides the capability
to perform site specific inspections of key properties. This analysis examines
specific location, condition, and sub-market trends. CBC's use of locally based
real estate professionals provides Alliance with a window on the operations of
the portfolio companies as information can immediately be put in the context of
local market events. Only those companies whose specific property portfolios
reflect the promise of their general markets will be considered for initial and
continued investment by the Fund.
Alliance further screens the universe of real estate industry companies by using
rigorous financial models and by engaging in regular contact with management of
targeted companies. Each management's strategic plan and ability to execute the
plan are determined and analyzed. Alliance will make extensive use of CBC's
network of industry analysts in order to assess trends in tenant industries.
This information is then used to further interpret management's strategic plans.
Financial ratio analysis is used to isolate those companies with the ability to
make value-added acquisitions. This information is combined with property market
trends and used to project future earnings potential.
Alliance believes that this process will result in a portfolio that will consist
of Real Estate Equity Securities of companies that own assets in the most
desirable markets across the country, diversified geographically and by property
type.
The short-term investments in which Real Estate Investment Fund may invest are:
corporate commercial paper and other short-term commercial obligations, in each
case rated or issued by companies with similar securities outstanding that are
rated Prime-1, Aa or better by Moody's or A-1, AA or better by S&P; obligations
(including certificates of deposit, time deposits, demand deposits and bankers'
acceptances) of banks with securities outstanding that are rated Prime-1, Aa or
better by Moody's or A-1, AA or better by S&P; and obligations issued or
guaranteed by the U.S. Government or its agencies or instrumentalities with
remaining maturities not exceeding 18 months.
The Fund may invest in debt securities rated BBB or higher by S&P or Baa or
higher by Moody's or, if not so rated, of equivalent credit quality as
determined by Alliance. The Fund expects that it will not retain a debt security
which is downgraded below BBB or Baa or, if unrated, determined by Alliance to
have undergone similar credit quality deterioration, subsequent to purchase by
the Fund.
The Fund, which is diversified under the 1940 Act, may also engage in the
following investment practices to the extent indicated: (i) invest up to 10% of
its net assets in rights or warrants; (ii) invest up to 15% of its net assets in
the convertible securities of companies whose common stocks are eligible for
purchase by the Fund; (iii) lend portfolio securities equal in value to not more
than 25% of total assets; (iv) enter into repurchase agreements of up to seven
days' duration; (v) enter into forward commitments transactions as long as the
Fund's aggregate commitments under such transactions are not more than 30% of
the Fund's total assets; (vi) enter into standby commitment agreements; (vii)
make short sales of securities or maintain a short position but only if at all
times when a short position is open not more than 25% of the Fund's net assets
(taken at market value) is held as collateral for such sales; and (viii) invest
in illiquid securities unless, as a result, more than 15% of its net assets
would be so invested.
ADDITIONAL INVESTMENT PRACTICES
Some or all of the Funds may engage in the following investment practices to the
extent described above.
Convertible Securities. Prior to conversion, convertible securities have the
same general characteristics as non-convertible debt securities, which provide a
stable stream of income with yields that are generally higher than those of
equity securities of the same or similar issuers. The price of a convertible
security will normally vary with changes in the price of the underlying stock,
although the higher yield tends to make the convertible security less volatile
than the underlying common stock. As with debt securities, the market value of
convertible securities tends to decline as interest rates increase and increase
as interest rates decline. While convertible securities generally offer lower
interest or dividend yields than non-convertible debt securities of similar
quality, they offer investors the potential to benefit from increases in the
market price of the underlying common stock.
Rights and Warrants. A Fund will invest in rights or warrants only if the
underlying equity securities themselves are deemed appropriate by Alliance for
inclusion in the Fund's portfolio. Rights and warrants entitle the holder to buy
equity securities at a specific price for a specific period of time. Rights are
similar to warrants except that they have a substantially shorter duration.
Rights and warrants may be considered more speculative than certain other types
of investments in that they do not entitle a holder to dividends or voting
rights with respect to the underlying securities nor do they represent any
rights in the assets of the issuing company. The value of a right or warrant
does not necessarily change with the value of the underlying security, although
the value of a right or warrant may decline because of a decrease in the value
of the underlying security, the passage of time or a change in perception as to
the potential of the underlying security, or any combination thereof. If the
market price of the underlying security is below the exercise price set forth in
the warrant on the expiration date, the warrant will expire worthless. Moreover,
a right or warrant ceases to have value if it is not exercised prior to the
expiration date.
Depositary Receipts and Securities of Supranational Entities. Depositary
receipts may not necessarily be denominated in the
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same currency as the underlying securities into which they may be converted. In
addition, the issuers of the stock of unsponsored depositary receipts are not
obligated to disclose material information in the United States and, therefore,
there may not be a correlation between such information and the market value of
the depositary receipts. ADRs are depositary receipts typically issued by a U.S.
bank or trust company that evidence ownership of underlying securities issued by
a foreign corporation. GDRs and other types of depositary receipts are typically
issued by foreign banks or trust companies and evidence ownership of underlying
securities issued by either a foreign or a U.S. company. Generally, depositary
receipts in registered form are designed for use in the U.S. securities markets,
and depositary receipts in bearer form are designed for use in foreign
securities markets.
A supranational entity is an entity designated or supported by the national
government of one or more countries to promote economic reconstruction or
development. Examples of supranational entities include, among others, the World
Bank (International Bank for Reconstruction and Development) and the European
Investment Bank. A European Currency Unit is a basket of specified amounts of
the currencies of the member states of the European Economic Community.
"Semi-governmental securities" are securities issued by entities owned by either
a national, state or equivalent government or are obligations of one of such
government jurisdictions which are not backed by its full faith and credit and
general taxing powers.
Zero-Coupon and Payment-in-Kind Bonds. Zero-coupon bonds are issued at a
significant discount from their principal amount in lieu of paying interest
periodically. Payment-in-kind bonds allow the issuer to make current interest
payments on the bonds in additional bonds. Because zero-coupon bonds and
payment-in-kind bonds do not pay current interest in cash, their value is
generally subject to greater fluctuation in response to changes in market
interest rates than bonds that pay interest in cash currently. Both zero-coupon
and payment-in-kind bonds allow an issuer to avoid the need to generate cash to
meet current interest payments. Accordingly, such bonds may involve greater
credit risks than bonds paying interest currently. Even though such bonds do not
pay current interest in cash, a Fund is nonetheless required to accrue interest
income on such investments and to distribute such amounts at least annually to
shareholders. Thus, a Fund could be required at times to liquidate other
investments in order to satisfy its dividend requirements.
Equity-Linked Debt Securities. Equity-linked debt securities are securities with
respect to which the amount of interest and/or principal that the issuer thereof
is obligated to pay is linked to the performance of a specified index of equity
securities. Such amount may be significantly greater or less than payment
obligations in respect of other types of debt securities. Adverse changes in
equity securities indices and other adverse changes in the securities markets
may reduce payments made under, and/or the principal of, equity-linked debt
securities held by the Fund. Furthermore, as with any debt securities, the
values of equity-linked debt securities will generally vary inversely with
changes in interest rates. The Fund's ability to dispose of equity-linked debt
securities will depend on the availability of liquid markets for such
securities. Investment in equity-linked debt securities may be considered to be
speculative. As with other securities, the Fund could lose its entire investment
in equity-linked debt securities.
Mortgage-Backed Securities and Associated Risks. Mortgage-Backed Securities
include mortgage pass-through certificates and multiple-class pass-through
securities, such as REMIC pass-through certificates, CMOs and stripped
mortgage-backed securities ("SMBS"), and other types of Mortgage-Backed
Securities that may be available in the future.
Guaranteed Mortgage Pass-Through Securities. Real Estate Investment Fund may
invest in guaranteed mortgage pass-through securities which represent
participation interests in pools of residential mortgage loans and are issued by
U.S. governmental or private lenders and guaranteed by the U.S. Government or
one of its agencies or instrumentalities, including but not limited to the
Government National Mortgage Association ("Ginnie Mae"), the Federal National
Mortgage Association ("Fannie Mae") and the Federal Home Loan Mortgage
Corporation ("Freddie Mac"). Ginnie Mae certificates are guaranteed by the full
faith and credit of the United States Government for timely payment of principal
and interest on the certificates. Fannie Mae certificates are guaranteed by
Fannie Mae, a federally chartered and privately-owned corporation for full and
timely payment of principal and interest on the certificates. Freddie Mac
certificates are guaranteed by Freddie Mac, a corporate instrumentality of the
United States Government, for timely payment of interest and the ultimate
collection of all principal of the related mortgage loans.
Multiple-Class Pass-Through Securities and Collateralized Mortgage Obligations.
Mortgage-Backed Securities also include CMOs and REMIC pass-through or
participation certificates, which may be issued by, among others, U.S.
Government agencies and instrumentalities as well as private lenders. CMOs and
REMIC certificates are issued in multiple classes and the principal of and
interest on the mortgage assets may be allocated among the several classes of
CMOs or REMIC certificates in various ways. Each class of CMOs or REMIC
certificates, often referred to as a "tranche," is issued at a specific
adjustable or fixed interest rate and must be fully retired no later than its
final distribution date. Generally, interest is paid or accrues on all classes
of CMOs or REMIC certificates on a monthly basis. Real Estate Investment Fund
will not invest in the lowest tranche of CMOs and REMIC certificates.
Typically, CMOs are collateralized by Ginnie Mae or Freddie Mac certificates but
also may be collateralized by other mortgage assets such as whole loans or
private mortgage pass-through securities. Debt service on CMOs is provided from
payments of principal and interest on collateral of mortgaged assets and any
reinvestment income thereon.
A REMIC is a CMO that qualifies for special tax treatment under the Code and
invests in certain mortgages primarily secured by interests in real property and
other permitted investments. Investors may purchase "regular" and "residual"
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interest shares of beneficial interest in REMIC trusts although the Fund does
not intend to invest in residual interests.
Risks. Investing in Mortgage-Backed Securities involves certain unique risks in
addition to those generally associated with investing in the real estate
industry in general. These unique risks include the failure of a counterparty to
meet its commitments, adverse interest rate changes and the effects of
prepayments on mortgage cash flows. See "Risk Considerations--Mortgage-Backed
Securities" for a more complete description of the characteristics of
Mortgage-Backed Securities and associated risks.
Illiquid Securities. Subject to any more restrictive applicable fundamental
investment policy, none of the Funds will maintain more than 15% of its net
assets in illiquid securities. Illiquid securities generally include (i) direct
placements or other securities that are subject to legal or contractual
restrictions on resale or for which there is no readily available market (e.g.,
when trading in the security is suspended or, in the case of unlisted
securities, when market makers do not exist or will not entertain bids or
offers), including many individually negotiated currency swaps and any assets
used to cover currency swaps and most privately negotiated investments in state
enterprises that have not yet conducted an initial equity offering, (ii)
over-the-counter options and assets used to cover over-the-counter options, and
(iii) repurchase agreements not terminable within seven days.
Because of the absence of a trading market for illiquid securities, a Fund may
not be able to realize their full value upon sale. With respect to each Fund
that may invest in such securities, Alliance will monitor their illiquidity
under the supervision of the Directors of the Fund. To the extent permitted by
applicable law, Rule 144A securities will not be treated as "illiquid" for
purposes of the foregoing restriction so long as such securities meet liquidity
guidelines established by a Fund's Directors.
A Fund that invests in securities for which there is no ready market may
therefore not be able to readily sell such securities. To the extent that these
securities are foreign securities, there is no law in many of the countries in
which a Fund may invest similar to the Securities Act requiring an issuer to
register the sale of securities with a governmental agency or imposing legal
restrictions on resales of securities, either as to length of time the
securities may be held or manner of resale. However, there may be contractual
restrictions on resale of securities.
Options. An option gives the purchaser of the option, upon payment of a premium,
the right to deliver to (in the case of a put) or receive from (in the case of a
call) the writer a specified amount of a security on or before a fixed date at a
predetermined price. A call option written by a Fund is "covered" if the Fund
owns the underlying security, has an absolute and immediate right to acquire
that security upon conversion or exchange of another security it holds, or holds
a call option on the underlying security with an exercise price equal to or less
than that of the call option it has written. A put option written by a Fund is
covered if the Fund holds a put option on the underlying securities with an
exercise price equal to or greater than that of the put option it has written.
In purchasing an option, a Fund would be in a position to realize a gain if,
during the option period, the price of the underlying security increased (in the
case of a call) or decreased (in the case of a put) by an amount in excess of
the premium paid; otherwise the Fund would experience a loss equal to the
premium paid for the option.
If an option written by a Fund were exercised, the Fund would be obligated to
purchase (in the case of a put) or sell (in the case of a call) the underlying
security at the exercise price. The risk involved in writing an option is that,
if the option were exercised, the underlying security would then be purchased or
sold by the Fund at a disadvantageous price. These risks could be reduced by
entering into a closing transaction (i.e., by disposing of the option prior to
its exercise). A Fund retains the premium received from writing a put or call
option whether or not the option is exercised. The writing of covered call
options could result in increases in a Fund's portfolio turnover rate,
especially during periods when market prices of the underlying securities
appreciate.
Quasar Fund will not write uncovered call options and will not write a call
option if, as a result, the aggregate of the Fund's portfolio securities subject
to outstanding call options (valued at the lower of the option price or market
value of such securities) would exceed 15% of the Fund's total assets or more
than 10% of the Fund's assets would be committed to call options that at the
time of sale have a remaining term of more than 100 days. The aggregate cost of
all outstanding options purchased and held by each of Premier Growth Fund and
Quasar Fund will at no time exceed 10% of the Fund's total assets.
A Fund that purchases or writes options on securities in privately negotiated
(i.e., over-the-counter) transactions will effect such transactions only with
investment dealers and other financial institutions (such as commercial banks or
savings and loan institutions) deemed creditworthy by Alliance, and Alliance has
adopted procedures for monitoring the creditworthiness of such entities. Options
purchased or written by a Fund in negotiated transactions are illiquid and it
may not be possible for the Fund to effect a closing transaction at an
advantageous time. See "Illiquid Securities."
Options on Securities Indices. An option on a securities index is similar to an
option on a security except that, rather than the right to take or make delivery
of a security at a specified price, an option on a securities index gives the
holder the right to receive, upon exercise of the option, an amount of cash if
the closing level of the chosen index is greater than (in the case of a call) or
less than (in the case of a put) the exercise price of the option.
Futures Contracts and Options on Futures Contracts. A "sale" of a futures
contract means the acquisition of a contractual obligation to deliver the
securities or foreign currencies or other commodity called for by the contract
at a specified price on a specified date. A "purchase" of a futures contract
means the incurring of an obligation to acquire the securities, foreign
currencies or other commodity called for by the contract at a specified price on
a specified date. The purchaser of a futures contract on an index agrees to take
or make delivery of an
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amount of cash equal to the difference between a specified dollar multiple of
the value of the index on the expiration date of the contract ("current contract
value") and the price at which the contract was originally struck. No physical
delivery of the securities underlying the index is made.
Options on futures contracts written or purchased by a Fund will be traded on
U.S. or foreign exchanges or over-the-counter. These investment techniques will
be used only to hedge against anticipated future changes in market conditions
and interest or exchange rates which otherwise might either adversely affect the
value of the Fund's portfolio securities or adversely affect the prices of
securities which the Fund intends to purchase at a later date.
No Fund will enter into any futures contracts or options on futures contracts if
immediately thereafter the market values of the outstanding futures contracts of
the Fund and the currencies and futures contracts subject to outstanding options
written by the Fund would exceed 50% of its total assets. Premier Growth Fund
may not purchase or sell a stock index future if immediately thereafter more
than 30% of its total assets would be hedged by stock index futures. Premier
Growth Fund may not purchase or sell a stock index future if, immediately
thereafter, the sum of the amount of margin deposits on the Fund's existing
futures positions would exceed 5% of the market value of the Fund's total
assets.
Options on Foreign Currencies. As in the case of other kinds of options, the
writing of an option on a foreign currency constitutes only a partial hedge, up
to the amount of the premium received, and a Fund could be required to purchase
or sell foreign currencies at disadvantageous exchange rates, thereby incurring
losses. The purchase of an option on a foreign currency may constitute an
effective hedge against fluctuations in exchange rates although, in the event of
rate movements adverse to a Fund's position, it may forfeit the entire amount of
the premium plus related transaction costs. See the Statement of Additional
Information of each Fund that may invest in options on foreign currencies for
further discussion of the use, risks and costs of options on foreign currencies.
Forward Foreign Currency Exchange Contracts. A Fund purchases or sells forward
contracts to minimize the risk to it from adverse changes in the relationship
between the U.S. dollar and other currencies. A forward contract is an
obligation to purchase or sell a specific currency for an agreed price at a
future date, and is individually negotiated and privately traded.
A Fund may enter into a forward contract, for example, when it enters into a
contract for the purchase or sale of a security denominated in a foreign
currency in order to "lock in" the U.S. dollar price of the security
("transaction hedge"). A Fund will not engage in transaction hedges with respect
to the currency of a particular country to an extent greater than the aggregate
amount of the Fund's transactions in that currency. When a Fund believes that a
foreign currency may suffer a substantial decline against the U.S. dollar, it
may enter into a forward sale contract to sell an amount of that foreign
currency approximating the value of some or all of the Fund's portfolio
securities denominated in such foreign currency, or when the Fund believes that
the U.S. dollar may suffer a substantial decline against a foreign currency, it
may enter into a forward purchase contract to buy that foreign currency for a
fixed dollar amount ("position hedge"). A Fund will not position hedge with
respect to the currency of a particular country to an extent greater than the
aggregate market value (at the time of making such sale) of the securities held
in its portfolio denominated or quoted in that particular foreign currency.
Instead of entering into a position hedge, a Fund may, in the alternative, enter
into a forward contract to sell a different foreign currency for a fixed U.S.
dollar amount where the Fund believes that the U.S. dollar value of the currency
to be sold pursuant to the forward contract will fall whenever there is a
decline in the U.S. dollar value of the currency in which portfolio securities
of the Fund are denominated ("cross-hedge"). Unanticipated changes in currency
prices may result in poorer overall performance for the Fund than if it had not
entered into such forward contracts.
Hedging against a decline in the value of a currency does not eliminate
fluctuations in the prices of portfolio securities or prevent losses if the
prices of such securities decline. Such transactions also preclude the
opportunity for gain if the value of the hedged currency should rise. Moreover,
it may not be possible for a Fund to hedge against a devaluation that is so
generally anticipated that the Fund is not able to contract to sell the currency
at a price above the devaluation level it anticipates.
Forward Commitments. Forward commitments for the purchase or sale of securities
may include purchases on a "when-issued" basis or purchases or sales on a
"delayed delivery" basis. In some cases, a forward commitment may be conditioned
upon the occurrence of a subsequent event, such as approval and consummation of
a merger, corporate reorganization or debt restructuring (i.e., a "when, as and
if issued" trade).
When forward commitment transactions are negotiated, the price is fixed at the
time the commitment is made, but delivery and payment for the securities take
place at a later date. Normally, the settlement date occurs within two months
after the transaction, but settlements beyond two months may be negotiated.
Securities purchased or sold under a forward commitment are subject to market
fluctuation, and no interest or dividends accrue to the purchaser prior to the
settlement date. At the time a Fund intends to enter into a forward commitment,
it records the transaction and thereafter reflects the value of the security
purchased or, if a sale, the proceeds to be received, in determining its net
asset value. Any unrealized appreciation or depreciation reflected in such
valuation of a "when, as and if issued" security would be canceled in the event
that the required conditions did not occur and the trade was canceled.
The use of forward commitments enables a Fund to protect against anticipated
changes in interest rates and prices. For instance, in periods of rising
interest rates and falling bond prices, a Fund might sell securities in its
portfolio on a forward commitment basis to limit its exposure to falling prices.
In periods of falling interest rates and rising bond prices, a Fund
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might sell a security in its portfolio and purchase the same or a similar
security on a when-issued or forward commitment basis, thereby obtaining the
benefit of currently higher cash yields. However, if Alliance were to forecast
incorrectly the direction of interest rate movements, a Fund might be required
to complete such when-issued or forward transactions at prices inferior to the
then current market values. When-issued securities and forward commitments may
be sold prior to the settlement date, but a Fund enters into when-issued and
forward commitments only with the intention of actually receiving securities or
delivering them, as the case may be. If a Fund chooses to dispose of the right
to acquire a when-issued security prior to its acquisition or dispose of its
right to deliver or receive against a forward commitment, it may incur a gain or
loss. Any significant commitment of Fund assets to the purchase of securities on
a "when, as and if issued" basis may increase the volatility of the Fund's net
asset value. No forward commitments will be made by Real Estate Investment Fund
if, as a result, the Fund's aggregate commitments under such transactions would
be more than 30% of the Fund's total assets. In the event the other party to a
forward commitment transaction were to default, a Fund might lose the
opportunity to invest money at favorable rates or to dispose of securities at
favorable prices.
Standby Commitment Agreements. Standby commitment agreements commit a Fund, for
a stated period of time, to purchase a stated amount of a security that may be
issued and sold to the Fund at the option of the issuer. The price and coupon of
the security are fixed at the time of the commitment. At the time of entering
into the agreement the Fund is paid a commitment fee, regardless of whether the
security ultimately is issued, typically equal to approximately 0.5% of the
aggregate purchase price of the security the Fund has committed to purchase. A
Fund will enter into such agreements only for the purpose of investing in the
security underlying the commitment at a yield and price considered advantageous
to the Fund and unavailable on a firm commitment basis. No Fund will enter into
a standby commitment with a remaining term in excess of 45 days. Investments by
the Real Estate Investment Fund in standby commitments will be limited so that
the aggregate purchase price of the securities subject to the commitments will
not exceed 25% of the Fund's assets taken at the time of making the commitment.
There is no guarantee that a security subject to a standby commitment will be
issued and the value of the security, if issued, on the delivery date may be
more or less than its purchase price. Since the issuance of the security
underlying the commitment is at the option of the issuer, a Fund will bear the
risk of capital loss in the event the value of the security declines and may not
benefit from an appreciation in the value of the security during the commitment
period if the issuer decides not to issue and sell the security to the Fund.
Repurchase Agreements. A repurchase agreement arises when a buyer purchases a
security and simultaneously agrees to resell it to the vendor at an agreed-upon
future date, normally a day or a few days later. The resale price is greater
than the purchase price, reflecting an agreed-upon interest rate for the period
the buyer's money is invested in the security. Such agreements permit a Fund to
keep all of its assets at work while retaining "overnight" flexibility in
pursuit of investments of a longer-term nature. If a vendor defaults on its
repurchase obligation, a Fund would suffer a loss to the extent that the
proceeds from the sale of the collateral were less than the repurchase price. If
a vendor goes bankrupt, a Fund might be delayed in, or prevented from, selling
the collateral for its benefit. Alliance monitors the creditworthiness of the
vendors with which the Fund enters into repurchase agreements. There is no
percentage restriction on a Fund's ability to enter into repurchase agreements,
other than as indicated under "Investment Objectives and Policies."
Short Sales. A short sale is effected by selling a security that a Fund does not
own, or if the Fund does own such security, it is not to be delivered upon
consummation of the sale. A short sale is "against the box" to the extent that a
Fund contemporaneously owns or has the right to obtain securities identical to
those sold short without payment. Real Estate Investment Fund may not make a
short sale if as a result more than 25% of the Fund's net assets would be held
as collateral for short sales. If the price of the security sold short increases
between the time of the short sale and the time a Fund replaces the borrowed
security, the Fund will incur a loss; conversely, if the price declines, the
Fund will realize a capital gain. See "Certain Fundamental Investment Policies."
Certain special federal income tax considerations may apply to short sales
entered into by a Fund. See "Dividends, Distributions and Taxes" in the relevant
Fund's Statement of Additional Information.
Loans of Portfolio Securities. The risk in lending portfolio securities, as with
other extensions of credit, consists of the possible loss of rights in the
collateral should the borrower fail financially. In determining whether to lend
securities to a particular borrower, Alliance will consider all relevant facts
and circumstances, including the creditworthiness of the borrower. While
securities are on loan, the borrower will pay the Fund any income earned thereon
and the Fund may invest any cash collateral in portfolio securities, thereby
earning additional income, or receive an agreed upon amount of income from a
borrower who has delivered equivalent collateral. Each Fund will have the right
to regain record ownership of loaned securities or equivalent securities in
order to exercise ownership rights such as voting rights, subscription rights
and rights to dividends, interest or distributions. A Fund may pay reasonable
finders', administrative and custodial fees in connection with a loan. A Fund
will not lend its portfolio securities to any officer, director, employee or
affiliate of the Fund or Alliance.
General. The successful use of the foregoing investment practices draws upon
Alliance's special skills and experience with respect to such instruments and
usually depends on Alliance's ability to forecast price movements, interest
rates or currency exchange rate movements correctly. Should interest rates,
prices or exchange rates move unexpectedly, a Fund may not achieve the
anticipated benefits of the transactions or may realize losses and thus be in a
worse position than if such strategies had not been used. Unlike many
exchange-traded futures contracts and options on futures contracts, there are no
daily price fluctuation
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limits with respect to certain options and forward contracts, and adverse market
movements could therefore continue to an unlimited extent over a period of time.
In addition, the correlation between movements in the prices of futures
contracts, options and forward contracts and movements in the prices of the
securities and currencies hedged or used for cover will not be perfect and could
produce unanticipated losses.
A Fund's ability to dispose of its position in futures contracts, options and
forward contracts depends on the availability of liquid markets in such
instruments. Markets in options and futures with respect to a number of types of
securities and currencies are relatively new and still developing, and there is
no public market for forward contracts. It is impossible to predict the amount
of trading interest that may exist in various types of futures contracts,
options and forward contracts. If a secondary market does not exist with respect
to an option purchased or written by a Fund, it might not be possible to effect
a closing transaction in the option (i.e., dispose of the option) with the
result that (i) an option purchased by the Fund would have to be exercised in
order for the Fund to realize any profit and (ii) the Fund may not be able to
sell currencies or portfolio securities covering an option written by the Fund
until the option expires or it delivers the underlying security, futures
contract or currency upon exercise. Therefore, no assurance can be given that
the Funds will be able to utilize these instruments effectively for the purposes
set forth above. Furthermore, a Fund's ability to engage in options and futures
transactions may be limited by tax considerations. See "Dividends, Distributions
and Taxes" in the Statement of Additional Information of each Fund that invests
in options and futures.
Future Developments. A Fund may, following written notice to its shareholders,
take advantage of other investment practices that are not currently contemplated
for use by the Fund or are not available but may yet be developed, to the extent
such investment practices are consistent with the Fund's investment objective
and legally permissible for the Fund. Such investment practices, if they arise,
may involve risks that exceed those involved in the activities described above.
Defensive Position. For temporary defensive purposes, each Fund may invest in
certain types of short-term, liquid, high grade or high quality (depending on
the Fund) debt securities. These securities may include U.S. Government
securities, qualifying bank deposits, money market instruments, prime commercial
paper and other types of short-term debt securities including notes and bonds.
For Funds that may invest in foreign countries, such securities may also include
short-term, foreign-currency denominated securities of the type mentioned above
issued by foreign governmental entities, companies and supranational
organizations. For a complete description of the types of securities each Fund
may invest in while in a temporary defensive position, please see such Fund's
Statement of Additional Information.
Portfolio Turnover. Alliance anticipates that the annual portfolio turnover will
be approximately 150% for Premier Growth Fund, and Quasar Fund and approximately
100% for Real Estate Investment Fund. A high rate of portfolio turnover involves
correspondingly greater brokerage and other expenses than a lower rate, which
must be borne by the Fund and its shareholders. High portfolio turnover also may
result in the realization of substantial net short-term capital gains. See
"Dividends, Distributions and Taxes" in each Fund's Statement of Additional
Information.
CERTAIN FUNDAMENTAL INVESTMENT POLICIES
Each Fund has adopted certain fundamental investment policies listed below,
which may not be changed without the approval of its shareholders. Additional
investment restrictions with respect to a Fund are set forth in its Statement of
Additional Information.
Premier Growth Fund may not: (i) purchase more than 10% of the outstanding
voting securities of any one issuer; (ii) invest 25% or more of the value of its
total assets in the same industry; (iii) borrow money or issue senior securities
except for temporary or emergency purposes in an amount not exceeding 5% of the
value of its total assets at the time the borrowing is made; (iv) pledge,
mortgage, hypothecate or otherwise encumber any of its assets except in
connection with the writing of call options and except to secure permitted
borrowings; or (v) invest in the securities of any issuer that has a record of
less than three years of continuous operation (including the operation of any
predecessor) if as a result more than 10% of the value of the total assets of
the Fund would be invested in the securities of such issuer or issuers.
Quasar Fund may not: (i) purchase the securities of any one issuer, other than
the U.S. Government or any of its agencies or instrumentalities, if as a result
more than 5% of its total assets would be invested in such issuer or the Fund
would own more than 10% of the outstanding voting securities of such issuer,
except that up to 25% of its total assets may be invested without regard to
these 5% and 10% limitations; (ii) invest more than 25% of its total assets in
any particular industry; (iii) borrow money except for temporary or emergency
purposes in an amount not exceeding 5% of its total assets at the time the
borrowing is made; or (iv) invest more than 10% of its assets in restricted
securities.
Real Estate Investment Fund may not: (i) with respect to 75% of its total
assets, have such assets represented by other than: (a) cash and cash items, (b)
U.S. Government securities, or (c) securities of any one issuer (other than the
U.S. Government and its agencies or instrumentalities) not greater in value than
5% of the Fund's total assets, and not more than 10% of the outstanding voting
securities of such issuer; (ii) purchase the securities of any one issuer, other
than the U.S. Government and its agencies or instrumentalities, if as a result
(a) the value of the holdings of the Fund in the securities of such issuer
exceeds 25% of its total assets, or (b) the Fund owns more than 25% of the
outstanding securities of any one class of securities of such
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issuer; (iii) invest 25% or more of its total assets in the securities of
issuers conducting their principal business activities in any one industry,
other than the real estate industry in which the Fund will invest at least 25%
or more of its total assets, except that this restriction does not apply to U.S.
Government securities; (iv) purchase or sell real estate, except that it may
purchase and sell securities of companies which deal in real estate or interests
therein, including Real Estate Equity Securities; or (v) borrow money except for
temporary or emergency purposes or to meet redemption requests, in an amount not
exceeding 5% of the value of its total assets at the time the borrowing is made.
RISK CONSIDERATIONS
Investment in certain of the Funds involves the special risk considerations
described below. These risks may be heightened when investing in emerging
markets.
Foreign Investment. The securities markets of many foreign countries are
relatively small, with the majority of market capitalization and trading volume
concentrated in a limited number of companies representing a small number of
industries. Consequently, a Fund whose investment portfolio includes such
securities may experience greater price volatility and significantly lower
liquidity than a portfolio invested solely in equity securities of United States
companies. These markets may be subject to greater influence by adverse events
generally affecting the market, and by large investors trading significant
blocks of securities, than is usual in the United States. Securities settlements
may in some instances be subject to delays and related administrative
uncertainties. These problems are particularly severe in India, where settlement
is through physical delivery, and, where, currently, a severe shortage of vault
capacity exists among custodial banks, although efforts are being undertaken to
alleviate the shortage. Certain foreign countries require governmental approval
prior to investments by foreign persons or limit investment by foreign persons
to only a specified percentage of an issuer's outstanding securities or a
specific class of securities which may have less advantageous terms (including
price) than securities of the company available for purchase by nationals. These
restrictions or controls may at times limit or preclude investment in certain
securities and may increase the costs and expenses of a Fund. In addition, the
repatriation of investment income, capital or the proceeds of sales of
securities from certain of the countries is controlled under regulations,
including in some cases the need for certain advance government notification or
authority, and if a deterioration occurs in a country's balance of payments, the
country could impose temporary restrictions on foreign capital remittances.
A Fund could be adversely affected by delays in, or a refusal to grant, any
required governmental approval for repatriation, as well as by the application
to it of other restrictions on investment. Investing in local markets may
require a Fund to adopt special procedures, which may involve additional costs
to a Fund. The liquidity of a Fund's investments in any country in which any of
these factors exists could be affected and Alliance will monitor the effect of
any such factor or factors on a Fund's investments. Furthermore, transaction
costs including brokerage commissions for transactions both on and off the
securities exchanges in many foreign countries are generally higher than in the
U.S. Issuers of securities in foreign jurisdictions are generally not subject to
the same degree of regulation as are U.S. issuers with respect to such matters
as insider trading rules, restrictions on market manipulation, shareholder proxy
requirements and timely disclosure of information. The reporting, accounting and
auditing standards of foreign countries may differ, in some cases significantly,
from U.S. standards in important respects and less information may be available
to investors in foreign securities than to investors in U.S. securities.
Substantially less information is publicly available about certain non-U.S.
issuers than is available about U.S. issuers.
The economies of individual foreign countries may differ favorably or
unfavorably from the U.S. economy in such respects as growth of gross domestic
product or gross national product, rate of inflation, capital reinvestment,
resource self-sufficiency and balance of payments position. Nationalization,
expropriation or confiscatory taxation, currency blockage, political changes,
government regulation, political or social instability or diplomatic
developments could affect adversely the economy of a foreign country or the
Fund's investments in such country. In the event of expropriation,
nationalization or other confiscation, a Fund could lose its entire investment
in the country involved. In addition, laws in foreign countries governing
business organizations, bankruptcy and insolvency may provide less protection to
security holders such as the Fund than that provided by U.S. laws.
Investment in Smaller, Emerging Companies. The Funds may invest in smaller,
emerging companies. Investment in such companies involves greater risks than is
customarily associated with securities of more established companies. The
securities of smaller companies may have relatively limited marketability and
may be subject to more abrupt or erratic market movements than securities of
larger companies or broad market indices.
The Real Estate Industry. Although Real Estate Investment Fund does not invest
directly in real estate, it does invest primarily in Real Estate Equity
Securities and does have a policy of concentration of its investments in the
real estate industry. Therefore, an investment in the Fund is subject to certain
risks associated with the direct ownership of real estate and with the real
estate industry in general. These risks include, among others: possible declines
in the value of real estate; risks related to general and local economic
conditions; possible lack of availability of mortgage funds; overbuilding;
extended vacancies of properties; increases in competition, property taxes and
operating expenses; changes in zoning laws; costs resulting from the clean-up
of, and liability to third parties for damages resulting from, environmental
problems; casualty or condemnation losses; uninsured damages from floods,
earthquakes or other natural disasters; limitations on and variations in rents;
and changes in interest rates. To the
13
<PAGE>
extent that assets underlying the Fund's investments are concentrated
geographically, by property type or in certain other respects, the Fund may be
subject to certain of the foregoing risks to a greater extent.
In addition, if Real Estate Investment Fund receives rental income or income
from the disposition of real property acquired as a result of a default on
securities the Fund owns, the receipt of such income may adversely affect the
Fund's ability to retain its tax status as a regulated investment company. See
"Dividends, Distributions and Taxes" in the Statement of Additional Information.
Investments by the Fund in securities of companies providing mortgage servicing
will be subject to the risks associated with refinancings and their impact on
servicing rights.
REITs. Investing in REITs involves certain unique risks in addition to those
risks associated with investing in the real estate industry in general. Equity
REITs may be affected by changes in the value of the underlying property owned
by the REITs, while mortgage REITs may be affected by the quality of any credit
extended. REITs are dependent upon management skills, are not diversified, are
subject to heavy cash flow dependency, default by borrowers and
self-liquidation. REITs are also subject to the possibilities of failing to
qualify for tax free pass-through of income under the Code and failing to
maintain their exemptions from registration under the 1940 Act.
REITs (especially mortgage REITs) are also subject to interest rate risks. When
interest rates decline, the value of a REIT's investment in fixed rate
obligations can be expected to rise. Conversely, when interest rates rise, the
value of a REIT's investment in fixed rate obligations can be expected to
decline. In contrast, as interest rates on adjustable rate mortgage loans are
reset periodically, yields on a REIT's investments in such loans will gradually
align themselves to reflect changes in market interest rates, causing the value
of such investments to fluctuate less dramatically in response to interest rate
fluctuations than would investments in fixed rate obligations.
Investing in REITs involves risks similar to those associated with investing in
small capitalization companies. REITs may have limited financial resources, may
trade less frequently and in a limited volume and may be subject to more abrupt
or erratic price movements than larger company securities. Historically, small
capitalization stocks, such as REITs, have been more volatile in price than the
larger capitalization stocks included in the S&P Index of 500 Common Stocks.
Mortgage-Backed Securities. As discussed above, investing in Mortgage-Backed
Securities involves certain unique risks in addition to those risks associated
with investment in the real estate industry in general. These risks include the
failure of a counterparty to meet its commitments, adverse interest rate changes
and the effects of prepayments on mortgage cash flows. When interest rates
decline, the value of an investment in fixed rate obligations can be expected to
rise. Conversely, when interest rates rise, the value of an investment in fixed
rate obligations can be expected to decline. In contrast, as interest rates on
adjustable rate mortgage loans are reset periodically, yields on investments in
such loans will gradually align themselves to reflect changes in market interest
rates, causing the value of such investments to fluctuate less dramatically in
response to interest rate fluctuations than would investments in fixed rate
obligations.
Further, the yield characteristics of Mortgage-Backed Securities, such as those
in which Real Estate Investment Fund may invest, differ from those of
traditional fixed-income securities. The major differences typically include
more frequent interest and principal payments (usually monthly), the
adjustability of interest rates, and the possibility that prepayments of
principal may be made substantially earlier than their final distribution dates.
Prepayment rates are influenced by changes in current interest rates and a
variety of economic, geographic, social and other factors, and cannot be
predicted with certainty. Both adjustable rate mortgage loans and fixed rate
mortgage loans may be subject to a greater rate of principal prepayments in a
declining interest rate environment and to a lesser rate of principal
prepayments in an increasing interest rate environment. Early payment associated
with Mortgage-Backed Securities causes these securities to experience
significantly greater price and yield volatility than that experienced by
traditional fixed-income securities. Under certain interest rate and prepayment
rate scenarios, the Fund may fail to recoup fully its investment in
Mortgage-Backed Securities notwithstanding any direct or indirect governmental
or agency guarantee. When the Fund reinvests amounts representing payments and
unscheduled prepayments of principal, it may receive a rate of interest that is
lower than the rate on existing adjustable rate mortgage pass-through
securities. Thus, Mortgage-Backed Securities, and adjustable rate mortgage
pass-through securities in particular, may be less effective than other types of
U.S. Government securities as a means of "locking in" interest rates.
U.S. and Foreign Taxes. A Fund's investment in foreign securities may be subject
to taxes withheld at the source on dividend or interest payments. Foreign taxes
paid by a Fund may be creditable or deductible by U.S. shareholders for U.S.
income tax purposes. No assurance can be given that applicable tax laws and
interpretations will not change in the future. Moreover, non-U.S. investors may
not be able to credit or deduct such foreign taxes. Investors should review
carefully the information discussed under the heading "Dividends, Distributions
and Taxes" and should discuss with their tax advisers the specific tax
consequences of investing in a Fund.
Fixed-Income Securities. The value of each Fund's shares will fluctuate with the
value of its investments. The value of each Fund's investments in fixed-income
securities will change as the general level of interest rates fluctuates. During
periods of falling interest rates, the values of fixed-income securities
generally rise. Conversely, during periods of rising interest rates, the values
of fixed-income securities generally decline.
Under normal market conditions, the average dollar-weighted maturity of a Fund's
portfolio of debt or other fixed-income securities is expected to vary between
one year or less and 30 years in the case of all Funds that invest in such
securities. In
14
<PAGE>
periods of increasing interest rates, each of the Funds may, to the extent it
holds mortgage-backed securities, be subject to the risk that the average
dollar-weighted maturity of the Fund's portfolio of debt or other fixed-income
securities may be extended as a result of lower than anticipated prepayment
rates. See "Additional Investment Practices--Mortgage-Backed Securities."
Securities Ratings. The ratings of securities by S&P, Moody's, Duff & Phelps and
Fitch are a generally accepted barometer of credit risk. They are, however,
subject to certain limitations from an investor's standpoint. The rating of an
issuer is heavily weighted by past developments and does not necessarily reflect
probable future conditions. There is frequently a lag between the time a rating
is assigned and the time it is updated. In addition, there may be varying
degrees of difference in credit risk of securities within each rating category.
Securities rated Aaa by Moody's and AAA by S&P, Duff & Phelps and Fitch are
considered to be of the highest quality; capacity to pay interest and repay
principal is extremely strong. Securities rated Aa by Moody's and AA by S&P,
Duff & Phelps and Fitch are considered to be high quality; capacity to repay
principal is considered very strong, although elements may exist that make risks
appear somewhat larger than exist with securities rated Aaa or AAA. Securities
rated A are considered by Moody's to possess adequate factors giving security to
principal and interest. S&P, Duff & Phelps and Fitch consider such securities to
have a strong capacity to pay interest and repay principal. Such securities are
more susceptible to adverse changes in economic conditions and circumstances
than higher-rated securities.
Securities rated Baa by Moody's and BBB by S&P, Duff & Phelps and Fitch are
considered to have an adequate capacity to pay interest and repay principal.
Such securities are considered to have speculative characteristics and share
some of the same characteristics as lower-rated securities. Sustained periods of
deteriorating economic conditions or of rising interest rates are more likely to
lead to a weakening in the issuer's capacity to pay interest and repay principal
than in the case of higher-rated securities. Securities rated Ba by Moody's and
BB by S&P, Duff & Phelps and Fitch are considered to have speculative
characteristics with respect to capacity to pay interest and repay principal
over time; their future cannot be considered as well-assured. Securities rated B
by Moody's, S&P, Duff & Phelps and Fitch are considered to have highly
speculative characteristics with respect to capacity to pay interest and repay
principal. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Securities rated Caa by Moody's and CCC by S&P, Duff & Phelps and Fitch are of
poor standing and there is a present danger with respect to payment of principal
or interest. Securities rated Ca by Moody's and CC by S&P and Fitch are
minimally protected, and default in payment of principal or interest is
probable. Securities rated C by Moody's, S&P and Fitch are in imminent default
in payment of principal or interest and have extremely poor prospects of ever
attaining any real investment standing. Securities rated D by S&P and Fitch are
in default. The issuer of securities rated DD by Duff & Phelps is under an order
of liquidation.
Foreign government securities are not treated like U.S. Government securities
for purposes of the diversification tests described in the preceding paragraph,
but instead are subject to these tests in the same manner as the securities of
non-governmental issuers.
- --------------------------------------------------------------------------------
PURCHASE AND SALE
- --------------------------------------------------------------------------------
OF SHARES
- --------------------------------------------------------------------------------
HOW TO BUY SHARES
You can purchase shares of any of the Funds at a price based on the next
calculation of their net asset value after receipt of a proper purchase order
either through broker-dealers, banks or other financial intermediaries, or
directly through AFD.
Each Fund offers two classes of shares. Shares of the Funds are available
through your financial representative. Class I shares may be purchased and held
solely (i) through accounts established under a fee-based program sponsored and
maintained by a registered broker-dealer or other financial intermediary and
approved by the Distributor, (ii) through Employee Plans that have at least $10
million in assets, (iii) by investment advisory clients of, and certain other
persons associated with, Alliance and its affiliates or the Funds, and (iv)
through registered investment advisers or other financial intermediaries who
charge a management, consulting or other fee for their service and who purchase
shares through a broker or agent approved by the Distributor and clients of such
registered investment advisers or financial intermediaries whose accounts are
linked to the master account of such investment adviser or financial
intermediary on the books of such approved broker or agent. A shareholder's
Class I shares will automatically convert to Class II shares of the same Fund
under certain circumstances. See "Conversion Feature--Conversion to Class II
Shares." Class II shares may be purchased and held solely (i) by investors
participating in wrap-fee or other similar programs offered by registered
broker-dealers or other financial intermediaries that meet certain requirements
established by the Distributor, and (ii) Employee Plans that have at least $10
million in assets. For more detailed information about who may purchase and hold
the shares of each Fund, see the Fund's Statement of Additional Information.
Fee-based and other programs may impose different requirements with respect to
investment in the shares of the Funds than described above.
The minimum initial investment in the Company is $2 million, which may be
invested in any one or more of the Funds.
15
<PAGE>
Investments made through fee-based or wrap-fee programs will satisfy the minimum
initial investment requirement if the fee-based or wrap-fee program, as a whole,
invests at least $2 million in one or more of the Funds. There is no minimum for
subsequent investments. The minimum initial investment may be waived in the
discretion of the Company. The Funds may refuse any order to purchase shares. In
this regard, the Funds reserve the right to restrict purchases of shares
(including through exchanges) when there appears to be evidence of a pattern of
frequent purchases and sales made in response to short-term considerations.
How the Funds Value Their Shares
The net asset value of shares of a class of each Fund is calculated by dividing
the value of the Fund's net assets allocable to the class by the outstanding
shares of that class. Shares are valued each day the New York Stock Exchange
(the "Exchange") is open as of the close of regular trading (currently 4:00 p.m.
Eastern time). The securities in a Fund are valued at their current market value
determined on the basis of market quotations or, if such quotations are not
readily available, such other methods as the Company's Directors believe would
accurately reflect fair market value.
General
In addition to the discount or commission which may be paid to dealers or agents
in connection with the sale of shares of a Fund, AFD may from time to time pay
additional cash or other incentives to dealers or agents, including EQ Financial
Consultants, Inc., an affiliate of AFD, in connection with such sales. Such
additional amounts may be utilized, in whole or in part, in some cases together
with other revenues of such dealers or agents, to provide additional
compensation to registered representatives who sell shares of the Funds. On some
occasions, such cash or other incentives will be conditioned upon the sale of a
specified minimum dollar amount of the shares of a Fund and/or other Alliance
Mutual Funds during a specific period of time. Such incentives may take the form
of payment for attendance at seminars, meals, sporting events or theater
performances, or payment for travel, lodging and entertainment incurred in
connection with travel by persons associated with a dealer or agent and their
immediate family members to urban or resort locations within or outside the
United States. Such dealer or agent may elect to receive cash incentives of
equivalent amount in lieu of such payments.
HOW TO SELL SHARES
You may "redeem," i.e., sell your shares in a Fund to the Company on any day the
Exchange is open, either directly or through your financial representative. The
price you will receive is the net asset value next calculated after the Company
receives your request in proper form. Proceeds generally will be sent to you
within seven days. However, for shares recently purchased by check or electronic
funds transfer, the Company will not send proceeds until it is reasonably
satisfied that the check or electronic funds transfer has been collected (which
may take up to 15 days). If you are in doubt about what documents are required
by your fee-based program or other program, you should contact your financial
representative.
Selling Shares Through Your Financial Representative
Your financial representative must receive your request before 4:00 p.m. Eastern
time, and your financial representative must transmit your request to the Fund
by 5:00 p.m. Eastern time, for you to receive that day's net asset value. Your
financial representative is responsible for furnishing all necessary
documentation to the Company and may charge you for this service.
Selling Shares Directly To The Company
Send a signed letter of instruction or stock power form to AFS along with
certificates, if any, that represent the shares you want to sell. For your
protection, signatures must be guaranteed by a bank, a member firm of a national
stock exchange or other eligible guarantor institution. Stock power forms are
available from your financial representative, AFS, and many commercial banks.
Additional documentation is required for the sale of shares by corporations,
intermediaries, fiduciaries and surviving joint owners. For details contact:
Alliance Fund Services
P.O. Box 1520
Secaucus, NJ 07096-1520
1-800-221-5672
Alternatively, a request for redemption of shares for which no stock
certificates have been issued can also be made by telephone to 800-221-5672.
Telephone redemption requests must be made by 4 p.m. Eastern time on a Fund
business day in order to receive that day's net asset value, and, except for
certain omnibus accounts, may be made only once in any 30-day period. A
shareholder who has completed the Telephone Transactions section of the
Subscription Application, or the Shareholder Options form obtained from AFS, can
elect to have the proceeds of his or her redemption sent to his or her bank via
an electronic funds transfer. Proceeds of telephone redemptions also may be sent
by check to a shareholder's address of record. Except for certain omnibus
accounts, redemption requests by electronic funds transfer may not exceed
$100,000 and redemption requests by check may not exceed $50,000. Telephone
redemption is not available for shares held in nominee or "street name" accounts
or retirement plan accounts or shares held by a shareholder who has changed his
or her address of record within the previous 30 calendar days.
General
The sale of shares is a taxable transaction for federal tax purposes. Under
unusual circumstances, the Company may suspend redemptions or postpone payment
for up to seven days or longer, as permitted by federal securities law. The
Company reserves the right to close an account that through redemption has
remained below $200 for 90 days. Shareholders will receive 60 days' written
notice to increase the account value before the account is closed.
During drastic economic or market developments, you might have difficulty
reaching AFS by telephone, in which event you should issue written instructions
to AFS. AFS is not responsible for the authenticity of telephonic requests to
purchase, sell or exchange shares. AFS will employ
16
<PAGE>
reasonable procedures to verify that telephone requests are genuine, and could
be liable for losses resulting from unauthorized transactions if it failed to do
so. Dealers and agents may charge a commission for handling telephonic requests.
The telephone service may be suspended or terminated at any time without notice.
HOW TO EXCHANGE SHARES
You may exchange your shares of any Fund for the same class of shares of any
other Fund and for Class A shares of any other Alliance Mutual Fund. Exchanges
of shares are made at the net asset value next determined and without sales or
service charges. Exchanges may be made by telephone or written request.
Telephone exchange requests must be received by AFS by 4:00 p.m. Eastern time on
a Fund business day in order to receive that day's net asset value.
Please read carefully the prospectus of the Fund into which you are exchanging
before submitting the request. Call AFS at 800-221-5672 to exchange
uncertificated shares. An exchange is a taxable capital transaction for federal
tax purposes. The exchange service may be changed, suspended, or terminated on
60 days' written notice.
GENERAL
If you are a Fund shareholder through an account established under a fee-based
or other program, your fee-based or other program may impose requirements with
respect to the purchase, sale or exchange of shares of a Fund that are different
from those described in this Prospectus. A transaction, service, administrative
or other similar fee may be charged by your broker-dealer, agent, financial
intermediary or other financial representative with respect to the purchase,
sale or exchange of shares made through such financial representative. Such
financial intermediaries may also impose requirements with respect to the
purchase, sale or exchange of shares that are different from, or in addition to,
those imposed by the Company, including requirements as to the minimum initial
and subsequent investment amounts.
- --------------------------------------------------------------------------------
MANAGEMENT OF THE FUNDS
- --------------------------------------------------------------------------------
ADVISER
Alliance, which is a Delaware limited partnership with principal offices at 1345
Avenue of the Americas, New York, New York 10105, has been retained under an
advisory agreement (the "Advisory Agreement") to provide investment advice and,
in general, to conduct the management and investment program of each Fund,
subject to the general supervision and control of the Directors of the Fund.
The following table lists the person or persons who are primarily responsible
for the day-to-day management of each Fund, the length of time that each person
has been primarily responsible, and each person's principal occupation during
the past five years.
Principal occupation
during the past
Fund Employee; year; title five years
- --------------------------------------------------------------------------------
Premier Growth Fund Alfred Harrison since inception-- Associated with
Vice Chairman of Alliance Capital Alliance
Management Corporation ("ACMC")*
Quasar Fund Alden M. Stewart since 1997-- Associated with
Executive Vice President of ACMC Alliance since
1993; prior
thereto,
associated with
Equitable Capital
Management
Corporation
("Equitable
Capital")**
Randall E. Haase since 1997-- Associated with
Senior Vice President of ACMC Alliance since
1993; prior
thereto,
associated with
Equitable Capital
Real Estate Daniel G. Pine since 1996-- Associated with
Investment Fund Senior Vice President Alliance since
of ACMC 1996; prior
thereto, Senior
Vice President of
Desai Capital
Management
David Kruth since 1997-- Associated with
Vice President of ACMC Alliance since
1997; prior
thereto, Senior
Vice President of
the Yarmouth
Group
- --------------------------------------------------------------------------------
* The sole general partner of Alliance.
** Equitable Capital was, prior to Alliance's acquisition of it, a management
firm under common control with Alliance.
*** An indirect wholly-owned subsidiary of Alliance.
Alliance is a leading international investment manager supervising client
accounts with assets as of September 30, 1997 totaling more than $217 billion
(of which approximately $81 billion represented the assets of investment
companies). Alliance's clients are primarily major corporate employee benefit
funds, public employee retirement systems, investment companies, foundations and
endowment funds. The 54 registered investment companies managed by Alliance
comprising 116 separate investment portfolios currently have over two million
shareholders. As of September 30, 1997, Alliance was an investment manager of
employee benefit plan assets for 28 of the Fortune 100 companies.
ACMC, the sole general partner of, and the owner of a 1% general partnership
interest in, Alliance, is an indirect wholly-owned subsidiary of The Equitable
Life Assurance Society of the United States ("Equitable"), one of the largest
life insurance -of The Equitable Companies Incorporated, a holding company
controlled by AXA-UAP, a French insurance holding company. Certain information
concerning the ownership and control of Equitable by AXA-UAP is set forth in
each Fund's Statement of Additional Information under "Management of the Fund."
17
<PAGE>
Performance of Similarly Managed Investment Companies. Each of the Funds is
identical in its investment objectives, policies and practices to a currently
existing open-end management investment company managed by Alliance, Alliance
Premier Growth Fund, Inc., Alliance Quasar Fund, Inc. and Alliance Real Estate
Investment Fund, Inc. (each, a "Retail Fund"). Each Fund is managed by the same
investment personnel, in the identical investment style and following the same
investment strategy, as its corresponding Retail Fund. Set forth below is
performance data for each of the Retail Funds for the 1, 5 and 10 year (or since
inception) periods through September 30, 1997. As of September 30, 1997, the
assets in the corresponding Retail Funds totaled approximately $1.3 billion for
Alliance Premier Growth Fund, $1.1 billion for Alliance Quasar Fund and $324
million for Alliance Real Estate Investment Fund. The following performance data
for the Retail Funds is net of actual fees incurred by those Funds for the
relevant periods and is based on each Fund's Class A shares with imposition of
the maximum 4.25% sales charge.
<TABLE>
<CAPTION>
Year ended 5 Years ended 10 Years ended
Retail Funds 9/30/97 9/30/97 9/30/97
- ------------ ------- ------- -------
<S> <C> <C> <C>
Alliance Premier Growth Fund 47.16% 21.93% 21.88*%
Alliance Quasar Fund 22.38 23.53 12.48
Alliance Real Estate
Investment Fund 40.67* -- --
</TABLE>
- ---------
* Inception dates for Alliance Premier Growth Fund--September 28, 1992 and
Alliance Real Estate Investment Fund--October 1, 1996.
Performance of Similarly Managed Portfolios--Premier Growth Institutional Fund.
In addition to managing the assets of Premier Growth Institutional Fund, Mr.
Harrison has ultimate responsibility for the management of discretionary
tax-exempt accounts of institutional clients managed as described below without
significant client-imposed restrictions ("Historical Portfolios"). These
accounts have substantially the same investment objectives and policies and are
managed in accordance with essentially the same investment strategies and
techniques as those for Premier Growth Institutional Fund, except for the
ability of Premier Growth Institutional Fund to use futures and options as
hedging tools and to invest in warrants. The Historical Portfolios are also not
subject to certain limitations, diversification requirements and other
restrictions imposed under the 1940 Act and the Code to which Premier Growth
Institutional Fund, as a portfolio within a registered investment company, is
subject and which if applicable to the Historical Portfolios, may have adversely
affected the performance results of the Historical Portfolios. See "Investment
Objective and Policies."
Set forth below is performance data provided by the Adviser relating to the
Historical Portfolios for each of the eighteen full calendar years during which
Mr. Harrison has managed the Historical Portfolios as an employee of Alliance
and cumulatively through September 30, 1997. As of September 30, 1997, the
assets in the Historical Portfolios totaled approximately $12.4 billion and the
average size of an institutional account in the Historical Portfolio was $355
million. Each Historical Portfolio has a nearly identical composition of
individual investment holdings and related percentage weightings.
The performance data is net of all fees (including brokerage commissions)
charged to those accounts. The performance data is computed in accordance with
standards formulated by the Association of Investment Management and Research
and has not been adjusted to reflect any fees that will be payable by Premier
Growth Institutional Fund, which are higher than the fees imposed on the
Historical Portfolio and will result in a higher expense ratio and lower returns
for Premier Growth Institutional Fund. The performance data has also not been
adjusted for corporate or individual taxes, if any, payable by the account
owners.
The Adviser has calculated the investment performance of the Historical
Portfolios on a trade-date basis. Dividends have been accrued at the end of the
month and cash flows weighted daily. Composite investment performance for all
portfolios has been determined on an asset-weighted basis. New accounts are
included in the composite investment performance computations at the beginning
of the quarter following the initial contribution. The composite total returns
set forth below are calculated using a method that links the monthly return
amounts for the disclosed periods, resulting in a time-weighted rate of return.
As reflected below, the Historical Portfolios have over time performed favorably
when compared with the performance of recognized performance indices. The S&P
500 Index is a widely recognized, unmanaged index of market activity based upon
the aggregate performance of a selected portfolio of publicly traded common
stocks, including monthly adjustments to reflect the reinvestment of dividends
and other distributions. The S&P 500 Index reflects the total return of
securities comprising the Index, including changes in market prices as well as
accrued investment income, which is presumed to be reinvested. The Russell 1000
universe of securities is compiled by Frank Russell Company and is segmented
into two style indices, based on the capitalization-weighted median
book-to-price ratio of each of the securities. At each reconstitution, the
Russell 1000 constituents are ranked by their book-to-price ratio. Once so
ranked, the breakpoint for the two styles is determined by the median market
capitalization of the Russell 1000. Thus, those securities falling within the
top fifty percent of the cumulative market capitalization (as ranked by
descending book-to-price) become members of the Russell Price-Driven Indices.
The Russell 1000 Growth Index is, accordingly, designed to include those Russell
1000 securities with a greater-than-average growth orientation. In contrast with
the securities in the Russell Price-Driven Indices, companies in the Growth
Index tend to exhibit higher price-to-book and price-earnings ratios, lower
dividend yield and higher forecasted growth values.
To the extent Premier Growth Institutional Fund does not invest in U.S. common
stocks or utilizes investment techniques such as futures or options, the S&P 500
and Russell 1000 Growth Index may not be substantially comparable to Premier
Growth Institutional Fund. The S&P 500 and Russell 1000 Growth Index are
included to illustrate material economic and market factors that existed during
the time period shown. The S&P 500 and Russell 1000 Growth Index do not reflect
the deduction of any fees. If Premier Growth Institutional Fund
18
<PAGE>
were to purchase a portfolio of securities substantially identical to the
securities comprising the S&P 500 Index or the Russell 1000 Growth Index,
Premier Growth Institutional Fund's performance relative to the index would be
reduced by Premier Growth Institutional Fund's expenses, including brokerage
commissions, advisory fees, distribution fees, custodial fees, transfer agency
costs and other administrative expenses as well as by the impact on Premier
Growth Institutional Fund's shareholders of sales charges and income taxes.
The Lipper Growth Fund Index is prepared by Lipper Analytical Services, Inc. and
represents a composite index of the investment performance for the 30 largest
growth mutual funds. The composite investment performance of the Lipper Growth
Fund Index reflects investment management and administrative fees and other
operating expenses paid by these mutual funds and reinvested income dividends
and capital gain distributions, but excludes the impact of any income taxes and
sales charges.
The following performance data is provided solely to illustrate Mr. Harrison's
performance in managing the Historical Portfolios as measured against certain
broad based market indices and against the composite performance of other
open-end growth mutual funds. Investors should not rely on the following
performance data of the Historical Portfolios as an indication of future
performance of Premier Growth Institutional Fund. The composite investment
performance for the periods presented may not be indicative of future rates of
return. Other methods of computing investment performance may produce different
results, and the results for different periods may vary.
Schedule of Composite Investment Performance Historical Portfolios*
<TABLE>
<CAPTION>
Russell Lipper
Historical S&P 500 1000 Growth
Portfolios Index Growth Index Fund Index
Total Return** Total Return Total Return Total Return
-------------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
Year ended December:
1996*** ............... 22.22% 22.96% 23.12% 17.48%
1995*** ............... 40.12 37.58 37.19 32.65
1994 .................. (4.83) 1.32 2.66 (1.57)
1993 .................. 10.62 10.08 2.90 11.98
1992 .................. 12.27 7.62 5.00 7.63
1991 .................. 39.19 30.47 41.16 35.20
1990 .................. (1.57) (3.10) (0.26) (5.00)
1989 .................. 39.08 31.69 35.92 28.60
1988 .................. 10.96 16.61 11.27 15.80
1987 .................. 8.57 5.25 5.31 1.00
1986 .................. 27.60 18.67 15.36 15.90
1985 .................. 37.68 31.73 32.85 30.30
1984 .................. (3.33) 6.27 (.95) (2.80)
1983 .................. 20.95 22.56 15.98 22.30
1982 .................. 28.23 21.55 20.46 20.20
1981 .................. (1.10) (4.92) (11.31) (8.40)
1980 .................. 51.10 32.50 39.57 37.30
1979 .................. 30.99 18.61 23.91 27.40
Cumulative total return
for the period
January 1, 1979 to
September 30, 1997 .... 3188.99 1888.65 1656.41 1772.84
- -------------------------------------------------------------------------------------
</TABLE>
* Total return is a measure of investment performance that is based upon the
change in value of an investment from the beginning to the end of a
specified period and assumes reinvestment of all dividends and other
distributions. The basis of preparation of this data is described in the
preceding discussion.
** Assumes imposition of the maximum advisory fee charged by Alliance for any
Historical Portfolio for the period involved, although not the impact of
the payment of that fee on a quarterly rather than an annual basis and the
compounding effect thereof over the periods for which return information is
provided in the table following this footnote, which would correspondingly
reduce the returns presented.
*** During this period, the Historical Portfolios differed from Premier Growth
Institutional Fund in that the Historical Portfolios were unable, by their
investment restrictions, to purchase warrants on equity securities in which
Premier Growth Institutional Fund could have invested. In lieu of warrants,
the Historical Portfolios acquired the common stock upon which the warrants
were based.
The average annual total returns presented below are based upon the cumulative
total return as of September 30, 1997, and for more than one year assume a
steady compounded rate of return and are not year-by-year results, which
fluctuated over the periods as shown.
<TABLE>
<CAPTION>
Average Annual Total Returns
-------------------------------------------------
Russell Lipper
Historical S&P 500 1000 Growth
Portfolios Index Growth Index Fund Index
---------- ----- ------------ ----------
<S> <C> <C> <C> <C>
One year ................ 54.05% 40.45% 36.30% 33.52%
Three years ............. 32.26 29.92 29.81 24.84
Five years. ............. 21.99 20.77 19.66 18.62
Ten years ............... 16.03 14.75 14.66 13.19
Since January 1, 1979 ... 20.48 17.29 16.51 16.18
</TABLE>
CONSULTANT TO ALLIANCE WITH RESPECT TO INVESTMENT IN REAL ESTATE SECURITIES
Alliance, with respect to investment in real estate securities, has retained as
a consultant CB Commercial Real Estate Group, Inc. ("CBC"), a publicly held
company and the largest real estate services company in the United States,
comprised of real estate brokerage, property and facilities management, and real
estate finance and investment advisory activities (CBC in August of 1997
acquired Koll, which previously provided these consulting services to Alliance).
In 1996, CBC (and Koll, on a combined basis) completed 25,000 sale and lease
transactions, managed over 4,100 client properties, created over $3.5 billion in
mortgage originations, and completed over 2,600 appraisal and consulting
assignments. In addition, they advised and managed for institutions over $4
billion in real estate investments. CBC will make available to Alliance the CBC
National Real Estate Index, which gathers, analyzes and publishes targeted
research data for the 65 largest U.S. markets, based on a variety of
public-sector and private-sector sources as well as CBC's proprietary database
of approximately 60,000 property transactions representing over $400 billion of
investment property. This information provides a substantial component of the
research and data used to create the REIT o Score model. As a consultant, CBC
provides to Alliance, at Alliance's expense, such in-depth information regarding
the real estate market, the factors influencing regional valuations and analysts
of recent transactions in office, retail, industrial and multi-family properties
as Alliance shall from time to time request. CBC will not furnish advice or make
recommendations regarding the purchase or sale of securities by the Fund nor
will it be responsible for making investment decisions involving Fund assets.
19
<PAGE>
CBC is one of the three largest fee-based property management firms in the
United States, the largest commercial real estate brokerage firm in the country,
the largest investment property brokerage firm in the country, as well as one of
the largest publishers of real estate research, with approximately 6,000
employees nationwide. CBC will provide Alliance with exclusive access to its
REIT o Score model which ranks approximately 130 REITs based on the relative
attractiveness of the property markets in which they own real estate. This model
scores approximately 12,000 individual properties owned by these companies.
REIT o Score is in turn based on CBC's National Real Estate Index which gathers,
analyzes and publishes targeted research for the 65 largest U.S.real estate
markets based on a variety of public- and private-sector sources as well as
CBC's proprietary database of 60,000 commercial property transactions
representing over $400 billion of investment property and over 3,000 tracked
properties which report rent and expense data quarterly. CBC has previously
provided access to its REIT o Score model results primarily to the institutional
market through subscriptions. The model is no longer provided to any research
publications and the Fund is currently the only mutual fund available to retail
investors that has access to CBC's REIT o Score model.
DISTRIBUTION SERVICES AGREEMENTS
Rule 12b-1 adopted by the Commission under the 1940 Act permits an investment
company to pay expenses associated with the distribution of its shares in
accordance with a duly adopted plan. Each Fund has entered into a Distribution
Services Agreement (the "Agreement") with AFD and, with respect to its Class II
shares, has adopted a "Rule 12b-1 plan" (for each Fund, a "Plan"). Pursuant to
its Plan, a Fund pays to AFD a Rule 12b-1 distribution services fee with respect
to its Class II shares; which may not exceed an annual rate of .30% of the
Fund's aggregate average daily net assets for distribution expenses. The Plans
provide that a portion of the distribution services fee in an amount not to
exceed .25% of the aggregate average daily net assets of each Fund constitutes a
service fee used for personal service and/or the maintenance of shareholder
accounts.
The Plans provide that AFD will use the distribution services fee received from
a Fund in its entirety for payments (i) to compensate broker-dealers or the
other persons for providing distribution assistance, (ii) to otherwise promote
the sale of shares of the Fund, and (iii) to compensate broker-dealers,
depository institutions and other financial intermediaries for providing
administrative, accounting and other services with respect to the Fund's
shareholders. In this regard, some payments under the Plans are used to
compensate financial intermediaries with trail or maintenance commissions in an
amount equal to .25%, annualized. Distribution services fees received from the
Funds, will not be used to pay any interest expenses, carrying charges or other
financing costs or allocation of overhead of AFD. The Plans also provide that
Alliance may use its own resources to finance the distribution of each Fund's
shares.
The Glass-Steagall Act and other applicable laws may limit the ability of a bank
or other depository institution to become an underwriter or distributor of
securities. However, in the opinion of the Funds' management, based on the
advice of counsel, these laws do not prohibit such depository institutions from
providing services for investment companies such as the administrative,
accounting and other services referred to in the Agreements. In the event that a
change in these laws prevented a bank from providing such services, it is
expected that other service arrangements would be made and that shareholders
would not be adversely affected.
- --------------------------------------------------------------------------------
DIVIDENDS, DISTRIBUTIONS
- --------------------------------------------------------------------------------
AND TAXES
- --------------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS
If you receive an income dividend or capital gains distribution in cash you may,
within 120 days following the date of its payment, reinvest the dividend or
distribution in additional shares of the same class of the Fund which paid the
dividend or distribution without charge by returning to Alliance, with
appropriate instructions, the check representing such dividend or distribution.
Thereafter, unless you otherwise specify, you will be deemed to have elected to
reinvest all subsequent dividends and distributions in shares of that Fund.
Each income dividend and capital gains distribution, if any, declared by a Fund
on its outstanding shares will, at the election of each shareholder, be paid in
cash or in additional shares of the same class of shares of that Fund having an
aggregate net asset value as of the payment date of such dividend or
distribution equal to the cash amount of such income dividend or distribution.
Election to receive dividends and distributions in cash or shares is made at the
time shares are initially purchased and may be changed at any time prior to the
record date for a particular dividend or distribution. Cash dividends can be
paid by check or, if the shareholder so elects, electronically via the ACH
network. There is no sales or other charge in connection with the reinvestment
of dividends and capital gains distributions.
While its is the intention of each Fund to distribute to its shareholders
substantially all of each fiscal year's net income and net realized capital
gains, if any, the amount and time of any such dividend or distribution must
necessarily depend upon the realization by such Fund of income and capital gains
from investments. There is no fixed dividend rate, and there can be no assurance
that a Fund will pay any dividends or realize any capital gains. Since REITs pay
distributions based on cash flow, without regard to depreciation and
amortization, it is likely that a portion of the distributions paid to Real
Estate Investment Fund and subsequently distributed to shareholders may be a
nontaxable return of capital. The final determination of the amount of a Fund's
return of capital distributions for the period will be made after the end of
each calendar year.
If you buy shares just before a Fund deducts a distribution from its net asset
value, you will pay the full price for the shares and then receive a portion of
the price back as a taxable distribution.
FOREIGN INCOME TAXES
Investment income received by a Fund from sources within foreign countries may
be subject to foreign income taxes
20
<PAGE>
withheld at the source. To the extent that any Fund is liable for foreign income
taxes withheld at the source, each Fund intends, if possible, to operate so as
to meet the requirements of the Code to "pass through" to the Fund's
shareholders credits for foreign income taxes paid, but there can be no
assurance that any Fund will be able to do so.
U.S. FEDERAL INCOME TAXES
Each Fund intends to qualify to be taxed as a "regulated investment company"
under the Code. To the extent that a Fund distributes its taxable income and net
capital gain to its shareholders, qualification as a regulated investment
company relieves that Fund of federal income taxes on that part of its taxable
income including net capital gains which it pays out to its shareholders.
Dividends out of net ordinary income and distributions of net short-term capital
gains are taxable to the recipient shareholders as ordinary income. In the case
of corporate shareholders, such dividends may be eligible for the
dividends-received deduction, except that the amount eligible for the deduction
is limited to the amount of qualifying dividends received by the Fund. Dividends
received from REITs generally do not constitute qualifying dividends. A
corporation's dividends-received deduction with respect to a dividend will be
disallowed unless the corporation holds shares in the Fund on the ex-dividend
date and for at least 45 other days during the 90-day period beginning 45 days
prior to the ex-dividend date. Furthermore, the dividends-received deduction
will be disallowed to the extent a corporation's investment in shares of a Fund
is financed with indebtedness.
Pursuant to the Taxpayer Relief Act of 1997, two different tax rates apply to
net capital gains--that is, the excess of net gains from capital assets held for
more than one year over net losses from capital assets held for not more than
one year. One rate (generally 28%) applies to net gains on capital assets held
for more than one year but not more than 18 months ("mid-term gains"), and a
second rate (generally 20%) applies to the balance of such net capital gains
("adjusted net capital gains"). Distributions of mid-term gains and adjusted net
capital gains will be taxable to shareholders as such, regardless of how long a
shareholder has held shares in the Fund. Distributions of net capital gains are
not eligible for the dividends-received deduction referred to above.
Distributions received by a shareholder may include nontaxable returns of
capital, which will reduce a shareholder's basis in shares of the Fund. If that
basis is reduced to zero (which could happen if the shareholder does not
reinvest distributions and returns of capital are significant) any further
returns of capital will be taxable as capital gain.
Under the current federal tax law, the amount of an income dividend or capital
gains distribution declared by a Fund during October, November or December of a
year to shareholders of record as of a specified date in such a month that is
paid during January of the following year is includable in the prior year's
taxable income of shareholders that are calendar year taxpayers.
Any dividend or distribution received by a shareholder on shares of a Fund will
have the effect of reducing the net asset value of such shares by the amount of
such dividend or distribution. Furthermore, a dividend or distribution made
shortly after the purchase of such shares by a shareholder, although in effect a
return of capital to that particular shareholder, would be taxable to him or her
as described above. If a shareholder held shares six months or less and during
that period received a distribution of net capital gains, any loss realized on
the sale of such shares during such six-month period would be a long-term
capital loss to the extent of such distribution.
A dividend or capital gains distribution with respect to shares of a Fund held
by a tax-deferred or qualified plan, generally such as an individual retirement
account, 403(b)(7) retirement plan or corporate pension or profit-sharing plan,
generally will not be taxable to the plan. Distributions from such plans will be
taxable to individual participants under applicable tax rules without regard to
the character of the income earned by the qualified plan.
Distributions by a Fund may be subject to state and local taxes. Premier Growth
Fund and Quasar Fund are qualified to do business in the Commonwealth of
Pennsylvania and, therefore, are subject to the Pennsylvania foreign franchise
and corporate net income tax in respect of their business activities in
Pennsylvania. Accordingly, shares of such Funds are exempt from Pennsylvania
personal property taxes. These Funds anticipate continuing such business
activities but reserve the right to suspend them at any time, resulting in the
termination of the exemptions.
A Fund will be required to withhold 31% of any payments made to a shareholder if
the shareholder has not provided a certified taxpayer identification number to
the Fund, or the Secretary of the Treasury notifies a Fund that a shareholder
has not reported all interest and dividend income required to be shown on the
shareholder's Federal income tax return.
Under certain circumstances, if a Fund realizes losses from fluctuations in
currency exchange rates after paying a dividend, all or a portion of the
dividend may subsequently be characterized as a return of capital. See
"Dividends, Distributions and Taxes" in the Statement of Additional Information.
Shareholders will be advised annually as to the tax status of dividends and
capital gains and return of capital distributions. Shareholders are urged to
consult their tax advisers regarding their own tax situation.
- --------------------------------------------------------------------------------
CONVERSION FEATURE
- --------------------------------------------------------------------------------
CONVERSION TO CLASS II SHARES
Class I shares may be held solely through the fee-based program accounts,
employee benefit plans and registered investment advisory or other financial
intermediary relationships described above under "--How to Buy Shares," and by
investment advisory clients of, and certain other persons associated with,
Alliance and its affiliates or the Funds. If (i) a holder of Class I shares
ceases to participate in the fee-based program or plan, or to be associated with
an investment advisor or financial intermediary, in each case that satisfies the
requirements to purchase shares set forth under "--How to Buy Shares" or (ii)
the holder is otherwise no longer eligible to purchase Class I shares as
described in this Prospectus (each, a "Conversion Event"), then
21
<PAGE>
all Class I shares held by the shareholder will convert automatically and
without notice to the shareholder, other than the notice contained in this
Prospectus, to Class II shares of the Fund during the calendar month following
the month in which the Fund is informed of the occurrence of the Conversion
Event.
The failure of a shareholder or a fee-based program to satisfy the minimum
investment requirements to purchase Class I shares will not constitute a
Conversion Event. The conversion would occur on the basis of the relative net
asset values of the two classes and without the imposition of any sales load,
fee or other charge.
- --------------------------------------------------------------------------------
GENERAL INFORMATION
- --------------------------------------------------------------------------------
PORTFOLIO TRANSACTIONS
Consistent with the Conduct Rules of the National Association of Securities
Dealers, Inc., and subject to seeking best price and execution, a Fund may
consider sales of its shares as a factor in the selection of dealers to enter
into portfolio transactions with the Fund.
ORGANIZATION
Alliance Institutional Funds, Inc., is a Maryland corporation organized on
October 3, 1997. It is anticipated that annual shareholder meetings will not be
held; shareholder meetings will be held only when required by federal or state
law. Shareholders have available certain procedures for the removal of
Directors.
A shareholder in a Fund will be entitled to share pro rata with other holders of
the same class of shares all dividends and distributions arising from the Fund's
assets and, upon redeeming shares, will receive the then current net asset value
of the Fund represented by the redeemed shares. The Company is empowered to
establish, without shareholder approval, additional portfolios in the Company,
which may have different investment objectives, and additional classes of shares
in the Funds. If an additional portfolio or class were established in a Fund,
each share of the portfolio or class would normally be entitled to one vote for
all purposes. Generally, shares of each portfolio and class would vote together
as a single class on matters, such as the election of Directors, that affect
each portfolio and class in substantially the same manner. Each class has
identical voting, dividend, liquidation and other rights, except that each class
bears its own transfer agency expenses, Class II shares bear their own
distribution expenses and Class I shares convert to Class II shares under
certain circumstances. Each class of shares votes separately with respect to
matters for which separate class voting is appropriate under applicable law.
Shares are freely transferable, are entitled to dividends as determined by the
Directors and, in liquidation of a Fund, are entitled to receive the net assets
of the Fund. Since this Prospectus sets forth information about all the Funds,
it is theoretically possible that a Fund might be liable for any materially
inaccurate or incomplete disclosure in this Prospectus concerning another Fund.
Based on the advice of counsel, however, the Funds believe that the potential
liability of each Fund with respect to the disclosure in this Prospectus extends
only to the disclosure relating to that Fund. Certain additional matters
relating to a Fund's organization are discussed in its Statement of Additional
Information.
REGISTRAR, TRANSFER AGENT AND DIVIDEND-DISBURSING AGENT
AFS, an indirect wholly-owned subsidiary of Alliance, located at 500 Plaza
Drive, Secaucus, New Jersey 07094, acts as each Fund's registrar, transfer agent
and dividend-disbursing agent for a fee based upon the number of shareholder
accounts maintained for the Funds.
PRINCIPAL UNDERWRITER
AFD, an indirect wholly-owned subsidiary of Alliance, located at 1345 Avenue of
the Americas, New York, New York 10105, is the principal underwriter of shares
of the Funds.
PERFORMANCE INFORMATION
From time to time, the Funds advertise their "total return," which is computed
separately for each class of shares. Such advertisements disclose a Fund's
average annual compounded total return for the periods prescribed by the
Commission. A Fund's total return for each such period is computed by finding,
through the use of a formula prescribed by the Commission, the average annual
compounded rate of return over the period that would equate an assumed initial
amount invested to the value of the investment at the end of the period. For
purposes of computing total return, income dividends and capital gains
distributions paid on shares of a Fund are assumed to have been reinvested when
paid and the maximum sales charges applicable to purchases and redemptions of a
Fund's shares are assumed to have been paid.
A Fund's advertisements may quote performance rankings or ratings of a Fund by
financial publications or independent organizations such as Lipper Analytical
Services, Inc. and Morningstar, Inc. or compare a Fund's performance to various
indices.
ADDITIONAL INFORMATION
This Prospectus and the Statements of Additional Information, which have been
incorporated by reference herein, do not contain all the information set forth
in the Registration Statements filed by the Funds with the Commission under the
Securities Act. Copies of the Registration Statements may be obtained at a
reasonable charge from the Commission or may be examined, without charge, at the
offices of the Commission in Washington, D.C.
This prospectus does not constitute an offering in any state in which such
offering may not lawfully be made.
This prospectus is intended to constitute an offer by each Fund only of the
securities of which it is the issuer and is not intended to constitute an offer
by any Fund of the securities of any other Fund whose securities are also
offered by this prospectus. No Fund intends to make any representation as to the
accuracy or completeness of the disclosure in this prospectus relating to any
other Fund. See "General Information--Organization."
22
<PAGE>
SUBSCRIPTION APPLICATION
- --------------------------------------------------------------------------------
ALLIANCE INSTITUTIONAL FUNDS
(see instructions at the front of the application)
- --------------------------------------------------------------------------------
1. YOUR ACCOUNT REGISTRATION (Please Print)
- --------------------------------------------------------------------------------
|_| INDIVIDUAL OR JOINT ACCOUNT
|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|
Owner's Name (First Name) (MI) (Last Name)
|_|_|_|-|_|_|-|_|_|_|_|
Social Security Number (Required to open account)
|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|
Joint Owner's Name* (First Name) (MI) (Last Name)
*Joint Tenants with right of survivorship unless Alliance Fund Services is
informed otherwise.
|_| GIFT/TRANSFER TO A MINOR
|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|
Custodian - One Name Only (First Name) (MI) (Last Name)
|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|
Minor (First Name) (MI) (Last Name)
|_|_|_|-|_|_|-|_|_|_|_|
Minor's Social Security Number (Required to open account)
Under the State of __________ (Minor's Residence) Uniform Gifts/Transfer to
Minor's Act
|_| TRUST ACCOUNT
|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|
Name of Trustee
|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|
Name of Trust
|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|
Name of Trust (cont'd)
|_|_|_|_|_|_|_|_|_|_|_|_|_|_| |_|_|_|_|_|_|_|_|_|
Trust Dated Tax ID or Social Security Number
(Required to open account)
|_| OTHER
|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|
Name of Corporation, Partnership, Investment Only Retirement Plan,
or other Entity
|_|_|_|_|_|_|_|_|_| |_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|
Tax ID Number Trustee Name (Retirement Plans Only)
- --------------------------------------------------------------------------------
2. YOUR ADDRESS
- --------------------------------------------------------------------------------
|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|
Street
|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|
City State Zip Code
|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|
If Non-U.S., Specify Country
|_|_|_|-|_|_|_|-|_|_|_|_| |_|_|_|-|_|_|_|-|_|_|_|_|
Daytime Phone Evening Phone
I am a: |_| U.S. Citizen |_| Non-Resident Alien |_| Resident Alien
|_| Other
---------------------------------------------------
For Alliance Use Only
---------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
3. YOUR INITIAL INVESTMENT
- --------------------------------------------------------------------------------
The minimum investment is $2 million, which may be placed in any one or more of
the Funds.
I hereby subscribe for shares of the following portfolio of the Alliance
Institutional Funds and elect distribution options as indicated.
DIVIDEND AND CAPITAL GAIN DISTRIBUTION OPTIONS: R REINVEST DISTRIBUTIONS
into my fund account.
- --------------------------
BROKER/DEALER USE ONLY C SEND MY DISTRIBUTIONS IN
WIRE CONFIRM # CASH to the address I
- -------------------------- have provided in Section
2. (Complete Section 4D
- -------------------------- for direct deposit to
your bank account.
Complete Section 4E for
payment to a third
party).
D DIRECT MY DISTRIBUTIONS
TO ANOTHER FUND.
Complete the appropriate
portion of Section 4A to
direct your distributions
(dividends and capital
gains) to another Fund.
- --------------------------------------------------------------------------------
DISTRIBUTIONS
OPTIONS
MAKE ALL CHECKS PAYABLE TO: CLASS OF SHARES *CIRCLE*
ALLIANCE FUND SERVICES ------------------------------ ---------------------
CAPITAL
ALLIANCE FUND NAME CLASS I CLASS II DIVIDENDS GAINS
- --------------------------------------------------------------------------------
Premier Growth Institutional
Fund $ $ ( ) R C D R C D
- --------------------------------------------------------------------------------
Quasar Institutional Fund $ $ R C D R C D
- --------------------------------------------------------------------------------
Real Estate Investment
Institutional Fund $ $ R C D R C D
- --------------------------------------------------------------------------------
TOTAL INVESTMENT $ $
==========================================================
<PAGE>
MY SOCIAL SECURITY (TAX IDENTIFICATION) NUMBER IS: |_|_|_|_|_|_|_|_|_|
- --------------------------------------------------------------------------------
4. YOUR SHAREHOLDER OPTIONS
- --------------------------------------------------------------------------------
60699GEN-EQTY-AC-App
- -----------------------------------------
A. PURCHASES AND REDEMPTIONS VIA EFT
- -----------------------------------------
You can call our toll-free number 1-800-221-5672 and instruct Alliance Fund
Services, Inc. in a recorded conversation to purchase, redeem or exchange shares
for your account. Purchase and redemption requests will be processed via
electronic funds transfer (EFT) to and from your bank account.
Instructions: o Review the information in the Prospectus about telephone
transaction services.
o If you select the telephone purchase or redemption
privilege, you must write "VOID" across the face of a check
from the bank account you wish to use and attach it to
Section 4B of this application.
PURCHASES AND REDEMPTIONS VIA EFT
|_| I hereby authorize Alliance Fund Services, Inc. to effect the purchase
and/or redemption of Fund shares for my account according to my telephone
instructions or telephone instructions from my Broker/Agent, and to
withdraw money or credit money for such shares via EFT from the bank
account I have selected.
In the case of shares purchased by check or EFT, redemption proceeds may
not be made available until the Fund is reasonably assured that the check
has cleared, normally 15 calendar days after the purchase date.
- ------------------------
B. BANK INFORMATION
- ------------------------
This bank account information will be used for:
|_| Distributions (Section 3) |_| Telephone Transactions
(Section 4A)
Please attach a voided check:
- --------------------------------------------------------------------------------
Tape Preprinted Voided Check Here.
We Cannot Establish These Services Without it.
- --------------------------------------------------------------------------------
Your bank must be a member of the National Automated Clearing House Association
(NACHA) in order to have EFT transactions processed to your fund account.
For EFT transactions, the fund requires signatures of bank account owners
exactly as they appear on bank records.
- -----------------------------------
C. THIRD PARTY PAYMENT DETAILS
- -----------------------------------
|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|
Name
|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|
Address - Line 1
|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|
Address - Line 2
|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|
Address - Line 3
<PAGE>
- --------------------------------------------------------------------------------
5. SHAREHOLDER AUTHORIZATION This section MUST be completed
- --------------------------------------------------------------------------------
TELEPHONE EXCHANGES AND REDEMPTIONS BY CHECK
Unless I have checked one or both boxes below, these privileges will
automatically apply, and by signing this application, I hereby authorize
Alliance Fund Services, Inc. to act on my telephone instructions, or on
telephone instructions from any person representing himself to be an authorized
employee of an investment dealer or agent requesting a redemption or exchange on
my behalf. (NOTE: Telephone exchanges may only be processed between accounts
that have identical registrations.) Telephone redemption checks will only be
mailed to the name and address of record; and the address must have no change
within the last 30 days. The maximum telephone redemption amount is $50,000.
This service can be enacted once every 30 days.
|_| I do not elect the telephone exchange service.
|_| I do not elect the telephone redemption by check service.
I CERTIFY UNDER PENALTY OF PERJURY THAT THE NUMBER SHOWN IN SECTION 1 OF THIS
FORM IS MY CORRECT TAX IDENTIFICATION NUMBER OR SOCIAL SECURITY NUMBER AND THAT
I HAVE NOT BEEN NOTIFIED THAT THIS ACCOUNT IS SUBJECT TO BACKUP WITHHOLDING.
By selecting any of the above telephone privileges, I agree that neither the
Fund nor Alliance, Alliance Fund Distributors, Inc., Alliance Fund Services,
Inc. or other Fund Agent will be liable for any loss, injury, damage or expense
as a result of acting upon telephone instructions purporting to be on my behalf,
that the Fund reasonably believes to be genuine, and that neither the Fund nor
any such party will be responsible for the authenticity of such telephone
instructions. I understand that any or all of these privileges may be
discontinued by me or the Fund at any time. I understand and agree that the Fund
reserves the right to refuse any telephone instructions and that my investment
dealer or agent reserves the right to refuse to issue any telephone instructions
I may request.
For non-residents only: Under penalties of perjury, I certify that to the best
of my knowledge and belief, I qualify as a foreign person as indicated in
Section 2.
I am of legal age and capacity and have received and read the Prospectus and
agree to its terms.
THE INTERNAL REVENUE SERVICE DOES NOT REQUIRE YOUR CONSENT TO ANY PROVISION OF
THIS DOCUMENT OTHER THAN THE CERTIFICATION REQUIRED TO AVOID BACK-UP
WITHHOLDING.
- -------------------------------- ----------------------------
Signature Date
- -------------------------------- ---------------------------- ----------------
Signature Date Acceptance Date
- --------------------------------------------------------------------------------
DEALER/AGENT AUTHORIZATION For selected Dealers or Agents ONLY.
- --------------------------------------------------------------------------------
We hereby authorize Alliance Fund Services, Inc. to act as our agent in
connection with transactions under this authorization form; and we guarantee the
signature(s) set forth in Section 5, as well as the legal capacity of the
shareholder.
- ------------------------------------------- -----------------------------------
Dealer/Agent Firm Authorized Signature
- ------------------------------------------- -------------- -------------------
Representative First Name MI Last Name
- --------------------------------------------------------------------------------
Representative Number
- --------------------------------------------------------------------------------
Branch Office Address
- --------------------------------------------------------------------------------
City State Zip Code
( )
- --------------------------------------------------------------------------------
Branch Number Branch Phone
<PAGE>
ALLIANCE SUBSCRIPTION APPLICATION
- --------------------------------------------------------------------------------
THE ALLIANCE INSTITUTIONAL FUNDS
PREMIER GROWTH QUASAR INSTITUTIONAL REAL ESTATE INVESTMENT
INSTITUTIONAL FUND FUND INSTITUTIONAL FUND
- --------------------------------------------------------------------------------
INFORMATION AND INSTRUCTIONS
- --------------------------------------------------------------------------------
TO OPEN YOUR NEW ALLIANCE ACCOUNT...
Please complete the application and mail it to:
ALLIANCE FUND SERVICES, INC.
P.O. BOX 1520
Secaucus, New Jersey 07096-1520
For certified or overnight deliveries, send to:
ALLIANCE FUND SERVICES, INC.
500 PLAZA DRIVE
SECAUCUS, NEW JERSEY 07094
- -----------
SECTION 1 YOUR ACCOUNT REGISTRATION (REQUIRED)
- -----------
Complete one of the available choices. To ensure proper tax reporting to the
IRS:
-- Individuals, Joint Tenants and Gift/Transfer to a Minor:
o Indicate your name(s) exactly as it appears on your social
security card.
-- Trust/Other:
o Indicate the name of the entity exactly as it appeared on the
notice you received from the IRS when your Employer
Identification number was assigned.
- -----------
SECTION 2 YOUR ADDRESS (REQUIRED)
- -----------
Complete in full.
- -----------
SECTION 3 YOUR INITIAL INVESTMENT (REQUIRED)
- -----------
For each fund in which you are investing: 1) Write the dollar amount of your
initial purchase and the class of shares 2) Circle a distribution option for
your dividends 3) Circle a distribution option for your capital gains. All
distributions (dividends and capital gains) will be reinvested into your fund
account unless you direct otherwise. If you want distributions sent directly to
your bank account, then you must complete Section 4B and attach a voided check
for that account. If you want your distributions sent to a third party you must
complete Section 4C.
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SECTION 4 YOUR SHAREHOLDER OPTIONS (COMPLETE ONLY THOSE OPTIONS YOU WANT)
- -----------
A. TELEPHONE TRANSACTIONS VIA EFT - Complete this option if you would like to
be able to transact via telephone between your fund account and your bank
account.
B. BANK INFORMATION - If you have elected any options that involve
transactions between your bank account and your fund account or have
elected cash distribution options and would like the payments sent to your
bank account, please tape a voided check of the account you wish to use to
this section of the application.
C. THIRD PARTY PAYMENT DETAILS - If you have chosen cash distributions and/or
a Systematic Withdrawal Plan and would like the payments sent to a person
and/or address other than those provided in section 1 or 2, complete this
option.
- -----------
SECTION 5 SHAREHOLDER AUTHORIZATION (REQUIRED)
- -----------
All owners must sign. If it is a custodial, corporate, or trust account, the
custodian, an authorized officer, or the trustee respectively must sign.
- -----------
- -----------
IF WE CAN ASSIST YOU IN ANY WAY, PLEASE DO NOT HESITATE TO CALL US AT:
(800) 221-5672.
