<PAGE>
As filed with the Securities and Exchange
Commission on October 6, 2000
File Nos. 333-37177
811-08403
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
__________________________
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No.
Post-Effective Amendment No. 6
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT
COMPANY ACT OF 1940
Amendment No. 7
_______________________________
Alliance Institutional Funds, Inc.
(Exact Name of Registrant as Specified in Charter)
1345 Avenue of the Americas, New York, New York 10105
(Address of Principal Executive Office) (Zip Code)
Registrant's Telephone Number, including Area
Code:(212) 969-1000
_____________________________
EDMUND P. BERGAN, JR.
Alliance Capital Management L.P.
1345 Avenue of the Americas
New York, New York 10105
(Name and address of agent for service)
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Copies of communications to:
Thomas G. MacDonald
Seward & Kissel LLP
One Battery Park Plaza
New York, New York 10004
It is proposed that this filing will become effective (check
appropriate box)
x immediately upon filing pursuant to paragraph (b)
on ________ pursuant to paragraph (b)
60 days after filing pursuant to paragraph (a)(1)
on (date) pursuant to paragraph (a)(1)
75 days after filing pursuant to paragraph (a)(2)
on (date) pursuant to paragraph (a)(2) of Rule 485.
If appropriate, check the following box:
This post-effective amendment designates a new
effective date for a previously filed post-effective
amendment.
This Post-Effective Amendment No. 6 relates solely to
the Technology Institutional Fund and the International
Premier Growth Institutional Fund of the Registrant. No
information contained in the Registrant's Registration
Statement relating to the Premier Growth Institutional Fund,
the Real Estate Investment Institutional Fund, the Quasar
Institutional Fund or the Special Equity Institutional Fund
of the Registrant is amended or superseded hereby.
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Alliance Institutional Funds Prospectus and Application
October 16, 2000
o Alliance International Premier Growth
Institutional Fund
Alliance Institutional Funds, Inc. provides a selection of equity investment
alternatives to institutional and other investors through qualifying programs
who seek capital growth or high total return.
The Securities and Exchange Commission has not approved or disapproved these
securities or passed upon the adequacy of this Prospectus. Any representation to
the contrary is a criminal offense.
Alliance Capital [LOGO](R)
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Investment Products Offered
-----------------------------
o Are Not FDIC Insured
o May Lose Value
o Are Not Bank Guaranteed
-----------------------------
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TABLE OF CONTENTS
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Page
RISK/RETURN SUMMARY ...................................................... 3
FEES AND EXPENSES OF THE FUND ............................................ 5
GLOSSARY ................................................................. 6
DESCRIPTION OF THE FUND .................................................. 6
Investment Objective, Principal Policies and
Risk Considerations ................................................... 7
Description of Additional Investment Practices ........................... 8
Additional Risk Considerations ........................................... 12
MANAGEMENT OF THE FUND ................................................... 13
PURCHASE AND SALE OF SHARES .............................................. 13
How The Fund Values Its Shares ........................................... 13
How To Buy Shares ........................................................ 13
How To Exchange Shares ................................................... 13
How To Sell Shares ....................................................... 14
DIVIDENDS, DISTRIBUTIONS AND TAXES ....................................... 14
DISTRIBUTION ARRANGEMENTS ................................................ 15
GENERAL INFORMATION ...................................................... 16
Alliance International Premier Growth Institutional Fund's investment adviser is
Alliance Capital Management L.P., a global investment manager providing
diversified services to institutions and individuals through a broad line of
investments including more than 100 mutual funds.
RISK/RETURN SUMMARY
The following is a summary of certain key information about Alliance
International Premier Growth Institutional Fund. The Summary describes the
Fund's objective, principal investment strategies, principal risks and fees.
This Summary includes a short discussion of some of the principal risks of
investing in the Fund.
A more detailed description of the Fund, including the risks associated with
investing in the Fund, can be found further back in this Prospectus. Please be
sure to read this additional information BEFORE you invest. As with all
investments, you may lose money by investing in the Fund.
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OBJECTIVE:
The Fund's investment objective is long-term growth of capital by investing
predominantly in equity securities of a limited number of carefully selected,
non-U.S. companies that are judged likely to achieve superior earnings growth.
Current income is incidental to the Fund's objective.
PRINCIPAL INVESTMENT STRATEGIES:
The Fund invests primarily in equity securities of comparatively large,
high-quality, non-U.S. companies. The Fund invests in at least four, and usually
considerably more, countries. Normally, the Fund invests no more than 15% of its
total assets in issuers of any one foreign country, but may invest up to 35% of
its total assets in each of the United Kingdom and Japan and up to 25% of its
total assets in each of Canada, France, Germany, Italy, The Netherlands and
Switzerland. Unlike more typical international equity funds, the Fund focuses on
a relatively small number of intensely researched companies. Alliance selects
the Fund's investments from a research universe of approximately 900 companies.
Normally, the Fund invests in about 40 companies, with the 30 most highly
regarded of these companies usually constituting approximately 70%, and often
more, of the Fund's net assets. The Fund invests in companies with market values
generally in excess of $10 billion. Alliance may take advantage of market
volatility to adjust the Fund's portfolio positions. To the extent consistent
with local market liquidity considerations, the Fund strives to capitalize on
apparently unwarranted price fluctuations, both to purchase or increase
positions on weakness and to sell or reduce overpriced holdings. The Fund
invests primarily in equity securities and also may invest in convertible
securities.
PRINCIPAL RISKS:
Among the principal risks of investing in the Fund are market risk, foreign risk
and currency risk. In addition, since the Fund invests in a smaller number of
securities than many other international equity funds, changes in the value of a
single security may have a more significant effect, either negative or positive,
on the Fund's net asset value.
BAR CHART AND PERFORMANCE TABLE:
There is no bar chart or performance table for the Fund because it has not
completed a full calendar year of operations.
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FEES AND EXPENSES OF THE FUND
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This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.
SHAREHOLDER FEES (fees paid directly from your investment)
Maximum Front-end or Deferred Sales Charge (Load)
(as a percentage of original purchase price or redemption
proceeds, whichever is lower) None
ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from fund assets) and
EXAMPLES
The Examples are to help you compare the cost of investing in the Fund with the
cost of investing in other funds. They assume that you invest $10,000 in the
Fund for the time periods indicated and then redeem all your shares at the end
of those periods. They also assume that your investment has a 5% return each
year, that the Fund's operating expenses stay the same and that all dividends
and distributions are reinvested. Your actual costs may be higher or lower.
<TABLE>
<CAPTION>
Operating Expenses Examples
------------------------------------------------- -----------------------------------------
<S> <C> <C> <C> <C> <C>
Class I Class II Class I Class II
------- -------- ------- --------
Management fees 1.00% 1.00% After 1 Year $ 92 $ 132
12b-1 fees None 0.30% After 3 Years (b) $ 287 $ 391
Other expenses .60% .60%
---- ----
Total Fund operating
expenses 1.60% 1.90%
==== ====
Waiver and/or Expense
Reimbursement (a) (.70) (.70)
---- ----
Net Expenses .90% 1.20%
==== ====
</TABLE>
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(a) Reflects Alliance's contractual waiver of a portion of its advisory fee
and/or reimbursement of a portion of the Fund's operating expenses. This
waiver extends through the Fund's current fiscal year and may be extended
by Alliance for additional one-year terms.
(b) These example assume that Alliance's agreement to waive management fees
and/or to bear operating expenses is not extended beyond its initial
period.
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GLOSSARY
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This Prospectus uses the following terms.
TYPES OF SECURITIES
Convertible securities are fixed-income securities that are convertible into
common stock.
Debt securities are bonds, debentures, notes, bills, loans, other direct debt
instruments, and other fixed, floating, and variable rate debt obligations, but
do not include convertible securities.
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.
Fixed-income securities are debt securities and dividend-paying preferred
stocks, including floating rate and variable rate instruments.
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.
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.
Non-U.S. Company is an entity that (i) is organized under the laws of a foreign
country, (ii) has its principal place of business in foreign countries, and
(iii) issues equity or debt securities that are traded principally on a stock
exchange in a foreign country.
Rule 144A securities are securities that may be resold pursuant to Rule 144A of
the Securities Act.
U.S. Government securities are securities issued or guaranteed by the United
States Government, its agencies or instrumentalities.
RATING AGENCIES AND RATED SECURITIES
Duff & Phelps is Duff & Phelps Credit Rating Co.
Fitch is Fitch IBCA, Inc.
Moody's is Moody's Investors Service, Inc.
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.
S&P is Standard & Poor's Ratings Services.
S&P 500 is S&P's 500 Composite Stock Index, a widely recognized unmanaged index
of market activity.
OTHER
1940 Act is the Investment Company Act of 1940, as amended.
Code is the Internal Revenue Code of 1986, as amended.
Commission is the Securities and Exchange Commission.
Exchange is the New York Stock Exchange.
Securities Act is the Securities Act of 1933, as amended.
--------------------------------------------------------------------------------
DESCRIPTION OF THE FUND
--------------------------------------------------------------------------------
This section of the Prospectus provides a more complete description of the
Fund's investment objectives, principal strategies and principal risks. Of
course, there can be no assurance that the Fund will achieve its investment
objective.
Please note that:
o Additional discussion of the Fund's investments, including the risks of
investments, can be found in the discussion under Description of
Additional Investment Practices following this section.
o The description of the Fund's risks may include risks discussed in the
Risk/Return Summary above. Additional information about risks of investing
in the Fund can be found in the discussion under Additional Risk
Considerations.
o Additional descriptions of the Fund's strategies, investments, and risks
can be found in the Fund's Statement of Additional Information or SAI.
o The Fund's investment objective is "fundamental" and cannot be changed
without a shareholder vote, and, except as noted, the Fund's investment
policies are not fundamental and thus can be changed without a shareholder
vote. Where an investment policy or restriction has a percentage
limitation, such limitation is applied at the time of investment. Changes
in the market value of securities in the Fund's portfolio after they are
purchased by the Fund will not cause the Fund to be in violation of such
limitation.
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INVESTMENT OBJECTIVE, PRINCIPAL POLICIES AND RISK CONSIDERATIONS
Investment Objective
The Fund seeks long-term capital appreciation by investing predominately in the
equity securities of a limited number of carefully selected non-U.S. companies
that are judged likely to achieve superior earnings growth. Current income is
incidental to that objective.
How the Fund Pursues Its Objective
As a matter of fundamental policy, the Fund will invest under normal
circumstances at least 85% of its total assets in equity securities. The Fund
makes investments based upon their potential for capital appreciation.
In the main, the Fund's investments will be in comparatively large, high-quality
companies. Normally, about 40 companies will be represented in the Fund's
portfolio, and the 30 most highly regarded of these companies usually will
constitute approximately 70%, and often more, of the Fund's net assets. The Fund
thus differs from more typical international equity mutual funds by focusing on
a relatively small number of intensively researched companies. The Fund is
designed for investors seeking to accumulate capital over time. Because of
market risks inherent in any investment, the selection of securities on the
basis of their appreciation possibilities cannot ensure against possible loss in
value. There is, of course, no assurance that the Fund's investment objective
will be met.
Alliance expects the market capitalization of the companies represented in the
Fund's portfolio will generally be in excess of $10 billion.
Within the investment framework of the Fund, Alliance's Large Cap Growth Group,
headed by Alfred Harrison, Alliance's Vice Chairman, has responsibility for
managing the Fund's portfolio. As discussed below, in selecting the Fund's
portfolio investments Alliance's Large Cap Growth Group will follow a
structured, disciplined research and investment process that is essentially
similar to that which it employs in managing the Alliance Premier Growth Fund.
In managing the Fund's assets, Alliance's investment strategy will emphasize
stock selection and investment in the securities of a limited number of issuers.
Alliance depends heavily upon the fundamental analysis and research of its large
global equity research team situated in numerous locations around the world. Its
global equity analysts follow a research universe of approximately 900
companies. As one of the largest multinational investment management firms,
Alliance has access to considerable information concerning the companies in its
research universe, an in-depth understanding of the products, services, markets
and competition of these companies, and a good knowledge of their management.
Research emphasis is placed on the identification of companies whose superior
prospective earnings growth is not fully reflected in current market valuations.
Alliance constantly adds to and deletes from this universe as fundamentals and
valuations change. Alliance's global equity analysts rate companies in three
categories. The performance of each analyst's ratings is an important
determinant of his or her incentive compensation. The equity securities of
"one-rated" companies are expected to significantly outperform the local market
in local currency terms. All equity securities purchased for the Fund's
portfolio will be selected from the universe of approximately 100 "one-rated"
companies. As noted above, the Fund usually invests approximately 70% of its net
assets in the approximately 30 of the most highly regarded of these companies.
The Fund's portfolio emphasis upon particular industries or sectors will be a
by-product of the stock selection process rather than the result of assigned
targets or ranges.
The Fund diversifies its investments among at least four, and usually
considerably more, countries. No more than 15% of the Fund's total assets will
be invested in issuers in any one foreign country, except that the Fund may
invest up to 35% of its total assets in each of the United Kingdom and Japan and
25% of its total assets in issuers in each of Canada, France, Germany, Italy,
The Netherlands and Switzerland. Within these limits, geographic distribution of
the Fund's investments among countries or regions also will be a product of the
stock selection process rather than a predetermined allocation. To the extent
that the Fund concentrates its assets within one region or country, the Fund may
be subject to any special risks associated with that region or country. During
such times, the Fund would be subject to a correspondingly greater risk of loss
due to adverse political or regulatory developments or an economic downturn,
within that country. While the Fund may engage in currency hedging programs in
periods in which Alliance perceives extreme exchange rate risk, the Fund
normally will not make significant use of currency hedging strategies.
In the management of the Fund's investment portfolio, Alliance will seek to
utilize market volatility judiciously (assuming no change in company
fundamentals) to adjust the Fund's portfolio positions. To the extent consistent
with local market liquidity considerations, the Fund will strive to capitalize
on apparently unwarranted price fluctuations, both to purchase or increase
positions on weakness and to sell or reduce overpriced holdings. Under normal
circumstances, the Fund will remain substantially fully invested in equity
securities and will not take significant cash positions for market timing
purposes. Rather, through "buying into declines" and "selling into strength,"
Alliance seeks superior relative returns over time.
The Fund also may:
o invest up to 20% of its total assets in convertible securities;
o invest up to 20% of its total assets in rights or warrants;
o write covered call and put options, purchase put and call options on
securities of the types in which it is permitted to invest and on
exchange-traded index options, and write uncovered options for cross
hedging purposes;
o enter into contracts for the purchase or sale for future delivery of
fixed-income securities or foreign currencies, or contracts based on
financial indices, including any index of
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U.S. Government securities, foreign government securities, or common stock
and may purchase and write options on such future contracts;
o purchase and write put and call options on foreign currencies for hedging
purposes;
o purchase or sell forward contracts;
o enter into standby commitment agreements;
o enter into forward commitments;
o enter into currency swaps for hedging purposes;
o make short sales of securities or maintain short positions of no more than
5% on its net assets as collateral for short sales;
o make securities loans of portfolio securities of up to 30% of its total
assets; and
o enter into repurchase agreements for U.S. Government securities.
Because the Fund invests in a smaller number of securities than many other
equity funds, your investment also has the risk that changes in value of a
single security may have a more significant effect, either negative or positive,
on the Fund's net asset value.
RISK CONSIDERATIONS
The value of an investment in the Fund changes with the values of the Fund's
investments. Many factors can affect those values. In the following summary, we
describe the principal risks that may affect the Fund's portfolio as a whole.
The Fund could be subject to additional principal risks because the types of
investments made by the Fund can change over time. This Prospectus has
additional descriptions of types of investments that appear in bold type in the
discussions under Description of Additional Investment Practices or Additional
Risk Considerations. These sections also include more information about the
Fund, its investments, and related risks. Among the principal risks of investing
in the Fund are:
o Market Risk. This is the risk that the value of the Fund's investments
will fluctuate as the stock or bond markets fluctuate and that prices
overall will decline over short or longer-term periods.
o Capitalization Risk. This is the risk of investments in
small-capitalization companies. Investments in small-cap companies tend to
be more volatile than investments in large-cap or mid-cap companies. The
Fund's investments in smaller capitalization stocks may have additional
risks because these companies often have limited product lines, markets,
or financial resources.
o Foreign Risk. This is the risk of investments in issuers located in
foreign countries. Investments in foreign securities particularly may
experience more rapid and extreme changes in value than investments solely
in securities of U.S. companies. This is because the securities markets of
many foreign countries are relatively small, with a limited number of
companies representing a small number of industries. Additionally, foreign
securities issuers are usually not subject to the same degree of
regulation as U.S. issuers. Reporting, accounting, and auditing standards
of foreign countries differ, in some cases significantly, from U.S.
standards. Also, nationalization, expropriation or confiscatory taxation,
currency blockage, or political changes or diplomatic developments could
adversely affect the Fund's investments in a foreign country. In the event
of nationalization, expropriation, or other confiscation, the Fund could
lose its entire investment.
o Currency Risk. This is the risk that fluctuations in the exchange rates
between the U.S. Dollar and foreign currencies may negatively affect the
value of the Fund's investments. Investments in foreign securities are
subject to this risk.
o Focused Portfolio Risk. This is the risk that changes in the value of a
single security may have a more significant effect, either negative or
positive, on the Fund's net asset value.
o Management Risk. The Fund is subject to management risk because it is an
actively managed investment portfolio. Alliance will apply its investment
techniques and risk analyses in making investment decisions for the Fund,
but there is no guarantee that its decisions will produce the intended
result.
DESCRIPTION OF ADDITIONAL INVESTMENT PRACTICES
This section describes the Fund's investment practices and associated risks.
Unless otherwise noted, the Fund's use of any of these practices was specified
in the previous section.
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.
Currency Swaps. Currency swaps involve the individually negotiated exchange by
the Fund with another party of a series of payments in specified currencies. A
currency swap may involve the delivery at the end of the exchange period of a
substantial amount of one designated currency in exchange for the other
designated currency. Therefore, the entire principal value of a currency swap is
subject to the risk that the other party to the swap will default on its
contractual delivery obligations. The Fund will not enter into any currency swap
unless the credit quality of the unsecured senior debt or the claims-paying
ability of the counterparty is rated in the highest
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rating category of at least one nationally recognized rating organization at the
time of entering into the transaction. If there is a default by the counterparty
to the transaction, the Fund will have contractual remedies under the
transaction agreements.
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.
The use of forward commitments enables the Fund to protect against anticipated
changes in interest rates and prices. For instance, in periods of rising
interest rates and falling bond prices, the 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, the Fund 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. If, however, Alliance were to forecast incorrectly
the direction of interest rate movements, the 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 the 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 the 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 the Fund if, as a result,
the Fund's aggregate commitments under the transactions would be more than 30%
of its total assets. In the event the other party to a forward commitment
transaction were to default, the Fund might lose the opportunity to invest money
at favorable rates or to dispose of securities at favorable prices.
Illiquid Securities. The Fund will limit its investments in illiquid securities
to 15% of its net assets. 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, the Fund may
not be able to realize their full value upon sale. Alliance will monitor the
illiquidity of the Fund's investments in such securities. Rule 144A securities
will not be treated as "illiquid" for purposes of this limit on investments if
they meet certain liquidity guidelines established by the Fund or the Adviser.
The Fund may not be able to readily sell securities for which there is no ready
market. Such securities are unlike securities that are traded in the open market
and can be expected to be sold immediately if the market is adequate. The sale
price of illiquid securities may be lower or higher than Alliance's most recent
estimate of their fair value. Generally, less public information is available
about the issuers of such securities than about companies whose securities are
traded on an exchange. To the extent that these securities are foreign
securities, there is no law in many of the countries in which the 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.
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 from the
securities. The Fund may invest any cash collateral in portfolio securities and
earn additional income or receive an agreed-upon amount of income from a
borrower who has delivered equivalent collateral. The 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. The Fund may pay reasonable
finders', administrative and custodial fees in connection with a loan.
Options on Securities. 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 the 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
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equal to or less than that of the call option it has written. A put option
written by the 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.
A call option is for cross-hedging purposes if the Fund does not own the
underlying security, and is designed to provide a hedge against a decline in
value in another security which the Fund owns or has the right to acquire. The
Fund would write a call option for cross-hedging purposes, instead of writing a
covered call option, when the premium to be received from the cross-hedge
transaction would exceed that which would be received from writing a covered
call option, while at the same time achieving the desired hedge.
In purchasing an option, the 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 the 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). The 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 the Fund's portfolio turnover rate,
especially during periods when market prices of the underlying securities
appreciate.
Options purchased or written by the Fund in negotiated transactions are illiquid
and it may not be possible for the Fund to effect a closing transaction at an
advantageous time.
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.
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 the Fund could be required to
purchase or sell foreign currencies at disadvantageous exchange rates and incur
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 the Fund's position, it may forfeit the entire amounts
of the premium plus related transaction costs. See the Fund's SAI for further
discussion of the use, risks, and costs of options on foreign currencies.
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 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.
The Fund may purchase options on futures contracts written or purchased that are
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.
The Fund will not 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 100% of its total assets.
Repurchase Agreements. The Fund may enter into 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 the 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, the
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, the
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.
Rights and Warrants. The Fund will invest in rights or warrants only if Alliance
deems the underlying equity securities themselves appropriate 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
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<PAGE>
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 of these factors. If the market price of the underlying security is
below the exercise price of 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.
Short Sales. A short sale is effected by selling a security that the 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
the Fund contemporaneously owns or has the right to obtain securities identical
to those sold short without payment. If the price of the security sold short
increases between the time of the short sale and the time the Fund replaces the
borrowed security, the Fund will incur a loss; conversely, if the price
declines, the Fund will realize a capital gain. Certain special federal income
tax considerations may apply to short sales entered into by the Fund.
Standby Commitment Agreements. Standby commitment agreements commit the 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. The
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. Investments in standby
commitments will be limited so that the aggregate purchase price of the
securities subject to the commitments will not exceed 50% with respect to the
Fund's assets at the time of making the commitment. The Fund will not enter into
a standby commitment with a remaining term in excess of 45 days.
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, the 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.
Future Developments. The 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.
General. The successful use of the investment practices described above 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, the 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 limits for 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.
The 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 for an
option purchased or written by the 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 Fund will
be able to utilize these instruments effectively. In addition, the Fund's
ability to engage in options and futures transactions may be limited by tax
considerations.
Portfolio Turnover. The Fund is actively managed and, in some cases in response
to market conditions, the Fund's portfolio turnover rate may exceed 100%. A
higher rate of portfolio turnover increases brokerage and other expenses, which
must be borne by the Fund and its shareholders. Higher portfolio turnover also
may result in the realization of substantial net short-term capital gains,
which, when distributed, are taxable to shareholders.
Temporary Defensive Position. For temporary defensive purposes, the Fund may
reduce its position in equity securities and invest in, without limit, certain
types of short-term, liquid, high grade or high quality 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. Such securities also may include
short-term, foreign-currency denominated securities of the type mentioned above
issued by foreign governmental entities, companies, and supranational
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<PAGE>
organizations. While the Fund invest for temporary defensive purposes, it may
not meet its investment objective.
ADDITIONAL RISK CONSIDERATIONS
Investment in the Fund involves the special risk considerations described below.
Currency Considerations. Substantially all the assets of the Fund are invested
in foreign securities which may be denominated in foreign currencies. The Fund
receives a corresponding portion of its revenues in foreign currencies.
Therefore, the dollar equivalent of its net assets, distributions, and income
will be adversely affected by reductions in the value of certain foreign
currencies relative to the U.S. Dollar. If the value of the foreign currencies
in which the Fund receives its income falls relative to the U.S. Dollar between
receipt of the income and the making of Fund distributions, the Fund may be
required to liquidate securities in order to make distributions if it has
insufficient cash in U.S. Dollars to meet distribution requirements that the
Fund must satisfy to qualify as a regulated investment company for federal
income tax purposes. Similarly, if an exchange rate declines between the time
the Fund incurs expenses in U.S. Dollars and the time cash expenses are paid,
the amount to the currency required to be converted into U.S. Dollars in order
to pay expenses in U.S. Dollars could be greater than the equivalent amount of
such expenses in the currency at the time they were incurred. In light of these
risks, the Fund may engage in currency hedging transactions, as describe above,
which involve certain special risks.
Foreign Securities. 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, the Fund's portfolio may experience greater price
volatility and significantly lower liquidity than a portfolio invested solely in
equity securities of U. S. 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.
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 that 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 the 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.
The Fund also could be adversely affected by delays in, or a refusal to grant,
any required governmental approval for repatriation, as well as by the
application of other restrictions on investment. Investing in local markets may
require the Fund to adopt special procedures that may involve additional costs
to the Fund. These factors may affect the liquidity of the Fund's investments in
any country and Alliance will monitor the effect of any such factor or factors
on the 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 and the
Fund's investments. In the event of expropriation, nationalization, or other
confiscation, the 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.
U.S. and Foreign Taxes. The Fund's investment in foreign securities may be
subject to taxes withheld at the source on dividend or interest payments.
Foreign taxes paid by the 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.
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--------------------------------------------------------------------------------
MANAGEMENT OF THE FUND
--------------------------------------------------------------------------------
INVESTMENT ADVISER AND PORTFOLIO MANAGER
The Fund's Adviser is Alliance Capital Management, L.P. ("Alliance"), 1345
Avenue of the Americas, New York, New York 10105. Alliance is a leading
international adviser supervising client accounts with assets as of June 30,
2000 totaling more than $388 billion (of which more than $185 billion
represented assets of investment companies). As of June 30, 2000, Alliance
managed retirement assets for many of the largest public and private employee
benefit plans (including 29 of the nation's FORTUNE 100 companies), for public
employee retirement funds in 33 states, for investment companies, and for
foundations, endowments, banks and insurance companies worldwide. The 52
registered investment companies managed by Alliance, comprising 122 separate
investment portfolios, currently have more than 6.1 million shareholder
accounts.
The persons primarily responsible for the day-to-day management of the Fund are
Alfred Harrison, Vice Chairman of Alliance Capital Management Corporation
("ACMC"), with which he has been associated with since prior to 1995 and Thomas
Kamp, Senior Vice President of ACMC; with which he has been associated since
prior to 1995.
Alliance provides investment advisory services and order placement facilities
for the Fund. For these advisory services, the Fund pays Alliance a fee at an
annualized rate of 1.00% of the Fund's average daily net assets. The fee will be
accrued daily and paid monthly.
Performance of Similarly Managed Investment Companies. The Fund is identical in
its investment objectives, policies and practices to Alliance International
Premier Growth Fund (a "Retail Fund"), a currently existing open-end management
investment company managed by Alliance. The 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 the Retail Fund for the 1 year and since inception periods
through December 31, 1999. As of December 31, 1999, the net assets in the
corresponding Retail Fund totaled approximately $71,752,405. The following
performance data for the Retail Fund is net of actual fees incurred by that Fund
for the relevant periods and is based on the Retail Fund's Class A shares with
imposition of the maximum 4.25% sales charge.
Year Ended Since Inception Period
12/31/99 Ended 12/31/99
---------- ----------------------
Retail Fund. 40.89% 20.85%
----- -----
--------------------------------------------------------------------------------
* Inception date for Alliance International Premier Growth Fund--March 3,
1998.
--------------------------------------------------------------------------------
PURCHASE AND SALE OF SHARES
--------------------------------------------------------------------------------
How The Fund Values Its Shares
The price of the Fund's shares is based on net asset value or NAV, which is
calculated at 4:00 p.m., Eastern time, each day the Exchange is open for
business. To calculate NAV, the Fund's assets are valued and totaled,
liabilities are subtracted, and the balance, called net assets, is divided by
the number of shares outstanding. The Fund values its securities 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 Fund's directors
believe accurately reflect fair market value.
Your order for purchase, sale, or exchange of shares is priced at the next NAV
calculated after your order is accepted by the Fund.
How To Buy Shares
You may purchase the Fund's shares through your financial representative at NAV.
The Fund's shares are not subject to any initial or contingent sales charges.
See "Distribution Arrangements" for a description of who can buy each class of
shares of the Fund.
The minimum initial investment in the Alliance Institutional Funds is $2
million, which may be invested in any one or more of its 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. The minimum initial investment may be waived in the
discretion of the Fund.
The Fund is required to withhold 31% of taxable dividends, capital gains
distributions, and redemptions paid to shareholders who have not provided the
Fund with their certified taxpayer identification number. To avoid this, you
must provide your correct Tax Identification Number (Social Security Number for
most investors) on your account application.
The Fund may refuse any order to purchase shares. In particular, the Fund
reserves 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 To Exchange Shares
You may exchange your shares of the Fund for the same class of shares of any
other Alliance Institutional Fund and for Class A shares of any other Alliance
Mutual Fund. Exchanges of shares are made at the next-determined NAV without
sales or service charges. You may request an exchange by mail or telephone. You
must call by 4:00 p.m., Eastern time, to receive that day's NAV. The Fund may
change, suspend, or terminate the exchange service on 60 days' notice.
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<PAGE>
How To Sell Shares
You may "redeem" your shares (i.e., sell your shares to the Fund) on any day the
Exchange is open, either directly or through your financial representative. Your
sales price will be the next-determined NAV after the Fund receives your sales
request in proper form. Normally, proceeds will be sent to you within seven
days. If you recently purchased your shares by check or electronic funds
transfer, your redemption payment may be delayed until the Fund is reasonably
satisfied that the check or electronic funds transfer has been collected (which
may take up to 15 days).
o Selling Shares Through Your Financial Representative
Your financial representative must receive your sales request by 4:00 p.m.,
Eastern time, and submit it to the Fund by 5:00 p.m., Eastern time, for you to
receive that day's NAV. Your financial representative is responsible for
submitting all necessary documentation to the Fund and may charge you for this
service. If you are in doubt about what documents are required by your fee-based
program or other program, you should contact your financial representative.
o Selling Shares Directly To The Fund
By Mail:
--Send a signed letter of instruction or stock power form, along with
certificates, to:
Alliance Fund Services, Inc.
P.O. Box 1520
Secaucus, NJ 07096-1520
800-221-5672
--For your protection, a bank, a member firm of a national stock exchange
or other eligible guarantor institution must guarantee signatures. 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. If you have any questions about these procedures, contact
AFS.
By Telephone:
--You may redeem your shares for which no stock certificates have been
issued by telephone request. Call AFS at 800-221-5672 with instructions
on how you wish to receive your sale proceeds.
--A telephone redemption request must be received by 4:00 p.m., Eastern
time, for you to receive that day's NAV.
--If you have selected electronic funds transfer in your Subscription
Application, the redemption proceeds will be sent directly to your bank.
Otherwise, the proceeds will be mailed to you.
--Redemption requests by electronic funds transfer may not exceed $100,000
and redemption requests by check may not exceed $50,000 per day (except
for certain omnibus accounts).
--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.
--------------------------------------------------------------------------------
DIVIDENDS, DISTRIBUTIONS
AND TAXES
--------------------------------------------------------------------------------
The Fund's income dividend and capital gains distribution, if any, declared by
the 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 the Fund. If
paid in additional shares, the shares will have an aggregate NAV as of the
payment date of the dividend or distribution equal to the cash amount of the
income dividend or distribution. You may make an election to receive dividends
and distributions in cash or shares at the time you purchase shares. Your
election can be changed at any time prior to the record date for a particular
dividend or distribution. Cash dividends can be paid by check or, at your
election, electronically via the ACH network. There is no sales or other charge
on with the reinvestment of Fund 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 without charge
by returning to Alliance, with appropriate instructions, the check representing
the dividend or distribution. Thereafter, unless you otherwise specify, you will
be deemed to have elected to reinvest all subsequent dividends and distributions
in shares of the Fund.
The Fund expects that distributions will consist either of net income or
long-term capital gains. For federal income tax purposes, the Fund's dividend
distributions of net income (or short-term capital gains) will be taxable to you
as ordinary income. Any long-term capital gains distributions may be taxable to
you as long-term capital gains. The Fund's distributions also may be subject to
certain state and local taxes.
While it is the intention of the 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 will
depend upon the realization by the Fund of income and capital gains from
investments. There is no fixed dividend rate and there can be no assurance that
the Fund will pay any dividends or realize any capital gains.
Investment income received by the Fund from sources within foreign countries may
be subject to foreign income taxes withheld at the source. To the extent that
the Fund is liable for foreign income taxes withheld at the source, the Fund
intends,
14
<PAGE>
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 the Fund will be able to do so. Furthermore, a
shareholder's ability to claim a foreign tax credit or deduction for foreign
taxes paid by the Fund may be subject to certain limitations imposed by the
Code, as a result of which a shareholder may not be permitted to claim a full
credit or deductions for the amount of such taxes.
Under certain circumstances, if the Fund realizes losses (e.g., from
fluctuations in currency exchange rates) after paying a dividend, all or a
portion of the distributions may subsequently be characterized as a return of
capital. Returns of capital are generally nontaxable, but 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 a capital gain.
If you buy shares just before the Fund deducts a distribution from its NAV, you
will pay the full price for the shares and then receive a portion of the price
back as a taxable distribution.
The sale or exchange of Fund shares is a taxable transaction for federal income
tax purposes.
Each year shortly after December 31, the Fund will send you tax information
stating the amount and type of all its distributions for the year. Consult your
tax adviser about the federal, state, and local tax consequences in your
particular circumstances.
--------------------------------------------------------------------------------
DISTRIBUTION ARRANGEMENTS
--------------------------------------------------------------------------------
Share Classes. The Fund offers two classes of shares.
Class I Shares
You may purchase and hold shares of Class I solely:
o through accounts established under a fee-based program sponsored and
maintained by a registered broker-dealer or other financial intermediary
and approved by the Fund's principal underwriter, Alliance Fund
Distributors, Inc. or AFD;
o through employee plans that have at least $10 million in assets;
o as an interest in a "qualified State tuition program" (within the meaning
of section 529 of the Code) approved by AFD;
o if you are an investment advisory client of, or are a certain other person
associated with, Alliance and its affiliates or the Fund; and
o 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 AFD 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.
Class II Shares.
You may purchase and hold shares of Class II solely:
o if you are an investor participating in a wrap-fee or other similar
program offered by a registered broker-dealer or other financial
intermediary that meets certain requirements established by AFD; and
o through employee plans that have at least $10 million in assets.
For more detailed information about who may purchase and hold the shares of the
Fund, see the Fund's SAI. Fee-based and other programs may impose different
requirements with respect to investment in the shares of the Fund than described
above.
Asset-based Sales Charge or Rule 12b-1 Fees. The Fund has adopted a plan under
Commission Rule 12b-1 that allows the Fund to pay asset-based sales charges or
distribution and service fees for the distribution and sale of its Class II
shares. The amount of these fees is .30% of the Fund's aggregate average daily
net assets. Because these fees are paid out of the Fund's assets on an on-going
basis, over time these fees will increase the cost of your investment and may
cost you more than paying other types of sales fees.
Conversion Feature. As described above, Class I shares may be held solely
through the fee-based program accounts, employee benefit plans, qualified State
tuition programs and registered investment advisory or other financial
intermediary relationships, and by investment advisory clients of, and certain
other persons associated with, Alliance and its affiliates or the Fund. If a
holder of Class I shares (i) ceases to participate in the fee-based program or
plan, or to be associated with an investment advisor or financial intermediary
or (ii) is otherwise no longer eligible to purchase Class I shares as described
in this Prospectus (each, a "Conversion Event"), then all Class I shares held by
the shareholder will convert automatically to Class II shares of the Fund. The
Fund will provide the shareholder with at least 30 days advance notice of such
conversion.
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 NAVs
of the two classes and without the imposition of any sales load, fee or other
charge.
Other. 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 the
Fund that are different from those described in this Prospectus. A transaction,
service, administrative or other similar fee may be charged by
15
<PAGE>
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.
--------------------------------------------------------------------------------
GENERAL INFORMATION
--------------------------------------------------------------------------------
Under unusual circumstances, the Fund may suspend redemptions or postpone
payment for up to seven days or longer, as permitted by federal securities law.
The Fund 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 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.
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For more information about the Fund, the following documents are available upon
request:
o Statement of Additional Information (SAI)
The Fund has an SAI, which contains more detailed information about the Fund,
including its operations and investment policies. The Fund's SAI is incorporated
by reference into (and are legally part of) this Prospectus.
You may request a free copy of the SAI, or make other shareholder inquiries
concerning the Fund, by contacting your broker or other financial intermediary,
or by contacting Alliance:
By Mail: c/o Alliance Fund Services, Inc.
P.O. Box 1520
Secaucus, NJ 07096-1520
By Phone: For Information: (800) 221-5672
For Literature: (800) 227-4618
Or you may view or obtain these documents from the Commission:
o Call the Commission at 1-202-942-8090 for information on the operation of
the Public Reference Room.
o Reports and other information about the Fund are available on the EDGAR
Database on the Commission's Internet site at http://www.sec.gov
o Copies of the information may be obtained, after paying a duplicating fee,
by electronic request at [email protected], or by writing the
Commission's Public Reference Section, Washington, DC 20549-0102
You also may find more information about Alliance and the Funds on the Internet
at: www.Alliancecapital.com
SEC FILE NO. 811-08403
<PAGE>
(LOGO) ALLIANCE INSTITUTIONAL FUNDS, INC.
- ALLIANCE TECHNOLOGY INSTITUTIONAL FUND
- ALLIANCE INTERNATIONAL PREMIER GROWTH
INSTITUTIONAL FUND
_________________________________________________________________
c/o Alliance Fund Services, Inc.
P.O. Box 1520, Secaucus, New Jersey 07096-1520
Toll Free (800) 221-5672
For Literature: Toll Free (800) 227-4618
_________________________________________________________________
STATEMENT OF ADDITIONAL INFORMATION
October 6, 2000
_________________________________________________________________
This Statement of Additional Information is not a
prospectus but supplements and should be read in conjunction with
the Prospectus dated October 6, 2000 (the "Prospectus") for
Alliance Institutional Funds, Inc. - Alliance Technology
Institutional Fund and Alliance International Premier Growth
Institutional Fund. Copies of the Prospectus may be obtained by
contacting Alliance Fund Services, Inc. at the address or the
"For Literature" telephone number shown above.
TABLE OF CONTENTS
PAGE
DESCRIPTION OF THE FUNDS....................................
TECHNOLOGY INSTITUTIONAL FUND...........................
INTERNATIONAL PREMIER GROWTH INSTITUTIONAL FUND.........
MANAGEMENT OF THE FUNDS.....................................
EXPENSES OF THE FUNDS.......................................
PURCHASE OF SHARES..........................................
REDEMPTION AND REPURCHASE OF SHARES.........................
SHAREHOLDER SERVICES........................................
NET ASSET VALUE.............................................
DIVIDENDS, DISTRIBUTIONS AND TAXES..........................
PORTFOLIO TRANSACTIONS......................................
GENERAL INFORMATION.........................................
APPENDIX A: Certain Investment Practices...................A-1
APPENDIX B: Additional Information About Japan.............B-1
APPENDIX C: Additional Information About the
United Kingdom.................................C-1
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(R) This registered service mark used under license from the
owner, Alliance Capital Management L.P.
<PAGE>
_________________________________________________________________
DESCRIPTION OF THE FUNDS
_________________________________________________________________
Alliance Institutional Funds, Inc. (the "Company") is an
open-end management investment company whose shares are offered
in separate series referred to herein as "Funds." Each Fund is a
separate pool of assets constituting, in effect, a separate fund
with its own investment objective and policies. A shareholder in
a Fund will be entitled to his or her pro-rata share of all
dividends and distributions arising from that Fund's assets and,
upon redeeming shares of that Fund, the shareholder will receive
the then current net asset value of the applicable class of
shares of that Fund. (See "Purchase and Sale of Shares" in the
Prospectus.) The Company is empowered to establish, without
shareholder approval, additional Funds which may have different
investment objectives.
The Company currently has six portfolios: Alliance
Technology Institutional Fund and Alliance International Premier
Growth Institutional Fund (the "Funds"), which are described in
this Statement of Additional Information, and Alliance Special
Equity Institutional Fund, Alliance Premier Growth Institutional
Fund, Alliance Quasar Institutional Fund and Alliance Real Estate
Investment Institutional Fund, which are each described in a
separate Statement of Additional Information, copies of which can
be obtained by contacting Alliance Fund Services, Inc. at the
address or the "For Literature" telephone number shown on the
cover of this Statement of Additional Information.
Investments will be made based upon their potential for
capital appreciation. Because of the market risks inherent in
any investment, the selection of securities on the basis of their
appreciation possibilities cannot ensure against possible loss in
value, and there is, of course, no assurance that a Fund's
investment objective will be met.
The following investment policies and restrictions
supplement those set forth in the Prospectus. Except as
otherwise noted, the Funds' investment policies described below
are not designated "fundamental policies" within the meaning of
the Investment Company Act of 1940, as amended, (the "1940 Act")
and may be changed by the Board of Directors of the Company (the
"Board of Directors" or the "Directors") without shareholder
approval. However, the Funds will not change their investment
policies without contemporaneous written notice to shareholders.
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TECHNOLOGY INSTITUTIONAL FUND
GENERAL. The investment objective of the Fund is to
emphasize growth of capital, and investments will be made based
upon their potential for capital appreciation. Therefore,
current income will be incidental to the objective of capital
growth. However, subject to the limitations referred to under
"Options" below, the Fund may seek to earn income through the
writing of listed call options. In seeking to achieve its
objective, the Fund will invest primarily in securities of
companies which are expected to benefit from technological
advances and improvements (i.e., companies which use technology
extensively in the development of new or improved products or
processes). The Fund will have at least 80% of its assets
invested in the securities of such companies except when the Fund
assumes a temporary defensive position. There obviously can be
no assurance that the Fund's investment objective will be
achieved, and the nature of the Fund's investment objective and
policies may involve a somewhat greater degree of risk than would
be present in a more conservative investment approach.
How the Fund Pursues Its Objective
The Fund expects under normal circumstances to have
substantially all of its assets invested in equity securities
(common stocks or securities convertible into common stocks or
rights or warrants to subscribe for or purchase common stocks).
When business or financial conditions warrant, the Fund may take
a defensive position and invest without limit in investment grade
debt securities or preferred stocks or hold its assets in cash.
The Fund at times may also invest in debt securities and
preferred stocks offering an opportunity for price appreciation
(e.g., convertible debt securities).
Critical factors which will be considered in the
selection of securities will include the economic and political
outlook, the value of individual securities relative to other
investment alternatives, trends in the determinants of corporate
profits, and management capability and practices. Generally
speaking, disposal of a security will be based upon factors such
as (i) actual or potential deterioration of the issuer's earning
power which the Fund believes may adversely affect the price of
its securities, (ii) increases in the price level of the security
or of securities generally which the Fund believes are not fully
warranted by the issuer's earning power, and (iii) changes in the
relative opportunities offered by various securities.
Companies in which the Fund will invest include those
whose processes, products or services are anticipated by Alliance
Capital Management L.P., the Fund's investment adviser (the
"Adviser"), to be significantly benefited by the utilization or
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commercial application of scientific discoveries or developments
in such fields as, for example, aerospace, aerodynamics,
astrophysics, biochemistry, chemistry, communications, computers,
conservation, electricity, electronics (including radio,
television and other media), energy (including development,
production and service activities), geology, health care,
mechanical engineering, medicine, metallurgy, nuclear physics,
oceanography and plant physiology.
The Fund will endeavor to invest in companies where the
expected benefits to be derived from the utilization of
technology will significantly enhance the prospects of the
company as a whole (including, in the case of a conglomerate,
affiliated companies). The Fund's investment objective permits
the Fund to seek securities having potential for capital
appreciation in a variety of industries.
Certain of the companies in which the Fund invests may
allocate greater than usual amounts to research and product
development. The securities of such companies may experience
above-average price movements associated with the perceived
prospects of success of the research and development programs.
In addition, companies in which the Fund invests could be
adversely affected by lack of commercial acceptance of a new
product or products or by technological change and obsolescence.
Additional Investment Policies and Practices
Options. In seeking to attain its investment goal of
capital appreciation, the Fund may supplement customary
investment practices by writing and purchasing call options
listed on one or more national securities exchanges and
purchasing listed put options, including put options on market
indices. Upon payment of a premium, a put option gives the buyer
of such option the right to deliver a specified number of shares
of a stock to the writer of the option on or before a fixed date,
at a predetermined price. A call option gives the purchaser of
the option, upon payment of a premium, the right to call upon the
writer to deliver a specified number of shares of a specified
stock on or before a fixed date, at a predetermined price,
usually the market price at the time the contract is negotiated.
The writing of call options will involve a potential
loss of opportunity to sell securities at higher prices. In
exchange for the premium received, the writer of a fully
collateralized call option assumes the full downside risk of the
securities subject to such option. In addition, the writer of
the call gives up the gain possibility of the stock protecting
the call. Generally the opportunity for profit from the writing
of options is higher, and consequently the risks are greater,
when the stocks involved are lower priced or volatile, or both.
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While an option that has been written is in force, the maximum
profit that may be derived from the optioned stock is the premium
less brokerage commissions and fees. The actual return earned by
the Fund from writing a call option depends on factors such as
the amount of the transaction costs and whether or not the option
is exercised. Option premiums vary widely depending primarily on
supply and demand.
Writing and purchasing options are highly specialized
activities and entail greater than ordinary investment risks. If
an option purchased by the Fund is not sold and is permitted to
expire without being exercised, its premium would be lost by the
Fund. When calls written by the Fund are exercised, the Fund
will be obligated to sell stocks below the current market price.
The Fund will not write a call unless the Fund at all
times during the option period owns either (a) the optioned
securities, or securities convertible into or carrying rights to
acquire the optioned securities, or (b) an offsetting call option
on the same securities. It is the Fund's policy not to write a
call option if the premium to be received by the Fund in
connection with such option would not produce an annualized
return of at least 15% of the then current market value of the
securities subject to option (without giving effect to
commissions, stock transfer taxes and other expenses of the Fund
which are deducted from premium receipts). The actual return
earned by the Fund from writing a call depends on factors such as
the amount of the transaction costs and whether or not the option
is exercised. Calls written by the Fund will ordinarily be sold
either on a national securities exchange or through put and call
dealers, most, if not all, of whom are members of a national
securities exchange on which options are traded, and will in such
cases be endorsed or guaranteed by a member of a national
securities exchange or qualified broker-dealer, which may be
Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ"), an
affiliate of the Adviser. The endorsing or guaranteeing firm
requires that the option writer (in this case the Fund) maintain
a margin account containing either corresponding stock or other
equity as required by the endorsing or guaranteeing firm.
In purchasing a call option, the Fund would be in a
position to realize a gain if, during the option period, the
price of the security increased over the strike price by an
amount in excess of the premium paid and commissions payable on
exercise. It would realize a loss if the price of the security
declined or remained the same or did not increase over the strike
price during the period by more than the amount of the premium
and commissions payable on exercise. By purchasing a put option,
the Fund would be in a position to realize a gain if, during the
option period, the price of the security declined below the
strike price by an amount in excess of the premium paid and
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commissions payable on exercise. It would realize a loss if the
price of the security increased or remained the same or did not
decrease below the strike price during that period by more than
the amount of the premium and commissions payable on exercise.
If a put or call option purchased by the Fund were permitted to
expire without being sold or exercised, its premium would
represent a realized loss to the Fund.
If the Fund desires to sell a particular security from
its portfolio on which it has written an option, the Fund seeks
to effect a "closing purchase transaction" prior to, or
concurrently with, the sale of the security. A closing purchase
transaction is a transaction in which an investor who is
obligated as a writer of an option terminates his obligation by
purchasing an option of the same series as the option previously
written. (Such a purchase does not result in the ownership of an
option.) The Fund may enter into a closing purchase transaction
to realize a profit on a previously written option or to enable
the Fund to write another option on the underlying security with
either a different exercise price or expiration date or both.
The Fund realizes a profit or loss from a closing purchase
transaction if the cost of the transaction is less or more than
the premium received from the writing of the option. The Fund
may not, however, effect a closing purchase transaction with
respect to an option after it has been notified of the exercise
of such option.
The Fund may dispose of an option which it has purchased
by entering into a "closing sale transaction" with the writer of
the option. A closing sale transaction terminates the obligation
of the writer of the option and does not result in the ownership
of an option. The Fund realizes a profit or loss from a closing
sale transaction if the premium received from the transaction is
more than or less than the cost of the option.
The Fund 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. The Fund will not sell any call option if
such sale would result in more than 10% of the Fund's assets
being committed to call options written by the Fund which, at the
time of sale by the Fund, have a remaining term of more than 100
days. The aggregate cost of all outstanding options purchased
and held by the Fund will at no time exceed 10% of the Fund's
total assets.
The Fund may purchase or write options on securities of
the types in which it is permitted to invest in privately
negotiated (i.e., over-the-counter) transactions. The Fund will
effect such transactions only with investment dealers and other
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financial institutions (such as commercial banks or savings and
loan institutions) deemed creditworthy by the Adviser, and the
Adviser has adopted procedures for monitoring the
creditworthiness of such entities.
Options on Market Indices. Options on securities
indices are similar to options 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.
Through the purchase of listed index options, the Fund
could achieve many of the same objectives as through the use of
options on individual securities. Price movements in the Fund's
portfolio securities probably will not correlate perfectly with
movements in the level of the index and, therefore, the Fund
would bear a risk of loss on index options purchased by it if
favorable price movements of the hedged portfolio securities do
not equal or exceed losses on the options or if adverse price
movements of the hedged portfolio securities are greater than
gains realized from the options.
Warrants. The Fund may invest up to 10% of its total
assets in warrants which entitle the holder to buy equity
securities at a specific price for a specific period of time.
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 securities which
may be purchased nor do they represent any rights in the assets
of the issuing company. Also, the value of a warrant does not
necessarily change with the value of the underlying securities
and a warrant ceases to have value if it is not exercised prior
to the expiration date.
Foreign Securities. Investing in securities of
non-United States companies which are generally denominated in
foreign currencies involves certain considerations comprising
both risk and opportunity not typically associated with investing
in United States companies. These considerations include changes
in exchange rates and exchange control regulation, political and
social instability, expropriation, imposition of foreign taxes,
less liquid markets and less available information than are
generally the case in the United States, higher transaction
costs, less government supervision of exchanges and brokers and
issuers, difficulty in enforcing contractual obligations, lack of
uniform accounting and auditing standards and greater price
volatility. Additional risks may be incurred in investing in
particular countries. The Fund will not purchase a foreign
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security if such purchase at the time thereof would cause 10% or
more of the value of the Fund's total assets to be invested in
foreign securities.
Restricted Securities. The Fund may invest in
restricted securities and in other assets having no ready market
if such purchases at the time thereof would not cause more than
10% of the value of the Fund's net assets to be invested in all
such restricted or not readily marketable assets. This
limitation does not apply to liquid restricted securities, such
as those eligible for resale under Rule 144A of the Securities
Act of 1933, as amended (the "Securities Act"). Restricted
securities may be sold only in privately negotiated transactions,
in a public offering with respect to which a registration
statement is in effect under the Securities Act or pursuant to
Rules 144 or 144A promulgated under such Act. Where registration
is required, the Fund may be obligated to pay all or part of the
registration expense, and a considerable period may elapse
between the time of the decision to sell and the time the Fund
may be permitted to sell a security under an effective
registration statement. If during such a period adverse market
conditions were to develop, the Fund might obtain a less
favorable price than prevailed when it decided to sell.
Restricted securities will be valued in such manner as the Board
of Directors of the Fund, in good faith, deems appropriate to
reflect their fair market value.
Lending of Portfolio Securities. The Fund may seek to
increase income by lending portfolio securities. Under present
regulatory policies, such loans are required to be secured
continuously by collateral consisting of liquid assets maintained
in an amount at least equal to the market value of the securities
loaned. The Fund has the right to call such a loan and obtain
the securities loaned or equivalent securities at any time on
five days' notice. During the existence of a loan, the Fund will
receive the income earned on investment of the collateral. The
aggregate value of the securities loaned by the Fund may not
exceed 30% of the value of the Fund's total assets.
Portfolio Turnover. The investment activities described
above are likely to result in the Fund engaging in a considerable
amount of trading of securities held for less than one year.
Accordingly, it can be expected that the Fund will have a higher
turnover rate than might be expected from investment companies
which invest substantially all of their funds on a long-term
basis. Correspondingly heavier brokerage commission expenses can
be expected to be borne by the Fund. Management anticipates that
the Fund's annual rate of portfolio turnover will not be in
excess of 100% in future years. A 100% annual turnover rate
would occur, for example, if all the stocks in the Fund's
portfolio were replaced once in a period of one year.
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Within this basic framework, the policy of the Fund is
to invest in any company and industry and in any type of security
which are believed to offer possibilities for capital
appreciation. Investments may be made in well-known and
established companies as well as in new and unseasoned companies.
Since securities fluctuate in value due to general economic
conditions, corporate earnings and many other factors, the shares
of the Fund will increase or decrease in value accordingly, and
there can be no assurance that the Fund will achieve its
investment goal or be successful.
Fundamental Investment Policies
The following restrictions may not be changed without
approval of a majority of the outstanding voting securities of
the Fund, which means the vote of (i) 67% or more of the shares
represented at a meeting at which more than 50% of the
outstanding shares are represented or (ii) more than 50% of the
outstanding shares, whichever is less.
To maintain portfolio diversification and reduce
investment risk, as a matter of fundamental policy, the 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) securities issued or guaranteed as to principal or interest
by the U.S. Government or its agencies or instrumentalities
("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 immediately after and as a result of such purchase (a) the
value of the holdings of the Fund in the securities of such
issuer exceeds 25% of the value of the Fund's total assets, or
(b) the Fund owns more than 25% of the outstanding securities of
any one class of securities of such issuer;
(iii) concentrate its investments in any one industry;
(iv) invest in the securities of any issuer which has a
record of less than three years of continuous operation
(including the operation of any predecessor) if such purchase at
the time thereof would cause 10% or more of the total assets of
the Fund to be invested in the securities of such issuer or
issuers;
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(v) make short sales of securities or maintain a short
position or write put options;
(vi) mortgage, pledge or hypothecate or otherwise
encumber its assets, except as may be necessary in connection
with permissible borrowings mentioned in investment restriction
(xiv) listed below;
(vii) purchase the securities of any other investment
company or investment trust, except when such purchase is part of
a merger, consolidation or acquisition of assets;
(viii) purchase or sell real property (including limited
partnership interests but excluding readily marketable interests
in real estate investment trusts or readily marketable securities
of companies which invest in real estate) commodities or
commodity contracts;
(ix) purchase participations or other direct interests
in oil, gas, or other mineral exploration or development
programs;
(x) participate on a joint or joint and several basis
in any securities trading account;
(xi) invest in companies for the purpose of exercising
control;
(xii) purchase securities on margin, but it may obtain
such short-term credits from banks as may be necessary for the
clearance of purchases and sales of securities;
(xiii) make loans to other persons, except that the Fund
may lend portfolio securities in accordance with applicable law.
The acquisition of investment securities or other investment
instruments shall not be deemed the making of a loan;
(xiv) issue senior securities (except to the extent that
securities lending may be considered senior securities) or borrow
money 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;
(xv) act as an underwriter of securities of other
issuers, except that the Fund may acquire restricted or not
readily marketable securities under circumstances where, if sold,
the Fund might be deemed to be an underwriter for purposes of the
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Securities Act (the Fund will not invest more than 10% of its net
assets in aggregate in restricted securities and not readily
marketable securities);
(xvi) purchase or retain the securities of any issuer if,
to the knowledge of the Fund's management, those officers and
directors of the Fund, and those employees of the Adviser, who
each owns beneficially more than one-half of 1% of the
outstanding securities of such issuer together own more than 5%
of the securities of such issuer; or
(xvii) 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.
Whenever any investment policy or restriction states a
minimum or maximum percentage of the Fund's assets which may be
invested in any security or other asset, it is intended that such
minimum or maximum percentage limitation be determined
immediately after and as a result of the Fund's acquisition of
such security or other asset. Accordingly, any later increase or
decrease in percentage beyond the specified limitations resulting
from a change in values or net assets will not be considered a
violation of this percentage limitation. In the event that the
aggregate of restricted and not readily marketable securities
exceeds 10% of the Fund's net assets, the management of the Fund
will consider whether action should be taken to reduce the
percentage of such securities.
In connection with the qualification or registration of
the Fund's shares for sale under the securities laws of certain
states, the Fund has agreed, in addition to the foregoing
investment restrictions, that it will not invest in the
securities of any issuer which has a record of less than three
years of continuous operation (including the operation of any
predecessor) if such purchase at the time thereof would cause
more than 5% of the value of the Fund's total assets to be
invested in the securities of such issuer or issuers. The Fund
may not purchase or sell real property (including limited
partnership interests but excluding readily marketable interests
in real estate investment trusts, or readily marketable
securities of companies which invest in real estate), commodities
or commodity contracts. In addition, the Fund may not invest in
mineral leases.
INTERNATIONAL PREMIER GROWTH INSTITUTIONAL FUND
GENERAL. Alliance International Premier Growth
Institutional Fund seeks long-term capital appreciation by
investing predominately in the equity securities of a limited
number of carefully selected non-U.S. companies that are judged
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likely to achieve superior earnings growth. As a matter of
fundamental policy, the Fund will invest under normal
circumstances at least 85% of its total assets in equity
securities. The Fund makes investments based upon their
potential for capital appreciation. Current income is incidental
to that objective.
For additional information on the use, risks and costs
of options, futures contracts, stock index futures, options on
futures contracts and options on foreign currencies, see
Appendix A.
The Fund may invest up to 35% of its assets in each of
Japan and the United Kingdom. For additional information
concerning Japan and the United Kingdom, see Appendices B and C,
respectively.
Short Sales. A short sale is effected by selling a
security that the 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 the
Fund contemporaneously owns or has the right to obtain securities
identical to those sold short without payment. Pursuant to the
Taxpayer Relief Act of 1997, if the Fund has unrealized gain with
respect to a security and enters into a short sale with respect
to such security, the Fund generally will be deemed to have sold
the appreciated security and thus will recognize gain for tax
purposes. The Fund has adopted a non-fundamental investment
policy that it will not make a short sale if as a result more
than 5% of its 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 the Fund replaces the
borrowed security, the Fund will incur a loss; conversely, if the
price declines, the Fund will realize a gain.
Future Developments. The Fund may, following written
notice to its shareholders, take advantage of other investment
practices which are not at present contemplated for use by the
Fund or which currently are not available but which may be
developed, to the extent such investment practices are both
consistent with the Fund's investment objective and legally
permissible for the Fund. Such investment practices, if they
arise, may involve risks which exceed those involved in the
activities described above.
Certain Fundamental Investment Policies. The following
restrictions, which supplement those set forth in the Prospectus,
may not be changed without approval by the vote of a majority of
the Fund's outstanding voting securities, which means the
affirmative vote of the holders of (i) 67% or more or the shares
represented at a meeting at which more than 50% of the
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outstanding shares are represented, or (ii) more than 50% of the
outstanding shares, whichever is less. Whenever any investment
restriction states a maximum percentage of the Fund's assets
which may be invested in any security or other asset, it is
intended that such maximum percentage limitation be determined
immediately after and as a result of the Fund's acquisition of
such securities or other assets. Accordingly, any later
increases or decreases in percentage beyond the specified
limitation resulting from a change in values or net assets will
not be considered a violation.
The Fund may not:
(i) invest 25% or more of its total assets in securities
of issuers conducting their principal business activities in the
same industry, except that this restriction does not apply to
U.S. Government securities;
(ii) issue senior securities (except to the extent that
securities lending may be considered senior securities) or borrow
money 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;
(iii) pledge, hypothecate, mortgage or otherwise
encumber its assets, except to secure permitted borrowings;
(iv) make loans to other persons, except that the Fund
may lend portfolio securities in accordance with applicable law.
The acquisition of investment securities or other investment
instruments shall not be deemed the making of a loan;
(v) participate on a joint or joint and several basis in
any securities trading account;
(vi) invest in companies for the purpose of exercising
control;
(vii) make short sales of securities or maintain a short
position, unless not more than 25% of the Fund's net assets
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(taken at market value) is held as collateral for such sales at
any one time;* or
(viii) (a) purchase or sell real estate except that it
may purchase and sell securities of companies that deal in real
estate or interests therein; (b) purchase or sell commodities or
commodity contracts including futures contracts (except foreign
currencies, foreign currency options and futures, options and
futures on securities and securities indices and forward
contracts or contracts for the future acquisition or delivery of
securities and foreign currencies and related options on futures
contracts and similar contracts); (c) purchase securities on
margin, except for such short-term credits as may be necessary
for the clearance of transactions; and (d) act as an underwriter
of securities, except that the Fund may acquire restricted
securities under circumstances in which, if such securities were
sold, the Fund might be deemed to be an underwriter for purposes
of the Securities Act of 1933, as amended (the "Securities Act").
_________________________________________________________________
MANAGEMENT OF THE FUNDS
_________________________________________________________________
Adviser
The Funds' investment adviser, Alliance Capital
Management L.P. (the "Adviser"), 1345 Avenue of the Americas, New
York, New York 10105, is a leading international investment
adviser managing client accounts with assets as of June 30, 2000
totaling more than $388 billion (of which more than $185 billion
represented the assets of investment companies). As of June 30,
2000, the Adviser managed retirement assets for many of the
largest public and private employee benefit plans (including 29
of the nations' FORTUNE 100 companies), for public employee
retirement funds in 33 states, for investment companies, and for
foundations, endowments, banks and insurance companies worldwide.
The 52 registered investment companies managed by the Adviser,
comprising 122 separate investment portfolios, currently have
approximately 6.1 million shareholder accounts.
____________________
* The Fund has adopted a non-fundamental investment policy
that it will not make a short sale of securities if as a
result more than 5% of its net assets would be held as
collateral for short sales.
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Alliance Capital Management Corporation ("ACMC") is the
general partner of the Adviser and a wholly owned subsidiary of
The Equitable Life Assurance Society of the United States
("Equitable"). Equitable, one of the largest life insurance
companies in the United States, is the beneficial owner of an
approximately 55.4% partnership interest in the Adviser.
Alliance Capital Management Holding L.P. ("Alliance Holding")
owns an approximately 41.9% partnership interest in the
Adviser.** Equity interests in Alliance Holding are traded on
the New York Stock Exchange in the form of units. Approximately
98% of such interests are owned by the public and management or
employees of the Adviser and approximately 2% are owned by
Equitable. Equitable is a wholly owned subsidiary of AXA
Financial, Inc. ("AXA Financial"), a Delaware corporation whose
shares are traded on the New York Stock Exchange. AXA Financial
serves as the holding company for the Adviser, Equitable and
Donaldson, Lufkin & Jenrette, Inc., an integrated investment and
merchant bank. As of June 30, 1999, AXA, a French insurance
holding company, owned approximately 58.2% of the issued and
outstanding shares of common stock of AXA Financial.
Under the Advisory Agreement between the Company and the
Adviser (the "Advisory Agreement"), the Adviser furnishes advice
and recommendations with respect to each Fund's portfolio of
securities and investments and provides persons satisfactory to
the Board of Directors to act as officers and employees of the
Company. Such officers and employees may be employees of the
Adviser or its affiliates.
The Adviser is, under the Advisory Agreement,
responsible for certain expenses incurred by the Funds,
including, for example, office facilities and certain
administrative services, and any expenses incurred in promoting
the sale of Funds shares (other than the portion of the
promotional expenses borne by each Fund in accordance with an
effective plan pursuant to Rule 12b-1 under the 1940 Act, and the
costs of printing Company prospectuses and other reports to
____________________
** Until October 29, 1999, Alliance Holding served as the
investment adviser to the Fund. On that date, Alliance
Holding reorganized by transferring its business to the
Adviser. Prior thereto, the Adviser had no material
business operations. One result of the reorganization was
that the Advisory Agreement, then between the Fund and
Alliance Holding, was transferred to the Adviser by means
of a technical assignment, and ownership of Alliance Fund
Distributors, Inc. and Alliance Fund Services, Inc. the
Fund's principal underwriter and transfer agent,
respectively, also was transferred to the Adviser.
15
<PAGE>
shareholders and fees related to registration with the Commission
and with state regulatory authorities).
The Funds have, under the Advisory Agreement, assumed
the obligation for payment of all of their other expenses. As to
the obtaining of services other than those specifically provided
to each Fund by the Adviser, each Fund may utilize personnel
employed by the Adviser or by other subsidiaries of Equitable.
Each Fund may employ its own personnel or contract for services
to be performed by third parties. In such event, the services
will be provided to each Fund at cost and the payments
specifically approved by the Board of Directors.
The Advisory Agreement became effective as to the Funds
on July 20, 2000, having been approved by the unanimous vote,
cast in person, of the Directors (including the Directors who are
not parties to the Advisory Agreement or interested persons, as
defined by the 1940 Act, of any such party) at a meeting called
for that purpose held on that date, and by the Company's initial
shareholder of each Fund on November 3, 1997.
The Advisory Agreement will continue in effect only so
long as its continuance is specifically approved annually by a
vote of a majority of each Fund's outstanding voting securities
or by the Board of Directors, including in either case, approval
by a majority of the Directors who are not parties to the
Advisory Agreement or interested persons of any such party as
defined by the 1940 Act.
The Advisory Agreement is terminable without penalty by
a vote of a majority of each Fund's outstanding voting securities
or by a vote of a majority of the Directors on 60 days' written
notice, or by the Adviser on 60 days' written notice, and will
automatically terminate in the event of its assignment. The
Advisory Agreement provides that in the absence of willful
misfeasance, bad faith or gross negligence on the part of the
Adviser, or of reckless disregard of its obligations thereunder,
the Adviser shall not be liable for any action or failure to act
in accordance with its duties thereunder.
Certain other clients of the Adviser may have investment
objectives and policies similar to those of the Funds. The
Adviser may, from time to time, make recommendations which result
in the purchase or sale of a particular security by other of its
clients simultaneously with the Funds. If transactions on behalf
of more than one client during the same period increase the
demand for securities being purchased or the supply of securities
being sold, there may be an adverse effect on price or quantity.
It is the policy of the Adviser to allocate advisory
16
<PAGE>
recommendations and the placing of orders in a manner which is
deemed equitable by the Adviser to the accounts involved,
including the Funds. When two or more of the clients of the
Adviser (including the Funds) are purchasing or selling the same
security on a given day from the same broker-dealer, such
transactions may be averaged as to price.
The Adviser may act as an investment adviser to other
persons, firms or corporations, including investment companies,
and is investment adviser to AFD Exchange Reserves, The Alliance
Fund, Inc., Alliance All-Asia Investment Fund, Inc., Alliance
Balanced Shares, Inc., Alliance Bond Fund, Inc., Alliance Capital
Reserves, Alliance Disciplined Value Fund, Inc., Alliance Global
Dollar Government Fund, Inc., Alliance Global Small Cap Fund,
Inc., Alliance Global Strategic Income Trust, Inc., Alliance
Government Reserves, Alliance Greater China '97 Fund, Inc.,
Alliance Health Care Fund, Inc., Alliance High Yield Fund, Inc.,
Alliance Growth and Income Fund, Inc., Alliance Institutional
Reserves, Inc., Alliance International Fund, Alliance
International Premier Growth Fund, Inc., Alliance Limited
Maturity Government Fund, Inc., Alliance Money Market Fund,
Alliance Mortgage Securities Income Fund, Inc., Alliance Multi-
Market Strategy Trust, Inc., Alliance Municipal Income Fund,
Inc., Alliance Municipal Income Fund II, Alliance Municipal
Trust, Alliance New Europe Fund, Inc., Alliance North American
Government Income Trust, Inc., Alliance Premier Growth Fund,
Inc., Alliance Quasar Fund, Inc., Alliance Real Estate Investment
Fund, Inc., Alliance Select Investor Series, Inc., Alliance
Technology Fund, Inc., Alliance Utility Income Fund, Inc.,
Alliance Variable Products Series Fund, Inc., Alliance Worldwide
Privatization Fund, Inc., The Alliance Portfolios and the EQ
Advisors Trust, all registered open-end investment companies; and
to ACM Government Income Fund, Inc., ACM Government Securities
Fund, Inc., ACM Government Spectrum Fund, Inc., ACM Government
Opportunity Fund, Inc., ACM Managed Income Fund, Inc., ACM
Managed Dollar Income Fund, Inc., ACM Municipal Securities Income
Fund, Inc., Alliance All-Market Advantage Fund, Inc., Alliance
World Dollar Government Fund, Inc., Alliance World Dollar
Government Fund II, Inc., The Austria Fund, Inc., The Korean
Investment Fund, Inc., The Southern Africa Fund, Inc., and The
Spain Fund, Inc., all registered closed-end investment companies.
Directors and Officers
The Directors and principal officers of the Company,
their ages and their principal occupations during the past five
years are set forth below. Each of the Directors and officers
are trustees, directors and officers of other registered
investment companies sponsored by the Adviser. Unless otherwise
17
<PAGE>
specified, the address of each of the following is 1345 Avenue of
the Americas, New York, New York 10105.
Directors
JOHN D. CARIFA,*** 55, Chairman of the Board of
Directors, is the President, Chief Operating Officer and a
Director of Alliance Capital Management Corporation ("ACMC"),
with which he has been associated since prior to 1995.
RUTH BLOCK, 69, was formerly Executive Vice President
and Chief Insurance Officer of Equitable. She is a Director of
Ecolab Incorporated (specialty chemicals) and BP Amoco
Corporation (oil and gas). Her address is 75 Briar Woods Trail,
Stamford, Connecticut, 06903.
DAVID H. DIEVLER, 71, is an independent consultant. He
was formerly a Senior Vice President of ACMC until 1994. He is
currently an independent consultant. His address is P.O. Box
167, Spring Lake, New Jersey, 07762.
JOHN H. DOBKIN, 58, has been the President of Historic
Hudson Valley (historic preservation) since prior to 1995.
Previously, he was Director of the National Academy of Design.
His address is 150 White Plains Road, Tarrytown, New York 10591.
WILLIAM H. FOULK, JR., 68, is an Investment Advisor and
independent consultant. He was formerly Senior Manager of
Barrett Associates, Inc., a registered investment adviser with
which he had been associated since prior to 1995. His address is
Suite 100, 2 Greenwich Plaza, Greenwich, Connecticut 06830.
DR. JAMES M. HESTER, 76, is President of the Harry Frank
Guggenheim Foundation, with which he has been associated since
prior to 1995. He was formerly President of New York University,
the New York Botanical Garden and Rector of the United Nations
University. His address is 25 Cleveland Lane, Princeton, New
Jersey 08540.
CLIFFORD L. MICHEL, 61, is a member of the law firm of
Cahill Gordon & Reindel, with which he has been associated since
prior to 1995. He is President and Chief Executive Officer of
Wenonah Development Company (investments) and a Director of
Placer Dome, Inc. (mining). His address is 80 Pine Street, New
York, NY 10005.
____________________
*** An "interested person" of the Fund as defined in the 1940
Act.
18
<PAGE>
DONALD J. ROBINSON, 66, was formerly a partner at
Orrick, Herrington & Sutcliff and is currently Senior Counsel to
that law firm. His address is 98 Hell's Peak Road, Weston, VT
05161.
Officers
JOHN D. CARIFA, Chairman and President, see biography
under "Directors" above.
ALFRED HARRISON, Executive Vice President, 62, is Vice
Chairman of the Board of ACMC, with which he has been associated
since prior to 1995.
ALDEN M. STEWART, Executive Vice President, 54, is an
Executive Vice President of ACMC, with which he has been
associated since prior to 1995.
JANE MACK GOULD, Executive Vice President, 61, is a
Senior Vice President of ACMC, with which she has been associated
since prior to 1995.
KATHLEEN A. CORBET, Senior Vice President, 40, is an
Executive Vice President of ACMC, with which she has been
associated since prior to 1995.
DANIEL G. PINE, Senior Vice President, 48, has been
associated with the Adviser since 1996. Previously, he was a
Senior Vice President of Desai Capital Management since prior to
1995.
THOMAS BARDONG, Vice President, 54, is a Senior Vice
President of ACMC, with which he has been associated since prior
to 1995.
MARK J. CUNNEEN, Vice President, 39, is a Senior Vice
President of ACMC, with which he has been associated since 1999.
Prior thereto, he was head of INVESCO's New York Small Cap Equity
Group and was responsible for overall portfolio management and
the research of small cap technology industries. Previously, he
was a small cap portfolio manager and analyst of Chancellor
Capital Management since prior to 1995.
DAVID KRUTH, Vice President, 35, is a Vice President of
ACMC, with which he has been associated since 1997. Prior
thereto he was a Senior Vice President of the Yarmouth Group
since prior to 1995.
19
<PAGE>
DANIEL NORDBY, Vice President, 55, is a Senior Vice
President of ACMC, with which he has been associated since 1996.
Prior thereto he was in private practice as a consulting
psychologist since prior to 1995.
MARK D. GERSTEN, Treasurer and Chief Financial Officer,
49, is a Senior Vice President of Alliance Fund Services, Inc.
("AFS") with which he has been associated since prior to 1995.
VINCENT S. NOTO, Controller, 35, is a Vice President of
AFS, with which he has been associated since prior to 1995.
EDMUND P. BERGAN, JR., Secretary, 50, is a Senior Vice
President and General Counsel of Alliance Fund Distributors, Inc.
("AFD") and AFS, with which he has been associated since prior to
1995.
DOMENICK PUGLIESE, Assistant Secretary, 39, is a Senior
Vice President and Assistant General Counsel of AFD, with which
he has been associated since May 1995. Prior thereto, he was
Vice President and Counsel of Concord Holding Corporation since
1994, Vice President and Associate General Counsel of Prudential
Securities prior to 1995.
ANDREW L. GANGOLF, Assistant Secretary, 46, is a Senior
Vice President and Assistant General Counsel of AFD, with which
he has been associated since prior to 1995.
The aggregate compensation paid by the Company to each
of the Directors during its fiscal period ended October 31, 1999,
the aggregate compensation paid to each of the Directors during
calendar year 1999 by all of the registered investment companies
to which the Adviser provides investment advisory services
(collectively, the "Alliance Fund Complex") and the total number
of registered investment companies (and separate investment
portfolios within those companies) in the Alliance Fund Complex
with respect to which each of the Directors serves as a director
or trustee, are set forth below. Neither the Company nor any
other fund in the Alliance Fund Complex provides compensation in
the form of pension or retirement benefits to any of its
directors or trustees. Each of the Directors is a director or
trustee of one or more other registered investment companies in
the Alliance Fund Complex.
20
<PAGE>
Total Number Total Number
of Investment of Investment
Companies in Portfolios
the Alliance within the
Total Complex, Alliance Fund
Compensation Including the Complex,
from the Company, as including the
Aggregate Alliance Fund to which the Funds, as to
Compensation Complex, Director is a which the
from the Including the Director or Director is a
Name of Director Company Company Trustee Director or Trustee
John D. Carifa $ -0- $ -0- 50 103
Ruth Block $291 $154,263 38 80
David H. Dievler $291 $210,188 45 87
John H. Dobkin $291 $206,488 42 84
William H. Foulk, Jr. $291 $246,413 45 98
Dr. James M. Hester $291 $164,138 39 81
Clifford L. Michel $291 $183,388 39 83
Donald J. Robinson $291 $154,313 41 92
The Directors and officers of the Company as a group
owned less than 1% of the Funds' shares.
_________________________________________________________________
EXPENSES OF THE FUND
_________________________________________________________________
Distribution Services Agreement
The Company has entered into a Distribution Services
Agreement (the "Agreement") with Alliance Fund Distributors,
Inc., the Funds' principal underwriter (the "Principal
Underwriter"), to permit the Principal Underwriter to distribute
the Fund's Class I and Class II shares and to permit the Funds to
pay distribution services fees to defray expenses associated with
the distribution of its Class II shares in accordance with a plan
of distribution which is included in the Agreement and has been
duly adopted and approved in accordance with Rule 12b-1 adopted
by the Commission under the 1940 Act (the "Rule 12b-1 Plan").
Distribution services fees are accrued daily and paid
monthly and are charged as expenses of each Fund as accrued.
Under the Agreement, the Treasurer of each Fund reports the
amounts expended under the Rule 12b-1 Plan and the purposes for
which such expenditures were made to the Directors for their
review on a quarterly basis. Also, the Agreement provides that
21
<PAGE>
the selection and nomination of Directors who are not "interested
persons" of the Company, as defined in the 1940 Act, are
committed to the discretion of such disinterested Directors then
in office.
The Agreement became effective as to the Funds on July
20, 2000. The Agreement will continue in effect so long as its
continuance is specifically approved annually by the Directors or
by vote of the holders of a majority of the outstanding voting
securities (as defined in the 1940 Act) of that class, and, in
either case, by a majority of the Directors who are not parties
to the Agreement or interested persons, as defined in the 1940
Act, of any such party (other than as directors of the Funds) and
who have no direct or indirect financial interest in the
operation of the Rule 12b-1 Plan or any agreement related
thereto.
In approving the Rule 12b-1 Plan, the Directors of the
Funds determined that there was a reasonable likelihood that the
Rule 12b-1 Plan would benefit the Funds and their Class II
shareholders. The distribution services fee of a particular
class will not be used to subsidize the provision of distribution
services with respect to any other class.
The Adviser may from time to time and from its own funds
or such other resources as may be permitted by rules of the
Commission make payments for distribution services to the
Principal Underwriter; the latter may, in turn, pay part or all
of such compensation to brokers or other persons for their
distribution assistance.
In the event that the Rule 12b-1 Plan is terminated or
not continued with respect to the Class II shares (i) no
distribution services fee (other than current amounts accrued but
not yet paid) would be owed by the Funds to the Principal
Underwriter with respect to that class, and (ii) the Funds would
not be obligated to pay the Principal Underwriter for any amounts
expended under the Agreement not previously recovered by the
Principal Underwriter from distribution services fees in respect
of shares of such class.
Transfer Agency Agreement
Alliance Fund Services, Inc., an indirect wholly-owned
subsidiary of the Adviser located at 500 Plaza Drive, Secaucus,
New Jersey 07094 ("AFS"), acts as the Fund's registrar, transfer
agent and dividend-disbursing agent. AFS receives a transfer
agency fee per account holder of each of the Class I and Class II
shares of each Fund, plus reimbursement for out-of-pocket
22
<PAGE>
expenses. The transfer agency fee with respect to the Class II
shares is higher than the transfer agency fee with respect to the
Class I shares.
Code of Ethics
The Fund, the Adviser and the Principal Underwriter have
each adopted codes of ethics pursuant to Rule 17j-1 of the 1940
Act. These codes of ethics permit personnel subject to the codes
to invest in securities, including securities that may be
purchased or held by the Fund.
_________________________________________________________________
PURCHASE OF SHARES
_________________________________________________________________
The following information supplements that set forth in
the Prospectus under the heading "Purchase and Sale of Shares--
How To Buy Shares."
General
Class I shares of a Fund 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 Principal Underwriter,
(ii) through employee benefit plans, including defined
contribution and defined benefit plans ("Employee Plans"), that
have at least $10 million in assets, (iii) by "qualified State
tuition programs" (within the meaning of section 529 of the
Internal Revenue Code of 1986, as amended) approved by AFD,
(iv) by investment advisory clients of the Adviser or its
affiliates, (v) by (a) officers and present or former Directors
of the Company, (b) present or former directors and trustees of
other investment companies managed by the Adviser, (c) present or
retired full-time employees of the Adviser, the Principal
Underwriter, Alliance Fund Services, Inc. and their affiliates,
(d) officers and directors of ACMC, the Principal Underwriter,
Alliance Fund Services, Inc. and their affiliates, (e) (1) the
spouse, sibling, direct ancestor or direct descendant
(collectively "relatives") of any person listed in (a) through
(d), (2) any trust, individual retirement account or retirement
plan account for the benefit of any person listed in (a) through
(d) or a relative of such person, or (3) the estate of any person
listed in (a) through (d) or a relative of such person, if such
shares are purchased for investment purposes (such shares may not
be resold except to the Funds), (vi) by (a) the Adviser, the
Principal Underwriter, Alliance Fund Services, Inc. and their
23
<PAGE>
affiliates or (b) certain employee benefit plans for employees of
the Adviser, the Principal Underwriter, Alliance Fund Services,
Inc. and their affiliates, and (vii) 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
Principal Underwriter, 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.
Class II shares of a Fund 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 Principal Underwriter, and (ii) Employee Plans
that have at least $10 million in assets.
The shares of the Funds are offered on a continuous
basis at a price equal to their net asset value. The minimum
initial investment in the Company is $2,000,000, 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 $2,000,000 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.
Investors may purchase shares of a Fund through their
financial representatives. A transaction, service,
administrative or other similar fee may be charged by your
financial representative with respect to the purchase, sale or
exchange of shares made through such financial representative.
Such financial representative 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 a Fund as
described in the Prospectus and this Statement of Additional
Information, including requirements as to the minimum initial and
subsequent investment amounts.
The Funds may refuse any order for the purchase of
shares. The Funds reserve the right to suspend the sale of their
shares to the public in response to conditions in the securities
markets or for other reasons.
The public offering price of shares of a Fund is their
net asset value. On each Company business day on which a
purchase or redemption order is received by a Fund and trading in
the types of securities in which the Fund invests might
materially affect the value of Fund shares, the per share net
24
<PAGE>
asset value is computed in accordance with the Fund's Articles of
Incorporation and By-Laws as of the next close of regular trading
on the New York Stock Exchange (the "Exchange") (currently 4:00
p.m. Eastern time) by dividing the value of the Fund's total
assets, less its liabilities, by the total number of its shares
then outstanding. A Company business day is any day on which the
Exchange is open for trading.
The Funds will accept unconditional orders for their
shares to be executed at the public offering price equal to their
net asset value next determined as described below. Orders
received by the Principal Underwriter prior to the close of
regular trading on the Exchange on each day the Exchange is open
for trading are priced at the net asset value computed as of the
close of regular trading on the Exchange on that day. In the
case of orders for the purchase of shares placed through
financial representatives, the applicable public offering price
will be the net asset value as so determined, but only if the
financial representative receives the order prior to the close of
regular trading on the Exchange and transmits it to the Principal
Underwriter prior to 5:00 p.m. Eastern time. The financial
representative is responsible for transmitting such orders by
5:00 p.m. Eastern time. If the financial representative fails to
do so, the investor's right to that day's closing price must be
settled between the investor and the financial representative.
If the financial representative receives the order after the
close of regular trading on the Exchange, the price will be based
on the net asset value determined as of the close of regular
trading on the Exchange on the next day it is open for trading.
Following the initial purchase of Fund shares, a
shareholder may place orders to purchase additional shares by
telephone if the shareholder has completed the appropriate
portion of the Subscription Application or an "Autobuy"
application obtained by calling the "For Literature" telephone
number shown on the cover of this Statement of Additional
Information. Except with respect to certain omnibus accounts,
telephone purchase orders may not exceed $500,000. Payment for
shares purchased by telephone can be made only by electronic
funds transfer from a bank account maintained by the shareholder
at a bank that is a member of the National Automated Clearing
House Association ("NACHA"). If a shareholder's telephone
purchase request is received before 3:00 p.m. Eastern time on a
Company business day, the order to purchase shares is
automatically placed the following Company business day, and the
applicable public offering price will be the public offering
price determined as of the close of business on such following
business day.
Full and fractional shares are credited to a
subscriber's account in the amount purchased by the subscriber.
25
<PAGE>
As a convenience to the subscriber, and to avoid unnecessary
expense to the Funds, stock certificates representing shares of a
Fund are not issued except upon written request to that Fund by
the shareholder or the subscriber's financial representative.
This facilitates later redemption and relieves the shareholder of
the responsibility for and inconvenience of lost or stolen
certificates. No certificates are issued for fractional shares,
although such shares remain in the shareholder's account on the
books of a Fund.
In addition to the discount or commission paid to
dealers or agents, the Principal Underwriter from time to time
pays additional cash or other incentives to dealers or agents, in
connection with the sale of shares of the Funds. Such additional
amounts may be utilized, in whole or in part to provide
additional compensation to registered representatives who sell
shares of the Funds. On some occasions, such cash or other
incentives 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 taken by persons associated with a dealer
or agent to 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.
Class I and Class II shares each represent an interest
in the same portfolio of investments of a Fund, have the same
rights and are identical in all respects, except that
(i) Class II has exclusive voting rights with respect to
provisions of the Rule 12b-1 Plan pursuant to which its
distribution services fees are paid and other matters for which
separate class voting is appropriate under applicable law,
provided that, if a Fund submits to a vote of the Class II
shareholders an amendment to the Rule 12b-1 Plan that would
materially increase the amount to be paid thereunder with respect
to the Class II shares, then such amendment will also be
submitted to the Class I shareholders and the Class II and Class
I shareholders will vote separately thereon by class and
(ii) Class I shares are subject to a conversion feature.
The Directors have determined that currently no conflict
of interest exists between Class I and Class II shares. On an
ongoing basis, the Directors, pursuant to their fiduciary duties
under the 1940 Act and state law, will seek to ensure that no
such conflict arises.
Conversion of Class I Shares to Class II Shares
Class I shares may be held solely through the fee-based
program accounts, employee benefit plans, qualified State tuition
26
<PAGE>
programs and registered investment advisory or other financial
intermediary relationships described above under "Purchase of
Shares--General," and by investment advisory clients of, and by
certain other persons associated with, the Adviser 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 the investment adviser or financial intermediary,
in each case, that satisfies the requirements to purchase shares
set forth under "Purchase of Shares--General" or (ii) the holder
is otherwise no longer eligible to purchase Class I shares as
described in this Statement of Additional Information (each a
"Conversion Event"), then all Class I shares held by the
shareholder will convert automatically to Class II shares of that
Fund during the calendar month following the month in which the
Fund is informed of the occurrence of the Conversion Event. The
Funds will provide the shareholder with at least 30 days' notice
of the conversion. 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. Class II shares currently bear a .30%
distribution services fee. Class I shares do not have any
distribution services fee. As a result, Class II shares have a
higher expense ratio and may pay correspondingly lower dividends
and have a lower net asset value than Class I shares.
The conversion of Class I shares to Class II shares is
subject to the continuing availability of an opinion of counsel
to the effect that the conversion of Class I shares to Class II
shares does not constitute a taxable event under federal income
tax law. The conversion of Class I shares to Class II shares may
be suspended if such an opinion is no longer available at the
time such conversion is to occur. In that event, the Class I
shareholder would be required to redeem his Class I shares, which
would constitute a taxable event under federal income tax law.
_________________________________________________________________
REDEMPTION AND REPURCHASE OF SHARES
_________________________________________________________________
The following information supplements that set forth in
the Prospectus under the heading "Purchase and Sale of Shares-
-How to Sell Shares." If you are a shareholder through an
account established under a fee-based program, your fee-based
program may impose requirements with respect to the purchase,
sale or exchange of shares of a Fund that are different from
those described herein. A transaction fee may be charged by your
financial representative with respect to the purchase, sale or
exchange of shares made through such financial representative.
27
<PAGE>
Redemption
Subject to the limitations described below, the
Company's Articles of Incorporation require that the Company
redeem the shares tendered to it, as described below, at a
redemption price equal to their net asset value as next computed
following the receipt of shares tendered for redemption in proper
form. There is no redemption charge. If a shareholder is in
doubt about what documents are required by his or her fee-based
program or employee benefit plan, the shareholder should contact
the shareholder's financial representative.
The right of redemption may not be suspended or the date
of payment upon redemption postponed for more than seven days
after shares are tendered for redemption, except for any period
during which the Exchange is closed (other than customary weekend
and holiday closings) or during which the Commission determines
that trading thereon is restricted, or for any period during
which an emergency (as determined by the Commission) exists as a
result of which disposal by a Fund of securities owned by it is
not reasonably practicable or as a result of which it is not
reasonably practicable for the Fund fairly to determine the value
of its net assets, or for such other periods as the Commission
may by order permit for the protection of security holders of the
Fund.
Payment of the redemption price will be made in cash.
The value of a shareholder's shares on redemption or repurchase
may be more or less than the cost of such shares to the
shareholder, depending upon the market value of a Fund's
portfolio securities at the time of such redemption or
repurchase. Payment received by a shareholder upon redemption or
repurchase of the shareholder's shares, assuming the shares
constitute capital assets in the shareholder's hands, will result
in long-term or short-term capital gains (or loss) depending upon
the shareholder's holding period and basis in respect of the
shares redeemed.
To redeem shares of a Fund for which no stock
certificates have been issued, the registered owner or owners
should forward a letter to the Company containing a request for
redemption. The signature or signatures on the letter must be
guaranteed by an institution that is an "eligible guarantor
institution" as defined in Rule 17Ad-15 under the Securities
Exchange Act of 1934, as amended.
To redeem shares of a Fund represented by stock
certificates, the investor should forward the appropriate stock
certificate or certificates, endorsed in blank or with blank
stock powers attached, to the Company with the request that the
shares represented thereby, or a specified portion thereof, be
28
<PAGE>
redeemed. The stock assignment form on the reverse side of each
stock certificate surrendered to the Company for redemption must
be signed by the registered owner or owners exactly as the
registered name appears on the face of the certificate or,
alternatively, a stock power signed in the same manner may be
attached to the stock certificate or certificates or, where
tender is made by mail, separately mailed to the Company. The
signature or signatures on the assignment form must be guaranteed
in the manner described above.
Telephone Redemption by Electronic Funds Transfer. Each
Fund shareholder is entitled to request redemption by electronic
funds transfer once in any 30-day period (except for certain
omnibus accounts), of shares for which no stock certificates have
been issued by telephone at (800) 221-5672 by a shareholder who
has completed the appropriate portion of the Subscription
Application or, in the case of an existing shareholder, an
"Autosell" application obtained from Alliance Fund Services, Inc.
A telephone redemption request may not exceed $100,000 (except
for certain omnibus accounts) and must be made by 4:00 p.m.
Eastern time on a Company business day as defined above.
Proceeds of telephone redemptions will be sent by electronic
funds transfer to a shareholder's designated bank account at a
bank selected by the shareholder that is a member of the NACHA.
Telephone Redemption by Check. Except for certain
omnibus accounts or as noted below, each Fund shareholder is
eligible to request redemption by check, once in any 30-day
period, of shares for which no stock certificates have been
issued by telephone at (800) 221-5672 before 4:00 p.m. Eastern
time on a Company business day in an amount not exceeding
$50,000. Proceeds of such redemptions are remitted by check to
the shareholder's address of record. Telephone redemption by
check is not available with respect to shares (i) for which
certificates have been issued, (ii) held in nominee or "street
name" accounts, (iii) held by a shareholder who has changed his
or her address of record within the preceding 30 calendar days or
(iv) held in any retirement plan account. A shareholder
otherwise eligible for telephone redemption by check may cancel
the privilege by written instruction to Alliance Fund Services,
Inc., or by checking the appropriate box on the Subscription
Application found in the Prospectus.
Telephone Redemptions - General. During periods of
drastic economic or market developments, such as the market break
of October 1987, it is possible that shareholders would have
difficulty in reaching Alliance Fund Services, Inc. by telephone
(although no such difficulty was apparent at any time in
connection with the 1987 market break). If a shareholder were to
experience such difficulty, the shareholder should issue written
instructions to Alliance Fund Services, Inc. at the address shown
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on the cover of this Statement of Additional Information. The
Company reserves the right to suspend or terminate its telephone
redemption service at any time without notice. Neither the
Company nor the Adviser, the Principal Underwriter or Alliance
Fund Services, Inc. will be responsible for the authenticity of
telephone requests for redemptions that the Company reasonably
believes to be genuine. The Company will employ reasonable
procedures in order to verify that telephone requests for
redemptions are genuine, including, among others, recording such
telephone instructions and causing written confirmations of the
resulting transactions to be sent to shareholders. If the
Company did not employ such procedures, it could be liable for
losses arising from unauthorized or fraudulent telephone
instructions. Financial representatives may charge a commission
for handling telephone requests for redemptions.
Repurchase
The Company may repurchase shares through the Principal
Underwriter or selected financial intermediaries. The repurchase
price will be the net asset value next determined after the
Principal Underwriter receives the request, except that requests
placed through selected financial representatives before the
close of regular trading on the Exchange on any day will be
executed at the net asset value determined as of such close of
regular trading on that day if received by the Principal
Underwriter prior to its close of business on that day (normally
5:00 p.m. Eastern time). The financial intermediary is
responsible for transmitting the request to the Principal
Underwriter by 5:00 p.m. If the financial intermediary fails to
do so, the shareholder's right to receive that day's closing
price must be settled between the shareholder and the financial
representative. A shareholder may offer shares of a Fund to the
Principal Underwriter either directly or through the
shareholder's financial representative. Neither the Company nor
the Principal Underwriter charges a fee or commission in
connection with the repurchase of shares. Normally, if shares of
a Fund are offered through a financial intermediary, the
repurchase is settled by the shareholder as an ordinary
transaction with or through the financial representative, who may
charge the shareholder for this service. The repurchase of
shares of a Fund as described above is a voluntary service of the
Fund and the Fund may suspend or terminate this practice at any
time.
General
The Company reserves the right to close out an account
that has remained below $200 for at least 90 days. Shareholders
will receive 60 days' written notice to increase the account
value before the account is closed. In the case of a redemption
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or repurchase of shares of a Fund recently purchased by check,
redemption proceeds will not be made available until the Company
is reasonably assured that the check has cleared, normally up to
15 calendar days following the purchase date.
_________________________________________________________________
SHAREHOLDER SERVICES
_________________________________________________________________
The following information supplements that set forth in
the Prospectus under the heading "Purchase and Sale of Shares-
-Shareholder Services." If you are a shareholder through an
account established under a fee-based program, your fee-based
program may impose requirements with respect to the purchase,
sale or exchange of shares of a Fund that are different from
those described herein. A transaction fee may be charged by your
financial representative with respect to the purchase, sale or
exchange of shares made through such financial representative.
Exchange Privilege
You may exchange your investment in a Fund for shares of
the same class of any other Fund and for Class A shares of any
other Alliance Mutual Fund (as defined below). 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 Alliance Fund Services, Inc. by 4:00 p.m. Eastern
time on a Company business day in order to be effected at that
day's net asset value.
Currently, the Alliance Mutual Funds include:
AFD Exchange Reserves
Alliance All-Asia Investment Fund, Inc.
Alliance Balanced Shares, Inc.
Alliance Bond Fund, Inc.
-Corporate Bond Portfolio
-Quality Bond Portfolio
-U.S. Government Portfolio
Alliance Disciplined Value Fund, Inc.
Alliance Global Dollar Government Fund, Inc.
Alliance Global Small Cap Fund, Inc.
Alliance Global Strategic Income Trust, Inc.
Alliance Greater China '97 Fund, Inc.
Alliance Growth and Income Fund, Inc.
Alliance Health Care Fund, Inc.
Alliance High Yield Fund, Inc.
Alliance International Fund
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Alliance International Premier Growth Fund, Inc.
Alliance Limited Maturity Government Fund, Inc.
Alliance Mortgage Securities Income Fund, Inc.
Alliance Multi-Market Strategy Trust, Inc.
Alliance Municipal Income Fund, Inc.
-California Portfolio
-Insured California Portfolio
-Insured National Portfolio
-National Portfolio
-New York Portfolio
Alliance Municipal Income Fund II
-Arizona Portfolio
-Florida Portfolio
-Massachusetts Portfolio
-Michigan Portfolio
-Minnesota Portfolio
-New Jersey Portfolio
-Ohio Portfolio
-Pennsylvania Portfolio
-Virginia Portfolio
Alliance New Europe Fund, Inc.
Alliance North American Government Income Trust, Inc.
Alliance Premier Growth Fund, Inc.
Alliance Quasar Fund, Inc.
Alliance Real Estate Investment Fund, Inc.
Alliance Select Investor Series, Inc.
-Biotechnology Portfolio
-Premier Portfolio
-Technology Portfolio
Alliance Technology Fund, Inc.
Alliance Utility Income Fund, Inc.
Alliance Worldwide Privatization Fund, Inc.
The Alliance Fund, Inc.
The Alliance Portfolios
-Alliance Growth Fund
-Alliance Conservative Investors Fund
-Alliance Growth Investors Fund
Please read carefully the portions of the prospectus of
a Fund or Alliance Mutual Fund, as applicable, into which you
wish to exchange before submitting the request. Call Alliance
Fund Services, Inc. at (800) 221-5672 to exchange uncertificated
shares. Exchanges of shares as described above in this section
are taxable transactions for federal income tax purposes. The
exchange service may be changed, suspended or terminated on 60
days' written notice.
All exchanges are subject to the minimum investment
requirements and any other applicable terms set forth in the
Prospectus or the prospectus for the Fund or Alliance Mutual Fund
32
<PAGE>
whose shares are being acquired, as applicable. An exchange is
effected through the redemption of the shares tendered for
exchange and the purchase of shares being acquired at their
respective net asset values as next determined following receipt
by the Fund or the Alliance Mutual Fund, as applicable, whose
shares are being exchanged of (i) proper instructions and all
necessary supporting documents as described in that fund's
prospectus, or (ii) a telephone request for such exchange in
accordance with the procedures set forth in the following
paragraph. Exchanges involving the redemption of shares recently
purchased by check will be permitted only after the fund whose
shares have been tendered for exchange is reasonably assured that
the check has cleared, normally up to 15 calendar days following
the purchase date. Exchanges of shares of Funds or Alliance
Mutual Funds will generally result in the realization of a
capital gain or loss for federal income tax purposes.
Each Fund shareholder, and the shareholder's financial
representative, are authorized to make telephone requests for
exchanges unless Alliance Fund Services, Inc., receives a written
instruction to the contrary from the shareholder, or the
shareholder declines the privilege by checking the appropriate
box on the Subscription Application found in the Prospectus.
Such telephone requests cannot be accepted with respect to shares
then represented by stock certificates. Shares acquired pursuant
to a telephone request for exchange will be held under the same
account registration as the shares redeemed through the exchange.
Eligible shareholders desiring to make an exchange
should telephone Alliance Fund Services, Inc. with their account
number and other details of the exchange at (800) 221-5672 before
4:00 p.m., Eastern time, on a Company business day as defined
above. Telephone requests for exchange received before 4:00 p.m.
Eastern time on a Company business day will be processed as of
the close of business on that day. During periods of drastic
economic or market developments, such as the market break of
October 1987, it is possible that shareholders would have
difficulty in reaching Alliance Fund Services, Inc. by telephone
(although no such difficulty was apparent at any time in
connection with the 1987 market break). If a shareholder were to
experience such difficulty, the shareholder should issue written
instructions to Alliance Fund Services, Inc. at the address shown
on the cover of this Statement of Additional Information.
None of the Company, the Alliance Mutual Funds, the
Adviser, the Principal Underwriter or Alliance Fund Services,
Inc. will be responsible for the authenticity of telephone
requests for exchanges that the Company reasonably believes to be
genuine. The Company will employ reasonable procedures in order
to verify that telephone requests for exchanges are genuine,
including, among others, recording such telephone instructions
33
<PAGE>
and causing written confirmations of the resulting transactions
to be sent to shareholders. If the Company did not employ such
procedures, it could be liable for losses arising from
unauthorized or fraudulent telephone instructions. Financial
representatives, may charge a commission for handling telephone
requests for exchanges.
The exchange privilege is available only in states where
shares of the Alliance Mutual Fund being acquired may be legally
sold. Each Alliance Mutual Fund reserves the right, at any time
on 60 days' notice to its shareholders, to reject any order to
acquire its shares through exchange or otherwise to modify,
restrict or terminate the exchange privilege.
Retirement Plans
The Funds may be a suitable investment vehicle for part
or all of the assets held in various types of retirement plans,
such as those listed below. The Company has available forms of
such plans pursuant to which investments can be made in the Fund
and other Alliance Mutual Funds. Persons desiring information
concerning these plans should contact Alliance Fund Services,
Inc. at the "For Literature" telephone number on the cover of
this Statement of Additional Information, or write to:
Alliance Fund Services, Inc.
Retirement Plans
P.O. Box 1520
Secaucus, New Jersey 07096-1520
Employer-Sponsored Qualified Retirement Plans. Sole
proprietors, partnerships and corporations may sponsor qualified
money purchase pension and profit-sharing plans, including
Section 401(k) plans ("qualified plans"), under which annual tax-
deductible contributions are made within prescribed limits based
on compensation paid to participating individuals. The minimum
initial investment requirement may be waived with respect to
certain of these qualified plans.
Simplified Employee Pension Plan ("SEP"). Sole
proprietors, partnerships and corporations may sponsor a SEP
under which they make annual tax-deductible contributions to an
IRA established by each eligible employee within prescribed
limits based on employee compensation.
403(b)(7) Retirement Plan. Certain tax-exempt
organizations and public educational institutions may sponsor
retirement plans under which an employee may agree that monies
deducted from his or her compensation (minimum $25 per pay
period) may be contributed by the employer to a custodial account
established for the employee under the plan.
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The Alliance Plans Division of Frontier Trust Company, a
subsidiary of Equitable which serves as custodian or trustee
under the retirement plan prototype forms available from the
Fund, charges certain nominal fees for establishing an account
and for annual maintenance. A portion of these fees is remitted
to Alliance Fund Services, Inc. as compensation for its services
to the retirement plan accounts maintained with a Fund.
Distributions from retirement plans are subject to
certain Code requirements in addition to normal redemption
procedures. For additional information please contact Alliance
Fund Services, Inc.
Statements and Reports
Each shareholder of a Fund receives semi-annual and
annual reports which include a listing of the Fund's investments,
financial statements and, in the case of the annual report, the
report of the Company's independent auditors, Ernst & Young LLP,
as well as a confirmation of each purchase and redemption of
shares by the shareholder. By contacting his or her broker or
Alliance Fund Services, Inc., a shareholder can arrange for
copies of his or her account statements to be sent to another
person.
_________________________________________________________________
NET ASSET VALUE
_________________________________________________________________
A Fund's per share net asset value is computed in
accordance with the Company's Articles of Incorporation and By-
Laws at the next close of regular trading on the Exchange
(ordinarily 4:00 p.m. Eastern time) following receipt of a
purchase or redemption order by the Company, on each Company
business day on which such an order is received and on such other
days as the Board of Directors deems appropriate or necessary in
order to comply with Rule 22c-1 under the 1940 Act. A Fund's per
share net asset value is calculated by dividing the value of the
Fund's total assets, less its liabilities, by the total number of
its shares then outstanding. A Company business day is any
weekday on which the Exchange is open for trading.
In accordance with applicable rules under the 1940 Act,
portfolio securities are valued at current market value or at
fair value as determined in good faith by the Board of Directors.
The Board of Directors has delegated to the Adviser certain of
the Board's duties with respect to the following procedures.
Readily marketable securities listed on the Exchange or on a
foreign securities exchange (other than foreign securities
exchanges whose operations are similar to those of the United
35
<PAGE>
States over-the-counter market) are valued, except as indicted
below, at the last sale price reflected on the consolidated tape
at the close of the Exchange or, in the case of a foreign
securities exchange, at the last quoted sale price, in each case
on the business day as of which such value is being determined.
If there has been no sale on such day, the securities are valued
at the mean of the closing bid and asked prices on such day. If
no bid or asked prices are quoted on such day, then the security
is valued in good faith at fair value by, or in accordance with
procedures established by, the Board of Directors. Readily
marketable securities not listed on the Exchange or on a foreign
securities exchange but listed on other United States national
securities exchanges or traded on The Nasdaq Stock Market, Inc.
are valued in like manner. Portfolio securities traded on the
Exchange and on one or more foreign or other national securities
exchanges, and portfolio securities not traded on the Exchange
but traded on one or more foreign or other national securities
exchanges are valued in accordance with these procedures by
reference to the principal exchange on which the securities are
traded.
Readily marketable securities traded in the over-the-
counter market, securities listed on a foreign securities
exchange whose operations are similar to those of the United
States over-the-counter market, and securities listed on a U.S.
national securities exchange whose primary market is believed to
be over-the-counter (but excluding securities traded on The
Nasdaq Stock Market, Inc.), are valued at the mean of the current
bid and asked prices as reported by Nasdaq or, in the case of
securities not quoted by Nasdaq, the National Quotation Bureau or
another comparable sources.
Listed put or call options purchased by a Fund are
valued at the last sale price. If there has been no sale on that
day, such securities will be valued at the closing bid prices on
that day.
Open futures contracts and options thereon will be
valued using the closing settlement price or, in the absence of
such a price, the most recent quoted bid price. If there are no
quotations available for that day of valuations, the last
available closing settlement price will be used.
U.S. Government securities and other debt instruments
having 60 days or less remaining until maturity are valued at
amortized cost if their original maturity was 60 days or less, or
by amortizing their fair value as of the 61st day prior to
maturity if their original term to maturity exceeded 60 days
(unless in either case the Board of Directors determines that
this method does not represent fair value).
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<PAGE>
Fixed-income securities may be valued on the basis of
prices provided by a pricing service when such prices are
believed to reflect the fair market value of such securities.
The prices provided by pricing service take into account many
factors, including institutional size trading in similar groups
of securities and any developments related to specific
securities.
All other assets of a Fund are valued in good faith at
fair value by, or in accordance with procedures established by,
the Board of Directors.
Trading in securities on Far Eastern and European
securities exchanges and over-the-counter markets is normally
completed well before the close of business of each Fund business
day. In addition, trading in foreign markets may not take place
on all Fund business days. Furthermore, trading may take place
in various foreign markets on days that are not Fund business
days. A Fund's calculation of the net asset value per share,
therefore, does not always take place contemporaneously with the
most recent determination of the prices of portfolio securities
in these markets. Events affecting the values of these portfolio
securities that occur between the time their prices are
determined in accordance with the above procedures and the close
of the Exchange will not be reflected in a Fund's calculation of
net asset value unless it is believed that these prices do not
reflect current market value, in which case the securities will
be valued in good faith by, or in accordance with procedures
established by, the Board of Directors at fair value.
The Board of Directors may suspend the determination of
a Fund's net asset value (and the offering and sale of shares)
subject to the rules of the Commission and other governmental
rules and regulations, at a time when: (1) the Exchange is
closed, other than customary weekend and holiday closings, (2) an
emergency exists as a result of which it is not reasonably
practicable for the Fund to dispose of securities owned by it or
to determine fairly the value of its net assets, or (3) for the
protection of shareholders, the Commission by order permits a
suspension of the right of redemption or a postponement of the
date of payment on redemption.
For purposes of determining the Fund's net asset value
per share, all assets and liabilities initially expressed in a
foreign currency will be converted into U.S. dollars at the mean
of the current bid and asked prices of such currency against the
U.S. dollar last quoted by a major bank that is a regular
participant in the relevant foreign exchange market or on the
basis of a pricing service that takes into account the quotes
provided by a number of such major banks. If such quotations are
not available as of the close of the Exchange, the rate of
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<PAGE>
exchange will be determined in good faith by, or under the
direction of, the Board of Directors.
The assets belonging to the Class I and Class II shares
will be invested together in a single portfolio. The net asset
value of each class will be determined separately by subtracting
the liabilities allocated to that class from the assets belonging
to that class in conformance with the provisions of a plan
adopted by each Fund in accordance with Rule 18f-3 under the 1940
Act.
_________________________________________________________________
DIVIDENDS, DISTRIBUTIONS AND TAXES
_________________________________________________________________
United States Federal Income Taxation of Dividends and
Distributions
General
Each Fund intends for each taxable year to qualify to be
taxed as a "regulated investment company" under the Internal
Revenue Code of 1986, as amended (the "Code"). Such
qualification relieves the Funds of federal income tax liability
on the part of its net ordinary income and net realized capital
gains which it timely distributes to its shareholders. Such
qualification does not, of course, involve governmental
supervision of management or investment practices or policies.
Investors should consult their own counsel for a complete
understanding of the requirements the Fund must meet to qualify
to be taxed as a "regulated investment company."
The information set forth in the Prospectus and the
following discussion relate solely to the significant United
States federal income taxes on dividends and distributions by the
Funds and assumes that the Funds qualifie to be taxed as a
regulated investment company. An investor should consult the
investor's own tax counsel with respect to the specific tax
consequences of being a shareholder of a Fund, including the
effect and applicability of federal, state and local tax laws to
the investor's particular situation and the possible effects of
changes therein.
It is the present policy of the Funds to distribute to
shareholders all net investment income annually and to distribute
net realized capital gains, if any, annually. The amount of any
such distributions necessarily depends upon the realization by
the Funds of income and capital gains from investments.
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<PAGE>
The Funds intend to declare and distribute dividends in
the amounts and at the times necessary to avoid the application
of the 4% federal excise tax imposed on certain undistributed
income of regulated investment companies. A Fund will be
required to pay the 4% excise tax to the extent it does not
distribute to its shareholders during any calendar year an amount
equal to the sum of (i) 98% of its ordinary taxable income for
the calendar year, (ii) 98% of its capital gain net income and
foreign currency gains for the twelve months ended October 31 of
such year and (iii) any ordinary income or capital gain net
income from the preceding calendar year that was not distributed
during such year. For this purpose, income or gain retained by a
Fund that is subject to corporate income tax will be considered
to have been distributed by the Fund by year-end. For federal
income and excise tax purposes, dividends declared and payable to
shareholders of record as of a date in October, November or
December but actually paid during the following January will be
taxable to these shareholders for the year declared, and not for
the subsequent calendar year in which the shareholders actually
receive the dividend.
Dividends of each Fund's net ordinary income and
distributions of any net realized short-term capital gain are
taxable to shareholders as ordinary income. Dividends paid by a
Fund and received by a corporate shareholder are eligible for the
dividends received deduction to the extent that the Fund's income
is derived from certain dividends received from domestic
corporations, provided the corporate shareholder holds shares in
the Fund for at least 46 days during the 90-day period beginning
45 days before the date on which the shareholder becomes entitled
to receive the dividend. In determining the holding period of
shares for this purpose, any period during which a shareholder's
risk of loss is offset by means of options, short sales or
similar transactions is not counted. In addition, the dividends
received deduction will be disallowed to the extent the
investment in shares of a Fund is financed with indebtedness.
Distributions of net capital gain (i.e., the excess of
net long-term capital gain over net short-term capital loss) are
taxable as long-term capital gain, regardless of how long a
shareholder has held shares in a Fund. 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 the dividend or distribution. Furthermore, a
dividend or distribution made shortly after the purchase of
shares by a shareholder, although in effect a return of capital
to that particular shareholder, would be taxable to the
shareholder as described above.
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<PAGE>
Dividends are taxable in the manner discussed regardless
of whether they are paid to a shareholder in cash or are
reinvested in additional shares of a Fund.
If a shareholder has held shares in a Fund for six
months or less and during that period has received a distribution
of net capital gain, any loss recognized by the shareholder on
the sale of those shares during the six-month period will be
treated as a long-term capital loss to the extent of the
distribution. In determining the holding period of such shares
for this purpose, any period during which a shareholder's risk of
loss is offset by means of options, short sales or similar
transactions is not counted.
Any loss realized by a shareholder on a sale or exchange
of shares of a Fund will be disallowed to the extent the shares
disposed of are replaced within a period of 61 days beginning 30
days before and ending 30 days after the shares are sold or
exchanged. For this purpose, acquisitions pursuant to the
Dividend Reinvestment Plan would constitute a replacement if made
within that period. If disallowed, the loss will be reflected in
an upward adjustment to the basis of the shares acquired.
A dividend or capital gains distribution with respect to
shares of a Fund held by a tax-deferred or qualified plan, such
as an individual retirement account, 403(b)(7) retirement plan or
corporate pension or profit-sharing plan, 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.
Foreign Taxes. Income received by a Fund may also be
subject to foreign income taxes, including withholding taxes. It
is not possible to determine the effective rate of foreign tax in
advance since the amount of a Fund's assets to be invested within
various countries is not known. If more than 50% of the value of
a Fund's total assets at the close of its taxable year consists
of stocks or securities of foreign corporations, the Fund will be
eligible and intends to file an election with the Internal
Revenue Service to pass through to its shareholders the amount of
foreign taxes paid by the Fund. However, there can be no
assurance that a Fund will be able to do so. Pursuant to this
election a shareholder will be required to (i) include in gross
income (in addition to taxable dividends actually received) his
pro rata share of foreign taxes paid by the Fund, (ii) treat his
pro rata share of such foreign taxes as having been paid by him,
and (iii) either deduct such pro rata share of foreign taxes in
computing his taxable income or treat such foreign taxes as a
credit against United States federal income taxes. Shareholders
who are not liable for federal income taxes, such as retirement
40
<PAGE>
plans qualified under section 401 of the Code, will not be
affected by any such pass through of taxes by a Fund. No
deduction for foreign taxes may be claimed by an individual
shareholder who does not itemize deductions. In addition,
certain shareholders may be subject to rules which limit or
reduce their ability to fully deduct, or claim a credit for,
their pro rata share of the foreign taxes paid by a Fund. A
shareholder's foreign tax credit with respect to a dividend
received from the Fund will be disallowed unless the shareholder
holds shares in the Fund on the ex-dividend date and for at least
15 other days during the 30-day period beginning 15 days prior to
the ex-dividend date. Each shareholder will be notified within
60 days after the close of a Fund's taxable year whether the
foreign taxes paid by that Fund will pass through for that year
and, if so, such notification will designate (i) the
shareholder's portion of the foreign taxes paid to each such
country and (ii) the portion of dividends that represents income
derived from sources within each such country.
A Fund may be required to withhold federal income tax at
the rate of 31% from all taxable distributions payable to
shareholders who fail to provide the Fund with their correct
taxpayer identification numbers or to make required
certifications, or who have been notified by the Internal Revenue
Service that they are subject to backup withholding. Corporate
shareholders and certain other shareholders specified in the Code
are exempt from such backup withholding. Backup withholding is
not an additional tax; any amounts so withheld may be credited
against a shareholder's federal income tax liability or refunded.
United States Federal Income Taxation of the Fund
The following discussion relates to certain significant
United States federal income tax consequences to a Fund with
respect to the determination of its "investment company taxable
income" each year. This discussion assumes that the Fund will be
taxed as a regulated investment company for each of its taxable
years.
Currency Fluctuations-"Section 988" Gains or Losses.
Under the Code, gains or losses attributable to fluctuations in
exchange rates which occur between the time a Fund accrues
interest or other receivables or accrues expenses or other
liabilities denominated in a foreign currency and the time the
Fund actually collects such receivables or pays such liabilities
are treated as ordinary income or ordinary loss. Similarly,
gains or losses from the disposition of foreign currencies, from
the disposition of debt securities denominated in a foreign
currency, or from the disposition of a forward contract
denominated in a foreign currency, which are attributable to
fluctuations in the value of the foreign currency between the
41
<PAGE>
date of acquisition of the asset and the date of disposition also
are treated as ordinary income or loss. These gains or losses,
referred to under the Code as "section 988" gains or losses,
increase or decrease the amount of a Fund's investment company
taxable income available to be distributed to its shareholders as
ordinary income, rather than increasing or decreasing the amount
of a Fund's net capital gain. Because section 988 losses reduce
the amount of ordinary dividends a Fund will be allowed to
distribute for a taxable year, such section 988 losses may result
in all or a portion of prior dividend distributions for such year
being recharacterized as a non-taxable return of capital to
shareholders, rather than as an ordinary dividend, reducing each
shareholder's basis in his Fund shares. If such distributions
exceed such shareholder's basis, such excess will be treated as a
gain from the sale of shares.
Options, Futures and Forward Contracts. Certain listed
options, regulated futures contracts, and forward foreign
currency contracts are considered "section 1256 contracts" for
federal income tax purposes. Section 1256 contracts held by a
Fund at the end of each taxable year will be "marked to market"
and treated for federal income tax purposes as though sold for
fair market value on the last business day of such taxable year.
Gain or loss realized by a Fund on section 1256 contracts other
than forward foreign currency contracts will be considered 60%
long-term and 40% short-term capital gain or loss. Gain or loss
realized by a Fund on forward foreign currency contracts
generally will be treated as section 988 gain or loss and will
therefore be characterized as ordinary income or loss and will
increase or decrease the amount of a Fund's net investment income
available to be distributed to shareholders as ordinary income,
as described above. A Fund can elect to exempt its section 1256
contracts which are part of a "mixed straddle" (as described
below) from the application of section 1256.
The Treasury Department has the authority to issue
regulations that would permit or require a Fund either to
integrate a foreign currency hedging transaction with the
investment that is hedged and treat the two as a single
transaction, or otherwise to treat the hedging transaction in a
manner that is consistent with the hedged investment. The
regulations issued under this authority generally should not
apply to the type of hedging transactions in which the Funds
intend to engage.
With respect to equity options or options traded over-
the-counter or on certain foreign exchanges, gain or loss
realized by a Fund upon the lapse or sale of such options held by
a Fund will be either long-term or short-term capital gain or
loss depending upon the Fund's holding period with respect to
such option. However, gain or loss realized upon the lapse or
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closing out of such options that are written by a Fund will be
treated as short-term capital gain or loss. In general, if a
Fund exercises an option, or an option that the Fund has written
is exercised, gain or loss on the option will not be separately
recognized but the premium received or paid will be included in
the calculation of gain or loss upon disposition of the property
underlying the option.
Gain or loss realized by a Fund on the lapse or sale of
put and call options on foreign currencies which are traded over-
the-counter or on certain foreign exchanges will be treated as
section 988 gain or loss and will therefore be characterized as
ordinary income or loss and will increase or decrease the amount
of a Fund's net investment income available to be distributed to
shareholders as ordinary income, as described above. The amount
of such gain or loss shall be determined by subtracting the
amount paid, if any, for or with respect to the option (including
any amount paid by a Fund upon termination of an option written
by a Fund) from the amount received, if any, for or with respect
to the option (including any amount received by a Fund upon
termination of an option held by a Fund). In general, if a Fund
exercises such an option on a foreign currency, or such an option
that a Fund has written is exercised, gain or loss on the option
will be recognized in the same manner as if the Fund had sold the
option (or paid another person to assume the Fund's obligation to
make delivery under the option) on the date on which the option
is exercised, for the fair market value of the option. The
foregoing rules will also apply to other put and call options
which have as their underlying property foreign currency and
which are traded over- the-counter or on certain foreign
exchanges to the extent gain or loss with respect to such options
is attributable to fluctuations in foreign currency exchange
rates.
Tax Straddles. Any option, futures contract, forward
foreign currency contract, currency swap, or other position
entered into or held by a Fund in conjunction with any other
position held by the Fund may constitute a "straddle" for federal
income tax purposes. A straddle of which at least one, but not
all, the positions are section 1256 contracts may constitute a
"mixed straddle". In general, straddles are subject to certain
rules that may affect the character and timing of a Fund's gains
and losses with respect to straddle positions by requiring, among
other things, that (i) loss realized on disposition of one
position of a straddle not be recognized to the extent that a
Fund has unrealized gains with respect to the other position in
such straddle; (ii) a Fund's holding period in straddle positions
be suspended while the straddle exists (possibly resulting in
gain being treated as short-term capital gain rather than long-
term capital gain); (iii) losses recognized with respect to
certain straddle positions which are part of a mixed straddle and
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which are non-section 1256 positions be treated as 60% long-term
and 40% short-term capital loss; (iv) losses recognized with
respect to certain straddle positions which would otherwise
constitute short-term capital losses be treated as long-term
capital losses; and (v) the deduction of interest and carrying
charges attributable to certain straddle positions may be
deferred. The Treasury Department is authorized to issue
regulations providing for the proper treatment of a mixed
straddle where at least one position is ordinary and at least one
position is capital. No such regulations have yet been issued.
Various elections are available to a Fund which may mitigate the
effects of the straddle rules, particularly with respect to mixed
straddles. In general, the straddle rules described above do not
apply to any straddles held by a Fund all of the offsetting
positions of which consist of section 1256 contracts.
Other Taxation
The Funds may be subject to other state and local taxes
than those discussed above. Also, distributions by the Fund may
be subject to additional state, local and foreign taxes depending
on each shareholder's particular circumstances.
Taxation of Foreign Stockholders
The foregoing discussion relates only to United States
federal income tax law as it affects shareholders who are United
States citizens or residents or United States corporations. The
effects of federal income tax law on shareholders who are non-
resident alien individuals or foreign corporations may be
substantially different. Foreign investors should therefore
consult their counsel for further information as to the United
States tax consequences of investing in the Funds.
_________________________________________________________________
PORTFOLIO TRANSACTIONS
_________________________________________________________________
Subject to the general supervision of the Board of
Directors, the Adviser is responsible for the investment
decisions and the placing of orders for portfolio transactions
for the Funds. The Adviser determines the broker to be used in
each specific transaction with the objective of negotiating a
combination of the most favorable commission and the best price
obtainable on each transaction (generally defined as best
execution). When consistent with the objective of obtaining best
execution, brokerage may be directed to persons or firms
supplying investment information to the Adviser. There may be
occasions where the transaction cost charged by a broker may be
greater than that which another broker may charge if a Fund
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determines in good faith that the amount of such transaction cost
is reasonable in relation to the value of the brokerage, research
and statistical services provided by the executing broker.
Neither the Company nor the Adviser has entered into
agreements or understandings with any brokers regarding the
placement of securities transactions because of research services
they provide. To the extent that such persons or firms supply
investment information to the Adviser for use in rendering
investment advice to the Funds, such information may be supplied
at no cost to the Adviser and, therefore, may have the effect of
reducing the expenses of the Adviser in rendering advice to the
Funds. While it is impossible to place an actual dollar value on
such investment information, its receipt by the Adviser probably
does not reduce the overall expenses of the Adviser to any
material extent.
The investment information provided to the Adviser is of
the type described in Section 28(e)(3) of the Securities Exchange
Act of 1934 and is designed to augment the Adviser's own internal
research and investment strategy capabilities. Research services
furnished by brokers through which the Funds effect securities
transactions are used by the Adviser in carrying out its
investment responsibilities with respect to all its client
accounts.
The Funds may deal in some instances in securities which
are not listed on a national stock exchange but are traded in the
over-the-counter market. The Funds may also purchase listed
securities through the third market, i.e., from a dealer which is
not a member of the exchange on which a security is listed.
Where transactions are executed in the over-the-counter market or
third market, the Funds will seek to deal with the primary market
makers; but when necessary in order to obtain the best price and
execution, it will utilize the services of others. In all cases,
the Funds will attempt to negotiate best execution.
The extent to which commissions that will be charged by
broker-dealers selected by the Funds may reflect an element of
value for research cannot presently be determined. To the extent
that research services of value are provided by broker-dealers
with or through whom the Funds place portfolio transactions, the
Adviser may be relieved of expenses which it might otherwise
bear. Research services furnished by broker-dealers could be
useful and of value to the Adviser in servicing its other clients
as well as the Funds; but, on the other hand, certain research
services obtained by the Adviser as a result of the placement of
portfolio brokerage of other clients could be useful and of value
to it in serving the Funds. Consistent with the Conduct Rules of
the National Association of Securities Dealers, Inc., and subject
to seeking best execution, the Funds may consider sales of shares
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of the Funds or other investment companies managed by the Adviser
as a factor in the selection of broker-dealers to execute
portfolio transactions for the Funds.
The Funds may from time to time place orders for the
purchase or sale of securities (including listed call options)
with Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ"),
an affiliate of the Adviser, and with brokers which may have
their transactions cleared or settled, or both, by the Pershing
Division of DLJ, for which DLJ may receive a portion of the
brokerage commission. In such instances, the placement of orders
with such brokers would be consistent with each Fund's objective
of obtaining best execution and would not be dependent upon the
fact that DLJ is an affiliate of the Adviser. With respect to
orders placed with DLJ for execution on a national securities
exchange, commissions received must conform to Section
17(e)(2)(A) of the 1940 Act and Rule 17e-1 thereunder, which
permit an affiliated person of a registered investment company
(such as the Company), or any affiliated person of such person,
to receive a brokerage commission from such registered investment
company, provided that such commission is reasonable and fair
compared to the commissions received by other brokers in
connection with comparable transactions involving similar
securities during a comparable period of time.
_________________________________________________________________
GENERAL INFORMATION
_________________________________________________________________
Capitalization
The Company is a Maryland corporation organized on
October 3, 1997. The authorized capital stock of the Company
consists of 36,000,000,000 shares, of which 3,000,000,000 shares
are Class I shares of Alliance Technology Institutional Fund,
3,000,000,000 shares are Class II shares of Alliance Technology
Institutional Fund, 3,000,000,000 shares are Class I shares of
Alliance International Premier Growth Institutional Fund and
3,000,000,000 shares are Class II shares of Alliance
International Premier Growth Institutional Fund, each having
$.001 par value. The balance of the shares of the Company are
Class I and Class II shares of the Company's other four
portfolios.
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.
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All shares of each Fund, when issued, are fully paid and
non-assessable. The Directors are authorized to reclassify and
issue any unissued shares to any number of additional series and
classes without shareholder approval. Accordingly, the Directors
in the future, for reasons such as the desire to establish one or
more additional portfolios with different investment objectives,
policies or restrictions, may create additional classes or series
of shares. Any issuance of shares of another class or series
would be governed by the 1940 Act and the law of the State of
Maryland. If shares of another series were issued in connection
with the creation of a new portfolio, each share of each
portfolio would normally be entitled to one vote for all
purposes. Generally, shares of all portfolios would vote as a
single series on matters, such as the election of Directors, that
affected both portfolios in substantially the same manner. As to
matters affecting portfolios differently, such as approval of the
Advisory Agreement and changes in investment policy, shares of
each portfolio would vote as a separate series. Procedures for
calling a shareholders' meeting for the removal of Directors of a
Fund, similar to those set forth in Section 16(c) of the 1940
Act, are available to shareholders of a Fund. The rights of the
holders of shares of a series may not be modified except by the
vote of a majority of the outstanding shares of such series.
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 a Fund's assets and, upon
redeeming shares, will receive the then current net asset value
of that 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 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 mattes 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 that Fund.
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Custodian
State Street Bank and Trust Company, 225 Franklin
Street, Boston, Massachusetts 02110, will act as the Funds'
custodian for the assets of the Funds but plays no part in
deciding the purchase or sale of portfolio securities. Subject
to the supervision of the Directors, State Street Bank and Trust
Company may enter into sub-custodial agreements for the holding
of the Funds' foreign securities.
Principal Underwriter
Alliance Fund Distributors, Inc., an indirect wholly-
owned subsidiary of the Adviser, located at 1345 Avenue of the
Americas, New York, New York 10105, is the principal underwriter
of shares of the Funds. Under the Distribution Services Agreement
between the Funds and the Principal Underwriter, the Funds have
agreed to indemnify the Principal Underwriter, in the absence of
its willful misfeasance, bad faith, gross negligence or reckless
disregard of its obligations thereunder, against certain civil
liabilities, including liabilities under the Securities Act.
Counsel
Legal matters in connection with the issuance of the
shares of Common Stock offered hereby are passed upon by Seward &
Kissel LLP, New York, New York. Seward & Kissel LLP has relied
upon the opinion of Venable, Baetjer and Howard, LLP, Baltimore,
Maryland, for matters relating to Maryland law.
Independent Auditors
Ernst & Young LLP, New York, New York, has appointed as
independent auditors for the Company.
Performance Information
From time to time the Funds advertise their "total
return." Computed separately for each class, a Fund's "total
return" is its average annual compounded total return for its
most recently completed one, five and ten-year periods (or the
period since the Fund's inception). A Fund's total return for
such a 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 such investment
at the end of the period. For purposes of computing total
return, income dividends and capital gains distributions paid on
shares of a Fund are assumed to have been reinvested in Fund
shares when paid.
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A Fund's total return is computed separately for Class I
and Class II shares. A Fund's total return is not fixed and will
fluctuate in response to prevailing market conditions or as a
function of the type and quality of the securities in a Fund's
portfolio and a Fund's expenses. Total return information is
useful in reviewing a Fund's performance, but such information
may not provide a basis for comparison with bank deposits or
other investments which pay a fixed yield for a stated period of
time. An investor's principal invested in a Fund is not fixed and
will fluctuate in response to prevailing market conditions.
A Fund's average total return is computed separately for
Class I and Class II shares.
Advertisements quoting performance rankings of a Fund as
measured by financial publications or by independent
organizations such as Lipper Analytical Services, Inc. and
Morningstar, Inc., and advertisements presenting the historical
record of payments of income dividends by a Fund may also from
time to time be sent to investors or placed in newspapers,
magazines such as Barrons, Business Week, Changing Times, Forbes,
Investor's Daily, Money Magazine, The New York Times and The Wall
Street Journal or other media on behalf of a Fund.
Additional Information
Any shareholder inquiries may be directed to the
shareholder's broker or to Alliance Fund Services, Inc. at the
address or telephone number shown on the front cover of this
Statement of Additional Information. This Statement of
Additional Information does not contain all the information set
forth in the Registration Statement filed by the Funds with the
Commission. Copies of the Registration Statement may be obtained
at a reasonable charge from the Commission or may be examined,
without charge, at the offices of the Commission in Washington,
D.C.
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____________________________________________________________
APPENDIX A:
CERTAIN INVESTMENT PRACTICES
____________________________________________________________
The information in this Appendix concerns investment
practices in which the Alliance International Premier Growth
Institutional Fund (the "Fund") is authorized to engage, but in
which the Fund is not required to engage and which may not
currently be permitted under applicable laws or regulations or
may otherwise be unavailable in certain countries. The Fund's
investment policies and restrictions authorize it to engage in
these practices to the extent such practices become available and
permissible in the future.
Options
The Fund may write covered put and call options and
purchase put and call options on securities of the types in which
it is permitted to invest that are traded on U.S. and foreign
securities exchanges and over-the-counter, including options on
market indices. The Fund will only write "covered" put and call
options unless such options are written for cross-hedging
purposes. There are no specific limitations on the Fund's
writing and purchasing of options.
The Fund may purchase put options to hedge against a
decline in the value of its portfolio. By using put options in
this way, the Fund will reduce any profit it might otherwise have
realized in the underlying security by the amount of the premium
paid for the put option and by transaction costs. The Fund may
purchase call options to hedge against an increase in the price
of securities that the Fund anticipates purchasing in the future.
The premium paid for the call option plus any transaction costs
will reduce the benefit, if any, realized by the Fund upon
exercise of the option, and, unless the price of the underlying
security rises sufficiently, the option may expire worthless to
the Fund.
A put option gives the purchaser of such option, upon
payment of a premium, the right to deliver a specified amount of
a security to the writer of the option on or before a fixed date
at a predetermined price. A call option gives the purchaser of
the option, upon payment of a premium, the right to call upon the
writer to deliver a specified amount of a security on or before a
fixed date at a predetermined price. A call option written by
the Fund is "covered" if the Fund owns the underlying security
covered by the call or has an absolute and immediate right to
acquire that security without additional cash consideration (or
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for additional cash consideration held in a segregated account by
its custodian) upon conversion or exchange of other securities
held in its portfolio. A call option is also covered if the Fund
holds a call on the same security and in the same principal
amount as the call written where the exercise price of the call
held (i) is equal to or less than the exercise price of the call
written or (ii) is greater than the exercise price of the call
written if the difference is maintained by the Fund in cash and
liquid high-grade debt securities in a segregated account with
its custodian. A put option written by the Fund is "covered" if
the Fund maintains cash or high-grade liquid assets with a value
equal to the exercise price in a segregated account with its
custodian, or else holds a put on the same security and in the
same principal amount as the put written where the exercise price
of the put held is equal to or greater than the exercise price of
the put written. The premium paid by the purchaser of an option
will reflect, among other things, the relationship of the
exercise price to the market price and volatility of the
underlying security, the remaining term of the option, supply and
demand and interest rates.
A call option is for cross-hedging purposes if the Fund
does not own the underlying security but seeks to provide a hedge
against a decline in value in another security which the Fund
owns or has the right to acquire. In such circumstances, the
Fund collateralizes its obligation under the option by
maintaining in a segregated account with the Fund's custodian
cash or liquid securities in an amount not less than the market
value of the underlying security, marked to market daily. The
Fund would write a call option for cross-hedging purposes,
instead of writing a covered call option, when the premium to be
received from the cross-hedge transaction would exceed that which
would be received from writing a covered call option, while at
the same time achieving the desired hedge.
In purchasing a call option, the Fund would be in a
position to realize a gain if, during the option period, the
price of the underlying security increased by an amount in excess
of the premium paid. It would realize a loss if the price of the
underlying security declined or remained the same or did not
increase during the period, by more than the amount of the
premium. In purchasing a put option, the Fund would be in a
position to realize a gain if, during the option period, the
price of the underlying security declined by an amount in excess
of the premium paid. It would realize a loss if the price of the
underlying security increased or remained the same or did not
decrease during that period by more than the amount of the
premium. If a put or call option purchased by the Fund were
permitted to expire without being sold or exercised, its premium
would be lost by the Fund.
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If a put option written by the Fund were exercised, the
Fund would be obligated to purchase the underlying security at
the exercise price. If a call option written by the Fund were
exercised, the Fund would be obligated to sell the underlying
security at the exercise price. The risk involved in writing a
put option is that there could be a decrease in the market value
of the underlying security caused by rising interest rates or
other factors. If this occurred, the option could be exercised
and the underlying security would then be sold by the option
holder to the Fund at a higher price than its current market
value. The risk involved in writing a call option is that there
could be an increase in the market value of the underlying
security caused by declining interest rates or other factors. If
this occurred, the option could be exercised and the underlying
security would then be sold by the Fund at a lower price than its
current market value. These risks could be reduced by entering
into a closing transaction prior to the option expiration dates
if a liquid market is available. The Fund retains the premium
received from writing a put or call option whether or not the
option is exercised.
The Fund may purchase or write options on securities of
the types in which it is permitted to invest in privately
negotiated (i.e., over-the-counter) transactions. The Fund will
effect such transactions only with investment dealers and other
financial institutions (such as commercial banks or savings and
loan institutions) deemed creditworthy by the Adviser, and the
Adviser has adopted procedures for monitoring the
creditworthiness of such entities. Options purchased or written
by the Fund in negotiated transactions are illiquid and it may
not be possible for the Fund to effect a closing transaction at a
time when the Adviser believes it would be advantageous to do so.
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
exercises 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. There are no specific limitations on the Fund's
purchasing and selling of options on securities indices.
The writer of an option may have no control over when
the underlying securities must be sold, in the case of a call
option, or purchased, in the case of a put option, since with
regard to certain options, the writer may be assigned an exercise
notice at any time prior to the termination of the obligation.
Whether or not an option expires unexercised, the writer retains
the amount of the premium. This amount, of course, may, in the
case of a covered call option, be offset by a decline in the
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market value of the underlying security during the option period.
If a call option is exercised, the writer experiences a profit or
loss from the sale of the underlying security. If a put option
is exercised, the writer must fulfill the obligation to purchase
the underlying security at the exercise price, which will usually
exceed the then market value of the underlying security.
The writer of a listed option that wishes to terminate
its obligation may effect a "closing purchase transaction." This
is accomplished by buying an option of the same series as the
option previously written. The effect of the purchase is that
the writer's position will be cancelled by the clearing
corporation. However, a writer may not effect a closing purchase
transaction after being notified of the exercise of an option.
Likewise, an investor who is the holder of a listed option may
liquidate its position by effecting a "closing sale transaction."
This is accomplished by selling an option of the same series as
the option previously purchased. There is no guarantee that
either a closing purchase or a closing sale transaction can be
effected in any particular situation.
Effecting a closing transaction in the case of a written
call option will permit the Fund to write another call option on
the underlying security with either a different exercise price or
expiration date or both, or in the case of a written put option
will permit the Fund to write another put option to the extent
that the exercise price thereof is secured by deposited cash or
short-term securities. Also, effecting a closing transaction
will permit the cash or proceeds from the concurrent sale of any
securities subject to the option to be used for other Fund
investments. If the Fund desires to sell a particular security
from its portfolio on which it has written a call option, it will
effect a closing transaction prior to or concurrent with the sale
of the security.
The Fund will realize a profit from a closing
transaction if the price of the transaction is less than the
premium received from writing the option or is more than the
premium paid to purchase the option; the Fund will realize a loss
from a closing transaction if the price of the transaction is
more than the premium received from writing the option or is less
than the premium paid to purchase the option. Because increases
in the market price of a call option will generally reflect
increases in the market price of the underlying security, any
loss resulting from the repurchase of a call option is likely to
be offset in whole or in part by appreciation of the underlying
security owned by the Fund.
An option position may be closed out only where there
exists a secondary market for an option of the same series. If a
secondary market does not exist, it might not be possible to
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effect closing transactions in particular options with the result
that the Fund would have to exercise the options in order to
realize any profit. If the Fund is unable to effect a closing
purchase transaction in a secondary market, it will not be able
to sell the underlying security until the option expires or it
delivers the underlying security upon exercise. Reasons for the
absence of a liquid secondary market include the following:
(i) there may be insufficient trading interest in certain
options, (ii) restrictions may be imposed by a national
securities exchange ("National Exchange") on opening transactions
or closing transactions or both, (iii) trading halts, suspensions
or other restrictions may be imposed with respect to particular
classes or series of options or underlying securities,
(iv) unusual or unforeseen circumstances may interrupt normal
operations on a National Exchange, (v) the facilities of a
National Exchange or the Options Clearing Corporation may not at
all times be adequate to handle current trading volume, or
(vi) one or more National Exchanges could, for economic or other
reasons, decide or be compelled at some future date to
discontinue the trading of options (or a particular class or
series of options), in which event the secondary market on that
National Exchange (or in that class or series of options) would
cease to exist, although outstanding options on that National
Exchange that had been issued by the Options Clearing Corporation
as a result of trades on that National Exchange would continue to
be exercisable in accordance with their terms.
The Fund may write options in connection with buy-and-
write transactions; that is, the Fund may purchase a security and
then write a call option against that security. The exercise
price of the call the Fund determines to write will depend upon
the expected price movement of the underlying security. The
exercise price of a call option may be below ("in-the-money"),
equal to ("at-the-money") or above ("out-of-the-money") the
current value of the underlying security at the time the option
is written. Buy-and-write transactions using in-the-money call
options may be used when it is expected that the price of the
underlying security will remain flat or decline moderately during
the option period. Buy-and-write transactions using at-the-money
call options may be used when it is expected that the price of
the underlying security will remain fixed or advance moderately
during the option period. Buy-and-write transactions using out-
of-the-money call options may be used when it is expected that
the premiums received from writing the call option plus the
appreciation in the market price of the underlying security up to
the exercise price will be greater than the appreciation in the
price of the underlying security alone. If the call options are
exercised in such transactions, the Fund's maximum gain will be
the premium received by it for writing the option, adjusted
upwards or downwards by the difference between the Fund's
purchase price of the security and the exercise price. If the
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options are not exercised and the price of the underlying
security declines, the amount of such decline will be offset in
part, or entirely, by the premium received.
The writing of covered put options is similar in terms
of risk/return characteristics to buy-and-write transactions. If
the market price of the underlying security rises or otherwise is
above the exercise price, the put option will expire worthless
and the Fund's gain will be limited to the premium received. If
the market price of the underlying security declines or otherwise
is below the exercise price, the Fund may elect to close the
position or take delivery of the security at the exercise price
and the Fund's return will be the premium received from the put
option minus the amount by which the market price of the security
is below the exercise price. Out-of-the-money, at-the-money, and
in-the-money put options may be used by the Fund in the same
market environments that call options are used in equivalent buy-
and-write transactions.
Futures Contracts
The Fund may enter into contracts for the purchase or
sale for future delivery of fixed-income securities or foreign
currencies, or contracts based on financial indices including any
index of U.S. Government securities, securities issued by foreign
government entities or common stocks. U.S. futures contracts
have been designed by exchanges which have been designated
"contracts markets" by the Commodity Futures Trading Commission
("CFTC"), and must be executed through a futures commission
merchant, or brokerage firm, which is a member of the relevant
contract market. Futures contracts trade on a number of exchange
markets, and, through their clearing corporations, the exchanges
guarantee performance of the contracts as between the clearing
members of the exchange.
At the same time a futures contract is purchased or
sold, the Fund must allocate cash or securities as a deposit
payment ("initial deposit"). It is expected that the initial
deposit would be approximately 1 1/2% to 5% of a contract's face
value. Daily thereafter, the futures contract is valued and the
payment of "variation margin" may be required, since each day the
Fund would provide or receive cash that reflects any decline or
increase in the contract's value.
At the time of delivery of securities pursuant to such a
contract, adjustments are made to recognize differences in value
arising from the delivery of securities with a different price or
interest rate from that specified in the contract. In some (but
not many) cases, securities called for by a futures contract may
not have been issued when the contract was written.
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Although futures contracts by their terms call for the
actual delivery or acquisition of securities, in most cases the
contractual obligation is fulfilled before the date of the
contract without having to make or take delivery of the
securities. The offsetting of a contractual obligation is
accomplished by buying (or selling, as the case may be) on a
commodities exchange an identical futures contract calling for
delivery in the same month. Such a transaction, which is
effected through a member of an exchange, cancels the obligation
to make or take delivery of the securities. Since all
transactions in the futures market are made, offset or fulfilled
through a clearinghouse associated with the exchange on which the
contracts are traded, the Fund will incur brokerage fees when it
purchases or sells futures contracts.
Stock Index Futures
The Fund may purchase and sell stock index futures as a
hedge against movements in the equity markets. There are several
risks in connection with the use of stock index futures by the
Fund as a hedging device. One risk arises because of the
imperfect correlation between movements in the price of the stock
index futures and movements in the price of the securities which
are the subject of the hedge. The price of the stock index
futures may move more than or less than the price of the
securities being hedged. If the price of the stock index futures
moves less than the price of the securities which are the subject
of the hedge, the hedge will not be fully effective but, if the
price of the securities being hedged has moved in an unfavorable
direction, the Fund would be in a better position than if it had
not hedged at all. If the price of the securities being hedged
has moved in a favorable direction, this advantage will be
partially offset by the loss on the index future. If the price
of the future moves more than the price of the stock, the Fund
will experience either a loss or gain on the future which will
not be completely offset by movements in the price of the
securities which are subject to the hedge. To compensate for the
imperfect correlation of movements in the price of securities
being hedged and movements in the price of the stock index
futures, the Fund may buy or sell stock index futures contracts
in a greater dollar amount than the dollar amount of securities
being hedged if the volatility over a particular time period of
the prices of such securities has been greater than the
volatility over such time period of the index, or if otherwise
deemed to be appropriate by the Adviser. Conversely, the Fund
may buy or sell fewer stock index futures contracts if the
volatility over a particular time period of the prices of the
securities being hedged is less than the volatility over such
time period of the stock index, or it is otherwise deemed to be
appropriate by the Adviser. It is also possible that, when the
Fund has sold futures to hedge its portfolio against a decline in
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the market, the market may advance and the value of securities
held in the Fund may decline. If this occurred, the Fund would
lose money on the futures and also experience a decline in value
in its portfolio securities. However, over time the value of a
diversified portfolio should tend to move in the same direction
as the market indices upon which the futures are based, although
there may be deviations arising from differences between the
composition of the Fund and the stocks comprising the index.
Where futures are purchased to hedge against a possible
increase in the price of stock before the Fund is able to invest
its cash (or cash equivalents) in stocks (or options) in an
orderly fashion, it is possible that the market may decline
instead. If the Fund then concludes not to invest in stock or
options at that time because of concern as to possible further
market decline or for other reasons, the Fund will realize a loss
on the futures contract that is not offset by a reduction in the
price of securities purchased.
In addition to the possibility that there may be an
imperfect correlation, or no correlation at all, between
movements in the stock index futures and the portion of the
portfolio being hedged, the price of stock index futures may not
correlate perfectly with movement in the stock index due to
certain market distortions. Rather than meeting additional
margin deposit requirements, investors may close futures
contracts through offsetting transactions which could distort the
normal relationship between the index and futures markets.
Secondly, from the point of view of speculators, the deposit
requirements in the futures market are less onerous than margin
requirements in the securities market. Therefore, increased
participation by speculators in the futures market may also cause
temporary price distortions. Due to the possibility of price
distortion in the futures market, and because of the imperfect
correlation between the movements in the stock index and
movements in the price of stock index futures, a correct forecast
of general market trends by the investment adviser may still not
result in a successful hedging transaction over a short time
frame.
Positions in stock index futures may be closed out only
on an exchange or board of trade which provides a secondary
market for such futures. Although the Fund intends to purchase
or sell futures only on exchanges or boards of trade where there
appear to be active secondary markets, there is no assurance that
a liquid secondary market on any exchange or board of trade will
exist for any particular contract or at any particular time. In
such event, it may not be possible to close a futures investment
position, and in the event of adverse price movements, the Fund
would continue to be required to make daily cash payments of
variation margin. However, in the event futures contracts have
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been used to hedge portfolio securities, such securities will not
be sold until the futures contract can be terminated. In such
circumstances, an increase in the price of the securities, if
any, may partially or completely offset losses on the futures
contract. However, as described above, there is no guarantee
that the price of the securities will in fact correlate with the
price movements in the futures contract and thus provide an
offset on a futures contract.
Options on Futures Contracts
The Fund intends to purchase and write options on
futures contracts for hedging purposes. The Fund is not a
commodity pool and all transactions in futures contracts and
options on futures contracts engaged in by the Fund must
constitute bona fide hedging or other permissible transactions in
accordance with the rules and regulations promulgated by the
CFTC. The purchase of a call option on a futures contract is
similar in some respects to the purchase of a call option on an
individual security. Depending on the pricing of the option
compared to either the price of the futures contract upon which
it is based or the price of the underlying debt securities, it
may or may not be less risky than ownership of the futures
contract or underlying debt securities. As with the purchase of
futures contracts, when the Fund is not fully invested it may
purchase a call option on a futures contract to hedge against
adverse market conditions.
The writing of a call option on a futures contract
constitutes a partial hedge against declining prices of the
security or foreign currency which is deliverable upon exercise
of the futures contract or securities comprising an index. If
the futures price at expiration of the option is below the
exercise price, the Fund will retain the full amount of the
option premium which provides a partial hedge against any decline
that may have occurred in the Fund's portfolio holdings. The
writing of a put option on a futures contract constitutes a
partial hedge against increasing prices of the security or
foreign currency which is deliverable upon exercise of the
futures contract or securities comprising an index. If the
futures price at expiration of the option is higher than the
exercise price, the Fund will retain the full amount of the
option premium which provides a partial hedge against any
increase in the price of securities which the Fund intends to
purchase. If a put or call option the Fund has written is
exercised, the Fund will incur a loss which will be reduced by
the amount of the premium it receives. Depending on the degree
of correlation between changes in the value of its portfolio
securities and changes in the value of its futures positions, the
Fund's losses from existing options on futures may to some extent
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be reduced or increased by changes in the value of portfolio
securities.
The purchase of a put option on a futures contract is
similar in some respects to the purchase of protective put
options on portfolio securities. For example, the Fund may
purchase a put option on a futures contract to hedge the Fund's
portfolio against the risk of rising interest rates.
The amount of risk the Fund assumes when it purchases an
option on a futures contract is the premium paid for the option
plus related transaction costs. In addition to the correlation
risks discussed above, the purchase of an option also entails the
risk that changes in the value of the underlying futures contract
will not be fully reflected in the value of the option purchased.
Options on Foreign Currencies
The Fund may purchase and write options on foreign
currencies for hedging purposes in a manner similar to that in
which futures contracts on foreign currencies, or forward
contracts, will be utilized. For example, a decline in the
dollar value of a foreign currency in which portfolio securities
are denominated will reduce the dollar value of such securities,
even if their value in the foreign currency remains constant. In
order to protect against such diminutions in the value of
portfolio securities, the Fund may purchase put options on the
foreign currency. If the value of the currency does decline, the
Fund will have the right to sell such currency for a fixed amount
in dollars and will thereby offset, in whole or in part, the
adverse effect on its portfolio which otherwise would have
resulted. 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 the
Fund's position, it may forfeit the entire amount of the premium
plus related transaction costs. Options on foreign currencies to
be written or purchased by the Fund are traded on U.S. and
foreign exchanges or over-the-counter.
Conversely, where a rise in the dollar value of a
currency in which securities to be acquired are denominated is
projected, thereby increasing the cost of such securities, the
Fund may purchase call options thereon. The purchase of such
options could offset, at least partially, the effects of the
adverse movements in exchange rates. As in the case of other
types of options, however, the benefit to the Fund deriving from
purchases of foreign currency options will be reduced by the
amount of the premium and related transaction costs. In
addition, where currency exchange rates do not move in the
direction or to the extent anticipated, the Fund could sustain
losses on transactions in foreign currency options which would
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require it to forego a portion or all of the benefits of
advantageous changes in such rates.
The Fund may write options on foreign currencies for the
same types of hedging purposes. For example, where the Fund
anticipates a decline in the dollar value of foreign currency
denominated securities due to adverse fluctuations in exchange
rates it could, instead of purchasing a put option, write a call
option on the relevant currency. If the expected decline occurs,
the option will most likely not be exercised, and the diminution
in value of portfolio securities will be offset by the amount of
the premium received.
Similarly, instead of purchasing a call option to hedge
against an anticipated increase in the dollar cost of securities
to be acquired, the Fund could write a put option on the relevant
currency which, if rates move in the manner projected, will
expire unexercised and allow the Fund to hedge such increased
cost up to the amount of the premium. As in the case of other
types of options, however, the writing of a foreign currency
option will constitute only a partial hedge up to the amount of
the premium, and only if rates move in the expected direction.
If this does not occur, the option may be exercised and the Fund
would be required to purchase or sell the underlying currency at
a loss which may not be offset by the amount of the premium.
Through the writing of options on foreign currencies, the Fund
also may be required to forego all or a portion of the benefits
which might otherwise have been obtained from favorable movements
in exchange rates.
The Fund intends to write covered call options on
foreign currencies. A call option written on a foreign currency
by the Fund is "covered" if the Fund owns the underlying foreign
currency covered by the call or has an absolute and immediate
right to acquire that foreign currency without additional cash
consideration (or for additional cash consideration held in a
segregated account by its custodian) upon conversion or exchange
of other foreign currency held in its portfolio. A call option
is also covered if the Fund has a call on the same foreign
currency and in the same principal amount as the call written
where the exercise price of the call held (a) is equal to or less
than the exercise price of the call written or (b) is greater
than the exercise price of the call written if the difference is
maintained by the Fund in cash, U.S. Government securities and
other high-grade liquid debt securities in a segregated account
with its custodian.
The Fund also intends to write call options on foreign
currencies for cross-hedging purposes. An option that is cross-
hedged is not covered, but is designed to provide a hedge against
a decline in the U.S. dollar value of a security which the Fund
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owns or has the right to acquire and which is denominated in the
currency underlying the option due to an adverse change in the
exchange rate. In such circumstances, the Fund collateralizes
the option by maintaining in a segregated account with its
custodian, cash or other high-grade liquid debt securities in an
amount not less than the value of the underlying foreign currency
in U.S. dollars marked to market daily.
Additional Risks of Options on Futures Contracts,
Forward Contracts and Options on Foreign Currencies
Unlike transactions entered into by the Fund in futures
contracts, options on foreign currencies and forward contracts
are not traded on contract markets regulated by the CFTC or (with
the exception of certain foreign currency options) by the SEC.
To the contrary, such instruments are traded through financial
institutions acting as market-makers, although foreign currency
options are also traded on certain national securities exchanges,
such as the Philadelphia Stock Exchange and the Chicago Board
Options Exchange, subject to SEC regulation. Similarly, options
on securities may be traded over-the-counter. In an
over-the-counter trading environment, many of the protections
afforded to exchange participants will not be available. Although
the purchaser of an option cannot lose more than the amount of
the premium plus related transaction costs, this entire amount
could be lost. Moreover, the option writer and a trader of
forward contracts could lose amounts substantially in excess of
their initial investments, due to the margin and collateral
requirements associated with such positions.
Options on foreign currencies traded on national
securities exchanges are within the jurisdiction of the SEC, as
are other securities traded on such exchanges. As a result, many
of the protections provided to traders on organized exchanges
will be available with respect to such transactions. In
particular, all foreign currency option positions entered into on
a national securities exchange are cleared and guaranteed by the
Options Clearing Corporation ("OCC"), thereby reducing the risk
of counterparty default. Further, a liquid secondary market in
options traded on a national securities exchange may be more
readily available than in the over-the-counter market,
potentially permitting the Fund to liquidate open positions at a
profit prior to exercise or expiration, or to limit losses in the
event of adverse market movements.
The purchase and sale of exchange-traded foreign
currency options, however, is subject to the risks of the
availability of a liquid secondary market described above, as
well as the risks regarding adverse market movements, margining
of options written, the nature of the foreign currency market,
possible intervention by governmental authorities and the effects
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of other political and economic events. In addition, exchange-
traded options on foreign currencies involve certain risks not
presented by the over-the-counter market. For example, exercise
and settlement of such options must be made exclusively through
the OCC, which has established banking relationships in
applicable foreign countries for this purpose. As a result, the
OCC may, if it determines that foreign governmental restrictions
or taxes would prevent the orderly settlement of foreign currency
option exercise, or would result in undue burdens on the OCC or
its clearing member, impose special procedures on exercise and
settlement, such as technical changes in the mechanics of
delivery of currency, the fixing of dollar settlement prices or
prohibitions on exercise.
In addition, futures contracts, options on futures
contracts, forward contracts and options on foreign currencies
may be traded on foreign exchanges. Such transactions are
subject to the risk of governmental actions affecting trading in
or the prices of foreign currencies or securities. The value of
such positions also could be adversely affected by (i) other
complex foreign political and economic factors, (ii) lesser
availability than in the United States of data on which to make
trading decisions, (iii) delays in the Fund's ability to act upon
economic events occurring in foreign markets during nonbusiness
hours in the United States, (iv) the imposition of different
exercise and settlement terms and procedures and margin
requirements than in the United States, and (v) lesser trading
volume.
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________________________________________________________________
APPENDIX B: ADDITIONAL INFORMATION ABOUT JAPAN
________________________________________________________________
The information in this section is based on material
obtained by the Alliance International Premier Growth
Institutional Fund (the "Fund") from various Japanese
governmental and other sources believed to be accurate but has
not been independently verified by the Fund or the Adviser. It
is not intended to be a complete description of Japan, its
economy or the consequences of investing in Japanese securities.
Japan, located in eastern Asia, consists of four main
islands: Hokkaido, Honshu, Kyushu and Shikoku, and many small
islands. Its population is approximately 126 million.
GOVERNMENT
The government of Japan is a representative democracy
whose principal executive is the Prime Minister. Japan's
legislature (known as the Diet) consists of two houses, the House
of Representatives (the lower house) and the House of Councillors
(the upper house).
POLITICS
From 1955 to 1993, Japan's government was controlled by
the Liberal Democratic Party (the "LDP"), the major conservative
party. In August 1993, after a main faction left the LDP over
the issue of political reform, a non-LDP coalition government was
formed consisting of centrist and leftist parties and was headed
by Prime Minister Morihiro Hosokawa. In April 1994, Mr. Hosokawa
resigned due to allegations of personal financial irregularities.
The coalition members thereafter agreed to choose as prime
minister the foreign minister, Tsutomu Hata. As a result of the
formation of a center-right voting bloc, however, the Japan
Socialist Party (the "JSP"), a leftist party, withdrew from the
coalition. Consequently, Mr. Hata's government was a minority
coalition, the first since 1955, and was therefore unstable. In
June 1994, Mr. Hata and his coalition were replaced by a new
coalition made up of the JSP (since renamed the "Social
Democratic Party (the "SDP")), the LDP and the small New Party
Sakigake (the "Sakigake"). This coalition, which surprised many
because of the historic rivalries between the LDP and the SDP,
was led by Tomiichi Murayama, the first Socialist prime minister
in 47 years. Mr. Murayama stepped down in January 1996 and was
succeeded as Prime Minister by Liberal Democrat Ryutaro
Hashimoto. By September 1996, when Prime Minister Hashimoto
called for a general election on October 20, 1996, the stability
of the SDP-LDP-Sakigake coalition had become threatened. Both
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the SDP and the Sakigake had lost more than half their seats in
the lower house of the Diet when a faction of the Sakigake split
off to form the Democratic Party of Japan. Their strength was
further diminished as a result of the October 20, 1996 House of
Representatives election. Although the LDP was 12 seats short of
winning a majority in that election, it was able to reduce the
margin to three seats and to achieve enough support from its two
former coalition parties, the SDP and the Sakigake, as well as
independents and other conservatives, to return Japan to a
single-party government for the first time since 1993. Mr.
Hashimoto was reappointed as Prime Minister on November 7, 1996.
Subsequent to the 1996 elections, the LDP established and is
maintaining a majority in the House of Representatives as
individual members have joined the ruling party. By 1998 the
popularity of the LDP had declined, due to dissatisfaction with
Mr. Hashimoto's leadership, and in the July 12, 1998 House of
Councillors election, the LDP's representation fell to 103 seats
from 120 seats. As a result of the LDP's defeat, on July 13,
1998, Mr. Hashimoto announced his resignation as Prime Minister
and was replaced by Keizo Obuchi on July 24, 1998. On January
14, 1999, the LDP formed a coalition government with a major
opposition party. As a result, Mr. Obuchi's administration
strengthened its position in the Diet, where it increased its
majority in the House of Representatives and reduced its
shortfall in the House of Councillors. A new three-party
coalition government was formed on October 5, 1999 that has
further strengthened the position of Mr. Obuchi's administration
in the Diet. The new coalition holds 357 of 500 seats in the
House of Representatives and 141 of 252 seats in the House of
Councillors. The opposition is dominated by the new Minshuto
(Democratic Party of Japan), which was established in April 1998
by various opposition groups and parties. The next general
election (House of Representatives) is scheduled to occur in
October 2000.
ECONOMY
The Japanese economy maintained an average annual growth
rate of 2.1% in real GDP terms from 1990 through 1994, compared
with 2.4% for the United States during the same period. In 1995
and 1996, Japan's real GDP growth was 1.4% and 5.2%,
respectively. In 1997 and 1998, Japan's real GDP growth rate fell
to 1.4% and -2.9%, respectively. Following five consecutive
quarters in which Japan experienced a negative real GDP growth
rate, resulting in the longest contraction of the economy since
the Japanese government began compiling such data in 1955, real
GDP growth rate was 1.5% and 1.0% during the first and second
quarters of 1999, respectively, compared to the previous quarter.
In the third quarter of 1999, however, Japan's real GDP growth
rate was -1.0%. Inflation has remained low, 1.3% in 1993, 0.7%
in 1994, -0.1% in 1995, 0.1% in 1996, 1.7% in 1997 and 0.7% in
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1998. Between January and November 1999, the inflation rate fell
from 0.2% to -0.6%. Although private consumer demand showed a
modest increase in the first quarter of 1999, after slowing down
for several years due to uncertainty about the economy and higher
consumer taxes that went into effect in April 1997, consumer
demand dropped again in the third quarter of 1999. Unemployment
is at its highest level since the end of World War II, rising to
4.6% in October 1999, and is not expected to fall appreciably in
the foreseeable future.
Japan's post World War II reliance on heavy industries
has shifted to higher technology products assembly and, most
recently, to automobile, electrical and electronic production.
Japan's success in exporting its products has generated sizable
trade surpluses. Since the early 1980's, Japan's relations with
its trading partners have been difficult, partly due to the
concentration of Japanese exports in products such as
automobiles, machine tools and semiconductors and the large trade
surpluses resulting therefrom, and an overall trade imbalance as
indicated by Japan's balance of payments. Japan's overall trade
surplus for 1994 was the largest in its history, amounting to
almost $145 billion. Exports totaled $386 billion, up 9.3% from
1993, and imports were $242 billion, up 13.6% from 1993. The
current account surplus in 1994 was $130 billion, down 1.5% from
a record high in 1993. By 1996, Japan's overall trade surplus
had decreased to $83 billion. Exports had increased to a total
of $400 billion, up 3.6% from 1994, and imports had increased to
a total of $317 billion, up 31.0% from 1994. During 1997, the
overall trade surplus increased approximately 22% from 1996.
Exports increased to a total of $409 billion, up 2% from 1996,
and imports decreased to $308 billion, down 3% from 1996. During
1998, the overall trade surplus increased approximately 20% from
1997. Exports decreased to a total of $374.0 billion, down 8.6%
from 1997, and imports decreased to $251.7 billion, down 18.2%
from 1997. In the third quarter of 1999, the overall trade
surplus declined by 10.9% from the third quarter of 1998, with
imports showing a decline of 5.7% and exports showing a decline
of 7.2%. Japan remains the largest creditor nation and a
significant donor of foreign aid.
On October 1, 1994, the U.S. and Japan reached an
agreement with respect to trade in insurance, glass and medical
and telecommunications equipment. In June 1995, the two
countries agreed in principal to increase Japanese imports of
American automobiles and automotive parts. These and other
agreements, however, have not been successful in addressing
Japan's trade surplus with the U.S. Other current sources of
tension between the two countries are disputes in connection with
trade in steel, semiconductors and photographic supplies,
deregulation of the Japanese insurance market, a dispute over
aviation rights and access to Japanese ports. It is expected
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that the friction between the United States and Japan with
respect to trade issues will continue for the foreseeable future.
In response to pressures caused by the slumping Japanese
economy, the fragile financial markets and the appreciating Yen,
the Japanese government, in April and June 1995, announced
emergency economic packages that focused on higher and
accelerated public works spending and increased aid for post-
earthquake reconstruction in the Kobe area. These measures
helped to increase public investment and lead to faster GDP
growth, but failed to produce fundamental changes. In 1997 and
again in 1998, the government announced additional stimulus
packages that included increased public works spending and tax
cuts. These measures have also been unsuccessful in stimulating
Japan's economy. In October 1998, Prime Minister Obuchi
instructed his cabinet to prepare another emergency economic
stimulus plan calling for even more public spending and further
tax cuts. The plan was finalized in November 1998.
In addition to the government's emergency economic
packages announced in 1995, the Bank of Japan attempted to assist
the financial markets by lowering its official discount rate to a
record low in 1995. However, large amounts of bad debt have
prevented banks from expanding their loan portfolios despite low
discount rates. Japanese banks have suffered several years of
declining profits and many banks have required public funds to
avert insolvency. In June 1995, the Finance Ministry announced
an expansion of deposit insurance and restrictions on rescuing
insolvent banks. In June 1996, six bills designed to address the
large amount of bad debt in the banking system were passed by the
Diet, but the difficulties worsened. By the end of the 1997/98
fiscal year, the government estimated that the banking system's
bad loans totaled 87.5 trillion Yen (approximately $600 billion),
or 11% of outstanding bank loans.
On December 17, 1997, in the wake of the collapse in the
previous month of one of Japan's 20 largest banks, the government
announced a proposal to strengthen the banks by means of an
infusion of public funds and other measures. In addition, the
imposition of stricter capital requirements and other supervisory
reforms scheduled to go into effect in April 1998 were postponed.
Subsequent to the December 1997 proposals, the government
proposed a series of additional proposals, culminating, after
vigorous political debate, in a set of laws that was approved by
the Diet in October 1998. The new laws made $508 billion in
public funds available to increase the capital of Japan's banks,
to guarantee depositors'' accounts and to nationalize the weakest
banks. On October 23, 1998, the Long-Term Credit Bank of Japan,
Ltd., one of Japan's 19 largest banks, became the first Japanese
bank to be nationalized pursuant to the new laws. On December
11, 1998, the Nippon Credit Bank, Ltd. became the second Japanese
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bank to be nationalized pursuant to the new laws. Since then,
four additional banks have been nationalized. It is unclear
whether these laws will achieve their intended effect. While the
risk of collapse among Japan's largest banks has diminished as a
result of the infusion of public funds there remains a high level
of bad debt throughout Japan's banks. In this regard, the
government has established the Resolution and Collection Bank to
purchase bad loans from insolvent and solvent banks and also has
established a legal framework for the securitization of bad
loans. The government has also announced a delay from April 2001
to April 2002 in the implementation of a plan announced in 1996
to scale back the amount of deposit insurance available to
depositors from its current unlimited amount to $97,700 per
depositor. The delay is designed to give smaller institutions
more time to get back on their feet before the protection of
unlimited deposit insurance is removed. In addition to bad
domestic loans, Japanese banks also have had significant exposure
to the recent financial turmoil in other Asian markets. The
financial system's fragility is expected to continue for the
foreseeable future.
In November 1996, then Prime Minister Hashimoto
announced a set of initiatives to deregulate the financial sector
by the year 2001. Known as "Tokyo's Big Bang," the reforms
include changes in tax laws to favor investors, the lowering of
barriers between banking, securities and insurance, abolition of
foreign exchange restrictions and other measures designed to
revive Tokyo's status in the international capital markets and to
stimulate the economy. The Big Bang was formally launched in
April 1998. Some of the measures that have already been
implemented include a liberalization of foreign exchange
restrictions, a repeal of the ban on holding companies, allowing
banks to sell mutual funds and to issue bonds, the elimination of
restrictions on the range of activities permitted for securities
subsidiaries and trust banking subsidiaries and the elimination
of fixed brokerage commissions on all stock trades. The
remaining reform measures, which include the entry of banks and
trust banks into the insurance business through subsidiaries, are
expected to be implemented by March 2001. While in the long term
the Big Bang is viewed as a positive step for Japan, in the
current economic climate it is viewed as putting additional
stress on weaker institutions.
In the mid 1990s, a growing budget deficit and the
threat of a budget crisis resulted in a tightening of fiscal
policy. In March 1997, Prime Minister Hashimoto announced the
first detailed plan for fiscal reform. The plan called for the
lowering of the budget deficit to below 3% of GDP by Fiscal Year
2003/2004. In June 1997, specific proposals for spending cuts
were approved by the cabinet and a Fiscal Reform Law,
incorporating the proposals into binding targets, were to have
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been presented to the Diet late in 1997. In November 1997,
however, Prime Minister Hashimoto, facing growing pressure to
take steps to revitalize Japan's stagnant economy, announced a
new economic plan, the "Urgent Economic Policy Package Reforming
Japan for the 21st Century," which included tax cuts and public
spending. Thereafter, in April 1998, Japan announced its then
largest ever package of public spending and tax cuts. In
November 1999, Japan announced its ninth major economic stimulus
plan of the 1990s, calling for $171.4 billion in public spending.
After becoming Prime Minister in July 1998 Mr. Obuchi
established several advisory bodies to devise a plan to improve
Japan's economy. One of these, the Economic Strategy Council,
which was comprised mostly of private experts, issued a report in
February 1999 that contained 234 recommendations. Less than 40
of these recommendations, those least likely to produce
fundamental changes, were accepted by Japan's various government
ministries. Subsequently, Mr. Obuchi formed another advisory
group, the Competitiveness Commission, which resulted in the
passage of the "industrial revitalization law," which became
effective in October 1999. The objective of the new law is to
encourage new enterprises and technologies and to write off
excess capacity in the industrial sector.
Between 1985 and 1995, the Japanese Yen generally
appreciated against the U.S. Dollar. Between 1990 and 1994 the
Yen's real effective exchange rate appreciated by approximately
36%. On April 19, 1995, the Japanese Yen reached an all time
high of 79.75 against the U.S. Dollar. After its peak of April
19, 1995, the Yen generally decreased in value against the U.S.
Dollar YD until mid-1998, when the Japanese Yen began to
appreciate again against the U.S. Dollar, reaching a 43-month
high against the U.S. Dollar in September 1999. This
precipitated a series of interventions in the currency market by
the Bank of Japan that have slowed the appreciation of the
Japanese Yen against the U.S. Dollar. The average Yen-Dollar
exchange rates in 1996, 1997, 1998, and 1999 were 108.8, 121.0,
130.99 and 113.73, respectively.
JAPANESE STOCK EXCHANGES. Currently, there are eight
stock exchanges in Japan. The Tokyo Stock Exchange (the "TSE"),
the Osaka Securities Exchange and the Nagoya Stock Exchange are
the largest, together accounting for approximately 99.8% of the
share trading volume and for about 99.9% of the overall trading
value of all shares traded on Japanese stock exchanges during the
first 11 months of 1999. The other stock exchanges are located
in Kyoto, Hiroshima, Fukuoka, Niigata and Sapporo. The chart
below presents annual share trading volume (in millions of
shares) and annual trading value (in billions of Yen) information
with respect to each of the three major Japanese stock exchanges
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for the years 1989 through 1999 (November). Trading volume and
the value of foreign stocks are not included.
<TABLE>
<CAPTION>
All Exchanges TOKYO OSAKA NAGOYA
VOLUME VALUE VOLUME VALUE VOLUME VALUE VOLUME VALUE
_______ ______ ______ _____ _______ ______ _______ _____
<S> <C> <C> <C> <C> <C> <C> <C> <C>
19991 161,881 186,494 142,540 163,795 14,068 20,178 4,890 2,314
1998 139,757 124,102 123,198 97,392 12,836 20,532 3,367 5,986
1997 130,657 151,445 107,566 108,500 15,407 27,024 6,098 12,758
1996 126,496 136,170 101,170 101,893 20,783 27,280 4,104 5,391
1995 120,149 115,840 92,034 83,564 21,094 24,719 5,060 5,462
1994 105,937 114,622 84,514 87,356 14,904 19,349 4,720 5,780
1993 101,173 106,123 86,935 86,889 10,440 14,635 2,780 3,459
1992 82,563 80,456 66,408 60,110 12,069 15,575 3,300 3,876
1991 107,844 134,160 93,606 110,897 10,998 18,723 2,479 3,586
1990 145,837 231,837 123,099 186,667 17,187 35,813 4,323 7,301
1989 256,296 386,395 222,599 332,617 25,096 41,679 7,263 10,395
1 Through November.
Source: The Tokyo Stock Exchange Fact Books (1994-1998); monthly data sheets (1999).
</TABLE>
THE TOKYO STOCK EXCHANGE
OVERVIEW OF THE TOKYO STOCK EXCHANGE. The TSE is the
largest of the Japanese stock exchanges and as such is widely
regarded as the principal securities exchange for all of Japan.
During the first 11 months of 1999, the TSE accounted for 88.1%
of the market value and 87.8% of the share trading volume on all
Japanese stock exchanges. A foreign stock section on the TSE,
consisting of shares of non-Japanese companies, listed 44 (out of
1,870 total companies listed on the TSE) non-Japanese companies
at the end of November 1999. The market for stock of Japanese
issuers on the TSE is divided into a First Section and a Second
Section. The First Section is generally for larger, established
companies (in existence for five years or more) that meet listing
criteria relating to the size and business condition of the
issuing company, the liquidity of its securities and other
factors pertinent to investor protection. The TSE's Second
Section is for smaller companies and newly listed issuers.
The TSE has recently undertaken several new initiatives.
In November 1999, for example, the TSE established MOTHERS
(Market for the High-Growth and Emerging Stocks), a new market
designed to foster the growth of emerging companies. In
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addition, the TSE is in discussions with the New York Stock
Exchange to form an alliance.
SECTOR ANALYSIS OF THE FIRST AND SECOND SECTIONS. The
TSE's domestic stocks include a broad cross-section of companies
involved in many different areas of the Japanese economy. At the
end of November 1999, the three largest industry sectors, based
on market value, listed on the first section of the TSE were
electric appliances, with 141 companies representing 17.63% of
all domestic stocks so listed; communications, with 6 companies
representing 14.26% of all domestic stocks listed on the TSE; and
banking with 95 companies representing 11.94% of all domestic
stocks so listed.
MARKET GROWTH OF THE TSE. The First and Second Sections
of the TSE grew in terms of both average daily trading value and
aggregate year-end market value from 1982, when they were l28,320
million Yen and 98,090 billion Yen, respectively, through the end
of 1989, when they were 1,335,810 million Yen and 611,152 billion
Yen, respectively. Following the peak in 1989, both average
daily trading value and aggregate year-end market value declined
through 1992 when they were 243,362 million Yen and 289,483
billion Yen, respectively. In 1993 and 1994, both average daily
trading value and aggregate year-end market value increased and
were 353,208 and 353,666 million Yen, respectively, and 324,357
and 358,392 billion Yen, respectively. In 1995, average daily
trading value decreased to 335,598 million Yen and aggregate
year-end market value increased to 365,716 billion Yen. In 1996,
average daily trading value increased to 412,521 million Yen and
aggregate year-end market value decreased to 347,578 billion Yen.
In 1997, average daily trading value increased to 442,858 million
Yen and aggregate year-end market value decreased to 280,930
billion Yen. In 1998, average daily trading value decreased to
394,297 million Yen and aggregate year-end market value decreased
to 275,181 billion Yen. During November 1999, the average daily
trading value was 1,235 billion Yen and aggregate market value at
the end of November 1999 was 434,732 billion Yen.
MARKET PERFORMANCE OF THE FIRST SECTION. As measured by
the TOPIX, a capitalization-weighted composite index of all
common stocks listed in the First Section, the performance of the
First Section reached a peak of 2,884.80 on December 18, 1989.
Thereafter, the TOPIX declined approximately 45% through
December 29, 1995. On December 30, 1996 the TOPIX closed at
1,470.94, down approximately 7% from the end of 1995. On
December 30, 1997, the TOPIX closed at 1,175.03, down
approximately 20% from the end of 1996. On December 30, 1998 the
TOPIX closed at 1086.99, down approximately 7% from the end of
1997. On December 31, 1999 the TOPIX closed at 1722.20, up
approximately 58% from the end of 1998.
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JAPANESE FOREIGN EXCHANGE CONTROLS
Under Japan's Foreign Exchange and Foreign Trade Control
Law and cabinet orders and ministerial ordinances thereunder (the
"Foreign Exchange Controls"), prior notification to the Minister
of Finance of Japan (the "Minister of Finance") of the
acquisition of shares in a Japanese company from a resident of
Japan (including a corporation) by a non-resident of Japan
(including a corporation) is required unless the acquisition is
made from or through a securities company designated by the
Minister of Finance or if the Yen equivalent of the aggregate
purchase price of shares is not more than 100 million Yen. Even
in these situations, if a foreign investor intends to acquire
shares of a Japanese corporation listed on a Japanese stock
exchange or traded on a Japanese over-the-counter market
(regardless of the person from or through whom the foreign
investor acquires such shares) and as a result of the acquisition
the foreign investor would directly or indirectly hold 10% or
more of the total outstanding shares of that corporation, the
foreign investor must file a report within 15 days from the day
of such acquisition with the Minister of Finance and any other
minister with proper jurisdiction. In instances where the
acquisition concerns national security or meets certain other
conditions specified in the Foreign Exchange Controls, the
foreign investor must file a prior notification with respect to
the proposed acquisition with the Minister of Finance and any
other minister with proper jurisdiction. The ministers may make
a recommendation to modify or prohibit the proposed acquisition
if they consider that the acquisition would impair the safety and
maintenance of public order in Japan or harmfully influence the
smooth operation of the Japanese economy. If the foreign
investor does not accept the recommendation, the ministers may
issue an order modifying or prohibiting the acquisition. In
certain limited and exceptional circumstances, the Foreign
Exchange Controls give the Minister of Finance the power to
require prior approval for any acquisition of shares in a
Japanese company by a non-resident of Japan.
In general, the acquisition of shares by non-resident
shareholders by way of stock splits, as well as the acquisition
of shares of a Japanese company listed on a Japanese stock
exchange by non-residents upon exercise of warrants or conversion
of convertible bonds, are not subject to any of the foregoing
notification or reporting requirements. Under the Foreign
Exchange Controls, dividends paid on shares, held by non-
residents of Japan and the proceeds of any sales of shares within
Japan may, in general, be converted into any foreign currency and
remitted abroad.
Certain provisions of the Foreign Exchange Controls were
repealed or liberalized beginning in April 1998, pursuant to the
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revised Foreign Exchange and Foreign Trade Law, which was
approved in May 1997 as part of the plan to implement the Big
Bang. Under the new law, Japanese citizens are permitted to open
bank accounts abroad and companies are now permitted to trade
foreign currencies without prior government approval.
Additionally, the foreign exchange bank system, which required
that all foreign exchange transactions be conducted through
specially designated institutions, has been eliminated.
REGULATION OF THE JAPANESE EQUITIES MARKETS
The principal securities law in Japan is the Securities
and Exchange Law ("SEL") which provides overall regulation for
the issuance of securities in public offerings and private
placements and for secondary market trading. The SEL was amended
in 1988 in order to liberalize the securities market; to regulate
the securities futures, index, and option trade; to add
disclosure regulations; and to reinforce the prevention of
insider trading. Insider trading provisions are applicable to
debt and equity securities listed on a Japanese stock exchange
and to unlisted debt and equity securities issued by a Japanese
corporation that has securities listed on a Japanese stock
exchange or registered with the Securities Dealers Association
(the "SDA"). In addition, each of the eight stock exchanges in
Japan has its own constitution, regulations governing the sale
and purchase of securities and standing rules for exchange
contracts for the purchase and sale of securities on the
exchange, as well as detailed rules and regulations covering a
variety of matters, including rules and standards for listing and
delisting of securities.
The loss compensation incidents involving preferential
treatment of certain customers by certain Japanese securities
companies, which came to light in 1991, provided the impetus for
amendments to the SEL, which took effect in 1992, as well as two
reform bills passed by the Diet in 1992. The amended SEL now
prohibits securities companies from operating discretionary
accounts, compensating losses or providing artificial gains in
securities transactions, directly or indirectly, to their
customers and making offers or agreements with respect thereto.
Despite these amendments, there have been certain incidents
involving loss compensation. To ensure that securities are
traded at their fair value, the SDA and the TSE have promulgated
certain rules, effective in 1992, which, among other things,
explicitly prohibit any transaction undertaken with the intent to
provide loss compensation of illegal gains regardless of whether
the transaction otherwise technically complies with the rules.
The reform bill passed by the Diet, which took effect in 1992 and
1993, provides for the establishment of a new Japanese securities
regulator and for a variety of reforms designed to revitalize the
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Japanese financial and capital markets by permitting banks and
securities companies to compete in each other's field of
business, subject to various regulations and restrictions.
Further reforms in the regulation of the securities
markets are anticipated over the next several years as the Big
Bang is implemented.
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________________________________________________________________
APPENDIX C: ADDITIONAL INFORMATION ABOUT THE UNITED KINGDOM
_______________________________________________________________
The information in this section is based on material
obtained by the Alliance International Premier Growth Fund (the
"Fund") from various United Kingdom government and other sources
believed to be accurate but has not been independently verified
by the Fund or the Adviser. It is not intended to be a complete
description of The United Kingdom, its economy or the
consequences of investing in United Kingdom securities.
The United Kingdom of Great Britain and Northern Ireland
is located off the continent of Europe in the Atlantic Ocean.
Its population is approximately 59 million.
GOVERNMENT
The United Kingdom is a constitutional monarchy. Queen
Elizabeth II has been the head of state since she acceded to the
throne in 1952. The monarchy was established in 1066. The
monarch's power has eroded over the centuries, but the monarch
retains the power to call and dissolve Parliament, to give assent
to bills passed by Parliament, to appoint the Prime Minister and
to sign treaties or declare war. In practice, most of these acts
are performed by government ministers, and supreme legislative
authority now resides in the Parliament. Parliament, the
bicameral legislature, consists of the House of Commons and the
House of Lords. Acts of Parliament passed in 1911 and 1949 limit
the powers of the House of Lords to prevent bills passed by the
House of Commons from becoming law. The main purpose of the
House of Lords is now to revise and amend laws passed by the
House of Commons. The future role and composition of the House of
Lords is the subject of a December 1999 report of the Royal
Commission on House of Lords Reform, whose recommendations are to
be considered by a joint committee of the House of Commons and
the House of Lords. An initial step in the reform effort was
taken in November 1999, when hereditary peers lost their right to
sit and vote in the House of Lords. The national government is
headed by the Prime Minister who is appointed by the monarch on
the basis of ability to form a government with the support of the
House of Commons.
POLITICS
Since World War II the national government has been
formed by either the Conservative Party or the Labour Party. The
Conservative Party under the leadership of Margaret Thatcher
achieved a parliamentary majority and formed a new government in
May 1979. In June 1983 and again in June 1987, the Conservative
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Party under her leadership was reelected. The Party pursued
policies of reducing state intervention in the economy, reducing
taxes, de-regulating business and industry and privatizing state-
owned enterprises. It also displayed an antipathy toward the
European Union. In November 1990, Mrs. Thatcher faced a
challenge for the leadership of the party from Michael Heseltine,
one of her former cabinet ministers. The opposition proposed
changes in policy, including increased government intervention in
the economy and a less confrontational approach toward the
European Union. The two wings of the Conservative Party looked
for someone who could unite the Party and elected John Major as
its leader and, by virtue of the Conservative Party majority, to
the post of Prime Minister.
Mr. Major led the Conservative Party to its fourth
successive general election victory in April 1992, after which
time, the popularity of both Mr. Major and the Conservative Party
declined. In April 1995, the Conservative Party won only 11% of
the vote in Scotland local elections, which resulted in
Conservative Party control of only 81 council seats out of 1,161.
It won only 25% of the vote in local council elections in England
and Wales in May 1995. In July 1995, Mr. Major won a vote of
confidence with his reelection as leader of the Conservative
Party. Despite Mr. Major's strengthened position within the
Conservative Party, the Party continued to suffer setbacks.
Within two weeks of Mr. Major's victory, the Conservative Party
lost its fifth by-election since the general election of 1992.
By 1996, his overall majority was reduced to one. In the next
general election, on May 1, 1997, Mr. Major and the Conservative
Party were defeated by the Labour Party led by Tony Blair, who
subsequently was appointed Prime Minister. The Labour Party now
holds 417 of the 659 seats in the House of Commons. The next
general election is required by law to occur no later than May
2002.
ECONOMY
The United Kingdom's economy is the fifth largest in the
Organization for Economic Cooperation and Development, behind the
United States, Japan, Germany and France. Its economy maintained
an average annual growth rate of 3.6% in real growth domestic
product ("GDP") terms from 1982 through 1988; and from 1989
through 1993, the United Kingdom's real GDP annual growth rate
was 1.0%. The economy has continued to experience the moderate
growth that began in 1993, after the 1990-1992 recession, with
real GDP having grown by 4.4% in 1994, 2.8% in 1995, 2.6% in
1996, and 3.5% in 1997 and 2.1% in 1998. In the first three
quarters of 1999, the United Kingdom's real GDP growth rate was
0.6%, 1.2% and 1.9%, respectively, compared to the first, second
and third quarters of 1998. The government has forecast a GDP
growth rate of 1.75% for 1999, and 1.5% to 2.0% for 2000.
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Since the early 1990s, the United Kingdom's economy has
had moderate inflation, averaging 2.8% (as measured by the RPIX,
which excludes mortgage interest payments). The inflation rate
during 1999 is expected to fall below the governments target rate
of 2.5%.
The sluggish growth in the United Kingdom's
manufacturing sector since the 1990-1992 recession continued the
trend toward the decreased importance of manufacturing in the
economy. Manufacturing accounted for just 20.2% of GDP in 1998
compared with 36.5% in 1960. As the United Kingdom's
manufacturing industry has declined in importance, the service
industry, including financial services, has increased in
importance. The service industries' share of GDP has increased
to almost two-thirds from 45% in 1960.
Employment has been shifting from manufacturing to the
service industry, a trend expected to continue for the
foreseeable future. Overall, unemployment has continued to fall
from a post-recession high of 10.6% in January 1993 to 5.9% in
October 1999.
Foreign trade remains an important part of the United
Kingdom's economy. In 1998, exports of goods represented 26.9%
of GDP. The United Kingdom has historically been an exporter of
manufactured products and an importer of food and raw materials,
but there is a growing trend toward manufactured goods forming a
larger proportion of imports. Machinery and transport equipment
accounted for 44.7% of imports in 1998 compared to 20.4% in 1975
and for 47.8% of exports in 1998 compared to 42.3% in 1975. For
every year since 1982, the United Kingdom has been a net importer
of goods. The relative importance of the United Kingdom's
trading partners has also shifted. In 1998, the other members of
the European Union accounted for 57.5% of all exports and 53.3%
of its imports, as compared to 43.3% and 41.3%, respectively, in
1980. In 1998, the United Kingdoms largest trading partner with
respect to imports and exports was the United States.
Historically, the United Kingdom's current account
consisted of relatively small trade deficits, sometimes
outweighed by surpluses on invisibles (services, interest,
dividends, profits and transfers). Since 1980, several important
changes have taken place with regard to the United Kingdom's
trading position. Those include the increased importance to the
economy of oil exports from the North Sea, the change from being
a net exporter to a net importer of goods and the diminishing
surpluses from invisibles. These developments led to a balance
of payments deficit, which continued through 1996. The balance
of payments moved into surplus in 1997 for the first time in over
a decade. Although overall in 1998 the balance of payments was
in surplus, it was in a deficit position during the first two
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quarters of 1998 and returned to a deficit in the first ten
months of 1999.
With regard to the public sector of the economy, the
national government publishes forecasts for the economy and the
public sector net cash requirement (PSNCR), previously known as
the public sector borrowing requirement ("PSBR"). The PSNCR is a
mandated measure of the amount of borrowing required to balance
the national government's budget. Figures for the fiscal year
ended March 31, 1998, show a PSNCR equal to 0.2% of GDP (or a
general government financial deficit of 0.8%). As a result, the
general government budget balance for the 1997/1998 fiscal year
was well below the permitted level for countries permitted to
participate in the Economic and Monetary Union ("EMU") beginning
in January 1999. Although the United Kingdom has met the EMUs
eligibility criteria, the government chose not to participate in
the EMU when it was launched in January 1999. Further, the
government announced that it would not take any action before a
referendum is held after the next general election. In January
1999, the government submitted a report to the European
Commission detailing the steps the government is taking to
prepare the United Kingdom for possibly joining the EMU at a
later date.
MONETARY AND BANKING SYSTEM
The central bank of the United Kingdom is the Bank of
England. Its main functions are to advise on the formulation and
execution of monetary policy, to supervise banking operations in
the United Kingdom, to manage the domestic currency, and, as
agent for the Government, the country's foreign exchange
reserves. Additionally, shortly after taking office in 1997,
Prime Minister Blair vested responsibility for setting interest
rates in a new Monetary Policy Committee headed by the Bank of
England, as opposed to the Treasury.
The City of London is one of the world's major financial
centers. It has the greatest concentration of banks and the
largest insurance market in the world. It is estimated that
United Kingdom insurers handle approximately 20% of the general
insurance business placed in the international market. Financial
services currently form approximately 20% of the country's GDP.
The currency unit of the United Kingdom is the Pound
Sterling. In June 1972, the Pound was allowed to float against
other currencies. The general trend since then has been a
depreciation against most major currencies, including the U.S.
Dollar, Japanese Yen, German Deutsche Mark ("DM"), French Franc
and the European Currency Unit ("ECU"). On October 8, 1990,
Pound Sterling became part of the Exchange Rate Mechanism ("ERM")
of the European Monetary System at a central rate of L1:DM2.95.
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Membership in the ERM requires that each currency remain within a
certain fluctuation range against other currencies. If this
range is not maintained, the currency must be revalued.
Initially, the Pound remained competitive within the DM range of
2.80 to 2.98, but the pressures exerted by ERM membership made it
increasingly difficult for the United Kingdom to allow the Pound
to remain in the ERM. While the government continued to defend
the relative value of the Pound by raising interest rates, it
became clear that the Pound was not competitive against the
Deutsche Mark. On September 16, 1992, the Pound's membership in
the ERM was suspended. The value of the Pound continued to fall
rapidly after the exit from the ERM, reaching a low of DM2.335 at
the end of February 1993. It has since recovered against the
Deutsche Mark and other currencies. In addition to the United
Kingdom's former membership in the ERM, the growing importance of
trade with the European Union has made the Deutsche Mark exchange
rate more important to the United Kingdom than the U.S. Dollar
exchange rate. From 1988 through 1993, the Pound declined at an
average annual rate of approximately 15% against the U.S. Dollar
and approximately 20% against the Deutsche Mark. Since 1993, the
exchange rate between the Pound and the U.S. Dollar has remained
fairly constant, while the exchange rate between the Pound and
the Deutsche Mark has risen significantly, by over 35% between
January 1996 and July 1997. In 1996, the average annual exchange
rates of the Pound against the U.S. Dollar and the Deutsche Mark
were $1.59 and DM2.41, respectively. In 1997, the average
exchange rates of the Pound against the U.S. Dollar and the
Deutsche Mark were $1.64 and DM2.84, respectively. In 1998, the
average exchange rates of the Pound against the U.S. Dollar and
the Deutsche Mark were $1.66 and DM2.91, respectively.
On January 1, 1999 eleven member countries of the
European Union (Austria, Belgium, Finland, France, Germany,
Ireland, Italy, Luxembourg, The Netherlands, Portugal and Spain)
adopted the Euro as their common currency. In the transition
period of January 1, 1999 to January 1, 2002, the national
currencies of these eleven countries (e.g., the Deutsche Mark and
the French Franc) will be subdivisions of the Euro. After
January 1, 2002, it is anticipated that the national currencies
will no longer be valid, except to exchange old banknotes. The
ECU, which was not a true currency in its own right, but rather a
unit of account whose value was tied to its underlying
constituent currencies, ceased to exist as of January 1, 1999, at
which time all ECU obligations were converted into Euro
obligations at a 1:1 conversion rate.
THE LONDON STOCK EXCHANGE
The London Stock Exchange ("LSE") is both the national
stock exchange for the United Kingdom and the world's leading
marketplace for the trading of international equities. The LSE
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provides a secondary market for trading in more than 10,000
securities. It offers markets for domestic securities
(securities issued by companies in the United Kingdom or
Ireland), foreign equities, United Kingdom gilts (securities
issued by the national government), bonds or fixed interest
stocks (usually issued by companies or local authorities) and
options. At the end of 1999, foreign equities constituted
approximately 66% and United Kingdom equities constituted
approximately 34% of the market value of all LSE listed and
quoted equity securities. At the end of 1998, the LSE was the
world's third largest stock exchange in terms of market value,
the New York Stock Exchange being the largest and the Tokyo Stock
Exchange being the second largest.
The LSE comprises different markets. In addition to the
market for officially-listed securities, the LSE includes a
market created in 1995 for smaller and newer companies known as
AIM. As of December 31, 1999, 347 companies with an aggregate
market value of 13.5 billion Pounds were traded on AIM. As of
December 31, 1999, the market value of the securities traded on
AIM was less than 1% of the market value of the securities
officially listed on the LSE. Another new market, known as
techMARK, was launched by the LSE on November 4, 1999 for
innovative technology companies. As of December 31, 1999, 190
companies with an aggregate market value of 626.1 million Pounds
were traded on techMARK.
The LSE runs markets for trading securities by providing
a market structure, regulating the operation of the markets,
supervising the conduct of member firms dealing in the markets,
publishing company news and providing trade confirmation and
settlement services. The domestic market is based on the
competing marketmaker system. The bid and offer prices are
distributed digitally via the Exchange's automated price
information system, SEAQ (Stock Exchange Automated Quotations),
which provides widespread dissemination of the securities prices
for the United Kingdom equity market. Throughout the trading
day, marketmakers display their bid (buying) and offer (selling)
prices and the maximum transaction size to which these prices
relate. These prices are firm to other LSE member firms, except
that the prices for larger transactions are negotiable.
Marketmakers in the international equity market display
their quotes on SEAQ International. The system operates in a
manner similar to the domestic SEAQ, but is divided into 40
separate country sectors, of which 15 are developing markets
sectors.
On October 20, 1997 the LSE launched the new Stock
Exchange Electronic Trading Service, an initiative that will
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improve efficiency and lower share trading costs, and is expected
to attract more volume and thus increase liquidity.
On July 7, 1998 the LSE and its German counterpart, the
Deutsche Borse, unexpectedly announced their intention to form a
strategic alliance under which members of one exchange will be
members of the other. While the first phase of the proposed
alliance began in January 1999, the LSE and the Deutsche Borse
still must address numerous issues, including agreement on common
regulations and promulgation by their respective governments of a
common tax regime for share trading. On May 4, 1999 the LSE and
the Deutsche Borse, together with six other leading European
stock exchanges, signed a Memorandum of Understanding to confirm
their ongoing commitment to continue to work jointly towards
establishing a pan-European equity market.
On November 23, 1999 the LSE, together with the Bank of
England and CREST (the paperless share settlement system through
which trades executed on the LSE's markets can be settled),
announced proposals for the United Kingdom's equity and corporate
debt markets to move from T+5 to T+3 settlement starting in
February 2001.
Sector Analysis of the LSE. The LSE's domestic and
foreign securities include a broad cross-section of companies
involved in many different industries. In 1999, the five largest
industry sectors by turnover among domestic securities were
telecommunications with 15.3%, banks with 12.6%, oil with 8.3%,
pharmaceuticals with 8.0% and media/photography with 4.9%. In
1999, the five largest country sectors by market value among
listed and SEAQ International quoted securities were France with
15.9% of the aggregate market value of listed and SEAQ
International quoted securities, Germany with 12.7%, Italy with
11.8%, The Netherlands with 10.8%, and Switzerland with 8.5%
Market Growth of the LSE. LSE market value and the
trading volume have increased dramatically since the end of 1990.
In 1999, 335.5 billion domestic shares and 725.9 billion foreign
shares were traded as compared with 155.4 billion and 34.8
billion, respectively in 1991. At the end of 1999, the market
value of listed domestic companies and foreign companies
increased to 1,410.6 billion Pounds and 2,420.1 billion Pounds
from 450.5 billion Pounds and 1,124.1 billion Pounds,
respectively, at the end of 1990.
Market Performance of the LSE. The FT-SE 100 is an
index that consists of the 100 largest United Kingdom companies.
The FT-SE 100 was introduced by the LSE in cooperation with The
Financial Times and the Institute and Faculty of Actuaries in
1984. As measured by the FT-SE 100, the performance of the 100
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largest companies reached a record high of 6663.8 on May 4, 1999.
On December 31, 1999, the FT-SE 100 closed at 6930.2.
REGULATION OF THE UNITED KINGDOM FINANCIAL SERVICES INDUSTRY
The principal securities law in the United Kingdom is
the Financial Services Act. The Financial Services Act, which
became law in November 1986, established a new regulatory system
for the conduct of investment businesses in the United Kingdom.
Most of the statutory powers under the Act were transferred to
the Securities and Investments Board ("SIB"), a designated agency
created for this purpose. The SIB was given wide-ranging
enforcement powers and was made accountable to Parliament through
the Treasury. A system of self regulating organizations
("SROs"), which regulate their members, was made accountable to
the SIB. There are three SROs covering the financial market,
including the Securities and Futures Authority which is
responsible for overseeing activities on the Exchange. The other
SROs are the Investment Management Regulatory Organization and
the Personal Investment Authority. In 1988, it became illegal for
any firm to conduct business without authorization from the SRO
responsible for overseeing its activities. In addition,
Recognized Investment Exchanges ("RIEs"), which include the
London Stock Exchange of London, the London International
Financial Futures and Options Exchange, the London Commodities
Exchange, the International Petroleum Exchange of London, the
London Metal Exchange and the London Securities and Derivatives
Exchange were made accountable to the SIB. Recognition as an
RIE exempts the exchange (but not its members) from obtaining
authorization for actions taken in its capacity as an RIE. To
become an RIE, an exchange must satisfy the SIB that it meets
various prerequisites set out in the Act, including having
effective arrangements for monitoring and enforcing compliance
with its rules. Recognized Professional Bodies ("RPBs")
supervise the conduct of lawyers, actuaries, accountants and some
insurance brokers. Together the SROs, RIEs and RPBs provide the
framework for protection for investors and integrity of the
markets.
On May 20, 1997 the newly installed Labour government
announced a proposed major restructuring of the regulation and
supervision of the financial services industry in the United
Kingdom. The main feature of the restructuring plan is to
transfer regulatory authority over banks from the Bank of England
to an expanded SIB, which has been named the Financial Services
Authority (FSA). In addition, the plan calls for the merger of
the three SROs into the FSA. The transfer of banking supervision
from the Bank of England to the FSA was formally implemented on
June 1, 1998. The most recent version of legislation
implementing the proposed consolidation of the SROs into the FSA,
which is more complex and more controversial, was introduced in
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<PAGE>
the House of Commons on June 17, 1999 and is expected to become
law by mid-2000.
The European Union's Investment Services Directive
("ISD") will, with the various banking directives, provide the
framework for a single market in financial services in Europe.
Authorized firms will be able to operate on the basis of one
authorization throughout Europe. Member states were given until
January 1, 1996 to implement the ISD. As of October 1998, all
member states, including the United Kingdom, had implemented the
ISD, with the exception of Luxembourg, which is in the process of
doing so.
Basic restrictions on insider dealing in securities are
contained in the Company Securities Act of 1985. The Financial
Services Act provides guidelines for investigations into insider
dealing under the Criminal Justice Act of 1993 and penalties for
any person who fails to cooperate with such an investigation. In
addition, the Financial Services Act introduced new listing and
disclosure requirements for companies.
UNITED KINGDOM FOREIGN EXCHANGE AND INVESTMENT CONTROLS
The United Kingdom has no exchange or investment
controls, and funds and capital may be moved freely in and out of
the country. Exchange controls were abolished in 1979. As a
member of the European Union, the United Kingdom applies the
European Union's common external tariff.
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<PAGE>
PART C
OTHER INFORMATION
ITEM 23. Exhibits
(a) (1) Articles of Incorporation of the Registrant -
Incorporated by reference to Exhibit 1 to the
Registrant's Registration Statement on Form N-
1A (File Nos. 333-37177 and 811-08403) filed
with the Securities and Exchange Commission on
October 3, 1997.
(2) Articles Supplementary to the Charter of the
Registrant dated February 25, 1999 -
Incorporated by reference to Exhibit (a)(2) to
Post Effective Amendment No. 4 to the
Registrant's Registration Statement on Form N-
1A (File Nos. 333-37177 and 811-08403) filed
with the Securities and Exchange Commission on
February 29, 2000.
(b) By-Laws of the Registrant - Incorporated by
reference to Exhibit 2 to the Fund's Registration
Statement on Form N-1A (File Nos. 333-37177 and
811-08403) filed with the Securities and Exchange
Commission on October 3, 1997.
(c) Not applicable.
(d) Advisory Agreement between the Registrant and
Alliance Capital Management L.P. as amended May 1,
1999 - Incorporated by reference to Exhibit (d) to
Post Effective Amendment No. 4 to the Registrant's
Registration Statement on Form N-1A (File Nos. 333-
37177 and 811-08403) filed with the Securities and
Exchange Commission on February 29, 2000.
(e) (1) Distribution Services Agreement between the
Registrant and Alliance Fund Distributors,
Inc. - Incorporated by reference to Exhibit
(e)(1) to Post-Effective Amendment No. 1 to
the Registrant's Registration Statement on
Form N-1A (File Nos. 333-37177 and 811-08403)
filed with the Securities and Exchange
Commission on December 15, 1998.
(2) Form of Selected Dealer Agreement between
Alliance Fund Distributors, Inc. and selected
dealers offering shares of the Registrant -
Incorporated by reference to Exhibit 6(b) to
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Pre-Effective Amendment No. 1 to the
Registrant's Registration Statement on Form N-
1A (File Nos. 333-37177 and 811-08403) filed
with the Securities and Exchange Commission on
November 14, 1997.
(3) Form of Selected Agent Agreement between
Alliance Fund Distributors, Inc. and selected
agents making available shares of the
Registrant - Incorporated by reference to
Exhibit 6(c) to Pre-Effective Amendment No. 1
to the Registrant's Registration Statement on
Form N-1A (File Nos. 333-37177 and 811-08403)
filed with the Securities and Exchange
Commission on November 14, 1997.
(f) Not applicable.
(g) (1) Custodian Contract between the Registrant and
State Street Bank and Trust Company -
Incorporated by reference to Exhibit (g) to
Post-Effective Amendment No. 1 to the
Registrant's Registration Statement on Form N-
1A (File Nos. 333-37177 and 811-08403) filed
with the Securities and Exchange Commission on
December 15, 1998.
(2) Amendment to Custodian Contract between the
Registrant and State Street Bank and Trust
Company dated June 1, 1999 - Incorporated by
reference to Exhibit (g)(2) to Post Effective
Amendment No. 4 to the Registrant's
Registration Statement on Form N-1A (File Nos.
333-37177 and 811-08403) filed with the
Securities and Exchange Commission on February
29, 2000.
(h) (1) Transfer Agency Agreement between the
Registrant and Alliance Fund Services, Inc. -
Incorporated by reference to Exhibit (h) to
Post-Effective Amendment No. 1 to the
Registrant's Registration Statement on Form N-
1A (File Nos. 333-37177 and 811-08403) filed
with the Securities and Exchange Commission on
December 15, 1998.
(2) Expense Limitation Undertaking by Alliance
Capital Management L.P. with respect to
Alliance Premier Growth Institutional Fund -
Incorporated by reference to Exhibit (h)(2) to
Post Effective Amendment No. 4 to the
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<PAGE>
Registrant's Registration Statement on Form N-
1A (File Nos. 333-37177 and 811-08403) filed
with the Securities and Exchange Commission on
February 29, 2000.
(3) Expense Limitation Undertaking by Alliance
Capital Management L.P. with respect to
Alliance Quasar Institutional Fund -
Incorporated by reference to Exhibit (h)(3) to
Post Effective Amendment No. 4 to the
Registrant's Registration Statement on Form N-
1A (File Nos. 333-37177 and 811-08403) filed
with the Securities and Exchange Commission on
February 29, 2000.
(4) Expense Limitation Undertaking by Alliance
Capital Management L.P. with respect to
Alliance Real Estate Institutional Fund -
Incorporated by reference to Exhibit (h)(4) to
Post Effective Amendment No. 4 to the
Registrant's Registration Statement on Form N-
1A (File Nos. 333-37177 and 811-08403) filed
with the Securities and Exchange Commission on
February 29, 2000.
(i) (1) Opinion and Consent of Seward & Kissel LLP -
Incorporated by reference to Exhibit (i)(1) to
Post-Effective Amendment No. 4 to the
Registrant's Registration Statement on Form N-
1A (File Nos. 333-37177 and 811-08403) filed
with the Securities and Exchange Commission on
February 29, 2000.
(2) Opinion and Consent of Seward & Kissel LLP -
Filed herewith.
(3) Opinion and Consent of Venable, Baetjer and
Howard, LLP. - Incorporated by reference to
Exhibit 10(b) to Pre-Effective Amendment No. 1
to the Registrant's Registration Statement on
Form N-1A (File Nos. 333-37177 and 811-08403)
filed with the Securities and Exchange
Commission on November 14, 1997.
(j) Not applicable.
(k) Not applicable.
(l) Investment representation letter of Alliance
Capital Management L.P. - Incorporated by reference
to Exhibit 13 to Pre-Effective Amendment No. 1 to
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<PAGE>
the Registrant's Registration Statement on Form N-
1A (File Nos. 333-37177 and 811-08403) filed with
the Securities and Exchange Commission on
November 14, 1997.
(m) Rule 12b-1 Plan - See Exhibit (e)(1).
(n) Rule 18f-3 Plan - Incorporated by reference to
Exhibit (0) to Post-Effective Amendment No. 1 to
the Registrant's Registration Statement on Form N-
1A (File Nos. 333-37177 and 811-08403) filed with
the Securities and Exchange Commission on
December 15, 1998.
(o) Reserved.
(p) (1) Code of Ethics relating to Alliance
Institutional Funds, Inc. - Filed herewith.
(2) Code of Ethics relating to Alliance Capital
Management L.P. - Filed herewith.
Other Exhibits:
Powers of Attorney for: Ruth Block, John D. Carifa,
David H. Dievler, John H. Dobkin, William H. Foulk,
Jr., James M. Hester, Clifford L. Michel and
Donald J. Robinson - Incorporated by reference to
Other Exhibits to Post Effective Amendment No. 4 to
the Registrant's Registration Statement on Form N-
1A (File Nos. 333-37177 and 811-08403) filed with
the Securities and Exchange Commission on February
29, 2000.
ITEM 24. Persons Controlled by or under Common Control with
the Fund.
None.
ITEM 25. Indemnification.
It is the Registrant's policy to indemnify its directors
and officers, employees and other agents to the maximum
extent permitted by Section 2-418 of the General
Corporation Law of the State of Maryland, which is
incorporated by reference herein, and as set forth in
Article EIGHTH of Registrant's Articles of
Incorporation, filed as Exhibit (a) hereto, Article VII
and Article VIII of Registrant's By-Laws, filed as
Exhibit (b) hereto, and Section 10 of the Distribution
C-4
<PAGE>
Services Agreement, filed as Exhibit (e)(1) hereto. The
Adviser's liability for any loss suffered by the
Registrant or its shareholders is set forth in Section 4
of the Advisory Agreement, filed as Exhibit (d) hereto.
Insofar as indemnification for liabilities arising under
the Securities Act may be permitted to directors,
officers and controlling persons of the Registrant
pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that, in the opinion of the
Securities and Exchange Commission, such indemnification
is against public policy as expressed in the Securities
Act and is, therefore, unenforceable. In the event that
a claim for indemnification against such liabilities
(other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of
any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection
with the securities being registered, the Registrant
will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question of
whether such indemnification by it is against public
policy as expressed in the Securities Act and will be
governed by the final adjudication of such issue.
In accordance with Release No. IC-11330 (September 2,
1980), the Registrant will indemnify its directors,
officers, investment manager and principal underwriters
only if (1) a final decision on the merits was issued by
the court or other body before whom the proceeding was
brought that the person to be indemnified (the
"indemnitee") was not liable by reason or willful
misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of his
office ("disabling conduct") or (2) a reasonable
determination is made, based upon a review of the facts,
that the indemnitee was not liable by reason of
disabling conduct, by (a) the vote of a majority of a
quorum of the directors who are neither "interested
persons" of the Registrant as defined in section
2(a)(19) of the Investment Company Act of 1940 nor
parties to the proceeding ("disinterested, non-party
directors"), or (b) an independent legal counsel in a
written opinion. The Registrant will advance attorneys
fees or other expenses incurred by its directors,
officers, investment adviser or principal underwriters
in defending a proceeding, upon the undertaking by or on
behalf of the indemnitee to repay the advance unless it
is ultimately determined that he is entitled to
C-5
<PAGE>
indemnification and, as a condition to the advance,
(1) the indemnitee shall provide a security for his
undertaking, (2) the Registrant shall be insured against
losses arising by reason of any lawful advances, or
(3) a majority of a quorum of disinterested, non-party
directors of the Registrant, or an independent legal
counsel in a written opinion, shall determine, based on
a review of readily available facts (as opposed to a
full trial-type inquiry), that there is reason to
believe that the indemnitee ultimately will be found
entitled to indemnification.
The Registrant participates in a joint
trustees/directors and officers liability insurance
policy issued by the ICI Mutual Insurance Company.
Coverage under this policy has been extended to
directors, trustees and officers of the investment
companies managed by Alliance Capital Management L.P.
Under this policy, outside trustees and directors are
covered up to the limits specified for any claim against
them for acts committed in their capacities as trustee
or director. A pro rata share of the premium for this
coverage is charged to each investment company and to
the Adviser.
ITEM 26. Business and Other Connections of Investment Adviser.
The descriptions of Alliance Capital Management L.P.
under the captions "Management of the Funds" in the
Prospectus and in the Statement of Additional
Information constituting Parts A and B, respectively, of
this Registration Statement are incorporated by
reference herein.
The information as to the directors and executive
officers of Alliance Capital Management Corporation, the
general partner of Alliance Capital Management L.P., set
forth in Alliance Capital Management L.P.'s Form ADV
filed with the Securities and Exchange Commission on
April 21, 1988 (File No. 801-32361) and amended through
the date hereof, is incorporated by reference.
ITEM 27. Principal Underwriters.
(a) Alliance Fund Distributors, Inc., the Registrant's
Principal Underwriter in connection with the sale of
shares of the Registrant. Alliance Fund Distributors,
Inc. acts as Principal Underwriter or Distributor for
the following investment companies:
AFD Exchange Reserves
C-6
<PAGE>
Alliance All-Asia Investment Fund, Inc.
Alliance Balanced Shares, Inc.
Alliance Bond Fund, Inc.
Alliance Capital Reserves
Alliance Disciplined Value Fund, Inc.
Alliance Global Dollar Government Fund, Inc.
Alliance Global Environment Fund, Inc.
Alliance Global Small Cap Fund, Inc.
Alliance Global Strategic Income Trust, Inc.
Alliance Government Reserves
Alliance Greater China '97 Fund, Inc.
Alliance Growth and Income Fund, Inc.
Alliance Health Care Fund, Inc.
Alliance High Yield Fund, Inc.
Alliance Institutional Funds, Inc.
Alliance Institutional Reserves, Inc.
Alliance International Fund
Alliance International Premier Growth Fund, Inc.
Alliance Limited Maturity Government Fund, Inc.
Alliance Money Market Fund
Alliance Mortgage Securities Income Fund, Inc.
Alliance Multi-Market Strategy Trust, Inc.
Alliance Municipal Income Fund, Inc.
Alliance Municipal Income Fund II
Alliance Municipal Trust
Alliance New Europe Fund, Inc.
Alliance North American Government Income Trust, Inc.
Alliance Premier Growth Fund, Inc.
Alliance Quasar Fund, Inc.
Alliance Real Estate Investment Fund, Inc.
Alliance Select Investor Series, Inc.
Alliance Technology Fund, Inc.
Alliance Utility Income Fund, Inc.
Alliance Variable Products Series Fund, Inc.
Alliance Worldwide Privatization Fund, Inc.
The Alliance Fund, Inc.
The Alliance Portfolios
(b) The following are the Directors and Officers of Alliance
Fund Distributors, Inc., the principal place of business
of which is 1345 Avenue of the Americas, New York, New
York, 10105.
POSITIONS AND POSITIONS AND
OFFICES WITH OFFICES WITH
NAME UNDERWRITER REGISTRANT
Michael J. Laughlin Director and Chairman
John D. Carifa Director Chairman and
President
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<PAGE>
Robert L. Errico Director and President
Geoffrey L. Hyde Director and Senior
Vice President
Dave H. Williams Director
David Conine Executive Vice President
Richard K. Saccullo Executive Vice President
Edmund P. Bergan, Jr. Senior Vice President, Secretary
General Counsel and
Secretary
Richard A. Davies Senior Vice President
and Managing Director
Robert H. Joseph, Jr. Senior Vice President
and Chief Financial Officer
Anne S. Drennan Senior Vice President
and Treasurer
Benji A. Baer Senior Vice President
Karen J. Bullot Senior Vice President
John R. Carl Senior Vice President
James S. Comforti Senior Vice President
James L. Cronin Senior Vice President
Daniel J. Dart Senior Vice President
Byron M. Davis Senior Vice President
Mark J. Dunbar Senior Vice President
Donald N. Fritts Senior Vice President
Andrew L. Gangolf Senior Vice President and Assistant
Assistant General Counsel Secretary
Bradley F. Hanson Senior Vice President
George H. Keith Senior Vice President
Richard E. Khaleel Senior Vice President
C-8
<PAGE>
Stephen R. Laut Senior Vice President
Susan L. Matteson-King Senior Vice President
Daniel D. McGinley Senior Vice President
Antonios G. Poleondakis Senior Vice President
Robert E. Powers Senior Vice President
Domenick Pugliese Senior Vice President and Assistant
Assistant General Counsel Secretary
Kevin A. Rowell Senior Vice President
John P. Schmidt Senior Vice President
Raymond S. Sclafani Senior Vice President
Gregory K. Shannahan Senior Vice President
Scott C. Sipple Senior Vice President
Joseph F. Sumanski Senior Vice President
Peter J. Szabo Senior Vice President
William C. White Senior Vice President
Nicholas K. Willett Senior Vice President
Richard A. Winge Senior Vice President
Emily D. Wrapp Senior Vice President and
Assistant General Counsel
Gerard J. Friscia Vice President and
Controller
Ricardo Arreola Vice President
Kenneth F. Barkoff Vice President
Charles M. Barrett Vice President
Gregory P. Best Vice President
Casimir F. Bolanowski Vice President
Dale E. Boyd Vice President
C-9
<PAGE>
Robert F. Brendli Vice President
Christopher L. Butts Vice President
Thomas C. Callahan Vice President
Kevin T. Cannon Vice President
Doris T. Ciliberti Vice President
William W. Collins, Jr. Vice President
Leo H. Cook Vice President
Russell R. Corby Vice President
John W. Cronin Vice President
William J. Crouch Vice President
Robert J. Cruz Vice President
Richard W. Dabney Vice President
Richard P. Dyson Vice President
John C. Endahl Vice President
John E. English Vice President
Sohaila S. Farsheed Vice President
Daniel J. Frank Vice President
Shawn C. Gage Vice President
Joseph C. Gallagher Vice President
Michael J. Germain Vice President
Mark D. Gersten Vice President Treasurer and
Chief
Financial
Officer
Hyman Glasman Vice President
John Grambone Vice President
Charles M. Greenberg Vice President
C-10
<PAGE>
Alan Halfenger Vice President
William B. Hanigan Vice President
Michael S. Hart Vice President
Scott F. Heyer Vice President
Timothy A. Hill Vice President
Brian R. Hoegee Vice President
George R. Hrabovsky Vice President
Michael J. Hutten Vice President
Scott Hutton Vice President
Oscar J. Isoba Vice President
Richard D. Keppler Vice President
Richard D. Kozlowski Vice President
Daniel W. Krause Vice President
Donna M. Lamback Vice President
P. Dean Lampe Vice President
Henry Michael Lesmeister Vice President
Eric L. Levinson Vice President
James M. Liptrot Vice President
James P. Luisi Vice President
Michael F. Mahoney Vice President
Kathryn Austin Masters Vice President
Shawn P. McClain Vice President
David L. McGuire Vice President
Jeffrey P. Mellas Vice President
Michael V. Miller Vice President
Thomas F. Monnerat Vice President
C-11
<PAGE>
Timothy S. Mulloy Vice President
Joanna D. Murray Vice President
Michael F. Nash, Jr. Vice President
Timothy H. Nasworthy Vice President
Nicole Nolan-Koester Vice President
Daniel A. Noto Vice President
Peter J. O'Brien Vice President
John C. O'Connell Vice President
John J. O'Connor Vice President
Christopher W. Olson Vice President
Daniel P. O'Donnell Vice President
Richard J. Olszewski Vice President
Catherine N. Peterson Vice President
Jeffrey R. Peterson Vice President
Joanne M. Philpott Vice President
James J. Posch Vice President
Bruce W. Reitz Vice President
Jeffrey B. Rood Vice President
Karen C. Satterberg Vice President
Robert C. Schultz Vice President
Richard J. Sidell Vice President
Clara Sierra Vice President
Teris A. Sinclair Vice President
Jeffrey C. Smith Vice President
David A. Solon Vice President
John M. Sorrell Vice President
C-12
<PAGE>
Martine H. Stansbery, Jr. Vice President
Eileen Stauber Vice President
Michael J. Tobin Vice President
Joseph T. Tocyloski Vice President
Benjamin H. Travers Vice President
David R. Turnbough Vice President
Andrew B. Vaughey Vice President
Wayne W. Wagner Vice President
Patrick E. Walsh Vice President
Mark E. Westmoreland Vice President
Paul C. Wharf Vice President
Stephen P. Wood Vice President
Michael W. Alexander Assistant Vice
President
Richard J. Appaluccio Assistant Vice
President
Paul G. Bishop Assistant Vice
President
Mark S. Burns Assistant Vice
President
John M. Capeci Assistant Vice
President
Maria L. Carreras Assistant Vice
President
John P. Chase Assistant Vice
President
Judith A. Chin Assistant Vice
President
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<PAGE>
Jorge Ciprian Assistant Vice
President
William P. Condon Assistant Vice
President
Jean A. Coomber Assistant Vice
President
Terri J. Daly Assistant Vice
President
Ralph A. DiMeglio Assistant Vice
President
Faith C. Deutsch Assistant Vice
President
Timothy J. Donegan Assistant Vice
President
Adam E. Engelhardt Assistant Vice
President
Michele Grossman Assistant Vice
President
Arthur F. Hoyt, Jr. Assistant Vice
President
David A. Hunt Assistant Vice
President
Theresa Iosca Assistant Vice
President
Erik A. Jorgensen Assistant Vice
President
Eric G. Kalender Assistant Vice
President
Elizabeth E. Keefe Assistant Vice
President
Edward W. Kelly Assistant Vice
President
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<PAGE>
Victor Kopelakis Assistant Vice
President
Alexandra C. Landau Assistant Vice
President
Laurel E. Lindner Assistant Vice
President
Evamarie C. Lombardo Assistant Vice
President
Richard F. Meier Assistant Vice
President
Charles B. Narrick Assistant Vice
President
Alex E. Pady Assistant Vice
President
Raymond E. Parker Assistant Vice
President
Wandra M. Perry Hartsfield Assistant Vice
President
Rizwan A. Raja Assistant Vice
President
Carol H. Rappa Assistant Vice
President
Brendan J. Reynolds Assistant Vice
President
James A. Rie Assistant Vice
President
Lauryn A. Rivello Assistant Vice
President
Nancy D. Testa Assistant Vice
President
Margaret M. Tompkins Assistant Vice
President
Marie R. Vogel Assistant Vice
President
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<PAGE>
Nina C. Wilkinson Assistant Vice
President
Wesley S. Williams Assistant Vice
President
Matthew Witschel Assistant Vice
President
Mark R. Manley Assistant Secretary
(c) Not applicable.
ITEM 28. Location of Accounts and Records.
The majority of the accounts, books and other documents
required to be maintained by Section 31(a) of the
Investment Company Act of 1940 and the rules thereunder
are maintained as follows: journals, ledgers,
securities records and other original records are
maintained principally at the offices of Alliance Fund
Services, Inc., 500 Plaza Drive, Secaucus, New Jersey,
07094 and at the offices of State Street Bank and Trust
Company, the Registrant's custodian. All other records
so required to be maintained are maintained at the
offices of Alliance Capital Management L.P., 1345 Avenue
of the Americas, New York, New York, 10105.
ITEM 29. Management Services.
Not applicable.
ITEM 30. Undertakings.
The Registrant undertakes to provide assistance to
shareholders in communications concerning the removal of
any Director of the Fund in accordance with Section 16
of the Investment Company Act of 1940.
C-16
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of
1933, as amended, and the Investment Company Act of 1940, as
amended, the Registrant certifies that it meets all of the
requirements for effectiveness of this Amendment to its
Registration Statement pursuant to Rule 485(a) under the
Securities Act of 1933 and has duly caused this Amendment to the
Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in The City of New York
and the State of New York, on the 6th day of October, 2000.
Alliance Institutional Funds, Inc.
/s/ John D. Carifa
__________________________________
John D. Carifa
Chairman and President
Pursuant to the requirements of the Securities Act of
1933, as amended, this Amendment to the Registration Statement
has been signed below by the following persons in the capacities
and on the date indicated.
Signature Title Date
_____________ _____ ____
(1) Principal Executive Officer:
/s/ John D. Carifa Chairman and October 6, 2000
______________________ President
John D. Carifa
(2) Principal Financial
and Accounting Officer:
/s/ Mark D. Gersten Treasurer October 6, 2000
_____________________ and Chief
Mark D. Gersten Financial
Officer
(3) All of the Directors:
John D. Carifa William H. Foulk
Ruth Block Dr. James M. Hester
David H. Dievler Clifford L. Michel
John H. Dobkin Donald J. Robinson
/s/ Edmund P. Bergan, Jr.
_________________________ October 6, 2000
Edmund P. Bergan, Jr.
C-17
<PAGE>
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<PAGE>
Index to Exhibits
(i)(2) Opinion and Consent of Seward & Kissel LLP
(p)(1) Code of Ethics relating to Alliance Institutional Funds,
Inc.
(p)(2) Code of Ethics relating to Alliance Capital Management
L.P.
00250237.AQ5
C-19
