<PAGE>
As filed with the Securities and Exchange
Commission on July 29, 1997
File Nos. 333-2629
811-08201
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
__________________________
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No. 1 X
Post-Effective Amendment No.
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 1 X
_______________________________
Alliance Greater China '97 Fund, 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)
Copies of communications to:
Bruce D. Senzel
Seward & Kissel
One Battery Park Plaza
New York, New York 10004
<PAGE>
It is proposed that this filing will become effective (check
appropriate box)
immediately upon filing pursuant to paragraph (b)
on (date) 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.
The purpose of this Registration Statement is to register the
Registrant under the Investment Company Act of 1940, to register
the shares of the Registrant under the Securities Act of 1933 and
to declare pursuant to Section 24(f) of the Investment Company
Act of 1940 and Rule 24f-2 thereunder that an indefinite number
of its securities is being registered by this Registration
Statement.
The Registrant hereby amends this Registrant Statement under
the Securities Act of 1933 on such date or dates as may be
necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this
Registration Statement shall thereafter become effective in
accordance with the provisions of Section 8(a) of the Securities
Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to
Section 8(a), may determine.
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CROSS REFERENCE SHEET
(as required by Rule 404(c))
N-1A Item No. Location in Prospectus
_____________ (Caption)
_______________________
PART A
Item 1. Cover Page........................ Cover Page
Item 2. Synopsis.......................... Expense Information
Item 3. Condensed Financial
Information....................... Not Applicable
Item 4. General Description
of Registrant..................... Description of the
Fund; General
Information
Item 5. Management of the Fund............ Management of the
Fund; General
Information
Item 6. Capital Stock and Other
Securities........................ Dividends,
Distributions and
Taxes; General
Information
Item 7. Purchase of Securities
Being Offered..................... Purchase and Sale of
Shares; General
Information
Item 8. Redemption or Repurchase.......... Purchase and Sale of
Shares; General
Information
Item 9. Pending Legal Proceedings......... Not Applicable
Location in Statement of
PART B Additional Information
______ (Caption)
________________________
Item 10. Cover Page........................ Cover Page
Item 11. Table of Contents................. Cover Page
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Item 12. General Information
and History....................... Management of the
Fund; General
Information
Item 13. Investment Objectives and
Policies.......................... Description of the
Fund
Item 14. Management of the Registrant ..... Management of the
Fund
Item 15. Control Persons and
Principal Holders of
Securities ....................... Not Applicable
Item 16. Investment Advisory and
Other Services.................... Management of the
Fund, Expenses of
the Fund, General
Information
Item 17. Brokerage Allocation and
Other Practices................... Portfolio
Transactions
Item 18. Capital Stock and Other
Securities........................ General Information
Item 19. Purchase, Redemption and Pricing
of Securities Being Offered....... Purchase of Shares;
Redemption and
Repurchase of
Shares; Dividends,
Distributions and
Taxes; Shareholder
Services
Item 20. Tax Status........................ Description of the
Fund; Dividends,
Distributions and
Taxes
Item 21. Underwriters...................... General Information
Item 22. Calculation of Performance
Data.............................. General Information
Item 23. Financial Statements.............. Not Applicable
4
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ALLIANCE GREATER CHINA '97 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
Prospectus and Application
August [ ], 1997
Table of Contents Page
The Fund at a Glance....................................
Expense Information.....................................
Glossary................................................
Description of the Fund.................................
Investment Objective.................................
Greater China Countries..............................
Investment Policies and Practices....................
Additional Investment Practices......................
Certain Other Fundamental Investment
Policies..........................................
Certain Considerations and Risks.....................
Purchase and Sale of Shares.............................
Management of the Fund..................................
Dividends, Distributions and Taxes......................
General Information.....................................
Adviser
Alliance Capital Management L.P.
1345 Avenue of the Americas
New York, New York 10105
Consultant to Adviser
New-Alliance Asset Management (Asia) Limited
Sun Hung Kai Centre
30 Harbour Road
Hong Kong
<PAGE>
Alliance Greater China '97 Fund, Inc. (the "Fund") seeks long
term capital appreciation by investing at least 80% of its total
assets in equity securities issued by Greater China companies.
The Fund is an open-end, non-diversified management investment
company. This Prospectus sets forth concisely the information
that a prospective investor should know about the Fund before
investing. A "Statement of Additional Information" for the Fund
dated August [ ], 1997, which provides further information
regarding certain matters discussed in this Prospectus and other
matters which may be of interest to some investors, has been
filed with the Securities and Exchange Commission and is
incorporated herein by reference. For a free copy, call or write
Alliance Fund Services, Inc. at the indicated address or call the
"For Literature" telephone number shown above.
The Fund offers three classes of shares through this Prospectus.
These shares may be purchased, at the investor's choice, at a
price equal to their net asset value (i) plus an initial sales
charge imposed at the time of purchase ("Class A shares"),
(ii) with a contingent deferred sales charge imposed on most
redemptions made within four years of purchase ("Class B
shares"), or (iii) without any initial or contingent deferred
sales charge, as long as the shares are held for one year or more
("Class C shares"). See "Purchase and Sale of Shares."
An investment in these securities is not a deposit or obligation
of, or guaranteed or endorsed by, any bank and is not federally
insured by the Federal Deposit Insurance Corporation, the Federal
Reserve Board or any other agency.
Investors are advised to read this Prospectus carefully and to
retain it for future reference.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
[Alliance Logo] (R)/SM These are registered marks used under
license from the owner, Alliance Capital Management L.P.
2
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The Fund At A Glance
The following summary is qualified in its entirety by the more
detailed information contained inside this Prospectus.
The Fund's Investment Adviser Is . . .
Alliance Capital Management L.P. ("Alliance"), a global
investment adviser providing diversified services to institutions
and individuals through a broad line of investments including
more than 100 mutual funds. Since 1971, Alliance has earned a
reputation as a leader in the investment world with over $182
billion in assets under management as of March 31, 1997.
Alliance provides investment management services to employee
benefit plans for 31 of the FORTUNE 100 companies.
The Consultant To The Adviser Is . . .
New-Alliance Asset Management (Asia) Limited, a joint venture
company headquartered in Hong Kong formed by Alliance and Sun
Hung Kai Properties Limited, one of Hong Kong's largest
diversified property developers, which will provide Alliance with
expertise with respect to economic, financial, political,
technological and social conditions and trends in Greater China
countries, all of which significantly impact the investment
environment and opportunities in the region.
The Fund
Seeks . . . Long-term capital appreciation.
Invests principally in . . . a non-diversified portfolio of
equity securities of Greater China companies.
A Word About Risk . . .
The price of shares of the Fund will fluctuate as the daily
prices of the individual stocks and other securities in which it
invests fluctuate, so that your shares, when redeemed, may be
worth more or less than their original cost. Because the Fund
will invest in foreign currency denominated securities, these
fluctuations may be magnified by changes in foreign exchange
rates. Investment in the Fund involves risks not associated with
funds that invest primarily in securities of U.S. issuers.
Investments in Greater China companies entail certain risks which
are different from, and in certain cases, greater than, risks
associated with investments in other international markets. See
"Certain Considerations and Risks." In addition, because at
least 80% of the Fund's portfolio will be invested in equity
securities issued by Greater China companies, the Fund is subject
3
<PAGE>
to greater risk of being influenced by events impacting Greater
China countries and therefore Greater China companies than would
a fund with a more diversified portfolio. While the Fund invests
principally in common stocks and other equity securities, in
order to achieve its investment objectives the Fund may at times
use certain types of investment derivatives, such as options,
futures, forwards and swaps. These involve risks different from,
and, in certain cases, greater than, risks presented by more
traditional investments. These risks are fully discussed in this
Prospectus. An investment in the Fund may be considered for
moderately aggressive long-term investors who may wish to
consider investing a portion of their overall equity portfolios
in the markets of Greater China countries.
Getting Started . . .
Shares of the Fund are available through your financial
representative and most banks, insurance companies and brokerage
firms nationwide. Shares can be purchased for a minimum initial
investment of $250, and subsequent investments can be made for as
little as $50. For detailed information about purchasing and
selling shares, see "Purchase and Sale of Shares." In addition,
the Fund offers several time and money saving services to
investors. Be sure to ask your financial representative about:
AUTOMATIC DIVIDEND REINVESTMENT
AUTOMATIC INVESTMENT PROGRAM
RETIREMENT PLANS
SHAREHOLDER COMMUNICATIONS
DIVIDEND DIRECTION PLANS
AUTO EXCHANGE
SYSTEMATIC WITHDRAWALS
A CHOICE OF PURCHASE PLANS
TELEPHONE TRANSACTIONS
24-HOUR INFORMATION
ALLIANCE LOGO
(R)/SM These are registered marks used under license from the
owner, Alliance Capital Management L.P.
4
<PAGE>
________________________________________________________________
EXPENSE INFORMATION
________________________________________________________________
Shareholder Transaction Expenses are one of several factors to
consider when you invest in the Fund. The following table
summarizes your maximum transaction costs and annual expenses for
each class of shares. The Example following the table shows the
cumulative expenses attributable to a hypothetical $1,000
investment in each class for the periods specified.
Class A Shares Class B Shares Class C Shares
Maximum sales charge imposed
on purchases (as a percentage
of offering price)....... 4.25%(a) None None
Sales charge imposed on
dividend reinvestments... None None None
Deferred sales charge (as
a percentage of original
purchase price or
redemption proceeds,
whichever is lower)...... None 4.0% during the 1% during the
first year, first year,
decreasing 1.0% 0% thereafter
annually to 0%
after the fourth
year(b)
Exchange fee............... None None None
____________________________________________________________
(a) Reduced for larger purchases. Purchases of $1,000,000 or more are not
subject to an initial sales charge but may be subject to a 1% deferred
sales charge on redemption within one year of purchase. See "Purchase
and Sale of Shares--How to Buy Shares"-page __.
(b) Class B shares automatically convert to Class A shares after eight years.
See "Purchase and Sale of Shares--How to Buy Shares"-page __.
5
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Operating Expenses Class A Class B Class C
Management fees 1.00% 1.00% 1.00%
12b-1 fees [ ]% [ ]% [ ]%
Other expenses(a) [ ]% [ ]% [ ]%
Total fund operating expenses [ ]% [ ]% [ ]%
==== ==== ====
Example Class A Class B+ Class B++ Class C+ Class C++
After 1 year $ $ $ $ $
After 3 years $ $ $ $ $
___________________________________________________________
+ Assumes redemption at end of period.
++ Assumes no redemption at end of period.
(a) These expenses include a transfer agency fee payable to Alliance Fund
Services, Inc., an affiliate of Alliance, based on a fixed dollar amount
charged to the Fund for each shareholder account.
The purpose of the foregoing table is to assist the investor in
understanding the various costs and expenses that an investor in
the Fund will bear directly or indirectly. Long-term
shareholders of the Fund may pay aggregate sales charges totaling
more than the economic equivalent of the maximum initial sales
charges permitted by the Conduct Rules of the National
Association of Securities Dealers, Inc. See "Management of the
Fund--Distribution Services Agreement." The Rule 12b-1 fee for
each class comprises a service fee not exceeding .25% of the
aggregate average daily net assets of the Fund attributable to
the class and an asset-based sales charge equal to the remaining
portion of the Rule 12b-1 fee. "Other Expenses" are based on
estimated amounts for the Fund's current fiscal year. The
Example set forth above assumes reinvestment of all dividends and
distributions and utilizes a 5% annual rate of return as mandated
by Securities and Exchange Commission regulations. THE EXAMPLE
SHOULD NOT BE CONSIDERED REPRESENTATIVE OF PAST OR FUTURE
EXPENSES; ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE
SHOWN.
6
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________________________________________________________________
GLOSSARY
________________________________________________________________
The following terms are used in this Prospectus.
Greater China company is an entity that (i) is organized under
the laws of a Greater China country and conducts business in a
Greater China country, (ii) derives 50% or more of its total
revenues from business in Greater China countries, or
(iii) issues equity or debt securities that are traded
principally on a stock exchange in a Greater China country. A
company of a particular Greater China country is a company that
meets any of these criteria with respect to that country.
Greater China countries are the People's Republic of China
("China"), the Hong Kong Special Administrative Region of the
Peoples Republic of China ("Hong Kong") and the Republic of China
("Taiwan").
Equity securities are common and preferred stocks, securities
convertible into common and preferred stocks and equity-linked
debt securities, but do not include rights, warrants and options
to subscribe for the purchase of common and preferred stocks.
Convertible securities are debt securities that are convertible
at a stated exchange rate into common stock.
Debt securities are bonds, debentures, notes, bills, repurchase
agreements and loans and other direct debt instruments, but do
not include convertible securities.
Investment grade securities are debt securities rated Baa and
above by Moody's Investors Service, Inc. ("Moody's") or BBB and
above by Standard & Poor's Ratings Services ("S&P"), Duff &
Phelps Credit Rating Co. ("Duff & Phelps") or Fitch Investors
Service, L.P. ("Fitch") or determined by Alliance to be of
equivalent quality.
Rule 144A securities are securities that may be resold pursuant
to Rule 144A under the Securities Act of 1933, as amended (the
"Securities Act").
U.S. Government securities are securities issued or guaranteed by
the United States Government, its agencies or instrumentalities.
7
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Depositary receipts include American Depositary Receipts
("ADRs"), Global Depositary Receipts ("GDRs") and other types of
depositary receipts.
Commission is the United States Securities and Exchange
Commission.
Code is the Internal Revenue Code of 1986, as amended.
8
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___________________________________________________________
DESCRIPTION OF THE FUND
___________________________________________________________
The Fund is a non-diversified investment company. The Fund's
investment objective is "fundamental" and cannot be changed
without a shareholder vote. Except as noted, the Fund's
investment policies are not fundamental and thus can be changed
without a shareholder vote. The Fund will not change these
policies without notifying its shareholders. There is no
guarantee that the Fund will achieve its investment objective.
INVESTMENT OBJECTIVE
The Fund's investment objective is to seek long-term capital
appreciation through investment of at least 80% of its total
assets in equity securities issued by Greater China companies.
GREATER CHINA COUNTRIES
In furtherance of its investment objective, the Fund expects to
invest a significant portion, which may be greater than 50%, of
its assets in equity securities of Hong Kong companies and may
invest, from time to time, all of its assets in Hong Kong
companies of either of the other Greater China countries.
In recent years, China, Hong Kong and Taiwan have each
experienced a high level of real economic growth. This growth
has resulted not only from advantageous economic conditions,
including favorable demographics, competitive wage rates, and
rising per capita income and consumer demand. Significantly, the
growth has also been fueled by an easing by both China and Taiwan
of government restrictions and an increased receptivity to
foreign investment. This expanded, if not yet complete openness
to foreign investment, extends as well to the securities markets
of both countries. Hong Kong's free-market economy has
historically included securities markets completely open to
foreign investments. All three countries have regulated stock
exchanges upon which shares of an increasing number of Greater
China companies are traded.
With its population estimated at more than 1.2 billion as a
driving force, and notwithstanding its continuing political
rigidity, China's economic growth has been coupled with
significantly reduced government economic intervention and basic
economic structural change. Recent years have seen large
increases in industrial production with a significant decline in
the state sector share of industrial output and increased
involvement of local governmental units and the private sector in
establishing new business enterprises.
9
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With China's growth has come an increasing direct and
indirect economic involvement of all three Greater China
countries. For some time, Hong Kong as a world financial and
trade center in its own right, with the world's ninth largest
stock exchange, and with offices of many of the worlds multi-
national companies, has been the gateway to trade with and
foreign investment in China. With the long-awaited transfer on
July 1, 1997 of the sovereignty of Hong Kong from Great Britain
to China, not only the political but the economic ties between
China and Hong Kong are expected to intensify, albeit with the
continuation of Hong Kong's economic system as provided for in
the law governing its sovereignty.
Notwithstanding the, at times, considerable political tension
between the two countries, it is generally recognized that
substantially increased trade and investment with China has been
generated from Taiwan, in many cases through Hong Kong. Along
with this increased interaction with China, Taiwan is becoming a
regional technological and telecommunication center, while
continuing the process of opening its economy up to foreign
investment. Although geographically limited, Taiwan boasts an
economy among the world's twenty largest and its foreign exchange
reserves are in the top five of all countries measured in U.S.
dollars. As China's economy continues to expand, it is expected
that Taiwan's economic interaction with China will likewise
increase.
Alliance believes that current conditions are favorable for
continuing and expanding economic growth in all three Greater
China countries. It is this potential which the Fund hopes to
take advantage of by investing both in established and new and
emerging companies.
Set forth below under "Certain Considerations and Risks" and
in Appendix A to the Statement of Additional Information is
additional information concerning the Greater China countries.
INVESTMENT POLICIES AND PRACTICES
In addition to investing in equity securities of Greater
China companies, the Fund may invest up to 20% of its total
assets in (i) debt securities issued or guaranteed by Greater
China companies or by Greater China governments, their agencies
or instrumentalities, and (ii) equity or debt securities issued
by issuers other than Greater China companies. The Fund will not
invest in debt securities other than investment grade securities.
Should a debt security in which the Fund is invested be
downgraded below investment grade or be determined by Alliance to
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have undergone a similar credit quality deterioration, the Fund
will dispose of that security.
The Fund may also: (i) invest up to 25% of its net assets in
the convertible securities of companies whose common stocks are
eligible for purchase by the Fund; (ii) invest up to 20% of its
net assets in rights or warrants; (iii) invest in depositary
receipts, instruments of supranational entities denominated in
the currency of any country, securities of multinational
companies and "semi-governmental securities;" (iv) invest up to
25% of its net assets in equity-linked debt securities with the
objective of realizing capital appreciation; (v) invest up to 20%
of its net assets in loans and other direct debt securities;
(vi) write covered put and call options on securities of the
types in which it is permitted to invest and on exchange-traded
index options; (vii) 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 stock and may purchase and
write options on future contracts; (viii) purchase and write put
and call options on foreign currencies for hedging purposes;
(ix) purchase or sell forward contracts; (x) enter into interest
rate swaps and purchase or sell interest rate caps and floors;
(xi) enter into forward commitments for the purchase or sale of
securities; (xii) enter into standby commitment agreements;
(xiii) enter into currency swaps for hedging purposes;
(xiv) enter into repurchase agreements pertaining to U.S.
Government securities with member banks of the Federal Reserve
System or primary dealers in such securities; (xv) make short
sales of securities or maintain a short position, in each case
only if "against the box;" and (xvi) make secured loans of its
portfolio securities not in excess of 30% of its total assets to
entities with which it can enter into repurchase agreements. All
or some of the policies and practices listed above may not be
available to the Fund in the Greater China countries, and the
Fund will utilize these policies only to the extent permissible.
For additional information on the use, risks and costs of these
policies and practices see "Additional Investment Practices."
ADDITIONAL INVESTMENT PRACTICES
The Fund may engage in the following investment practices to
the extent described above. Additional Information concerning
certain of these practices is set forth in Appendix B of the
Statement of Additional Information.
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 generally higher yields than those of equity
11
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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 enable
investors to benefit from increases in the market price of the
underlying common stock. Convertible securities rank senior to
common stocks in an issuer's capital structure. They are
consequently of higher quality and entail less risk than the
issuer's common stock, although the extent to which such risk is
reduced depends in large measure upon the degree to which the
convertible security sells above its value as a fixed income
security. Convertible debt securities that are rated Baa by
Moody's or BBB by S&P and comparable not rated securities as
determined by Alliance may share some or all of the risks of debt
securities with those ratings.
Rights and Warrants. The Fund will invest in rights or
warrants only if the equity securities themselves are deemed
appropriate by Alliance for inclusion in the Fund's portfolio.
Rights and warrants entitle the holder to buy equity securities
at a specific price for a specific period of time. Rights are
similar to warrants except that they have a substantially shorter
duration. Rights and warrants may be considered more speculative
than certain other types of investments in that they do not
entitle a holder to dividends or voting rights with respect to
the underlying securities nor do they represent any rights in the
assets of the issuing company. The value of a right or warrant
does not necessarily change with the value of the underlying
securities, however, although the value of a right or warrant may
decline because of a decrease in the value of the underlying
stock, the passage of time or a change in perception as to the
potential of the underlying stock, or any combination thereof.
If the market price of the underlying stock is below the exercise
price set forth in the warrant on the expiration date, the
warrant will expire worthless. Moreover, a right or warrant
ceases to have value if it is not exercised prior to the
expiration date.
Depositary Receipts and Securities of Supranational Entities.
Depositary receipts may not necessarily be denominated in the
same currency as the underlying securities into which they may be
converted. In addition, the issuers of the stock of unsponsored
depositary receipts are not obligated to disclose material
information in the United States and, therefore, there may not be
a correlation between such information and the market value of
the depositary receipts. ADRs are depositary receipts typically
12
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issued by a U.S. bank or trust company that evidence ownership of
underlying securities issued by a foreign corporation. GDRs and
other types of depositary receipts are typically issued by
foreign banks or trust companies and evidence ownership of
underlying securities issued by either a foreign or a U.S.
company. Generally, depositary receipts in registered form are
designed for use in the U.S. securities markets and depositary
receipts in bearer form are designed for use in foreign
securities markets. For purposes of determining the country of
issuance, the investments of the Fund in depositary receipts are
deemed to be investments in the underlying securities.
A supranational entity is an entity designated or supported
by the national government of one or more countries to promote
economic reconstruction or development. Examples of
supranational entities include, among others, the World Bank
(International Bank for Reconstruction and Development) and the
European Investment Bank. "Semi-governmental securities," are
securities issued by entities owned by either a national, state
or equivalent government or are obligations of one of such
government jurisdictions which are not backed by its full faith
and credit and general taxing powers.
Illiquid Securities. Subject to any more restrictive
applicable fundamental investment policy, the Fund will not
maintain more than 15% of its net assets in illiquid securities.
Illiquid securities generally include (i) direct placements or
other securities that are subject to legal or contractual
restrictions on resale or for which there is no readily available
market (e.g., when trading in the security is suspended or, in
the case of unlisted securities, when market makers do not exist
or will not entertain bids or offers), including many
individually negotiated currency swaps and any assets used to
cover currency swaps and most privately negotiated investments in
state enterprises that have not yet conducted an initial equity
offering, (ii) over-the-counter options and assets used to cover
over-the-counter options, and (iii) repurchase agreements not
terminable within seven days.
Because of the absence of a trading market for illiquid
securities, the Fund may not be able to realize their full value
upon sale. Alliance will monitor the illiquidity of such
securities with respect to the Fund under the supervision of the
Directors of the Fund. To the extent permitted by applicable
law, Rule 144A securities will not be treated as "illiquid" for
purposes of the foregoing restriction so long as such securities
meet liquidity guidelines established by the Fund's Directors.
The Fund may not be able to readily sell securities for which
there is no ready market. Such securities are unlike securities
which are traded in the open market and which can be expected to
13
<PAGE>
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 with respect to the issuers of such
securities than with respect to companies whose securities are
traded on an exchange. Illiquid securities are more likely to be
issued by small businesses and therefore subject to greater
economic, business and market risks than the listed securities of
more well-established companies. Adverse conditions in the
public securities markets may at certain times preclude a public
offering of an issuer's securities. To the extent that the Fund
makes any privately negotiated investments in state enterprises,
such investments are likely to be in securities that are not
readily marketable. It is the intention of the Fund to make such
investments when Alliance believes there is a reasonable
expectation that the Fund would be able to dispose of its
investment within three years. 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.
Equity-Linked Debt Securities. Equity-linked debt securities
are securities with respect to which the amount of interest
and/or principal that the issuer thereof is obligated to pay is
linked to the performance of a specified index of equity
securities. Such amount may be significantly greater or less
than payment obligations in respect of other types of debt
securities. Adverse changes in equity securities indices and
other adverse changes in the securities markets may reduce
payments made under, and/or the principal of, equity-linked debt
securities held by the Fund. Furthermore, as with any debt
securities, the values of equity-linked debt securities will
generally vary inversely with changes in interest rates. The
Fund's ability to dispose of equity-linked debt securities will
depend on the availability of liquid markets for such securities.
Investment in equity-linked debt securities may be considered to
be speculative. As with other securities, the Fund could lose
its entire investment in equity-linked debt securities.
Loans and Other Direct Debt Instruments. Loans and other
direct debt instruments are interests in amounts owed by a
corporate, governmental or other borrower to another party. They
may represent amounts owed to lenders or lending syndicates
(loans and loan participations), to suppliers of goods or
services (trade claims or other receivables), or to other
creditors. Direct debt instruments involve the risk of loss in
case of default or insolvency of the borrower and may offer less
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legal protection to the Fund in the event of fraud or
misrepresentation than debt securities. In addition, loan
participations involve a risk of insolvency of the lending bank
or other financial intermediary. Direct debt instruments may
also include standby financing commitments that obligate the Fund
to supply additional cash to the borrower on demand. Loans and
other direct debt instruments are generally illiquid and may be
transferred only through individually negotiated private
transactions.
Purchasers of loans and other forms of direct indebtedness
depend primarily upon the creditworthiness of the borrower for
payment of principal and interest. Direct debt instruments may
not be rated by any nationally recognized rating service. If the
Fund does not receive scheduled interest or principal payments on
such indebtedness, the Fund's share price and yield could be
adversely affected. Loans that are fully secured offer the Fund
more protection than unsecured loans in the event of non-payment
of scheduled interest or principal. However, there is no
assurance that the liquidation of collateral from a secured loan
would satisfy the borrower's obligation, or that the collateral
can be liquidated. Indebtedness of borrowers whose
creditworthiness is poor may involve substantial risks, and may
be highly speculative.
Borrowers that are in bankruptcy or restructuring may never
pay off their indebtedness, or may pay only a small fraction of
the amount owed. Direct indebtedness of Greater China countries
will also involve a risk that the governmental entities
responsible for the repayment of the debt may be unable, or
unwilling, to pay interest and repay principal when due.
Investments in loans through direct assignment of a financial
institution's interests with respect to a loan may involve
additional risks to the Fund. For example, if a loan is
foreclosed, the Fund could become part owner of any collateral,
and would bear the costs and liabilities associated with owning
and disposing of the collateral. Direct debt instruments may
also involve a risk of insolvency of the lending bank or other
intermediary.
A loan is often administered by a bank or other financial
institution that acts as agent for all holders. The agent
administers the terms of the loan, as specified on the loan
agreement. Unless, under the terms of the loan or other
indebtedness, the Fund has direct recourse against the borrower,
it may have to rely on the agent to apply appropriate credit
remedies against a borrower. If assets held by the agent for the
benefit of the Fund were determined to be subject to the claims
of the agent's general creditors, the Fund might incur certain
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costs and delays in realizing payment on the loan or loan
participation and could suffer a loss of principal or interest.
Direct indebtedness purchased by the Fund may include letters
of credit, revolving credit facilities, or other standby
financing commitments obligating the Fund to pay additional cash
on demand. These commitments may have the effect of requiring
the Fund to increase its investment in a borrower at a time when
it would not otherwise have done so, even if the borrower's
condition makes it unlikely that the amount will ever be repaid.
The Fund will not invest in lower-rated loans and other
lower-rated direct debt instruments.
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
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
on the underlying securities with an exercise price equal to or
greater than that of the put option it has written. There are no
specific limitations on the Fund's writing and purchasing of
options.
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 may write call
options for cross-hedging purposes. 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 (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
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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.
The Fund will purchase or write options on securities in
privately negotiated (i.e., over-the-counter) transactions only
with investment dealers and other financial institutions (such as
commercial banks or savings and loan institutions) deemed
creditworthy by Alliance, and Alliance has adopted procedures for
monitoring the creditworthiness of such entities. Options
purchased or written by 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. See "Illiquid
Securities."
Options on Securities Indices. An option on a securities
index is similar to an option on a security except that, rather
than the right to take or make delivery of a security at a
specified price, an option on a securities index gives the holder
the right to receive, upon exercise of the option, an amount of
cash if the closing level of the chosen index is greater than (in
the case of a call) or less than (in the case of a put) the
exercise price of the option.
Futures Contracts and Options on Futures Contracts. A "sale"
of a futures contract means the acquisition of a contractual
obligation to deliver the securities or foreign currencies or
other commodity called for by the contract at a specified price
on a specified date. A "purchase" of a futures contract means
the incurring of an obligation to acquire the securities, foreign
currencies or other commodity called for by the contract at a
specified price on a specified date. The purchaser of a futures
contract on an index agrees to take or make delivery of an amount
of cash equal to the difference between a specified dollar
multiple of the value of the index on the expiration date of the
contract ("current contract value") and the price at which the
contract was originally struck. No physical delivery of the
securities underlying the index is made.
Options on futures contracts written or purchased by the Fund
will be traded on U.S. or foreign exchanges or over-the-counter.
These investment techniques will be used only to hedge against
anticipated future changes in market conditions and interest or
exchange rates which otherwise might either adversely affect the
value of the Fund's portfolio securities or adversely affect the
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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 50% of its total assets.
Options on Foreign Currencies. As in the case of other kinds
of options, the writing of an option on a foreign currency
constitutes only a partial hedge, up to the amount of the premium
received, and the Fund could be required to purchase or sell
foreign currencies at disadvantageous exchange rates, thereby
incurring losses. The purchase of an option on a foreign
currency may constitute an effective hedge against fluctuations
in exchange rates although, in the event of rate movements
adverse to the Fund's position, it may forfeit the entire amount
of the premium plus related transaction costs. See the Statement
of Additional Information for a further discussion of the use,
risks and costs of options on foreign currencies.
Forward Foreign Currency Exchange Contracts. The Fund may
purchase or sell forward contracts so as to minimize the risk to
it from adverse changes in the relationship between the U.S.
Dollar and other currencies. A forward contract is an obligation
to purchase or sell a specific currency for an agreed price at a
future date, and is individually negotiated and privately traded.
The Fund may enter into a forward contract, for example, when
it enters into a contract for the purchase or sale of a security
denominated in a foreign currency in order to "lock in" the U.S.
Dollar price of the security ("transaction hedge"). The Fund may
not engage in transaction hedges with respect to the currency of
a particular country to an extent greater than the aggregate
amount of the Fund's transactions in that currency. When the
Fund believes that a foreign currency may suffer a substantial
decline against the U.S. Dollar, it may enter into a forward sale
contract to sell an amount of that foreign currency approximating
the value of some or all of the Fund's portfolio securities
denominated in such foreign currency; or when the Fund believes
that the U.S. Dollar may suffer a substantial decline against a
foreign currency, it may enter into a forward purchase contract
to buy that foreign currency for a fixed dollar amount ("position
hedge"). The Fund will not position hedge with respect to the
currency of a particular country to an extent greater than the
aggregate market value (at the time of making such sale) of the
securities held in its portfolio denominated or quoted in that
particular foreign currency. Instead of entering into a position
hedge, the Fund may, in the alternative, enter into a forward
contract to sell a different foreign currency for a fixed U.S.
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Dollar amount where the Fund believes that the U.S. Dollar value
of the currency to be sold pursuant to the forward contract will
fall whenever there is a decline in the U.S. dollar value of the
currency in which portfolio securities of the Fund are
denominated ("cross-hedge"). Unanticipated changes in currency
prices may result in poorer overall performance for the Fund than
if it had not entered into such forward contracts.
Hedging against a decline in the value of a currency does not
eliminate fluctuations in the prices of portfolio securities or
prevent losses if the prices of such securities decline. Such
transactions also preclude the opportunity for gain if the value
of the hedge currency should rise. Moreover, it may not be
possible for the Fund to hedge against a devaluation that is so
generally anticipated that the Fund is not able to contract to
sell the currency at a price above the devaluation level it
anticipates.
Forward Commitments. Forward commitments for the purchase or
sale of securities may include purchases on a "when-issued" basis
or purchases or sales on a "delayed delivery" basis. In some
cases, a forward commitment may be conditioned upon the
occurrence of a subsequent event, such as approval and
consummation of a merger, corporate reorganization or debt
restructuring (i.e., a "when, as and if issued" trade).
When forward commitment transactions are negotiated, the
price is fixed at the time the commitment is made, but delivery
and payment for the securities take place at a later date.
Normally, the settlement date occurs within two months after the
transaction, but settlements beyond two months may be negotiated.
Securities purchased or sold under a forward commitment are
subject to market fluctuation, and no interest or dividends
accrue to the purchaser prior to the settlement date. At the
time the Fund intends to enter into a forward commitment, it
records the transaction and thereafter reflects the value of the
security purchased or, if a sale, the proceeds to be received, in
determining its net asset value. Any unrealized appreciation or
depreciation reflected in such valuation of a "when, as and if
issued" security would be canceled in the event that the required
conditions did not occur and the trade was canceled.
The use of forward commitments enables 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
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yields. However, if 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
chose 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 such transactions would be more than
30% of the Fund's total assets. In the event the other party to
a forward commitment transaction were to default, the Fund might
lose the opportunity to invest money at favorable rates or to
dispose of securities at favorable prices.
Standby Commitment Agreements. Standby commitment agreements
commit 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. The Fund will not enter into a standby
commitment with a remaining term in excess of 45 days and will
limit its investment in such commitments so that the aggregate
purchase price of the securities subject to the commitments will
not exceed 50% of its assets taken at the time of making the
commitment.
There is no guarantee that the securities 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.
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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
net amount of the excess, if any, of the Fund's obligations over
its entitlements with respect to each currency swap will be
accrued on a daily basis. The Fund will enter into currency
swaps for hedging purposes only. 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 other party
thereto is rated in the highest 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 other party
to such a transaction, the Fund will have contractual remedies
pursuant to the agreements related to the transactions.
Interest Rate Transactions. Interest rate transactions are
entered into primarily to preserve a return or spread on a
particular investment or portion of the Fund's portfolio or to
protect against any increase in the price of securities the Fund
anticipates purchasing at a later date. The Fund does not intend
to use these transactions in a speculative manner.
Interest rate swaps involve the exchange by the Fund with
another party of their respective commitments to pay or receive
interest (e.g., an exchange of floating rate payments for fixed
rate payments). Interest rate swaps are entered on a net basis
(i.e., the two payment streams are netted out, with the Fund
receiving or paying, as the case may be, only the net amount of
the two payments). With respect to the Fund, the exchange
commitments can involve payments in the same currency or in
different currencies. The purchase of an interest rate cap
entitles the purchaser, to the extent that a specified index
exceeds a predetermined interest rate, to receive payments of
interest on a contractually-based principal amount from the party
selling such interest rate cap. The purchase of an interest rate
floor entitles the purchaser, to the extent that a specified
index falls below a predetermined interest rate, to receive
payments of interest on an agreed principal amount from the party
selling the interest rate floor.
The Fund may enter into interest rate swaps, caps and floors
on either an asset-based or liability-based basis, depending upon
whether it is hedging its assets or liabilities. The net amount
of the excess, if any, of the Fund's obligations over its
entitlements with respect to each interest rate swap, cap or
floor is accrued daily. The Fund will not enter into an interest
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rate swap, cap or floor transaction unless the unsecured senior
debt or the claims-paying ability of the other party thereto is
then rated in the highest rating category of at least one
nationally recognized rating organization. Alliance will monitor
the creditworthiness of counterparties on an ongoing basis. The
swap market has grown substantially in recent years, with a large
number of banks and investment banking firms acting both as
principals and as agents utilizing standardized swap
documentation. As a result, the swap market has become
relatively liquid. Caps and floors are more recent innovations
for which standardized documentation has not yet been developed,
and, accordingly, they are less liquid than swaps.
The use of interest rate transactions is a highly specialized
activity that involves investment techniques and risks different
from those associated with ordinary portfolio securities
transactions. If Alliance incorrectly forecasts market values,
interest rates and other applicable factors, the investment
performance of the Fund would be adversely affected by the use of
these investment techniques. Moreover, even if Alliance is
correct in its forecasts, there is a risk that the transaction
position may correlate imperfectly with the price of the asset or
liability being hedged. There is no limit on the amount of
interest rate transactions that may be entered into by the Fund.
These transactions do not involve the delivery of securities or
other underlying assets of principal. Accordingly, the risk of
loss with respect to interest rate transactions is limited to the
net amount of interest payments that the Fund is contractually
obligated to make. If the other party to an interest rate
transaction defaults, the Fund's risk of loss consists of the net
amount of interest payments that the Fund contractually is
entitled to receive.
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. The Fund
may enter into repurchase agreements pertaining to U.S.
Government Securities with member banks of the Federal Reserve
System or "primary dealers" (as designated by the Federal Reserve
Bank of New York) in such securities. Alliance monitors the
creditworthiness of the dealers with which the Fund enters into
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repurchase agreements. Currently, the Fund intends to enter into
repurchase agreements only with its custodian and such primary
dealers. There is no percentage restriction on the Fund's
ability to enter into repurchase agreements.
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. The Fund may make
short sales of securities or maintain short positions only for
the purpose of deferring realization of gain or loss for U.S.
federal income tax purposes, provided that at all times when a
short position is open the Fund owns an equal amount of
securities of the same issue as, and equal in amount to, the
securities sold short. In addition, the Fund may not make a
short sale if as a result more than 25% of the Fund's net assets
would be held as collateral for short sales. If the price of the
security sold short increases between the time of the short sale
and the time the Fund replaces the borrowed security, the Fund
will incur a loss; conversely, if the price declines, the Fund
will realize a capital gain. See "Certain Fundamental Investment
Policies." Certain special federal income tax considerations may
apply to short sales entered into by the Fund. See "Dividends,
Distributions and Taxes" in the Statement of Additional
Information.
Loans of Portfolio Securities. The risks in lending
portfolio securities, as with other extensions of credit, consist
of possible loss of rights in the collateral should the borrower
fail financially. In determining whether to lend securities to a
particular borrower, Alliance will consider all relevant facts
and circumstances, including the creditworthiness of the
borrower. While securities are on loan, the borrower will pay
the Fund any income earned thereon, and the Fund may invest any
cash collateral in portfolio securities, thereby earning
additional income, or receive an agreed upon amount of income
from a borrower who has delivered equivalent collateral. The
Fund will have the right to regain record ownership of loaned
securities 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. The
Fund will not lend portfolio securities to any officer, director,
employee or affiliate of the Fund or Alliance. The Board of
Directors will monitor the Fund's lending of portfolio
securities.
General. The successful use of the foregoing investment
practices draws upon Alliance's special skills and experience
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with respect to such instruments and usually depends on
Alliance's ability to forecast price movements or currency
exchange rate movements correctly. Should 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
with respect to options on currencies 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 such instruments 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 with
respect to 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 futures contract or currency upon exercise.
Therefore, no assurance can be given that the Fund will be able
to utilize these instruments effectively for the purposes set
forth above. Furthermore, the Fund's ability to engage in
options and futures transactions may be limited by tax
considerations. See "Dividends, Distributions and Taxes" in the
Statement of Additional Information.
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.
Defensive Position. For temporary defensive purposes, the
Fund may reduce its position in equity securities and increase
without limit its position in short-term, liquid, high-grade debt
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securities, which may include U.S. Government securities, bank
deposits, money market instruments, short-term debt securities,
including notes and bonds, and short-term foreign-currency
denominated high-grade debt securities issued by foreign
governmental entities, companies and supranational organizations.
For a complete description of the types of securities the Fund
may invest in while in a temporary defensive position, please see
the Statement of Additional Information.
Portfolio Turnover. Alliance anticipates that the Fund's
annual rate of turnover will not exceed 150%. A 150% annual
turnover rate would occur if all of the securities in the Fund's
portfolio are replaced one and one-half times in a period of one
year. A 150% portfolio turnover rate is greater than that of
most other investment companies, including those which emphasize
capital appreciation as a basic policy. A high rate of portfolio
turnover involves correspondingly greater brokerage and other
expenses than a lower rate, which must be borne by the Fund and
its shareholders. High portfolio turnover also may result in the
realization of substantial net short-term capital gains. See
"Dividends, Distributions and Taxes" in the Statement of
Additional Information.
CERTAIN OTHER FUNDAMENTAL INVESTMENT POLICIES
The Fund has adopted certain fundamental investment policies
listed below, which may not be changed without the approval of
its shareholders. Additional investment restrictions with
respect to the Fund are set forth in the Statement of Additional
Information.
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; (ii) borrow money except from
banks for temporary or emergency purposes, including the meeting
of redemption requests that might require the untimely
disposition of securities; borrowing in the aggregate may not
exceed 15%, and borrowing for purposes other than meeting
redemptions may not exceed 5%, of the Fund's total assets
(including the amount borrowed) less liabilities (not including
the amount borrowed) at the time the borrowing is made;
outstanding borrowings in excess of 5% of the value of the Fund's
total assets will be repaid before any investments are made; or
(iii) pledge, hypothecate, mortgage or otherwise encumber its
assets, except to secure permitted borrowings.
CERTAIN CONSIDERATIONS AND RISKS
Investment in the Fund involves, among others, the
considerations and risks referred to below.
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Political, Economic and Social Considerations and
Interrelationships. China, in particular, but Hong Kong and
Taiwan, as well, in significant measure because of their existing
and increasing economic, and now in the case of Hong Kong, direct
political ties with China, may be subject to a greater degree of
social, political and economic instability than is the case in
the United States.
China's economy is very much in transition. While the
government still controls production and pricing in major
economic sectors, significant steps have been taken toward
capitalism and China's economy has become increasingly market
oriented. China's strong economic growth and ability to attract
significant foreign investment in recent years stem from the
economic liberalization initiated by Deng Xiaoping who assumed
power in the late 1970s. The economic growth, however, has not
been smooth and has been marked by extremes in many respects of
inordinate growth which has not been tightly controlled followed
by rigid measures of austerity. The rapidity and erratic nature
of the growth have resulted in inefficiencies and dislocations,
including at times high rates of inflation.
China's economic development has occurred notwithstanding the
continuation of the power of China's Communist Party and its
authoritarian government control, not only of centrally planned
economic decisions, but of many aspects of the social structure.
While a significant portion of China's population has benefited
from China's economic growth, the conditions of many leave much
room for improvement. Notwithstanding restrictions on freedom of
expression and the absence of a free press, and notwithstanding
the extreme manner in which past unrest has been dealt with, the
1989 Tianamen Square uprising being a recent reminder, the
potential for renewed popular unrest associated with demands for
improved social, political and economic conditions cannot be
dismissed.
A key unknown as to China's future relates to the political
uncertainty in connection with the succession to Deng who died
earlier this year. Many observers have cited the potential for
political instability. While his policies in many respects have
effectively outdated the Communist Party and the governmental
structure, both the Communist Party and the government remain
entrenched and only time will tell how the ruling structure will
stabilize. There can be no assurance that the resulting
structure will continue the capitalistic steps or be able to
prevent wide economic swings and control inflation, which is in
any event expected to remain high by present Western standards.
In this latter regard, the existing economic weight of the
current political and governmental structure currently adds to
inflationary pressures and impedes economic efficiency and
commerce. The Communist Party still controls access to
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governmental positions and closely monitors governmental action.
Essentially there exists a highly inefficient set of parallel
bureaucracies and attendant opportunities for corruption.
In addition to the economic impact of China's internal
political uncertainties, the potential effect of China's actions,
not only on China itself, but on Hong Kong and Taiwan as well,
could be significant.
China is heavily dependent on foreign trade, particularly
with the United States, Japan and Germany. Political
developments adverse to its trading partners, as well as
political and social repression, could cause the United States
and others to alter their trading policy towards China. For
example, in the United States, the continued extension of most
favored nation trading status to China is an issue of significant
controversy which is reviewed regularly. Loss of that status
would clearly hurt China's economy by reducing its exports. With
much of China's trading activity being funneled through Hong Kong
and with trade through Taiwan becoming increasingly significant,
any sizable reduction in demand for goods from China would have
negative implications for both countries. China is believed to
be the largest investor in Hong Kong and its markets and an
economic downturn in China would be expected to reverberate to
Hong Kong's markets as well.
Regarding Hong Kong, although China has committed by treaty
to preserve Hong Kong's autonomy and its economic, political and
social freedoms for fifty years from the July 1, 1997 transfer of
sovereignty over Hong Kong from Great Britain to China, the
continuation of Hong Kong's current economic system is dependent
on how the government of China imposes its authority. While Deng
expressed China's commitment as a "one country, two systems"
philosophy, the future of Hong Kong's political and social
system, including its independent judiciary, professional civil
service and free press, remains unclear. While many believe that
the economies of China and Hong Kong have become interdependent
to such an extent that it would not be in China's interest to
alter Hong Kong's present economic structure, a change of social
policy or in the political structure could also have negative
economic implications. Investor and business confidence in Hong
Kong can be significantly affected by such developments, which in
turn can affect markets and business performance. In this
connection, it is noted that a substantial portion of the
companies listed on the Hong Kong Stock Exchange are involved in
real estate-related activities.
Investment in Greater China Countries; Risks of Foreign
Investment. The securities markets of China, and to a lesser
extent Taiwan, are relatively small, with the majority of market
capitalization and trading volume concentrated in a limited
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number of companies representing a small number of industries.
Consequently, the Fund 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 U.S. Securities
settlements may in some instances be subject to delays and
related administrative uncertainties.
Foreign investment in the securities markets of China
and Taiwan is restricted or controlled to varying degrees. These
restrictions or controls, which apply to the Fund, may at times
limit or preclude investment in certain securities and may
increase the cost and expenses of the Fund. China and Taiwan
require governmental approval prior to investments by foreign
persons or limit investment by foreign persons to only a
specified percentage of an issuer's outstanding securities or a
specific class of securities which may have less advantageous
terms (including price) than securities of the company available
for purchase by nationals. In addition, the repatriation of
investment income, capital or the proceeds of sales of securities
from China and Taiwan 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
restrictions on foreign capital remittances.
The Fund could be adversely affected by delays in, or a
refusal to grant, any required governmental approval for
repatriation, as well as by the application to it of other
restrictions on investment. The liquidity of the Fund's
investments in any country in which any of these factors exists
could be affected by any such factor or factors on the Fund's
investments. The limited liquidity in certain Greater China
markets is a factor to be taken into account in the Fund's
valuation of portfolio securities in this category and may affect
the Fund's ability to dispose of securities in order to meet
redemption requests at the price and time it wishes to do so.
Transaction costs including brokerage commissions for
transactions both on and off the securities exchanges in Greater
China countries may be higher than in the U.S.
Issuers of securities in Greater China countries are
generally not subject to the same degree of regulation as are
U.S. issuers with respect to such matters as timely disclosure of
information, insider trading rules, restrictions on market
manipulation and shareholder proxy requirements. Reporting,
accounting and auditing standards of Greater China countries may
differ, in some cases significantly, from U.S. standards in
important respects, and less information may be available to
28
<PAGE>
investors in securities of Greater China country issuers than to
investors in securities of U.S. issuers.
Investment in Greater China companies which are in the
initial stages of their development involves greater risk than is
customarily associated with securities of more established
companies. The securities of such companies may have relatively
limited marketability and may be subject to more abrupt or
erratic market movements than securities of established companies
or broad market indices.
Currency Considerations. Substantially all of the assets of
the Fund will be invested in securities denominated in foreign
currencies, and a corresponding portion of the Fund's revenues
will be received in these currencies. Therefore, the dollar
equivalent of the Fund's net assets and distributions will be
adversely affected by reductions in the value of foreign
currencies relative to the U.S. Dollar. Such changes will also
affect the Fund's income. The Fund will, however, consider
whether to attempt to protect itself against adverse changes in
the values of foreign currencies by engaging in certain of the
investment practices listed above under "Additional Investment
Practices." While it has this ability, there is no certainty as
to whether these practices are available and, if so, whether and
to what extent it will engage in these practices, and, if it
does, whether it will be successful in doing so. 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. 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 of 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.
Extreme Governmental Action; Less Protective Laws. In
contrast with the United States, and with no specific reference
to any of the Greater China countries, foreign investment may
involve in certain situations greater risk of nationalization,
expropriation, confiscatory taxation, currency blockage or other
extreme governmental action which could adversely impact the
Fund's investments. In the event of certain such actions, the
Fund could lose its entire investment in the country involved.
In addition, laws in various foreign countries, including in
certain respects each of the Greater China countries, governing,
among other subjects, business organization and practices,
securities and securities trading, bankruptcy and insolvency may
29
<PAGE>
provide less protection to investors such as the Fund than
provided under United States laws.
U.S. and Foreign Taxes. Foreign taxes paid by the Fund may
be creditable or deductible by U.S. shareholders of the Fund for
U.S. income tax purposes. Non-U.S. investors may not be able to
credit or deduct such foreign taxes. Investors should review
carefully the information discussed under the heading "Dividends,
Distributions and Taxes" below and in the Statement of Additional
Information under "Dividends, Distributions and Taxes" and should
consider with their tax advisers the specific tax consequences of
investing in the Fund.
Non-Diversified Status. The Fund is a "non-diversified"
investment company, which means that the Fund is not limited by
the 1940 Act in the proportion of its assets that may be invested
in the securities of a single issuer. However, the Fund intends
to conduct its operations so as to qualify to be taxed as a
"regulated investment company" for purposes of the Code, which
will relieve the Fund of any liability for federal income tax to
the extent its earnings are distributed to shareholders. See
"Dividends, Distributions and Taxes--United States Federal Income
Taxation of Dividends and Distributions" in the Statement of
Additional Information. To so qualify, among other requirements,
the Fund will limit its investments so that, at the close of each
quarter of each taxable year, (i) not more than 25% of the Fund's
total assets will be invested in the securities of a single
issuer, and (ii) with respect to 50% of its total assets, not
more than 5% of its total assets will be invested in the
securities of a single issuer and the Fund will not own more than
10% of the outstanding voting securities of a single issuer.
Foreign government securities are subject to these tests in the
same manner as the securities of non-governmental issuers. The
Fund's investments in U.S. Government securities, if any, are
not, however, subject to these limitations. Because as a non-
diversified investment company the Fund, may invest in a smaller
number of individual issuers than a diversified investment
company, an investment in the Fund may, under certain
circumstances, present greater risk to an investor than an
investment in a diversified investment company.
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________________________________________________________________
PURCHASE AND SALE OF SHARES
________________________________________________________________
HOW TO BUY SHARES
You can purchase shares of the Fund at a price based on the
next calculation of their net asset value after receipt of a
proper purchase order either through broker-dealers, banks or
other financial intermediaries, or directly through Alliance Fund
Distributors, Inc. ("AFD"), the Fund's principal underwriter.
The minimum initial investment in each Fund is $250. The minimum
for subsequent investments in each Fund is $50. Investments of
$25, however, or more are allowed under the Fund's automatic
investment program of Share certificates are issued only upon
request. See the Subscription Application and Statement of
Additional Information for more information.
Existing shareholders may make subsequent purchases by
electronic funds transfer if they have completed the Telephone
Transactions section of the Subscription Application or the
Shareholder Options form obtained from Alliance Fund Services,
Inc. ("AFS"), the Fund's registrar, transfer agent and dividend
disbursing agent. Telephone purchase orders can be made by
calling (800) 221-5672 and may not exceed $500,000.
The Fund offers three classes of shares through this
prospectus, Class A, Class B and Class C. The Fund may refuse
any order to purchase Fund shares. In this regard, 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.
Class A Shares--Initial Sales Charge Alternative
You can purchase Class A shares at net asset value plus an
initial sales charge, as follows:
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Initial Sales Charge
Commission to
as % of Dealer/Agent
Net Amount as % of as % of
Amount Purchased Invested Offering Price Offering Price
Less than $100,000 4.44% 4.25% 4.00%
$100,000 to
less than $250,000 3.36 3.25 3.00
$250,000 to
less than $500,000 2.30 2.25 2.00
$500,000 to
less than $1,000,000 1.78 1.75 1.50
On purchases of $1,000,000 or more, you pay no initial sales
charge but may pay a contingent deferred sales charge ("CDSC")
equal to 1% of the lesser of net asset value at the time of
redemption or original cost if you redeem within one year.
Alliance may pay the dealer or agent a fee of up to 1% of the
dollar amount purchased. Certain purchases of Class A shares may
qualify for reduced or eliminated sales charges in accordance
with the Fund's Combined Purchase Privilege, Cumulative Quantity
Discount, Statement of Intention, Privilege for Certain
Retirement Plans, Reinstatement Privilege and Sales at Net Asset
Value programs. Consult the Subscription Application and
Statement of Additional Information regarding these programs.
Class B Shares--Deferred Sales Charge Alternative
You can purchase Class B shares at net asset value without an
initial sales charge. However, you may pay a CDSC if you redeem
shares within four years after purchase. The amount of the CDSC
(expressed as a percentage of the lesser of the current net asset
value or original cost) will vary according to the number of
years from the purchase of Class B shares until the redemption of
those shares. The amount of the CDSC on Class B shares is set
forth below.
Year Since Purchase CDSC
First 4.0%
Second 3.0%
Third 2.0%
Fourth 1.0%
Fifth None
Class B shares are subject to higher distribution fees than
Class A shares for a period of eight years (after which they
convert to Class A shares). The higher fees mean a higher
expense ratio, so Class B shares pay correspondingly lower
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<PAGE>
dividends and may have a lower net asset value than Class A
shares.
Class C Shares--Asset-Based Sales Charge Alternative
You can purchase Class C shares without any initial sales
charge. The Fund will thus receive the full amount of your
purchase, and, if you hold your shares for one year or more, you
will receive the entire net asset value of your shares upon
redemption. Class C shares incur higher distribution fees than
Class A shares and do not convert to any other class of shares of
the Fund. The higher fees mean a higher expense ratio, so Class
C shares pay correspondingly lower dividends and may have a lower
net asset value than Class A shares.
Class C shares redeemed within one year of purchase will be
subject to a CDSC equal to 1% of the lesser of their original
cost or net asset value at the time of redemption.
Application of the CDSC
Shares obtained from dividend or distribution reinvestment
are not subject to the CDSC. The CDSC is deducted from the
amount of the redemption and is paid to AFD. The CDSC will be
waived on redemptions of shares following the death or disability
of a shareholder, to meet the requirements of certain qualified
retirement plans or pursuant to a monthly, bimonthly or quarterly
systematic withdrawal plan. See the Statement of Additional
Information concerning these matters.
How the Fund Values its Shares
The net asset value of each class of shares of the Fund is
calculated by dividing the value of the Fund's net assets
allocable to that class by the number of outstanding shares of
that class. Shares are valued each day the New York Stock
Exchange (the "Exchange") is open as of the close of regular
trading (currently 4:00 p.m. Eastern time). The securities in
the Fund are valued at their current market value determined on
the basis of market quotations or, if such quotations are not
readily available, such other methods as the Fund's Directors
believe would accurately reflect fair market value.
General
The decision as to which class of shares is more beneficial
to you depends on the amount and intended length of your
investment. If you are making a large investment, thus
qualifying for a reduced sales charge, you might consider Class A
shares. If you are making a smaller investment, you might
consider Class B shares because 100% of your purchase is invested
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<PAGE>
immediately. If you are unsure of the length of your
investment, you might consider Class C shares because there is no
initial sales charge and, as long as the shares are held for one
year or more, no CDSC. Consult your financial agent. Dealers
and agents may receive differing compensation for selling
Class A, Class B or Class C shares. There is no size limit on
purchases of Class A shares. The maximum purchase of Class B
shares is $250,000. The maximum purchase of Class C shares is
$1,000,000.
The Fund offers a fourth class of shares, Advisor Class
shares, by means of a separate prospectus. Advisor Class shares
may be purchased and held solely by (i) accounts established
under a fee-based program sponsored and maintained by a
registered broker-dealer or other financial intermediary and
approved by AFD, (ii) a self-directed defined contribution
employee benefit plan (e.g., a 401(k) plan) that has at least
1,000 participants or $25 million in assets and (iii) certain
other categories of investors described in the prospectus for the
Advisor Class shares, including investment advisory clients of,
and certain other persons associated with, Alliance and its
affiliates or the Fund. Advisor Class shares are offered without
any initial sales charge or CDSC and without an ongoing
distribution fee and are expected, therefore, to have different
performance than Class A, Class B or Class C shares. You may
obtain more information about Advisor Class shares by contacting
AFS at 800-221-5672 or by contacting your financial
representative.
In addition to the discount or commission paid to dealers or
agents, AFD from time to time pays additional cash or other
incentives to dealers or agents, including EQ Financial
Consultants, Inc., an affiliate of AFD, in connection with the
sale of shares of the Fund. Such additional amounts may be
utilized, in whole or in part, in some cases together with other
revenues of such dealers or agents, to provide additional
compensation to registered representatives who sell shares of the
Fund. On some occasions, such cash or other incentives will be
conditioned upon the sale of a specified minimum dollar amount of
the shares of the Fund and/or other Alliance Mutual Funds during
a specific period of time. Such incentives may take the form of
payment for attendance at seminars, meals, sporting events or
theater performances, or payment for travel, lodging and
entertainment incurred in connection with travel by persons
associated with a dealer or agent and their immediate family
members to urban or resort locations within or outside the United
States. Such dealer or agent may elect to receive cash
incentives of equivalent amount in lieu of such payments.
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Initial Offering
It is expected that shares of the Fund will be offered during
an initial offering period, which is currently scheduled to end
on August 26, 1997. During the initial offering period, Class A
shares will be offered to the public at their net asset value of
$10.00 per share plus a sales charge which will vary with the
size of the purchase as shown in the foregoing initial sales
charge table and as described in the Application and the
Statement of Additional Information under "Purchase and Sale of
Shares--Class A Shares." The maximum offering price of the Class
A shares during the initial offering period is $10.44 per share.
Class B and Class C shares will be offered to the public during
the initial offering period at their net asset value of $10.00.
During the initial offering period, the Fund will not accept
subscriptions for Fund shares other than through authorized
dealers and agents, and any subscription monies sent directly to
the Fund will be promptly returned. In addition, under
Commission regulations (e.g., Rule 15c2-4 under the Securities
Exchange Act of 1934), authorized dealers and agents will not be
permitted to accept subscription monies from their customers in
advance of the purchase date unless appropriate arrangements are
made for the temporary investment or deposit of such monies.
Shares subscribed for during the Fund's initial offering period
will be sold to subscribers on the purchase date, which is
expected to occur on August 27, 1997 following the end of the
initial offering period.
HOW TO SELL SHARES
You may "redeem", i.e., sell, your shares in the Fund to the
Fund on any day the Exchange is open, either directly or through
your financial intermediary. The price you will receive is the
net asset value (less any applicable CDSC) next calculated after
the Fund receives your request in proper form. Proceeds
generally will be sent to you within seven days. However, for
shares recently purchased by check or electronic funds transfer,
the Fund will not send proceeds until it is reasonably satisfied
that the check or electronic funds transfer has been collected
(which may take up to 15 days).
Selling Shares Through Your Broker
Your broker must receive your request before 4:00 p.m.
Eastern time, and your broker must transmit your request to the
Fund by 5:00 p.m. Eastern time, for you to receive that day's net
asset value (less any applicable CDSC). Your broker is
responsible for furnishing all necessary documentation to the
Fund and may charge you for this service.
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<PAGE>
Selling Shares Directly To The Fund
Send a signed letter of instruction or stock power form to
AFS along with certificates, if any, that represent the shares
you want to sell. For your protection, signatures must be
guaranteed by a bank, a member firm of a national stock exchange
or other eligible guarantor institution. Stock power forms are
available from your financial intermediary, AFS, and many
commercial banks. Additional documentation is required for the
sale of shares by corporations, intermediaries, fiduciaries and
surviving joint owners. For details contact:
Alliance Fund Services
P.O. Box 1520
Secaucus, NJ 07096-1520
800-221-5672
Alternatively, a request for redemption of shares for which
no stock certificates have been issued can also be made by
telephone to 800-221-5672. Telephone redemption requests must be
made by 4:00p.m. Eastern time on the Fund business day in order
to receive that day's net asset value, and, except for certain
omnibus accounts, may be made only once in any 30-day period. A
shareholder who has completed the Telephone Transactions section
of the Subscription Application, or the Shareholder Options form
obtained from AFS, can elect to have the proceeds of the
shareholder's redemption sent to the sharehoder's bank via an
electronic funds transfer. Proceeds of telephone redemptions
also may be sent by check to a shareholder's address of record.
Redemption requests by electronic funds transfer may not exceed
$100,000, and redemption requests by check may not exceed
$50,000. Telephone redemption is not available for shares held
in nominee or "street name" accounts or retirement plan accounts
or shares held by a shareholder who has changed the shareholder's
address of record within the previous 30 calendar days.
General
The sale of shares is a taxable transaction for federal tax
purposes. Under unusual circumstances, the 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
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<PAGE>
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.
SHAREHOLDER SERVICES
AFS offers a variety of shareholder services. For more
information about these services or your account, call AFS's
toll-free number, 800-221-5672. Some services are described in
the attached Subscription Application. A shareholder's manual
explaining all available services will be provided upon request.
To request a shareholder manual, call 800-227-4618.
HOW TO EXCHANGE SHARES
You may exchange your shares of the Fund for shares of the
same class of other Alliance Mutual Funds (including AFD Exchange
Reserves, a money market fund managed by Alliance). Exchanges of
shares are made at the net asset values next determined, without
sales or service charges. Exchanges may be made by telephone or
written request. Telephone exchange requests must be received by
AFS by 4:00 p.m. Eastern time on the Fund business day in order
to receive that day's net asset value.
Shares will continue to age without regard to exchanges for
purposes of determining the CDSC, if any, upon redemption and, in
the case of Class B shares, for the purposes of conversion to
Class A shares. After an exchange, your Class B shares will
automatically convert to Class A shares in accordance with the
conversion schedule applicable to the Class B shares of the
Alliance Mutual Fund you originally purchased for cash ("original
shares"). When redemption occurs, the CDSC applicable to the
original shares is applied.
Please read carefully the Prospectus of the mutual fund into
which you are exchanging before submitting the request. Call AFS
at 800-221-5672 to exchange uncertificated shares. An exchange
is a taxable capital transaction for federal tax purposes. The
exchange service may be changed, suspended, or terminated on 60
days' written notice.
GENERAL
A transaction, service, administrative or other similar fee
may be charged by your broker-dealer, agent, financial
intermediary or other financial representative with respect to
the purchase, sale or exchange of Class A, Class B or Class C
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
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<PAGE>
different from, or in addition to, those imposed by the Fund,
including requirements as to the minimum initial and subsequent
investment amounts.
________________________________________________________________
MANAGEMENT OF THE FUND
________________________________________________________________
ADVISER
Alliance, which is a Delaware limited partnership with
principal offices at 1345 Avenue of the Americas, New York, New
York 10105, has been retained under an advisory agreement (the
"Advisory Agreement") to provide investment advice and, in
general, with exclusive authority and responsibility to conduct
the management and investment program of the Fund, subject to the
general supervision and control of the Directors of the Fund. As
described below, Alliance has retained the Hong Kong firm of New
Alliance as a consultant to provide Alliance with its regional
expertise as to conditions in and developments impacting Greater
China countries. See "Management of the Fund - Consultant to the
Adviser."
Alliance is a leading international investment manager
supervising client accounts with assets as of March 31, 1997 of
more than $182 billion (of which more than $66 billion
represented the assets of investment companies). Alliance's
clients are primarily major corporate employee benefit funds,
public employee retirement systems, investment companies,
foundations and endowment funds. The 53 registered investment
companies managed by Alliance comprising more than 110 separate
investment portfolios currently have over two million
shareholders. As of March 31, 1997 Alliance was an investment
manager of employee benefit fund assets for 31 of the Fortune 100
companies.
Alliance Capital Management Corporation ("ACMC"), the
sole general partner of, and the owner of a 1% general
partnership interest in, Alliance, is an indirect wholly-owned
subsidiary of The Equitable Life Assurance Society of the United
States ("Equitable"), one of the largest life insurance companies
in the United States, which is a wholly-owned subsidiary of The
Equitable Companies Incorporated, a holding company controlled by
AXA-UAP, a French insurance holding company. Certain information
concerning the ownership and control of Equitable is set forth in
the Fund's Statement of Additional Information under "Management
of the Fund."
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<PAGE>
Under the Advisory Agreement, the Fund pays Alliance a
fee, which is accrued daily and paid monthly, at the annual rate
of 1.00% of the Fund's average daily net assets.
The person primarily responsible for the day-to-day
management of the Fund is Matthew W.S. Lee, a senior vice
president of ACMC. Prior to joining ACMC in 1997, Mr. Lee was a
director of National Mutual Funds Management (Asia) responsible
for managing a wide range of funds and accounts, including region
and single country funds. Prior to 1994, he worked for James
Capel & Co. in both London and Hong Kong, with responsibility for
sales of Asian securities with a specialization in the Greater
China region. Prior thereto, Mr. Lee was employed in London by
Credit Suisse Group to manage CS Tiger Fund, an open-end unit
trust investing in South-East Asian equity securities.
CONSULTANT TO THE ADVISER
In connection with its provision of advisory services to
the Fund, Alliance has retained at its expense as a consultant
New Alliance, a joint venture company headquartered in Hong Kong
which was formed in 1997 by Alliance and Sun Hung Kai Properties
Limited ("SHKP"). New Alliance will provide Alliance with
ongoing current and comprehensive information and analysis of
conditions and developments in Greater China countries consisting
of, but not limited to, statistical and factual research and
assistance with respect to economic, financial, political,
technological and social conditions and trends in Greater China
countries, including information on markets and industries. In
addition to its own staff of professionals, New Alliance has
access to the expertise and personnel of SHKP, one of Hong Kong's
largest property developers for both the residential and
commercial sectors, whose developments include office and
industrial properties, hotels and shopping centers, and selected
projects in China. SHKP is one of the largest enterprises in
Hong Kong measured by market capitalization and has considerable
expertise in evaluating business and market conditions in Hong
Kong and the other Greater China countries. Its activities
complementary to property development include insurance and
estate management, and SHKP is diversified as well into
telecommunications and infrastructure projects.
EXPENSES OF THE FUND
In addition to the payments to Alliance under the
Advisory Agreement described above, the Fund pays certain other
costs, including (i) custody, transfer and dividend disbursing
expenses, (ii) fees of the Directors who are not affiliated with
Alliance, (iii) legal and auditing expenses, (iv) clerical,
accounting and other office costs, (v) costs of printing the
Fund's prospectuses and shareholder reports, (vi) costs of
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<PAGE>
maintaining the Fund's existence, (vii) interest charges, taxes,
brokerage fees and commissions, (viii) costs of stationery and
supplies, (ix) expenses and fees related to registration and
filing with the Commission and with state regulatory authorities,
(x) upon the approval of the Board of Directors, costs of
personnel of Alliance or its affiliates rendering clerical,
accounting and other office services and (xi) such promotional,
shareholder servicing and other expenses as may be contemplated
by the Distribution Services Agreement, described below.
DISTRIBUTION SERVICES AGREEMENT
Rule 12b-1 adopted by the Commission under the 1940 Act
permits an investment company to pay expenses associated with the
distribution of its shares in accordance with a duly adopted
plan. The Fund has adopted a "Rule 12b-1 plan" (the "Plan") and
has entered into a Distribution Services Agreement (the
"Agreement") with AFD. Pursuant to the Plan, the Fund pays to
AFD for distribution expenses a Rule 12b-1 distribution services
fee, which may not exceed an annual rate of .30% of the Fund's
aggregate average daily net assets attributable to the Class A
shares, 1.00% of the Fund's aggregate average daily net assets
attributable to the Class B shares and 1.00% of the Fund's
aggregate average daily net assets attributable to the Class C
shares. The Plan provides that a portion of the distribution
services fee in an amount not to exceed .25% of the aggregate
average daily net assets of the Fund attributable to each of
Class A, Class B and Class C shares constitutes a service fee
used for personal service and/or the maintenance of shareholder
accounts.
The Plan provides that AFD will use the distribution
services fee received from the Fund in its entirety for payments
(i) to compensate broker-dealers or other persons for providing
distribution assistance, (ii) to otherwise promote the sale of
shares of the Fund, and (iii) to compensate broker-dealers,
depository institutions and other financial intermediaries for
providing administrative, accounting and other services with
respect to the Fund's shareholders. In this regard, some
payments under the Plan are used to compensate financial
intermediaries with trail or maintenance commissions in an amount
equal to .25%, annualized, with respect to Class A shares and
Class B shares, and 1.00%, annualized, with respect to Class C
shares, of the assets maintained in the Fund by their customers.
Distribution services fees received from the Fund with respect to
Class A shares will not be used to pay any interest expenses,
carrying charges or other financing costs or allocation of
overhead of AFD. Distribution services fees received from the
Fund with respect to Class B and Class C shares may be used for
these purposes. The Plan also provides that Alliance may use its
own resources to finance the distribution of the Fund's shares.
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<PAGE>
The Fund is not obligated under the Plan to pay any
distribution services fee in excess of the amounts set forth
above. With respect to Class A shares of the Fund, distribution
expenses accrued by AFD in one fiscal year may not be paid from
distribution services fees received from the Fund in subsequent
fiscal years. AFD's compensation with respect to Class B and
Class C shares under the Plan is directly tied to the expenses
incurred by AFD. Actual distribution expenses for such Class B
and Class C shares for any given year, however, will probably
exceed the distribution services fees payable under the Plan with
respect to the class involved and, in the case of Class B and
Class C shares, payments received from CDSCs. The excess will be
carried forward by AFD and reimbursed from distribution services
fees payable under the Plan with respect to the class involved
and in the case of Class B and Class C shares payments
subsequently received through CDSCs, so long as the Plan and the
Agreement are in effect.
The Plan is in compliance with rules of the National
Association of Securities Dealers, Inc. which effectively limit
the annual asset-based sales charges and service fees that a
mutual fund may pay on a class of shares to .75% and .25%,
respectively, of the average annual net assets attributable to
that class. The rules also limit the aggregate of all front-end,
deferred and asset-based sales charges imposed with respect to a
class of shares by a mutual fund that also charges a service fee
to 6.25% of cumulative gross sales of shares of that class, plus
interest at the prime rate plus 1% per annum.
The Glass-Steagall Act and other applicable laws may
limit the ability of a bank or other depository institution to
become an underwriter or distributor of securities. However, in
the opinion of the Fund's management, based on the advice of
counsel, these laws do not prohibit such depository institutions
from providing services for investment companies such as the
administrative, accounting and other services referred to in the
Agreement. In the event that a change in these laws prevented a
bank from providing such services, it is expected that other
service arrangements would be made and that shareholders would
not be adversely affected.
________________________________________________________________
DIVIDENDS, DISTRIBUTIONS AND TAXES
________________________________________________________________
DIVIDENDS AND DISTRIBUTIONS
If you receive an income dividend or capital gains
distribution in cash you may, within 120 days following the date
of its payment, reinvest the dividend or distribution in
41
<PAGE>
additional shares of the Fund without charge by returning to
Alliance, with appropriate instructions, the check representing
such dividend or distribution. Thereafter, unless you otherwise
specify, you will be deemed to have elected to reinvest all
subsequent dividends and distributions in shares of the Fund.
Each 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 Fund having an aggregate net asset value as of the
payment date of such dividend or distribution equal to the cash
amount of such dividend or distribution. Election to receive
dividends and distributions in cash or shares is made at the time
shares are initially purchased and may be changed at any time
prior to the record date for a particular dividend or
distribution. Cash dividends can be paid by check or, if the
shareholder so elects, electronically via the ACH network. There
is no sales or other charge in connection with the reinvestment
of dividends and distributions. Dividends and distributions paid
by the Fund, if any, with respect to Class A, Class B and Class C
shares will be calculated in the same manner at the same time on
the same day and will be in the same amount, except that the
higher distribution services fees applicable to Class B and C
shares and any incremental transfer agency costs relating to
Class B shares, will be borne exclusively by the class to which
they relate.
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 must necessarily 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.
If you buy shares just before the Fund deducts a
distribution from its net asset value, you will pay the full
price for the shares and then receive a portion of the price back
as a taxable distribution.
Foreign Income Taxes
Investment income received by 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, 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. For further information
42
<PAGE>
regarding foreign taxes see "Dividends, Distribution and Taxes-
- -Foreign Taxation" in the Statement of Additional Information.
U.S. Federal Income Taxes
The Fund intends to qualify to be taxed as a "regulated
investment company" under the Code. To the extent that the Fund
distributes its taxable income and net capital gain to its
shareholders, qualification as a regulated investment company
relieves the Fund of federal income and excise taxes on that part
of its taxable income including net capital gains which it pays
out to its shareholders. Dividends out of net ordinary income
and distributions of net short-term capital gains are taxable to
the recipient shareholders as ordinary income. In the case of
corporate shareholders, such dividends may be eligible for the
dividends-received deduction, except that the amount eligible for
the deduction is limited to the amount of qualifying dividends
received by the Fund. A corporation's dividends-received
deduction will be disallowed unless the corporation holds shares
in the Fund at least 46 days. Furthermore, the dividends-
received deduction will be disallowed to the extent a
corporation's investment in shares of the Fund is financed with
indebtedness.
The excess of net long-term capital gains over the net
short-term capital losses realized and distributed by the Fund to
its shareholders as capital gains distributions is taxable to the
shareholders as long-term capital gains, irrespective of the
length of time a shareholder may have held his or her stock.
Long-term capital gains distributions are not eligible for the
dividends-received deduction referred to above.
Any dividend or distribution received by a shareholder
on shares of the Fund 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 such shares by a shareholder,
although in effect a return of capital to that particular
shareholder, would be taxable to the shareholder as described
above. If a shareholder held shares six months or less and
during that period received a distribution taxable to the
shareholder as long-term capital gain, any loss realized on the
sale of such shares during such six-month period would be a long-
term capital loss to the extent of the distribution.
An income dividend or capital gains distribution with
respect to shares of the Fund held by a tax-deferred or qualified
plan, such as an individual retirement account, 403(b)(7)
retirement plan or corporate pension or profit-sharing plan, will
not be taxable to the plan. Distributions from such plans will
be taxable to individual participants under applicable tax rules
43
<PAGE>
without regard to the character of the income earned by the
qualified plan.
The Fund will be required to withhold 31% of any
payments made to a shareholder if the shareholder has not
provided a certified taxpayer identification number to the Fund,
or the Secretary of the Treasury notifies the Fund that a
shareholder has not reported all interest and dividend income
required to be shown on the shareholder's federal income tax
return.
Under certain circumstances, if the Fund realizes losses
from fluctuations in currency exchange rates after paying a
dividend, all or a portion of the dividend may subsequently be
characterized as a return of capital. See "Dividends,
Distributions and Taxes" in the Statement of Additional
Information for additional information concerning the taxation of
the Fund and its shareholders. Shareholders are urged to consult
their tax advisers regarding their own tax situation.
Shareholders will be advised annually as to the federal tax
status of income dividends and capital gain and return of capital
distributions made by the Fund for the preceding year.
Distributions by the Fund may be subject to state and local
taxes.
________________________________________________________________
GENERAL INFORMATION
_________________________________________________________________
PORTFOLIO TRANSACTIONS
Consistent with the Conduct Rules of the National
Association of Securities Dealers, Inc., and subject to seeking
best price and execution, the Fund may consider sales of its
shares as a factor in the selection of dealers to enter into
portfolio transactions with the Fund.
ORGANIZATION
Alliance Greater China '97 Fund, Inc. is a Maryland
corporation organized on April 30, 1997. It is anticipated that
annual shareholder meetings will not be held and that
shareholder meetings will be held only when required by federal
or state law. Shareholders have available certain procedures for
the removal of Directors.
A shareholder in the Fund will be entitled to his or her
share pro rata with other holders of the same class of shares of
all dividends and distributions arising from the Fund's assets
and, upon redeeming shares, will receive the then current net
44
<PAGE>
asset value of the Fund represented by the redeemed shares less
any applicable CDSC. The Fund is empowered to establish, without
shareholder approval, additional portfolios, which may have
different investment objectives, and additional classes of
shares. If an additional portfolio or class were established,
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 as a single series or class on
matters, such as the election of Directors, that affect each
portfolio or class in substantially the same manner. Class A,
Class B, Class C and Advisor Class shares have identical voting,
dividend, liquidation and other rights, except that each class
bears its own transfer agency expenses, each of Class A, Class B
and Class C shares bears its own distribution expenses, Class B
shares convert to Class A shares after eight years and Advisor
Class shares convert to Class A shares under certain
circumstances. Each class of shares votes separately with
respect to the Fund's Rule 12b-1 distribution plan and other
matters for which separate class voting is appropriate under
applicable law. Shares are freely transferable, are entitled to
dividends and distributions as determined by the Directors and,
in liquidation of the Fund, are entitled to receive the net
assets of the Fund. Certain additional matters relating to the
Fund's organization are discussed in the Statement of Additional
Information.
REGISTRAR, TRANSFER AGENT AND
DIVIDEND-DISBURSING AGENT
AFS, an indirect wholly-owned subsidiary of Alliance,
located at 500 Plaza Drive, Secaucus, New Jersey 07094, acts as
the Fund's registrar, transfer agent and dividend-disbursing
agent for a fee based upon the number of shareholder accounts
maintained for the Fund. The transfer agency fee with respect to
the Class B shares will be higher than the transfer agency fee
with respect to the Class A shares or Class C shares.
PRINCIPAL UNDERWRITER
AFD, an indirect wholly-owned subsidiary of Alliance,
located at 1345 Avenue of the Americas, New York, New York 10105,
is the principal underwriter of shares of the Fund.
PERFORMANCE INFORMATION
From time to time, the Fund advertises its total return,
which is computed separately for Class A, Class B and Class C
shares. Such advertisements disclose the Fund's average annual
compounded total return for the periods prescribed by the
Commission. The Fund's total return for each such period is
computed by determining, through the use of a formula prescribed
45
<PAGE>
by the Commission, the average annual compounded rate of return
over the period that would equate an assumed initial amount
invested to the value of the investment at the end of the period.
For purposes of computing total return, income dividends and
capital gains distributions paid on shares of the Fund are
assumed to have been reinvested when paid, and the maximum sales
charges applicable to purchases and redemptions of the Fund's
shares are assumed to have been paid. The Fund's advertisements
may quote performance rankings or ratings of the Fund by
financial publications or independent organizations such as
Lipper Analytical Services, Inc. and Morningstar, Inc. or compare
the Fund's performance to various indices.
ADDITIONAL INFORMATION
This Prospectus and the Statement of Additional
Information, which has been incorporated by reference herein, do
not contain all the information set forth in the Registration
Statement filed by the Fund with the Commission under the
Securities Act. Copies of the Registration Statement may be
obtained at a reasonable charge from the Commission or may be
examined, without charge, at the offices of the Commission in
Washington, D.C.
This Prospectus does not constitute an offering in any state in
which such offering may not lawfully be made.
46
<PAGE>
ALLIANCE GREATER CHINA '97 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
Prospectus and Application
(Advisor Class)
August [ ], 1997
Table of Contents Page
The Fund at a Glance....................................
Expense Information.....................................
Glossary................................................
Description of the Fund.................................
Investment Objectives................................
Greater China Countries..............................
Investment Policies and Practices....................
Additional Investment Practices......................
Certain Other Fundamental Investment
Policies..........................................
Certain Considerations and Risks.....................
Purchase and Sale of Shares.............................
Management of the Fund..................................
Dividends, Distributions and Taxes......................
Conversion Feature......................................
General Information.....................................
Adviser
Alliance Capital Management L.P.
1345 Avenue Of The Americas
New York, New York 10105
Consultant to Adviser
New-Alliance Asset Management (Asia) Limited
Sun Hung Kai Centre
30 Harbour Road
Hong Kong
<PAGE>
Alliance Greater China '97 Fund, Inc. (the "Fund") seeks long
term capital appreciation by investing at least 80% of its total
assets in equity securities issued by Greater China companies.
The Fund is an open-end, non-diversified, management investment
company. This Prospectus sets forth concisely the information
that a prospective investor should know about the Fund before
investing. A "Statement of Additional Information" for the Fund
dated August [ ], 1997, which provides further information
regarding certain matters discussed in this Prospectus and other
matters which may be of interest to some investors, has been
filed with the Securities and Exchange Commission and is
incorporated herein by reference. For a free copy, call or write
Alliance Fund Services, Inc. at the indicated address or call the
"For Literature" telephone number shown above.
This Prospectus offers the Advisor Class shares of the Fund,
which may be purchased at net asset value without any initial or
contingent deferred sales charges and without ongoing
distribution expenses. Advisor Class shares are offered solely
to (i) investors participating in fee-based programs meeting
certain standards established by Alliance Fund Distributors,
Inc., the Fund's principal underwriter, (ii) participants in
self-directed defined contribution employee benefit plans (e.g.,
401(k) plans) that meet certain minimum standards and
(iii) certain other categories of investors described in the
Prospectus, including investment advisory clients of, and certain
other persons associated with, Alliance Capital Management L.P.
and its affiliates or the Fund. See "Purchase and Sale of
Shares."
An investment in these securities is not a deposit or obligation
of, or guaranteed or endorsed by, any bank and is not federally
insured by the Federal Deposit Insurance Corporation, the Federal
Reserve Board or any other agency.
Investors are advised to read this Prospectus carefully and to
retain it for future reference.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
[Alliance Logo] (R)/SM These are registered marks used under
license from the owner, Alliance Capital Management L.P.
2
<PAGE>
The Fund At A Glance
The following summary is qualified in its entirety by the more
detailed information contained inside this Prospectus.
The Fund's Investment Adviser Is . . .
Alliance Capital Management L.P. ("Alliance"), a global
investment adviser providing diversified services to institutions
and individuals through a broad line of investments including
more than 100 mutual funds. Since 1971, Alliance has earned a
reputation as a leader in the investment world with over $182
billion in assets under management as of March 31, 1997.
Alliance provides investment management services to employee
benefit plans for 31 of the FORTUNE 100 companies.
The Consultant To The Adviser Is . . .
New-Alliance Asset Management (Asia) Limited, a joint venture
company headquartered in Hong Kong and formed by Alliance and Sun
Hung Kai Properties Limited, one of Hong Kong's largest
diversified property developers, which will provide Alliance with
expertise with respect to economic, financial, political,
technological and social conditions and trends in Greater China
countries, all of which significantly impact the investment
environment and opportunities in the region.
The Fund
Seeks . . . Long-term capital appreciation.
Invests principally in . . . a non-diversified portfolio of
equity securities of Greater China companies.
A Word About Risk . . .
The price of shares of the Fund will fluctuate as the daily
prices of the individual stocks and other securities in which it
invests fluctuate, so that your shares, when redeemed, may be
worth more or less than their original cost. Because the Fund
will invest in foreign currency denominated securities, these
fluctuations may be magnified by changes in foreign exchange
rates. Investment in the Fund involves risks not associated with
funds that invest primarily in securities of U.S. issuers.
Investments in Greater China companies entail certain risks which
are different from, and in certain cases, greater than, risks
associated with investments in other international markets. See
"Certain Considerations and Risks." In addition, because at
least 80% of the Fund's portfolio will be invested in equity
securities issued by Greater China companies, the Fund is subject
3
<PAGE>
to greater risk of being influenced by events impacting Greater
China countries and therefore Greater China companies than would
a fund with a more diversified portfolio. While the Fund invests
principally in common stocks and other equity securities, in
order to achieve its investment objectives the Fund may at times
use certain types of investment derivatives, such as options,
futures, forwards and swaps. These involve risks different from,
and, in certain cases, greater than, risks presented by more
traditional investments. These risks are fully discussed in this
Prospectus. An investment in the Fund may be considered for
moderately aggressive long-term investors who may wish to
consider investing a portion of their overall equity portfolios
in the markets of Greater China countries.
Getting Started . . .
Shares of the Fund are available through your financial
representative. The Fund offers multiple classes of shares, of
which only the Advisor Class is offered by this Prospectus.
Advisor Class shares may be purchased at net asset value without
any initial or contingent deferred sales charges and are not
subject to ongoing distribution expenses. Advisor Class shares
may be purchased and held solely (i) through accounts established
under a fee-based program, sponsored and maintained by a
registered broker-dealer or other financial intermediary and
approved by Alliance Fund Distributors, Inc. ("AFD"), the Fund's
principal underwriter, (ii) through a self-directed defined
contribution employee benefit plan (e.g., a 401(k) plan) that has
at least 1,000 participants or $25 million in assets, (iii) by
investment advisory clients of, and certain other persons
associated with, Alliance and its affiliates or the Fund and (iv)
through registered investment advisers or other financial
intermediaries who charge a management, consulting or other fee
for their service and who purchase shares through a broker or
agent approved by 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. A
shareholder's Advisor Class shares will automatically convert to
Class A shares of the Fund under certain circumstances. See
"Conversion Feature -- Conversion to Class A Shares." Generally,
a fee-based program must charge an asset-based or other similar
fee and must invest at least $250,000 in Advisor Class shares of
the Fund in order to be approved by AFD for investment in Advisor
Class shares. For more detailed information about who may
purchase and hold Advisor Class shares see the Statement of
Additional Information. Fee-based and other programs through
which Advisor Class shares may be purchased may impose different
requirements with respect to investment in Advisor Class shares
than described above. For detailed information about purchasing
and selling shares, see "Purchase and Sale of Shares."
4
<PAGE>
ALLIANCE LOGO
(R)/SM These are registered marks used under license from the
owner, Alliance Capital Management L.P.
5
<PAGE>
_________________________________________________________________
EXPENSE INFORMATION
_________________________________________________________________
Shareholder Transaction Expenses are one of several factors to
consider when you invest in the Fund. The following table
summarizes your maximum transaction costs and annual expenses for
Advisor Class shares of the Fund. The Example following the
table shows the cumulative expenses attributable to a
hypothetical $1,000 investment in Advisor Class shares for the
periods specified.
Advisor
Class Shares
Maximum sales charge imposed on purchases (as a
percentage of offering price).................. None
Sales charge imposed on dividend reinvestments... None
Deferred sales charge............................ None
Exchange fee..................................... None
_______________________________________________________________
Operating Expenses Advisor Class
Management fees.......................... [ ]%
12b-1 fees............................... None
Other expenses (a)....................... [ ]%
Total fund operating
expenses (b)........................... [ ]%
=====
Example Advisor Class
After 1 year............................. $_____
After 3 years............................ $_____
______________________________________________________________
(a) These expenses include a transfer agency fee payable to
Alliance Fund Services, Inc., an affiliate of Alliance, based
on a fixed dollar amount charged to the Fund for each
shareholder's account.
(b) The expense information does not reflect any charges or
expenses imposed by your financial representative or your
employee benefit plan.
6
<PAGE>
The purpose of the foregoing table is to assist the investor in
understanding the various costs and expenses that an investor in
the Fund will bear directly or indirectly. The Example set forth
above assumes reinvestment of all dividends and distributions and
utilizes a 5% annual rate of return as mandated by Commission
regulations. "Other Expenses" are based on estimated amounts for
the Fund's current fiscal year. THE EXAMPLE SHOULD NOT BE
CONSIDERED REPRESENTATIVE OF PAST OR FUTURE EXPENSES; ACTUAL
EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
7
<PAGE>
_________________________________________________________________
GLOSSARY
_________________________________________________________________
The following terms are used in this Prospectus.
Greater China company is an entity that (i) is organized under
the laws of a Greater China country and conducts business in a
Greater China country, (ii) derives 50% or more of its total
revenues from business in Greater China countries, or
(iii) issues equity or debt securities that are traded
principally on a stock exchange in a Greater China country. A
company of a particular Greater China country is a company that
meets any of these criteria with respect to that country.
Greater China countries are the People's Republic of China
("China"), the Hong Kong Special Administrative Region of the
Peoples Republic of China ("Hong Kong") and the Republic of China
("Taiwan").
Equity securities are common and preferred stocks, securities
convertible into common and preferred stocks and equity-linked
debt securities, but do not include rights, warrants and options
to subscribe for the purchase of common and preferred stocks.
Convertible securities are debt securities that are convertible
at a stated exchange rate into common stock.
Debt securities are bonds, debentures, notes, bills, repurchase
agreements and loans and other direct debt instruments, but do
not include convertible securities.
Investment grade securities are debt securities rated Baa and
above by Moody's Investors Service, Inc. ("Moody's") or BBB and
above by Standard & Poor's Ratings Services ("S&P"), Duff &
Phelps Credit Rating Co. ("Duff & Phelps") or Fitch Investors
Service, L.P. ("Fitch") or determined by Alliance to be of
equivalent quality.
Rule 144A securities are securities that may be resold pursuant
to Rule 144A under the Securities Act of 1933, as amended (the
"Securities Act").
U.S. Government securities are securities issued or guaranteed by
the United States Government, its agencies or instrumentalities.
8
<PAGE>
Depositary receipts include American Depositary Receipts
("ADRs"), Global Depositary Receipts ("GDRs") and other types of
depositary receipts.
Commission is the United States Securities and Exchange
Commission.
Code is the Internal Revenue Code of 1986, as amended.
9
<PAGE>
___________________________________________________________
DESCRIPTION OF THE FUND
___________________________________________________________
The Fund is a non-diversified investment company. The Fund's
investment objective is "fundamental" and cannot be changed
without a shareholder vote. Except as noted, the Fund's
investment policies are not fundamental and thus can be changed
without a shareholder vote. The Fund will not change these
policies without notifying its shareholders. There is no
guarantee that the Fund will achieve its investment objective.
INVESTMENT OBJECTIVE
The Fund's investment objective is to seek long-term capital
appreciation through investment of at least 80% of its total
assets in equity securities issued by Greater China companies.
GREATER CHINA COUNTRIES
In furtherance of its investment objective, the Fund expects
to invest a significant portion, which may be greater than 50%,
of its assets in equity securities of Hong Kong companies and may
invest, from time to time, all of its assets in Hong Kong
companies or companies of either of the other Greater China
countries.
In recent years, China, Hong Kong and Taiwan have each
experienced a high level of real economic growth. This growth
has resulted not only from advantageous economic conditions,
including favorable demographics, competitive wage rates, and
rising per capita income and consumer demand. Significantly, the
growth has also been fueled by an easing by both China and Taiwan
of government restrictions and an increased receptivity to
foreign investment. This expanded, if not yet complete openness
to foreign investment, extends as well to the securities markets
of both countries. Hong Kong's free-market economy has
historically included securities markets completely open to
foreign investments. All three countries have regulated stock
exchanges upon which shares of an increasing number of Greater
China companies are traded.
With its population estimated at more than 1.2 billion as a
driving force, and notwithstanding its continuing political
rigidity, China's economic growth has been coupled with
significantly reduced government economic intervention and basic
economic structural change. Recent years have seen large
increases in industrial production with a significant decline in
the state sector share of industrial output and increased
10
<PAGE>
involvement of local governmental units and the private sector in
establishing new business enterprises.
With China's growth has come an increasing direct and
indirect economic involvement of all three Greater China
countries. For some time, Hong Kong as a world financial and
trade center in its own right, with the world's ninth largest
stock exchange, and with offices of many of the worlds multi-
national companies, has been the gateway to trade with and
foreign investment in China. With the long-awaited transfer on
July 1, 1997 of the sovereignty of Hong Kong from Great Britain
to China, not only the political but the economic ties between
China and Hong Kong are expected to intensify, albeit with the
continuation of Hong Kong's economic system as provided for in
the law governing its sovereignty.
Notwithstanding the, at times, considerable political tension
between the two countries, it is generally recognized that
substantially increased trade and investment with China has been
generated from Taiwan, in many cases through Hong Kong. Along
with this increased interaction with China, Taiwan is becoming a
regional technological and telecommunication center, while
continuing the process of opening its economy up to foreign
investment. Although geographically limited, Taiwan boasts an
economy among the world's twenty largest and its foreign exchange
reserves are in the top five of all countries measured in U.S.
dollars. As China's economy continues to expand, it is expected
that Taiwan's economic interaction with China will likewise
increase.
Alliance believes that current conditions are favorable for
continuing and expanding economic growth in all three Greater
China countries. It is this potential which the Fund hopes to
take advantage of by investing both in established and new and
emerging companies.
Set forth below under "Certain Considerations and Risks" and
in Appendix A to the Statement of Additional Information is
additional information concerning the Greater China countries.
INVESTMENT POLICIES AND PRACTICES
In addition to investing in equity securities of Greater
China companies, the Fund may invest up to 20% of its total
assets in (i) debt securities issued or guaranteed by Greater
China companies or by Greater China governments, their agencies
or instrumentalities, and (ii) equity or debt securities issued
by issuers other than Greater China companies. The Fund will not
invest in debt securities other than investment grade securities.
Should a debt security in which the Fund is invested be
downgraded below investment grade or be determined by Alliance to
11
<PAGE>
have undergone a similar credit quality deterioration, the Fund
will dispose of that security.
The Fund may also: (i) invest up to 25% of its net assets in
the convertible securities of companies whose common stocks are
eligible for purchase by the Fund; (ii) invest up to 20% of its
net assets in rights or warrants; (iii) invest in depositary
receipts, instruments of supranational entities denominated in
the currency of any country, securities of multinational
companies and "semi-governmental securities;" (iv) invest up to
20% of its net assets in equity-linked debt securities with the
objective of realizing capital appreciation; (v) invest up to 20%
of its net assets in loans and other direct debt securities;
(vi) write covered put and call options on securities of the
types in which it is permitted to invest and on exchange-traded
index options; (vii) 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 stock and may purchase and
write options on future contracts; (viii) purchase and write put
and call options on foreign currencies for hedging purposes;
(ix) purchase or sell forward contracts; (x) enter into interest
rate swaps and purchase or sell interest rate caps and floors;
(xi) enter into forward commitments for the purchase or sale of
securities; (xii) enter into standby commitment agreements;
(xiii) enter into currency swaps for hedging purposes;
(xiv) enter into repurchase agreements pertaining to U.S.
Government securities with member banks of the Federal Reserve
System or primary dealers in such securities; (xv) make short
sales of securities or maintain a short position, in each case
only if "against the box;" and (xvi) make secured loans of its
portfolio securities not in excess of 30% of its total assets to
entities with which it can enter into repurchase agreements. All
or some of the policies and practices listed above may not be
available to the Fund in the Greater China countries, and the
Fund will utilize these policies only to the extent permissible.
For additional information on the use, risks and costs of these
policies and practices see "Additional Investment Practices."
ADDITIONAL INVESTMENT PRACTICES
The Fund may engage in the following investment practices to
the extent described above. Additional information concerning
certain of these practices is set forth in Appendix B of the
Statement of Additional Information.
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 generally higher yields than those of equity
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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 enable
investors to benefit from increases in the market price of the
underlying common stock. Convertible securities rank senior to
common stocks in an issuer's capital structure. They are
consequently of higher quality and entail less risk than the
issuer's common stock, although the extent to which such risk is
reduced depends in large measure upon the degree to which the
convertible security sells above its value as a fixed income
security. Convertible debt securities that are rated Baa by
Moody's or BBB by S&P and comparable not rated securities as
determined by Alliance may share some or all of the risks of debt
securities with those ratings.
Rights and Warrants. The Fund will invest in rights or
warrants only if the equity securities themselves are deemed
appropriate by Alliance for inclusion in the Fund's portfolio.
Rights and warrants entitle the holder to buy equity securities
at a specific price for a specific period of time. Rights are
similar to warrants except that they have a substantially shorter
duration. Rights and warrants may be considered more speculative
than certain other types of investments in that they do not
entitle a holder to dividends or voting rights with respect to
the underlying securities nor do they represent any rights in the
assets of the issuing company. The value of a right or warrant
does not necessarily change with the value of the underlying
securities, however, although the value of a right or warrant may
decline because of a decrease in the value of the underlying
stock, the passage of time or a change in perception as to the
potential of the underlying stock, or any combination thereof.
If the market price of the underlying stock is below the exercise
price set forth in the warrant on the expiration date, the
warrant will expire worthless. Moreover, a right or warrant
ceases to have value if it is not exercised prior to the
expiration date.
Depositary Receipts and Securities of Supranational Entities.
Depositary receipts may not necessarily be denominated in the
same currency as the underlying securities into which they may be
converted. In addition, the issuers of the stock of unsponsored
depositary receipts are not obligated to disclose material
information in the United States and, therefore, there may not be
a correlation between such information and the market value of
the depositary receipts. ADRs are depositary receipts typically
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issued by a U.S. bank or trust company that evidence ownership of
underlying securities issued by a foreign corporation. GDRs and
other types of depositary receipts are typically issued by
foreign banks or trust companies and evidence ownership of
underlying securities issued by either a foreign or a U.S.
company. Generally, depositary receipts in registered form are
designed for use in the U.S. securities markets and depositary
receipts in bearer form are designed for use in foreign
securities markets. For purposes of determining the country of
issuance, the investments of the Fund in depositary receipts are
deemed to be investments in the underlying securities.
A supranational entity is an entity designated or supported
by the national government of one or more countries to promote
economic reconstruction or development. Examples of
supranational entities include, among others, the World Bank
(International Bank for Reconstruction and Development) and the
European Investment Bank. "Semi-governmental securities," are
securities issued by entities owned by either a national, state
or equivalent government or are obligations of one of such
government jurisdictions which are not backed by its full faith
and credit and general taxing powers.
Illiquid Securities. Subject to any more restrictive
applicable fundamental investment policy, the Fund will not
maintain more than 15% of its net assets in illiquid securities.
Illiquid securities generally include (i) direct placements or
other securities that are subject to legal or contractual
restrictions on resale or for which there is no readily available
market (e.g. when trading in the security is suspended or, in the
case of unlisted securities, when market makers do not exist or
will not entertain bids or offers), including many individually
negotiated currency swaps and any assets used to cover currency
swaps and most privately negotiated investments in state
enterprises that have not yet conducted an initial equity
offering, (ii) over-the-counter options and assets used to cover
over-the-counter options, and (iii) repurchase agreements not
terminable within seven days.
Because of the absence of a trading market for illiquid
securities, the Fund may not be able to realize their full value
upon sale. Alliance will monitor the illiquidity of such
securities with respect to the Fund under the supervision of the
Directors of the Fund. To the extent permitted by applicable
law, Rule 144A securities will not be treated as "illiquid" for
purposes of the foregoing restriction so long as such securities
meet liquidity guidelines established by the Fund's Directors.
The Fund may not be able to readily sell securities for which
there is no ready market. Such securities are unlike securities
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which are traded in the open market and which 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 with respect to the issuers of such
securities than with respect to companies whose securities are
traded on an exchange. Illiquid securities are more likely to be
issued by small businesses and therefore subject to greater
economic, business and market risks than the listed securities of
more well-established companies. Adverse conditions in the
public securities markets may at certain times preclude a public
offering of an issuer's securities. To the extent that the Fund
makes any privately negotiated investments in state enterprises,
such investments are likely to be in securities that are not
readily marketable. It is the intention of the Fund to make such
investments when Alliance believes there is a reasonable
expectation that the Fund would be able to dispose of its
investment within three years. 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.
Equity-Linked Debt Securities. Equity-linked debt securities
are securities with respect to which the amount of interest
and/or principal that the issuer thereof is obligated to pay is
linked to the performance of a specified index of equity
securities. Such amount may be significantly greater or less
than payment obligations in respect of other types of debt
securities. Adverse changes in equity securities indices and
other adverse changes in the securities markets may reduce
payments made under, and/or the principal of, equity-linked debt
securities held by the Fund. Furthermore, as with any debt
securities, the values of equity-linked debt securities will
generally vary inversely with changes in interest rates. The
Fund's ability to dispose of equity-linked debt securities will
depend on the availability of liquid markets for such securities.
Investment in equity-linked debt securities may be considered to
be speculative. As with other securities, the Fund could lose
its entire investment in equity-linked debt securities.
Loans and Other Direct Debt Instruments. Loans and other
direct debt instruments are interests in amounts owed by a
corporate, governmental or other borrower to another party. They
may represent amounts owed to lenders or lending syndicates
(loans and loan participations), to suppliers of goods or
services (trade claims or other receivables), or to other
creditors. Direct debt instruments involve the risk of loss in
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case of default or insolvency of the borrower and may offer less
legal protection to the Fund in the event of fraud or
misrepresentation than debt securities. In addition, loan
participations involve a risk of insolvency of the lending bank
or other financial intermediary. Direct debt instruments may
also include standby financing commitments that obligate the Fund
to supply additional cash to the borrower on demand. Loans and
other direct debt instruments are generally illiquid and may be
transferred only through individually negotiated private
transactions.
Purchasers of loans and other forms of direct indebtedness
depend primarily upon the creditworthiness of the borrower for
payment of principal and interest. Direct debt instruments may
not be rated by any nationally recognized rating service. If the
Fund does not receive scheduled interest or principal payments on
such indebtedness, the Fund's share price and yield could be
adversely affected. Loans that are fully secured offer the Fund
more protection than unsecured loans in the event of non-payment
of scheduled interest or principal. However, there is no
assurance that the liquidation of collateral from a secured loan
would satisfy the borrower's obligation, or that the collateral
can be liquidated. Indebtedness of borrowers whose
creditworthiness is poor may involve substantial risks, and may
be highly speculative.
Borrowers that are in bankruptcy or restructuring may never
pay off their indebtedness, or may pay only a small fraction of
the amount owed. Direct indebtedness of Greater China countries
will also involve a risk that the governmental entities
responsible for the repayment of the debt may be unable, or
unwilling, to pay interest and repay principal when due.
Investments in loans through direct assignment of a financial
institution's interests with respect to a loan may involve
additional risks to the Fund. For example, if a loan is
foreclosed, the Fund could become part owner of any collateral,
and would bear the costs and liabilities associated with owning
and disposing of the collateral. Direct debt instruments may
also involve a risk of insolvency of the lending bank or other
intermediary.
A loan is often administered by a bank or other financial
institution that acts as agent for all holders. The agent
administers the terms of the loan, as specified on the loan
agreement. Unless, under the terms of the loan or other
indebtedness, the Fund has direct recourse against the borrower,
it may have to rely on the agent to apply appropriate credit
remedies against a borrower. If assets held by the agent for the
benefit of the Fund were determined to be subject to the claims
of the agent's general creditors, the Fund might incur certain
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costs and delays in realizing payment on the loan or loan
participation and could suffer a loss of principal or interest.
Direct indebtedness purchased by the Fund may include letters
of credit, revolving credit facilities, or other standby
financing commitments obligating the Fund to pay additional cash
on demand. These commitments may have the effect of requiring
the Fund to increase its investment in a borrower at a time when
it would not otherwise have done so, even if the borrower's
condition makes it unlikely that the amount will ever be repaid.
The Fund will not invest in lower-rated loans and other lower-
rated direct debt instruments.
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
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
on the underlying securities with an exercise price equal to or
greater than that of the put option it has written. There are no
specific limitations on the Fund's writing and purchasing of
options.
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 may write call
options for cross-hedging purposes. 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 (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
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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.
The Fund will purchase or write options on securities in
privately negotiated (i.e., over-the-counter) transactions only
with investment dealers and other financial institutions (such as
commercial banks or savings and loan institutions) deemed
creditworthy by Alliance, and Alliance has adopted procedures for
monitoring the creditworthiness of such entities. Options
purchased or written by 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. See "Illiquid
Securities."
Options on Securities Indices. An option on a securities
index is similar to an option on a security except that, rather
than the right to take or make delivery of a security at a
specified price, an option on a securities index gives the holder
the right to receive, upon exercise of the option, an amount of
cash if the closing level of the chosen index is greater than (in
the case of a call) or less than (in the case of a put) the
exercise price of the option.
Futures Contracts and Options on Futures Contracts. A "sale"
of a futures contract means the acquisition of a contractual
obligation to deliver the securities or foreign currencies or
other commodity called for by the contract at a specified price
on a specified date. A "purchase" of a futures contract means
the incurring of an obligation to acquire the securities, foreign
currencies or other commodity called for by the contract at a
specified price on a specified date. The purchaser of a futures
contract on an index agrees to take or make delivery of an amount
of cash equal to the difference between a specified dollar
multiple of the value of the index on the expiration date of the
contract ("current contract value") and the price at which the
contract was originally struck. No physical delivery of the
securities underlying the index is made.
Options on futures contracts written or purchased by the Fund
will be traded on U.S. or foreign exchanges or over-the-counter.
These investment techniques will be used only to hedge against
anticipated future changes in market conditions and interest or
exchange rates which otherwise might either adversely affect the
value of the Fund's portfolio securities or adversely affect the
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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 50% of its total assets.
Options on Foreign Currencies. As in the case of other kinds
of options the writing of an option on a foreign currency
constitutes only a partial hedge, up to the amount of the premium
received, and the Fund could be required to purchase or sell
foreign currencies at disadvantageous exchange rates, thereby
incurring losses. The purchase of an option on a foreign
currency may constitute an effective hedge against fluctuations
in exchange rates although, in the event of rate movements
adverse to the Fund's position, it may forfeit the entire amount
of the premium plus related transaction costs. See the Statement
of Additional Information for a further discussion of the use,
risks and costs of options on foreign currencies.
Forward Foreign Currency Exchange Contracts. The Fund may
purchase or sell forward contracts so as to minimize the risk to
it from adverse changes in the relationship between the U.S.
Dollar and other currencies. A forward contract is an obligation
to purchase or sell a specific currency for an agreed price at a
future date, and is individually negotiated and privately traded.
The Fund may enter into a forward contract, for example, when
it enters into a contract for the purchase or sale of a security
denominated in a foreign currency in order to "lock in" the U.S.
Dollar price of the security ("transaction hedge"). The Fund may
not engage in transaction hedges with respect to the currency of
a particular country to an extent greater than the aggregate
amount of the Fund's transactions in that currency. When the
Fund believes that a foreign currency may suffer a substantial
decline against the U.S. Dollar, it may enter into a forward sale
contract to sell an amount of that foreign currency approximating
the value of some or all of the Fund's portfolio securities
denominated in such foreign currency, or when the Fund believes
that the U.S. Dollar may suffer a substantial decline against a
foreign currency, it may enter into a forward purchase contract
to buy that foreign currency for a fixed dollar amount ("position
hedge"). The Fund will not position hedge with respect to the
currency of a particular country to an extent greater than the
aggregate market value (at the time of making such sale) of the
securities held in its portfolio denominated or quoted in that
particular foreign currency. Instead of entering into a position
hedge, the Fund may, in the alternative, enter into a forward
contract to sell a different foreign currency for a fixed U.S.
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Dollar amount where the Fund believes that the U.S. Dollar value
of the currency to be sold pursuant to the forward contract will
fall whenever there is a decline in the U.S. Dollar value of the
currency in which portfolio securities of the Fund are
denominated ("cross-hedge"). Unanticipated changes in currency
prices may result in poorer overall performance for the Fund than
if it had not entered into such forward contracts.
Hedging against a decline in the value of a currency does not
eliminate fluctuations in the prices of portfolio securities or
prevent losses if the prices of such securities decline. Such
transactions also preclude the opportunity for gain if the value
of the hedge currency should rise. Moreover, it may not be
possible for the Fund to hedge against a devaluation that is so
generally anticipated that the Fund is not able to contract to
sell the currency at a price above the devaluation level it
anticipates.
Forward Commitments. Forward commitments for the purchase or
sale of securities may include purchases on a "when-issued" basis
or purchases or sales on a "delayed delivery" basis. In some
cases, a forward commitment may be conditioned upon the
occurrence of a subsequent event, such as approval and
consummation of a merger, corporate reorganization or debt
restructuring (i.e., a "when, as and if issued" trade).
When forward commitment transactions are negotiated, the
price is fixed at the time the commitment is made, but delivery
and payment for the securities take place at a later date.
Normally, the settlement date occurs within two months after the
transaction, but settlements beyond two months may be negotiated.
Securities purchased or sold under a forward commitment are
subject to market fluctuation, and no interest or dividends
accrue to the purchaser prior to the settlement date. At the
time the Fund intends to enter into a forward commitment, it
records the transaction and thereafter reflects the value of the
security purchased or, if a sale, the proceeds to be received, in
determining its net asset value. Any unrealized appreciation or
depreciation reflected in such valuation of a "when, as and if
issued" security would be canceled in the event that the required
conditions did not occur and the trade was canceled.
The use of forward commitments enables 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
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yields. However, if 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
chose 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 such transactions would be more than
30% of the Fund's total assets. In the event the other party to
a forward commitment transaction were to default, the Fund might
lose the opportunity to invest money at favorable rates or to
dispose of securities at favorable prices.
Standby Commitment Agreements. Standby commitment agreements
commit 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. The Fund will not enter into a standby
commitment with a remaining term in excess of 45 days and will
limit its investment in such commitments so that the aggregate
purchase price of the securities subject to the commitments will
not exceed 50% of its assets taken at the time of making the
commitment.
There is no guarantee that the securities 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.
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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
net amount of the excess, if any, of the Fund's obligations over
its entitlements with respect to each currency swap will be
accrued on a daily basis. The Fund will enter into currency
swaps for hedging purposes only. 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 other party
thereto is rated in the highest 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 other party
to such a transaction, the Fund will have contractual remedies
pursuant to the agreements related to the transactions.
Interest Rate Transactions. Interest rate transactions are
entered into primarily to preserve a return or spread on a
particular investment or portion of the Fund's portfolio or to
protect against any increase in the price of securities the Fund
anticipates purchasing at a later date. The Fund does not intend
to use these transactions in a speculative manner.
Interest rate swaps involve the exchange by the Fund with
another party of their respective commitments to pay or receive
interest (e.g., an exchange of floating rate payments for fixed
rate payments). Interest rate swaps are entered on a net basis
(i.e., the two payment streams are netted out, with the Fund
receiving or paying, as the case may be, only the net amount of
the two payments). With respect to the Fund, the exchange
commitments can involve payments in the same currency or in
different currencies. The purchase of an interest rate cap
entitles the purchaser, to the extent that a specified index
exceeds a predetermined interest rate, to receive payments of
interest on a contractually-based principal amount from the party
selling such interest rate cap. The purchase of an interest rate
floor entitles the purchaser, to the extent that a specified
index falls below a predetermined interest rate, to receive
payments of interest on an agreed principal amount from the party
selling the interest rate floor.
The Fund may enter into interest rate swaps, caps and floors
on either an asset-based or liability-based basis, depending upon
whether it is hedging its assets or liabilities. The net amount
of the excess, if any, of the Fund's obligations over its
entitlements with respect to each interest rate swap, cap or
floor is accrued daily. The Fund will not enter into an interest
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rate swap, cap or floor transaction unless the unsecured senior
debt or the claims-paying ability of the other party thereto is
then rated in the highest rating category of at least one
nationally recognized rating organization. Alliance will monitor
the creditworthiness of counterparties on an ongoing basis. The
swap market has grown substantially in recent years, with a large
number of banks and investment banking firms acting both as
principals and as agents utilizing standardized swap
documentation. As a result, the swap market has become
relatively liquid. Caps and floors are more recent innovations
for which standardized documentation has not yet been developed
and, accordingly, they are less liquid than swaps.
The use of interest rate transactions is a highly specialized
activity that involves investment techniques and risks different
from those associated with ordinary portfolio securities
transactions. If Alliance incorrectly forecasts market values,
interest rates and other applicable factors, the investment
performance of the Fund would be adversely affected by the use of
these investment techniques. Moreover, even if Alliance is
correct in its forecasts, there is a risk that the transaction
position may correlate imperfectly with the price of the asset or
liability being hedged. There is no limit on the amount of
interest rate transactions that may be entered into by the Fund.
These transactions do not involve the delivery of securities or
other underlying assets of principal. Accordingly, the risk of
loss with respect to interest rate transactions is limited to the
net amount of interest payments that the Fund is contractually
obligated to make. If the other party to an interest rate
transaction defaults, the Fund's risk of loss consists of the net
amount of interest payments that the Fund contractually is
entitled to receive.
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. The Fund
may enter into repurchase agreements pertaining to U.S.
Government Securities with member-banks of the Federal Reserve
System or "primary dealers" (as designated by the Federal Reserve
Bank of New York) in such securities. Alliance monitors the
creditworthiness of the dealers with which the Fund enters into
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repurchase agreements. Currently, the Fund intends to enter into
repurchase agreements only with its custodian and such primary
dealers. There is no percentage restriction on the Fund's
ability to enter into repurchase agreements.
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. The Fund may make
short sales of securities or maintain short positions only for
the purpose of deferring realization of gain or loss for U.S.
federal income tax purposes, provided that at all times when a
short position is open the Fund owns an equal amount of
securities of the same issue as, and equal in amount to, the
securities sold short. In addition, the Fund may not make a
short sale if as a result more than 25% of the Fund's net assets
would be held as collateral for short sales. If the price of the
security sold short increases between the time of the short sale
and the time the Fund replaces the borrowed security, the Fund
will incur a loss; conversely, if the price declines, the Fund
will realize a capital gain. See "Certain Fundamental Investment
Policies." Certain special federal income tax considerations may
apply to short sales entered into by the Fund. See "Dividends,
Distributions and Taxes" in the Statement of Additional
Information.
Loans of Portfolio Securities. The risks in lending
portfolio securities, as with other extensions of credit, consist
of possible loss of rights in the collateral should the borrower
fail financially. In determining whether to lend securities to a
particular borrower, Alliance will consider all relevant facts
and circumstances, including the creditworthiness of the
borrower. While securities are on loan, the borrower will pay
the Fund any income earned thereon and the Fund may invest any
cash collateral in portfolio securities, thereby earning
additional income, or receive an agreed upon amount of income
from a borrower who has delivered equivalent collateral. The
Fund will have the right to regain record ownership of loaned
securities 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. The
Fund will not lend portfolio securities to any officer, director,
employee or affiliate of the Fund or Alliance. The Board of
Directors will monitor the Fund's lending of portfolio
securities.
General. The successful use of the foregoing investment
practices draws upon Alliance's special skills and experience
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with respect to such instruments and usually depends on
Alliance's ability to forecast price movements or currency
exchange rate movements correctly. Should 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
with respect to options on currencies 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 such instruments 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 with
respect to 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 futures contract or currency upon exercise.
Therefore, no assurance can be given that the Fund will be able
to utilize these instruments effectively for the purposes set
forth above. Furthermore, the Fund's ability to engage in
options and futures transactions may be limited by tax
considerations. See "Dividends, Distributions and Taxes" in the
Statement of Additional Information.
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.
Defensive Position. For temporary defensive purposes, the
Fund may reduce its position in equity securities and increase
without limit its position in short-term, liquid, high-grade debt
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securities, which may include U.S. Government securities, bank
deposits, money market instruments, short-term debt securities,
including notes and bonds, and short-term foreign-currency
denominated high-grade debt securities issued by foreign
governmental entities, companies and supranational organizations.
For a complete description of the types of securities the Fund
may invest in while in a temporary defensive position, please see
the Statement of Additional Information.
Portfolio Turnover. Alliance anticipates that the Fund's
annual rate of turnover will not exceed 150%. A 150% annual
turnover rate would occur if all of the securities in the Fund's
portfolio are replaced one and one-half times in a period of one
year. A 150% portfolio turnover rate is greater than that of
most other investment companies, including those which emphasize
capital appreciation as a basic policy. A high rate of portfolio
turnover involves correspondingly greater brokerage and other
expenses than a lower rate, which must be borne by the Fund and
its shareholders. High portfolio turnover also may result in the
realization of substantial net short-term capital gains. See
"Dividends, Distributions and Taxes" in the Statement of
Additional Information.
CERTAIN OTHER FUNDAMENTAL INVESTMENT POLICIES
The Fund has adopted certain fundamental investment policies
listed below, which may not be changed without the approval of
its shareholders. Additional investment restrictions with
respect to the Fund are set forth in the Statement of Additional
Information.
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; (ii) borrow money except from
banks for temporary or emergency purposes, including the meeting
of redemption requests that might require the untimely
disposition of securities; borrowing in the aggregate may not
exceed 15%, and borrowing for purposes other than meeting
redemptions may not exceed 5%, of the Fund's total assets
(including the amount borrowed) less liabilities (not including
the amount borrowed) at the time the borrowing is made;
outstanding borrowings in excess of 5% of the value of the Fund's
total assets will be repaid before any investments are made; or
(iii) pledge, hypothecate, mortgage or otherwise encumber its
assets, except to secure permitted borrowings.
CERTAIN CONSIDERATIONS AND RISKS
Investment in the Fund involves among others, the
considerations and risks referred to below.
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Political, Economic and Social Considerations and
Interrelationships. China, in particular, but Hong Kong and
Taiwan, as well, in significant measure because of their existing
and increasing economic, and now in the case of Hong Kong, direct
political ties with China, may be subject to a greater degree of
social, political and economic instability than is the case in
the United States.
China's economy is very much in transition. While the
government still controls production and pricing in major
economic sectors, significant steps have been taken toward
capitalism and China's economy has become increasingly market
oriented. China's strong economic growth and ability to attract
significant foreign investment in recent years stem from the
economic liberalization initiated by Deng Xiaoping who assumed
power in the late 1970s. The economic growth, however, has not
been smooth and has been marked by extremes in many respects of
inordinate growth which has not been tightly controlled followed
by rigid measures of austerity. The rapidity and erratic nature
of the growth have resulted in inefficiencies and dislocations,
including at times high rates of inflation.
China's economic development has occurred notwithstanding the
continuation of the power of China's Communist Party and its
authoritarian government control, not only of centrally planned
economic decisions, but of many aspects of the social structure.
While a significant portion of China's population has benefited
from China's economic growth, the conditions of many leave much
room for improvement. Notwithstanding restrictions on freedom of
expression and the absence of a free press, and notwithstanding
the extreme manner in which past unrest has been dealt with, the
1989 Tianamen Square uprising being a recent reminder, the
potential for renewed popular unrest associated with demands for
improved social, political and economic conditions cannot be
dismissed.
A key unknown as to China's future relates to the political
uncertainty in connection with the succession to Deng who died
earlier this year. Many observers have cited the potential for
political instability. While his policies in many respects have
effectively outdated the Communist Party and the governmental
structure, both the Communist Party and the government remain
entrenched and only time will tell how the ruling structure will
stabilize. There can be no assurance that the resulting
structure will continue the capitalistic steps or be able to
prevent wide economic swings and control inflation, which is in
any event expected to remain high by present Western standards.
In this latter regard, the existing economic weight of the
current political and governmental structure currently adds to
inflationary pressures and impedes economic efficiency and
commerce. The Communist Party still controls access to
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governmental positions and closely monitors governmental action.
Essentially there exists a highly inefficient set of parallel
bureaucracies and attendant opportunities for corruption.
In addition to the economic impact of China's internal
political uncertainties, the potential effect of China's actions,
not only on China itself, but on Hong Kong and Taiwan as well,
could be significant.
China is heavily dependent on foreign trade, particularly
with the United States, Japan and Germany. Political
developments adverse to its trading partners, as well as
political and social repression, could cause the United States
and others to alter their trading policy towards China. For
example, in the United States, the continued extension of most
favored nation trading status to China is an issue of significant
controversy which is reviewed regularly. Loss of that status
would clearly hurt China's economy by reducing its exports. With
much of China's trading activity being funneled through Hong Kong
and with trade through Taiwan becoming increasingly significant,
any sizable reduction in demand for goods from China would have
negative implications for both countries. China is believed to
be the largest investor in Hong Kong and its markets and an
economic downturn in China would be expected to reverberate to
Hong Kong's markets as well.
Regarding Hong Kong, although China has committed by treaty
to preserve Hong Kong's autonomy and its economic, political and
social freedoms for fifty years from the July 1, 1997 transfer of
sovereignty over Hong Kong from Great Britain to China, the
continuation of Hong Kong's current economic system is dependent
on how the government of China imposes its authority. While Deng
expressed China's commitment as a "one country, two systems"
philosophy, the future of Hong Kong's political and social
system, including its independent judiciary, professional civil
service and free press, remains unclear. While many believe that
the economies of China and Hong Kong have become interdependent
to such an extent that it would not be in China's interest to
alter Hong Kong's present economic structure, a change of social
policy or in the political structure could also have negative
economic implications. Investor and business confidence in Hong
Kong can be significantly affected by such developments, which in
turn can affect markets and business performance. In this
connection, it is noted that a substantial portion of the
companies listed on the Hong Kong Stock Exchange are involved in
real estate-related activities.
Investment in Greater China Countries; Risks of Foreign
Investment. The securities markets of China, and to a lesser
extent Taiwan, are relatively small, with the majority of market
capitalization and trading volume concentrated in a limited
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number of companies representing a small number of industries.
Consequently, the Fund 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 U.S. Securities
settlements may in some instances be subject to delays and
related administrative uncertainties.
Foreign investment in the securities markets of China
and Taiwan is restricted or controlled to varying degrees. These
restrictions or controls, which apply to the Fund, may at times
limit or preclude investment in certain securities and may
increase the cost and expenses of the Fund. China and Taiwan
require governmental approval prior to investments by foreign
persons or limit investment by foreign persons to only a
specified percentage of an issuer's outstanding securities or a
specific class of securities which may have less advantageous
terms (including price) than securities of the company available
for purchase by nationals. In addition, the repatriation of
investment income, capital or the proceeds of sales of securities
from China and Taiwan 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
restrictions on foreign capital remittances.
The Fund could be adversely affected by delays in, or a
refusal to grant, any required governmental approval for
repatriation, as well as by the application to it of other
restrictions on investment. The liquidity of the Fund's
investments in any country in which any of these factors exists
could be affected by any such factor or factors on the Fund's
investments. The limited liquidity in certain Greater China
markets is a factor to be taken into account in the Fund's
valuation of portfolio securities in this category and may affect
the Fund's ability to dispose of securities in order to meet
redemption requests at the price and time it wishes to do so.
Transaction costs including brokerage commissions for
transactions both on and off the securities exchanges in Greater
China, countries may be higher than in the U.S.
Issuers of securities in Greater China countries are
generally not subject to the same degree of regulation as are
U.S. issuers with respect to such matters as timely disclosure of
information, insider trading rules, restrictions on market
manipulation and shareholder proxy requirements. Reporting,
accounting and auditing standards of Greater China countries may
differ, in some cases significantly, from U.S. standards in
important respects and less information may be available to
29
<PAGE>
investors in securities of Greater China country issuers than to
investors in securities of U.S. issuers.
Investment in Greater China companies which are in the
initial stages of their development involves greater risk than is
customarily associated with securities of more established
companies. The securities of such companies may have relatively
limited marketability and may be subject to more abrupt or
erratic market movements than securities of established companies
or broad market indices.
Currency Considerations. Substantially all of the assets of
the Fund will be invested in securities denominated in foreign
currencies, and a corresponding portion of the Fund's revenues
will be received in these currencies. Therefore, the dollar
equivalent of the Fund's net assets and distributions will be
adversely affected by reductions in the value of foreign
currencies relative to the U.S. Dollar. Such changes will also
affect the Fund's income. The Fund will, however, consider
whether to attempt to protect itself against adverse changes in
the values of foreign currencies by engaging in certain of the
investment practices listed above under "Additional Investment
Practices." While it has this ability, there is no certainty as
to whether these practices are available and, if so, whether and
to what extent it will engage in these practices, and if it does,
whether it will be successful in doing so. 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. 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 of 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.
Extreme Governmental Action; Less Protective Laws. In
contrast with the United States, and with no specific reference
to any of the Greater China countries, foreign investment may
involve in certain situations greater risk of nationalization,
expropriation, confiscatory taxation, currency blockage or other
extreme governmental action which could adversely impact the
Fund's investments. In the event of certain such actions, the
Fund could lose its entire investment in the country involved.
In addition, laws in various foreign countries, including in
certain respects each of the Greater China countries, governing,
among other subjects, business organization and practices,
securities and securities trading, bankruptcy and insolvency may
30
<PAGE>
provide less protection to investors such as the Fund than
provided under United States laws.
U.S. and Foreign Taxes. Foreign taxes paid by the Fund may
be creditable or deductible by U.S. shareholders for U.S. income
tax purposes. Moreover, non-U.S. investors may not be able to
credit or deduct such foreign taxes. Investors should review
carefully the information discussed under the heading "Dividends,
Distributions and Taxes" below and should consider with their tax
advisers the specific tax consequences of investing in the Fund.
Non-Diversified Status. The Fund is a "non-diversified"
investment company, which means that the Fund is not limited by
the 1940 Act in the proportion of its assets that may be invested
in the securities of a single issuer. However, the Fund intends
to conduct its operations so as to qualify to be taxed as a
"regulated investment company" for purposes of the Code, which
will relieve the Fund of any liability for federal income tax to
the extent its earnings are distributed to shareholders. See
"Dividends, Distributions and Taxes--United States Federal Income
Taxation of Dividends and Distributions" in the Statement of
Additional Information. To so qualify, among other requirements,
the Fund will limit its investments so that, at the close of each
quarter of each taxable year, (i) not more than 25% of the Fund's
total assets will be invested in the securities of a single
issuer, and (ii) with respect to 50% of its total assets, not
more than 5% of its total assets will be invested in the
securities of a single issuer and the Fund will not own more than
10% of the outstanding voting securities of a single issuer.
Foreign government securities are subject to these tests in the
same manner as the securities of non-governmental issuers. The
Fund's investments in U.S. Government securities, if any, are
not, however, subject to these limitations. Because as a non-
diversified investment company the Fund, may invest in a smaller
number of individual issuers than a diversified investment
company, an investment in the Fund may, under certain
circumstances, present greater risk to an investor than an
investment in a diversified investment company.
_________________________________________________________________
PURCHASE AND SALE OF SHARES
_________________________________________________________________
HOW TO BUY SHARES
The Fund offers multiple classes of shares, of which only the
Advisor Class is offered by this Prospectus. Advisor Class
shares of the Fund may be purchased through your financial
representative at net asset value without any initial or
contingent deferred sales charges and are not subject to ongoing
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distribution expenses. Advisor Class shares may be purchased and
held solely (i) through accounts established under a fee-based
program, sponsored and maintained by a registered broker-dealer
or other financial intermediary and approved by AFD, (ii) through
a self-directed defined contribution employee benefit plan (e.g.
a 401(k) plan) that has at least 1,000 participants or $25
million in assets, (iii) by investment advisory clients of, and
certain other persons associated with, Alliance and its
affiliates or the Fund and (iv) through registered investment
advisers or other financial intermediaries who charge a
management, consulting or other fee for their service and who
purchase shares through a broker or agent approved by 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. For more detailed information
about who may purchase and hold Advisor Class shares see the
Statement of Additional Information. A shareholder's Advisor
Class shares will automatically convert to Class A shares of the
Fund under certain circumstances. For a more detailed
description of the conversion feature and Class A shares, see
"Conversion Feature."
Generally, a fee-based program must charge an asset-based or
other similar fee and must invest at least $250,000 in Advisor
Class shares of the Fund in order to be approved by AFD for
investment in Advisor Class shares. Share certificates are
issued only upon request. See the Subscription Application and
the Statement of Additional Information for more information.
The Fund may refuse any order to purchase Advisor Class
shares. In this regard, the Fund reserves the right to restrict
purchases of Advisor Class shares (including through exchanges)
when there appears to be evidence of a pattern of frequent
purchases and sales made in response to short-term
considerations.
How the Fund Values its Shares
The net asset value of Advisor Class shares of the Fund is
calculated by dividing the value of the Fund's net assets
allocable to the Advisor Class by the outstanding shares of the
Advisor Class. Shares are valued each day the New York Stock
Exchange (the "Exchange") is open as of the close of regular
trading (currently 4:00 p.m. Eastern time). The securities in
the Fund are valued at their current market value determined on
the basis of market quotations or, if such quotations are not
readily available, such other methods as the Fund's Directors
believe would accurately reflect fair market value.
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Initial Offering
It is expected that Advisor Class shares of the Fund will be
offered during an initial offering period, which is currently
scheduled to end on August 26, 1997. During the Fund's initial
offering period, Advisor Class shares will be offered to the
public at their net asset value of $10.00.
During the initial offering period, the Fund will not accept
subscriptions for Advisor Class shares other than through
authorized dealers and agents, and any subscription monies sent
directly to the Fund will be promptly returned. In addition,
under Commission regulations (e.g., Rule 15c2-4 under the
Securities Exchange Act of 1934), authorized dealers and agents
will not be permitted to accept subscription monies from their
customers in advance of the purchase date unless appropriate
arrangements are made for the temporary investment or deposit of
such monies. Advisor Class shares subscribed for during the
Fund's initial offering period will be sold to subscribers on the
purchase date, which is expected to occur on August 26, 1997
following the end of the initial offering period.
HOW TO SELL SHARES
You may "redeem", i.e., sell your shares in the Fund to the
Fund on any day the Exchange is open, either directly or through
your financial intermediary. The price you will receive is the
net asset value next calculated after the Fund receives your
request in proper form. Proceeds generally will be sent to you
within seven days. However, for shares recently purchased by
check or electronic funds transfer, the Fund will not send
proceeds until it is reasonably satisfied that the check or
electronic funds transfer has been collected (which may take up
to 15 days). If you are in doubt about what documents are
required by your fee-based program or employee benefit plan, you
should contact your financial representative.
Selling Shares Through Your Financial Representative
Your financial representative must receive your request
before 4:00 p.m. Eastern time, and your financial representative
must transmit your request to the Fund by 5:00 p.m. Eastern time,
for you to receive that days net asset value. Your financial
representative is responsible for furnishing all necessary
documentation to the Fund and may charge you for this service.
Selling Shares Directly To The Fund
Send a signed letter of instruction or stock power form to
AFS along with certificates, if any, that represent the shares
you want to sell. For your protection, signatures must be
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guaranteed by a bank, a member firm of a national stock exchange
or other eligible guarantor institution. Stock power forms are
available from your financial intermediary, AFS, and many
commercial banks. Additional documentation is required for the
sale of shares by corporations, intermediaries, fiduciaries and
surviving joint owners. For details contact:
Alliance Fund Services
P.O. Box 1520
Secaucus, NJ 07096-1520
800-221-5672
Alternatively, a request for redemption of shares for which
no stock certificates have been issued can also be made by
telephone to 800-221-5672. Telephone redemption requests must be
made by 4:00 p.m. Eastern time on the Fund business day in order
to receive that day's net asset value, and, except for certain
omnibus accounts, may be made only once in any 30-day period. A
shareholder who has completed the Telephone Transactions section
of the Subscription Application, or the Shareholder Options form
obtained from AFS, can elect to have the proceeds of the
shareholder's redemption sent to the shareholder's bank via an
electronic funds transfer. Proceeds of telephone redemptions
also may be sent by check to a shareholder's address of record.
Redemption requests by electronic funds transfer may not exceed
$100,000 and redemption requests by check may not exceed $50,000.
Telephone redemption is not available for shares held in nominee
or "street name" accounts or retirement plan accounts or shares
held by a shareholder who has changed address of record within
the previous 30 calendar days.
General
The sale of shares is a taxable transaction for federal tax
purposes. Under unusual circumstances, the 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
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<PAGE>
telephonic requests. The telephone service may be suspended or
terminated at any time without notice.
SHAREHOLDER SERVICES
AFS offers a variety of shareholder services. For more
information about these services or your account, call AFS's
toll-free number, 800-221-5672. Some services are described in
the attached Subscription Application. A shareholder's manual
explaining all available services will be provided upon request.
To request a shareholder manual, call 800-227-4618.
HOW TO EXCHANGE SHARES
You may exchange your Advisor Class shares of the Fund for
Advisor Class shares of other Alliance Mutual Funds (including
AFD Exchange Reserves, a money market fund managed by Alliance).
Exchanges of shares are made at the net asset values next
determined and without sales or service charges. Exchanges may
be made by telephone or written request. Telephone exchange
requests must be received by AFS by 4:00 p.m. Eastern time on the
Fund business day in order to receive that day's net asset value.
Please read carefully the Prospectus of the mutual fund into
which you are exchanging before submitting the request. Call AFS
at 800-221-5672 to exchange uncertificated shares. An exchange
is a taxable capital transaction for federal tax purposes. The
exchange service may be changed, suspended, or terminated on 60
days' written notice.
GENERAL
If you are a Fund shareholder through an account established
under a fee-based program, your fee-based program may impose
requirements with respect to the purchase, sale or exchange of
Advisor Class shares of the Fund that are different from those
described in this Prospectus. A transaction fee may be charged
by your financial representative with respect to the purchase,
sale or exchange of Advisor Class shares made through such
financial representative.
The Fund offers three classes of shares other than the
Advisor Class, which are Class A, Class B and Class C. All
classes of shares of the Fund have a common investment objective
and investment portfolio. Class A shares are offered with an
initial sales charge and pay a distribution services fee.
Class B shares have a contingent deferred sales charge (a "CDSC")
and also pay a distribution services fee. Class C shares have no
initial sales charge or CDSC as long as they are not redeemed
within one year of purchase, but pay a distribution services fee.
Because Advisor Class shares have no initial sales charge or CDSC
35
<PAGE>
and pay no distribution services fee, Advisor Class shares are
expected to have different performance from Class A, Class B or
Class C shares. You may obtain more information about Class A,
Class B and Class C shares, which are not offered by this
Prospectus, by contacting AFS by telephone at 800-221-5672 or by
contacting your financial representative.
_________________________________________________________________
MANAGEMENT OF THE FUND
_________________________________________________________________
ADVISER
Alliance, which is a Delaware limited partnership with
principal offices at 1345 Avenue of the Americas, New York, New
York 10105, has been retained under an advisory agreement (the
"Advisory Agreement") to provide investment advice and, in
general, with exclusive authority and responsibility to conduct
the management and investment program of the Fund, subject to the
general supervision and control of the Directors of the Fund. As
described below, Alliance has retained the Hong Kong firm of New-
Alliance Asset Management (Asia) Limited ("New Alliance") as a
consultant to provide Alliance with its regional expertise as to
conditions in and developments impacting Greater China countries.
See "Management of the Fund - Consultant to the Adviser".
Alliance is a leading international investment manager
supervising client accounts with assets as of March 31, 1997 of
more than $182 billion (of which more than $66 billion
represented the assets of investment companies). Alliance's
clients are primarily major corporate employee benefit funds,
public employee retirement systems, investment companies,
foundations and endowment funds. The 53 registered investment
companies managed by Alliance comprising more than 110 separate
investment portfolios currently have over two million
shareholders. As of March 31, 1997 Alliance was an investment
manager of employee benefit fund assets for 31 of the Fortune 100
companies.
Alliance Capital Management Corporation ("ACMC"), the
sole general partner of, and the owner of a 1% general
partnership interest in, Alliance, is an indirect wholly-owned
subsidiary of The Equitable Life Assurance Society of the United
States ("Equitable"), one of the largest life insurance companies
in the United States, which is a wholly-owned subsidiary of The
Equitable Companies Incorporated, a holding company controlled by
AXA, a French insurance holding company. Certain information
concerning the ownership and control of Equitable by AXA is set
forth in the Fund's Statement of Additional Information under
"Management of the Fund."
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Under the Advisory Agreement, the Fund pays Alliance a
fee, which is accrued daily and paid monthly, at the annual rate
of 1.00% of the Fund's average daily net assets.
The person primarily responsible for the day-to-day
management of the Fund is Matthew W.S. Lee, a senior vice
president of ACMC. Prior to joining ACMC in 1997, Mr. Lee was a
director of National Mutual Funds Management (Asia), responsible
for managing a wide range of funds and accounts, including region
and single country funds. Prior to 1994, he worked for James
Capel & Co. in both London and Hong Kong, with responsibility for
sales of Asian securities with a specialization in the Greater
China region. Prior thereto Mr. Lee was employed in London by
Credit Suisse Group to manage CS Tiger Fund, an open-end unit
trust investing in South-East Asian equity securities.
CONSULTANT TO THE ADVISER
In connection with its provision of advisory services to
the Fund, Alliance has retained at its expense as a consultant
New Alliance, a joint venture company headquartered in Hong Kong
which was formed in 1997 by Alliance and Sun Hung Kai Properties
Limited ("SHKP"). New Alliance will provide Alliance with
ongoing current and comprehensive information and analysis of
conditions and developments in Greater China countries consisting
of, but not limited to, statistical and factual research and
assistance with respect to economic, financial, political,
technological and social conditions and trends in Greater China
countries, including information on markets and industries. In
addition to its own staff of professionals, New-Alliance has
access to the expertise and personnel of SHKP, one of Hong Kong's
largest property developers for both the residential and
commercial sectors, whose developments include office and
industrial properties, hotels and shopping centers, and selected
projects in China. SHKP is one of the largest enterprises in
Hong Kong measured by market capitalization and has considerable
expertise in evaluating business and market conditions in Hong
Kong and the other Greater China countries. Its activities
complementary to property development include insurance and
estate management, and SHKP is diversified as well into
telecommunications and infrastructure projects.
EXPENSES OF THE FUND
In addition to the payments to Alliance under the
Advisory Agreement described above, the Fund pays certain other
costs, including (i) custody, transfer and dividend disbursing
expenses, (ii) fees of the Directors who are not affiliated with
Alliance, (iii) legal and auditing expenses, (iv) clerical,
accounting and other office costs, (v) costs of printing the
Fund's prospectuses and shareholder reports, (vi) costs of
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<PAGE>
maintaining the Fund's existence, (vii) interest charges, taxes,
brokerage fees and commissions, (viii) costs of stationery and
supplies, (ix) expenses and fees related to registration and
filing with the Commission and with state regulatory authorities,
(x) upon the approval of the Board of Directors, costs of
personnel of Alliance or its affiliates rendering clerical,
accounting and other office services and (xi) such promotional,
shareholder servicing and other expenses as may be contemplated
by the Distribution Services Agreement, described below.
DISTRIBUTION SERVICES AGREEMENT
The Fund has entered into a Distribution Services
Agreement with AFD with respect to the Advisor Class Shares. The
Glass-Steagall Act and other applicable laws may limit the
ability of a bank or other depository institution to become an
underwriter or distributor of securities. However, in the opinion
of the Fund's management, based on the advice of counsel, these
laws do not prohibit such depository institutions from providing
services for investment companies such as the administrative,
accounting and other services referred to in the Agreement. In
the event that a change in these laws prevented a bank from
providing such services, it is expected that other service
arrangements would be made and that shareholders would not be
adversely affected.
_________________________________________________________________
DIVIDENDS, DISTRIBUTIONS AND TAXES
_________________________________________________________________
DIVIDENDS AND DISTRIBUTIONS
If you receive an income dividend or capital gains
distribution in cash you may, within 120 days following the date
of its payment, reinvest the dividend or distribution in
additional shares of the Fund without charge by returning to
Alliance, with appropriate instructions, the check representing
such dividend or distribution. Thereafter, unless you otherwise
specify, you will be deemed to have elected to reinvest all
subsequent dividends and distributions in shares of the Fund.
Each 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 Fund having an aggregate net asset value as of the
payment date of such dividend or distribution equal to the cash
amount of such dividend or distribution. Election to receive
dividends and distributions in cash or shares is made at the time
shares are initially purchased and may be changed at any time
prior to the record date for a particular dividend or
38
<PAGE>
distribution. Cash dividends can be paid by check or, if the
shareholder so elects, electronically via the ACH network. There
is no sales or other charge in connection with the reinvestment
of dividends and capital gains distributions.
While 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 must necessarily 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.
If you buy shares just before the Fund deducts a
distribution from its net asset value, you will pay the full
price for the shares and then receive a portion of the price back
as a taxable distribution.
Foreign Income Taxes
Investment income received by 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, 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. For further information regard-
ing foreign taxes see "Dividends, Distributions and Taxes--
Foreign Taxation" in the Statement of Additional Information.
U.S. Federal Income Taxes
The Fund intends to qualify to be taxed as a "regulated
investment company" under the Code. To the extent that the Fund
distributes its taxable income and net capital gain to its
shareholders, qualification as a regulated investment company
relieves the Fund of federal income and excise taxes on that part
of its taxable income including net capital gains which it pays
out to its shareholders. Dividends out of net ordinary income
and distributions of net short-term capital gains are taxable to
the recipient shareholders as ordinary income. In the case of
corporate shareholders, such dividends may be eligible for the
dividends-received deduction, except that the amount eligible for
the deduction is limited to the amount of qualifying dividends
received by the Fund. A corporation's dividends-received
deduction will be disallowed unless the corporation holds shares
in the Fund at least 46 days. Furthermore, the dividends-
received deduction will be disallowed to the extent a
39
<PAGE>
corporation's investment in shares of the Fund is financed with
indebtedness.
The excess of net long-term capital gains over the net
short-term capital losses realized and distributed by the Fund to
its shareholders as capital gains distributions is taxable to the
shareholders as long-term capital gains, irrespective of the
length of time a shareholder may have held his or her stock.
Long-term capital gains distributions are not eligible for the
dividends-received deduction referred to above.
Any dividend or distribution received by a shareholder
on shares of the Fund 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 such shares by a shareholder,
although in effect a return of capital to that particular
shareholder, would be taxable to the shareholder as described
above. If a shareholder held shares six months or less and
during that period received a distribution taxable to the
shareholder as long-term capital gain, any loss realized on the
sale of such shares during such six-month period would be a long-
term capital loss to the extent of the distribution.
An income dividend or capital gains distribution with
respect to shares of the Fund held by a tax-deferred or qualified
plan, such as an individual retirement account, 403(b)(7)
retirement plan or corporate pension or profit-sharing plan, will
not be taxable to the plan. Distributions from such plans will
be taxable to individual participants under applicable tax rules
without regard to the character of the income earned by the
qualified plan.
The Fund will be required to withhold 31% of any
payments made to a shareholder if the shareholder has not
provided a certified taxpayer identification number to the Fund,
or the Secretary of the Treasury notifies the Fund that a
shareholder has not reported all interest and dividend income
required to be shown on the shareholder's federal income tax
return.
Under certain circumstances, if the Fund realizes losses
from fluctuations in currency exchange rates after paying a
dividend, all or a portion of the dividend may subsequently be
characterized as a return of capital. See "Dividends,
Distributions and Taxes" in the Statement of Additional
Information for additional information concerning the taxation of
the Fund and its shareholders. Shareholders are urged to consult
their tax advisers regarding their own tax situation.
Shareholders will be advised annually as to the federal tax
status of income dividends and capital gain and return of capital
40
<PAGE>
distributions made by the Fund for the preceding year.
Distributions by the Fund may be subject to state and local
taxes.
______________________________________________________________
CONVERSION FEATURE
______________________________________________________________
CONVERSION TO CLASS A SHARES
Advisor Class shares may be held solely through the fee-
based program accounts, employee benefit plans and registered
investment advisory or other financial intermediary relationships
described above under "Purchase and Sale of Shares--How to Buy
Shares," and by investment advisory clients of, and certain other
persons associated with, Alliance and its affiliates or the Fund.
If (i) a holder of Advisor Class shares ceases to participate in
a fee-based program or plan, or to be associated with an
investment adviser or financial intermediary, in each case that
satisfies the requirements to purchase shares set forth under
"Purchase and Sale of Shares--How to Buy Shares" or (ii) the
holder is otherwise no longer eligible to purchase Advisor Class
shares as described in this Prospectus (each, a "Conversion
Event"), then all Advisor Class shares held by the shareholder
will convert automatically and without notice to the shareholder,
other than the notice contained in this Prospectus, to Class A
shares of the Fund during the calendar month following the month
in which the Fund is informed of the occurrence of the Conversion
Event. The failure of a shareholder or a fee-based program to
satisfy the minimum investment requirements to purchase Advisor
Class shares will not constitute a Conversion Event. The
conversion would occur on the basis of the relative net asset
values of the two classes without the imposition of any sales
load, fee or other charge.
DESCRIPTION OF CLASS A SHARES
The following sets forth maximum transaction costs,
annual expenses, per share income and capital charges for Class A
shares of the Fund. Class A shares are subject to a distribution
fee that may not exceed an annual rate of .30%. The higher fees
mean a higher expense ratio, so Class A shares pay
correspondingly lower dividends and may have a lower net asset
value than Advisor Class shares.
Shareholder Transaction Expenses are one of several
factors to consider when you invest in the Fund. The following
table summarizes your maximum transaction costs from investing in
Class A shares of the Fund and estimated annual expenses for
Class A shares of the Fund. The "Example" following the table
41
<PAGE>
below shows the cumulative expenses attributable to a
hypothetical $1,000 investment in Class A shares for the periods
specified.
Class A Shares
Maximum sales charge imposed on purchase
(as a percentage of offering price) (a)........... None
(sales charge
waived)
Sales charge imposed on dividend reinvestments.... None
Deferred sales charge (as a percentage of
original purchase price or redemption
proceeds, whichever is lower)...................... None
Operating Expenses Class A
Management fees.................................... [ ]%
12b-1 fees......................................... [ ]%
Other expenses (b).................................
Total fund operating expenses...................... [ ]%
========
Example(a) Class A
After 1 year....................................... $[ ]
After 3 years...................................... $[ ]
______________________________________________________________
(a) Advisor Class shares convert to Class A shares at net asset
value and without the imposition of any sales charge and
accordingly the maximum sales charge of 4.25% on most
purchases of Class A shares for cash does not apply.
(b) These expenses include a transfer agency fee payable to
Alliance Fund Services, Inc., an affiliate of Alliance, based
on a fixed dollar amount charged to the Fund for each
shareholder's account.
The purpose of the foregoing table is to assist the
investor in understanding the various costs and expenses that an
investor in the Fund will bear directly or indirectly. Long-term
shareholders of Class A shares of the Fund may pay aggregate
sales charges totaling more than the economic equivalent of the
maximum initial sales charges totaling permitted by the Conduct
Rules of the National Association of Securities Dealers, Inc.
The Rule 12b-1 fee for Class A comprises a service fee not
exceeding .25% of the aggregate average daily net assets of the
42
<PAGE>
Fund attributable to Class A and an asset-based sales charge
equal to the remaining portion of the Rule 12b-1 fee. "Other
Expenses" for Class A shares are based on estimated amounts for
the Fund's current fiscal year. The Example set forth above
assumes reinvestment of all dividends and distributions and
utilizes a 5% annual rate of return as mandated by Commission
regulations. The Example should not be considered representative
of past or future expenses; actual expenses may be greater or
less than those shown.
Shareholders will be advised annually as to the federal
tax status of dividends and capital gains distributions made by
the Fund for the preceding year. Shareholders are urged to
consult their tax advisers regarding their own tax situations.
__________________________________________________________________
GENERAL INFORMATION
__________________________________________________________________
PORTFOLIO TRANSACTIONS
Consistent with the Conduct Rules of the National
Association of Securities Dealers, Inc., and subject to seeking
best price and execution, the Fund may consider sales of its
shares as a factor in the selection of dealers to enter into
portfolio transactions with the Fund.
ORGANIZATION
Alliance Greater China '97 Fund, Inc. is a Maryland
corporation organized on April 30, 1997. It is anticipated that
annual shareholder meetings will not be held and that shareholder
meetings will be held only when required by federal or state law.
Shareholders have available certain procedures for the removal of
Directors.
A shareholder in the Fund will be entitled to his or her
share pro rata with other holders of the same class of shares of
all dividends and distributions arising from the Fund's assets
and, upon redeeming shares, will receive the then current net
asset value of the Fund represented by the redeemed shares less
any applicable CDSC. The Fund is empowered to establish, without
shareholder approval, additional portfolios, which may have
different investment objectives, and additional classes of
shares. If an additional portfolio or class were established,
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 as a single series or class on
matters, such as the election of Directors, that affect each
portfolio or class in substantially the same manner. Class A,
43
<PAGE>
Class B, Class C and Advisor Class shares have identical voting,
dividend, liquidation and other rights, except that each class
bears its own transfer agency expenses, each of Class A, Class B
and Class C shares bears its own distribution expenses, Class B
shares convert to Class A shares after eight years and Advisor
Class shares convert to Class A shares under certain
circumstances. Each class of shares votes separately with
respect to the Fund's Rule 12b-1 distribution plan and other
matters for which separate class voting is appropriate under
applicable law. Shares are freely transferable, are entitled to
dividends and distributions as determined by the Directors and,
in liquidation of the Fund, are entitled to receive the net
assets of the Fund. Certain additional matters relating to the
Fund's organization are discussed in the Statement of Additional
Information.
REGISTRAR, TRANSFER AGENT AND
DIVIDEND-DISBURSING AGENT
AFS, an indirect wholly-owned subsidiary of Alliance,
located at 500 Plaza Drive, Secaucus, New Jersey 07094, acts as
the Fund's registrar, transfer agent and dividend-disbursing
agent for a fee based upon the number of shareholder accounts
maintained for the Fund.
PRINCIPAL UNDERWRITER
AFD, an indirect wholly-owned subsidiary of Alliance,
located at 1345 Avenue of the Americas, New York, New York 10105,
is the principal underwriter of shares of the Fund.
PERFORMANCE INFORMATION
From time to time, the Fund advertises its "total
return," which is computed separately for each Class of shares
including the Advisor Class. Such advertisements disclose the
Fund's average annual compounded total return for the periods
prescribed by the Commission. The Fund's total return for each
such period is computed by finding, through the use of a formula
prescribed by the Commission, the average annual compounded rate
of return over the period that would equate an assumed initial
amount invested to the value of the investment at the end of the
period. For purposes of computing total return, income,
dividends and capital gains distributions paid on shares of the
Fund are assumed to have been reinvested when paid and the
maximum sales charges applicable to purchases and redemptions of
the Fund's shares are assumed to have been paid. The Fund's
advertisements may quote performance rankings or ratings of the
Fund by financial publications or independent organizations such
as Lipper Analytical Services, Inc. and Morningstar, Inc. or
compare the Fund's performance to various indices.
44
<PAGE>
ADDITIONAL INFORMATION
This Prospectus and the Statement of Additional
Information, which has been incorporated by reference herein, do
not contain all the information set forth in the Registration
Statement filed by the Fund with the Commission under the
Securities Act. Copies of the Registration Statement may be
obtained at a reasonable charge from the Commission or may be
examined, without charge, at the offices of the Commission in
Washington, D.C.
This Prospectus does not constitute an offering in any state in
which such offering may not lawfully be made.
45
<PAGE>
(LOGO) ALLIANCE GREATER CHINA '97 FUND, 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
August [ ], 1997
____________________________________________________________
This Statement of Additional Information is not a
prospectus but supplements and should be read in conjunction with
the current Prospectus for Alliance Greater China '97 Fund, Inc.
(the "Fund") that offers the Class A, Class B and Class C shares
of the Fund and the current Prospectus for the Fund that offers
the Advisor Class shares of the Fund (the "Advisor Class
Prospectus" and, together with the Prospectus for the Fund that
offers the Class A, Class B and Class C shares, the
"Prospectus"). Copies of either 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 Fund
Management of the Fund
Expenses of the Fund
Purchase of Shares
Redemption and Repurchase of Shares
Shareholder Services
Net Asset Value
Dividends, Distributions and Taxes
Brokerage and Portfolio Transactions
General Information
Appendix A: Certain Investment Practices A-1
Appendix B: Additional Information About China,
Hong Kong and Taiwan B-1
Appendix C: Bond Ratings C-1
(R): This registered service mark used under license from the
owner, Alliance Capital Management L.P.
<PAGE>
____________________________________________________________
DESCRIPTION OF THE FUND
____________________________________________________________
Except as otherwise indicated, the investment policies
of Alliance Greater China '97 Fund, Inc. (the "Fund") are not
"fundamental policies" and may, therefore, be changed by the
Board of Directors without a shareholder vote. However, the Fund
will not change its investment policies without contemporaneous
written notice to its shareholders. The Fund's investment
objective is fundamental and may not be changed without
shareholder approval. There can be, of course, no assurance that
the Fund will achieve its investment objective.
Investment Objective
The Fund's investment objective is to seek long-term
capital appreciation through investment of at least 80% of its
total assets in equity securities issued by Greater China
companies. In furtherance of its investment objective, the Fund
expects to invest a significant portion, which may be greater
than 50%, of its assets in equity securities of Hong Kong
companies and may invest, from time to time, all of its assets in
Hong Kong companies or companies of either of the other Greater
China countries.
Investment Policies and Practices
In addition to investing in equity securities of Greater
China companies, the Fund may invest up to 20% of its total
assets in (i) debt securities issued or guaranteed by Greater
China companies or by Greater China governments, their agencies
or instrumentalities, and (ii) equity or debt securities issued
by issuers other than Greater China companies. The Fund will not
invest in debt securities other than investment grade securities.
Should a debt security in which the Fund is invested be
downgraded below investment grade or be determined by Alliance to
have undergone a similar credit quality deterioration, the Fund
will dispose of that security.
The Fund may also: (i) invest up to 25% of its net
assets in the convertible securities of companies whose common
stocks are eligible for purchase by the Fund; (ii) invest up to
20% of its net assets in rights or warrants; (iii) invest in
depositary receipts, instruments of supranational entities
denominated in the currency of any country, securities of
multinational companies and "semi-governmental securities";
(iv) invest up to 25% of its net assets in equity-linked debt
securities with the objective of realizing capital appreciation;
(v) invest up to 20% of its net assets in loans and other direct
2
<PAGE>
debt securities; (vi) write covered put and call options on
securities of the types in which it is permitted to invest and on
exchange-traded index options; (vii) 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 stock and may
purchase and write options on future contracts; (viii) purchase
and write put and call options on foreign currencies for hedging
purposes; (ix) purchase or sell forward contracts; (x) enter into
interest rate swaps and purchase or sell interest rate caps and
floors; (xi) enter into forward commitments for the purchase or
sale of securities; (xii) enter into standby commitment
agreements; (xiii) enter into currency swaps for hedging
purposes; (xiv) enter into repurchase agreements pertaining to
U.S. Government securities with member banks of the Federal
Reserve System or primary dealers in such securities; (xv) make
short sales of securities or maintain a short position, in each
case only if "against the box"; and (xvi) make secured loans of
its portfolio securities not in excess of 30% of its total assets
to entities with which it can enter into repurchase agreements.
All or some of the policies and practices listed above may not be
available to the Fund in one or more of the Greater China
countries, and the Fund will utilize these policies only to the
extent permissible.
With respect to currency swaps, standby commitment
agreements and other commitments that may have the effect of
requiring the Fund to increase its investment in a borrower or
other issuer, the net amount of the excess, if any, of the Fund's
obligations over its entitlements will be accrued on a daily
basis and an amount of liquid assets having an aggregate value at
least equal to the accrued excess will be maintained in a
segregated accounting by the Fund's Custodian.
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.
Portfolio Turnover. Generally, the Fund's policy with
respect to portfolio turnover is to purchase securities with a
view to holding them for periods of time sufficient to assure
that the Fund will realize less than 30% of its gross income from
the sale or other disposition of securities held for less than
three months (see "Dividends, Distributions and Taxes-United
3
<PAGE>
States Federal Income Taxation of Dividends and Distributions--
General") and to hold its securities for six months or longer.
However, it is also the Fund's policy to sell any security
whenever, in the judgment of the Adviser, its appreciation
possibilities have been substantially realized or the business or
market prospects for such security have deteriorated,
irrespective of the length of time that the security has been
held. The Adviser anticipates that the Fund's annual rate of
portfolio turnover will not exceed 150%. A 150% annual turnover
rate would occur if all the securities in the Fund's portfolio
were replaced one and one-half times within a period of one year.
The turnover rate has a direct effect on the transaction costs to
be borne by the Fund, and as portfolio turnover increases it is
more likely that the Fund will realize short-term capital
gains.
Certain Fundamental Investment Policies. The following
restrictions, which supplement those set forth in the Fund's
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
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) borrow money except from banks for temporary or
emergency purposes, including the meeting of redemption requests
which might require the untimely disposition of securities;
borrowing in the aggregate may not exceed 15%, and borrowing for
purposes other than meeting redemptions may not exceed 5% of the
value of the Fund's total assets (including the amount borrowed)
less liabilities (not including the amount borrowed) at the time
the borrowing is made; outstanding borrowings in excess of 5% of
the value of the Fund's total assets will be repaid before any
investments are made;
(ii) pledge, hypothecate, mortgage or otherwise encumber
its assets, except to secure permitted borrowings;
(iii) make loans except through (i) the purchase of debt
obligations in accordance with its investment objectives and
4
<PAGE>
policies; (ii) the lending of portfolio securities; or (iii) the
use of repurchase agreements;
(iv) participate on a joint or joint and several basis
in any securities trading account;
(v) invest in companies for the purpose of exercising
control;
(vi) issue any senior security within the meaning of the
Act;
(vii) make short sales of securities or maintain a short
position, unless at all times when a short position is open an
equal amount of such securities or securities convertible into or
exchangeable for, without payment of any further consideration,
securities of the same issue as, and equal in amount to, the
securities sold short ("short sales against the box") and unless
not more than 25% of the Fund's net assets (taken at market
value) is held as collateral for such sales at any one time (it
is the Fund's present intention to make such sales only for the
purpose of deferring realization of gain or loss for Federal
income tax purposes);
(viii) (a) 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); (b) purchase securities on margin, except
for such short-term credits as may be necessary for the clearance
of transactions; and (c) 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;
___________________________________________________________
MANAGEMENT OF THE FUND
___________________________________________________________
Directors and Officers
The Directors and principal officers of the Fund, their
ages and their primary occupations during the past five years are
set forth below. Certain Directors and officers are also
directors, trustees or officers of other registered investment
companies sponsored by the Adviser. Unless otherwise specified,
5
<PAGE>
the address of each of the following persons is 1345 Avenue of
the Americas, New York, New York 10105.
DIRECTORS
JOHN D. CARIFA,1 51, Chairman of the Board and President
of the Fund, is the President, Chief Operating Officer and a
Director of ACMC with which he has been associated since prior to
1992.
DAVID H. DIEVLER, 67, was formerly a Senior Vice
President of ACMC with which he had been associated since prior
to 1992. He is currently an independent consultant. His address
is P.O. Box 167, Spring Lake, New Jersey 07762.
WILLIAM H. FOULK, JR., 64, is an Investment Adviser and
an Independent Consultant. He was formerly Senior Manager of
Barrett Associates, Inc., a registered investment adviser, with
which he had been associated since prior to 1992. His address is
2 Hekma Road, Greenwich, Connecticut 06831.
TAK-LUNG TSIM, [Age], [official title in his consulting
company] of T.L. Tsim Associates Limited, an independent
consulting company [which advices multinational companies on
[political risks and] strategic planning] with which he has been
associated since 1994[, [and] a Fellow of Shaw College of The
Chinese University of Hong Kong] [and a member of the Steering
Committee of China Review, an annual publication focusing on
current events in China]. Prior to forming T.L. Tsim Associates
he was a member of the Central Policy Unit of [T]he Hong Kong
[G]overnment. His address is [ ].
OFFICERS
JOHN D. CARIFA, Chairman and President, see biography
above.
KATHLEEN A. CORBET, 37, Senior Vice President, is an
Executive Vice President of ACMC, with which she has been
associated since July 1993. Prior thereto, she was employed by
Equitable Capital since prior to 1992.
MATHEW W.S. LEE, ____, Vice President, is a Senior Vice
President of ACMC, with which he has been associated since [ ]
1997. Prior thereto he was a director of National Mutual Funds
Management (ASIA), since 1994 and an [employee] [job title] of
James Capel & Co. since prior to [1992].
_________________________
1. An interested person of the Fund as defined in the 1940 Act.
6
<PAGE>
EDMUND P. BERGAN, JR., 46, Secretary, is a Senior Vice
President and General Counsel of Alliance Fund Distributors, Inc.
("AFD") with which he has been associated since prior to
1992.
MARK D. GERSTEN, 46, Treasurer, and Chief Financial
Officer, is a Senior Vice President of Alliance Fund Services,
Inc. ("AFS"), with which he has been associated since prior to
1992.
VINCENT S. NOTO, 32, Controller, is a Vice President of
AFS with which he has been associated since prior to 1992.
ANDREW L. GANGOLF, 42, Assistant Secretary, is a Vice
President and Assistant General Counsel of AFD with which he has
been associated since December 1994. Prior thereto, he was a
Vice President and Assistant Secretary of Delaware Management
Company, Inc. since October 1992 and a Vice President and Counsel
to Equitable Life Assurance Society of the United States since
prior to 1992.
DOMENICK PUGLIESE, 35, Assistant Secretary, is a Vice
President and Assistant General Counsel of AFD, with which he has
been associated since May 1995. Prior thereto, he was a Vice
President and Associate General Counsel of Prudential Securities
since prior to 1992.
EMILIE D. WRAPP, 40, Assistant Secretary, is a Vice
President and Special Counsel of AFD, with which she has been
associated since prior to 1992.
The aggregate compensation to be paid by the Fund to
each of the Directors during its current fiscal year ended
July 1, 1998 (estimating future payments based upon existing
arrangements), and the aggregate compensation paid to each of the
Directors during calendar year 1996 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 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 Fund nor any other fund in the Alliance Fund Complex provides
compensation in the form of pensions or retirement benefits to
any of its directors or trustees.
7
<PAGE>
Total Number
of Funds in
the Alliance
Total Fund Complex,
Compensation Including the
from the Fund, as to
Alliance Fund which the
Name of Aggregate Complex, Director is a
Director Compensation Including the Director or
of the Fund from the Fund* Fund Trustee
___________ ____________ ______________ _____________
John D. Carifa $0 $0 51
David H. Dievler [$ ] $182,00 44
William H. Foulk, Jr. [$ ] $144,250 33
T.L. Tsim [$ ] [$ ] 1
_______________
* estimated
As of [ ], the Directors and officers of the
Fund as a group owned [less than 1%] [ ]% of the Class [ ]
shares of the Fund.
Adviser
Alliance Capital Management L.P., a New York Stock
Exchange listed company with principal offices at 1345 Avenue of
the Americas, New York, New York 10105, has been retained under
an investment advisory agreement (the "Advisory Agreement") to
provide investment advice and, in general, to conduct the
management and investment program of the Fund under the
supervision and control of the Fund's Board of Directors.
Alliance is a leading international investment manager
supervising client accounts with assets as of March 31, 1997 of
more than $182 billion (of which more than $66 billion
represented the assets of investment companies). The Adviser's
clients are primarily major corporate employee benefit funds,
public employee retirement systems, investment companies,
foundations and endowment funds and included as of March 31,
1997, 31 of the FORTUNE 100 companies. As of that date, the
Adviser and its subsidiaries employed approximately 1,450
employees who operated out of domestic offices and the offices of
subsidiaries in Bombay, Istanbul, London, Paris, Sao Paolo,
Sydney, Tokyo, Toronto, Bahrain, Luxembourg and Singapore. The
53 registered investment companies comprising 110 separate
investment portfolios managed by the Adviser currently have more
than two million shareholders.
8
<PAGE>
Alliance Capital Management Corporation, the sole
general partner of, and the owner of a 1% general partnership
interest in, the Adviser, is an indirect wholly-owned subsidiary
of The Equitable Life Assurance Society of the United States
("Equitable"), one of the largest life insurance companies in the
United States and a wholly-owned subsidiary of The Equitable
Companies Incorporated ("ECI"), a holding company controlled by
AXA-UAP, a French insurance holding company. As of March 1,
1997, ACMC, Inc. and Equitable Capital Management Corporation,
each a wholly-owned direct or indirect subsidiary of Equitable,
together with Equitable, owned in the aggregate approximately 58%
of the issued and outstanding units representing assignments of
beneficial ownership of limited partnership interests in the
Adviser ("Units"). As of March 31, 1997, approximately 33% and
9% of the Units were owned by the public and an employee of the
Adviser and its subsidiaries, respectively, [including an
employee of the Adviser who serve as a Director of the Fund.]
As of March 1, 1997, AXA-UAP and its subsidiaries owned
60.7% of the issued and outstanding shares of the capital stock
of ECI. ECI is a public company with shares traded on the
Exchange. AXA-UAP, a French company, is the holding company for
an international group of insurance and related financial
services companies. AXA-UAP's insurance operations include
activities in life insurance, property and casualty insurance and
reinsurance. The insurance operations are diverse geographically
with activities, principally in Western Europe, North America and
the Asia/Pacific area. AXA-UAP is also engaged in asset
management, investment banking, securities trading, brokerage,
real estate and other financial services activities principally
in the United States, as well as in Western Europe and the
Asia/Pacific area.
Based on information provided by AXA-UAP, on March 1,
1997, 22.5% of the issued ordinary shares (representing 33.0% of
the voting power) of AXA-UAP were controlled directly and
indirectly by Finaxa, a French holding company. As of March 1,
1997, 61.4% of the shares (representing 72.0% of the voting
power) of Finaxa were owned by four French mutual insurance
companies (the "Mutuelles AXA") (one of which, AXA Assurances
I.A.R.D. Mutuelle, owned 34.9% of the shares, representing 40.0%
of the voting power), and 23.7% of the shares of Finaxa
(representing 14.6% of the voting power) were owned by Banque
Paribas, a French bank ("Paribas"). Including the ordinary
shares owned by Finaxa, on March 1, 1997, the Mutuelles AXA
directly or indirectly controlled 26.0% of the issued ordinary
shares (representing 38.1% of the voting power) of AXA-UAP.
Acting as a group, the Mutuelles AXA control AXA-UAP and
Finaxa.
9
<PAGE>
In November 1996, AXA offered (the "Exchange Offer") to
acquire 100% of the ordinary shares ("UAP Shares") of FF10 each
of Compagnie UAP, a societe anonyme organized under the laws of
France ("UAP"), in exchange for ordinary shares ("Shares") and
Certificates of Guaranteed Value ("Certificates") of AXA. Each
UAP shareholder that tendered UAP Shares in the Exchange Offer
received two Shares and two Certificates for every five UAP
Shares so tendered. On January 24, 1997, AXA acquired 91.37% of
the outstanding UAP Shares. AXA-UAP currently intends to merge
(the "Merger") with UAP at some future date in 1997. It is
anticipated that approximately 11,706,826 additional Shares will
be issued in connection with the Merger to UAP shareholders who
did not tender UAP Shares in the Exchange Offer. If the Merger
had been completed at March 1, 1997, Finaxa would have
beneficially owned (directly and indirectly) approximately 21.7%
of the Shares (representing approximately 32.0% of the voting
power), and the Mutuelles AXA would have controlled (directly or
indirectly through their interest in Finaxa) 25.1% of the issued
ordinary shares (representing 36.8% of the voting power) of AXA-
UAP. On January 17, 1997, AXA announced its intention to redeem
its outstanding 6% Bonds (the "Bonds"). Between February 14,
1997 and May 14, 1997, holders of the Bonds has the option to
convert each Bond into 5.15 Shares. On May 15, 1997, each Bond
still outstanding was redeemed into cash at FF1,285 plus FF9.29
accrued interest. Finaxa converted the Bonds it had owned into
2,153,308 Shares. After giving effect to the conversion of all
outstanding Bonds into Shares and to the Merger as if it had been
completed at March 1, 1997, Finaxa would have beneficially owned
(directly and indirectly) approximately 21.4% of the Shares
(representing 31.3% of the voting power), and the Mutuelles AXA
would have controlled (directly or indirectly through their
interest in Finaxa) 24.7% of the issued ordinary shares
(representing 36.0% of the voting power) of AXA-UAP.
Under the Advisory Agreement, the Adviser provides
investment advisory services and order placement facilities for
the Fund and pays all compensation of Directors and officers of
the Fund who are affiliated persons of the Adviser. The Adviser
or its affiliates also furnishes the Fund, without charge,
management supervision and assistance and office facilities and
provides persons satisfactory to the Fund's Board of Directors to
serve as the Fund's officers.
The Adviser is, under the Advisory Agreement,
responsible for certain expenses incurred by the Fund, including,
for example, office facilities and certain administrative
services, and any expenses incurred in promoting the sale of Fund
shares (other than the portion of the promotional expenses borne
by the Fund in accordance with an effective plan pursuant to Rule
12b-1 under the Securities Exchange Act of 1940, as amended, (the
"1940 Act") and the costs of printing Fund prospectuses and other
10
<PAGE>
reports to shareholders and fees related to registration with the
Securities and Exchange Commission (the "Commission") and with
state regulatory authorities).
The Fund has, under the Advisory Agreement, assumed the
obligation for payment of all of its other expenses. As to the
obtaining of services other than those specifically provided to
the Fund by the Adviser, the Fund may employ its own personnel.
For such services, it also may utilize personnel employed by the
Adviser or by other subsidiaries of Equitable. In such event,
the services will be provided to the Fund at cost and the
payments specifically approved by the Fund's Board of Directors.
Under the Advisory Agreement, the Fund pays the Adviser
a fee at the annual rate of 1.00% of the value of the average
daily net assets of the Fund. This fee is higher than the
management fees paid by most U.S. registered investment companies
investing exclusively in securities of U.S. issuers, although the
Adviser believes the fee is generally comparable to the
management fees paid by other open-end registered investment
companies that invest in the securities of foreign issuers and it
is justified by the special care that must be given to the
selection and supervision of the particular types of securities
in which the Fund will invest. The fee is accrued daily and paid
monthly.
The Advisory Agreement became effective on
[ ] having been approved by the unanimous vote, cast
in person, of the Fund's Directors, including the Directors who
are not parties to the Advisory Agreement or interested persons
as defined in the 1940 Act of any such party, at a meeting called
for that purpose and held on July 29, 1997, and by the Fund's
initial shareholder on July 30, 1997.
The Advisory Agreement will remain in force for
successive twelve-month periods (computed from each July 1),
provided that such continuance is approved at least annually by a
vote of a majority of the Fund's outstanding voting securities or
by the Fund's 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 Act.
The Advisory Agreement is terminable without penalty by
a vote of a majority of the Fund's outstanding voting securities
or by a vote of a majority of the Fund's 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,
11
<PAGE>
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 Fund. The Adviser
may, from time to time, make recommendations which result in the
purchase or sale of a particular security by its other clients
simultaneously with the Fund. 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 recommendations
and the placing of orders in a manner which is deemed equitable
by the Adviser to the accounts involved, including the Fund.
When two or more of the clients of the Adviser (including the
Fund) 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 ACM Institutional Reserves, Inc.,
AFD Exchange Reserves, Alliance All-Asia Investment Fund, Inc.,
The Alliance Fund, Inc., Alliance Balanced Shares, Inc., Alliance
Bond Fund, Inc., Alliance Capital Reserves, Alliance Developing
Markets Fund, Inc., Alliance Global Dollar Government Fund, Inc.,
Alliance Global Small Cap Fund, Inc., Alliance Global Strategic
Income Trust, Inc., Alliance Government Reserves, Alliance Growth
and Income Fund, Inc., Alliance High Yield Fund, Inc., Alliance
Income Builder Fund, Inc., Alliance International Fund, 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/Regent Sector Opportunity Fund, Inc.,
Alliance Short-Term Multi-Market Trust, Inc., Alliance Technology
Fund, Inc., Alliance Utility Income Fund, Inc., Alliance Variable
Products Series Fund, Inc., Alliance World Income Trust, Inc.,
Alliance Worldwide Privatization Fund, Inc., The Alliance
Portfolios, Fiduciary Management Associates and The Hudson River
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 Dollar Income Fund, Inc., ACM
Managed Income Fund, Inc., ACM Municipal Securities Income Fund,
Inc., Alliance Global Environment Fund, Inc., Alliance World
Dollar Government Fund, Inc., Alliance World Dollar Government
Fund II, Inc., The Austria Fund, Inc., The Korean Investment
12
<PAGE>
Fund, Inc., The Southern Africa Fund, Inc. and The Spain Fund,
Inc., all registered closed-end investment companies.
Consultant to the Adviser
In connection with its provision of advisory services to
the Fund, Alliance has retained at its expense as a consultant
New-Alliance Asset Management (Asia) Limited ("New Alliance"), a
joint venture company headquartered in Hong Kong which was formed
in 1997 by Alliance and Sun Hung Kai Properties Limited ("SHKP").
New Alliance will provide Alliance with ongoing current and
comprehensive information and analysis of conditions and
developments in Greater China countries consisting of, but not
limited to, statistical and factual research and assistance with
respect to economic, financial, political, technological and
social conditions and trends in Greater China countries,
including information on markets and industries. In addition to
its own staff of professionals, New Alliance has access to the
expertise and personnel of SHKP, one of Hong Kong's largest
property developers for both the residential and commercial
sectors, whose developments include office and industrial
properties, hotels and shopping centers, and selected projects in
China. SHKP is one of the largest enterprises in Hong Kong
measured by market capitalization and has considerable expertise
in evaluating business and market conditions in Hong Kong and the
other Greater China countries. Its activities complementary to
property development include insurance and estate management, and
SHKP is diversified as well into telecommunications and
infrastructure projects.
___________________________________________________________
EXPENSES OF THE FUND
___________________________________________________________
Distribution Services Agreement
The Fund has entered into a Distribution Services
Agreement (the "Agreement") with Alliance Fund Distributors,
Inc., the Fund's principal underwriter (the "Principal
Underwriter"), to permit the Principal Underwriter to distribute
the Fund's shares and to permit the Fund to pay distribution
services fees to defray expenses associated with the distribution
of its Class A shares, Class B shares and Class C 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 the Fund as accrued. The
13
<PAGE>
distribution services fees attributable to the Class B shares and
Class C shares are designed to permit an investor to purchase
such shares through broker-dealers without the assessment of an
initial sales charge and at the same time to permit the Principal
Underwriter to compensate broker-dealers in connection with the
sale of such shares. In this regard, the purpose and function of
the combined contingent deferred sales charges and distribution
services fees on the Class B shares and Class C shares are the
same as those of the initial sales charge and distribution
services fee with respect to the Class A shares in that in each
case the sales charge and distribution services fee provide for
the financing of the distribution of the relevant class of the
Fund's shares.
Under the Agreement, the Treasurer of the Fund reports
the amounts expended under the Rule 12b-1 Plan and the purposes
for which such expenditures were made to the Directors of the
Fund for their review on a quarterly basis. Also, the Agreement
provides that the selection and nomination of Directors who are
not "interested persons" of the Fund, as defined in the 1940 Act,
are committed to the discretion of such disinterested Directors
then in office. The Agreement was initially approved by the
Directors of the Fund at a meeting held on July 29, 1997, and by
the Fund's initial shareholder on July 30, 1997.
The Agreement became effective on [ ] with
respect to Class A shares, Class B shares and Class C shares and
Advisor Class shares. The Agreement will continue in effect for
successive twelve-month periods (computed from each July 1),
provided, however, that such continuance is specifically approved
at least annually by the Directors of the Fund 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 of the Fund 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 Fund) and who have
no direct or indirect financial interest in the operation of the
Rule 12b-1 Plan or any agreement related thereto.
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 Agreement is terminated or not
continued with respect to the Class A shares, Class B shares or
Class C shares, (i) no distribution services fees (other than
current amounts accrued but not yet paid) would be owed by the
Fund to the Principal Underwriter with respect to that class and
14
<PAGE>
(ii) the Fund 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 or
through deferred sales charges.
All material amendments to the Agreement must be
approved by a vote of the Directors or the holders of the Fund's
outstanding voting securities, voting separately by class, and in
either case, by a majority of the disinterested Directors, cast
in person at a meeting called for the purpose of voting on such
approval; and the Agreement may not be amended in order to
increase materially the costs that the Fund may bear pursuant to
the Agreement without the approval of a majority of the holders
of the outstanding voting shares of the class or classes
affected. The Agreement may be terminated (a) by the Fund
without penalty at any time by a majority vote of the holders of
the outstanding voting securities of the Fund, voting separately
by class or by a majority vote of the Directors who are not
"interested persons" as defined in the 1940 Act, or (b) by the
Principal Underwriter. To terminate the Agreement, any party
must give the other parties 60 days' written notice; to terminate
the Rule 12b-1 Plan only, the Fund need give no notice to the
Principal Underwriter. The Agreement will terminate
automatically in the event of its assignment.
Transfer Agency Agreement
Alliance Fund Services, Inc., an indirect wholly-owned
subsidiary of the Adviser, receives a transfer agency fee per
account holder of each of the Class A shares, Class B shares,
Class C shares and Advisor Class shares of the Fund, plus
reimbursement for out-of-pocket expenses. The transfer agency
fee with respect to the Class B shares and Class C shares is
higher than the transfer agency fee with respect to the Class A
and Advisor Class shares.
_______________________________________________________________
PURCHASE OF SHARES
_______________________________________________________________
The following information supplements that set forth in
the Fund's Prospectus under the heading "Purchase and Sale of
Shares -- How To Buy Shares."
General
Shares of the Fund are offered on a continuous basis at
a price equal to their net asset value plus an initial sales
charge at the time of purchase ("Class A shares"), with a
15
<PAGE>
contingent deferred sales charge ("Class B shares") without any
initial sales charge and, as long as the shares are held for one
year or more, without any contingent deferred sales charge
("Class C shares"), or, to investors eligible to purchase Advisor
Class shares, without any initial, contingent deferred or asset-
based sales charge, in each case as described below. Shares of
the Fund that are offered subject to a sales charge are offered
through (i) investment dealers that are members of the National
Association of Securities Dealers, Inc. and have entered into
selected dealer agreements with the Principal Underwriter
("selected dealers"), (ii) depository institutions and other
financial intermediaries or their affiliates that have entered
into selected agent agreements with the Principal Underwriter
("selected agents") and (iii) the Principal Underwriter.
Advisor Class shares of the Fund may be purchased and
held solely (i) through accounts established under fee-based
programs, sponsored and maintained by registered broker-dealers
or other financial intermediaries and approved by the Principal
Underwriter, (ii) through self-directed defined contribution
employee benefit plans (e.g., 401(k) plans) that have at least
1,000 participants or $25 million in assets, (iii) by the
categories of investors described in clauses (i) through (iv)
below under "--Sales at Net Asset Value" (other than officers,
directors and present and full-time employees of selected dealers
or agents, or relatives of such person, or any trust, individual
retirement account or retirement plan account for the benefit of
such relative, none of whom is eligible on the basis solely of
such status to purchase and hold Advisor Class shares) or,
(iv) by directors and present or retired full-time employees of
New-Alliance and Koll Real Estate Services. Generally, a fee-
based program must charge an asset-based or other similar fee and
must invest at least $250,000 in Advisor Class shares of the Fund
in order to be approved by the Principal Underwriter for
investment in Advisor Class shares.
If you are a Fund 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 Advisor Class shares of the Fund that are different
from those described in the Advisor Class Prospectus and this
Statement of Additional Information. A transaction fee may be
charged by your financial representative with respect to the
purchase, sale or exchange of Advisor Class shares made through
such financial representative.
Investors may purchase shares of the Fund either through
selected broker-dealers, agents, financial intermediaries or
other financial representatives, or directly through the
Principal Underwriter. A transaction, service, administrative or
other similar fee may be charged by your broker-dealer, agent,
16
<PAGE>
financial intermediary or other financial representative with
respect to the purchase, sale or exchange of Class A, Class B,
Class C or Advisor Class 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 the Fund, including requirements as to the minimum initial and
subsequent investment amounts. Sales personnel of selected
dealers and agents distributing the Fund's shares may receive
differing compensation for selling Class A, Class B, Class C or
Advisor Class shares.
The Fund may refuse any order for the purchase of
shares. The Fund reserves the right to suspend the sale of its
shares to the public in response to conditions in the securities
markets or for other reasons.
The public offering price of shares of the Fund is their
net asset value, plus, in the case of Class A shares, a sales
charge which will vary depending on the purchase alternative
chosen by the investor, as shown in the table below under "Class
A Shares." On each Fund business day on which a purchase or
redemption order is received by the Fund and trading in the types
of securities in which the Fund invests might materially affect
the value of Fund shares, the per share net asset value is
computed in accordance with the 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 Fund business day is any day, on which the Exchange is open for
trading.
The respective per share net asset values of the
Class A, Class B, Class C and Advisor Class shares are expected
to be substantially the same. Under certain circumstances,
however, the per share net asset values of the Class B and
Class C shares may be lower than the per share net asset values
of the Class A and Advisor Class shares, as a result of the
differential daily expense accruals of the distribution and
transfer agency fees applicable with respect to those classes of
shares. Even under those circumstances, the per share net asset
values of the four classes eventually will tend to converge
immediately after the payment of dividends, which will differ by
approximately the amount of the expense accrual differential
among the classes.
The Fund will accept unconditional orders for its shares
to be executed at the public offering price equal to their net
asset value next determined (plus applicable Class A sales
charges), as described below. Orders received by the Principal
17
<PAGE>
Underwriter prior to the close of regular trading on the Exchange
on each day the Exchange is open for trading are priced at the
net asset value computed as of the close of regular trading on
the Exchange on that day (plus applicable Class A sales charges).
In the case of orders for purchases of shares placed through
selected dealers, agents or financial representatives, as
applicable, the applicable public offering price will be the net
asset value as so determined, but only if the selected dealer,
agent or 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
selected dealer, agent or financial representative, as
applicable, is responsible for transmitting such orders by
5:00 p.m. Eastern time. If the selected dealer, agent or
financial representative fails to do so, the investor's right to
that day's closing price must be settled between the investor and
the selected dealer, agent or financial representative, as
applicable. If the selected dealer, agent or financial
representatives, as applicable, 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
Fund business day, the order to purchase shares is automatically
placed the following Fund business day, and the applicable public
offering price will be the public offering price determined as of
the close of business on such following business day.
Full and fractional shares are credited to a
subscriber's account in the amount of his or her subscription. As
a convenience to the subscriber, and to avoid unnecessary expense
to the Fund, stock certificates representing shares of the Fund
are not issued except upon written request to the Fund by the
shareholder or his or her authorized selected dealer or agent.
This facilitates later redemption and relieves the shareholder of
the responsibility for and inconvenience of lost or stolen
certificates. No certificates are issued for fractional shares,
18
<PAGE>
although such shares remain in the shareholder's account on the
books of the 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,
including EQ Financial Consultants, Inc., formerly Equico
Securities, Inc., an affiliate of the Principal Underwriter, in
connection with the sale of shares of the Fund. Such additional
amounts may be utilized, in whole or in part to provide
additional compensation to registered representatives who sell
shares of the Fund. On some occasions, cash or other incentives
will be conditioned upon the sale of a specified minimum dollar
amount of the shares of the Fund and/or other Alliance Mutual
Funds, as defined below, during a specific period of time. On
some occasions, such cash or other incentives may take the form
of payment for attendance at 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 and their immediate family
members to urban or resort locations within or outside the United
States. Such dealer or agent may elect to receive cash
incentives of equivalent amount in lieu of such payments.
Class A, Class B, Class C and Advisor Class shares each
represent an interest in the same portfolio of investments of the
Fund, have the same rights and are identical in all respects,
except that (i) Class A shares bear the expense of the initial
sales charge (or contingent deferred sales charge when
applicable) and Class B and Class C shares bear the expense of
the deferred sales charge, (ii) Class B shares and Class C shares
each bear the expense of a higher distribution services fee than
that borne by Class A shares, and Advisor Class shares do not
bear such a fee, (iii) Class B and Class C shares bear higher
transfer agency costs than that borne by Class A and Advisor
Class shares, (iv) each of Class A, Class B and Class C shares
has exclusive voting rights with respect to provisions of the
Rule 12b-1 Plan pursuant to which its distribution services fee
is paid and other matters for which separate class voting is
appropriate under applicable law, provided that, if the Fund
submits to a vote of the Class A shareholders, an amendment to
the Rule 12b-1 Plan that would materially increase the amount to
be paid thereunder with respect to the Class A shares, then such
amendment will also be submitted to the Class B and Advisor Class
shareholders, and the Class A, the Class B and Advisor Class
shareholders will vote separately by class and (v) Class B and
Advisor Class shares are subject to a conversion feature. Each
class has different exchange privileges and certain different
shareholder service options available.
19
<PAGE>
The Directors of the Fund have determined that currently
no conflict of interest exists between or among the Class A,
Class B, Class C and Advisor Class shares. On an ongoing basis,
the Directors of the Fund, pursuant to their fiduciary duties
under the 1940 Act and state law, will seek to ensure that no
such conflict arises.
Alternative Retail Purchase Arrangements -- Class A, Class B
and Class C Shares2
The alternative purchase arrangements available with
respect to Class A shares, Class B shares and Class C shares
permit an investor to choose the method of purchasing shares that
is most beneficial given the amount of purchase, the length of
time the investor expects to hold the shares, and other
circumstances. Investors should consider whether, during the
anticipated life of their investment in the Fund, the accumulated
distribution services fee and contingent deferred sales charge on
Class B shares prior to conversion, or the accumulated
distribution services fee and contingent deferred sales charge on
Class C shares, would be less than the initial sales charge and
accumulated distribution services fee on Class A shares purchased
at the same time, and to what extent such differential would be
offset by the higher return of Class A shares. Class A shares
will normally be more beneficial than Class B shares to the
investor who qualifies for reduced initial sales charges on
Class A shares, as described below. In this regard, the
Principal Underwriter will reject any order (except orders from
certain retirement plans) for more than $250,000 for Class B
shares. Class C shares will normally not be suitable for the
investor who qualifies to purchase Class A shares at net asset
value. For this reason, the Principal Underwriter will reject
any order for more than $1,000,000 for Class C shares.
Class A shares are subject to a lower distribution
services fee and, accordingly, pay correspondingly higher
dividends per share than Class B shares or Class C shares.
However, because initial sales charges are deducted at the time
of purchase, investors purchasing Class A shares would not have
all their funds invested initially and, therefore, would
initially own fewer shares. Investors not qualifying for reduced
initial sales charges who expect to maintain their investment for
an extended period of time might consider purchasing Class A
shares because the accumulated continuing distribution charges on
Class B shares or Class C shares may exceed the initial sales
charge on Class A shares during the life of the investment.
Again, however, such investors must weigh this consideration
_________________________
2. Advisor Class shares are sold only to investors described
above in this section under "General."
20
<PAGE>
against the fact that, because of such initial sales charges, not
all their funds will be invested initially.
Other investors might determine, however, that it would
be more advantageous to purchase Class B shares or Class C shares
in order to have all their funds invested initially, although
remaining subject to higher continuing distribution charges and
being subject to a contingent deferred sales charge for a four-
year and one-year period, respectively. For example, based on
current fees and expenses, an investor subject to the 4.25%
initial sales charge would have to hold his or her investment
approximately seven years for the Class C distribution services
fee to exceed the initial sales charge plus the accumulated
distribution services fee of Class A shares. In this example, an
investor intending to maintain his or her investment for a longer
period might consider purchasing Class A shares. This example
does not take into account the time value of money, which further
reduces the impact of the Class C distribution services fees on
the investment, fluctuations in net asset value or the effect of
different performance assumptions.
Those investors who prefer to have all of their funds
invested initially but may not wish to retain Fund shares for the
four-year period during which Class B shares are subject to a
contingent deferred sales charge may find it more advantageous to
purchase Class C shares.
Class A Shares
The public offering price of Class A shares is the net
asset value plus a sales charge, as set forth below.
21
<PAGE>
Sales Charge
Discount or
Commission
As % of to Dealers
As % of the or Agents
Net Public As % of
Amount of Amount Offering Offering
Purchase Invested Price Price
________ ________ ________ ____________
Less than
$100,000 . . . 4.44% 4.25% 4.00%
$100,000 but
less than
$250,000. . . . 3.36 3.25 3.00
$250,000 but
less than
$500,000. . . . 2.30 2.25 2.00
$500,000 but
less than
$1,000,000*. . . 1.78 1.75 1.50
_____________
* There is no initial sales charge on transactions of $1,000,000
or more.
With respect to purchases of $1,000,000 or more, Class A
shares redeemed within one year of purchase will be subject to a
contingent deferred sales charge equal to 1% of the lesser of the
cost of the shares being redeemed or their net asset value at the
time of redemption. Accordingly, no sales charge will be imposed
on increases in net asset value above the initial purchase price.
In addition, no charge will be assessed on shares derived from
reinvestment of dividends or capital gains distributions. The
contingent deferred sales charge on Class A shares will be waived
on certain redemptions, as described below under "--Class B
Shares." In determining the contingent deferred sales charge
applicable to a redemption of Class A shares, it will be assumed
that the redemption is, first, of any shares that are not subject
to a contingent deferred sales charge (for example, because an
initial sales charge was paid with respect to the shares, or they
have been held beyond the period during which the charge applies
or were acquired upon the reinvestment of dividends and
distributions) and, second, of shares held longest during the
time they are subject to the sales charge. Proceeds from the
contingent deferred sales charge on Class A shares are paid to
the Principal Underwriter and are used by the Principal
Underwriter to defray the expenses of the Principal Underwriter
related to providing distribution-related services to the Fund in
22
<PAGE>
connection with the sales of Class A shares, such as the payment
of compensation to selected dealers and agents for selling
Class A Shares. With respect to purchases of $1,000,000 or more
made through selected dealers or agents, the Adviser may,
pursuant to the Distribution Services Agreement described above,
pay such dealers or agents from its own resources a fee of up to
1% of the amount invested to compensate such dealers or agents
for their distribution assistance in connection with such
purchases.
No initial sales charge is imposed on Class A shares
issued (i) pursuant to the automatic reinvestment of income
dividends or capital gains distributions, (ii) in exchange for
Class A shares of other "Alliance Mutual Funds" (as that term is
defined under "Combined Purchase Privilege" below), except that
an initial sales charge will be imposed on Class A shares issued
in exchange for Class A shares of AFD Exchange Reserves ("AFDER")
that were purchased for cash without the payment of an initial
sales charge and without being subject to a contingent deferred
sales charge or (iii) upon the automatic conversion of Class B
shares or Advisor Class shares as described below under "Class B
Shares-Conversion Feature" and "--Conversion of Advisor Class
Shares to Class A Shares". The Fund receives the entire net
asset value of its Class A shares sold to investors. The
Principal Underwriter's commission is the sales charge shown
above less any applicable discount or commission "reallowed" to
selected dealers and agents. The Principal Underwriter will
reallow discounts to selected dealers and agents in the amounts
indicated in the table above. In this regard, the Principal
Underwriter may elect to reallow the entire sales charge to
selected dealers and agents for all sales with respect to which
orders are placed with the Principal Underwriter. A selected
dealer who receives reallowance in excess of 90% of such a sales
charge may be deemed to be an "underwriter" under the Securities
Act of 1933, as amended.
Set forth below is an example of the method of computing
the offering price of the Class A shares. The example assumes a
purchase of Class A shares of the Fund aggregating less than
$50,000 subject to the schedule of sales charges set forth above
at a price based upon the net asset value of Class A shares of
the Fund on August 26, 1997.
Net Asset Value per Class A Share at
August 26, 1997 $10.00
Class A Per Share Sales Charge 4.25%
of offering price (4.44% of net asset
value per share) $ 0.44
23
<PAGE>
Class A Per Share Offering Price to
the Public $10.44
=====
Investors choosing the initial sales charge alternative
may under certain circumstances be entitled to pay (i) no initial
sales charge (but be subject in most such cases to a contingent
deferred sales charge) or (ii) a reduced initial sales charge.
The circumstances under which investors may pay a reduced initial
sales charge are described below.
Combined Purchase Privilege. Certain persons may
qualify for the sales charge reductions indicated in the schedule
of such charges above by combining purchases of shares of the
Fund into a single "purchase," if the resulting "purchase" totals
at least $100,000. The term "purchase" refers to: (i) a single
purchase by an individual, or to concurrent purchases, which in
the aggregate are at least equal to the prescribed amounts, by an
individual, his or her spouse and their children under the age of
21 years purchasing shares of the Fund for his, her or their own
account(s); (ii) a single purchase by a trustee or other
fiduciary purchasing shares for a single trust, estate or single
fiduciary account although more than one beneficiary is involved;
or (iii) a single purchase for the employee benefit plans of a
single employer. The term "purchase" also includes purchases by
any "company," as the term is defined in the 1940 Act, but does
not include purchases by any such company which has not been in
existence for at least six months or which has no purpose other
than the purchase of shares of the Fund or shares of other
registered investment companies at a discount. The term
"purchase" does not include purchases by any group of individuals
whose sole organizational nexus is that the participants therein
are credit card holders of a company, policy holders of an
insurance company, customers of either a bank or broker-dealer or
clients of an investment adviser. A "purchase" may also include
shares, purchased at the same time through a single selected
dealer or agent, of any other "Alliance Mutual Fund." Currently,
the Alliance Mutual Funds include:
AFD Exchange Reserves
The Alliance Fund, Inc.
Alliance All-Asia Investment Fund, Inc.
Alliance Balanced Shares, Inc.
Alliance Bond Fund, Inc.
-Corporate Bond Portfolio
-U.S. Government Portfolio
Alliance Developing Markets 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.
24
<PAGE>
Alliance Growth and Income Fund, Inc.
Alliance High Yield Fund, Inc.
Alliance Income Builder Fund, Inc.
Alliance International Fund
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/Regent Sector Opportunity Fund, Inc.
Alliance Short-Term Multi-Market Trust, Inc.
Alliance Technology Fund, Inc.
Alliance Utility Income Fund, Inc.
Alliance World Income Trust, Inc.
Alliance Worldwide Privatization Fund, Inc.
The Alliance Portfolios
-Alliance Growth Fund
-Alliance Conservative Investors Fund
-Alliance Growth Investors Fund
-Alliance Strategic Balanced Fund
-Alliance Short-Term U.S. Government Fund
Prospectuses for the Alliance Mutual Funds may be
obtained without charge by contacting Alliance Fund Services,
Inc. at the address or the "For Literature" telephone number
shown on the front cover of this Statement of Additional
Information.
Cumulative Quantity Discount (Right of Accumulation). An
investor's purchase of additional Class A shares of the Fund may
qualify for a Cumulative Quantity Discount. The applicable sales
charge will be based on the total of:
25
<PAGE>
(i) the investor's current purchase;
(ii) the net asset value (at the close of business
on the previous day) of (a) all shares of the
Fund held by the investor and (b) all shares
of any other Alliance Mutual Fund held by the
investor; and
(iii) the net asset value of all shares described in
paragraph (ii) owned by another shareholder
eligible to combine his or her purchase with
that of the investor into a single "purchase"
(see above).
For example, if an investor owned shares of an Alliance
Mutual Fund worth $200,000 at their then current net asset value
and, subsequently, purchased Class A shares of the Fund worth an
additional $100,000, the sales charge for the $100,000 purchase
would be at the 2.25% rate applicable to a single $300,000
purchase of shares of the Fund, rather than the 3.25% rate.
To qualify for the Combined Purchase Privilege or to
obtain the Cumulative Quantity Discount on a purchase through a
selected dealer or agent, the investor or selected dealer or
agent must provide the Principal Underwriter with sufficient
information to verify that each purchase qualifies for the
privilege or discount.
Statement of Intention. Class A investors may also
obtain the reduced sales charges shown in the table above by
means of a written Statement of Intention, which expresses the
investor's intention to invest not less than $100,000 within a
period of 13 months in Class A shares (or Class A, Class B,
Class C and/or Advisor Class shares) of the Fund or any other
Alliance Mutual Fund. Each purchase of shares under a Statement
of Intention will be made at the public offering price or prices
applicable at the time of such purchase to a single transaction
of the dollar amount indicated in the Statement of Intention. At
the investor's option, a Statement of Intention may include
purchases of shares of the Fund or any other Alliance Mutual Fund
made not more than 90 days prior to the date that the investor
signs the Statement of Intention; however, the 13-month period
during which the Statement of Intention is in effect will begin
on the date of the earliest purchase to be included.
Investors qualifying for the Combined Purchase Privilege
described above may purchase shares of the Alliance Mutual Funds
under a single Statement of Intention. For example, if at the
time an investor signs a Statement of Intention to invest at
least $100,000 in Class A shares of the Fund, the investor and
the investor's spouse each purchase shares of the Fund worth
26
<PAGE>
$20,000 (for a total of $40,000), it will be necessary to invest
only a total of $60,000 during the following 13 months in shares
of the Fund or any other Alliance Mutual Fund, to qualify for the
3.25% sales charge on the total amount being invested (the sales
charge applicable to an investment of $100,000).
The Statement of Intention is not a binding obligation
upon the investor to purchase the full amount indicated. The
minimum initial investment under a Statement of Intention is 5%
of such amount. Shares purchased with the first 5% of such
amount will be held in escrow (while remaining registered in the
name of the investor) to secure payment of the higher sales
charge applicable to the shares actually purchased if the full
amount indicated is not purchased, and such escrowed shares will
be involuntarily redeemed to pay the additional sales charge, if
necessary. Dividends on escrowed shares, whether paid in cash or
reinvested in additional Fund shares, are not subject to escrow.
When the full amount indicated has been purchased, the escrow
will be released. To the extent that an investor purchases more
than the dollar amount indicated on the Statement of Intention
and qualifies for a further reduced sales charge, the sales
charge will be adjusted for the entire amount purchased at the
end of the 13-month period. The difference in the sales charge
will be used to purchase additional shares of the Fund subject to
the rate of the sales charge applicable to the actual amount of
the aggregate purchases.
Investors wishing to enter into a Statement of Intention
in conjunction with their initial investment in Class A shares of
the Fund should complete the appropriate portion of the
Subscription Application found in the Prospectus while current
Class A shareholders desiring to do so can obtain a form of
Statement of Intention by contacting Alliance Fund Services, Inc.
at the address or telephone numbers shown on the cover of this
Statement of Additional Information.
Certain Retirement Plans. Multiple participant payroll
deduction retirement plans may also purchase shares of the Fund
or any other Alliance Mutual Fund at a reduced sales charge on a
monthly basis during the 13-month period following such a plan's
initial purchase. The sales charge applicable to such initial
purchase of shares of the Fund will be that normally applicable,
under the schedule of the sales charges set forth in this
Statement of Additional Information, to an investment 13 times
larger than such initial purchase. The sales charge applicable
to each succeeding monthly purchase will be that normally
applicable, under such schedule, to an investment equal to the
sum of (i) the total purchase previously made during the 13-month
period and (ii) the current month's purchase multiplied by the
number of months (including the current month) remaining in the
13-month period. Sales charges previously paid during such
27
<PAGE>
period will not be retroactively adjusted on the basis of later
purchases.
Reinstatement Privilege. A shareholder who has caused
any or all of his or her Class A or Class B shares of the Fund to
be redeemed or repurchased may reinvest all or any portion of the
redemption or repurchase proceeds in Class A shares of the Fund
at net asset value without any sales charge, provided that
(i) such reinvestment is made within 120 calendar days after the
redemption or repurchase date and (ii) for Class B shares, a
contingent deferred sales charge has been paid and the Principal
Underwriter has approved, at its discretion, the reinvestment of
such shares. Shares are sold to a reinvesting shareholder at the
net asset value next determined as described above. A
reinstatement pursuant to this privilege will not cancel the
redemption or repurchase transaction; therefore, any gain or loss
so realized will be recognized for Federal income tax purposes,
except that no loss will be recognized to the extent that the
proceeds are reinvested in shares of the Fund within 30 calendar
days after the redemption or repurchase transaction. Investors
may exercise the reinstatement privilege by written request sent
to the Fund at the address shown on the cover of this Statement
of Additional Information.
Sales at Net Asset Value. The Fund may sell its Class A
shares at net asset value (i.e., without an initial sales charge)
and without a contingent deferred sales charge to certain
categories of investors including:
(i) investment management clients of the
Adviser or its affiliates;
(ii) officers and present or former Directors
of the Fund; present or former directors
and trustees of other investment
companies managed by the Adviser; present
or retired full-time employees of the
Adviser, the Principal Underwriter,
Alliance Fund Services, Inc., New
Alliance and their affiliates; officers
and directors of ACMC, the Principal
Underwriter, Alliance Fund Services,
Inc., New Alliance and their affiliates;
officers, directors and present full-time
employees of selected dealers or agents;
or the spouse, or a sibling, direct
ancestor or direct descendent
(collectively, "relatives") of any such
person; or any trust, individual
retirement account or retirement plan
account for the benefit of any such
28
<PAGE>
person or relative; or the estate of any
such person or relative, if such shares
are purchased for investment purposes
(such shares may not be resold except to
the Fund);
(iii) the Adviser, the Principal Underwriter,
Alliance Fund Services, Inc.,
New-Alliance and their affiliates;
certain employee benefit plans for
employees of the Adviser, the Principal
Underwriter, Alliance Fund Services,
Inc., New Alliance and their affiliates;
(iv) 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;
(v) persons participating in a fee-based
program, sponsored and maintained by a
registered broker-dealer or other
financial intermediary and approved by
the Principal Underwriter, pursuant to
which such persons pay an asset-based fee
to such broker-dealer or other financial
intermediary, or its affiliates or
agents, for services in the nature of
investment advisory or administrative
services;
(vi) persons who establish to the Principal
Underwriter's satisfaction that they are
investing within such time period as may
be designated by the Principal
Underwriter, proceeds of redemption of
shares of such other registered
investment companies as may be designated
from time to time by the Principal
Underwriter; and
(vii) employer-sponsored qualified pensions or
profit-sharing plans (including Section
29
<PAGE>
401(k) plans), custodial accounts
maintained pursuant to Section 403(b)(7),
retirement plans and individual
retirement accounts (including individual
retirement accounts to which simplified
employee pension ("SEP") contributions
are made), if such plans or accounts are
established or administered under
programs sponsored by administrators or
other persons that have been approved by
the Principal Underwriter.
Class B Shares
Investors may purchase Class B shares at the public
offering price equal to the net asset value per share of the
Class B shares on the date of purchase without the imposition of
a sales charge at the time of purchase. The Class B shares are
sold without an initial sales charge so that the Fund will
receive the full amount of the investor's purchase payment.
Proceeds from the contingent deferred sales charge on
the Class B shares are paid to the Principal Underwriter and are
used by the Principal Underwriter to defray the expenses of the
Principal Underwriter related to providing distribution-related
services to the Fund in connection with the sale of the Class B
shares, such as the payment of compensation to selected dealers
and agents for selling Class B shares. The combination of the
contingent deferred sales charge and the distribution services
fee enables the Fund to sell the Class B shares without a sales
charge being deducted at the time of purchase. The higher
distribution services fee incurred by Class B shares will cause
such shares to have a higher expense ratio and to pay lower
dividends than those related to Class A shares.
Contingent Deferred Sales Charge. Class B shares that
are redeemed within four years of purchase will be subject to a
contingent deferred sales charge at the rates set forth below
charged as a percentage of the dollar amount subject thereto. The
charge will be assessed on an amount equal to the lesser of the
cost of the shares being redeemed or their net asset value at the
time of redemption. Accordingly, no sales charge will be imposed
on increases in net asset value above the initial purchase price.
In addition, no charge will be assessed on shares derived from
reinvestment of dividends or capital gains distributions.
To illustrate, assume that an investor purchased 100
Class B shares at $10 per share (at a cost of $1,000) and in the
second year after purchase, the net asset value per share is $12
and, during such time, the investor has acquired 10 additional
Class B shares upon dividend reinvestment. If at such time the
30
<PAGE>
investor makes his or her first redemption of 50 Class B shares
(proceeds of $600), 10 Class B shares will not be subject to
charge because of dividend reinvestment. With respect to the
remaining 40 Class B shares, the charge is applied only to the
original cost of $10 per share and not to the increase in net
asset value of $2 per share. Therefore, $400 of the $600
redemption proceeds will be charged at a rate of 3.0% (the
applicable rate in the second year after purchase).
The amount of the contingent deferred sales charge, if
any, will vary depending on the number of years from the time of
payment for the purchase of Class B shares until the time of
redemption of such shares.
Contingent Deferred Sales Charge as a
Years Since Purchase % of Dollar Amount Subject to Charge
____________________ ____________________________________
Less than one 4.0%
One 3 0%
Two 2.0%
Three 1.0%
Four or more None
In determining the contingent deferred sales charge
applicable to a redemption of Class B shares, it will be assumed
that the redemption is, first, of any shares that were acquired
upon the reinvestment of dividends or distributions and, second,
of shares held longest during the time they are subject to the
sales charge. When shares acquired in an exchange are redeemed,
the applicable contingent deferred sales charge and conversion
schedules will be the schedules that applied at the time of the
purchase of shares of the corresponding class of the Alliance
Mutual Fund originally purchased by the shareholder.
The contingent deferred sales charge is waived on
redemptions of shares (i) following the death or disability, as
defined in the Code, of a shareholder, (ii) to the extent that
the redemption represents a minimum required distribution from an
individual retirement account or other retirement plan to a
shareholder who has attained the age of 70-1/2, (iii) that had
been purchased by present or former Directors of the Fund, by the
relative of any such person, by any trust, individual retirement
account or retirement plan account for the benefit of any such
person or relative or by the estate of any such person or
relative, or (iv) pursuant to a systematic withdrawal plan (see
"Shareholder Services - Systematic Withdrawal Plan" below).
Conversion Feature. Eight years after the end of the
calendar month in which the shareholder's purchase order was
31
<PAGE>
accepted, Class B shares will automatically convert to Class A
shares and will no longer be subject to a higher distribution
services fee. Such conversion will occur on the basis of the
relative net asset values of the two classes, without the
imposition of any sales load, fee or other charge. The purpose
of the conversion feature is to reduce the distribution services
fee paid by holders of Class B shares that have been outstanding
long enough for the Principal Underwriter to have been
compensated for distribution expenses incurred in the sale of
such shares.
For purposes of conversion to Class A, Class B shares
purchased through the reinvestment of dividends and distributions
paid in respect of Class B shares in a shareholder's account will
be considered to be held in a separate sub-account. Each time
any Class B shares in the shareholder's account (other than those
in the sub-account) convert to Class A, an equal pro-rata portion
of the Class B shares in the sub-account will also convert to
Class A.
The conversion of Class B shares to Class A shares is
subject to the continuing availability of an opinion of counsel
to the effect that the conversion of Class B shares to Class A
shares does not constitute a taxable event under federal income
tax law. The conversion of Class B shares to Class A shares may
be suspended if such an opinion is no longer available at the
time such conversion is to occur. In that event, no further
conversions of Class B shares would occur, and shares might
continue to be subject to the higher distribution services fee
for an indefinite period which may extend beyond the period
ending eight years after the end of the calendar month in which
the shareholder's purchase order was accepted.
Class C Shares
Investors may purchase Class C shares at the public
offering price equal to the net asset value per share of the
Class C shares on the date of purchase without the imposition of
a sales charge either at the time of purchase or, as long as the
shares are held for one year or more, upon redemption. Class C
shares are sold without an initial sales charge so that the Fund
will receive the full amount of the investor's purchase payment
and, as long as the shares are held for one year or more, without
a contingent deferred sales charge so that the investor will
receive as proceeds upon redemption the entire net asset value of
his or her Class C shares. The Class C distribution services fee
enables the Fund to sell Class C shares without either an initial
or contingent deferred sales charge, as long as the shares are
held for one year or more. Class C shares do not convert to any
other class of shares of the Fund and incur higher distribution
services fees and transfer agency costs than Class A shares and
32
<PAGE>
Advisor Class shares, and will thus have a higher expense ratio
and pay correspondingly lower dividends than Class A shares and
Advisor Class shares.
Class C shares that are redeemed within one year of
purchase will be subject to a contingent deferred sales charge of
1%, charged as a percentage of the dollar amount subject thereto.
The charge will be assessed on an amount equal to the lesser of
the cost of the shares being redeemed or their net asset value at
the time of redemption. Accordingly, no sales charge will be
imposed on increases in net asset value above the initial
purchase price. In addition, no charge will be assessed on
shares derived from reinvestment of dividends or capital gains
distributions. The contingent deferred sales charge on Class C
shares will be waived on certain redemptions, as described above
under "--Class B Shares." In determining the contingent deferred
sales charge applicable to a redemption of Class C shares, it
will be assumed that the redemption is, first, of any shares that
are not subject to a contingent deferred sales charge (for
example, because the shares have been held beyond the period
during which the charge applies or were acquired upon the
reinvestment of dividends or distributions) and, second, of
shares held longest during the time they are subject to the sales
charge.
Proceeds from the contingent deferred sales charge are
paid to the Principal Underwriter and are used by the Principal
Underwriter to defray the expenses of the Principal Underwriter
related to providing distribution-related services to the Fund in
connection with the sale of the Class C shares, such as the
payment of compensation to selected dealers and agents for
selling Class C shares. The combination of the contingent
deferred sales charge and the distribution services fee enables
the Fund to sell the Class C shares without a sales charge being
deducted at the time of purchase. The higher distribution
services fee incurred by Class C shares will cause such shares to
have a higher expense ratio and to pay lower dividends than those
related to Class A shares and Advisor Class shares.
Conversion of Advisor Class Shares to Class A Shares
Advisor Class shares may be held solely through the fee-
based program accounts employee benefit plans and registered
investment advisory or other financial intermediary relationships
described above under "Purchase of Shares--General," and by
investment advisory clients of, and by certain other persons
associated with, the Adviser and its affiliates or the Fund. If
(i) a holder of Advisor Class 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
33
<PAGE>
satisfies the requirements to purchase shares set forth under
"Purchase of Shares--General" or (ii) the holder is otherwise no
longer eligible to purchase Advisor Class shares as described in
the Advisor Class Prospectus and this Statement of Additional
Information (each, a "Conversion Event"), then all Advisor Class
shares held by the shareholder will convert automatically and
without notice to the shareholder, other than the notice
contained in the Advisor Class Prospectus and this Statement of
Additional Information, to Class A shares of the Fund during the
calendar month following the month in which the Fund is informed
of the occurrence of the Conversion Event. The failure of a
shareholder or a fee-based program to satisfy the minimum
investment requirements to purchase Advisor Class 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 A shares currently bear a .30% distribution services fee
and have a higher expense ratio than Advisor Class shares. As a
result, Class A shares may pay correspondingly lower dividends
and have a lower net asset value than Advisor Class shares.
The conversion of Advisor Class shares to Class A shares
is subject to the continuing availability of an opinion of
counsel to the effect that the conversion of Advisor Class shares
to Class A shares does not constitute a taxable event under
federal income tax law. The conversion of Advisor Class shares
to Class A shares may be suspended if such an opinion is no
longer available at the time such conversion is to occur. In
that event, the Advisor Class shareholder would be required to
redeem the shareholder's Advisor Class 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 Fund's Prospectus under the heading "Purchase and Sale of
Shares -- How to Sell Shares." If you are an Advisor Class
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 Advisor Class shares
of the 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 Advisor Class
shares made through such financial representative.
34
<PAGE>
Redemption
Subject only to the limitations described below, the
Fund's Articles of Incorporation require that the Fund 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. Except
for any contingent deferred sales charge which may be applicable
to Class A shares, Class B shares or Class C shares, there is no
redemption charge. Payment of the redemption price will be made
within seven days after the Fund's receipt of such tender for
redemption. 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 his or her 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 the 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 the Fund's
portfolio securities at the time of such redemption or
repurchase. Redemption proceeds on Class A, Class B and Class C
shares will reflect the deduction of the contingent deferred
sales charge, if any. 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 the Fund for which no certificates
have been issued, the registered owner or owners should forward a
letter to the Fund containing a request for redemption. The
signature or signatures on the letter must be guaranteed by an
"eligible guarantor institution" as defined in Rule 17Ad-15 under
the Securities Exchange Act of 1934, as amended.
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To redeem shares of the Fund represented by share
certificates, the investor should forward the appropriate stock
certificate or certificates, endorsed in blank or with blank
stock powers attached, to the Fund with the request that the
shares represented thereby, or a specified portion thereof, be
redeemed. The stock assignment form on the reverse side of each
stock certificate surrendered to the Fund for redemption must be
signed by the registered owner or owners exactly as the
registered name appears on the face of the certificate or,
alternatively, a stock power signed in the same manner may be
attached to the stock certificate or certificates or, where
tender is made by mail, separately mailed to the Fund. 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 Fund business day as defined above. Proceeds of
telephone redemptions will be sent by Electronic Funds Transfer
to a shareholder's designated bank account at a bank selected by
the shareholder that is a member of the NACHA.
Telephone Redemption by Check. Except 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 Fund shares for which no stock certificates have been
issued by telephone at (800) 221-5672 before 4:00 p.m. Eastern
time on a Fund 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
36
<PAGE>
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. The
Fund reserves the right to suspend or terminate its telephone
redemption service at any time without notice. Neither the Fund
nor the Adviser, the Principal Underwriter or Alliance Fund
Services, Inc. will be responsible for the authenticity of
telephone requests for redemptions that the Fund reasonably
believes to be genuine. The Fund 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 Fund
did not employ such procedures, it could be liable for losses
arising from unauthorized or fraudulent telephone instructions.
Selected dealers or agents may charge a commission for handling
telephone requests for redemptions.
Repurchase
The Fund may repurchase shares through the Principal
Underwriter, selected financial intermediaries or selected
dealers or agents. The repurchase price will be the net asset
value next determined after the Principal Underwriter receives
the request (less the contingent deferred sales charge, if any,
with respect to the Class A, Class B and Class C shares), except
that requests placed through selected dealers or agents before
the close of regular trading on the Exchange on any day will be
executed at the net asset value determined as of such close of
regular trading on that day if received by the Principal
Underwriter prior to its close of business on that day (normally
5:00 p.m. Eastern time). The financial intermediary or selected
dealer or agent is responsible for transmitting the request to
the Principal Underwriter by 5:00 p.m. Eastern time. If the
financial intermediary or selected dealer or agent fails to do
so, the shareholder's right to receive that day's closing price
must be settled between the shareholder and the dealer or agent.
A shareholder may offer shares of the Fund to the Principal
Underwriter either directly or through a selected dealer or
agent. Neither the Fund nor the Principal Underwriter charges a
fee or commission in connection with the repurchase of shares
(except for the contingent deferred sales charge, if any, with
respect to Class A, Class B and Class C shares). Normally, if
shares of the Fund are offered through a financial intermediary
or selected dealer or agent, the repurchase is settled by the
shareholder as an ordinary transaction with or through the
selected dealer or agent, who may charge the shareholder for this
service. The repurchase of shares of the Fund as described above
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is a voluntary service of the Fund and the Fund may suspend or
terminate this practice at any time.
General
The Fund reserves the right to close out 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. No contingent
deferred sales charge will be deducted from the proceeds of this
redemption. In the case of a redemption or repurchase of shares
of the Fund recently purchased by check, redemption proceeds will
not be made available until the Fund is reasonably assured that
the check has cleared, normally up to 15 calendar days following
the purchase date.
_______________________________________________________________
SHAREHOLDER SERVICES
_______________________________________________________________
The following information supplements that set forth in
the Fund's Prospectus under the heading "Purchase and Sale of
Shares--Shareholder Services." The shareholder services set forth
below are applicable to Class A, Class B, Class C and Advisor
Class shares unless otherwise indicated. If you are an Advisor
Class 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 Advisor Class
shares of the 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
Advisor Class shares made through such financial representative.
Automatic Investment Program
Investors may purchase shares of the Fund through an
automatic investment program utilizing electronic funds transfers
drawn on the investor's own bank account. Under such a program,
pre-authorized monthly drafts for a fixed amount (at least $25)
are used to purchase shares through the selected dealer or
selected agent designated by the investor at the public offering
price next determined after the Principal Underwriter receives
the proceeds from the investor's bank. In electronic form,
drafts can be made on or about a date each month selected by the
shareholder. Investors wishing to establish an automatic
investment program in connection with their initial investment
should complete the appropriate portion of the Subscription
Application found in the Prospectus. Current shareholders should
contact Alliance Fund Services, Inc. at the address or telephone
38
<PAGE>
numbers shown on the cover of this Statement of Additional
Information to establish an automatic investment program.
Exchange Privilege
You may exchange your investment in the Fund for
shares of the same class of other Alliance Mutual Funds
(including AFD Exchange Reserves, a money market fund managed by
the Adviser). In addition, (i) present officers and full-time
employees of the Adviser, (ii) present Directors or Trustees of
any Alliance Mutual Fund and (iii) certain employee benefit plans
for employees of the Adviser, the Principal Underwriter, Alliance
Fund Services, Inc. and their affiliates may on a tax-free basis,
exchange Class A shares of the Fund for Advisor Class shares of
the Fund. Exchanges of shares are made at the net asset value
next determined and without sales or service charges. Exchanges
may be made by telephone or written request. Telephone exchange
requests must be received by Alliance Fund Services, Inc. by
4:00 p.m. Eastern time on a Fund business day in order to receive
that day's net asset value.
Shares will continue to age without regard to exchanges
for purpose of determining the CDSC, if any, upon redemption and,
in the case of Class B shares, for the purpose of conversion to
Class A shares. After an exchange, your Class B shares will
automatically convert to Class A shares in accordance with the
conversion schedule applicable to the Class B shares of the
Alliance Mutual Fund you originally purchased for cash ("original
shares"). When redemption occurs, the CDSC applicable to the
original shares is applied.
Please read carefully the prospectus of the mutual fund
into which you are exchanging before submitting the request.
Call Alliance Fund Services, Inc. at 800-221-5672 to exchange
uncertificated shares. Except with respect to exchanges of
Class A shares of the Fund for Advisor Class shares of the Fund,
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 for the Alliance Mutual Fund whose shares are being
acquired. An exchange is effected through the redemption of the
shares tendered for exchange and the purchase of shares being
acquired at their respective net asset values as next determined
following receipt by the Alliance Mutual Fund whose shares are
being exchanged of (i) proper instructions and all necessary
supporting documents as described in such fund's Prospectus, or
(ii) a telephone request for such exchange in accordance with the
39
<PAGE>
procedures set forth in the following paragraph. Exchanges
involving the redemption of shares recently purchased by check
will be permitted only after the Alliance Mutual 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.
Each Fund shareholder and the shareholder's selected
dealer, agent or financial representative, as applicable, are
authorized to make telephone requests for exchanges unless
Alliance Fund Services, Inc. receives written instruction to the
contrary from the shareholder, or the shareholder declines the
privilege by checking the appropriate box on the Subscription
Application found in the Prospectus. Such telephone requests
cannot be accepted with respect to shares then represented by
stock certificates. Shares acquired pursuant to a telephone
request for exchange will be held under the same account
registration as the shares redeemed through such exchange.
Eligible shareholders desiring to make an exchange
should telephone Alliance Fund Services, Inc. with their account
number and other details of the exchange, at (800) 221-5672
before 4:00 p.m. Eastern time on a Fund business day as defined
above. Telephone requests for exchange received before 4:00 p.m.
Eastern time on a Fund business day will be processed as of the
close of business on that day. During periods of drastic
economic or market developments (such as the market break of
October 1987) it is possible that shareholders would have
difficulty in reaching Alliance Fund Services, Inc. by telephone
(although no such difficulty was apparent at any time in
connection with the 1987 market break). If a shareholder were to
experience such difficulty, the shareholder should issue written
instructions to Alliance Fund Services, Inc. at the address shown
on the cover of this Statement of Additional Information.
A shareholder may elect to initiate a monthly "Auto
Exchange" whereby a specified dollar amount's worth of his or her
Fund shares (minimum $25) is automatically exchanged for shares
of another Alliance Mutual Fund. Auto Exchange transactions
normally occur on the 12th day of each month, or the following
Fund business day prior thereto.
None of 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 Fund reasonably believes to be genuine. The
Fund will employ reasonable procedures in order to verify that
telephone requests for exchanges are genuine, including, among
others, recording such telephone instructions and causing written
confirmations of the resulting transactions to be sent to
shareholders. If the Fund did not employ such procedures, it
40
<PAGE>
could be liable for losses arising from unauthorized or
fraudulent telephone instructions. Selected dealers, agents or
financial representatives, as applicable, 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 Fund 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 Fund 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
Individual Retirement Account ("IRA"). Individuals who
receive compensation, including earnings from self-employment,
are entitled to establish and make contributions to an IRA.
Taxation of the income and gains paid to an IRA by the Fund is
deferred until distribution from the IRA. An individual's
eligible contribution to an IRA will be deductible if neither the
individual nor his or her spouse is an active participant in an
employer-sponsored retirement plan. If the individual or his or
her spouse is an active participant in an employer-sponsored
retirement plan, the individual's contributions to an IRA may be
deductible, in whole or in part, depending on the amount of the
adjusted gross income of the individual and his or her spouse.
Employer-Sponsored Qualified Retirement Plans. Sole
proprietors, partnerships and corporations may sponsor qualified
money purchase pension and profit-sharing plans, including
Section 401(k) plans ("qualified plans"), under which annual tax-
deductible contributions are made within prescribed limits based
on compensation paid to participating individuals. The minimum
initial investment requirement may be waived with respect to
certain of these qualified plans.
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If the aggregate net asset value of shares of the
Alliance Mutual Funds held by a qualified plan reaches $5 million
on or before December 15 in any year, all Class B shares or
Class C shares of the Fund held by the plan can be exchanged, at
the plan's request, without any sales charge, for Class A shares
of the Fund.
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.
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 the Fund.
Distributions from retirement plans are subject to
certain Code requirements in addition to normal redemption
procedures. For additional information please contact Alliance
Fund Services, Inc.
Dividend Direction Plan
A shareholder who already maintains, in addition to his
or her Class A, Class B, Class C or Advisor Class Fund account, a
Class A, Class B, Class C or Advisor Class account with one or
more other Alliance Mutual Funds may direct that income dividends
and/or capital gains distributions paid on the shareholder's
Class A, Class B, Class C or Advisor Class Fund shares be
automatically reinvested, in any amount, without the payment of
any sales or service charges, in shares of the same class of such
other Alliance Mutual Fund(s). Further information can be
obtained by contacting Alliance Fund Services, Inc. at the
address or the "For Literature" telephone number shown on the
cover of this Statement of Additional Information. Investors
wishing to establish a dividend direction plan in connection with
their initial investment should complete the appropriate section
of the Subscription Application found in the Prospectus. Current
42
<PAGE>
shareholders should contact Alliance Fund Services, Inc. to
establish a dividend direction plan.
Systematic Withdrawal Plan
General. Any shareholder who owns or purchases shares
of the Fund having a current net asset value of at least $4,000
(for quarterly or less frequent payments), $5,000 (for bi-monthly
payments) or $10,000 (for monthly payments) may establish a
systematic withdrawal plan under which the shareholder will
periodically receive a payment in a stated amount of not less
than $50 on a selected date. Systematic withdrawal plan
participants must elect to have their dividends and distributions
from the Fund automatically reinvested in additional shares of
the Fund.
Shares of the Fund owned by a participant in the Fund's
systematic withdrawal plan will be redeemed as necessary to meet
withdrawal payments and such withdrawal payments will be subject
to any taxes applicable to redemptions and, except as discussed
below, any applicable contingent deferred sales charge. Shares
acquired with reinvested dividends and distributions will be
liquidated first to provide such withdrawal payments and
thereafter other shares will be liquidated to the extent
necessary, and depending upon the amount withdrawn, the
investor's principal may be depleted. A systematic withdrawal
plan may be terminated at any time by the shareholder or the
Fund.
Withdrawal payments will not automatically end when a
shareholder's account reaches a certain minimum level. Therefore,
redemptions of shares under the plan may reduce or even liquidate
a shareholder's account and may subject the shareholder to the
Fund's involuntary redemption provisions. See "Redemption and
Repurchase of Shares--General." Purchases of additional shares
concurrently with withdrawals are undesirable because of sales
charges when purchases are made. While an occasional lump-sum
investment may be made by a holder of Class A shares who is
maintaining a systematic withdrawal plan, such investment should
normally be an amount equivalent to three times the annual
withdrawal or $5,000, whichever is less.
Payments under a systematic withdrawal plan may be made
by check or electronically via the Automated Clearing House
("ACH") network. Investors wishing to establish a systematic
withdrawal plan in conjunction with their initial investment in
shares of the Fund should complete the appropriate portion of the
Subscription Application found in the Prospectus, while current
Fund shareholders desiring to do so can obtain an application
form by contacting Alliance Fund Services, Inc. at the address or
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<PAGE>
the "Literature" telephone number shown on the cover of this
Statement of Additional Information.
CDSC Waiver for Class B and Class C Shares. Under a
systematic withdrawal plan, up to 1% monthly, 2% bi-monthly or 3%
quarterly of the value at the time of redemption of the Class B
or Class C shares in a shareholder's account may be redeemed free
of any contingent deferred sales charge.
With respect to Class B shares, the waiver applies only
with respect to shares acquired after July 1, 1995. Class B
shares that are not subject to a contingent deferred sales charge
(such as shares acquired with reinvested dividends or
distributions) will be redeemed first and will count toward the
foregoing limitations. Remaining Class B shares that are held
the longest will be redeemed next. Redemptions of Class B shares
in excess of the foregoing limitations will be subject to any
otherwise applicable contingent deferred sales charge.
With respect to Class C shares, shares held the longest
will be redeemed first and will count toward the foregoing
limitations. Redemptions in excess of those limitations will be
subject to any otherwise applicable contingent deferred sales
charge.
Statements and Reports
Each shareholder of the Fund receives semi-annual and
annual reports which include a portfolio of investments,
financial statements and, in the case of the annual report, the
report of the Fund's independent auditors, Ernst & Young LLP, as
well as a confirmation of each purchase and redemption. By
contacting his or her broker or Alliance Fund Services, Inc., a
shareholder can arrange for copies of his or her account
statements to be sent to another person.
_______________________________________________________________
NET ASSET VALUE
_______________________________________________________________
Securities listed or traded on the Exchange or other
United States or foreign securities exchanges are valued at the
last quoted sales prices on such exchanges prior to the time when
assets are valued. Securities listed or traded on certain
foreign exchanges whose operations are similar to the United
States over-the-counter market are valued at the price within the
limits of the latest available current bid and asked prices
deemed best to reflect a fair value. A security which is listed
or traded on more than one exchange is valued at the quotations
on the exchange determined to be the primary market for such
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<PAGE>
security by the Directors or their delegates. Listed securities
that are not traded on a particular day, and securities regularly
traded in the over-the-counter market, are valued at the price
within the limits of the latest available current bid and asked
prices deemed best to reflect a fair value. In instances where
the price of a security determined above is deemed not to be
representative, the security is valued in such a manner as
prescribed by the Directors to reflect its fair value. All other
assets and securities are valued in a manner determined in good
faith by the Directors to reflect their fair value. For purposes
of determining the Fund's net asset value per share, all assets
ad liabilities initially expressed in foreign currencies will be
converted into United States dollars at the mean of the bid and
asked prices of such currencies against the United States dollar
lasted quoted by any major bank. If such quotations are not
available as of the close of the Exchange, the rate of exchange
will be determined in accordance with the policies established in
good faith by the Directors. On an ongoing basis, the Trustees
monitor the Fund's method of valuation.
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 business day
in New York (i.e., a day on which the Exchange is open). In
addition, Far Eastern and European securities trading generally
or in a particular country or countries may not take place on all
business days in New York. Furthermore, trading takes place in
various foreign markets on days which are not business days in
New York and on which the Fund's net asset value is not
calculated. The Fund calculates net asset value per share, and
therefore effects purchases and redemptions of its shares, as of
the next close of regular trading on the Exchange following
receipt of a purchase or redemption order (and on such other days
as the Trustees of the Fund deem necessary in order to comply
with Rule 22c-1 under the Act.) Such calculation does not take
place contemporaneously with the determination of the prices of
the majority of the portfolio securities used in such
calculation. Events affecting the values of portfolio securities
that occur between the time their prices are determined and and
the close of the Exchange will not be reflected in the Fund's
calculation of net asset value unless the Fund's Trustees deem
that the particular event would materially affect net asset
value, in which case an adjustment will be made.
The assets belonging to the Class A shares, the Class B
shares, the Class C shares and the Advisor Class shares will be
invested together in a single portfolio. The net asset value of
each Class will be determined separately by subtracting the
accrued expenses and liabilities allocated to that Class from the
assets belonging to that Class.
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<PAGE>
_______________________________________________________________
DIVIDENDS, DISTRIBUTIONS AND TAXES
_______________________________________________________________
The following summary addresses only principal United
States federal income tax considerations pertinent to the Fund
and to shareholders of the Fund who are United States citizens or
residents or United States corporations. The effects of federal
income tax law on shareholders who are nonresident alien
individuals, foreign corporations or other foreign persons may be
substantially different. Following the summary of federal income
tax matters is a summary of principal Greater China country tax
matters pertinent to the Fund and its shareholders. The
summaries for the United States and the Greater China countries
is based upon the advice of counsel for the Fund with respect to
the country involved and upon current law and interpretations
thereof. No confirmation has been obtained from the relevant tax
authorities. There is no assurance that the applicable laws and
interpretations will not change.
In view of the individual nature of tax consequences,
each shareholder is advised to consult the shareholder's own tax
adviser with respect to the specific tax consequences of being a
shareholder of the Fund, including the effect and applicability
of federal, state, local, foreign and other tax laws and the
effects of changes therein.
United States Federal Income Taxation
of Dividends and Distributions
General. The Fund intends to qualify and elect to be
treated as a "regulated investment company" under sections 851
through 855 of the Code. To so qualify, the Fund must, among
other things, (i) derive at least 90% of its gross income in each
taxable year from dividends, interest, payments with respect to
securities loans, gains from the sale or other disposition of
stock or securities or foreign currency, or certain other income
(including, but not limited to, gains from options, futures and
forward contracts) derived with respect to its business of
investing in stock, securities or currency; (ii) derive less than
30% of its gross income in each taxable year from the sale or
other disposition within three months of their acquisition by the
Fund of stocks, securities, options, futures or forward contracts
(other than options, futures, or forward contracts on foreign
currencies) and foreign currencies (or options, futures or
forward contracts on foreign currencies) that are not directly
related to the Fund's principal business of investing in stock or
securities (or options and futures with respect to stocks or
securities); and (iii) diversify its holdings so that, at the end
of each quarter of its taxable year, the following two conditions
46
<PAGE>
are met: (a) at least 50% of the value of the Fund's assets is
represented by cash, U.S. Government Securities, securities of
other regulated investment companies and other securities with
respect to which the Fund's investment is limited, in respect of
any one issuer, to an amount not greater than 5% of the Fund's
assets and 10% of the outstanding voting securities of such
issuer, and (b) not more than 25% of the value of the Fund's
assets is invested in securities of any one issuer (other than
U.S. Government Securities or securities of other regulated
investment companies) or of two or more issuers which the Fund
controls and which are determined to be engaged in the same or
similar trades or businesses or related trades or businesses.
These requirements, among other things, may limit the Fund's
ability to write and purchase options, futures and forward
foreign currency contracts. Currently pending legislation would
repeal the 30% gross income requirement described above.
However, it is uncertain whether, and if so in what form, such
legislation ultimately will become law.
If the Fund qualifies as a regulated investment company
for any taxable year and makes timely distributions to its
shareholders of 90% or more of its net investment income for that
year (calculated without regard to its net capital gain, i.e.,
the excess of its net long-term capital gain over its net short-
term capital loss), it will not be subject to federal income tax
on the portion of its taxable income for the year (including any
net capital gain) that it distributes to shareholders.
The Fund will also avoid the 4% federal excise tax that
would otherwise apply to certain undistributed income for a given
calendar year if it makes timely distributions to its
shareholders equal to at least the sum of (i) 98% of its ordinary
income for that year; (ii) 98% of its capital gain net income and
foreign currency gains for the twelve-month period ending on
October 31 of that year; and (iii) any ordinary income or capital
gain net income from the preceding calendar year that was not
distributed during that year. For this purpose, income or gain
retained by the 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 of a given year but actually paid during the
immediately following January will be treated as if paid by the
Fund on December 31 of that calendar year, and will be taxable to
these shareholders for the year declared, and not for the year in
which the shareholders actually receive the dividend.
The Fund intends to make timely distributions of the
Fund's taxable income (including any net capital gain) so that
the Fund will not be subject to federal income or excise taxes.
However, exchange control or other regulations on the
47
<PAGE>
repatriation of investment income, capital or the proceeds of
securities sales, if any exist or are enacted in the future, may
limit the Fund's ability to make distributions sufficient in
amount to avoid being subject to one or both of such federal
taxes.
Dividends and Distributions. Dividends of the Fund's
net ordinary income and distributions of any net realized short-
term capital gain will be taxable to shareholders as ordinary
income. The excess of net long-term capital gains over the net
short-term capital losses realized and distributed by the Fund to
its shareholders will be taxable to the shareholders as long-term
capital gains, irrespective of the length of time a shareholder
may have held his Fund shares. Any dividend or distribution
received by a shareholder on shares of the Fund will have the
effect of reducing the net asset value of such shares by the
amount of such dividend or distribution. Furthermore, a dividend
or distribution made shortly after the purchase of such shares by
a shareholder, although in effect a return of capital to that
particular shareholder, would be taxable to him as described
above. Dividends are taxable in the manner discussed regardless
of whether they are paid to the shareholder in cash or are
reinvested in additional shares of the Fund. Due to the
investment objectives of the Fund, it is anticipated that only a
small portion, if any, of the Fund's distributions will qualify
for the dividends-received deduction for corporations.
After the end of the taxable year, the Fund will notify
shareholders of the federal income tax status of any
distributions made by the Fund to shareholders during such
year.
It is the present policy of the Fund to distribute to
shareholders all net investment income and to distribute realized
capital gains, if any, annually. There is no fixed dividend rate
and there can be no assurance that the Fund will pay any
dividends. The amount of any dividend or distribution paid on
shares of the Fund must necessarily depend upon the realization
of income and capital gains from the Fund's investments.
Sales and Redemptions. Any gain or loss arising from a
sale or redemption of Fund shares generally will be capital gain
or loss except in the case of dealers or certain financial
institutions, and will be long-term capital gain or loss if such
shareholder has held such shares for more than one year at the
time of the sale or redemption; otherwise it will be short-term
capital gain or loss. However, if a shareholder has held shares
in the Fund for six months or less and during that period has
received a distribution taxable to the shareholder as a long-term
capital gain, any loss recognized by the shareholder on the sale
of those shares during the six-month period will be treated as a
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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 the 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 the period. If disallowed, the loss will be reflected in
an upward adjustment to the basis of the shares acquired.
Foreign Taxes. As discussed below under "Foreign
Taxation," income received by the Fund may 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 the Fund's assets to be invested within various
countries is not known. If, as is contemplated, more than 50% of
the value of the 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 the Fund will be able to do so. Pursuant to
this election a United States 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 plans qualified under section 401 of
the Code, will not be affected by any such pass through of taxes
by the Fund. No deduction for foreign taxes may be claimed by an
individual United States shareholder who does not itemize
deductions. In addition, certain United States 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 the Fund. Each shareholder will be
notified within 60 days after the close of the Fund's taxable
year whether the foreign taxes paid by the 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.
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Backup Withholding. The Fund may be required to
withhold United States federal income tax at the rate of 31% of
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 United States
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 the 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.
Passive Foreign Investment Companies. If the Fund owns
shares in a foreign corporation that constitutes a "passive
foreign investment company" (a "PFIC") for federal income tax
purposes and the Fund does not elect to treat the foreign
corporation as a "qualified electing fund" within the meaning of
the Code, the Fund may be subject to United States federal income
taxation on a portion of any "excess distribution" it receives
from the PFIC or any gain it derives from the disposition of such
shares, even if such income is distributed as a taxable dividend
by the Fund to its shareholders. The Fund may also be subject to
additional interest charges in respect of deferred taxes arising
from such distributions or gains. Any tax paid by the Fund as a
result of its ownership of shares in a PFIC will not give rise to
any deduction or credit to the Fund or to any shareholder. A
PFIC means any foreign corporation if, for the taxable year
involved, either (i) it derives at least 75% of its gross income
from "passive income" (including, but not limited to, interest,
dividends, royalties, rents and annuities), or (ii) on average,
at least 50% of the value (or adjusted tax basis, if elected) of
the assets held by the corporation produce "passive income."
Under proposed legislation, the Fund could elect to "mark-to
market" stock in a PFIC. Under such an election, the Fund would
include in income each year an amount equal to the excess, if
any, of the fair market value of the PFIC stock as of the close
of the taxable year over the Fund's adjusted basis in the PFIC
stock. The Fund would be allowed a deduction for the excess, if
any, of the adjusted basis of the PFIC stock over the fair market
value of the PFIC stock as of the close of the taxable year, but
only to the extent of any net mark-to-market gains included by
the Fund for prior taxable years. The Fund's adjusted basis in
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the PFIC stock would be adjusted to reflect the amounts included
in, or deducted from, income under this election. Amounts
included in income pursuant to this election, as well as gain
realized on the sale or other disposition of the PFIC stock,
would be treated as ordinary income. The deductible portion of
any mark-to-market loss, as well as loss realized on the sale or
other disposition of the PFIC stock to the extent that such loss
does not exceed the net mark-to-market gains previously included
by the Fund, would be treated as ordinary loss. The Fund
generally would not be subject to the deferred tax and interest
charge provisions discussed above with respect to PFIC stock for
which a mark-to-market election has been made. If the Fund
purchases shares in a PFIC and the Fund does elect to treat the
foreign corporation as a "qualified electing fund" under the
Code, the Fund may be required to include in its income each year
a portion of the ordinary income and net capital gains of the
foreign corporation, even if this income is not distributed to
the Fund. Any such income would be subject to the 90% and
calendar year distribution requirements described above.
Currency Fluctuations-"Section 988" Gains or Losses.
Under the Code, gains or losses attributable to fluctuations in
exchange rates which occur between the time the 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
date of acquisition of the asset and the date of disposition also
are treated as ordinary gain or loss. These gains or losses,
referred to under the Code as "Section 988" gains or losses,
increase or decrease the amount of the Fund's investment company
taxable income available to be distributed to its shareholders as
ordinary income, rather than increasing or decreasing the amount
of the Fund's net capital gain. Because section 988 losses
reduce the amount of ordinary dividends the 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
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federal income tax purposes. Section 1256 contracts held by the
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 the 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 the 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 the Fund's net investment
income available to be distributed to shareholders as ordinary
income, as described above. The 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 the 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 to date generally should
not apply to the type of hedging transactions in which the Fund
intends to engage.
With respect to equity options or options traded over-
the-counter or on certain foreign exchanges, gain or loss
realized by the Fund upon the lapse or sale of such options held
by the 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
closing out of such options that are written by the Fund will be
treated as short-term capital gain or loss. In general, if the
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 the 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 the 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 the Fund upon termination of
an option written by the Fund) from the amount received, if any,
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for or with respect to the option (including any amount received
by the Fund upon termination of an option held by the Fund). In
general, if the Fund exercises such an option on a foreign
currency, or such an option that the 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 the 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 the 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 the
Fund has unrealized gains with respect to the other position in
such straddle; (ii) the 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 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 the 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 the Fund all of the
offsetting positions of which consist of section 1256
contracts.
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Foreign Taxation
Set forth below is information concerning the taxation
by the Greater China countries of income received by the Fund, of
shareholders of the Fund and of transactions by the Fund.
The Fund has been advised that neither the Fund nor any
of the Fund's shareholders will be considered, insofar as
relevant for tax purposes, as a resident of or having an
establishment or a permanent establishment in any Greater China
country, or as engaged in, as carrying on a trade, profession or
business in, or as rendering independent personal services from a
fixed base in, any of these countries solely as a result of the
activities contemplated by the Prospectus and this Statement of
Additional Information. Certain of the tax exemptions and
reductions referred to below are dependent on the Fund's not
having such a status, and it is the intention of the Fund to
conduct its affairs in such a manner. To the extent applicable
law or the manner in which such law is interpreted changes or the
Fund otherwise changes the manner in which it conducts its
activities, the Fund and its shareholders may be subject to
higher taxes than those indicated.
China. The Fund will not currently be subject to any
China income tax either (i) on dividends it receives on "B"
shares of a China company listed on the Shanghai or Szenzhen
Stock Exchanges or on shares of a China company listed on a non-
China securities exchange, including "H" shares listed on the
Hong Kong Stock Exchange, or (ii) on capital gains which the Fund
derives from the sale of any such shares. These shares, which
are primary categories of equities of China companies for
acquisition by the Fund, are discussed in "Appendix A: Additional
Information about China, Hong Kong and Taiwan--China--Securities
Markets" in this Statement of Additional Information. These
exemptions are pursuant to a July 21, 1993 notice issued by the
China State Tax Bureau. Absent this notice, which may hereafter
be withdrawn, such dividends would be subject to withholding tax
at the rate of 10%, the maximum rate permitted by application of
the current tax treaty between the U.S. and China (the
"U.S./China Treaty"), and such gains would be subject to
withholding at the normal rate, currently 20%. Other China-
source dividends and gains on the disposition of securities,
including debt securities, would be taxable to the Fund at the
rates of 10% and 20%, respectively. Interest on China source
indebtedness will be subject to withholding tax at the maximum
rate of 10% as so limited by the U.S./China Treaty. Transfers of
"B" shares are subject to a stamp duty at the rate of [0.05]% of
the transaction price imposed on each of the buyer and
seller.
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Hong Kong. Dividends and interest received by the Fund
in respect of investments in securities of Hong Kong companies,
whether or not listed on the Hong Kong Stock Exchange, will not
be subject to any Hong Kong income tax. Also, Hong Kong does not
impose any tax on capital gains realized by the Fund from the
disposition of such securities. Transfers of shares of companies
on a Hong Kong share register, including "H" Shares and shares of
other companies incorporated outside of Hong Kong which are
listed on the Hong Kong Stock Exchange, are subject to a stamp
duty at the rate of .30% of the amount of the transfer price or,
if higher, the fair value of the shares, which tax is usually
borne equally by the buyer and the seller in respect of
transactions on the Hong Kong Stock Exchange. There is at
present no tax treaty between the United States and Hong
Kong.
Taiwan. Dividends and interest received by the Fund as
a QFII (See "Appendix A: Additional Information about China, Hong
Kong and Taiwan--Taiwan--Securities Transactions" in the
Statement of Additional Information for information concerning
QFIIs) from sources in Taiwan will be subject to Taiwan income
withholding tax at the rate of 20%. A tax on capital gains
arising from securities transactions is currently suspended and
gains on transactions in securities realized by the Fund are
therefore not currently subject to tax. A transaction tax on the
transaction price is imposed on the seller at the rate of 0.3%
for most stock transactions and at the rate of 0.1% for most
transactions in debt securities, other than government debt.
There is at present no tax treaty between the United States and
Taiwan.
Other Taxation
The Fund may be subject to other state, local and
foreign 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.
_______________________________________________________________
BROKERAGE AND PORTFOLIO TRANSACTIONS
_______________________________________________________________
The management of the Fund has the responsibility for
allocating its brokerage orders and may direct orders to any
broker. It is the Fund's general policy to seek favorable net
prices and prompt reliable execution in connection with the
purchase or sale of all portfolio securities. In the purchase
and sale of over-the-counter securities, it is the Fund's policy
to use the primary market makers except when a better price can
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be obtained by using a broker. The Board of Directors has
approved, as in the best interests of the Fund and the
shareholders, a policy of considering, among other factors, sales
of the Fund's shares as a factor in the selection of
broker-dealers to execute portfolio transactions, subject to best
execution. The Adviser is authorized under the Advisory
Agreement to place brokerage business with such brokers and
dealers. The use of brokers who supply supplemental research and
analysis and other services may result in the payment of higher
commissions than those available from other brokers and dealers
who provide only the execution of portfolio transactions. In
addition, the supplemental research and analysis and other
services that may be obtained from brokers and dealers through
which brokerage transactions are effected may be useful to the
Adviser in connection with advisory clients other than the Fund.
Investment decisions for the Fund are made independently
from those for other investment companies and other advisory
accounts managed by the Adviser. It may happen, on occasion,
that the same security is held in the portfolio of the Fund and
one or more of such other companies or accounts. Simultaneous
transactions are likely when several funds or accounts are
managed by the same Adviser, particularly when a security is
suitable for the investment objectives of more than one of such
companies or accounts. When two or more companies or accounts
managed by the Adviser are simultaneously engaged in the purchase
or sale of the same security, the transactions are allocated to
the respective companies or accounts both as to amount and price,
in accordance with a method deemed equitable to each company or
account. In some cases this system may adversely affect the
price paid or received by the Fund or the size of the position
obtainable for the Fund.
Allocations are made by the officers of the Fund or of
the Adviser. Purchases and sales of portfolio securities are
determined by the Adviser and are placed with broker-dealers by
the order department of the Adviser.
The extent to which commissions that will be charged by
broker-dealers selected by the Fund 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 Fund places 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 Fund; 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 Fund. Consistent with the Conduct Rules of
the National Association of Securities Dealers, Inc., and subject
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to seeking best execution, the Fund may consider sales of shares
of the Fund or other investment companies managed by the Adviser
as a factor in the selection of brokers to execute portfolio
transactions for the Fund.
The Fund 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 commissions. In such instances, the placement of
orders with such brokers would be consistent with the Fund's
objective of obtaining best execution and would not be dependent
upon the fact that DLJ is an affiliate of the Adviser.
Many of the Fund's portfolio transactions in equity
securities will occur on foreign stock exchanges. Transactions
on stock exchanges involve the payment of brokerage commissions.
On many foreign stock exchanges these commissions are fixed.
Securities traded in foreign over-the-counter markets (including
most fixed-income securities) are purchased from and sold to
dealers acting as principal. Over-the-counter transactions
generally do not involve the payment of a stated commission, but
the price usually includes an undisclosed commission or markup.
The prices of underwritten offerings, however, generally include
a stated underwriter's discount. The Adviser expects to effect
the bulk of its transactions in securities of companies based in
foreign countries through brokers, dealers or underwriters
located in such countries. U.S. Government or other U.S.
securities constituting permissible investments will be purchased
and sold through U.S. brokers, dealers or underwriters.
_______________________________________________________________
GENERAL INFORMATION
_______________________________________________________________
Capitalization
The authorized capital stock of the Fund currently
consists of 3,000,000,000 shares of Class A Common Stock,
3,000,000,000 shares of Class B Common Stock, 3,000,000,000
shares of Class C Common Stock and 3,000,000,000 shares of
Advisor Class Common Stock, each having a par value of $.001 per
share. All shares of the 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,
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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 second portfolio, each share of either
portfolio would normally be entitled to one vote for all
purposes. Generally, shares of both 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 each portfolio differently, such as approval of
the Investment Advisory Contract 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 the Fund, similar to those set forth in Section
16(c) of the 1940 Act will be available to shareholders of the
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.
Custodian
Brown Brothers Harriman & Co. ("Brown Brothers"), 40
Water Street, Boston, Massachusetts, will act as the Fund's
custodian. The Fund's securities and cash are held under a
custodian agreement by Brown Brothers. Rules adopted under the
1940 Act permit the Fund to maintain its securities and cash in
the custody of certain eligible banks and securities
depositories. Pursuant to those rules, the Fund's portfolio of
securities and cash, when invested in securities of foreign
countries, will be held by its subcustodians, subject to approval
by the Board of Directors of the Fund as and when appropriate in
accordance with the rules of the Commission. Selection of the
subcustodians will be made by the Board of Directors of the Fund
following a consideration of a number of factors, including, but
not limited to, the reliability and financial stability of the
institution, the ability of the institution to capably perform
custodial services of the Fund, the reputation of the institution
in its national market, the political and economic stability of
the countries in which the subcustodians will be located, and
risks of potential nationalization or exportation of Fund assets.
In addition, the 1940 Act requires that foreign bank
subcustodians, among other things, have shareholder equity in
excess of $200,000,000, have no lien on the Fund's asset and
maintain adequate and accessible records.
Principal Underwriter
Alliance Fund Distributors, Inc., 1345 Avenue of the
Americas, New York, New York 10105, serves as the Fund's
Principal Underwriter, and as such may solicit orders from the
public to purchase shares of the Fund. Under the Agreement, the
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Fund has 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 of 1933, as amended.
Counsel
Legal matters in connection with the issuance of the
shares offered hereby are passed upon by Seward & Kissel, New
York, New York. Seward & Kissel 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 been
appointed as independent auditors for the Fund.
Performance Information
From time to time the Fund advertises its "total
return." Computed separately for each class, the 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). The 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 the Fund are assumed to have been reinvested when paid
and the maximum sales charge applicable to purchases of Fund
shares is assumed to have been paid.
The Fund's total return is computed separately for
Class A, Class B, Class C and Advisor Class shares. The Fund's
total return is not fixed and will fluctuate in response to
prevailing market conditions or as a function of the type and
quality of the securities in the Fund's portfolio and the Fund's
expenses. Total return information is useful in reviewing the
Fund's performance but such information may not provide a basis
for comparison with bank deposits or other investments which pay
a fixed yield for a stated period of time. An investor's
principal invested in the Fund is not fixed and will fluctuate in
response to prevailing market conditions.
Advertisements quoting performance rankings of the Fund
as measured by financial publications or by independent
organizations such as Lipper Analytical Services, Inc., and
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Morningstar, Inc. and advertisements presenting the historical
record of payments of income dividends by the 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 the 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 numbers 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 Fund with the
Securities and Exchange Commission under the Securities Act 1933.
Copies of the Registration Statement may be obtained at a
reasonable charge from the Securities and Exchange Commission or
may be examined, without charge, at the offices of the Securities
and Exchange Commission in Washington, D.C.
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___________________________________________________________
APPENDIX A: INFORMATION CONCERNING
CHINA, HONG KONG AND TAIWAN
___________________________________________________________
The information in this section is based on material
obtained by the Fund from various governmental and other sources
which is believed to be accurate but all of which has not been
independently verified by the Fund or the Adviser. The
information provided is not intended to be a complete description
of the subject matter covered.
CHINA
With a population estimated at more than 1.2 billion
people, China is home to approximately 22% of the world's
population. It is the world's third largest nation in terms of
land area with approximately six million square miles; it shares
borders with 13 nations, including Russia, India, North Korea and
Vietnam; its vast and diverse terrain includes the Himalayan
Mountains, the Gobi Desert and tropical areas in the southeast.
Politically, China is divided into 23 provinces, five autonomous
regions and three municipalities.
History and Politics
China claims to be the oldest continuous civilization,
first unified as a nation in 221 B.C. In this century, China's
political system has moved from its first republic (1911-1949) to
a one-party communist state, after a civil war which ended in
1949 with the victory of the communist revolutionaires led by Mao
Zedong. Under his rule, the Chinese Communist Party (the "CCP")
established China's present governmental structure under which
all aspects of the Chinese economy were centrally planned and
implemented by the CCP. After his death in 1976, China's
economic system began a process of reformation under the
leadership of Deng Xiaoping marked by a trend toward capitalism,
private ownership and an easing of restrictions on foreign
investment.
Government
China, officially designated as a "people's republic",
defined by the Chinese government as a dictatorship of the
working classes, has a one party political system controlled by
the CCP, which currently consists of an estimated 57 million
members. The highest ranking legislative body in the State
hierarchy is the National People's Congress ("NPC"), composed of
approximately 3,000 members indirectly elected from lower-level
People's Congresses held every five years. This legislature,
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which meets once a year for two or three weeks, is empowered to
amend the Chinese Constitution, enact and amend other laws and
examine and approve national economic and social plans.
Historically, the NPC has been viewed as less of a law-making
body than as an organization structured solely to enact CCP
policies. When not in session, the powers of the NPC are vested
in a Central Committee, composed of approximately 200 members.
The highest organ of state administration is the State Council,
whose members are elected by the NPC, acting on recommendations
from the CCP and presided over by an executive board made up of
approximately 15 members.
The CCP structure parallels the governmental structure,
and often, the two systems overlap, with little distinction
between government and party positions. The CCP is governed by
its 188-member Central Committee, elected every five years. The
Central Committee normally convenes twice a year. When not in
session, a 15- to 20-member Politburo is vested with the
Committee's power. The Politburo is further centralized by the
Politburo Standing Committee, at present comprised of seven
members. This Standing Committee is seen as the real focus of
power in China, as it sets CCP policy and controls all
administrative, legal and executive appointments. The Standing
Committee currently consists of seven members, including the
Prime Minister, Li Peng, and Jiang Zemin, who holds the positions
of President, Party General Secretary and Chairman of the Central
Military Committee. Since the death of Deng Xiaoping earlier
this year, Jiang Zemin has taken over as the leader of the
Communist party and therefore of China. He continues to
consolidate his power, but as of yet does not appear to have the
same degree of control as did Deng Xiaoping.
Economy
China's economy is centrally planned by the government
through the use of a series of economic and social development
plans, which set overall targets for different sectors of the
economy. China is now in its Ninth Five-Year Plan, which sets
official economic targets through the year 2000. Since market-
oriented reforms were initiated under Deng, China's economy has
been in the process of transforming from a rural agricultural
economy into a modern manufacturing nation. China's economy has
seen rapid growth in recent years, with yearly double digit
percent increases in the growth of the gross domestic product
("GDP") from 1990 to 1995. In 1996, GDP growth slowed from its
past double-digit increases to approximately 9.7%, which was
modestly above China's target of an 8%-9% growth rate per year
between 1996 and 2000. In 1996, retail price inflation grew
6.1%, below the government's 10% target. The 1996 inflation rate
was seen as a marked improvement from the rates in recent years,
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which increased from 6.3% in 1992 to 14.6% in 1993, 24.1% in 1994
and 16.9% in 1995.
Until recently, China's economy was dominated by State-
owned enterprises ("SOEs"). Increasingly, China's economy is
being transformed, in accordance with the government's economic
plans, from a state controlled system to a system of private
ownership. The collective sector includes township and village
enterprises often combined with some measure of foreign
investment or privately owned enterprises. The collective and
private sector have played an increasingly important role in
China's economic development. The State is now responsible for
less than half of China's industrial output. In 1996, the
collective sector had the highest industrial output growth rate,
23.4%, compared with only a 7.2% increase by SOEs. The "other"
sector, consisting of foreign investors and privately owned
enterprises, showed a 19.2% growth rate in industrial output.
The rapid growth in the collective and private sectors
is expected to continue. It is anticipated that China will gain
entry into the World Trade Organization ("WTO") within the next
few years. While China's export market is expected to expand
upon WTO entry, its share of sales in its domestic markets may
decline as these markets will be open to increased foreign
competition, as China will be forced to lower tariffs under WTO
regulations. In preparation for entry into the WTO, China has
reduced its average tariff rate to 23% and further plans to lower
tariffs to an average of 15% by the year 2000. While the
collective and private sectors continue to expand, many SOEs are
unprofitable and kept afloat by large government subsidies,
normally in the form of policy loans from government controlled
banks, which add to China's budget deficit (see "--Banking and
Finance" below). According to the press reports, 45% of SOEs
(official figures from China put the figure at 34%) reported
losses amounting to US$8.3 billion in 1996.
As stated above, manufacturing in China has been rapidly
moving into private hands, particularly in the five Special
Economic Zones where tax incentives, among other factors, have
encouraged investment by both local and foreign investors into
the Chinese economy. Foreign investment into China rose 13.6%
from 1995 to 1996, with an estimated US$42.4 billion invested
into China in 1996. Manufacturing jobs have been moving into
China from other Asian nations based upon, among other factors,
China's low wages and large pool of cheap labor.
Another aspect of China's continued plan of economic
development is the government's continued investment in
infrastructure development programs, which are seen as necessary
to sustain China's current level of economic performance. The
government (financed in part by loans from Japan and the World
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Bank) has been investing heavily in infrastructure, including the
expansion of existing railways as well as the development of a
new inland route from Beijing to Kowloon, which is expected to
help boost the economy of the inland areas of China through which
the railway runs. Other projects include development and
expansion of ports near Shanghai and the continued development of
China's road system. China also has an expanding civil aviation
industry with approximately 30 Chinese airlines and is in the
process of upgrading its telecommunications systems, which
included the launching of China's first commercial satellite in
1994.
While China's foreign trade growth rate of 3.2% in 1996
was slower than in recent years, China accrued an estimated trade
surplus of approximately US$12.2 billion. In 1996, China's
reliance upon imports rose by 7.8%. With the slow down in growth
of the trade surplus, in combination with a deficit in services
and a large deficit income, China is expected to have run an
overall account deficit in excess of US$9 billion in 1996.
However, China's foreign trade growth has risen significantly in
the first five months of 1997 as exports rose 26.4% from the same
period in 1996 while imports fell 1.2%, with an estimated trade
surplus of US$13.9 billion for the five-month period, larger then
the trade surplus for all of 1996. State-owned enterprise export
volume increased 25% from the same period in 1996 and accounted
for 56% of total export volume.
As indicated above, China's strong economic performance
has been coupled with a high inflation rate in recent years,
averaging 11.4% in the years 1991-1995. China, however, has kept
inflation at rates below GDP growth rates in the 1990s and
inflation for 1996 remained in the single digits, at 8.3%.
Inflation has been controlled through a program of tough
austerity measures (such as a tightened monetary policy and price
controls on certain commodities such as coal, oil and certain
foodstuffs) imposed in 1994 after inflation exceeded 20%. While
some of these measures were lifted in mid-1996, many remain in
place and are enforced in varying degrees. Inflation has
contributed to a reduction in the standard of living for many
rural Chinese who do not live in the particular provinces where
the economy is growing, mainly the Eastern Seaboard cities. The
government's Ninth Five-Year Plan includes measures to increase
industrial production and the standard of living in these rural
areas, along with the continued development of Shanghai and,
particularly, the development of the Pudong New Area as a center
for international commerce.
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Banking and Finance
Banking in China is controlled by the wholly state-owned
People's Bank of China ("PBC"), the central bank of China. The
PBC has the same status under Chinese law as a department of the
government under the direct control of the State Council. In
addition to its central bank functions, which include
international settlements in connection with foreign trade and
non-trade transactions, international interbank deposits and
remittances, the buying and selling of foreign exchange and
issuing bonds and other securities in foreign currencies, the PBC
enjoys considerable autonomy in management and in operating as a
full-fledged commercial bank. It is continuing to open new
domestic branches in the more densely populated areas and is in
the process of diversifying into a wider range of banking and
financial services, including investment banking and credit
cards.
As a State owned unit, the PBC has been instrumental in
the implementation of China's planned economy, particularly
through lending in furtherance of government policies. In this
regard, the State has mandated that more than half of the PBC's
lending be in the form of policy loans, which are essentially
government expenditures. Many of these loans go to subsidize
unprofitable SOEs. Historically, SOEs have defaulted on
repayment of these loans. China's fiscal problems, especially
the high inflation rate prevalent during most of the 1990s, have
been exacerbated by the PBC's continued subsidization of
government programs, especially the SOEs. By continuing to
inject money into these organizations through the PBC, China has
not been able to combat inflation through its monetary policy as
the government has not effectively limited the amount of currency
in circulation. China, therefore, attempt to control monetary
policy by means of an annual credit plan, which sets credit
ceilings for the main banks. This approach has also not been
successful, however, as local government spending, poor
coordination and unofficial financial activity, in connection
with a poor regulatory system have worked against the plan. The
money supply has grown 30% since 1992, when lending limits were
put in place and total loans outstanding grew an average of 20% a
year between 1990 and 1994.
Another effect of this continued subsidization of the
SOEs by the PBC is a deficit which is larger then official budget
deficit figures since the loans are not reflected in the official
numbers. The International Bank for Reconstruction and
Development (the "World Bank") suggests that China's consolidated
government deficit ("CGD"), which includes the fiscal deficit
plus lending to financial systems which in turn finance the
expenditures to the SOEs, is a more accurate reflection of
China's deficit. The World Bank estimates that China's CGD
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amounts to 5%-6% of its GDP. Despite this large current account
deficit, China's external payment position is believed to be
sound, and China boasts one of the world's largest foreign
exchange reserves.
China is attempting to reform its banking system, with
the goal of making the financial system a more effective means of
macroeconomic control. The changes contemplated include making
the PBC more autonomous and curbing its role in policy lending,
while reorganizing the branch system along regional instead of
provincial lines. Further changes include the establishment of
policy banks to separate policy and commercial lending and
reforming interest rate policy. The government also plans to
offset the huge losses the PBC and other state controlled banks
have been bearing due to SOE bankruptcies by having the SOEs and
banks work together to come to agreements on restructuring the
debt, rather than having the banks write off these bad loans.
These banking reforms, however, are not expected to occur rapidly
as the changes address conflicting government policies,
especially the continued use of state banks to subsidize
government programs. Along with these internal reforms, China is
in the process of liberalizing access to foreign banks wishing to
do business in China. At present, China has opened more than 20
cities to foreign financial organizations, and more than fifty
operational units of foreign banks have been established in
China.
The monetary unit of China is the Renminbi ("RMB") and
in recent years has been exchange for U.S. Dollars at an 8 to 12
per dollar ratio. The RMB is not fully convertible into U.S.
dollars as the official exchange rate is regulated and published
daily by the State Administration of Foreign Exchange ("SAFE").
In 1986, to help solve the foreign exchange problems of foreign
investors, China established Foreign Exchange Adjustment Centers,
commonly referred to as "swap centers," in various cities. These
centers provide an official forum where foreign invested
enterprises may, under the supervision and control of the SAFE
and its branch offices, engage in mutual adjustment of their
foreign exchange surpluses and shortfalls. Trading of RMB and
foreign currencies at the swap centers is conducted at a rate
determined by supply and demand rather than at the official
exchange rate. Such market exchange rates can be highly volatile
and are subject to sharp fluctuations depending on market
conditions. The initial effect of the "swap" markets was a 50%
devaluation of the RMB against the U.S. dollar by January 1994.
Since then, however, the RMB has remained relatively stable
against the dollar. More recently, regulations have been relaxed
to allow Chinese state enterprises and individuals to participate
in foreign exchange swap transactions and in December 1996 the
government officially set the RMB exchange rate closer to the
swap markets rate, at 8.3 Renminbi per dollar. While this change
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brought China into compliance with the International Monetary
Fund's rules regarding currency exchange, it had little actual
effect on the swap markets, as most foreign investors continue to
use these swap markets for their foreign exchange purposes.
While foreign exchange regulations have been eased, the
Fund must still comply with procedures set up by SAFE regarding
amounts of foreign exchange allowed. Under such rules, the Fund,
as a foreign investment enterprise ("FIE") has to establish a
"current account" and a "capital account" with a bank authorized
to conduct foreign exchange business. SAFE has the authority to
determine the maximum amount of foreign exchange a FIE may
maintain in its current account in accordance with the paid-up
capital of the FIE and its need for foreign exchange working
funds. Any foreign currency income in the current account
exceeding such maximum limit is required to be sold either to a
bank authorized to conduct foreign exchange business or traded
through a swap center. Since November 1996, FIEs have been
allowed to exchange Renminbi into foreign currencies without
prior approval from SAFE if such funds are in respect of "current
account items". However, prior approval from SAFE is needed if
"capital account items" are to be converted into foreign
currencies. "Current account items" include dividends or profits
in other forms paid to foreign investors in FIEs. After the
payment of applicable taxes, FIEs may distribute dividends in
foreign currencies either by applying the balance in their
foreign exchange accounts to such distribution in Renminbi or
through a foreign exchange swap center. In addition, foreign
investors in FIEs may, following payment of applicable taxes,
exchange dividends or other profits in the form of Renminbi into
foreign currencies through such authorized banks.
Securities Markets
China has two officially recognized securities
exchanges, the Shanghai Securities Exchange opened in December
1990 and the Shenzhen Securities Exchange opened in July 1991
(the "Exchanges") which developed out of securities exchanges set
up to trade State treasury bonds. Trading on the Exchanges has
been very volatile since their inception. This volatility has
increased recently, in part as investors speculated over the
economic effects of the transfer of Hong Kong from Great Britain
to China. Stock prices on the Exchanges increased an average 60%
in the first four months of 1997 and trading volume has been very
high, recently at times exceeding the volume on the HKSE which
has a much larger market capitalization. In May 1996, the
Chinese government took steps to cool this speculation, with the
market dropping 10% after the authorities took various actions to
quell the speculation, including raising transaction fees and
doubling the quota for new share offerings.
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The Exchanges allow for the trading of only two types of
shares: "A" shares, which may only be held and traded in
Renminbi by mainland Chinese investors and "B" shares, officially
open, with narrow exceptions, only to foreign investors, also
denominated in Renminbi, but traded in U.S. and Hong Kong
dollars. As of May 1997, the two exchanges listed over 600
securities with a value of over RMB $35 billion. The "B"
markets, which are still relatively small with only 86 companies
listing "B" shares, typically trade at a discount to their "A"
share equivalents. Foreign investment into the securities
markets of China has been limited by this lack of adequate
investment opportunities. In response to the limited "B" market
size, China has stated that it will allow 33 more companies to
issue "B" shares in 1997. China has also signalled that it will
begin to open up the "A" markets to foreign investors. While
full merger of "A" and "B" share markets is not likely in the
near future, it is anticipated that joint ventures comprised of
foreign financial houses and mainland Chinese investors will soon
be allowed to purchase "A" shares, as well as granting Chinese
investors official access to the "B" market. The Chinese
government has also allowed certain Chinese companies to list
shares on the Hong Kong Stock Exchange, such shares designated as
"H" shares, and permitted certain companies to list on other
foreign exchanges, including two companies listed on the New York
Stock Exchange. At present, "H" shares of 31 issuers are listed
on the Hong Kong Stock Exchange, and there are plans to at least
add another 12 (see "--Additional Information About Hong Kong--
Securities Markets" for additional information on "H" shares).
China has also announced that it expects to allow 38 additional
companies to list shares on foreign exchanges.
The Exchanges continue to be very volatile and prone to
wide fluctuates. The official indices for the Exchanges are the
Shanghai Securities Exchange Index and the Shenzhen Securities
Exchange Index, respectively. These indices are comprised of all
listed "A" shares (as described below) and are market-value
weighted. The Shanghai Securities Exchange Index, was at a high
of 1,522 on December 9, 1996, a 120% increase from April 1 while
the Shenzen Securities Exchange Index, hit a high of 4,522, up
350% from April 1. By December 18, 1996, prices plunged an
average 20% after government warnings of excessive speculation.
As of June 30, 1997, the Shanghai Securities Exchange Index was
up to 864 while the Shenzen Securities Exchange Index stood at
1250. "B" shares, normally trading at large discounts on the
Exchanges, have also been affected by this volatility. The
Shanghai and Shenzhen Indices for "B" shares ended up
approximately 150% and [ %], respectively for 1996. As of
June 30, 1997, the "B" share indices for the Shanghai and Shenzen
Exchanges stood at 81.47 and 144.71, respectively.
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China also has an active bond market, as the government
issues Treasury bonds to help fund consistent budget deficits.
Prior to 1990, however, the government had difficulty raising
money through bond offerings, which were often viewed as
illiquid. Since 1990 government bond issues have been
underwritten by financial institutions resulting in the sale of
government bonds in amounts of more than 100 million RMB. In an
effort to curb inflation in 1997, China expects to increase note
issuance 13.6% instead of printing an excess of money. China's
sovereign foreign currency debt is currently rated investment
grade by both S&P and Moody's. Citing continued progress in
carrying out economic reforms, recent stable of government issued
debt economic growth and manageable inflation, S&P raised the
rating of government issued debt to BBB+ from BBB on May 14,
1997. In support of the upgrading, S&P also referred to China's
solid debt-to-export ratio, strong fiscal and balance of payment
accounts, modernization of its monetary management system and
developing capital markets. Moody's rating is A3. China, which
is in the process of drafting a new futures law, also allows
futures trading. While the government is wary of the speculation
futures markets can foster, China currently has 14 futures
exchanges.
HONG KONG
Hong Hong, which was under the control of Great Britain
until July 1, 1997, is a small territory located contiguous to
China on its southeastern coast, having an area of approximately
240 square miles and a population estimated at 6.3 million
people, the vast majority of which are ethnic Chinese. The
territory is divided into three regions, Hong Kong Island, the
New Territories (less populated suburbs) and Kowloon. Hong Kong
Island and Kowloon lie across Victoria Harbor from each other and
are densely populated.
History and Politics
Great Britain took control of Hong Kong Island during
the First Opium War in 1841, with the hope of using the island as
a colony from which it could open up the markets of mainland
China. In 1860, Britain extended its dominion to include
Kowloon, and in 1898 Britain forced China to turn over to it the
New Territories under a 99 year lease, which expired June 30,
1997. In 1984, Britain and China signed an agreement (the "Joint
Declaration") which provided that sovereignty over all of Hong
Kong was to be turned over to China on July 1, 1997. In this
Joint Declaration, China agreed that Hong Kong would become a
Special Administrative Region ("SAR") of China and retain its
present capitalist structure for the next 50 years. With the
transfer of sovereignty to China, Hong Kong is now governed under
a "Basic Law", essentially a constitution which, among other
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things, sets forth the economic, markets and social protections
governing Hong Kong and its people.
Government
Until July 1, 1997, Hong Kong was a colony of the
British crown, with Queen Elizabeth II as the Head of State and
an appointed governor as her representative. The Hong Kong
legislature, referred to as the Legco, had 60 members, most
indirectly elected by certain constituencies (such as
professionals) and 20 members directly elected by the people.
The executive committee, referred to as the Exco was composed of
twelve members appointed by the governor from the Hong Kong
elite. They advised the governor concerning legislation to be
debated in the Legco.
In 1992, the governor of Hong Kong, following the
apprehension raised by China's suppression of the demonstrations
in Tiananmen Square in June 1989, proposed a plan to develop a
more democratic political system in Hong Kong prior to British
departure. The plan expanded suffrage, increased the number of
directly elected seats in the Legco, and introduced the "first
past the post" (winner take all) voting system. China believed
that this proposal violated the Basic Law. After negotiation
between Great Britain and China broke down, the plan was
implemented. In the 1995 elections held under this expanded
political structure, the pro-democracy parties (including the
dominant Democratic Party) won 25 of the contested seats in the
Legco, while the pro-Chinese Democratic Alliance for the
Betterment of Hong Kong (DAB), won only two. In August 1994, the
NPC voted unanimously to abolish Hong Kong's present political
structure and appointed the Preparatory Committee on Hong Kong
("PC") which in turn selected the provisional legislature which
replaced the elected Legco as well as selecting Hong Kong's first
chief executive of the SAR, Tung Chee-Hwa. As with the NPC in
China, the PC is viewed by many as a rubber stamp of the policies
of the CCP. While the people of Hong Kong did not have the right
to vote for members of this transitional legislature, general
elections for the Legco are scheduled to be held in 1998. The
structure of the electoral system and whether China will allow a
freely elected body to take effect in 1998 remains unclear.
The extent of continued democracy in Hong Kong after the
transition is yet to be resolved. The Basic Law holds that the
Chief Executive must be acceptable to China, only a minority of
the members of the Legco will be directly elected, and China will
be responsible for defense and foreign affairs. There have also
been recent indications that civil liberties will be limited by
China. These indications include recent amendments of local
ordinances by Tung Chee-Hwa requiring official approval prior to
the staging of a public protest and warnings from China's Foreign
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Minister that Hong Kong's newspapers will not be allowed to
criticize Chinese leaders, advocate Taiwan or Tibetan
independence or publish "rumors."
Economy
Hong Kong's economy is highly cyclical and, compared to
the U.S. economy, quite volatile as the government does not
normally endeavor to restrain economic fluctuations. As Hong
Kong does not have a strong natural resource base, it is heavily
dependent on international services and foreign trade. Hong
Kong's economic growth began with the manufacturing of low-cost
consumer goods, particularly textiles (still Hong Kong's most
important export industry) and electronics. As Hong Kong's
standard of living increased, production costs also rose. While
other developing Asian nations, such as South Korea, moved to
high-tech industry from consumer goods, Hong Kong transformed
itself into a financial and trade center. Official statistics
show that the number of foreign companies operating in Hong Kong
has been rising steadily. It is estimated that of about 4,500
foreign companies operating in Hong Kong, about 40% have
commenced operations in the last five years, many setting up
regional headquarters or offices. It is estimated that
approximately 800 multinational corporations doing business in
Asia have regional headquarters in Hong Kong. Currently, Hong
Kong's services sector employs approximately 60% of the
population and accounts for over 75% of Hong Kong's GDP, while
manufacturing accounts for only 8.8% of its GDP. Hong Kong's
economy has been growing for the last few years, the growth rate
not dropping below 4.7% from 1992 through 1996, although its
recent growth rate has been below that of both China and Taiwan.
GDP growth has been projected to increase from an estimated 4.7%
for 1996 to 5.3% for 1997 and 5.2% for 1998. Growth for the
first quarter of 1997 has been estimated at 6%. Inflation during
the same period grew 9.3% in 1992, 8.5% in 1993, 8.1% in 1994,
8.7% in 1995 and 6.0% in 1996. Inflation has been estimated to
rise 6.7% in 1997 and 7.5% in 1998.
With the movement of manufacturing jobs to China, Hong
Kong has shifted its manufacturing base to the re-exporting of
goods manufactured in China. As much of Hong Kong's industry is
now involved in packaging, presenting, selling and shipping goods
produced in China, the measure of Hong Kong's continued
industrial growth is tied to China. From 1990 to 1995,
re-exports rose by 152.7%, compared to a 4.2% drop in exports of
goods produced in Hong Kong. The growth in re-exports slowed to
7.5% in 1996, down from 14.3% in 1995, while domestic exports
decreased 8.4% after a 2% increase in 1995. Hong Kong's role as
a re-exporter is expected to continue to decrease, while its role
in transshipment is expected to increase, as China continues to
modernize its own port facilities and direct shipping with
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Taiwan, which has recently been authorized by both China and
Taiwan on a limited basis, expands. Hong Kong's shipping sector
is still expected to grow at a moderate pace, as re-exports grew
8% in 1996, container throughput grew an estimated 13.4%, and the
Chinese government has made plans to directly connect Hong Kong's
ports to China's main railway lines. In line with Hong Kong's
strength as an exporter and re-exporter, its foreign exchange
reserves are estimated at US$63 billion, not including US$15
billion from the Land Fund.
In contrast to Hong Kong's large seaport, its airport is
considered inadequate, which has hindered the growth of both
tourism and the rapidly expanding air-cargo industry. Political
disagreements with China have delayed the opening of the new
airport until 1998. Tourism which earned HK$72.9 billion in
1995, as 21.4 million international passengers flew into
Hong Kong, is expected to remain stagnant until the new airport
opens. The new airport is expected to be able to handle 35
million passengers annually once the second runway is built,
which at present is expected to be in 2000. While tourism has
been increasing, hotel space in Hong Kong has been declining, as
this space has been converted into retail office space where
demand continues to grow. Hong Kong has also announced plans to
invest HK $2.5 billion in a science park and technology center in
an effort to stimulate growth in high technology industries.
Banking and Finance
Hong Kong has established itself as one of the most
important financial centers in the world. Together with real
estate and insurance, the financial sector accounted for 24.9% of
Hong Kong's GDP in 1996 as opposed to 15.6% in 1984. Unlike many
Asian economies, Hong Kong does not actively attract or dissuade
foreign investment, and is known as one of the most open markets
in the world. Given Hong Kong's low taxes and quality
infrastructure, many business looking to set up regional
headquarters or a foothold to do business in China have set up
offices in Hong Kong. While Hong Kong does not have a central
bank, in 1993 the Hong Kong Monetary Authority ("HKMA") was
established to assume certain central bank type responsibilities,
including monetary management and supervision of the banking
industry. Hong Kong has more than 350 authorized banking
institutions (including licensed banks, restricted-license banks
and "deposit-taking companies"). While government regulation is
kept to a minimum, all banks are required to be members of the
Hong Kong Association of Banks which supervises banking standards
and regulates charge and deposit interest rates. The HKMA does
not, however, set interest rates. Since 1983, the Hong Kong
dollar has been linked to the U.S. dollar at a rate of HK $7.80
to U.S. $1.00. The free market exchange rate of the Hong Kong
dollar amount against the U.S. dollar for the non-bank public is
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determined by supply and demand but has not deviated
significantly from this fixed exchange rate. Because of the tie
between the U.S. dollar and the HK dollar, Hong Kong interest
rates closely follow U.S. rates. This has effectively taken
monetary policy control away from the Hong Kong government,
leaving Hong Kong somewhat ill equipped to deal with inflationary
pressures which has contributed to periodic surges of money into
the stock and property markets. According to the Basic Law, for
the next 50 years from July 1, 1997 the Hong Kong dollar is to
remain linked to the U.S. dollar, the Hong Kong dollar is to be
freely convertible into other currencies and there are to be no
exchange controls or consents to raise debt or equity
capital.
Securities Markets
Foreign investment into Hong Kong is restricted only in
a few regulated sectors which are under direct government
control, including the postal system, harbor and airport
facilities, public utilities and broadcasting. No government
approvals are required for foreigners to invest in other sectors.
Funds invested in Hong Kong as well as gains and dividends and
interest may likewise be freely remitted abroad. Like its other
financial markets, the Hong Kong Stock Exchange ("HKSE") is
completely open to foreign investors with minimal regulations.
The regulatory powers of Hong Kong's Securities and Future
Commission ("SFC") are essentially limited to either a verbal
reprimand or an outright ban on trading with little power in
between. At present, the SFC does not have the power to levy
fines. There are signs that the SFC's power may soon be enhanced
in the face of a recent scandal in which a senior investment
manager at the largest fund manager in Hong Kong was found to
have made large profits through insider trading. The SFC has
also announced plans to add more staff investigators and it has
been disclosed that the SFC and the Hong Kong Investment Funds
Association are currently drawing up investment management
guidelines covering dealing practices, profit allocation,
investment restrictions and the handling of customer complaints.
The SFC is also expected soon to issue internal control
guidelines relating to dealing compliance and internal auditing
issues.
The HKSE expanded from 310 listed companies with a
market capitalization of HK$805 billion in 1991 to 610 listed
companies with a market capitalization of US$524 billion trillion
as of June, 1997. As the HKSE is not highly regulated, the
market is prone to wide fluctuations. The SFC does not impose
trading restrictions when the market becomes volatile. The Hang
Seng index which tracks 33 blue chip companies listed on the HKSE
has risen from 4,297 in 1991 when the HKSE was created from the
four then existing Hong Kong exchanges, to over 13,000 in
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November of 1996 and up to 15,196 as of June 30, 1997. This
growth has been marked by erratic movements. For example, in
1993 the year-end Hang Seng index was up 116% from the previous
year (in constant prices), but experienced a 31% drop in 1994,
followed by a 23% gain in 1995, a [ ]% gain in 1996 and
[ ]% gain through June 30, 1997.
As the July 1, 1997 transfer of sovereignty neared,
trading on the HKSE was very active and the Hang Seng index rose
[ ]% during the first six months of 1997, albeit on a
somewhat erratic basis. The performance of the Hang Seng China
Enterprises index, comprised of the 31 "H" shares listed on the
HKSE rose 22% in the second half of 1996 to close the year at
980. As of June 30, 1997, the index stood at 15,196. Companies
considered to have strong ties with the mainland have performed
particularly well. The Hang Seng China-Affiliated Index, an
index which tracks the "Red-Chip" companies (see discussion
below), meaning companies incorporated in Hong Kong, at least 35%
of whose assets are owned by Mainland entities, is also up
substantially. The index rose 7.28% on June 16, 1997, the first
day securities on the index were measured to close at 2,867. As
of June 30, 1997 the index stood at [ ].
Despite this growth, the HKSE has shown signs of
investor tensions in connection with the transition of power to
China. The market has recently seen a number of listed companies
move their domicile to other tax-friendly jurisdictions, such as
Bermuda, while other companies have obtained secondary listings
on the London and Shanghai exchanges, or have de-listed
altogether, as a reflection of doubt as to the impact of the
Chinese takeover. These departures have been replaced in part by
Chinese companies listing "H" shares on the HKSE. Companies
listing "H" shares must receive prior approval by the Chinese
government and meet minimum capital and financial disclosure
standards imposed by China and Hong Kong prior to listing their
shares. More recently, however, investors have been turning to
the "Red Chips", mainland Chinese state-controlled companies,
incorporated in Hong Kong and listed on both the Hong Kong and
Chinese stock exchanges, which are believed to better managed
then the "H" share listed companies and also provide better
company disclosure. Speculation in Red Chips have caused an
increase of 35% in the price of their shares since the beginning
of 1997, with these increases apparently based more on investor
hopes than solid financial information. A loss in confidence in
these Red Chips companies could adversely impact the Hong Kong
securities markets.
While Hong Kong has not needed to issue debt to raise
funds, as it does not run a budget deficit, the HKMA issues
Exchange Fund bills and notes in an effort to stimulate growth in
the local debt market. By the end of June 1996, the HKMA had
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HK$62.3 billion of outstanding Exchange Fund bills and notes. An
Exchange Fund debt investment is one which evidences the deposit
of money in Hong Kong dollars with the HKMA and is a direct
obligation of the Hong Kong government. Beginning in 1996, the
HKMA began issuing Exchange Fund debt with a maturity of seven
years, up from the previous maximum of five years and in October
1996 began issuing ten year notes.
The HKMA is also attempting to stimulate the limited
derivatives market by cutting the tax on currency futures and
extending the tax exemption on securities options for another
year. However, it is uncertain if the stock options market will
expand, as the high concentration of a few stocks on the Hang
Seng Index causes investors to put money into index options,
which are typically more liquid.
TAIWAN
Taiwan is an island located off the southeastern
coast of China with a land mass of approximately 14,000
square miles and a population estimated at 21.3 million, of
which 98% are ethnic Chinese. Half of the island is covered
by forests and the terrain is mountainous, especially
inland.
History and Politics
In 1949, after the Chinese Civil War when the
Nationalist leader Chiang-Kai-Shek and the remnants of his
Nationalist forces fled to the island and set up a
provisional government, Taiwan, formerly a province of
China, was declared by the provisional government to be the
official government of mainland China. The initial focus of
the Nationalist or Kuomintang Party (KMT) was to assume
control of mainland China rather than concentrating on
Taiwan. An impetus for internal development was slow in
arising. The KMT imposed marital law from 1949 until 1987,
when political scandals, among other factors, weakened the
KMT government to the point where elections and the
formation of opposition parties were allowed. The trend
toward democracy has continued since 1987. Opposition
parties have been allowed to participate in the political
process. In the legislative elections of 1995, the once-
dominant KMT party failed to attain a majority of the vote
although it still held a majority in the legislature, and in
1996 Taiwan elected its President by direct popular vote for
the first time.
China's official position regarding Taiwan is that
Taiwan is not an independent country but a province of
China, while Taiwan's official position remains the same as
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in 1949, that its government is the rightful government of
mainland China. All but 29 nations (including the United
States) recognize the government of China as the only
official government representing China. While there is a
growing movement in Taiwan towards declaring independence
from China, the Taiwanese government has been wary of such a
declaration out of fear of reprisals by China. While China
has from time to time flexed its military muscle, the threat
of an actual invasion from China is generally believed not
to be imminent.
Government
Taiwan continues in the process of moving from a
mostly one party system to a representative democracy. Its
elected branches of government consist of the National
Assembly which until 1994 elected the President and Vice
President, but is now limited to amending the Constitution,
and the Legislative Yuan which is the equivalent of a
Parliament. The role of the National Assembly, which is
partially elected and partially nominated by Taiwanese
political parties, in determining government policy has been
increasingly limited as the Legislative Yuan, which was
historically viewed as a means to legitimize KMT policy, has
assumed an increasingly important role. Along with the
President, who is directly elected by the Taiwanese people,
the Legislative Yuan appoints the Prime Minster and monitors
the administrative activities of the Executive Yuan.
Reforms are currently pending vote which would grant the
Legislative Yuan the power to dismiss the Prime Minister
through a vote of no confidence, impeach the President and
Vice President and propose constitutional amendments. It is
unclear if, and to what extent, these reforms will be
adopted and what their effect might be on Taiwan's economy
and relations with China.
Economy
Taiwan enjoyed substantial economic growth in the
1960s and 1970s when cheap labor and government tax breaks
resulted in large increases in Taiwanese consumer goods
exports. Similar to the experience of certain of the other
emerging Asian economies in the 1980s and 1990s, however,
prosperity brought higher labor costs and a loss of
competitiveness in the low-end consumer goods market. As a
result of these increased costs, Taiwan's manufacturing base
has moved towards the production of high-end consumer goods,
particularly into the chemical and computer sectors.
Taiwan's GDP has risen at a steady rate over recent years,
as its GDP grew 6.8% in 1992, 6.3% in 1993, 6.5% in 1994,
6.0% in 1995 and 5.7% in 1996. Estimates have been reported
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that Taiwan's GDP will grow at 6% in 1997 and at 6.3% in
1998. Taiwan's inflation rate was 4.5% in 1992, 2.9% in
1993, 4.1% in 1994, 3.7% in 1995 and 3.1% in 1996. Reported
estimates of inflation in 1997 and 1998 are 3% and 3.3%,
respectively.
In 1996, manufacturing continued as Taiwan's most
important sector, accounting for 28.2% of its GDP, with an
emphasis on electronics and computers. The financial,
insurance and real estate sectors, which continue to grow,
represented 19.5% of Taiwan's GDP. While the manufacturing
sector continues to be most important, Taiwan has been
reducing its economic reliance on this sector, with the
services sector, including the financial, insurance and real
estate sectors, at present accounting for over 60% of
Taiwan's GDP.
Due to its consistent yearly merchandise trade
surpluses, Taiwan retains one of the highest levels of
foreign reserves in the world, estimated at US$88 billion as
of the end of 1996. The annual trade surplus reached a peak
of US$18.7 billion in 1987 before declining to a low of
US$7.7 billion in 1994. In 1995 and 1996, the trade surplus
has again increased, mainly due to a sharp drop in the
demand for imports as economic growth in Taiwan has slowed.
The 1996 trade surplus reached a nine year high at US$14.7
billion. It has been predicted that Hong Kong will replace
the U.S. as Taiwan's number one export market within the
next few years, in part because Hong Kong is used as a
transshipment port for goods destined for China. Taiwan's
Ministry of Finance estimates that between 60% and 70% of
all exports to Hong Kong end up in China. Taiwan and China
have come to an agreement allowing Taiwan continued access
to Chinese markets through Hong Kong after Hong Kong becomes
a SAR of China.
Generous tax breaks for businesses, nearly
universal health coverage and heavy government investment in
infrastructure have resulted in a large government budget
deficits in recent years. From 1992 to 1995, budget
deficits ranged from 5% to 7.1% of GDP. While deficits are
being combatted by cutbacks in spending, debt-service
payments have been projected to be 13.9% of government
spending for fiscal year 1996-97.
Economic Relations with China
Taiwan and China, while separated geographically
and politically, are coming closer together economically
despite Taiwanese government warnings that Taiwan is
becoming overdependent on China, while at the same time
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losing its manufacturing base to the mainland. Inexpensive
labor is the main draw for Taiwanese companies shifting
their manufacturing to China. At present, China estimates
that Taiwanese investors have invested approximately US$15.6
billion into China (unofficial estimates range from US$20 to
$30 billion), with only US$6.8 billion of this amount
approved by the government. While the government continues
to attempt to limit investments in China, including recently
enacting sanctions ranging from NT$1 million up to NT$5
million for illegal investments, trade between China and
Taiwan continues to expand. Exports to China rose 8.7% in
1996 from 1995 with Taiwan recording an estimated US $15
billion trade surplus with China. The 1996 trade growth is
lower than in recent years, such as in 1993 when trade with
China grew almost 31%. In the first quarter of 1997,
exports to China have reportedly risen 1.9% from the same
period in 1996. Imports from China are estimated to have
increased 7.9% during the same period.
Trade between China and Taiwan is not expected to
be affected by Hong Kong's transfer to China, as limited
direct trade has begun between China and Taiwan and Taiwan's
continued use of Hong Kong as a entry port into China has
been agreed to by both countries. The Taiwanese government
has, however, continued to encourage Taiwanese investors to
invest in countries other than China. As a result,
investments in countries other than China increased by an
estimated 210% in 1996 from 1995. This policy, however, has
not had a large effect on slowing investment in China as
Taiwan accounted for an estimated 8.7% of all foreign
investment in China in 1996, second only to Hong Kong,
although this percentage of investment has declined from
recent years.
Banking and Finance
Unlike Hong Kong, the Taiwanese financial markets,
including both the banking and securities markets, have
historically been highly regulated by the Taiwanese
government. Monetary policy in Taiwan is controlled by the
Central Bank of China ("CBC"). Beginning in 1989, Taiwanese
financial markets began to be liberalized. Initially,
interest rate restrictions were lifted followed by removal
of certain restrictions on bank branches which has allowed
foreign banks to open more than one branch in Taiwan.
However, significant restrictions still limit foreign
capital investments. Taiwan has recently announced that
measures are being taken to further liberalize the financial
markets by lifting restrictions on foreign capital, raising
the limits on capital inflows and outflows by Taiwanese
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firms and allowing foreign banks greater freedom to
operate.
Securities Markets
The Taipei Stock Exchange ("TSE"), Taiwan's primary
securities exchange, is the sixth largest exchange in the
world in terms of average trading volume and the fifteenth
in terms of overall market capitalization. Unlike exchanges
in the U.S., the TSE is used far more for speculation with
excess liquidity than as a means to raise funds.
Historically, the market has been extremely volatile.
Beginning in 1989, the market rose from approximately 5,000,
to just below 12,500 by February 1990 and thereafter fell to
2,500 by September. Since this collapse, the market has
been less erratic and posted an increase of 34% for all of
1996. As of June 30, 1997, the Exchange was up to 9,030
from 6,934 at the end of December 1996. The ROC
Over-the-Counter Securities Exchange ("ROSE"), which is set
up similarly to the NASDAQ system in the U.S., has grown
rapidly in recent years. That exchange is up from 28 listed
companies worth an estimated NT$41.79 billion in 1995 to, at
present, 95 listed companies worth an estimated NT$108
billion. Government officials have indicated they expect 80
new listings this year.
While Taiwan is in the process of opening up its
financial markets to foreign investors, significant
restrictions still exist, including foreign investment
restrictions on the TSE. Although recently raised from 20%,
there is still a limit on total foreign investment in an
exchange listed security of 25% of the market capitalization
of the security. At present, this restriction is not viewed
as a significant hindrance to foreign investment, as total
foreign investment under this 25% cap is estimated at over
US $90 billion, while total foreign investment on the
exchange is estimated at only US $11 billion. Along with
the 25% limitation, no single CBC and TSEC qualified foreign
institutional investor ("QFII"), such as Alliance acting on
behalf of the Fund and Alliance's other clients, can acquire
more than 10% of a listed security's market capitalization.
Non-QIFFS are limited to a maximum investment in all
Taiwanese securities of US $5 million for individuals and
U.S. $50 million for corporations. Taiwan further restricts
purchases by foreign investors of securities of certain
companies to prescribed limits or forbids foreign investment
completely in certain industries. Securities of companies
in the cement, transportation, banking and utility
industries now traded on TSE or ROSE are currently subject
to proscribed limits.
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Because of the above limitations, and in part,
because of burdensome procedures that must be followed prior
to investing in Taiwanese securities, foreign investment has
never reached the maximum limits. The procedures which have
dissuaded foreign investment include requirements that a
QFII receive approvals from the CBC and Taiwan Securities
and Exchange Commission ("TSEC") prior to purchasing listed
and OTC securities. Further procedures include the need for
a QFII to obtain, on a case by case basis, government
approval to purchase non-listed and non-OTC securities, and
the restriction that only a preapproved maximum amount for
all of a QIII's accounts may be invested in TSE listed
securities. The maximum at present is US $600 million. The
TSE closely monitors trading by QFIIs. If the full
preapproved amount is not remitted in and converted into
N.T. Dollars within six months of initial approval, the
approval to the extent of the unremitted amount is revoked
and a new application for permitted investment, not
exceeding the US$600 million limit, must be submitted. The
approval and reapproval increases can take several weeks,
resulting in the possible loss of investment opportunities
by the Fund during such times. The quotas also involve
somewhat onerous reporting requirements. The Fund will
endeavor to have an appropriate amount approved for
investment on the TSE at all times, but given the Fund's
status as an open-end investment company and changing market
conditions, there may be times when the requisite approval
has not yet been received. The Taiwanese government is
aware that these bureautic restrictions are limiting foreign
investment, but there is no indication of any near-term
change.
The Taiwanese bond market has been expanding
rapidly in recent years, increasing from an estimated NT$41
billion of corporate debt instruments issued in 1995 to an
estimated NT$108 billion in 1996. In 1996 the Taiwanese
government issued bonds totaling an estimated NT$175
billion, the highest level in four years. On May 28, 1997,
the Taiwan Rating Corporation, which is half owned by
Standard and Poor's ("S&P"), began to rate debt issued by
Taiwanese corporations. It is expected that foreign
investors will become increasingly active in the local bond
market as rating information becomes available for Taiwanese
firms issuing corporate debt. This new local rating agency
does not rate government issued debt. S&P and Moody's rate
Taiwenese sovereign government debt at AA+ and Aa3,
respectively.
At present, neither short selling, margin
transactions nor the lending of securities by the Fund is
permitted, although it is expected that foreign investors
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will have limited access to securities lending within the
next year. Taiwan has also announced plans to open a
commodity futures exchange in October 1997 to be regulated
by a Securities and Futures Commission. Futures on indexes
of Taiwanese securities have been traded on the Chicago and
Singapore futures markets since January 9, 1997. While
Taiwan has restricted investment by its local futures
commission merchants in the Chicago or Singapore exchanges,
investors can still invest in these markets through brokers
in Hong Kong and elsewhere.
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____________________________________________________________
APPENDIX B:
CERTAIN INVESTMENT PRACTICES
____________________________________________________________
The information in this Appendix concerning
investment practices in which the Fund is authorized to
engage may not be currently permitted under applicable laws
or regulations or to engage in various of these practices
and they may otherwise be unavailable in certain countries.
The Fund intends 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
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acquire that security without additional cash consideration
(or 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
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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.
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
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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 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.
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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 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
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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 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
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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.
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
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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 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.
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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 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
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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 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
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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 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
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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 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 the Fund's
Custodian, cash or other high-grade liquid debt securities
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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 of other political and economic
events. In addition, exchange- traded options on foreign
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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 C
BOND RATINGS
_________________________________________________________________
STANDARD & POOR'S
A Standard & Poor's corporate debt rating is a current
assessment of the creditworthiness of an obligor with respect to
a specific obligation. Debt rated "AAA" has the highest rating
assigned by Standard & Poor's. Capacity to pay interest and
repay principal is extremely strong. Debt rated "AA" has a very
strong capacity to pay interest and to repay principal and
differs from the highest rated issues only in small degree. Debt
rated "A" has a strong capacity to pay interest and repay
principal although it is somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than
a debt of a higher rated category.
The ratings from "AA" and "A" may be modified by the addition
of a plus or minus sign to show relative standing within the
major rating categories.
MOODY'S
Excerpts from Moody's description of its corporate bond
ratings: Aaa - judged to be the best quality, carry the smallest
degree of investment risk; Aa - judged to be of high quality by
all standards; A - possess many favorable investment attributes
and are to be considered as higher medium grade obligations; Baa
- - considered as medium grade obligations, i.e., they are neither
highly protected nor poorly secured.
FITCH INVESTORS SERVICE
AAA. Securities of this rating are regarded as strictly high-
grade, broadly marketable, suitable for investment by Directors
and fiduciary institutions, and liable to but slight market
fluctuation other than through changes in the money rate. The
factor last named is of importance varying with the length of
maturity. Such securities are mainly senior issues of strong
companies, and are most numerous in the railway and public
utility fields, though some industrial obligations have this
rating. The prime feature of an AAA rating is showing of
earnings several times or many times interest requirements with
such stability of applicable earnings that safety is beyond
reasonable question whatever changes occur in conditions. Other
features may enter in, such as a wide margin of protection
through collateral security or direct lien on specific property
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as in the case of high class equipment certificates or bonds that
are first mortgages on valuable real estate. Sinking funds or
voluntary reduction of the debt by call or purchase are often
factors, while guarantee or assumption by parties other than the
original debtor may also influence the rating.
AA. Securities in this group are of safety virtually beyond
question, and as a class are readily salable while many are
highly active. Their merits are not greatly unlike those of the
AAA class, but a security so rated may be of junior through
strong lien--in many cases directly following an AAA security--or
the margin of safety is less strikingly broad. The issue may be
the obligation of a small company, strongly secured but
influenced as to ratings by the lesser financial power of the
enterprise and more local type of market.
A. A securities are strong investments and in many cases of
highly active market, but are not so heavily protected as the two
upper classes or possibly are of similar security but less
quickly salable. As a class they are more sensitive in standing
and market to material changes in current earnings of the
company. With favoring conditions such securities are likely to
work into a high rating, but in occasional instances changes
cause the rating to be lowered.
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PART C
OTHER INFORMATION
ITEM 24. Financial Statements and Exhibits.
(a) Financial Statements
No financial statements are included in this
Registration Statement since, on the date of filing, the
Registrant, being a newly organized corporation, has no assets or
known liabilities and has sold no shares of common stock. Prior
to the effective date of this Registration Statement, the
necessary financial statements will be filed by amendment hereto.
(b) Exhibits
(1) Copy of Articles of Incorporation.*
(2) Copy of By-Laws of the Registrant.*
(3) Not applicable.
(4) Not applicable.
(5) Copy of proposed Advisory Agreement between the
Registrant and Alliance Capital Management L.P.
(6) (a) Copy of proposed Distribution Services
Agreement between the Registrant and Alliance Fund Distributors,
Inc.
(b) Form of Selected Dealer Agreement between
Alliance Fund Distributors, Inc. and selected dealers offering
shares of Registrant.
____________________
* Incorporated by reference from Registrant's Registration
Statement on Form N-1A (File Nos. 333-26229 and 811-08201) filed
with the Securities and Exchange Commission on April 30, 1997.
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(c) Form of Selected Agent Agreement between
Alliance Fund Distributors, Inc. and selected agents making
available shares of Registrant.
(7) Not applicable.
(8) Copy of proposed Custodian Contract between the
Registrant and Brown Brothers Harriman & Company.
(9) Copy of proposed Transfer Agency Agreement between
the Registrant and Alliance Fund Services, Inc.
(10) (a) Opinion and Consent of Seward & Kissel.**
(b) Opinion and Consent of Venable, Baetjer and
Howard, LLP.**
(11) Consent of Independent Accountants.*
(12) Not applicable.
(13) Investment representation letter of Alliance
Capital Management L.P.*
(14) Not applicable.
(15) Rule 12b-1 Plan - see Exhibit 6(a) hereto.
(16) Schedule for computation of performance
quotations.***
(18) Rule 18f-3 Plan.
Other Exhibits -- Powers of Attorney for John D. Carifa, David H.
Dievler, William H. Foulk, Jr. and T.L. Tsim -- filed herewith.
ITEM 25. Persons Controlled by or under Common Control with
Registrant.
None. The Registrant is a recently organized
corporation and has no outstanding shares of common stock.
___________________________
** To be filed in a subsequent pre-effective amendment.
*** To be filed in a post-effective amendment.
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ITEM 26. Number of Holders of Securities.
None. The Registrant is a recently organized
corporation and has not issued any securities as of the
date of this Registration Statement.
ITEM 27. 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 1 hereto, Article VII
and Article VIII of Registrant's ,By-Laws, filed as
Exhibit 2 hereto, and Section 10 of the proposed
Distribution Services Agreement, to be filed by Pre-
Effective Amendment as Exhibit 6(a) hereto. The
Adviser's liability for any loss suffered by the
Registrant or its shareholders is set forth in Section 4
of the proposed Advisory Agreement, to be filed by Pre-
Effective Amendment as Exhibit 5 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
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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
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 28. Business and Other Connections of Investment Adviser.
The descriptions of Alliance Capital Management L.P.
under the captions "Management of the Fund" in the
Prospectus and in the Statement of Additional
Information constituting Parts A and B, respectively, of
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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 29. Principal Underwriters.
(a) Alliance Fund Distributors, Inc. is the
Registrant's Principal Underwriter in
connection with the sale of shares of the
Registrant. Alliance Fund Distributors, Inc.
also acts as Principal Underwriter or
Distributor for the following investment
companies:
ACM Institutional Reserves, Inc.
AFD Exchange Reserves
Alliance All-Asia Investment Fund, Inc.
Alliance Balanced Shares, Inc.
Alliance Bond Fund, Inc.
Alliance Capital Reserves
Alliance Developing Markets 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 Growth and Income Fund, Inc.
Alliance High Yield Fund, Inc.
Alliance Income Builder Fund, Inc.
Alliance International Fund
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.
C-5
<PAGE>
Alliance Regent/Sector Opportunity Fund
Alliance Short-Term Multi-Market Trust, Inc.
Alliance Technology Fund, Inc.
Alliance Utility Income Fund, Inc.
Alliance Variable Products Series Fund, Inc.
Alliance World Income Trust, Inc.
Alliance Worldwide Privatization Fund, Inc.
Fiduciary Management Associates
The Alliance Fund, Inc.
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 OFFICES POSITIONS AND OFFICES
NAME WITH UNDERWRITER WITH REGISTRANT
Michael J. Laughlin Chairman
Robert L. Errico President
Edmund P. Bergan, Jr. Senior Vice President, Secretary
General Counsel
and Secretary
James S. Comforti Senior Vice President
James L. Cronin Senior Vice President
Daniel J. Dart Senior Vice President
Byron M. Davis Senior Vice President
Richard A. Davies Senior Vice President
Anne S. Drennan Senior Vice President
and Treasurer
Mark J. Dunbar Senior Vice President
Bradley F. Hanson Senior Vice President
Geoffrey L. Hyde Senior Vice President
Robert H. Joseph, Jr. Senior Vice President
and Chief Financial Officer
Richard E. Khaleel Senior Vice President
C-6
<PAGE>
Stephen R. Laut Senior Vice President
Daniel D. McGingley Senior Vice President
Dusty W. Paschall Senior Vice President
Antonios G. Poleondakis Senior Vice President
Robert E. Powers Senior Vice President
Richard K. Sacculo Senior Vice President
Gregory K. Shannahan Senior Vice President
Joseph F. Sumanski Senior Vice President
Peter J. Szabo Senior Vice President
Nicholas K. Willett Senior Vice President
Richard A. Winge Senior Vice President
Jamie A. Atkinson Vice President
Benji A. Baer Vice President
Kenneth F. Barkoff Vice President
Casimir F. Bolanowski Vice President
Beth Cahill Vice President
Timothy W. Call Vice President
Kevin T. Cannon Vice President
John R. Carl Vice President
William W. Collins, Jr. Vice President
Leo H. Cook Vice President
Richard W. Dabney Vice President
John F. Dolan Vice President
Sohaila S. Farsheed Vice President
Leon M. Fern Vice President
William C. Fisher Vice President
C-7
<PAGE>
Gerard J. Friscia Vice President & Controller
Andrew L. Gangolf Vice President and Assistant Secretary
Assistant General Counsel
Mark D. Gersten Vice President Treasurer and
Chief Financial Officer
Joseph W. Gibson Vice President
William B. Hanigan Vice President
Alan Halfenger Vice President
Daniel M. Hazard Vice President
George R. Hrabovsky Vice President
Valerie J. Hugo Vice President
Scott Hutton Vice President
Thomas K. Intoccia Vice President
Larry P. Johns Vice President
Richard D. Keppler Vice President
Donna M. Lamback Vice President
Thomas Leavitt, III Vice President
James M. Liptrot Vice President
James P. Luisi Vice President
Christopher J. MacDonald Vice President
Michael F. Mahoney Vice President
Lori E. Master Vice President
Shawn P. McClain Vice President
Maura A. McGrath Vice President
Matthew P. Mintzer Vice President
Thomas F. Monnerat Vice President
Joanna D. Murray Vice President
C-8
<PAGE>
Jeanette M. Nardella Vice President
Nicole Nolan-Koester Vice President
John C. O'Connell Vice President
John J. O'Connor Vice President
Daniel J. Phillips Vice President
Robert T. Pigozzi Vice President
James J. Posch Vice President
Domenick Pugliese Vice President and Assistant Secretary
Assistant General Counsel
Bruce W. Reitz Vice President
Dennis A. Sanford Vice President
Karen C. Satterberg Vice President
Raymond S. Sclafani Vice President
Robert C. Schultz Vice President
Richard J. Sidell Vice President
Andrew D. Strauss Vice President
Michael J. Tobin Vice President
Joseph T. Tocyloski Vice President
Martha Volcker Vice President
Patrick E. Walsh Vice President
William C. White Vice President
Emilie D. Wrapp Vice President and Assistant Secretary
Special Counsel
Charles M. Barrett Assistant Vice President
Maria L. Carreras Assistant Vice President
John W. Cronin Assistant Vice President
Ralph A. DiMeglio Assistant Vice President
C-9
<PAGE>
Faith C. Dunn Assistant Vice President
John C. Endahl Assistant Vice President
John C. English Assistant Vice President
Duff C. Ferguson Assistant Vice President
John Grambone Assistant Vice President
Brian S. Hanigan Assistant Vice President
James J. Hill Assistant Vice President
Edward W. Kelly Assistant Vice President
Nicholas J. Lapi Assistant Vice President
Patrick Look Assistant Vice President and
Assistant Treasurer
Catherine N. Peterson Assistant Vice President
Carol H. Rappa Assistant Vice President
Clara Sierra Assistant Vice President
Vincent T. Strangio Assistant Vice President
Wesley S. Williams Assistant Vice President
Christopher J. Zingaro Assistant Vice President
Mark R. Manley Assistant Secretary
(c) Not applicable. Registrant is a newly organized
corporation.
ITEM 30. 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 Brown Brothers Harriman &
Company, the Registrant's custodian, 40 Water Street,
Boston, Massachusetts 02109. All other records so
required to be maintained are maintained at the offices
C-10
<PAGE>
of Alliance Capital Management L.P., 1345 Avenue of the
Americas, New York, New York, 10105.
ITEM 31. Management Services.
Not applicable.
ITEM 32. Undertakings.
(b) Registrant undertakes to file a Post-Effective
Amendment, using financial statements which need not be
certified, within four to six months from the effective
date of its Securities Act of 1933 Registration
Statement.
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-11
<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 has duly caused this 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 29th day of July, 1997.
Alliance Greater China
'97 Fund, Inc.
/s/ John D. Carifa
__________________________________
John D. Carifa
Chairman and President
Pursuant to the requirements of the Securities Act of
1933, as amended, this 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 July 29, 1997
______________________ President
John D. Carifa
(2) Principal Financial
and Accounting Officer:
/s/ Mark D. Gersten Treasurer July 29, 1997
_____________________ and Chief
Mark D. Gersten Financial
Officer
(3) A majority of the Directors
John D. Carifa
David H. Dievler
William H. Toulh, Jr.
T.L. Tsim
/s/ Edmund P. Bergan, Jr. Secretary July 29, 1997
_________________________
(Attorney-in-fact)
C-12
<PAGE>
Index To Exhibits
(5) Copy of proposed Advisory Agreement between the
Registrant and Alliance Capital Management L.P.
(6) (a) Copy of proposed Distribution Services Agreement
between the Registrant and Alliance Fund
Distributors, Inc.
(b) Form of Selected Dealer Agreement between
Alliance Fund Distributors, Inc. and selected
dealers offering shares of the Registrant.
(c) Form of selected Agent Agreement between Alliance
Fund Distributors, Inc., and selected agents
making available shares of the Registrant.
(8) Copy of proposed Custodian Contract between the
Registrant and State Street Bank and Trust Company.
(9) Copy of Proposed Transfer Agency Agreement between the
Registrant and Alliance Fund Services, Inc.
(18) Rule 18f-3 plan.
Other Exhibits: Power of Attorney for John D. Carifa,
David H. Dievler, William H. Foulk, Jr. and T.L. Tsim.
C-13
00250235.AI1
ADVISORY AGREEMENT
Alliance Greater China '97 Fund, Inc.
1345 Avenue Of The Americas
New York, New York 10105
, 1997
Alliance Capital Management L.P.
1345 Avenue of the Americas
New York, New York 10105
Dear Sirs:
Alliance Greater China '97 Fund, Inc. herewith
confirms our agreement with you as follows:
1. We are an open-end, non-diversified management
investment company registered under the Investment Company
Act of 1940, as amended (the "Act"). We are currently
authorized to issue separate classes of shares and our
Directors are authorized to reclassify and issue any
unissued shares to any number of additional classes or
series (portfolios) each having its own investment
objective, policies and restrictions, all as more fully
described in the prospectus and the statement of additional
information constituting parts of our Registration Statement
on Form N-1A filed with the Securities and Exchange
Commission under the Securities Act of 1933, as amended, and
the Act (the "Registration Statement"). We propose to
engage in the business of investing and reinvesting the
assets of each of our portfolios in securities ("the
portfolio assets") of the type and in accordance with the
limitations specified in our Articles of Incorporation, By-
Laws and Registration Statement, and any representations
made in our prospectus and statement of additional
information, all in such manner and to such extent as may
from time to time be authorized by our Board of Directors.
We enclose copies of the documents listed above and will
from time to time furnish you with any amendments thereof.
2. (a) We hereby employ you to manage the
investment and reinvestment of the portfolio assets as above
specified and, without limiting the generality of the
foregoing, to provide management and other services
specified below.
(b) You will make decisions with respect to
all purchases and sales of the portfolio assets. To carry
out such decisions, you are hereby authorized, as our agent
and attorney-in-fact, for our account and at our risk and in
our name, to place orders for the investment and
reinvestment of the portfolio assets. In all purchases,
sales and other transactions in the portfolio assets you are
authorized to exercise full discretion and act for us in the
same manner and with the same force and effect as we might
2
or could do with respect to such purchases, sales or other
transactions, as well as with respect to all other things
necessary or incidental to the furtherance or conduct of
such purchases, sales or other transactions.
(c) You will report to our Board of Directors
at each meeting thereof all changes in the portfolio assets
since the prior report, and will also keep us in touch with
important developments affecting the portfolio assets and on
your own initiative will furnish us from time to time with
such information as you may believe appropriate for this
purpose, whether concerning the individual issuers whose
securities are included in the portfolio assets, the
industries in which they engage, or the conditions
prevailing in the economy generally. You will also furnish
us with such statistical and analytical information with
respect to the portfolio assets as you may believe
appropriate or as we reasonably may request. In making such
purchases and sales of the portfolio assets, you will bear
in mind the policies set from time to time by our Board of
Directors as well as the limitations imposed by our Articles
of Incorporation and in our Registration Statement, the
limitations in the Act and of the Internal Revenue Code of
1986, as amended, in respect of regulated investment
3
companies and the investment objective, policies and
restrictions applicable to each of our portfolios.
(d) It is understood that you will from time
to time employ or associate with yourselves such persons as
you believe to be particularly fitted to assist you in the
execution of your duties hereunder, the cost of performance
of such duties to be borne and paid by you. No obligation
may be incurred on our behalf in any such respect. During
the continuance of this Agreement and at our request you
will provide to us persons satisfactory to our Board of
Directors to serve as our officers. You or your affiliates
will also provide persons, who may be our officers, to
render such clerical, accounting and other services to us as
we may from time to time request of you. Such personnel may
be employees of you or your affiliates. We will pay to you
or your affiliates the cost of such personnel for rendering
such services to us, provided that all time devoted to the
investment or reinvestment of the portfolio assets shall be
for your account. Nothing contained herein shall be
construed to restrict our right to hire our own employees or
to contract for services to be performed by third parties.
Furthermore, you or your affiliates shall furnish us without
charge with such management supervision and assistance and
such office facilities as you may believe appropriate or as
4
we may reasonably request subject to the requirements of any
regulatory authority to which you may be subject. You or
your affiliates shall also be responsible for the payment of
any expenses incurred in promoting the sale of our shares
(other than the portion of the promotional expenses to be
borne by us in accordance with an effective plan pursuant to
Rule 12b-1 under the Act and the costs of printing our
prospectuses and other reports to shareholders and fees
related to registration with the Securities and Exchange
Commission and with state regulatory authorities).
3. We hereby confirm that we shall be responsible
and hereby assume the obligation for payment of all of our
expenses, including: (a) payment of the fee payable to you
under paragraph 5 hereof; (b) custody, transfer and dividend
disbursing expenses; (c) fees of directors who are not your
affiliated persons; (d) legal and auditing expenses; (e)
clerical, accounting and other office costs; (f) the cost of
personnel providing services to us, as provided in
subparagraph (d) of paragraph 2 above; (g) costs of printing
our prospectuses and shareholder reports; (h) cost of
maintenance of our corporate existence; (i) interest
charges, taxes, brokerage fees and commissions; (j) costs of
stationery and supplies; (k) expenses and fees related to
registration and filing with the Securities and Exchange
5
Commission and with state regulatory authorities; and (l)
such promotional shareholder servicing and other expenses as
may be contemplated by an effective plan pursuant to Rule
12b-1 under the Act, provided, however, that our payment of
such promotional expenses shall be in the amounts, and in
accordance with the procedures, set forth in such plan.
4. We shall expect of you, and you will give us
the benefit of, your best judgment and efforts in rendering
these services to us, and we agree as an inducement to your
undertaking these services that you shall not be liable
hereunder for any mistake of judgment or in any event
whatsoever, except for lack of good faith, provided that
nothing herein shall be deemed to protect, or purport to
protect, you against any liability to us or to our security
holders to which you would otherwise be subject by reason of
willful misfeasance, bad faith or gross negligence in the
performance of your duties hereunder, or by reason of your
reckless disregard of your obligations and duties hereunder.
5. In consideration of the foregoing, we will pay
you a monthly fee at an annualized rate of 1% of our
average daily net assets. Such fee shall be payable in
arrears on the last day of each calendar month for services
performed hereunder during such month. If our initial
Registration Statement is declared effective by the
6
Securities and Exchange Commission after the beginning of a
month or this Agreement terminates prior to the end of a
month, such fee shall be prorated according to the
proportion which such portion of the month bears to the full
month.
6. This Agreement shall become effective on the
date hereof and shall remain in effect until June 30, 1999
and may be continued for successive twelve-month periods
(computed from each July 1 thereafter) with respect
to each portfolio, provided that such continuance is
specifically approved at least annually by the Board of
Directors or by the vote of a majority of the outstanding
voting securities of such portfolio (as defined in the Act),
and, in either case, by a majority of the Board of Directors
who are not parties to this Agreement or interested persons,
as defined in the Act, of any party to this Agreement (other
than as Directors of our corporation), and provided further,
however, that if the continuation of this Agreement is not
approved as to a portfolio, you may continue to render to
such portfolio the services described herein in the manner
and to the extent permitted by the Act and the rules and
regulations thereunder. Upon the effectiveness of this
Agreement, it shall supersede all previous agreements
between us covering the subject matter hereof. This
7
Agreement may be terminated with respect to any portfolio at
any time, without the payment of any penalty, by vote of a
majority of the outstanding voting securities (as so
defined) of such portfolio, or by a vote of the Board of
Directors on 60 days' written notice to you, or by you with
respect to any portfolio on 60 days' written notice to us.
7. This Agreement may not be transferred,
assigned, sold or in any manner hypothecated or pledged by
you and this Agreement shall terminate automatically in the
event of any such transfer, assignment, sale, hypothecation
or pledge by you. The terms "transfer", "assignment" and
"sale" as used in this paragraph shall have the meanings
ascribed thereto by governing law and any interpretation
thereof contained in rules or regulations promulgated by the
Securities and Exchange Commission thereunder.
8. (a) Except to the extent necessary to perform
your obligations hereunder, nothing herein shall be deemed
to limit or restrict your right, or the right of any of your
employees, or any of the officers or directors of Alliance
Capital Management Corporation, your general partner, who
may also be a Director, officer or employee of ours, or
persons otherwise affiliated with us (within the meaning of
the Act), to engage in any other business or to devote time
and attention to the management or other aspects of any
8
other business, whether of a similar or dissimilar nature,
or to render services of any kind to any other trust,
corporation, firm, individual or association.
(b) You will notify us of any change in the
general partners of your partnership within a reasonable
time after such change.
9. If you cease to act as our investment adviser,
or, in any event, if you so request in writing, we agree to
take all necessary action to change our name to a name not
including the term "Alliance." You may from time to time
make available without charge to us for our use such marks
or symbols owned by you, including marks or symbols
containing the term "Alliance" or any variation thereof, as
you may consider appropriate. Any such marks or symbols so
made available will remain your property and you shall have
the right, upon notice in writing, to require us to cease
the use of such mark or symbol at any time.
10. This Agreement shall be construed in
accordance with the laws of the State of New York, provided,
however, that nothing herein shall be construed as being
inconsistent with the Act.
9
If the foregoing is in accordance with your
understanding, will you kindly so indicate by signing and
returning to us the enclosed copy hereof.
Very truly yours,
ALLIANCE GREATER
CHINA '97 FUND, INC.
By__________________________
Agreed to and accepted
as of the date first set forth above
ALLIANCE CAPITAL MANAGEMENT L.P.
By ALLIANCE CAPITAL MANAGEMENT
CORPORATION, its general
partner
By_______________________________
10
00250235.AC8
<PAGE>
DISTRIBUTION SERVICES AGREEMENT
AGREEMENT made as of [ ], 1997 between
ALLIANCE GREATER CHINA '97 FUND, INC., a Maryland
corporation (the "Fund"), and ALLIANCE FUND DISTRIBUTORS,
INC., a Delaware corporation (the "Underwriter").
WITNESSETH
WHEREAS, the Fund is registered under the
Investment Company Act of 1940, as amended (the "Investment
Company Act"), as a non-diversified, open-end management
investment company and it is in the interest of the Fund to
offer its shares for sale continuously;
WHEREAS, the Underwriter is a securities firm
engaged in the business of selling shares of investment
companies either directly to purchasers or through other
securities dealers;
WHEREAS, the Fund and the Underwriter wish to enter
into an agreement with each other with respect to the
continuous offering of the Fund's shares in order to promote
the growth of the Fund and facilitate the distribution of
its shares;
NOW, THEREFORE, the parties agree as follows:
SECTION 1. Appointment of the Underwriter. The
Fund hereby appoints the Underwriter as the principal
underwriter and distributor of the Fund to sell to the
public shares of its Class A Common Stock (the "Class A
shares"), Class B Common Stock (the "Class B shares"), Class
C Common Stock (the "Class C shares"), Advisor Class Common
Stock (the "Advisor Class shares") and shares of such other
class or classes as the Fund and the Underwriter shall from
time to time mutually agree in writing shall become subject
to this Agreement (the "New shares") (the Class A shares,
the Class B shares, the Class C shares, the Advisor Class
shares and New shares being collectively referred to herein
as the "shares") and hereby agrees during the term of this
Agreement to sell shares to the Underwriter upon the terms
and conditions herein set forth.
SECTION 2. Exclusive Nature of Duties. The
Underwriter shall be the exclusive representative of the
Fund to act as principal underwriter and distributor of the
shares except that the rights given under this Agreement to
the Underwriter shall not apply to shares issued in
connection with (a) the merger or consolidation of any other
<PAGE>
investment company with the Fund, (b) the Fund's acquisition
by purchase or otherwise of all or substantially all of the
assets or stock of any other investment company or (c) the
reinvestment in shares by the Fund's shareholders of
dividends or other distributions.
SECTION 3. Purchase of Shares from the Fund.
(a) Prior to the continuous offering of the shares
commencing on a date agreed upon by the Fund and the
Underwriter, the Underwriter agrees to solicit subscriptions
for shares during an initial offering period which shall
last for such period as may be agreed upon by the parties
hereto. The subscriptions will be payable within six
business days after the termination of the initial offering
period.
(b) After a period of time following the
termination of the initial offering period, which will be
determined by the Fund, the Fund will commence a continuous
offering of its shares and thereafter the Underwriter shall
have the right to buy from the Fund the shares needed to
fill unconditional orders for shares of the Fund placed with
the Underwriter by investors or securities dealers,
depository institutions or other financial intermediaries
acting as agent for their customers. The price which the
Underwriter shall pay for the shares so purchased from the
Fund shall be the net asset value, determined as set forth
in Section 3(d) hereof, used in determining the public
offering price on which such orders are based.
(c) The shares are to be resold by the Underwriter
to investors at a public offering price, as set forth in
Section 3(c) hereof, or to securities dealers, depository
institutions or other financial intermediaries acting as
agent for their customers having agreements with the
Underwriter upon the terms and conditions set forth in
Section 8 hereof.
(d) The public offering price of the shares, i.e.,
the price per share at which the Underwriter or selected
dealers or selected agents (each as defined in Section 8(a)
below) may sell shares to the public, shall be the public
offering price determined in accordance with the then
current prospectus and statement of additional information
of the Fund (the "Prospectus" and "Statement of Additional
Information," respectively) under the Securities Act of
1933, as amended (the "Securities Act"), relating to such
shares, but not to exceed the net asset value at which the
Underwriter is to purchase such shares, plus, in the case of
Class A shares, an initial sales charge equal to a specified
2
<PAGE>
percentage or percentages of the public offering price of
the Class A shares as set forth in the Prospectus. Class A
shares may be sold without such a sales charge to certain
classes of persons as from time to time set forth in the
Prospectus and Statement of Additional Information. All
payments to the Fund hereunder shall be made in the manner
set forth in Section 3(g) hereof.
(e) The net asset value of shares of the Fund
shall be determined by the Fund, or any agent of the Fund,
as of the close of regular trading on the New York Stock
Exchange on each Fund business day in accordance with the
method set forth in the Prospectus and Statement of
Additional Information and guidelines established by the
Directors of the Fund.
(f) The Fund reserves the right to suspend the
offering of its shares at any time in the absolute
discretion of its Directors.
(g) The Fund, or any agent of the Fund designated
in writing to the Underwriter by the Fund, shall be promptly
advised by the Underwriter of all purchase orders for shares
received by the Underwriter. Any order may be rejected by
the Fund; provided, however, that the Fund will not
arbitrarily or without reasonable cause refuse to accept or
confirm orders for the purchase of shares. The Fund (or its
agent) will confirm orders upon their receipt, will make
appropriate book entries and upon receipt by the Fund (or
its agent) of payment thereof, will deliver deposit receipts
or certificates for such shares pursuant to the instructions
of the Underwriter. Payment shall be made to the Fund in
New York Clearing House funds. The Underwriter agrees to
cause such payment and such instructions to be delivered
promptly to the Fund (or its agent).
SECTION 4. Repurchase or Redemption of
Shares by the Fund.
(a) Any of the outstanding shares may be tendered
for redemption at any time, and the Fund agrees to redeem or
repurchase the shares so tendered in accordance with its
obligations as set forth in Section 8(d) of ARTICLE FIFTH of
its Articles of Incorporation and in accordance with the
applicable provisions set forth in the Prospectus and
Statement of Additional Information. The price to be paid
to redeem or repurchase the shares shall be equal to the net
asset value calculated in accordance with the provisions of
Section 3(c) hereof, less any applicable sales charge. All
payments by the Fund hereunder shall be made in the manner
set forth below. The redemption or repurchase by the Fund
3
<PAGE>
of any of the Class A shares purchased by or through the
Underwriter will not affect the initial sales charge secured
by the Underwriter or any selected dealer or compensation
paid to any selected agent (unless such selected dealer or
selected agent has otherwise agreed with the Underwriter),
in the course of the original sale, regardless of the length
of the time period between purchase by an investor and his
tendering for redemption or repurchase.
The Fund (or its agent) shall pay the total amount
of the redemption price and, except as may be otherwise
required by the Rules of Fair Practice of the National
Association of Securities Dealers, Inc. (the "NASD") and any
interpretations thereof ("NASD rules and interpretations"),
the deferred sales charges, if any, pursuant to the
instructions of the Underwriter in New York Clearing House
funds on or before the seventh business day subsequent to
its having received the notice of redemption in proper form.
(b) Redemption of shares or payment may be
suspended at times when the New York Stock Exchange is
closed, when trading thereon is closed, when trading thereon
is restricted, when an emergency exists as a result of which
disposal by the Fund of securities owned by it is not
reasonably practicable or it is not reasonably practicable
for the Fund fairly to determine the value of its net
assets, or during any other period when the Securities and
Exchange Commission, by order, so permits.
SECTION 5. Plan of Distribution.
(a) It is understood that Sections 5, 12 and 16
hereof together constitute a plan of distribution (the
"Plan") within the meaning of Rule 12b-1 adopted by the
Securities and Exchange Commission under the Investment
Company Act ("Rule 12b-1").
(b) Except as may be required by NASD rules and
interpretations, the Fund will pay to the Underwriter each
month a distribution services fee with respect to each
portfolio of the Fund ("Portfolio") that will not exceed, on
an annualized basis, .30% of the aggregate average daily net
assets of the Fund attributable to the Class A shares, 1.00%
of the aggregate average daily net assets of the Fund
attributable to the Class B shares and 1.00% of the
aggregate average daily net assets of the Fund attributable
to the Class C shares. With respect to each Portfolio, the
distribution services fee will be used in its entirety by
the Underwriter to make payments (i) to compensate broker-
dealers or other persons for providing distribution
assistance, (ii) to otherwise promote the sale of shares of
4
<PAGE>
each Portfolio, including payment for the preparation,
printing and distribution of prospectuses and sales
literature or other promotional activities, and (iii) to
compensate broker-dealers, depository institutions and other
financial intermediaries for providing administrative,
accounting and other services with respect to each
Portfolio's shareholders. A portion of the distribution
services fee that will not exceed, on an annualized basis,
.25% of the aggregate average daily net assets of the Fund
attributable to each of the Class A shares, Class B shares
and Class C shares will constitute a service fee that will
be used by the Underwriter for personal service and/or the
maintenance of shareholder accounts within the meaning of
NASD rules and interpretations.
(c) Alliance Capital Management L.P., the Fund's
investment adviser (the "Adviser"), may make payments from
time to time from its own resources for the purposes
described in Section 5(b) hereof.
(d) Payments to broker-dealers, depository
institutions and other financial intermediaries for the
purposes set forth in Section 5(b) are subject to the terms
and conditions of the written agreements between the
Underwriter and each broker-dealer, depository institution
or other financial intermediary. Such agreements will be in
a form satisfactory to the Directors of the Fund.
(e) The Treasurer of the Fund will prepare and
furnish to the Fund's Directors, and the Directors will
review, at least quarterly, a written report complying with
the requirements of Rule 12b-1 setting forth all amounts
expended hereunder and the purposes for which such
expenditures were made.
(f) The Fund is not obligated to pay any
distribution expense in excess of the distribution services
fee described above in Section 5(b) hereof. Any expenses of
distribution of the Fund's Class A shares accrued by the
Underwriter in one fiscal year of the Fund may not be paid
from distribution services fees received from the Fund in
respect of Class A shares in another fiscal year. Any
expenses of distribution of the Fund's Class B shares or
Class C shares accrued by the Underwriter in one fiscal year
of the Fund may be carried forward and paid from
distribution services fees received from the Fund in respect
of such class of shares in another fiscal year. No portion
of the distribution services fees received from the Fund in
respect of Class A shares may be used to pay any interest
expense, carrying charges or other financing costs or
allocation of overhead of the Underwriter. The distribution
5
<PAGE>
services fees received from the Fund in respect of Class B
shares and Class C shares may be used to pay interest
expenses, carrying charges and other financing costs or
allocation of overhead of the Underwriter to the extent
permitted by Securities and Exchange Commission rules,
regulations or Securities and Exchange Commission staff no-
action or interpretative positions in effect from time to
time. In the event this Agreement is terminated by either
party or is not continued with respect to a class as
provided in Section 12 below: (i) no distribution services
fees (other than current amounts accrued but not yet paid)
will be owed by the Fund to the Underwriter with respect to
that class, and (ii) the Fund will not be obligated to pay
the Underwriter for any amounts expended hereunder not
previously reimbursed by the Fund from distribution services
fees in respect of shares of such class or recovered through
deferred sales charges. The distribution services fee of a
particular class may not be used to subsidize the sale of
shares of any other class.
SECTION 6. Duties of the Fund.
(a) The Fund shall furnish to the Underwriter
copies of all information, financial statements and other
papers that the Underwriter may reasonably request for use
in connection with the distribution of shares of the Fund,
and this shall include one certified copy, upon request by
the Underwriter, of all financial statements prepared for
the Fund by independent public accountants. The Fund shall
make available to the Underwriter such number of copies of
the Prospectus as the Underwriter shall reasonably request.
(b) The Fund shall take, from time to time, but
subject to the necessary approval of its shareholders, all
necessary action to fix the number of authorized shares and
such steps as may be necessary to register the same under
the Securities Act, to the end that there will be available
for sale such number of shares as the Underwriter reasonably
may be expected to sell.
(c) The Fund shall use its best efforts to qualify
and maintain the qualification of an appropriate number of
its shares under the securities laws of such states as the
Underwriter and the Fund may approve. Any such
qualification may be withheld, terminated or withdrawn by
the Fund at any time in its discretion. As provided in
Section 9(b) hereof, the expense of qualification and
maintenance of qualification shall be borne by the Fund.
The Underwriter shall furnish such information and other
material relating to its affairs and activities as may be
required by the Fund in connection with such qualification.
6
<PAGE>
(d) The Fund will furnish, in reasonable
quantities upon request by the Underwriter, copies of annual
and interim reports of the Fund.
SECTION 7. Duties of the Underwriter.
(a) The Underwriter shall devote reasonable time
and effort to effect sales of shares of the Fund, but shall
not be obligated to sell any specific number of shares. The
services of the Underwriter to the Fund hereunder are not to
be deemed exclusive and nothing in this Agreement shall
prevent the Underwriter from entering into like arrangements
with other investment companies so long as the performance
of its obligations hereunder is not impaired thereby.
(b) In selling shares of the Fund, the Underwriter
shall use its best efforts in all material respects duly to
conform with the requirements of all federal and state laws
relating to the sale of such securities. Neither the
Underwriter, any selected dealer, any selected agent nor any
other person is authorized by the Fund to give any
information or to make any representations, other than those
contained in the Fund's Registration Statement on Form N-1A
(the "Registration Statement"), as amended from time to
time, under the Securities Act and the Investment Company
Act or the Prospectus and Statement of Additional
Information or any sales literature specifically approved in
writing by the Fund.
(c) The Underwriter shall adopt and follow
procedures, as approved by the officers of the Fund, for the
confirmation of sales to investors and selected dealers, the
collection of amounts payable by investors and selected
dealers on such sales, and the cancellation of unsettled
transactions, as may be necessary to comply with the
requirements of the NASD, as such requirements may from time
to time exist.
SECTION 8. Selected Dealer and Agent Agreements.
(a) The Underwriter shall have the right to enter
into selected dealer agreements with securities dealers of
its choice ("selected dealers") and selected agent
agreements with depository institutions and other financial
intermediaries of its choice ("selected agents") for the
sale of shares and fix therein the portion of the sales
charge that may be allocated to the selected dealers and
selected agents; provided, that the Fund shall approve the
forms of agreements with selected dealers and selected
agents and the selected dealer and selected agent
compensation set forth therein and shall evidence such
7
<PAGE>
approval by filing said forms and amendments thereto as
exhibits to its then currently effective Registration
Statement. Shares sold to selected dealers or through
selected agents shall be for resale by such selected dealers
and selected agents only at the public offering price set
forth in the Prospectus and Statement of Additional
Information.
(b) Within the United States, the Underwriter
shall offer and sell shares only to such selected dealers as
are members in good standing of the NASD.
SECTION 9. Payment of Expenses.
(a) The Fund shall bear all costs and expenses of
the Fund, including fees and disbursements of its counsel
and auditors, in connection with the preparation and filing
of its Registration Statement and Prospectus and Statement
of Additional Information, and all amendments and
supplements thereto, and preparing and mailing annual and
interim reports and proxy materials to shareholders
(including but not limited to the expense of setting in type
any such registration statements, prospectuses, annual or
interim reports or proxy materials).
(b) The Fund shall bear the cost of expenses of
qualification of shares for sale, and, if necessary or
advisable in connection therewith, of qualifying the Fund as
an issuer or as a broker or dealer, in such states of the
United States or other jurisdiction as shall be selected by
the Fund and the Underwriter pursuant to Section 6(c) hereof
and the cost and expenses payable to each such state for
continuing qualification therein until the Fund decides to
discontinue such qualification pursuant to Section 6(c)
hereof.
SECTION 10. Indemnification.
(a) The Fund agrees to indemnify, defend and hold
the Underwriter, and any person who controls the Underwriter
within the meaning of Section 15 of the Securities Act, free
and harmless from and against any and all claims, demands,
liabilities and expenses (including the cost of
investigating or defending such claims, demands or
liabilities and any counsel fees incurred in connection
therewith) which the Underwriter or any such controlling
person may incur, under the Securities Act, or under common
law or otherwise, arising out of or based upon any alleged
untrue statement of a material fact contained in the Fund's
Registration Statement, Prospectus or Statement of
Additional Information in effect from time to time under the
8
<PAGE>
Securities Act or arising out of or based upon any alleged
omission to state a material fact required to be stated in
any one thereof or necessary to make the statements in any
one thereof not misleading; provided, however, that in no
event shall anything herein contained be so construed as to
protect the Underwriter against any liability to the Fund or
its security holders to which the Underwriter would
otherwise be subject by reason of willful misfeasance, bad
faith or gross negligence in the performance of its duties,
or by reason of the Underwriter's reckless disregard of its
obligations and duties under this Agreement. The Fund's
agreement to indemnify the Underwriter and any such
controlling person as aforesaid is expressly conditioned
upon the Fund's being notified of the commencement of any
action brought against the Underwriter or any such
controlling person, such notification to be given by letter
or by telegram addressed to the Fund at its principal office
in New York, New York, and sent to the Fund by the person
against whom such action is brought within ten days after
the summons or other first legal process shall have been
served. The failure to so notify the Fund of the
commencement of any such action shall not relieve the Fund
from any liability which it may have to the person against
whom such action is brought by reason of any such alleged
untrue statement or omission otherwise than on account of
the indemnity agreement contained in this Section 10. The
Fund will be entitled to assume the defense of any suit
brought to enforce any such claim, and to retain counsel of
good standing chosen by the Fund and approved by the
Underwriter. In the event the Fund does not elect to assume
the defense of any such suit and retain counsel of good
standing approved by the Underwriter, the defendant or
defendants in such suit shall bear the fees and expenses of
any additional counsel retained by any of them; but in case
the Fund does not elect to assume the defense of any such
suit, or in case the Underwriter does not approve of counsel
chosen by the Fund, the Fund will reimburse the Underwriter
or the controlling person or persons named as defendant or
defendants in such suit, for the fees and expenses of any
counsel retained by the Underwriter or such persons. The
indemnification agreement contained in this Section 10 shall
remain operative and in full force and effect regardless of
any investigation made by or on behalf of the Underwriter or
any controlling person and shall survive the sale of any of
the Fund's shares made pursuant to subscriptions obtained by
the Underwriter. This agreement of indemnity will inure
exclusively to the benefit of the Underwriter, to the
benefit of its successors and assigns, and to the benefit of
any controlling persons and their successors and assigns.
The Fund agrees promptly to notify the Underwriter of the
commencement of any litigation or proceeding against the
9
<PAGE>
Fund in connection with the issue and sale of any of its
shares.
(b) The Underwriter agrees to indemnify, defend
and hold the Fund, its several officers and directors, and
any person who controls the Fund within the meaning of
Section 15 of the Securities Act, free and harmless from and
against any and all claims, demands, liabilities, and
expenses (including the cost of investigating or defending
such claims, demands or liabilities and any counsel fees
incurred in connection therewith) which the Fund, its
officers or directors, or any such controlling person may
incur under the Securities Act or under common law or
otherwise, but only to the extent that such liability, or
expense incurred by the Fund, its officers, directors or
such controlling person resulting from such claims or
demands shall arise out of or be based upon any alleged
untrue statement of a material fact contained in information
furnished in writing by the Underwriter to the Fund for use
in its Registration Statement, Prospectus or Statement of
Additional Information in effect from time to time under the
Securities Act, or shall arise out of or be based upon any
alleged omission to state a material fact in connection with
such information required to be stated in the Registration
Statement, Prospectus or Statement of Additional Information
or necessary to make such information not misleading. The
Underwriter's agreement to indemnify the Fund, its officers
and directors, and any such controlling person as aforesaid
is expressly conditioned upon the Underwriter being notified
of the commencement of any action brought against the Fund,
its officers or directors or any such controlling person,
such notification to be given by letter or telegram
addressed to the Underwriter at its principal office in New
York, and sent to the Underwriter by the person against whom
such action is brought, within ten days after the summons or
other first legal process shall have been served. The
Underwriter shall have a right to control the defense of
such action, with counsel of its own choosing, satisfactory
to the Fund, if such action is based solely upon such
alleged misstatement or omission on its part, and in any
other event the Underwriter and the Fund, and their officers
and directors or such controlling person, shall each have
the right to participate in the defense or preparation of
the defense of any such action. The failure so to notify
the Underwriter of the commencement of any such action shall
not relieve the Underwriter from any liability which it may
have to the Fund, to its officers and trustees, or to such
controlling person by reason of any such untrue statement or
omission on the part of the Underwriter otherwise than on
account of the indemnity agreement contained in this Section
10.
10
<PAGE>
SECTION 11. Notification by the Fund.
The Fund agrees to advise the Underwriter
immediately:
(a) of any request by the Securities and Exchange
Commission for amendments to the Fund's Registration
Statement, Prospectus or Statement of Additional Information
or for additional information,
(b) in the event of the issuance by the Securities
and Exchange Commission of any stop order suspending the
effectiveness of the Fund's Registration Statement,
Prospectus or Statement of Additional Information or the
initiation of any proceeding for that purpose,
(c) of the happening of any material event which
makes untrue any statement made in the Fund's Registration
Statement, Prospectus or Statement of Additional Information
or which requires the making of a change in any one thereof
in order to make the statements therein not misleading, and
(d) of all actions of the Securities and Exchange
Commission with respect to any amendments to the Fund's
Registration Statement, Prospectus or Statement of
Additional Information which may from time to time be filed
with the Securities and Exchange Commission under the
Securities Act.
SECTION 12. Term of Agreement.
(a) This Agreement shall become effective on the
date hereof and shall continue in effect until June 30,
1998, and thereafter for successive twelve-month periods
(computed from each July 1) with respect to each
class; provided, however, that such continuance is
specifically approved at least annually by the Directors of
the Fund or by vote of the holders of a majority of the
outstanding voting securities (as defined in the Investment
Company Act) of that class, and, in either case, by a
majority of the Directors of the Fund who are not parties to
this Agreement or interested persons, as defined in the
Investment Company Act, of any such party (other than as
directors of the Fund) and who have no direct or indirect
financial interest in the operation of the Plan or any
agreement related thereto; provided further, however, that
if the continuation of this Agreement is not approved as to
a class or a Portfolio, the Underwriter may continue to
render to such class or Portfolio the services described
herein in the manner and to the extent permitted by the Act
and the rules and regulations thereunder. Upon
11
<PAGE>
effectiveness of this Agreement, it shall supersede all
previous agreements between the parties hereto covering the
subject matter hereof. This Agreement may be terminated (i)
by the Fund with respect to any class or Portfolio at any
time, without the payment of any penalty, by the vote of a
majority of the outstanding voting securities (as so
defined) of such class or Portfolio, or by a vote of a
majority of the Directors of the Fund who are not interested
persons, as defined in the Investment Company Act, of the
Fund (other than as directors of the Fund) and have no
direct and indirect financial interest in the operation of
the Plan or any agreement related thereto, in any such event
on sixty days' written notice to the Underwriter; provided,
however, that no such notice shall be required if such
termination is stated by the Fund to relate only to Sections
5 and 16 hereof (in which event Sections 5 and 16 shall be
deemed to have been severed herefrom and all other
provisions of this Agreement shall continue in full force
and effect), or (ii) by the Underwriter with respect to any
Portfolio on sixty days' written notice to the Fund.
(b) This Agreement may be amended at any time with
the approval of the Directors of the Fund, provided that (i)
any material amendments of the terms hereof will become
effective only upon approval as provided in the first
proviso of the first sentence of Section 12(a) hereof, and
(ii) any amendment to increase materially the amount to be
expended for distribution services fees pursuant to Section
5(b) hereof will be effective only upon the additional
approval by a vote of a majority of the outstanding voting
securities as defined in the Investment Company Act of the
class or Portfolio affected.
SECTION 13. No Assignment. This Agreement may not
be transferred, assigned, sold or in any manner hypothecated
or pledged by either party hereto and this Agreement shall
terminate automatically in the event of any such transfer,
assignment, sale, hypothecation or pledge. The terms
"transfer", "assignment", and "sale" as used in this
paragraph shall have the meanings ascribed thereto by
governing law and any interpretation thereof contained in
rules or regulations promulgated by the Securities and
Exchange Commission thereunder.
SECTION 14. Notices. Any notice required or
permitted to be given hereunder by either party to the other
shall be deemed sufficiently given if sent by registered
mail, postage prepaid, addressed by the party giving such
notice to the other party at the last address furnished by
such other party to the party given notice, and unless and
12
<PAGE>
until changed pursuant to the foregoing provisions hereof
addressed to the Fund or the Underwriter.
SECTION 15. Governing Law. The provisions of this
Agreement shall be, to the extent applicable, construed and
interpreted in accordance with the laws of the State of New
York.
SECTION 16. Disinterested Directors of the Fund.
While the Agreement is in effect, the selection and
nomination of the Directors who are not "interested persons"
of the Fund (as defined in the Investment Company Act) will
be committed to the discretion of such disinterested
Directors.
IN WITNESS WHEREOF, the parties hereto have
executed this Agreement.
ALLIANCE GREATER CHINA
'97 FUND, INC.
By
ALLIANCE FUND DISTRIBUTORS,
INC.
By
Accepted as to
Sections 5, 12 and 16
as of [ ], 1997:
ALLIANCE CAPITAL MANAGEMENT L.P.
By Alliance Capital Management Corporation,
General Partner
By
13
00250235.AF9
<PAGE>
ALLIANCE FUND DISTRIBUTORS, INC.
1345 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10105
(800) 221-5672
(LOGO)
, 199
Selected Dealer Agreement
For Broker/Dealers (other than Bank Subsidiaries)
Dear Sirs:
As the principal underwriter of shares of certain
registered investment companies presently or hereafter managed by
Alliance Capital Management L.P., shares of which companies are
distributed by us pursuant to our Distribution Services
Agreements with such companies (the "Funds"), we invite you to
participate as principal in the distribution of shares of any and
all of the Funds upon the following terms and conditions:
1. You are to offer and sell such shares only at the
public offering prices which shall be currently in effect, in
accordance with the terms of the then current prospectuses and
statements of additional information of the Funds. You agree to
act only as principal in such transactions and shall not have
authority to act as agent for the Funds, for us, or for any other
dealer in any respect. All orders are subject to acceptance by
us and become effective only upon confirmation by us.
2. On each purchase of shares by you from us, the
total sales charges and discount to selected dealer, if any,
shall be as stated in each Fund's then current prospectus.
Such sales charges and discount to selected dealers are
subject to reductions under a variety of circumstances as
described in each Fund's then current prospectus and statement of
additional information. To obtain these reductions, we must be
notified when the sale takes place which would qualify for the
reduced charge.
There is no sales charge or discount to selected dealers
on the reinvestment of dividends.
3. As a selected dealer, you are hereby authorized
(i) to place orders directly with the Funds for their shares to
be resold by us to you subject to the applicable terms and
<PAGE>
conditions governing the placement of orders by us set forth in
the Distribution Services Agreement between each Fund and us and
subject to the applicable compensation provisions set forth in
each Fund's then current prospectus and statement of additional
information and (ii) to tender shares directly to the Funds or
their agent for redemption subject to the applicable terms and
conditions set forth in the Distribution Services Agreement.
4. Repurchases of shares will be made at the net asset
value of such shares in accordance with the then current
prospectuses and statements of additional information of the
Funds.
5. You represent that you are a member of the National
Association of Securities Dealers, Inc. and that you agree to
abide by the Rules of Fair Practice of such Association.
6. This Agreement is in all respects subject to
Rule 26 of the rules of Fair Practice of the National Association
of Securities Dealers, Inc. which shall control any provisions to
the contrary in this Agreement.
7. You agree:
(a) To purchase shares only from us or only from
your customers.
(b) To purchase shares from us only for the
purpose of covering purchase orders already
received or for your own bona fide investment.
(c) That you will not purchase any shares from
your customers at prices lower than the
redemption or repurchase prices then quoted by
the Fund. You shall, however, be permitted to
sell shares for the account of their record
owners to the Funds at the repurchase prices
currently established for such shares and may
charge the owner a fair commission for handing
the transaction.
(d) That you will not withhold placing customers'
orders for shares so as to profit yourself as
a result of such withholding.
(e) That if any shares confirmed to you hereunder
are redeemed or repurchased by any of the
Funds within seven business days after such
confirmation of your original order, you shall
forthwith refund to us the full discount
allowed to you on such sales. We shall notify
2
<PAGE>
you of such redemption or repurchase within
ten days from the date of delivery of the
request therefor or certificates to us or such
Fund. Termination or cancellation of this
Agreement shall not relieve you or us from the
requirements of this subparagraph.
8. We shall not accept from you any conditional orders
for shares. Delivery of certificates for shares purchased shall
be made by the Funds only against receipt of the purchase price,
subject to deduction for the discount reallowed to you and our
portion of the sales charge on such sales. If payment for the
shares purchased is not received within the time customary for
such payments, the sale may be cancelled forthwith without any
responsibility or liability on our part or on the part of the
Funds (in which case you will be responsible for any loss,
including loss of profit, suffered by the Funds resulting from
your failure to make payment as aforesaid), or, at our option, we
may sell the shares ordered back to the Funds (in which case we
may hold you responsible for any loss, including loss of profit
suffered by us resulting from your failure to make payment as
aforesaid).
9. You will not offer or sell any of the shares except
under circumstances that will result in compliance with the
applicable Federal and State securities laws and in connection
with sales and offers to sell shares you will furnish to each
person to whom any such sale or offer is made a copy of the
applicable then current prospectus. We shall be under no
liability to you except for lack of good faith and for
obligations expressly assumed by us herein. Nothing herein
contained, however, shall be deemed to be a condition,
stipulation or provision binding any persons acquiring any
security to waive compliance with any provision of the Securities
Act of 1933, or of the Rules and Regulations of the Securities
and Exchange Commission, or to relieve the parties hereto from
any liability arising under the Securities Act of 1933.
10. From time to time during the term of this Agreement
we may make payments to you pursuant to one or more of the
distribution plans adopted by certain of the Funds pursuant to
Rule 12b-1 under the Investment Company Act of 1940 (the "Act")
in consideration, with respect to each such Fund, of your
furnishing distribution services hereunder and providing
administrative, accounting and other services, including personal
service and/or the maintenance of shareholder accounts. We have
no obligation to make any such payments and you waive any such
payment until we receive monies therefor from the Fund. Any such
payments made pursuant to this Section 10 shall be subject to the
following terms and conditions:
3
<PAGE>
(a) Any such payments shall be in such amounts as
we may from time to time advise you in writing
but in any event not in excess of the amounts
permitted by the plan in effect with respect
to each particular Fund. Any such payments
shall be in addition to the selling
concession, if any, allowed to you pursuant to
this Agreement. Such payments shall include a
service fee in the amount of .25 of 1% per
annum of the average daily net assets of
certain Funds attributable to your clients.
Any such service fee shall be paid to you
solely for personal service and/or the
maintenance of shareholder accounts.
(b) The provisions of this Section 10 relate to
the plan adopted by a particular Fund pursuant
to Rule 12b-1. In accordance with Rule 12b-1,
any person authorized to direct the
disposition of monies paid or payable by a
Fund pursuant to this Section 10 shall provide
the Fund's Board of Directors, and the
Directors shall review, at least quarterly, a
written report of the amounts so expended and
the purposes for which such expenditures were
made.
(c) The provisions of this Section 10 applicable
to each Fund shall remain in effect for not
more than a year and thereafter for successive
annual periods only so long as such
continuance is specifically approved at least
annually in conformity with Rule 12b-1 and the
Act. The provisions of this Section 10 shall
automatically terminate with respect to a
particular Plan in the event of the assignment
(as defined by the Act) of this Agreement, in
the event such Plan terminates or is not
continued or in the event this Agreement
terminates or ceases to remain in effect. In
addition, the provisions of this Section 10
may be terminated at any time, without
penalty, by either party with respect to any
particular Plan on not more than 60 days' nor
less than 30 days' written notice delivered or
mailed by registered mail, postage prepaid, to
the other party.
11. No person is authorized to make any representations
concerning shares of the Funds except those contained in the
current prospectus, statement of additional information, and
4
<PAGE>
printed information issued by each Fund or by us as information
supplemental to each prospectus. We shall supply prospectuses
and statements of additional information, reasonable quantities
of reports to shareholders, supplemental sales literature, sales
bulletins, and additional information as issued. You agree to
distribute prospectuses and reports to shareholders of the Funds
to your customers in compliance with the applicable requirements,
except to the extent that we expressly undertake to do so on your
behalf. You agree not to use other advertising or sales material
relating to the Funds, unless approved in writing by us in
advance of such use. Any printed information furnished by us
other than the then current prospectus and statement of
additional information for each Fund, periodic reports and proxy
solicitation materials are our sole responsibility and not the
responsibility of the Funds, and you agree that the Funds shall
have no liability or responsibility to you in these respects
unless expressly assumed in connection therewith.
12. In connection with your distribution of shares of a
Fund, you shall conform to such written compliance standards as
we have provided you in the past or may from time to time provide
to you in the future.
13. We, our affiliates and the Funds shall not be
liable for any loss, expense, damages, costs or other claim
arising out of any redemption or exchange pursuant to telephone
instructions from any person or our refusal to execute such
instructions for any reason.
14. Either party to this Agreement may cancel this
Agreement by giving written notice to the other. Such notice
shall be deemed to have been given on the date on which it was
either delivered personally to the other party or any officer or
member thereof, or was mailed postpaid or delivered to a
telegraph office for transmission to the other party at his or
its address as shown below. This Agreement may be amended by us
at any time and your placing of an order after the effective date
of any such amendment shall constitute your acceptance thereof.
5
<PAGE>
15. This Agreement shall be construed in accordance
with the laws of the State of New York and shall be binding upon
both parties thereto when signed by us and accepted by you in the
space provided below.
Very truly yours,
ALLIANCE FUND DISTRIBUTORS, INC.
By:_____________________________
(Authorized Signature)
Bank or Firm Name _______________________________________________
Address _________________________________________________________
City _____________________ State ____________ Zip Code __________
ACCEPTED BY (signature) _____________________ Title _____________
Name (print) ________________________________ Title _____________
Date _____________________ 199__ Phone # ________________________
Please return two signed copies of this Agreement (one of
which will be signed above by us and thereafter returned to you)
in the accompanying return envelope to:
Alliance Fund Distributors, Inc.
1345 Avenue of the Americas, 38th Floor
New York, NY 10105
6
00250235.AF4
<PAGE>
ALLIANCE FUND DISTRIBUTORS, INC.
1345 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10105
(800) 221-5672
(LOGO)
, 199
Selected Agent Agreement
For Depository Institutions and Their Subsidiaries
Dear Sirs:
As the principal underwriter of shares of certain
registered investment companies presently or hereafter managed by
Alliance Capital Management L.P., shares of which companies are
distributed by us pursuant to our Distribution Services
Agreements with such companies (the "Funds"), we invite you,
acting as agent for your customers, to make available to your
customers shares of any or all of the Funds upon the following
terms and conditions:
1. The customers in question will be for all purposes
your customers. We shall execute transactions in shares of the
Funds for each of your customers only upon your authorization, it
being understood in all cases that (a) you are acting as the
agent for the customer; (b) each transaction is initiated solely
upon the order of the customer; (c) each transaction is for the
account of the customer and not for your account; (d) the
transactions are without recourse against you by the customer;
(e) except as we otherwise agree, each transaction is effected on
a fully disclosed basis; (f) as between you and the customer, the
customer will have full beneficial ownership of the shares;
(g) you shall provide no investment advice and exercise no
investment discretion regarding the purchase, sale, or redemption
of the shares; and (h) you shall make appropriate disclosure to
your customers that any Fund's shares are not endorsed by you, do
not constitute your obligation and are not entitled to federal
deposit insurance.
2. You are to sell shares of the Funds only at the
public offering prices which shall be currently in effect, in
accordance with the terms of the then current prospectuses and
statements of additional information of the Funds. You agree to
act only as agent for your customers in such transactions and
shall not have authority to act as agent for the Funds or for us
<PAGE>
in any respect. All orders are subject to acceptance by us and
become effective only upon confirmation by us.
3. On each purchase of shares of a Fund authorized by
you, the total sales charge and commission, if any, shall be as
stated in the Fund's then current prospectus. Such sales charges
and commissions are subject to reductions under a variety of
circumstances as described in each Fund's then current prospectus
and statement of additional information. To obtain such a
reduction, you must provide us with such information as we may
request to establish that a particular transaction qualifies for
the reduction. There is no sales charge or commission to
selected agents on the reinvestment of dividends.
4. As a selected agent, you are hereby authorized
(i) to place orders directly with the Funds for their shares to
be resold by us through you subject to the applicable terms and
conditions governing the placement of orders by us set forth in
the Distribution Services Agreement between each Fund and us and
subject to the applicable compensation provisions set forth in
each Fund's then current prospectus and statement of additional
information, and (ii) to tender shares directly to the Funds or
their agent for redemption or repurchase subject to the
applicable terms and conditions set forth in the Distribution
Services Agreement.
5. Redemptions and repurchases of shares will be made
at the net asset value of such shares in accordance with the then
current prospectuses and statements of additional information of
the Funds.
6. You represent that you are either:
(a) a bank as defined in Section 3(a)(6) of the
Securities Exchange Act of 1934, as amended
(the "1934 Act"), duly authorized to engage in
the transactions to be performed hereunder and
not required to register as a broker-dealer
pursuant to the 1934 Act; or
(b) a bank (as so defined) or an affiliate of a
bank, in either case registered as a broker-
dealer pursuant to the 1934 Act and a member
of the National Association of Securities
Dealers, Inc., and that you agree to abide by
the rules and regulations of the National
Association of Securities Dealers, Inc.
2
<PAGE>
7. You agree:
(a) to order shares of the Funds only from us and
to act as agent only for your customers;
(b) to order shares from us only for the purpose
of covering purchase orders already received;
(c) that you will not purchase any shares from
your customers at prices lower than the
redemption or repurchase prices then quoted by
the Funds, provided, however, that you shall
be permitted to sell shares for the accounts
of their record owners to the Funds at the
repurchase prices currently established for
such shares and may charge the owner a fair
commission for handling the transaction;
(d) that you will not withhold placing customers'
orders for shares so as to profit yourself as
a result of such withholding; and
(e) that if any shares confirmed through you
hereunder are redeemed or repurchased by any
of the Funds within seven business days after
such confirmation of your original order, you
shall forthwith refund to us the full
commission reallowed to you on such sales. We
shall notify you of such redemption or
repurchase within ten days from the date of
delivery of the request therefor or
certificates to us or such Fund. Termination
or cancellation of this Agreement shall not
relieve you or us from the requirements of
this subparagraph.
8. We shall not accept from you any conditional orders
for shares. Delivery of certificates for shares purchased shall
be made by the Funds only against receipt of the purchase price,
subject to deduction for the commission reallowed to you and our
portion of the sales charge on such sale. If payment for the
shares purchased is not received within the time customary for
such payments, the sale may be cancelled forthwith without any
responsibility or liability on our part or on the part of the
Funds (in which case you will be responsible for any loss,
including loss of profit, suffered by the Funds resulting from
your failure to make payment as aforesaid).
9. You will not accept orders for shares of any of the
Funds except under circumstances that will result in compliance
with the applicable Federal and State securities laws and banking
3
<PAGE>
laws, and in connection with sales of shares to your customers
you will furnish, unless we agree otherwise, to each customer who
has ordered shares a copy of the applicable then current
prospectus. We shall be under no liability to you except for
lack of good faith and for obligations expressly assumed by us
herein. Nothing herein contained, however, shall be deemed to be
a condition, stipulation or provision binding any persons
acquiring any security to waive compliance with any provision of
the Securities Act of 1933 or of the rules and regulations of the
Securities and Exchange Commission, or to relieve the parties
hereto from any liability arising under the Securities Act of
1933.
10. From time to time during the term of this Agreement
we may make payments to you pursuant to one or more of the
distribution plans adopted by certain of the Funds pursuant to
Rule 12b-1 under the Investment Company Act of 1940 (the "Act"),
to compensate you with respect to the shareholder accounts of
your customers in such Funds for providing administrative,
accounting and other services, including personal service and/or
the maintenance of such accounts. We have no obligation to make
any such payments and you waive any such payment until we receive
monies therefor from the fund. Any such payments made pursuant
to this Section 10 shall be subject to the following terms and
conditions:
(a) Any such payments shall be in such amounts as
we may from time to time advise you in writing
but in any event not in excess of the amounts
permitted by the plan in effect with respect
to each particular Fund. Such payments shall
include a service fee in the amount of .25 of
1% per annum of the average daily net assets
of certain Funds attributable to your clients.
Any such service fee shall be paid to you
solely for personal service and/or the
maintenance of shareholder accounts.
(b) The provisions of this Section 10 relate to
the plan adopted by a particular Fund pursuant
to Rule 12b-1. In accordance with Rule 12b-1,
any person authorized to direct the
disposition of monies paid or payable by a
Fund pursuant to this Section 10 shall provide
the Fund's Board of Directors, and the
Directors shall review, at lest quarterly, a
written report of the amounts so expended and
the purposes for which such expenditures were
made.
4
<PAGE>
(c) The provisions of this Section 10 applicable
to each Fund remain in effect for not more
than a year and thereafter for successive
annual periods only so long as such
continuance is specifically approved at least
annually in conformity with Rule 12b-1 and the
Act. The provisions of this Section 10 shall
automatically terminate with respect to a
particular Plan in the event of the assignment
(as defined by the Act) of this Agreement, in
the event such Plan terminates or is not
continued or in the event this Agreement
terminates or ceases to remain in effect. In
addition, the provisions of this Section 10
may be terminated at any time, without
penalty, by either party with respect to any
particular Plan on not more than 60 days' nor
less than 30 days' written notice delivered or
mailed by registered mail, postage prepaid, to
the other party.
11. No person is authorized to make any representation
concerning shares of the Funds except those contained in the
current prospectus, statement of additional information, and
printed information issued by each Fund or by us as information
supplemental to each prospectus. We shall supply prospectuses
and statements of additional information, reasonable quantities
of reports to shareholders, supplemental sales literature, sales
bulletins, and additional information as issued. You agree to
distribute prospectuses and reports to shareholders of the Funds
to your customers in compliance with applicable requirements,
except to the extent that we expressly undertake to do so on your
behalf. You agree not to use other advertising or sales material
relating to the Funds except in compliance with all laws and
regulations applicable to you and unless approved in writing by
us in advance of such use. Any printed information furnished by
us other than the then current prospectus and statement of
additional information for each Fund, periodic reports and proxy
solicitation materials are our sole responsibility and not the
responsibility of the Funds, and you agree that the Funds shall
have no liability or responsibility to you in these respects
unless expressly assumed in connection therewith.
12. In connection with your making shares of a Fund
available to your customers, you shall conform to such written
compliance standards as we have provided you in the past or may
from time to time provide to you in the future.
13. We, our affiliates and the Funds shall not be
liable for any loss, expense, damages, costs or other claim
arising out of any redemption or exchange pursuant to telephone
5
<PAGE>
instructions from any person or our refusal to execute such
instructions for any reason.
14. Either party to this Agreement may cancel this
Agreement by giving written notice to the other. Such notice
shall be deemed to have been given as of the date on which it was
either delivered personally to the other party or any officer or
member thereof, or was mailed postpaid or delivered to a
telegraph office for transmission to the other party at his or
its address as shown below. This Agreement may be amended by us
at any time and your placing of an order after the effective date
of any such amendment shall constitute your acceptance thereof.
If you are a bank or an affiliate of a bank, this Agreement will
automatically terminate if you cease to be, or the bank of which
you are an affiliate ceases to be, a bank as defined in the 1934
Act.
15. This Agreement shall be construed in accordance
with the laws of the State of New York and shall be binding upon
both parties hereto when signed by us and accepted by you in the
space provided below.
Very truly yours,
ALLIANCE FUND DISTRIBUTORS, INC.
By:_____________________________
(Authorized Signature)
Bank or Firm Name _______________________________________________
Address _________________________________________________________
City _____________________ State ____________ Zip Code __________
ACCEPTED BY (signature) _____________________ Title _____________
Name (print) ________________________________ Title _____________
Date _____________________ 199__ Phone # ________________________
Please return two signed copies of this Agreement (one of
which will be signed by us and thereafter returned to you)
in the accompanying return envelope to:
Alliance Fund Distributors, Inc.
1345 Avenue of the Americas, 38th Floor
New York, NY 10105
6
00250235.AF3
CUSTODIAN AGREEMENT
AGREEMENT made this ___ day of ________, 1996
between ALLIANCE GREATER CHINA '97 FUND, INC. (the "Fund")
and Brown Brothers Harriman & Co. (the "Custodian").
WITNESSETH: That in consideration of the mutual
covenants and agreements herein contained, the parties
hereto agree as follows:
1. The Fund hereby employs and appoints the
Custodian as a custodian for the term and subject to the
provisions of this Agreement. The Custodian shall not be
under any duty or obligation to require the Fund to deliver
to it any securities or funds owned by the Fund and shall
have no responsibility or liability for or on account of
securities or funds not so delivered. The Fund will deposit
with the Custodian copies of the Articles of Incorporation
and By-Laws (or comparable documents) of the Fund and all
amendments thereto, and copies of such votes and other
proceedings of the Fund as may be necessary for or
convenient to the Custodian in the performance of its
duties.
2. Except for securities and funds held by
subcustodians appointed pursuant to the provisions of
Section 3 hereof, the Custodian shall have and perform the
following powers and duties:
A. Safekeeping - To keep safely the securities of
the Fund that have been delivered to the Custodian and from
time to time to receive delivery of securities for
safekeeping.
B. Manner of Holding Securities - To hold
securities of the Fund (1) by physical possession of the
share certificates or other instruments representing such
securities in registered or bearer form, or (2) in book-
entry form by a Securities System (as said term is defined
in Section 2U).
C. Registered Name; Nominee - To hold registered
securities of the Fund (1) in the name or any nominee name
of the Custodian or the Fund, or in the name or any nominee
name of any agent appointed pursuant to Section 6E, or (2)
in street certificate form, so-called, and in any case with
or without any indication of fiduciary capacity.
D. Purchases - Upon receipt of Proper
Instructions, as defined in Section Y, insofar as funds are
available for the purpose, to pay for and receive securities
purchased for the account of the Fund, payment being made
only upon receipt of the securities (1) by the Custodian, or
(2) by a clearing corporation of a national securities
2
exchange of which the Custodian is a member, or (3) by a
Securities System. However, (i) in the case of repurchase
agreements entered into by the Fund, the Custodian (as well
as an Agent) may release funds to a Securities System or to
a Subcustodian prior to the receipt of advice from the
Securities System or Subcustodian that the securities
underlying such repurchase agreement have been transferred
by book entry into the Account (as defined in Section 2U) of
the Custodian (or such Agent) maintained with such
Securities System or Subcustodian, so long as such payment
instructions to the Securities System or Subcustodian
include a requirement that delivery is only against payment
for securities, (ii) in the case of foreign exchange
contracts, options, time deposits, call account deposits,
currency deposits and other deposits, contracts or options
pursuant to Sections 2J, 2I,, 2M and 2N, the Custodian may
make payment therefor without receiving an instrument
evidencing said deposit, contract or option so long as such
payment instructions detail specific securities to be
acquired, and (iii) in the case of securities in which
payment for the security and receipt of the instrument
evidencing the security are under generally accepted trade
practice or the terms of the instrument representing the
security expected to take place in different locations or
3
through separate parties, such as commercial paper which is
indexed to foreign currency exchange rates, derivatives and
similar securities, the Custodian may make payment for such
securities prior to delivery thereof in accordance with such
generally accepted trade practice or the terms of the
instrument representing such security.
E. Exchanges - Upon receipt of proper
instructions to exchange securities held by it for the
account of the Fund for other securities in connection with
any reorganization, recapitalization, split-up of shares,
change of par value, conversion or other event, and to
deposit any such securities in accordance with the terms of
any reorganization or protective plan. Without such
instructions, the Custodian may surrender securities in
temporary form for definitive securities, may surrender
securities for transfer into a name or nominee name as
permitted in Section 2C, and may surrender securities for a
different number of certificates or instruments representing
the same number of shares or same principal amount of
indebtedness, provided the securities to be issued are to be
delivered to the Custodian and further provided custodian
shall at the time of surrendering securities or instruments
receive a receipt or other evidence of ownership thereof.
4
F. Sales of Securities - Upon receipt of proper
instructions, to make delivery of securities which have been
sold for the account of the Fund, but only against payment
therefor (1) in cash, by a certified check, bank cashier's
check, bank credit, or bank wire transfer, or (2) by credit
to the account of the Custodian with a clearing corporation
of a national securities exchange of which the Custodian is
a member, or (3) by credit to the account of the Custodian
or an Agent of the Custodian with a Securities System;
provided, however, that (i) in the case of delivery of
physical certificates or instruments representing
securities, the Custodian may make delivery to the broker
buying the securities, against receipt therefor, for
examination in accordance with "street delivery" custom,
provided that the payment therefor is to be made to the
Custodian (which payment may be made by a broker's check) or
that such securities are to be returned to the Custodian,
and (ii) in the case of securities referred to in clause
(iii) of the last sentence of Section 2D, the Custodian may
make settlement, including with respect to the form of
payment, in accordance with generally accepted trade
practice relating to such securities or the terms of the
instrument representing said security.
5
G. Depositary Receipts - Upon receipt of proper
instructions, to instruct a subcustodian appointed pursuant
to Section 3 hereof (a "Subcustodian") or an agent of the
Custodian appointed pursuant to Section 6E hereof (an
"Agent") to surrender securities to the depositary used by
an issuer of American Depositary Receipts or International
Depositary communication evidencing the expiration,
termination or exercise of such covered option furnished by
The Options Clearing Corporation, the securities or options
exchange on which such covered option is traded or such
other organization as may be responsible for handling such
options transactions.
K. Borrowings - Upon receipt of proper
instructions to deliver securities of the Fund to lenders or
their agents as collateral for borrowings effected by the
Fund, provided that such borrowed money is payable to or
upon the Custodian's order as Custodian for the Fund.
L. Demand Deposit Bank Accounts - To open and
operate an account or accounts in the name of the Fund on
the Custodian's books subject only to draft or order by the
Custodian. All funds received by the Custodian from or for
the account of the Fund shall be deposited in said
account(s). The responsibilities of the Custodian to the
6
Fund for deposits accepted on the Custodian's books shall be
that of a U.S. bank for a similar deposit.
If and when authorized by proper instructions, the
Custodian may open and operate an additional account(s) in
such other banks or trust companies as may be designated by
the Fund in such instructions (any such bank or trust
company so designated by the Fund being referred to
hereafter as a "Banking Institution"), provided that such
account(s) shall be in the name of the Custodian for account
of the Fund and subject only to the Custodian's draft or
order. Such accounts may be opened with Banking Institutions
in the United States and in other countries and may be
denominated in either U.S. Dollars or other currencies as
the Fund may determine. All such deposits shall be deemed to
be portfolio securities of the Fund and accordingly the
responsibility of the Custodian therefore shall be the same
as and no greater than the Custodian's responsibility in
respect of other portfolio securities of the Fund.
M. Interest Bearing Call or Time Deposits - To
place interest bearing fixed term and call deposits with
such banks and in such amounts as the Fund may authorize
pursuant to proper instructions. Such deposits may be placed
with the Custodian or with Subcustodians or other Banking
Institutions as the Fund may determine. Deposits may be
7
denominated in U.S. Dollars or other currencies and need not
be evidenced by the issuance or delivery of a certificate to
the Custodian, provided that the Custodian shall include in
its records with respect to the assets of the Fund,
appropriate notation as to the amount and currency of each
such deposit, the accepting Banking Institution, and other
appropriate details. Such deposits other than those placed
with the Custodian, shall be deemed portfolio securities of
the Fund and the responsibilities of the Custodian therefor
shall be the same as those for demand deposit bank accounts
placed with other banks, as described in Section 2.L of this
agreement. The responsibility of the Custodian for such
deposits accepted on the Custodian's books shall be that of
a U.S. bank for a similar deposit.
N. Foreign Exchange Transactions and Futures
Contracts - Pursuant to proper instructions, to enter into
foreign exchange contracts or options to purchase and sell
foreign currencies for spot and future delivery on behalf
and for the account of the Fund. Such transactions may be
undertaken by the Custodian with such Banking Institutions,
including the Custodian and Subcustodian(s) as principals,
as approved and authorized by the Fund. Foreign exchange
contracts and options other than those executed with the
Custodian, shall be deemed to be portfolio securities of the
8
Fund and the responsibilities of the Custodian therefor
shall be the same as those for demand deposit bank accounts
placed with other banks as described in Section 2.L of this
agreement. Upon receipt of proper instructions, to receive
and retain confirmations evidencing the purchase or sale of
a futures contract or an option on a futures contract by the
Fund; to deposit and maintain in a segregated account, for
the benefit of any futures commission merchant or to pay to
such futures commission merchant, assets designated by the
fund as initial, maintenance or variation "margin" deposits
intended to secure the Fund's performance of its obligations
under any futures contracts purchased or sold or any options
on futures contracts written by the Fund, in accordance with
the provisions of any agreement or agreements among any of
the Fund, the Custodian and such futures commission
merchant, designated to comply with the rules of the
Commodity Futures Trading Commission and/or any contract
market, or any similar organization or organizations,
regarding such margin deposits; and to release and/or
transfer assets in such margin accounts only in accordance
with any such agreements or rules.
O. Stock Loans - Upon receipt of proper
instructions, to deliver securities of the Fund, in
connection with loans of securities by the Fund, to the
9
borrower thereof upon the receipt of the cash collateral, if
any, for such borrowing. In the event U.S. Government
securities are to be used as collateral, the Custodian will
not release the securities to be loaned until it has
received confirmation that such collateral has been
delivered to the Custodian. The Custodian and Fund
understand that the timing of receipt of such confirmation
will normally require that the delivery of securities to be
loaned will be made one day after receipt of the U.S.
Government collateral.
P. Collections - To collect, receive and deposit
in said account or accounts all income, payments of
principal and other payments with respect to the securities
held hereunder, and in connection therewith to deliver the
certificates or other instruments representing the
securities to the issuer thereof or its agent when
securities are called, redeemed, retired or otherwise become
payable; provided, that the payment is to be made in such
form and manner and at such time, which may be after
delivery by the Custodian of the instrument representing the
security, as is in accordance with the terms of the
instrument representing the security, or such proper
instructions as the Custodian may receive, or governmental
regulations, the rules of Securities Systems or other U.S.
10
securities depositories and clearing agencies or, with
respect to securities referred to in clause (iii) of the
last sentence of Section 2.D, in accordance with generally
accepted trade practice; (ii) to execute ownership and other
certificates and affidavits for all federal and state tax
purposes in connection with receipt of income or other
payments with respect to securities of the Fund or in
connection with transfer of securities, and (iii) pursuant
to proper instructions to take such other actions with
respect to collection or receipt of funds or transfer of
securities which involve an investment decision.
Q. Dividends, Distributions and Redemptions -
Upon receipt of proper instructions from the Fund, or upon
receipt of instructions from the Fund's shareholder
servicing agent or agent with comparable duties (the
"Shareholder Servicing Agent") (given by such person or
persons and in such manner on behalf of the Shareholder
Servicing Agent as the Fund shall have authorized), the
Custodian shall release funds or securities to the
Shareholder Servicing Agent or otherwise apply funds or
securities, insofar as available, for the payment of
dividends or other distributions to Fund shareholders. Upon
receipt of proper instructions from the Fund, or upon
receipt of instructions from the Shareholder Servicing Agent
11
(given by such person or persons and in such manner on
behalf of the Shareholder Servicing Agent as the Fund shall
have authorized), the Custodian shall release funds or
securities, insofar as available, to the Shareholder
Servicing Agent or as such Agent shall otherwise instruct
for payment to Fund shareholders who have delivered to such
Agent a request for repurchase or redemption of their shares
of capital stock of the Fund.
R. Proxies, Notices, Etc. - Promptly to deliver
or mail to the Fund all forms of proxies and all notices of
meetings and any other notices or announcements affecting or
relating to securities owned by the Fund that are received
by the Custodian, and upon receipt of proper instructions,
to execute and deliver or cause its nominee to execute and
deliver such proxies or other authorizations as may be
required. Neither the Custodian nor its nominee shall vote
upon any of such securities or execute any proxy to vote
thereon or give any consent or take any other action with
respect thereto (except as otherwise herein provided) unless
ordered to do so by proper instructions.
S. Nondiscretionary Details - Without the
necessity of express authorization from the Fund, (1) to
attend to all nondiscretionary details in connection with
the sale, exchange, substitution, purchase, transfer or
12
other dealings with securities, funds or other property of
the Portfolio held by the Custodian except as otherwise
directed from time to time by the Directors of the Fund, and
(2) to make payments to itself or others for minor expenses
of handling securities or other similar items relating to
the Custodian's duties under this Agreement, provided that
all such payments shall be accounted for to the Fund.
T. Bills - Upon receipt of proper instructions to
pay or cause to be paid, insofar as funds are available for
the purpose, bills, statements, or other obligations of the
Fund.
U. Deposit of Fund Assets in Securities Systems -
The Custodian may deposit and/or maintain securities owned
by the Fund in (i) The Depository Trust Company, (ii) any
book-entry system as provided in Subpart O of Treasury
Circular No. 300, 31 CFR 306, Subpart B of 31 CFR Part 350,
or the book-entry regulations of federal agencies
substantially in the form of Subpart O, or (iii) any other
domestic clearing agency registered with the Securities and
Exchange Commission under Section 17A of the Securities
Exchange Act of 1934 which acts as a securities depository
and whose use the Fund has previously approved in writing
(each of the foregoing being referred to in this Agreement
as a "Securities System"). Utilization of a Securities
13
System shall be in accordance with applicable Federal
Reserve Board and Securities and Exchange Commission rules
and regulations, if any, and subject to the following
provisions:
1) The Custodian may deposit and/or maintain Fund
securities, either directly or through one or more Agents
appointed by the Custodian (provided that any such agent
shall be qualified to act as a custodian of the Fund
pursuant to the Investment Company Act of 1940 and the rules
and regulations thereunder), in a Securities System provided
that such securities are represented in an account
("Account") of the Custodian or such Agent in the Securities
System which shall not include any assets of the Custodian
or Agent other than assets held as a fiduciary, custodian,
or otherwise for customers;
2) The records of the Custodian with respect to
securities of the Fund which are maintained in a Securities
System shall identity by book-entry those securities
belonging to the Fund;
3) The Custodian shall pay for securities
purchased for the account of the Fund upon (i) receipt of
advice from the Securities System that such securities have
been transferred to the Account, and (ii) the making of an
entry on the records of the Custodian to reflect such
14
payment and transfer for the account of the Fund. The
Custodian shall Transfer securities sold for the account of
the Fund upon (i) receipt of advice from the Securities
System that payment for such securities has been transferred
to the Account, and (ii) the making of an entry on the
records of the Custodian to reflect such transfer and
payment for the account of the Fund. Copies of all advices
from the Securities System of transfers of securities for
the account of the Fund shall identify the Fund, be
maintained for the Fund by the Custodian or an Agent as
referred to above, and be provided to the Fund at its
request. The Custodian shall furnish the Fund confirmation
of each transfer to or from the account of the Fund in the
form of a written advice or notice and shall furnish to the
Fund copies of daily transaction sheets reflecting each
day's transactions in the Securities System for the account
of the Fund on the next business day;
4) The Custodian shall provide the Fund with any
report obtained by the Custodian or any Agent as referred to
above on the Securities System's accounting system, internal
accounting control and procedures for safeguarding
securities deposited in the Securities System; and the
Custodian and such Agents shall send to the, Fund such
15
reports on their own systems of internal accounting control
as the Fund may reasonably request from time to time.
5) At the written request of the Fund, the
Custodian will terminate the use of any such Securities
System on behalf of the Fund as promptly as practicable.
V. Other Transfers - Upon receipt of Proper
Instructions, to deliver securities, funds and other
property of the Fund to a Subcustodian or another custodian
of the Fund; and, upon receipt of proper instructions, to
make such other disposition of securities, funds or other
property of the Fund in a manner other than or for purposes
other than as enumerated elsewhere in this Agreement,
provided that the instructions relating to such disposition
shall include a statement of the purpose for which the
delivery is to be made, the amount of securities to be
delivered and the name of the person or persons to whom
delivery is to be made.
W. Investment Limitations - In performing its
duties generally, and more particularly in connection with
the purchase, sale and exchange of securities made by or for
the Fund, the Custodian may assume unless and until notified
in writing to the contrary that proper instructions received
by it are not in conflict with or in any way contrary to any
provisions of the Fund's Articles of Incorporation or By-
16
Laws (or comparable documents) or votes or proceedings of
the shareholders or Directors of the Fund. The Custodian
shall in no event be liable to the Fund and shall be
indemnified by the Fund for any violation which occurs in
the course of carrying out instructions given by the Fund of
any investment limitations to which the Fund is subject or
other limitations with respect to the Fund's powers to make
expenditures, encumber securities, borrow or take similar
actions affecting its portfolio.
X. Restricted Securities - Notwithstanding any
other provision of this Agreement, the Custodian shall not
be liable for failure to take any action in respect of a
"restricted security" (as hereafter defined) if the
Custodian has not received Proper Instructions to take such
action (including but not limited to the failure to exercise
in a timely manner any right in respect of any restricted
security) unless the Custodian's responsibility to take such
action is set forth in a writing, agreed upon by the
Custodian and the Fund or the investment adviser of the
Fund, which specifies particular actions the Custodian is to
take without Proper Instructions in respect of specified
rights and obligations pertaining to a particular restricted
security. Further, the Custodian shall not be responsible
for transmitting to the Fund information concerning a
17
restricted security, such as with respect to exercise
periods and expiration dates for rights relating to the
restricted security, except such information which the
Custodian actually receives or which is published in a
source which is publicly distributed and generally
recognized as a major source of information with respect to
corporate actions of securities similar to the particular
restricted security. As used herein, the term "restricted
securities" shall mean securities which are subject to
restrictions on transfer, whether by reason of contractual
restrictions or federal, state or foreign securities or
similar laws, or securities which have special rights or
contractual features which do not apply to publicly-traded
shares of, or comparable interests representing, such
security.
Y. Proper Instructions - Proper instructions
shall include in order of preference, authenticated electro-
mechanical communications including SWIFT and tested telex;
a written request signed by two or more authorized persons
as set forth below; telefax transmissions and oral
instructions. Each of the foregoing methods of communicating
proper instructions is described and defined below and may
from time to time be further described and defined in
18
written operating memoranda between the Custodian and the
Fund.
Proper Instructions may include communications
effected directly between electro-mechanical or electronic
devices or systems, including authenticated SWIFT and tested
telex transmissions. The media through which such Proper
Instructions shall be transmitted and the data which must be
contained in such Proper Instructions in order for such
instruction to be complete shall be set forth in certain
operating memoranda to which the Custodian and the Fund
shall from time to time agree. The Fund shall be responsible
for sending instructions which meet the requirements set
forth therein and the Custodian shall only be responsible
for acting on instructions which meet such requirements. The
Custodian shall not be liable for direct or consequential
losses resulting from technical failures of any kind in
respect of instructions sent via electro-mechanical or
electronic communications.
Proper Instructions shall include a written
request, direction, instruction or certification signed or
initialed on behalf of the Fund by two or more persons as
the Board of Trustees or Directors of the Fund shall have
from time to time authorized, provided, however, that no
such instructions directing the delivery of securities or
19
the payment of funds to an authorized signatory of the Fund
shall be signed by such persons. Those persons authorized to
give proper instructions may be identified by the Board of
Trustees or Directors by name, title or position and will
include at least one officer empowered by the Board to name
other individuals who are authorized to give proper
instructions on behalf of the Fund. Telephonic or other
oral instructions or instructions given by facsimile
transmission may be given by any one of the above persons
and will be considered proper instructions if the Custodian
reasonably believes them to have been given by a person
authorized to give such instructions with respect to the
transaction involved.
With respect to telefax transmissions, the Fund
hereby acknowledges that (i) receipt of legible instructions
cannot be assured, (ii) the Custodian cannot verify that
authorized signatures on telefax instructions are original,
and (iii) the Custodian shall not be responsible for losses
or expenses incurred through actions taken in reliance on
such telefax instructions.
The Custodian may act on oral instructions provided
such instructions will be confirmed by authenticated
electro-mechanical communications in the manner set forth
above but the lack of such confirmation shall in no way
20
affect any action taken by the Custodian in reliance upon
such oral instructions. The Fund authorizes the Custodian to
tape record any and all telephonic or other oral
instructions given to the Custodian by or on behalf of the
Fund (including any of its officers, Directors, Trustees,
employees or agents or any investment manager or adviser or
person or entity with similar responsibilities which is
authorized to give proper instructions on behalf of the Fund
to the Custodian.)
Proper instructions may relate to specific
transactions or to types or classes of transactions, and may
be in the form of standing instructions.
Proper instructions may include communications
effected directly between electro-mechanical or electronic
devices or systems, in addition to tested telex, provided
that the Fund and the Custodian agree to the use of such
device or system.
3. Securities, funds and other property of the
Fund may be held by subcustodians appointed pursuant to the
provisions of this Section 3 (a "Subcustodian"). The
Custodian may, at any time and from time to time, appoint
any bank or trust company (meeting the requirements of a
custodian or a foreign custodian under the Investment
Company Act of 1940 and the rules and regulations
21
thereunder) to act as a Subcustodian for the Fund, provided
that the Fund shall have approved in writing (1) any such
bank or trust company and the subcustodian agreement to be
entered into between such bank or trust company and the
Custodian, and (2) if the subcustodian is a bank organized
under the laws of a country other than the United States,
the holding of securities, cash and other property of the
Fund in the country in which it is proposed to utilize the
services of such subcustodian. Upon such approval by the
Fund, the Custodian is authorized on behalf of the Fund to
notify each Subcustodian of its appointment as such. The
Custodian may, at any time in its discretion, remove any
bank or trust company that has been appointed as a
Subcustodian but will promptly notify the Fund of any such
action.
Those Subcustodians, their offices or branches
which the Fund has approved to date are set forth on
Appendix A hereto. Such Appendix shall be amended from time
to time as Subcustodians, branches or offices are changed,
added or deleted. The Fund shall be responsible for
informing the Custodian sufficiently in advance of a
proposed investment which is to be held at a location not
listed on Appendix A, in order that there shall be
sufficient time for the Fund to give the approval required
22
by the preceding paragraph and for the Custodian to put the
appropriate arrangements in place with such Subcustodian
pursuant to such subcustodian agreement.
Although the Fund does not intend to invest in a
country before the foregoing procedures have been completed,
in the event that an investment is made prior to approval,
if practical, such security shall be removed to an approved
location or if not practical such security shall be held by
such agent as the Custodian may appoint. In such event, the
Custodian shall be liable to the Fund for the actions of
such agent if and only to the extent the Custodian shall
have recovered from such agent for any damages caused the
Fund by such agent and provided that the Custodian shall
pursue its rights against such agent.
With respect to the securities and funds held by a
Subcustodian, either directly or indirectly, including
demand and interest bearing deposits, currencies or other
deposits and foreign exchange contracts as referred to in
Sections 2K, 2L or 2M, the Custodian shall be liable to the
Fund if and only to the extent that such Subcustodian is
liable to the Custodian; provided, however, that the
Custodian shall be liable to the Fund for losses resulting
from the bankruptcy or insolvency of a Subcustodian if and
only to the extent that such Subcustodian is liable to the
23
Custodian and the Custodian recovers from such Subcustodian
under the applicable subcustodian agreement. The Custodian
shall nevertheless be liable to the Fund for its own
negligence in transmitting any instructions received by it
from the Fund and for its own negligence in connection with
the delivery of any securities or funds held by it to any
such Subcustodian.
In the event that any Subcustodian appointed
pursuant to the provisions of this Section 3 fails to
perform any of its obligations under the terms and
conditions of the applicable subcustodian agreement, the
Custodian shall use its best efforts to cause such
Subcustodian to perform such obligations. In the event that
the Custodian is unable to cause such Subcustodian to
perform fully its obligations thereunder, the Custodian
shall forthwith upon the Fund's request terminate such
Subcustodian and, if necessary or desirable, appoint another
subcustodian in accordance with the provisions of this
Section 3. At the election of the Fund, it shall have the
right to enforce, to the extent permitted by the
subcustodian agreement and applicable law, the Custodian's
rights against any such Subcustodian for loss or damage
caused the Fund by such Subcustodian.
24
At the written request of the Fund, the Custodian
will terminate any subcustodian appointed pursuant to the
provisions of this Section 3 in accordance with the
termination provisions under the applicable subcustodian
agreement. The Custodian will not amend any subcustodian
agreement or agree to change or permit any changes
thereunder except upon the prior written approval of the
Fund.
In the event the Custodian receives a claim from a
Subcustodian under the indemnification provisions of any
subcustodian agreement, the Custodian shall promptly give
written notice to the Fund of such claim. No more than
thirty days after written notice to the Fund of the
Custodian's intention to make such payment, the Fund will
reimburse the Custodian the amount of such payment except in
respect of any negligence or misconduct of the Custodian.
4. The Custodian may assist generally in the
preparation of reports to Fund shareholders and others,
audits of accounts, and other ministerial matters of like
nature.
5. The Fund hereby also appoints the Custodian as
its financial agent. With respect to the appointment as
financial agent, the Custodian shall have and perform the
following powers and duties:
25
A. Records - To create, maintain and retain such
records relating to its activities and obligations under
this Agreement as are required under the Investment Company
Act of 1940 and the rules and regulations thereunder
(including Section 31 thereof and Rules 31a-1 and 31a-2
thereunder) and under applicable Federal and State tax laws.
All such records will be the property of the Fund and in the
event of termination of this Agreement shall be delivered to
the successor custodian' and the Custodian agrees to
cooperate with the Fund in execution of documents and other
action necessary or desirable in order to substitute the
successor custodian for the custodian under their agreement.
B. Accounts - To keep books of account and render
statements, including interim monthly and complete quarterly
financial statements, or copies thereof, from time to time
as reasonably requested by proper instructions.
C. Access to Records - Subject to security
requirements of the Custodian applicable to its own
employees having access to similar records within the
Custodian and such regulations as may be reasonably imposed
by the Custodian, the books and records maintained by the
Custodian pursuant to Sections 5A and 5B shall be open to
inspection and audit at reasonable times by officers of,
attorneys for, and auditors employed by, the Fund.
26
D. Calculation of Net Asset Value - To compute
and determine the net asset value per share of capital stock
of the Fund as of the close of business on the New York
Stock Exchange on each day on which such Exchange is open,
unless otherwise directed by proper instructions. Such
computation and determination shall be made in accordance
with (1) the provisions of the Fund's Articles of
Incorporation or By-Laws of the Fund, as they may from time
to time be amended and delivered to the Custodian, (2) the
votes of the Board of Directors of the Fund at the time in
force and applicable, as they may from time to time be
delivered to the Custodian, and (3) proper instructions from
such officers of the Fund or other persons as are from time
to time authorized by the Board of Directors of the Fund to
give instructions with respect to computation and
determination of the net asset value. On each day that the
Custodian shall compute the net asset value per share of the
Fund, the Custodian shall provide the Fund with written
reports which permit the Fund to verify that portfolio
transactions have been recorded in accordance with the
Fund's instructions.
In computing the net asset value, the Custodian may
rely upon any information furnished by proper instructions,
including without limitation any information (1) as to
27
accrual of liabilities of the Fund and as to liabilities of
the Fund not appearing on the books of account kept by the
custodian, (2) as to the existence, status and proper
treatment of reserves, if any, authorized by the fund, (3)
as to the sources of quotations to be used in computing the
net asset value, including those listed in Appendix B, (4)
as to the fair value to be assigned to any securities or
other property for which price quotations are not readily
available, and (5) as to the sources of information with
respect to "corporate actions" affecting portfolio
securities of the fund, including those listed in Appendix
B. (Information as to "corporate actions" shall include
information as to dividends, distributions, stock splits,
stock dividends, rights offerings, conversions, exchanges,
recapitalizations, mergers, redemptions, calls, maturity
dates and similar transactions, including the ex- and record
dates and the amounts or other terms thereof.)
In like manner, the Custodian shall compute and
determine the net asset value as of such other times as the
Board of Directors of the Fund from time to time may
reasonably request.
Notwithstanding any other provisions of this
Agreement, including Section 6C, the following provisions
shall apply with respect to the Custodian's foregoing
28
responsibilities in this Section 5.D: The Custodian shall be
held to the exercise of reasonable care in computing and
determining net asset value as provided in this Section 5.D,
but shall not be held accountable or liable for any losses,
damages or expenses the Fund or any shareholder or former
shareholder of the Fund may suffer or incur arising from or
based upon errors or delays in the determination of such net
asset value unless such error or delay was due to the
Custodian's negligence, gross negligence or reckless or
willful misconduct in determination of such net asset value.
(The parties hereto acknowledge, however, that the
Custodian's causing an error or delay in the determination
of net asset value may, but does not in and of itself,
constitute negligence, gross negligence or reckless or
willful misconduct.) In no event shall the Custodian be
liable or responsible to the Fund, any present or former
shareholder of the fund or any other party for any error or
delay which continued or was undetected after the date of an
audit performed by the certified public accountants employed
by the Fund if, in the exercise of reasonable care in
accordance with generally accepted accounting standards,
such accountants should have become aware of such error or
delay in the course of performing such audit. The
Custodian's liability for any such negligence, gross
29
negligence or reckless or willful misconduct which results
in an error in determination of such net asset value shall
be limited to the direct, out-of-pocket loss the Fund,
shareholder or former shareholder shall actually incur,
measured by the difference between the actual and the
erroneously computed net asset value, and any expenses the
fund shall incur in connection with correcting the records
of the Fund affected by such error (including charges made
by the Fund's registrar and transfer agent for making such
corrections) or communicating with shareholders or former
shareholders of the Fund affected by such error.
Without limiting the foregoing, the Custodian shall
not be held accountable or liable to the Fund, any
shareholder or former shareholder thereof or any other
person for any delays or losses, damages or expenses any of
them may suffer or incur resulting from (1) the Custodian's
failure to receive timely and suitable notification
concerning quotations or corporate actions relating to or
affecting portfolio securities of the fund or (2) any errors
in the computation of the net asset value based upon or
arising out of quotations or information as to corporate
actions if received by the Custodian either (i) from a
source which the Custodian was authorized pursuant to the
second paragraph of this Section 5.D to rely upon, or (ii)
30
from a source which in the Custodian's reasonable judgment
was as reliable a source for such quotations or information
as the sources authorized pursuant to that paragraph.
Nevertheless, the Custodian will use its best judgment in
determining whether to verify through other sources any
information it has received as to quotations or corporate
actions if the Custodian has reason to believe that any such
information might be incorrect.
In the event of any error or delay in the
determination of such net asset value for which the
Custodian may be liable, the Fund and the Custodian will
consult and make good faith efforts to reach agreement on
what actions should be taken in order to mitigate any loss
suffered by the Fund or its present or former shareholders,
in order that the custodian's exposure to liability shall be
reduced to the extent possible after taking into account all
relevant factors and alternatives. Such actions might
include the Fund or the custodian taking reasonable steps to
collect from any shareholder or former shareholder who has
received any overpayment upon redemption of shares such
overpaid amount or to collect from any shareholder who has
underpaid upon a purchase of shares the amount of such
underpayment or to reduce the number of shares issued to
such shareholder. It is understood that in attempting to
31
reach agreement on the actions to be taken or the amount of
the loss which should appropriately be borne by the
Custodian, the Fund and the Custodian will consider such
relevant factors as the amount of the loss involved, the
Fund's desire to avoid loss of shareholder good will, the
fact that other persons or entitles could have been
reasonably expected to have detected the error sooner than
the time it was actually discovered, the appropriateness of
limiting or eliminating t]he benefit which shareholders or
former shareholders might have obtained by reason of the
error, and the possibility that other parties providing
services to the fund might be induced to absorb a portion of
the loss incurred.
E. Disbursements - Upon receipt of proper
instructions, to pay or cause to be paid, insofar as funds
are available for the purpose, bills, statements and other
obligations of the Fund (including but not limited to
interest charges, taxes, management fees, compensation to
Fund officers and employees, and other operating expenses of
the Fund).
6. A. The Custodian shall not be liable for any
action taken or omitted in reliance upon proper instructions
believed by it to be genuine or upon any other written
notice, request, direction, instruction, certificate or
32
other instrument believed by it to be genuine and signed by
the proper party or parties.
The Secretary or Assistant Secretary of the Fund
shall certify to the Custodian the names, signatures and
scope of authority of all persons authorized to give proper
instructions or any other such notice, request, direction,
instruction, certificate or instrument on behalf of the
Fund, the names and signatures of the officers of the Fund,
the name and address of the Shareholder Servicing Agent, and
any resolutions, votes, instructions or directions of the
Fund's Board of Directors or shareholders. Such certificate
may be accepted and relied upon by the Custodian as
conclusive evidence of the facts set forth therein and may
be considered in full force and effect until receipt of a
similar certificate to the contrary.
So long as and to the extent that it is in the
exercise of reasonable care, the Custodian shall not be
responsible for the title, validity or genuineness of any
property or evidence of title thereto received by it or
delivered by it pursuant to this Agreement.
The Custodian shall be entitled, at the expense of
the Fund, to receive and act upon advice of counsel (who may
be counsel for the Fund) on all matters, and the Custodian
33
shall be without liability for any action reasonably taken
or omitted pursuant to such advice.
B. With respect to the portfolio securities, cash
and other property of the Fund held by a Securities System,
the Custodian shall be liable to the Fund only for any loss
or damage to the Fund resulting from use of the Securities
System if caused by any negligence, misfeasance or
misconduct of the Custodian or any of its agents or of any
of its or their employees or from any failure of the
Custodian or any such agent to enforce effectively such
rights as it may have against the Securities System.
C. Except as may otherwise be set forth in this
Agreement with respect to particular matters, the Custodian
shall be held only to the exercise of reasonable care and
diligence in carrying out the provisions of this Agreement,
provided that the Custodian shall not thereby be required to
take any action which is in contravention of any applicable
law. However, nothing herein shall exempt the Custodian from
liability due to its own negligence or willful misconduct.
The Fund agrees to indemnify and hold harmless the Custodian
and its nominees from all claims and liabilities (including
counsel fees) incurred or assessed against it or its
nominees in connection with the performance of this
Agreement, except such as may arise from its or its
34
nominee's breach of the relevant standard of conduct set
forth in this Agreement. Without limiting the foregoing
indemnification obligation of the Fund, the Fund agrees to
indemnify the Custodian and its nominees against any
liability the Custodian or such nominee may incur by reason
of taxes assessed to the Custodian or such nominee or other
costs, liability or expense incurred by the Custodian or
such nominee resulting directly or indirectly from the fact
that portfolio securities or other property of the Fund is
registered in the name of the Custodian or such nominee.
In order that the indemnification provisions
contained in this Paragraph 6.C shall apply, however, it is
understood that if in any case the Fund may be asked to
indemnify or hold the Custodian harmless, the Fund shall be
fully and promptly advised of all pertinent facts concerning
the situation in question, and it is further understood that
the Custodian will use all reasonable care to identify and
notify the Fund promptly concerning any situation which
presents or appears likely to present the probability of
such a claim for indemnification against the Fund. The Fund
shall have the option to defend the Custodian against any
claim which may be the subject of this indemnification, and
in the event that the Fund so elects it will so notify the
Custodian, and thereupon the Fund shall take over complete
35
defense of the claim, and the Custodian shall in such
situation initiate no further legal or other expenses for
which it shall seek indemnification under this Paragraph
6.C. The Custodian shall in no case confess any claim or
make any compromise in any case in which the Fund will be
asked to indemnify the Custodian except with the Fund's
prior written consent.
D. The Custodian shall be entitled to receive
reimbursement from the Fund on demand, in the manner
provided in Section 7, for its cash disbursements, expenses
and charges (including the fees and expenses of any
Subcustodian or any Agent) in connection with this
Agreement, but excluding salaries and usual overhead
expenses.
E. The Custodian may at any time or times in its
discretion appoint (and may at any time remove) any other
bank or trust company as its agent (an "Agent") to carry out
such of the provisions of this Agreement as the Custodian
may from time to time direct, provided, however, that the
appointment of such Agent (other than an Agent appointed
pursuant to the third paragraph of Section 3) shall not
relieve the Custodian of any of its responsibilities under
this agreement.
36
F. Upon request, the Fund shall deliver to the
Custodian such proxies, powers of attorney or other
instruments as may be reasonable and necessary or desirable
in connection with the performance by the Custodian or any
Subcustodian of their respective obligations under this
Agreement or any applicable subcustodian agreement.
7. The Fund shall pay the Custodian a custody fee
based on such fee schedule as may from time to time be
agreed upon in writing by the Custodian and the Fund. Such
fee, together with all amounts for which the Custodian is to
be reimbursed in accordance with Section 6D, shall be billed
to the Fund in such a manner as to permit payment by a
direct cash payment to the Custodian.
8. This Agreement shall continue in full force
and effect until terminated by either party by an instrument
in writing delivered or mailed, postage prepaid, to the
other party, such termination to take effect not sooner than
seventy five (75) days after the date of such delivery or
mailing. In the event of termination the Custodian shall be
entitled to receive prior to delivery of the securities,
funds and other property held by it all accrued fees and
unreimbursed expenses the payment of which is contemplated
by Sections 6D and 7, upon receipt by the Fund of a
statement setting forth such fees and expenses.
37
In the event of the appointment of a successor
custodian, it is agreed that the funds and securities owned
by the Fund and held by the Custodian or any Subcustodian
shall be delivered to the successor custodian, and the
Custodian agrees to cooperate with the Fund in execution of
documents and performance of other actions necessary or
desirable in order to substitute the successor custodian for
the Custodian under this Agreement.
9. This Agreement constitutes the entire
understanding and agreement of the parties hereto with
respect to the subject matter hereof. No provision of this
Agreement may be amended or terminated except by a statement
in writing signed by the party against which enforcement of
the amendment or termination is sought.
In connection with the operation of this Agreement,
the Custodian and the Fund may agree in writing from time to
time on such provisions interpretative of or in addition to
the provisions of this Agreement as may in their joint
opinion be consistent with the general tenor of this
Agreement. No interpretative or additional provisions made
as provided in the preceding sentence shall be deemed to be
an amendment of this Agreement.
38
10. This instrument is executed and delivered in
The Commonwealth of Massachusetts and shall be governed by
and construed according to the laws of said Commonwealth.
11. Notices and other writings delivered or mailed
postage prepaid to the Fund addressed to the Fund at 500
Plaza Drive 3rd Floor, Secaucus, NJ 07094 or to such other
address as the Fund may have designated to the Custodian in
writing, or to the Custodian at 40 Water Street, Boston,
Massachusetts 02109, Attention: Manager, Securities
Department, or to such other address as the Custodian may
have designated to the Fund in writing, shall be deemed to
have been properly delivered or given hereunder to the
respective addressee.
12. This Agreement shall be binding on and shall
inure to the benefit of the Fund and the Custodian and their
respective successors and assigns, provided that neither
party hereto may assign this Agreement or any of its rights
or obligations hereunder without the prior written consent
of the other party.
13. This Agreement may be executed in any number
of counterparts each of which shall be deemed an original.
This Agreement shall become effective when one or more
counterparts have been signed and delivered by each of the
parties.
39
IN WITNESS WHEREOF, each of the parties has caused
this Agreement to be executed in its name and on behalf on
the day and year first above written.
ALLIANCE GREATER CHINA '97 BROWN BROTHERS HARRIMAN & CO.
FUND, INC.
BY_________________________ per pro_____________________
Emmett C. Cadigan,
Deputy Manager
40
00250235.AH4
BROWN BROTHERS HARRIMAN & CO. - GLOBAL CUSTODY NETWORK
ALLIANCE GREATER CHINA '97 FUND
APPENDIX A
COUNTRY SUBCUSTODIAN DEPOSITORY
AUSTRALIA NATIONAL AUSTRALIA BANK LTD., MELBOURNE Austraclear Ltd.
National Australia Bank Agt. 5/1/85Reserve Bank of
Australia
Agreement Amendment 3/13/92
Omnibus Amendment 11/22/93
CHINA STANDARD CHARTERED BANK, SHANGHAI SSCCRC
Agreement Amendment 2/13/92
CHINA STANDARD CHARTERED BANK, SHENZHEN SSCC
Standard Chartered Bank Agreement 2/18/92
HONG KONG HONGKONG & SHANGHAI BANKING CORP., HONG KONG HKSCC
Hongkong & Shanghai Banking Corp. Agt. 4/19/91
Omnibus supplement 12/29/93
Schedule 5/14/96
INDIA CITIBANK, N.A., MUMBAI NSDL
Citibank, N.A. New York Agreement 7/16/81
New York Agreement Amendment 8/31/90
New York Agreement Amendment 7/26/96
Citibank, Mumbai Amendment 11/17/93
INDONESIA CITIBANK, N.A., JAKARTA None
Citibank, N.A., New York Agreement 7/16/81
New York Agreement Amendment 8/31/90
New York Agreement Amendment 7/26/96
JAPAN SUMITOMO TRUST & BANKING COMPANY, LTD JASDEC
Sumitomo Trust & Banking Agreement 7/17/92 Bank of Japan
Omnibus Agreement 1/13/94
KOREA CITIBANK, N.A., SEOUL KSD
Citibank N.A., New York Agreement 7/16/81
New York Agreement Amendment 8/31/90
New York Agreement Amendment 7/26/96
Citibank, Seoul Agreement Supplement 10/28/94
MALAYSIA HONGKONG BANK MALAYSIA BERHARD Bank Negara Malaysia
Hongkong & Shanghai Banking Corp. Agt. 4/19/91 MCD
Omnibus Supplement 12/29/93
Schedule 5/14/96
Malaysia Subsidiary Supplement 5/23/94
NEW ZEALAND NATIONAL AUSTRALIA BANK LTD., AUCKLANDReserve Bank of New
Zealand
National Australia Bank Agreement 5/1/85
BROWN BROTHERS HARRIMAN & CO. - GLOBAL CUSTODY NETWORK
ALLIANCE GREATER CHINA '97 FUND
APPENDIX A
COUNTRY SUBCUSTODIAN DEPOSITORY
Agreement Amendment 2/13/92
Omnibus Amendment 11/22/93
New Zealand Addendum 3/7/89
PAKISTAN STANDARD CHARTERED BANK, KARACHI None
Standard Chartered Bank Agreement 2/18/92
PHILIPPINES CITIBANK, N.A., MANILA PCD
Citibank, N.A., New York Agreement 7/16/81
New York Agreement Amendment 8/31/90
New York Agreement Amendment 7/26/96
SINGAPORE HONGKONG & SHANGHAI BANKING CORP., SINGAPORE CDP
Hongkong & Shanghai Banking Corp. Agt. 4/19/91
Omnibus Supplement 12/29/93
Schedule 5/14/96
TAIWAN STANDARD CHARTERED BANK, TAIPEI TSCD
Standard Chartered Bank Agreement 2/18/92
THAILAND HONGKONG & SHANGHAI BANKING CORP., BANGKOK TSDC
Hongkong & Shanghai Banking Corp. Agt. 4/19/91
Omnibus Amendment 12/29/93
Schedule 5/14/96
TRANSNATIONAL BROWN BROTHERS HARRIMAN & CO. Cedel
Euroclear
I HEREBY CERTIFY THAT AT ITS MEETING ON __________________ THE
BOARD APPROVED THE COUNTRIES, SUBCUSTODIANS, AGREEMENTS, AND CENTRAL
DEPOSITORIES LISTD ON THIS APPENDIX.
___________________________________ ______________________
(Signature) (Date)
___________________________________
(Title)
A-2
00250235.AH4
ALLIANCE GREATER CHINA '97 FUND, INC.
APPENDIX B
THE FOLLOWING AUTHORIZED SOURCES MAY BE UTILIZED BY THE
CUSTODIAN FOR PRICING AND FOREIGN EXCHANGE QUOTATIONS,
CORPORATE ACTION, DIVIDENDS AND RIGHTS OFFERINGS:
AUTHORIZED SOURCES
BLOOMBERG
EXTEL (LONDON)
FUND MANAGERS
INTERACTIVE DATA CORPORATION
REPUTABLE BROKERS
REUTERS
SUBCUSTODIAN BANKS
THE CUSTODIAN
TELEKURS
VALORINFORM (GENEVA)
REPUTABLE FINANCIAL PUBLICATIONS
STOCK EXCHANGES
FINANCIAL INFORMATION INC. CARD
JJ KENNY
FRI CORPORATION
B-1
00250235.AH4
AGREEMENT BETWEEN
BROWN BROTHERS HARRIMAN & CO.
AND
ALLIANCE GREATER CHINA '97 FUND, INC.
00250235.AH4
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ALLIANCE GREATER CHINA 97 FUND, INC.
TRANSFER AGENCY AGREEMENT
AGREEMENT, dated as of July , 1997, between
Alliance Greater China 97 Fund, Inc., a Maryland Corporation
and an open-end investment company registered with the
Securities and Exchange Commission (the "SEC") under the
Investment Company Act of 1940 (the "Investment Company
Act"), having its principal place of business at 1345 Avenue
of Americas, New York, New York 10105 (the "Fund"), and
ALLIANCE FUND SERVICES, INC., a Delaware corporation
registered with the SEC as a transfer agent under the
Securities Exchange Act of 1934, having its principal place
of business at 500 Plaza Drive, Secaucus, New Jersey 07094
("Fund Services"), provides as follows:
WHEREAS, Fund Services has agreed to act as
transfer agent to the Fund for the purpose of recording the
transfer, issuance and redemption of shares of each series
of the shares of beneficial interest of the Fund ("Shares"
or "Shares of a Series"), transferring the Shares,
disbursing dividends and other distributions to shareholders
of the Fund, and performing such other services as may be
agreed to pursuant hereto;
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NOW THEREFORE, for and in consideration of the
mutual covenants and agreements contained herein, the
parties do hereby agree as follows:
SECTION 1. The Fund hereby appoints Fund Services
as its transfer agent, dividend disbursing agent and
shareholder servicing agent for the Shares, and Fund
Services agrees to act in such capacities upon the terms set
forth in this Agreement. Capitalized terms used in this
Agreement and not otherwise defined shall have the meanings
assigned to them in SECTION 30.
SECTION 2.
(a) The Fund shall provide Fund Services with
copies of the following documents:
(1) Specimens of all forms of certificates for
Shares;
(2) Specimens of all account application forms and
other documents relating to Shareholders' accounts;
(3) Copies of each Prospectus;
(4) Specimens of all documents relating to
withdrawal plans instituted by the Fund, as described in
SECTION 16; and
(5) Specimens of all amendments to any of the
foregoing documents.
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(b) The Fund shall furnish to Fund Services a
supply of blank Share Certificates for the Shares and, from
time to time, will renew such supply upon Fund Services'
request. Blank Share Certificates shall be signed manually
or by facsimile signatures of officers of the Fund
authorized to sign by law or pursuant to the by-laws of the
Fund and, if required by Fund Services, shall bear the
Fund's seal or a facsimile thereof.
SECTION 3. Fund Services shall make original
issues of Shares in accordance with SECTIONS 13 and 14 and
the Prospectus upon receipt of (i) Written Instructions
requesting the issuance, (ii) a certified copy of a
resolution of the Fund's Directors authorizing the issuance,
(iii) necessary funds for the payment of any original issue
tax applicable to such Shares, and (iv) an opinion of the
Fund's counsel as to the legality and validity of the
issuance, which opinion may provide that it is contingent
upon the filing by the Fund of an appropriate notice with
the SEC, as required by Rule 24f-2 of the Investment Company
Act, as amended from time to time.
SECTION 4. Transfers of Shares shall be registered
and, subject to the provisions of SECTION 10 in the case of
Shares evidenced by Share Certificates, new Share
Certificates shall be issued by Fund Services upon surrender
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of outstanding Share Certificates in the form deemed by Fund
Services to be properly endorsed for transfer, which form
shall include (i) all necessary endorsers' signatures
guaranteed by a member firm of a national securities
exchange or a domestic commercial bank or through other
procedures mutually agreed to between the Fund and Fund
Services, (ii) such assurances as Fund Services may deem
necessary to evidence the genuineness and effectiveness of
each endorsement and (iii) satisfactory evidence of
compliance with all applicable laws relating to the payment
or collection of taxes.
SECTION 5. Fund Services shall forward Share
Certificates in "non-negotiable" form by first-class or
registered mail, or by whatever means Fund Services deems
equally reliable and expeditious. While in transit to the
addressee, all deliveries of Share Certificates shall be
insured by Fund Services as it deems appropriate. Fund
Services shall not mail Share Certificates in "negotiable"
form, unless requested in writing by the Fund and fully
indemnified by the Fund to Fund Services' satisfaction.
SECTION 6. In registering transfers of Shares,
Fund Services may rely upon the Uniform Commercial Code as
in effect from time to time in the State in which the Fund
is incorporated or organized or, if appropriate, in the
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State of New Jersey; provided, that Fund Services may rely
in addition or alternatively on any other statutes in effect
in the State of New Jersey or in the state under the laws of
which the Fund is incorporated or organized that, in the
opinion of Fund Services' counsel, protect Fund Services and
the Fund from liability arising from (i) not requiring
complete documentation in connection with an issuance or
transfer, (ii) registering a transfer without an adverse
claim inquiry, (iii) delaying registration for purposes of
an adverse claim inquiry or (iv) refusing registration in
connection with an adverse claim.
SECTION 7. Fund Services may issue new Share
Certificates in place of those lost, destroyed or stolen,
upon receiving indemnity satisfactory to Fund Services; and
may issue new Share Certificates in exchange for, and upon
surrender of, mutilated Share Certificates as Fund Services
deems appropriate.
SECTION 8. Unless otherwise directed by the Fund,
Fund Services may issue or register Share Certificates
reflecting the signature, or facsimile thereof, of an
officer who has died, resigned or been removed by the Fund.
The Fund shall file promptly with Fund Services' approval,
adoption or ratification of such action as may be required
by law or by Fund Services.
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SECTION 9. Fund Services shall maintain customary
stock registry records for Shares of each Series noting the
issuance, transfer or redemption of Shares and the issuance
and transfer of Share Certificates. Fund Services may also
maintain for Shares of each Series an account entitled
"Unissued Certificate Account," in which Fund Services will
record the Shares, and fractions thereof, issued and
outstanding from time to time for which issuance of Share
Certificates has not been requested. Fund Services is
authorized to keep records for Shares of each Series
containing the names and addresses of record of
Shareholders, and the number of Shares, and fractions
thereof, from time to time owned by them for which no Share
Certificates are outstanding. Each Shareholder will be
assigned a single account number for Shares of each Series,
even though Shares for which Certificates have been issued
will be accounted for separately.
SECTION 10. Fund Services shall issue Share
Certificates for Shares only upon receipt of a written
request from a Shareholder and as authorized by the Fund. If
Shares are purchased or transferred without a request for
the issuance of a Share Certificate, Fund Services shall
merely note on its stock registry records the issuance or
transfer of the Shares and fractions thereof and credit or
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debit, as appropriate, the Unissued Certificate Account and
the respective Shareholders' accounts with the Shares.
Whenever Shares, and fractions thereof, owned by
Shareholders are surrendered for redemption, Fund Services
may process the transactions by making appropriate entries
in the stock transfer records, and debiting the Unissued
Certificate Account and the record of issued Shares
outstanding; it shall be unnecessary for Fund Services to
reissue Share Certificates in the name of the Fund.
SECTION 11. Fund Services shall also perform the
usual duties and function required of a stock transfer agent
for a corporation, including but not limited to (i) issuing
Share Certificates as treasury Shares, as directed by
Written Instructions, and (ii) transferring Share
Certificates from one Shareholder to another in the usual
manner. Fund Services may rely conclusively and act without
further investigation upon any list, instruction,
certification, authorization, Share Certificate or other
instrument or paper reasonably believed by it in good faith
to be genuine and unaltered, and to have been signed,
countersigned or executed or authorized by a duly-authorized
person or persons, or by the Fund, or upon the advice of
counsel for the Fund or for Fund Services. Fund Services
may record any transfer of Share Certificates which it
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reasonably believes in good faith to have been duly
authorized, or may refuse to record any transfer of Share
Certificates if, in good faith, it reasonably deems such
refusal necessary in order to avoid any liability on the
part of either the Fund or Fund Services.
SECTION 12. Fund Services shall notify the Fund of
any request or demand for the inspection of the Fund's share
records. Fund Services shall abide by the Fund's
instructions for granting or denying the inspection;
provided, however, Fund Services may grant the inspection
without such instructions if it is advised by its counsel
that failure to do so will result in liability to Fund
Services.
SECTION 13. Fund Services shall observe the
following procedures in handling funds received:
(a) Upon receipt at the office designated by the
Fund of any check or other order drawn or endorsed to the
Fund or otherwise identified as being for the account of the
Fund, and, in the case of a new account, accompanied by a
new account application or sufficient information to
establish an account as provided in the Prospectus, Fund
Services shall stamp the transmittal document accompanying
such check or other order with the name of the Fund and the
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time and date of receipt and shall forthwith deposit the
proceeds thereof in the custodial account of the Fund.
(b) In the event that any check or other order for
the purchase of Shares is returned unpaid for any reason,
Fund Services shall, in the absence of other instructions
from the Fund, advise the Fund of the returned check and
prepare such documents and information as may be necessary
to cancel promptly any Shares purchased on the basis of such
returned check and any accumulated income dividends and
capital gains distributions paid on such Shares.
(c) As soon as possible after 4:00 p.m., Eastern
time or at such other times as the Fund may specify in
Written or Oral Instructions for any Series (the "Valuation
Time") on each Business Day Fund Services shall obtain from
the Fund's Adviser a quotation (on which it may conclusively
rely) of the net asset value, determined as of the Valuation
Time on that day. On each Business Day Fund Services shall
use the net asset value(s) determined by the Fund's Adviser
to compute the number of Shares and fractional Shares to be
purchased and the aggregate purchase proceeds to be
deposited with the Custodian. As necessary but no more
frequently than daily (unless a more frequent basis is
agreed to by Fund Services), Fund Services shall place a
purchase order with the Custodian for the proper number of
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Shares and fractional Shares to be purchased and promptly
thereafter shall send written confirmation of such purchase
to the Custodian and the Fund.
SECTION 14. Having made the calculations required
by SECTION 13, Fund Services shall thereupon pay the
Custodian the aggregate net asset value of the Shares
purchased. The aggregate number of Shares and fractional
Shares purchased shall then be issued daily and credited by
Fund Services to the Unissued Certificate Account. Fund
Services shall also credit each Shareholder's separate
account with the number of Shares purchased by such
Shareholder. Fund Services shall mail written confirmation
of the purchase to each Shareholder or the Shareholder's
representative and to the Fund if requested. Each
confirmation shall indicate the prior Share balance, the new
Share balance, the Shares for which Stock Certificates are
outstanding (if any), the amount invested and the price paid
for the newly-purchased Shares.
SECTION 15. Prior to the Valuation Time on each
Business Day, as specified in accordance with SECTION 13,
Fund Services shall process all requests to redeem Shares
and, with respect to each Series, shall advise the Custodian
of (i) the total number of Shares available for redemption
and (ii) the number of Shares and fractional Shares
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requested to be redeemed. Upon confirmation of the net
asset value by the Fund's Adviser, Fund Services shall
notify the Fund and the Custodian of the redemption, apply
the redemption proceeds in accordance with SECTION 16 and
the Prospectus, record the redemption in the stock registry
books, and debit the redeemed Shares from the Unissued
Certificates Account and the individual account of the
Shareholder.
In lieu of carrying out the redemption procedures
described in the preceding paragraph, Fund Services may, at
the request of the Fund, sell Shares to the Fund as
repurchases from Shareholders, provided that the sale price
is not less than the applicable redemption price. The
redemption procedures shall then be appropriately modified.
SECTION 16. Fund Services will carry out the
following procedures with respect to Share redemptions:
(a) As to each request received by the Fund from
or on behalf of a Shareholder for the redemption of Shares,
and unless the right of redemption has been suspended as
contemplated by the Prospectus, Fund Services shall, within
seven days after receipt of such redemption request, either
(i) mail a check in the amount of the proceeds of such
redemption to the person designated by the Shareholder or
other person to receive such proceeds or, (ii) in the event
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redemption proceeds are to be wired through the Federal
Reserve Wire System or by bank wire pursuant to procedures
described in the Prospectus, cause such proceeds to be wired
in Federal funds to the bank or trust company account
designated by the Shareholder to receive such proceeds.
Funds Services shall also prepare and send a confirmation of
such redemption to the Shareholder. Redemptions in kind
shall be made only in accordance with such Written
Instructions as Fund Services may receive from the Fund. The
requirements as to instruments of transfer and other
documentation, the determination of the appropriate
redemption price and the time of payment shall be as
provided in the Prospectus, subject to such additional
requirements consistent therewith as may be established by
mutual agreement between the Fund and Fund Services. In the
case of a request for redemption that does not comply in all
respects with the requirements for redemption, Fund Services
shall promptly so notify the Shareholder and shall effect
such redemption at the price in effect at the time of
receipt of documents complying with such requirements. Fund
Services shall notify the Fund's Custodian and the Fund on
each Business Day of the amount of cash required to meet
payments made pursuant to the provisions of this paragraph
and thereupon the Fund shall instruct the Custodian to make
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available to Fund Services in timely fashion sufficient
funds therefor.
(b) Procedures and standards for effecting and
accepting redemption orders from Shareholders by telephone
or by such check writing service as the Fund may institute
may be established by mutual agreement between Fund Services
and the Fund consistent with the Prospectus.
(c) For purposes of redemption of Shares that have
been purchased by check within fifteen (15) days prior to
receipt of the redemption request, the Fund shall provide
Fund Services with Written Instructions concerning the time
within which such requests may be honored.
(d) Fund Services shall process withdrawal orders
duly executed by Shareholders in accordance with the terms
of any withdrawal plan instituted by the Fund and described
in the Prospectus. Payments upon such withdrawal orders and
redemptions of Shares held in withdrawal plan accounts in
connection with such payments shall be made at such times as
the Fund may determine in accordance with the Prospectus.
(e) The authority of Fund Services to perform its
responsibilities under SECTIONS 15 and 16 with respect to
the Shares of any Series shall be suspended if Fund Services
receives notice of the suspension of the determination of
the net asset value of the Series.
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SECTION 17. Upon the declaration of each dividend
and each capital gains distribution by the Fund's Directors,
the Fund shall notify Fund Services of the date of such
declaration, the amount payable per Share, the record date
for determining the Shareholders entitled to payment, the
payment and the reinvestment date price.
SECTION 18. Upon being advised by the Fund of the
declaration of any income dividend or capital gains
distribution on account of its Shares, Fund Services shall
compute and prepare for the Fund records crediting such
distributions to Shareholders. Fund Services shall, on or
before the payment date of any dividend or distribution,
notify the Fund and the Custodian of the estimated amount
required to pay any portion of a dividend or distribution
which is payable in cash, and thereupon the Fund shall, on
or before the payment date of such dividend or distribution,
instruct the Custodian to make available to Fund Services
sufficient funds for the payment of such cash amount. Fund
Services will, on the designated payment date, reinvest all
dividends in additional shares and promptly mail to each
Shareholder at his address of record a statement showing the
number of full and fractional Shares (rounded to three
decimal places) then owned by the Shareholder and the net
asset value of such Shares; provided, however, that if a
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Shareholder elects to receive dividends in cash, Fund
Services shall prepare a check in the appropriate amount and
mail it to the Shareholder at his address of record within
five (5) business days after the designated payment date, or
transmit the appropriate amount in Federal funds in
accordance with the Shareholder's agreement with the Fund.
SECTION 19. Fund Services shall prepare and
maintain for the Fund records showing for each Shareholder's
account the following:
A. The name, address and tax identification
number of the Shareholder;
B. The number of Shares of each Series held by
the Shareholder;
C. Historical information including dividends
paid and date and price for all transactions;
D. Any stop or restraining order placed against
such account;
E. Information with respect to the withholding of
any portion of income dividends or capital gains
distributions as are required to be withheld under
applicable law;
F. Any dividend or distribution reinvestment
election, withdrawal plan application, and correspondence
relating to the current maintenance of the account;
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G. The certificate numbers and denominations of
any Share Certificates issued to the Shareholder; and
H. Any additional information required by Fund
Services to perform the services contemplated by this
Agreement. Fund Services agrees to make available upon
request by the Fund or the Fund's Adviser and to preserve
for the periods prescribed in Rule 31a-2 of the Investment
Company Act any records related to services provided under
this Agreement and required to be maintained by Rule 31a-1
of that Act, including:
(i) Copies of the daily transaction register for
each Business Day of the Fund;
(ii) Copies of all dividend, distribution and
reinvestment blotters;
(iii) Schedules of the quantities of Shares of
each Series distributed in each state for purposes of any
state's laws or regulations as specified in Oral or Written
Instructions given to Fund Services from time to time by the
Fund or its agents; and
(iv) Such other information, including
Shareholder lists, and statistical information as may be
agreed upon from time to time by the Fund and Fund Services.
SECTION 20. Fund Services shall maintain those
records necessary to enable the Fund to file, in a timely
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manner, form N-SAR (Semi-Annual Report) or any successor
report required by the Investment Company Act or rules and
regulations thereunder.
SECTION 21. Fund Services shall cooperate with the
Fund's independent public accountants and shall take
reasonable action to make all necessary information
available to such accountants for the performance of their
duties.
SECTION 22. In addition to the services described
above, Fund Services will perform other services for the
Fund as may be mutually agreed upon in writing from time to
time, which may include preparing and filing Federal tax
forms with the Internal Revenue Service, and, subject to
supervisory oversight by the Fund's Adviser, mailing Federal
tax information to Shareholders, mailing semi-annual
Shareholder reports, preparing the annual list of
Shareholders, mailing notices of Shareholders'
meetings,proxies and proxy statements and tabulating
proxies. Fund Services shall answer the inquiries of
certain Shareholders related to their share accounts and
other correspondence requiring an answer from the Fund.
Fund Services shall maintain dated copies of written
communications from Shareholders, and replies thereto.
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SECTION 23. Nothing contained in this Agreement is
intended to or shall require Fund Services, in any capacity
hereunder, to perform any functions or duties on any day
other than a Business Day. Functions or duties normally
scheduled to be performed on any day which is not a Business
Day shall be performed on, and as of, the next Business Day,
unless otherwise required by law.
SECTION 24. For the services rendered by Fund
Services as described above, the Fund shall pay to Fund
Services an annualized fee at a rate to be mutually agreed
upon from time to time. Such fee shall be prorated for the
months in which this Agreement becomes effective or is
terminated. In addition, the Fund shall pay, or Fund
Services shall be reimbursed for, all out-of-pocket expenses
incurred in the performance of this Agreement, including but
not limited to the cost of stationery, forms, supplies,
blank checks, stock certificates, proxies and proxy
solicitation and tabulation costs, all forms and statements
used by Fund Services in communicating with Shareholders of
the Fund or especially prepared for use in connection with
its services hereunder, specific software enhancements as
requested by the Fund, costs associated with maintaining
withholding accounts (including non-resident alien, Federal
government and state), postage, telephone, telegraph (or
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similar electronic media) used in communicating with
Shareholders or their representatives, outside mailing
services, microfiche/microfilm, freight charges and off-site
record storage. It is agreed in this regard that Fund
Services, prior to ordering any form in such supply as it
estimates will be adequate for more than two years' use,
shall obtain the written consent of the Fund. All forms for
which Fund Services has received reimbursement from the Fund
shall be the property of the Fund.
SECTION 25. Fund Services shall not be liable for
any taxes, assessments or governmental charges that may be
levied or assessed on any basis whatsoever in connection
with the Fund or any Shareholder, excluding taxes assessed
against Fund Services for compensation received by it
hereunder.
SECTION 26.
(a) Fund Services shall at all times act in good
faith and with reasonable care in performing the services to
be provided by it under this Agreement, but shall not be
liable for any loss or damage unless such loss or damage is
caused by the negligence, bad faith or willful misconduct of
Fund Services or its employees or agents.
(b) The Fund shall indemnify and hold Fund
Services harmless from all loss, cost, damage and
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expense,including reasonable expenses for counsel, incurred
by it resulting from any claim, demand, action or suit in
connection with the performance of its duties hereunder, or
as a result of acting upon any instruction reasonably
believed by it to have been properly given by a duly
authorized officer of the Fund, or upon any information,
data, records or documents provided to Fund Services or its
agents by computer tape, telex, CRT data entry or other
similar means authorized by the Fund; provided that this
indemnification shall not apply to actions or omissions of
Fund Services in cases of its own bad faith, willful
misconduct or negligence, and provided further that if in
any case the Fund may be asked to indemnify or hold Fund
Services harmless pursuant to this Section, the Fund shall
have been fully and promptly advised by Fund Services of all
material facts concerning the situation in question. The
Fund shall have the option to defend Fund Services against
any claim which may be the subject of this indemnification,
and in the event that the Fund so elects it will so notify
Fund Services, and thereupon the Fund shall retain competent
counsel to undertake defense of the claim, and Fund Services
shall in such situations incur no further legal or other
expenses for which it may seek indemnification under this
paragraph. Fund Services shall in no case confess any claim
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or make any compromise in any case in which the Fund may be
asked to indemnify Fund Services except with the Fund's
prior written consent.
Without limiting the foregoing:
(i) Fund Services may rely upon the advice of the
Fund or counsel to the Fund or Fund Services, and upon
statements of accountants, brokers and other persons
believed by Fund Services in good faith to be expert in the
matters upon which they are consulted. Fund Services shall
not be liable for any action taken in good faith reliance
upon such advice or statements;
(ii) Fund Services shall not be liable for any
action reasonably taken in good faith reliance upon any
Written Instructions or certified copy of any resolution of
the Fund's Directors, including a Written Instruction
authorizing Fund Services to make payment upon redemption of
Shares without a signature guarantee; provided, however,
that upon receipt of a Written Instruction countermanding a
prior Instruction that has not been fully executed by Fund
Services, Fund Services shall verify the content of the
second Instruction and honor it, to the extent possible.
Fund Services may rely upon the genuineness of any such
document, or copy thereof, reasonably believed by Fund
Services in good faith to have been validly executed;
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(iii) Fund Services may rely, and shall be
protected by the Fund in acting, upon any signature,
instruction, request, letter of transmittal, certificate,
opinion of counsel, statement, instrument, report, notice,
consent, order, or other paper or document reasonably
believed by it in good faith to be genuine and to have been
signed or presented by the purchaser, the Fund or other
proper party or parties; and
(d) Fund Services may, with the consent of the
Fund, subcontract the performance of any portion of any
service to be provided hereunder, including with respect to
any Shareholder or group of Shareholders, to any agent of
Fund Services and may reimburse the agent for the services
it performs at such rates as Fund Services may determine;
provided that no such reimbursement will increase the amount
payable by the Fund pursuant to this Agreement; and provided
further, that Fund Services shall remain ultimately
responsible as transfer agent to the Fund.
SECTION 27. The Fund shall deliver or cause to be
delivered over to Fund Services (i) an accurate list of
Shareholders, showing each Shareholder's address of record,
number of Shares of each Series owned and whether such
Shares are represented by outstanding Share Certificates or
by non-certificated Share accounts and (ii) all Shareholder
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records, files, and other materials necessary or appropriate
for proper performance of the functions assumed by the under
this Agreement (collectively referred to as the
"Materials"). The Fund shall indemnify Fund Services and
hold it harmless from any and all expenses, damages, claims,
suits, liabilities, actions, demands and losses arising out
of or in connection with any error, omission, inaccuracy or
other deficiency of such Materials, or out of the failure of
the Fund to provide any portion of the Materials or to
provide any information in the Fund's possession needed by
Fund Services to knowledgeably perform its functions;
provided the Fund shall have no obligation to indemnify Fund
Services or hold it harmless with respect to any expenses,
damages, claims, suits, liabilities, actions, demands or
losses caused directly or indirectly by acts or omissions of
Fund Services or the Fund's Adviser.
SECTION 28. This Agreement may be amended from
time to time by a written supplemental agreement executed by
the Fund and Fund Services and without notice to or approval
of the Shareholders; provided this Agreement may not be
amended in any manner which would substantially increase the
Fund's obligations hereunder unless the amendment is first
approved by the Fund's Directors, including a majority of
the Directors who are not a party to this Agreement or
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interested persons of any such party, at a meeting called
for such purpose, and thereafter is approved by the Fund's
Shareholders if such approval is required under the
Investment Company Act or the rules and regulations
thereunder. The parties hereto may adopt procedures as may
be appropriate or practical under the circumstances, and
Fund Services may conclusively rely on the determination of
the Fund that any procedure that has been approved by the
Fund does not conflict with or violate any requirement of
its Articles of Incorporation or Declaration of Trust, By-
Laws or Prospectus, or any rule, regulation or requirement
of any regulatory body.
SECTION 29. The Fund shall file with Fund Services
a certified copy of each operative resolution of its
Directors authorizing the execution of Written Instructions
or the transmittal of Oral Instructions and setting forth
authentic signatures of all signatories authorized to sign
on behalf of the Fund and specifying the person or persons
authorized to give Oral Instructions on behalf of the Fund.
Such resolution shall constitute conclusive evidence of the
authority of the person or persons designated therein to act
and shall be considered in full force and effect, with Fund
Services fully protected in acting in reliance therein,
until Fund Services receives a certified copy of a
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replacement resolution adding or deleting a person or
persons authorized to give Written or Oral Instructions. If
the officer certifying the resolution is authorized to give
Oral Instructions, the certification shall also be signed by
a second officer of the Fund.
SECTION 30. The terms, as defined in this Section,
whenever used in this Agreement or in any amendment or
supplement hereto, shall have the meanings specified below,
insofar as the context will allow.
(a) Business Day: Any day on which the Fund is
open for business as described in the Prospectus.
(b) Custodian: The term Custodian shall mean the
Fund's current custodian or any successor custodian acting
as such for the Fund.
(c) Fund's Adviser: The term Fund's Adviser shall
mean Alliance Capital Management L.P. or any successor
thereto who acts as the investment adviser or manager of the
Fund.
(d) Oral Instructions: The term Oral Instructions
shall mean an authorization, instruction, approval, item or
set of data, or information of any kind transmitted to Fund
Services in person or by telephone, vocal telegram or other
electronic means, by a person or persons reasonably believed
in good faith by Fund Services to be a person or persons
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authorized by a resolution of the Directors of the Fund to
give Oral Instructions on behalf of the Fund. Each Oral
Instruction shall specify whether it is applicable to the
entire Fund or a specific Series of the Fund.
(e) Prospectus: The term Prospectus shall mean a
prospectus and related statement of additional information
forming part of a currently effective registration statement
under the Investment Company Act and, as used with the
respect to Shares or Shares of a Series, shall mean the
prospectuses and related statements of additional
information covering the Shares or Shares of the Series.
(f) Securities: The term Securities shall mean
bonds, debentures, notes, stocks, shares, evidences of
indebtedness, and other securities and investments from time
to time owned by the Fund.
(g) Series: The term Series shall mean any series
of Shares of the common stock of the Fund that the Fund may
establish from time to time.
(h) Share Certificates: The term Share
Certificates shall mean the stock certificates for the
Shares.
(i) Shareholders: The term Shareholders shall
mean the registered owners from time to time of the Shares,
as reflected on the stock registry records of the Fund.
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(j) Written Instructions: The term Written
Instructions shall mean an authorization, instruction,
approval, item or set of data, or information of any kind
transmitted to Fund Services in original writing containing
original signatures, or a copy of such document transmitted
by telecopy, including transmission of such signature, or
other mechanical or documentary means, at the request of a
person or persons reasonably believed in good faith by Fund
Services to be a person or persons authorized by a
resolution of the Directors of the Fund to give Written
Instruction shall specify whether it is applicable to the
entire Fund or a specific Series of the Fund.
SECTION 31. Fund Services shall not be liable for
the loss of all or part of any record maintained or
preserved by it pursuant to this Agreement or for any delays
or errors occurring by reason of circumstances beyond its
control, including but not limited to acts of civil or
military authorities, national emergencies, fire, flood or
catastrophe, acts of God, insurrection, war, riot, or
failure of transportation, communication or power supply,
except to the extent that Fund Services shall have failed to
use its best efforts to minimize the likelihood of
occurrence of such circumstances or to mitigate any loss or
damage to the Fund caused by such circumstances.
27
<PAGE>
SECTION 32. The Fund may give Fund Services sixty
(60) days and Fund Services may give the Fund (90) days
written notice of the termination of this Agreement, such
termination to take effect at the time specified in the
notice. Upon notice of termination, the Fund shall use its
best efforts to obtain a successor transfer agent. If a
successor transfer agent is not appointed within ninety (90)
days after the date of the notice of termination, the
Directors of the Fund shall, by resolution, designate the
Fund as its own transfer agent. Upon receipt of written
notice from the Fund of the appointment of the successor
transfer agent and upon receipt of Oral or Written
Instructions Fund Services shall, upon request of the Fund
and the successor transfer agent and upon payment of Fund
Services reasonable charges and disbursements, promptly
transfer to the successor transfer agent the original or
copies of all books and records maintained by Fund Services
hereunder and cooperate with, and provide reasonable
assistance to, the successor transfer agent in the
establishment of the books and records necessary to carry
out its responsibilities hereunder.
SECTION 33. Any notice or other communication
required by or permitted to be given in connection with this
Agreement shall be in writing, and shall be delivered in
28
<PAGE>
person or sent by first-class mail, postage prepaid, to the
respective parties.
Notice to the Fund shall be given as follows until
further notice:
Alliance Greater China '97 Fund, Inc.
1345 Avenue of the Americas
New York, New York 10105
Attention: Secretary
Notice to Fund Services shall be given as follows until
further notice:
Alliance Fund Services, Inc.
500 Plaza Drive
Secaucus, New Jersey 07094
SECTION 34. The Fund represents and warrants to
Fund Services that the execution and delivery of this
Agreement by the undersigned officer of the Fund has been
duly and validly authorized by resolution of the Fund's
Directors. Fund Services represents and warrants to the
Fund that the execution and delivery of this Agreement by
the undersigned officer of Fund Services has also been duly
and validly authorized.
SECTION 35. This Agreement may be executed in more
than one counterpart, each of which shall be deemed to be an
original, and shall become effective on the last date of
signature below unless otherwise agreed by the parties.
Unless sooner terminated pursuant to SECTION 32, this
29
<PAGE>
Agreement will continue until June 30, 1998 and will
continue in effect thereafter for successive 12 month
periods only if such continuance is specifically approved at
least annually by the Directors or by a vote of the
stockholders of the Fund and in either case by a majority of
the Directors who are not parties to this Agreement or
interested persons of any such party, at a meeting called
for the purpose of voting on this Agreement.
SECTION 36. This Agreement shall extend to and
shall bind the parties hereto and their respective
successors and assigns; provided, however, that this
Agreement shall not be assignable by the Fund without the
written consent of Fund Services or by Fund Services without
the written consent of the Fund, authorized or approved by a
resolution of the Fund's Directors. Notwithstanding the
foregoing, either party may assign this Agreement without
the consent of the other party so long as the assignee is an
affiliate, parent or subsidiary of the assigning party and
is qualified to act under the Investment Company Act, as
amended from time to time.
SECTION 38. This Agreement shall be governed by
the laws of the State of New Jersey.
30
<PAGE>
WITNESS the following signatures:
ALLIANCE GREATER CHINA 97 FUND, INC.
BY:__________________________________
TITLE: President
ALLIANCE FUND SERVICES, INC.
BY:_________________________________
TITLE: President
31
00250235.AH3
<PAGE>
ALLIANCE GREATER CHINA '97 FUND, INC.
Plan pursuant to Rule 18f-3
under the Investment Company Act of 1940
This Plan (the "Plan") pursuant to Rule 18f-3 under the
Investment Company Act of 1940 (the "Act") of Alliance Greater
China '97 Fund, Inc. (the "Fund") sets forth the general
characteristics of, and the general conditions under which the
Fund may offer, multiple classes of shares of its now existing
and hereafter created portfolios.1 This Plan may be revised or
amended from time to time as provided below.
Class Designations
The Fund2 may from time to time issue one or more of the
following classes of shares: Class A shares, Class B shares,
Class C shares and Advisor Class shares. Each of the four
classes of shares will represent interests in the same portfolio
of investments of the Fund and, except as described herein, shall
have the same rights and obligations as each other class. Each
class shall be subject to such investment minimums and other
conditions of eligibility as are set forth in the prospectus or
statement of additional information through which such shares are
issued, as from time to time in effect (the "Prospectus").
Class Characteristics
Class A shares are offered at a public offering price
that is equal to their net asset value ("NAV") plus an initial
sales charge, as set forth in the Prospectus. Class A shares may
also be subject to a Rule 12b-1 fee, which may include a service
fee and, under certain circumstances, a contingent deferred sales
charge ("CDSC"), as described in the Prospectus.
Class B shares are offered at their NAV, without an
initial sales charge, and may be subject to a CDSC and a Rule
____________________
1. This Plan is intended to allow the Fund to offer multiple
classes of shares to the full extent and in the manner
permitted by Rule 18f-3 under the Act (the "Rule"), subject
to the requirements and conditions imposed by the Rule.
2. For purposes of this Plan, if the Fund has existing more than
one portfolio pursuant to which multiple classes of shares
are issued, then references in this Plan to the "Fund" shall
be deemed to refer instead to each portfolio.
<PAGE>
12b-1 fee, which may include a service fee, as described in the
Prospectus.
Class C shares are offered at their NAV, without an
initial sales charge, and may be subject to a CDSC and a Rule
12b-1 fee, which may include a service fee, as described in the
Prospectus.
Advisor Class shares are offered at their NAV, without
any initial sales charge, CDSC or Rule 12b-1 fee.
The initial sales charge on Class A shares and CDSC on
Class A, B and C shares are each subject to reduction or waiver
as permitted by the Act, and as described in the Prospectus.
Allocations to Each Class
Expense Allocations
The following expenses shall be allocated, to the extent
practicable, on a class-by-class basis: (i) Rule 12b-1 fees
payable by the Fund to the distributor or principal underwriter
of the Fund's shares (the "Distributor"), and (ii) transfer
agency costs attributable to each class. Subject to the approval
of the Fund's Board of Directors, including a majority of the
independent Directors, the following "Class Expenses" may be
allocated on a class-by-class basis: (a) printing and postage
expenses related to preparing and distributing materials such as
shareholder reports, prospectuses and proxy statements to current
shareholders of a specific class,3 (b) SEC registration fees
incurred with respect to a specific class, (c) blue sky and
foreign registration fees and expenses incurred with respect to a
specific class, (d) the expenses of administrative personnel and
services required to support shareholders of a specific class
(including, but not limited to, maintaining telephone lines and
personnel to answer shareholder inquiries about their accounts or
about the Fund), (e) litigation and other legal expenses relating
to a specific class of shares, (f) Directors' fees or expenses
incurred as a result of issues relating to a specific class of
shares, (g) accounting and consulting expenses relating to a
specific class of shares, (h) any fees imposed pursuant to a non-
Rule 12b-1 shareholder services plan that relate to a specific
class of shares, and (i) any additional expenses, not including
advisory or custodial fees or other expenses related to the
____________________
3. For Advisor Class shares, the expenses of preparation,
printing and distribution of prospectuses and shareholder
reports, as well as other distribution-related expenses, will
be borne by the investment adviser of the Fund (the
"Adviser") or the Distributor from their own resources.
2
<PAGE>
management of the Fund's assets, if these expenses are actually
incurred in a different amount with respect to a class, or if
services are provided with respect to a class that are of a
different kind or to a different degree than with respect to one
or more other classes.
All expenses not now or hereafter designated as Class
Expenses ("Fund Expenses") will be allocated to each class on the
basis of the net asset value of that class in relation to the net
asset value of the Fund.
However, notwithstanding the above, the Fund may
allocate all expenses other than Class Expenses on the basis of
relative net assets (settled shares), as permitted by Rule 18f-
3(c)(2) under the Act.
Waivers and Reimbursements
The Adviser or Distributor may choose to waive or
reimburse Rule 12b-1 fees, transfer agency fees or any Class
Expenses on a voluntary, temporary basis. Such waiver or
reimbursement may be applicable to some or all of the classes and
may be in different amounts for one or more classes.
Income, Gains and Losses
Income, and realized and unrealized capital gains and
losses shall be allocated to each class on the basis of the net
asset value of that class in relation to the net asset value of
the Fund.
Conversion and Exchange Features
Conversion Features
Class B shares of the Fund automatically convert to
Class A shares of the Fund after a certain number of months or
years after the end of the calendar month in which the
shareholder's purchase order was accepted as described in the
Prospectus. Class B shares purchased through reinvestment of
dividends and distributions will be treated as Class B shares for
all purposes except that such Class B shares will be considered
held in a separate sub-account. Each time any Class B shares in
the shareholder's account convert to Class A shares, an equal
pro-rata portion of the Class B shares in the sub-account will
also convert to Class A shares.
Advisor Class shares of the Fund automatically convert
to Class A shares of the Fund during the calendar month following
the month in which the Fund is informed that the beneficial owner
of the Advisor Class shares has ceased to participate in a fee-
3
<PAGE>
based program or employee benefit plan that satisfies the
requirements to purchase Advisor Class shares as described in the
Prospectus or the shareholder is otherwise no longer eligible to
purchase Advisor Class shares as provided in the Prospectus.
The conversion of Class B and Advisor Class shares to
Class A shares may be suspended if the opinion of counsel
obtained by the Fund that the conversion does not constitute a
taxable event under current federal income tax law is no longer
available. Class B and Advisor Class shares will convert into
Class A shares on the basis of the relative net asset value of
the two classes, without the imposition of any sales load, fee or
other charge.
In the event of any material increase in payments
authorized under the Rule 12b-1 Plan (or, if presented to
shareholders, any material increase in payments authorized by a
non-Rule 12b-1 shareholder services plan) applicable to Class A
shares, existing Class B and Advisor Class shares will stop
converting into Class A shares unless the Class B and Advisor
Class shareholders, voting separately as a class, approve the
increase in such payments. Pending approval of such increase, or
if such increase is not approved, the Directors shall take such
action as is necessary to ensure that existing Class B and
Advisor Class shares are exchanged or converted into a new class
of shares ("New Class A") identical in all material respects to
Class A shares as existed prior to the implementation of the
increase in payments, no later than such shares were previously
scheduled to convert to Class A shares. If deemed advisable by
the Directors to implement the foregoing, such action may include
the exchange of all existing Class B and Advisor Class shares for
new classes of shares ("New Class B" and "New Advisor Class,"
respectively) identical to existing Class B and Advisor Class
shares, except that New Class B and New Advisor Class shares
shall convert to New Class A shares. Exchanges or conversions
described in this paragraph shall be effected in a manner that
the Directors reasonably believe will not be subject to federal
income taxation. Any additional cost associated with the
creation, exchange or conversion of New Class A, New Class B and
New Advisor Class shares shall be borne by the Adviser and the
Distributor. Class B and Advisor Class shares sold after the
implementation of the fee increase may convert into Class A
shares subject to the higher maximum payment, provided that the
material features of the Class A plan and the relationship of
such plan to the Class B and Advisor Class shares are disclosed
in an effective registration statement.
4
<PAGE>
Exchange Features
Shares of each class generally will be permitted to be
exchanged only for shares of a class with similar characteristics
in another Alliance Mutual Fund and shares of certain Alliance
money market funds, except that certain holders of Class A shares
of the Fund eligible to purchase and hold Advisor Class shares of
the Fund may also exchange their Class A shares for Advisor Class
shares. If the aggregate net asset value of shares of all
Alliance Mutual Funds held by an investor in the Fund reaches the
minimum amount at which an investor may purchase Class A shares
at net asset value without a front-end sales load on or before
December 15 in any year, then all Class B and Class C shares of
the Fund held by that investor may thereafter be exchanged, at
the investor's request, at net asset value and without any front-
end sales load or CDSC for Class A shares of the Fund. All
exchange features applicable to each class will be described in
the Prospectus.
Dividends
Dividends paid by the Fund with respect to its Class A,
Class B, Class C and Advisor Class shares, to the extent any
dividends are paid, will be calculated in the same manner, at the
same time and will be in the same amount, except that any Rule
12b-1 fee payments relating to a class of shares will be borne
exclusively by that class and any incremental transfer agency
costs or, if applicable, Class Expenses relating to a class shall
be borne exclusively by that class.
Voting Rights
Each share of a Fund entitles the shareholder of record
to one vote. Each class of shares of the Fund will vote
separately as a class with respect to the Rule 12b-1 plan
applicable to that class and on other matters for which class
voting is required under applicable law. Class A, Class B and
Advisor Class shareholders will vote as three separate classes to
approve any material increase in payments authorized under the
Rule 12b-1 plan applicable to Class A shares.
Responsibilities of the Directors
On an ongoing basis, the Directors will monitor the Fund
for the existence of any material conflicts among the interests
of the four classes of shares. The Directors shall further
monitor on an ongoing basis the use of waivers or reimbursement
by the Adviser and the Distributor of expenses to guard against
cross-subsidization between classes. The Directors, including a
majority of the independent Directors, shall take such action as
is reasonably necessary to eliminate any such conflict that may
5
<PAGE>
develop. If a conflict arises, the Adviser and Distributor, at
their own cost, will remedy such conflict up to and including
establishing one or more new registered management investment
companies.
Reports to the Directors
The Adviser and Distributor will be responsible for
reporting any potential or existing conflicts among the four
classes of shares to the Directors. In addition, the Directors
will receive quarterly and annual statements concerning
distributions and shareholder servicing expenditures complying
with paragraph (b)(3)(ii) of Rule 12b-1. In the statements, only
expenditures properly attributable to the sale or servicing of a
particular class of shares shall be used to justify any
distribution or service fee charged to that class. The
statements, including the allocations upon which they are based,
will be subject to the review of the independent Directors in the
exercise of their fiduciary duties. At least annually, the
Directors shall receive a report from an expert, acceptable to
the Directors, (the "Expert"), with respect to the methodology
and procedures for calculating the net asset value, dividends and
distributions for the classes, and the proper allocation of
income and expenses among the classes. The report of the Expert
shall also address whether the Fund has adequate facilities in
place to ensure the implementation of the methodology and
procedures for calculating the net asset value, dividends and
distributions for the classes, and the proper allocation of
income and expenses among the classes. The Fund and the Adviser
will take immediate corrective measures in the event of any
irregularities reported by the Expert.
Amendments
The Plan may be amended from time to time in accordance
with the provisions and requirements of Rule 18f-3 under the Act.
Adopted by action of the Board of Directors this ___th day of
[ ], 1997.
By: _____________________
Edmund P. Bergan, Jr.
Secretary
6
00250235.AF6
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the person whose
signature appears below hereby revokes all prior powers granted
by the undersigned to the extent inconsistent herewith and
constitutes and appoints John D. Carifa, Edmund P. Bergan, Jr.,
and Domenick Pugliese, and each of them, to act severally as
attorneys-in-fact and agents, with power of substitution and
resubstitution, for the undersigned in any and all capacities,
solely for the purpose of signing the Registration Statement, and
any amendments thereto, on Form N-1A of Alliance Greater China
'97 Fund, Inc. and filing the same, with exhibits thereto, and
other documents in connection therewith, with the Securities and
Exchange Commission, hereby ratifying and confirming all that
said attorneys-in-fact, or their substitute or substitutes, may
do or cause to be done by virtue hereof.
/S/ John D. Carifa
__________________________
John D. Carifa
Dated: July 28, 1997
00250235.AI4
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the person whose
signature appears below hereby revokes all prior powers granted
by the undersigned to the extent inconsistent herewith and
constitutes and appoints John D. Carifa, Edmund P. Bergan, Jr.,
and Domenick Pugliese, and each of them, to act severally as
attorneys-in-fact and agents, with power of substitution and
resubstitution, for the undersigned in any and all capacities,
solely for the purpose of signing the Registration Statement, and
any amendments thereto, on Form N-1A of Alliance Greater China
'97 Fund, Inc. and filing the same, with exhibits thereto, and
other documents in connection therewith, with the Securities and
Exchange Commission, hereby ratifying and confirming all that
said attorneys-in-fact, or their substitute or substitutes, may
do or cause to be done by virtue hereof.
/S/ David H. Dievler
____________________________
David H. Dievler
Dated: July 28, 1997
00250235.AI4
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the person whose
signature appears below hereby revokes all prior powers granted
by the undersigned to the extent inconsistent herewith and
constitutes and appoints John D. Carifa, Edmund P. Bergan, Jr.,
and Domenick Pugliese, and each of them, to act severally as
attorneys-in-fact and agents, with power of substitution and
resubstitution, for the undersigned in any and all capacities,
solely for the purpose of signing the Registration Statement, and
any amendments thereto, on Form N-1A of Alliance Greater China
'97 Fund, Inc. and filing the same, with exhibits thereto, and
other documents in connection therewith, with the Securities and
Exchange Commission, hereby ratifying and confirming all that
said attorneys-in-fact, or their substitute or substitutes, may
do or cause to be done by virtue hereof.
/S/ William H. Foulk
____________________________
William H. Foulk
Dated: July 28, 1997
00250235.AI4
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the person whose
signature appears below hereby revokes all prior powers granted
by the undersigned to the extent inconsistent herewith and
constitutes and appoints John D. Carifa, Edmund P. Bergan, Jr.,
and Domenick Pugliese, and each of them, to act severally as
attorneys-in-fact and agents, with power of substitution and
resubstitution, for the undersigned in any and all capacities,
solely for the purpose of signing the Registration Statement, and
any amendments thereto, on Form N-1A of Alliance Greater China
'97 Fund, Inc. and filing the same, with exhibits thereto, and
other documents in connection therewith, with the Securities and
Exchange Commission, hereby ratifying and confirming all that
said attorneys-in-fact, or their substitute or substitutes, may
do or cause to be done by virtue hereof.
/S/ Tak Lung Tsim
_________________________
Tak Lung Tsim
Dated: July 28, 1997
00250235.AI4
