ALLIANCE GREATER CHINA '97 FUND
ANNUAL REPORT
JULY 31, 1998
ALLIANCE CAPITAL
LETTER TO SHAREHOLDERS ALLIANCE GREATER CHINA '97 FUND
_______________________________________________________________________________
September 25, 1998
Dear Shareholder:
This annual report contains investment results and market activity for Alliance
Greater China '97 Fund for the period ended July 31, 1998.
INVESTMENT RESULTS
The following table provides the performance data for your Fund since its
inception on September 3, 1997 and over the six months ended July 31, 1998, and
for comparison, that of the Lipper China Region Funds Average (Lipper Average).
For reference, the table also provides performance data for three Morgan
Stanley Capital International (MSCI) indices including the China, Hong Kong and
Taiwan indices. Since the performance for each MSCI index represents issues
located only in a single country, these indices should not be used to compare
the performance data of your Fund, as your Fund's investments are diversified
into all three countries.
While all major Asian indices continued to fall during the period, your Fund
was able to sustain somewhat less damage than the Lipper Average over the
six-month and since-inception periods ended July 31, 1998, mainly due to our
focus on companies with better financial strength to weather the economic
downturn. The Fund avoided some of the sectors that performed most poorly,
especially cyclical industries such as the petrochemical and steel industries.
INVESTMENT RESULTS*
Periods Ended July 31, 1998
TOTAL RETURNS
6 MONTHS SINCE INCEPTION**
--------- -----------------
ALLIANCE GREATER
CHINA '97 FUND
Class A -18.10% -51.20%
Class B -18.44% -51.53%
Class C -18.58% -51.53%
MSCI CHINA INDEX -30.12% -71.08%
MSCI HONG KONG INDEX -20.56% -48.24%
MSCI TAIWAN INDEX -13.16% -41.68%
LIPPER CHINA REGION FUNDS AVERAGE -20.32% -53.16%
* THE FUND'S INVESTMENT RESULTS REPRESENT TOTAL RETURNS AND ARE BASED ON THE
NET ASSET VALUE AS OF JULY 31, 1998. ALL FEES AND EXPENSES RELATED TO THE
OPERATION OF THE FUND HAVE BEEN DEDUCTED, BUT NO ADJUSTMENT HAS BEEN MADE FOR
SALES CHARGES THAT MAY APPLY WHEN SHARES ARE PURCHASED OR REDEEMED. RETURNS FOR
THE FUND INCLUDE THE REINVESTMENT OF ANY DISTRIBUTIONS PAID DURING THE PERIOD.
TOTAL RETURNS FOR ADVISOR CLASS SHARES WILL DIFFER DUE TO DIFFERENT EXPENSES
ASSOCIATED WITH THAT CLASS. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.
THE MSCI CHINA INDEX, THE MSCI HONG KONG INDEX, AND THE MSCI TAIWAN INDEX
ARE MARKET CAPITALIZATION-WEIGHTED INDICES OF COMPANIES LOCATED IN THEIR
RESPECTIVE COUNTRIES, AND ARE RESPECTIVELY COMPRISED OF 26, 35, AND 77
COMPANIES AS OF JULY 31, 1998. THE LIPPER CHINA REGION FUNDS AVERAGE REPRESENTS
FUNDS THAT INVEST IN EQUITY SECURITIES WHOSE PRIMARY TRADING MARKETS OR
OPERATIONS ARE CONCENTRATED IN THE CHINA REGION OR IN A SINGLE COUNTRY WITHIN
THIS REGION. THESE FUNDS HAVE GENERALLY SIMILAR INVESTMENT OBJECTIVES TO YOUR
FUND, ALTHOUGH INVESTMENT POLICIES FOR THE VARIOUS FUNDS MAY DIFFER. FOR THE
SIX-MONTH AND SINCE-INCEPTION PERIODS, THE LIPPER AVERAGE INCLUDED 22 AND 20
FUNDS, RESPECTIVELY. ALL COMPARATIVE INDICES ARE UNMANAGED AND REFLECT NO FEES
OR EXPENSES. AN INVESTOR CANNOT INVEST DIRECTLY IN AN INDEX OR AN AVERAGE.
** THE INCEPTION DATE FOR ALLIANCE GREATER CHINA '97 FUND CLASS A, CLASS B,
AND CLASS C SHARES IS SEPTEMBER 3, 1997. THE SINCE INCEPTION PERFORMANCE
RESULTS FOR THE FUND REPRESENT DATA FROM THE FUND'S INCEPTION DATE, WHILE
PERFORMANCE FIGURES FOR THE RELATIVE MSCI INDICES AND THE LIPPER AVERAGE ARE AS
OF AUGUST 31, 1997 (THE MONTH-END NEAREST TO THE FUND'S INCEPTION DATE).
ADDITIONAL INVESTMENT RESULTS APPEAR ON PAGE 3.
MARKET REVIEW
During the period under review, the equity markets of the Greater China region
corrected sharply due to the contagion effect of the Asian currency crisis and
the resulting economic slowdown in the Asian region including the Greater China
economies. The correction in the Greater China equity markets was compounded by
speculative attack on their currencies by many hedge funds. In addition, the
political turmoil in Indonesia and the weakness of the Japanese yen created
further volatility in the equity markets throughout the Asian region.
1
ALLIANCE GREATER CHINA '97 FUND
_______________________________________________________________________________
ECONOMIC REVIEW AND OUTLOOK
China's economy performed reasonably well and grew by 7% in the first half of
1998. The government of the People's Republic of China is committed to
achieving goals including 7%-8% Gross Domestic Product (GDP) growth in 1999,
low inflation and no devaluation of the Chinese currency, the renminbi. It is
intended that the engine of growth will result from stimulating domestic demand
with particular emphasis on infrastructure development. The latest statistics
for fixed-asset investment growth suggested that an economic upswing, driven by
domestic demand, should take place in the second half of 1998. The trade
performance was also satisfactory, with a US$26.7 billion surplus recorded for
the first seven months of 1998.
The Hong Kong economy has been adversely affected by high interest rates and
the slowdown of the Asian economies; and first quarter 1998 GDP contracted by
2.8%. As the Hong Kong dollar peg was maintained, the adjustment in the real
economy took place in the property and labor markets. In addition, liquidity
remained tight due to the credit crunch in the banking system. The government
has announced a series of measures aimed at addressing Hong Kong's economic
downturn. Moreover, Hong Kong should also benefit from an acceleration in
growth momentum in China. We expect that the Hong Kong economy should bottom
out sometime in 1999.
In the first half of 1998, Taiwan's economic growth was 5.5%, and the impact of
the Asian financial crisis was shown in slower private consumption and private
investment. As a result of global outsourcing, Taiwan's manufacturing sector,
electronics in particular, continued to benefit from strong order flow from
U.S. and Europe.
FUND STRATEGY
Going forward, the outlook for the Greater China economies remains positive
despite the short-term volatility created by the Asian financial crisis.
The Fund's strategy going forward is to continue to focus on companies with the
financial strength to weather the economic downturn, and to take advantage of
business opportunities as they arise. The Fund will continue to avoid the
cyclical industries in China, such as the petrochemical and steel industries,
which are suffering from oversupply and are therefore likely to experience
further consolidation. The Fund will focus on infrastructure and related
industries which we believe are likely to benefit from the pickup in
fixed-asset investment. We also prefer utility companies with strong cash flow
which are also defensive in the current downturn. And lastly, we expect that
the technology sector in Taiwan should also continue to benefit from global
outsourcing.
Thank you for your continued interest in Alliance Greater China '97 Fund. We
look forward to reporting to you on market activity and your Fund's investment
results in the coming periods.
Sincerely,
John D. Carifa
Chairman and President
Matthew Lee
Portfolio Manager
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, GUARANTEED OR ENDORSED
BY, ANY BANK; FURTHER, SUCH SHARES ARE NOT FEDERALLY INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY.
SHARES OF THE FUND INVOLVE INVESTMENT RISKS, INCLUDING THE POSSIBLE LOSS OF
PRINCIPAL.
2
INVESTMENT OBJECTIVE AND POLICIES ALLIANCE GREATER CHINA '97 FUND
_______________________________________________________________________________
Alliance Greater China '97 Fund is a non-diversified management investment
company that seeks long-term capital appreciation by investing at least 80% of
its total assets in equity securities issued by Greater China companies.
INVESTMENT RESULTS
NAV AND SEC TOTAL RETURNS AS OF JULY 31, 1998
CLASS A SHARES
WITHOUT WITH
SALES CHARGE SALES CHARGE
------------ ------------
Since Inception* -51.20% -53.25%
CLASS B SHARES
WITHOUT WITH
SALES CHARGE SALES CHARGE
------------ ------------
Since Inception* -51.53% -53.46%
CLASS C SHARES
WITHOUT WITH
SALES CHARGE SALES CHARGE
------------ ------------
Since Inception* -51.53% -52.01%
SEC TOTAL RETURNS AS OF THE MOST RECENT QUARTER-END (JUNE 30, 1998)
CLASS A CLASS B CLASS C
------- ------- -------
YTD -27.05% -27.19% -25.02%
Since Inception* -47.65% -47.86% -46.24%
The Fund's investment results represent total returns. The NAV and SEC returns
reflect reinvestment of dividends and/or capital gains distributions in
additional shares without (NAV) and with (SEC) the effect of the 4.25% maximum
front-end sales charge for Class A or applicable contingent deferred sales
charge for Class B (4% year 1, 3% year 2, 2% year 3, 1% year 4); and for Class
C shares (1% year 1). Returns for Class A shares do not reflect the imposition
of the 1 year 1% contingent deferred sales charge for accounts over $1,000,000.
Total return for Advisor Class shares will differ due to different expenses
associated with that class.
Past performance does not guarantee future results. Investment return and
principal value will fluctuate so that an investor's shares, when redeemed, may
be worth more or less than their original cost.
* Inception: 9/3/97, all share classes.
3
ALLIANCE GREATER CHINA '97 FUND
_______________________________________________________________________________
ALLIANCE GREATER CHINA '97 FUND
GROWTH OF A $10,000 INVESTMENT
9/30/97* TO 7/31/98
$10,000
$9,000
$8,000
$7,000
$6,000
$5,000
$4,000
9/30/97 11/30/97 1/31/98 3/31/98 5/31/98 7/31/98
GREATER CHINA '97 FUND CLASS A: $4,729
LIPPER CHINA REGION FUNDS AVERAGE: $4,691
This chart illustrates the total value of an assumed $10,000 investment in
Alliance Greater China '97 Class A shares (from 9/30/97 to 7/31/98) as compared
to the performance of an appropriate average. The chart reflects the deduction
of the maximum 4.25% sales charge from the initial $10,000 investment in the
Fund and assumes the reinvestment of dividends and capital gains. Performance
for Class B, Class C and Advisor Class shares will vary from the results shown
above due to differences in expenses charged to those classes. Past performance
is not indicative of future results, and is not representative of future gain
or loss in capital value or dividend income.
The Lipper China Region Funds Average reflects the performance of 20 funds
(based on the number of funds in the average from 9/30/97 to 7/31/98). These
funds have generally similar investment objectives to Alliance Greater China
'97 Fund, although the investment policies of some funds included in the
average may vary.
When comparing Alliance Greater China '97 Fund to the average shown above, you
should note that Lipper results include fees and expenses.
Greater China '97 Fund
Lipper China Region Funds Average
* Closest month-end after Fund's Class A share inception date of 9/3/97.
4
TEN LARGEST HOLDINGS
JULY 31, 1998 ALLIANCE GREATER CHINA '97 FUND
_______________________________________________________________________________
PERCENT OF
COMPANY U.S. $ VALUE NET ASSETS
- -------------------------------------------------------------------------------
HSBC Holdings Plc.--The company provides financial
services that include corporate and retail
banking, private and investment banking, and
insurance. $ 224,405 10.4%
Cheung Kong Holdings, Ltd.--The company is involved
in property development and investment,
infrastructure and related businesses. 208,144 9.6
Hutchison Whampoa, Ltd.--The company has diverse
operations including property investment and
development, port services, retail, manufacturing,
finance, investment and other services. 192,037 8.9
CLP Holdings, Ltd.--The company provides electricity
to Hong Kong and the People's Republic of China. 177,583 8.2
Hong Kong Telecommunications, Ltd.--The company
provides telecommunications, computer, engineering
and other services. 174,692 8.1
China Telecom (Hong Kong), Ltd.--The company
provides electricity to Hong Kong and the People's
Republic of China. 87,888 4.1
Henderson Land Development Co., Ltd.--A holding
company whose subsidiaries are involved in
property development and investment, project
management, construction, property management,
finance and investment holding. 87,694 4.1
Cheung Kong Infrastructure Holdings, Ltd.--The
company develops, invests in and manages
infrastructure projects mainly in the People's
Republic of China. 86,243 4.0
China Foods Holdings, Ltd.--A holding company whose
subsidiaries are involved in edible oils, food
processing and related businesses as well as
property management. 73,950 3.4
Ng Fung Hong, Ltd.--The company is engaged in the
distribution of foodstuffs, trading of cereals,
oils, and processed food, investment holdings and
acting as a commission agent. 66,903 3.1
$1,379,539 63.9%
5
INDUSTRY DIVERSIFICATION
JULY 31, 1998 ALLIANCE GREATER CHINA '97 FUND
_______________________________________________________________________________
PERCENT OF
U.S. $ VALUE NET ASSETS
- -------------------------------------------------------------------------------
Banking $ 324,385 15.0%
Capital Goods 123,257 5.7
Consumer Services 29,425 1.4
Consumer Staples 219,456 10.2
Finance 431,277 20.0
Multi Industry 336,165 15.6
Technology 151,175 7.0
Transportation 59,366 2.7
Utilities 506,972 23.5
Total Investments 2,181,478 101.1
Cash and receivables, net of liabilities (23,008) (1.1)
Net Assets $2,158,470 100.0%
6
PORTFOLIO OF INVESTMENTS
JULY 31, 1998 ALLIANCE GREATER CHINA '97 FUND
_______________________________________________________________________________
COMPANY SHARES U.S. $ VALUE
- -------------------------------------------------------------------------------
COMMON STOCKS & OTHER INVESTMENTS-101.1%
HONG KONG-88.3%
Cheung Kong Holdings, Ltd. 48,000 $ 208,144
Cheung Kong Infrastructure Holdings, Ltd. 55,000 86,243
China Foods Holdings, Ltd. 300,000 73,950
China Resources Enterprise, Ltd. 90,000 66,206
China Telecom, Ltd. (a) 60,000 87,888
CLP Holdings, Ltd. 40,000 177,583
Dao Heng Bank Group, Ltd. 15,000 23,037
Founder Hong Kong, Ltd. 60,000 16,648
Hang Seng Bank, Ltd. 12,000 58,540
Henderson Land Development Co., Ltd. 30,000 87,694
Hong Kong & China Gas Co., Ltd. 30,000 30,393
Hong Kong Telecommunications, Ltd. 94,000 174,692
HSBC Holdings Plc. 9,200 224,405
Hutchison Whampoa, Ltd. 40,000 192,037
Legend Holdings, Ltd. 200,000 45,170
New World Development Co., Ltd. 50,000 66,142
New World Infrastructure, Ltd. (a) 40,000 36,910
Ng Fung Hong, Ltd. 96,000 66,903
Shum Yip Investment, Ltd. 250,000 46,461
Sime Darby (Hong Kong), Ltd. 80,000 29,425
Union Bank of Hong Kong, Ltd. 40,000 21,682
VTech Holdings, Ltd. 6,000 27,102
Zhejiang Expressway Co., Ltd. Cl. H 400,000 59,366
---------
1,906,621
PEOPLE'S REPUBLIC OF CHINA-3.2%
Yantai Changyu Pioneer
Wine Co., Ltd. Cl. B (a) 200,000 51,881
Zhejiang Southeast Electric
Power Co., Ltd. Cl. B 85,000 16,660
---------
68,541
TAIWAN-9.6%
Asustek Computer, Inc. 1,500 12,745
D-Link Corp. 13,000 33,290
Hon Hai Precision Industry Co., Ltd. 4,000 26,539
Kang Na Hsiung Enterprise 25,000 29,972
Kindom Construction Co., Ltd. 21,250 26,280
Pacific Electrical Wire & Cable 25,000 19,715
Phoenixtec Power Co., Ltd. 14,000 35,036
Taiwan Semiconductor Manufacturing Co., Ltd. 10,000 22,698
---------
206,275
WARRANTS-0.0%
Hong Kong & China Gas
Warrants, expiring 9/30/99 (a) 1,000 41
---------
TOTAL INVESTMENTS-101.1%
(cost $3,410,210) 2,181,478
Other assets less liabilities-(1.1)% (23,008)
---------
NET ASSETS-100% $2,158,470
(a) Non-income producing security.
See notes to financial statements.
7
STATEMENT OF ASSETS AND LIABILITIES
JULY 31, 1998 ALLIANCE GREATER CHINA '97 FUND
_______________________________________________________________________________
ASSETS
Investments in securities, at value (cost $3,410,210) $2,181,478
Cash, at value (cost $132,696) 132,700
Deferred organization expenses 269,938
Receivable from Adviser 49,863
Dividends and interest receivable 5,798
Total assets 2,639,777
LIABILITIES
Organizational expense payable 326,500
Payable for investment securities purchased 9,148
Payable for capital stock redeemed 3,100
Distribution fee payable 1,697
Accrued expenses 140,862
Total liabilities 481,307
NET ASSETS $2,158,470
COMPOSITION OF NET ASSETS
Capital stock, at par $ 447
Additional paid-in capital 4,261,311
Distributions in excess of net investment income (1,554)
Accumulated net realized loss on investments and foreign
currency transactions (873,006)
Net unrealized depreciation of investments and foreign
currency denominated assets and liabilities (1,228,728)
$2,158,470
CALCULATION OF MAXIMUM OFFERING PRICE
CLASS A SHARES
Net asset value and redemption price per share
($445,352 / 92,060 shares of beneficial interest
issued and outstanding) $4.84
Sales charge--4.25% of public offering price .21
Maximum offering price $5.05
CLASS B SHARES
Net asset value and offering price per share
($1,551,429 / 321,641 shares of beneficial interest
issued and outstanding) $4.82
CLASS C SHARES
Net asset value and offering price per share
($101,768 / 21,109 shares of beneficial interest
issued and outstanding) $4.82
ADVISOR CLASS SHARES
Net asset value, redemption, and offering price per share
($59,921 / 12,352 shares of beneficial interest
issued and outstanding) $4.85
See notes to financial statements.
8
STATEMENT OF OPERATIONS
SEPTEMBER 3, 1997* TO JULY 31, 1998 ALLIANCE GREATER CHINA '97 FUND
_______________________________________________________________________________
INVESTMENT INCOME
Dividends (net of foreign taxes withheld of $335 $ 84,110
Interest 18,172 $ 102,282
EXPENSES
Advisory fee 27,471
Distribution fee - Class A 1,582
Distribution fee - Class B 20,212
Distribution fee - Class C 1,239
Administrative 116,400
Custodian 104,498
Audit and legal 81,884
Amortization of organizational expenses 56,562
Printing 34,593
Registration 31,960
Transfer agency 22,318
Directors fees 9,033
Miscellaneous 13,778
Total expenses 521,530
Less: expenses waived and reimbursed by the
Adviser (see Note B) (437,590)
Less: expense offset arrangement (see Note B) (468)
Net expenses 83,472
Net investment income 18,810
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
AND FOREIGN CURRENCY TRANSACTIONS
Net realized loss on investment transactions (873,006)
Net realized loss on foreign currency
transactions (4,924)
Net unrealized appreciation (depreciation) of:
Investments (1,228,732)
Foreign currency denominated assets and
liabilities 4
Net loss on investments and foreign currency
transactions (2,106,658)
NET DECREASE IN NET ASSETS FROM OPERATIONS $(2,087,848)
* Commencement of operations.
See notes to financial statements.
9
STATEMENT OF CHANGES IN NET ASSETS
SEPTEMBER 3, 1997* TO JULY 31, 1998 ALLIANCE GREATER CHINA '97 FUND
_______________________________________________________________________________
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS
Net investment income $ 18,810
Net realized loss on investments and foreign currency
transactions (877,930)
Net unrealized depreciation of investments and foreign
currency denominated assets and liabilities (1,228,728)
Net decrease in net assets from operations (2,087,848)
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income
Class A (5,303)
Class B (10,749)
Class C (619)
Advisor Class (714)
Distributions in excess of net investment income
Class A -0-
Class B (1,442)
Class C (191)
Advisor Class -0-
CAPITAL STOCK TRANSACTIONS
Net increase 4,165,036
Total increase 2,058,170
NET ASSETS
Beginning of period 100,300
End of period $ 2,158,470
* Commencement of operations.
See notes to financial statements.
10
NOTES TO FINANCIAL STATEMENTS
JULY 31, 1998 ALLIANCE GREATER CHINA '97 FUND
_______________________________________________________________________________
NOTE A: SIGNIFICANT ACCOUNTING POLICIES
Alliance Greater China '97 Fund, Inc. (the "Fund") was organized as a Maryland
corporation on April 30, 1997 and is registered under the Investment Company
Act of 1940 as a non-diversified, open-end management investment company. The
Fund offers Class A, Class B, Class C and Advisor Class shares. Class A shares
are sold with an initial sales charge of up to 4.25% for purchases not
exceeding $1,000,000. With respect to purchases of $1,000,000 or more, Class A
shares redeemed within one year of purchase will be subject to a contingent
deferred sales charge of 1%. Class B shares are sold with a contingent deferred
sales charge which declines from 4% to zero depending on the period of time the
shares are held. Class B shares will automatically convert to Class A shares
eight years after the end of the calendar month of purchase. Class C shares are
subject to a contingent deferred sales charge of 1% on redemptions made within
the first year after purchase. Advisor Class shares are sold without an initial
or contingent deferred sales charge and are not subject to ongoing distribution
expenses. Advisor Class shares are offered to investors participating in
fee-based programs and to certain retirement plan accounts. All four classes of
shares have identical voting, dividend, liquidation and other rights, except
that each class bears different distribution expenses and has exclusive voting
rights with respect to its distribution plan. The financial statements have
been prepared in conformity with generally accepted accounting principles which
require management to make certain estimates and assumptions that affect the
reported amounts of assets and liabilities in the financial statements and
amounts of income and expenses during the reporting period. Actual results
could differ from those estimates. The following is a summary of significant
accounting policies followed by the Fund.
1. SECURITY VALUATION
Portfolio securities traded on a national securities exchange or on a foreign
securities exchange (other than foreign securities exchanges whose operations
are similar to those of the United States over-the-counter market) are
generally valued at the last reported sales price or if no sale occurred, at
the mean of the closing bid and asked prices on that day. Readily marketable
securities traded in the over-the-counter market, securities listed on a
foreign securities exchange whose operations are similar to the U.S.
over-the-counter market, and securities listed on a national securities
exchange whose primary market is believed to be over-the-counter, are valued at
the mean of the current bid and asked prices. U.S. government and fixed income
securities which mature in 60 days or less are valued at amortized cost, unless
this method does not represent fair value. Securities for which current market
quotations are not readily available are valued at their fair value as
determined in good faith by, or in accordance with procedures adopted by, the
Board of Directors. Fixed income securities may be valued on the basis of
prices obtained from a pricing service when such prices are believed to reflect
the fair market value of such securities.
2. ORGANIZATION EXPENSES
Organization expenses of approximately $326,500 have been deferred and are
being amortized on a straight-line basis through August 2002.
3. CURRENCY TRANSLATION
Assets and liabilities denominated in foreign currencies and commitments under
forward exchange currency contracts are translated into U.S. dollars at the
mean of the quoted bid and asked price of such currencies against the U.S.
dollar. Purchases and sales of portfolio securities are translated at the rates
of exchange prevailing when such securities were acquired or sold. Income and
expenses are translated at rates of exchange prevailing when earned or accrued.
Net realized gain or loss on foreign currency transactions represents foreign
exchange gains and losses from sales and maturities of investments and foreign
currency contracts, the holding of foreign currencies, currency gains or losses
realized between the trade and settlement dates on foreign security
transactions, and the difference between the amounts of dividends, interest and
foreign taxes receivable recorded on the Fund's books and the U.S. dollar
equivalent of the amounts actually received or paid. Net unrealized currency
gains and losses from valuing foreign currency denominated assets and
liabilities at period end exchange rates are reflected as a component of net
change in unrealized appreciation (depreciation) of investments and foreign
currency denominated assets and liabilities.
11
NOTES TO FINANCIAL STATEMENTS (CONTINUED) ALLIANCE GREATER CHINA '97 FUND
_______________________________________________________________________________
4. TAXES
It is the Fund's policy to meet the requirements of the Internal Revenue Code
applicable to regulated investment companies and to distribute all of its
investment company taxable income and net realized gains, if any, to
shareholders. Therefore, no provisions for federal income or excise taxes are
required.
5. INCOME AND EXPENSES
All income earned and expenses incurred by the Fund are borne on a pro-rata
basis by each outstanding class of shares, based on the proportionate interest
in the Fund represented by the shares of such class, except that the Fund's
Class B and Class C shares bear higher distribution and transfer agent fees
than Class A shares and Advisor Class shares (Advisor Class shares also have no
distribution fees).
6. INVESTMENT INCOME AND INVESTMENT TRANSACTIONS
Dividend income is recorded on the ex-dividend date. Interest income is accrued
daily. Investment transactions are accounted for on the date securities are
purchased or sold. Investment gains and losses are determined on the identified
cost basis. The Fund accretes discounts on short-term securities as adjustments
to interest income.
7. DIVIDENDS AND DISTRIBUTIONS
Dividends and distributions to shareholders are recorded on the ex-dividend
date.
Income dividends and capital gains distributions are determined in accordance
with federal tax regulations and may differ from those determined in accordance
with generally accepted accounting principles. To the extent these differences
are permanent, such amounts are reclassified within the capital accounts based
on their federal tax basis treatment; temporary differences do not require such
reclassification.
During the current fiscal year, permanent differences, primarily due to foreign
currency transactions resulted in a decrease in accumulated net realized loss
on investment and foreign currency transactions and a corresponding decrease in
additional paid-in-capital and an increase in distributions in excess of net
investment income. This reclassification had no effect on net assets.
NOTE B: ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Under the terms of an investment advisory agreement, the Fund pays Alliance
Capital Management L.P. ("the Adviser") a fee at an annual rate of 1% of the
Fund's average daily net assets. Such fee is accrued daily and paid monthly.
The Adviser has agreed to voluntarily waive its fee and bear certain expenses
so that total expenses do not exceed on an annual basis 2.50%, 3.20%, 3.20%,
and 2.20% of average net assets, respectively, for the Class A, Class B, Class
C and Advisor Class shares. For the period ended July 31, 1998, such waiver and
reimbursement amounted to $437,590. The Adviser voluntarily waived $116,400,
pursuant to the advisory agreement representing the cost of certain legal and
accounting services provided to the Fund by the Adviser for the period ended
July 31, 1998.
The Fund compensates Alliance Fund Services, Inc. (a wholly-owned subsidiary of
the Adviser) under a Transfer Agency Agreement for providing personnel and
facilities to perform transfer agency services for the Fund. For the period
ended July 31, 1998, the Transfer Agent voluntarily waived all of its fees
under the Agreement which amounted to $5,150.
In addition, for the period ended July 31, 1998, the Fund's expenses were
reduced by $468 under an expense offset arrangement with Alliance Fund
Services. Transfer agency fees reported in the statement of operations exclude
these credits.
Alliance Fund Distributors, Inc. (a wholly-owned subsidiary of the Adviser)
serves as the Distributor of the Fund's shares. The Distributor received
front-end sales charges of $1,598 from the sale of Class A shares and $10,341
in contingent deferred sales charges imposed upon redemptions by shareholders
of Class B shares for the period ended July 31, 1998.
Brokerage commissions paid on investment transactions for the period ended July
31, 1998 amounted to $34,049, none of which was paid to brokers utilizing the
services of the Pershing Division of Donaldson, Lufkin & Jenrette Securities
Corp. ("DLJ"), an affiliate of the Adviser, nor DLJ directly.
12
ALLIANCE GREATER CHINA '97 FUND
_______________________________________________________________________________
NOTE C: DISTRIBUTION SERVICES AGREEMENT
The Fund has adopted a Distribution Services Agreement (the "Agreement")
pursuant to Rule 12b-1 under the Investment Company Act of 1940. Under the
Agreement, the Fund pays a distribution fee to the Distributor at an annual
rate of up to .30 of 1% of the Fund's average daily net assets attributable to
Class A shares and 1% of the average daily net assets attributable to both
Class B and Class C shares. There is no distribution fee on the Advisor Class
shares. The fees are accrued daily and paid monthly. The Agreement provides
that the Distributor will use such payments in their entirety for distribution
assistance and promotional activities. The Distributor has incurred expenses in
excess of the distribution costs reimbursed by the Fund in the amounts of
$533,473 and $18,510 for Class B and Class C shares, respectively. Such costs
may be recovered from the Fund in future periods so long as the Agreement is in
effect. In accordance with the Agreement, there is no provision for recovery of
unreimbursed distribution costs, incurred by the Distributor, beyond the
current fiscal year for Class A shares. The Agreement also provides that the
Adviser may use its own resources to finance the distribution of the Fund's
shares.
NOTE D: INVESTMENT TRANSACTIONS
Purchases and sales of investment securities (excluding short-term and U.S.
government obligations) aggregated $5,861,957 and $1,578,742, respectively, for
the period ended July 31, 1998. There were no purchases or sales of U.S.
government or government agency obligations for the period ended July 31, 1998.
At July 31, 1998, the cost of investments for federal income tax purposes was
$3,514,726. Accordingly, gross unrealized appreciation of investments was
$22,520 and gross unrealized depreciation of investments was $1,355,768
resulting in net unrealized depreciation of $1,333,248 (excluding foreign
currency transactions).
FORWARD EXCHANGE CURRENCY CONTRACTS
The Fund enters into forward exchange currency contracts for investment
purposes and to hedge its exposure to changes in foreign currency exchange
rates on its foreign portfolio holdings and to hedge certain firm purchase and
sale commitments denominated in foreign currencies. A forward exchange currency
contract is a commitment to purchase or sell a foreign currency at a future
date at a negotiated forward rate. The gain or loss arising from the difference
between the original contracts and the closing of such contracts is included in
net realized gains or losses on foreign currency transactions. Fluctuations in
the value of forward exchange currency contracts are recorded for financial
reporting purposes as unrealized gains or losses by the Fund.
The Fund's custodian will place and maintain cash not available for investment
or other liquid assets in a separate account of the Fund having a value equal
to the aggregate amount of the Fund's commitments under forward exchange
currency contracts entered into with respect to position hedges. Risks may
arise from the potential inability of a counterparty to meet the terms of a
contract and from unanticipated movements in the value of foreign currencies
relative to the U.S. dollar. There were no forward exchange currency contracts
outstanding at July 31, 1998. The Fund incurred and elected to defer post
October currency and capital losses of $4,854 and $768,490 for the year ended
July 31, 1998.
13
NOTES TO FINANCIAL STATEMENTS (CONTINUED) ALLIANCE GREATER CHINA '97 FUND
_______________________________________________________________________________
NOTE E: CAPITAL STOCK
There are 12,000,000,000 shares of $.001 par value capital stock authorized,
divided into four classes, designated Class A, Class B, Class C and Advisor
Class. Each class consists of 3,000,000,000 authorized shares.
Transactions in capital stock were as follows:
SHARES AMOUNT
------------------- -------------------
SEPTEMBER 3, 1997* SEPTEMBER 3, 1997*
TO TO
JULY 31, 1998 JULY 31, 1998
------------------- -------------------
CLASS A
Shares sold 112,520 $ 971,684
Shares issued in reinvestment of
dividends 502 3,613
Shares redeemed (20,972) (132,177)
Net increase 92,050 $ 843,120
CLASS B
Shares sold 398,593 $3,556,766
Shares issued in reinvestment of
dividends and distributions 1,205 8,686
Shares redeemed (78,167) (463,301)
Net increase 321,631 $3,102,151
CLASS C
Shares sold 21,183 $ 201,955
Shares issued in reinvestment of
dividends and distributions 84 604
Shares redeemed (168) (1,054)
Net increase 21,099 $ 201,505
ADVISOR CLASS
Shares sold 2,622 $ 20,507
Shares redeemed (279) (2,311)
Net increase 2,352 $ 18,260
NOTE F: BANK BORROWING
A number of open-end mutual funds managed by the Adviser, including the Fund,
participate in a $750 million revolving credit facility (the "Facility") to
provide short-term financing if necessary, subject to certain restrictions in
connection with abnormal redemption activity. Commitment fees related to the
Facility are paid by the participating funds and are included in the
miscellaneous expenses in the statement of operations. The Fund did not utilize
the Facility during the period ending on July 31, 1998.
NOTE G: CONCENTRATION OF RISK
Investing in securities of foreign companies involves special risks which
include revaluation of currency and future adverse political and economic
developments. Moreover, securities of many foreign companies and their markets
may be less liquid and their prices more volatile than those of comparable U.S.
companies.
* Commencement of operations.
14
FINANCIAL HIGHLIGHTS ALLIANCE GREATER CHINA '97 FUND
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
ADVISOR
CLASS A CLASS B CLASS C CLASS
------------- ------------- ------------- -------------
SEPTEMBER 3, SEPTEMBER 3, SEPTEMBER 3, SEPTEMBER 3,
1997 (A) 1997 (A) 1997 (A) 1997 (A)
TO TO TO TO
JULY 31, 1998 JULY 31, 1998 JULY 31, 1998 JULY 31, 1998
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $10.00 $10.00 $10.00 $10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income (b)(c) .08 .03 .03 .10
Net realized and unrealized loss on
investments and foreign currency
transactions. (5.18) (5.17) (5.17) (5.18)
Net decrease in net asset value from
operations (5.10) (5.14) (5.14) (5.08)
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (.06) (.03) (.03) (.07)
Distributions in excess of net investment
income .00 (.01) (.01) .00
Total dividends and distributions (.06) (.04) (.04) (.07)
Net asset value, end of period $4.84 $4.82 $4.82 $4.85
TOTAL RETURN
Total investment return based on net asset
value (d) (51.20)% (51.53)% (51.53)% (51.06)%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $445 $1,551 $102 $60
Ratio to average net assets of:
Expenses, net of waivers/
reimbursements (e)(f) 2.52% 3.22% 3.22% 2.22%
Expenses, before waivers/
reimbursements (e) 18.27% 19.18% 19.37% 18.13%
Net investment income (e) 1.20% .53% .50% 1.51%
Portfolio turnover rate 58% 58% 58% 58%
</TABLE>
(a) Commencement of operations.
(b) Based on average shares outstanding.
(c) Net of expenses waived/reimbursed by the Adviser.
(d) Total investment return is calculated assuming an initial investment made
at the net asset value at the beginning of the period, reinvestment of all
dividends and distributions at net asset value during the period, and
redemption on the last day of the period. Initial sales charge or contingent
deferred sales charges are not reflected in the calculation of total investment
return. Total investment return calculated for a period of less than one year
is not annualized.
(e) Annualized.
(f) Ratio reflects expenses grossed up for expense offset arrangement with the
transfer agent. For the year ended July 31, 1998, the ratios of expenses net of
waivers/reimbursements would have been 2.50%, 3.20%, 3.20% and 2.20% for Class
A, B, C and Advisor Class.
15
REPORT OF ERNST & YOUNG LLP
INDEPENDENT AUDITORS ALLIANCE GREATER CHINA '97 FUND
_______________________________________________________________________________
TO THE SHAREHOLDERS AND BOARD OF DIRECTORS
ALLIANCE GREATER CHINA '97 FUND, INC.
We have audited the accompanying statement of assets and liabilities of
Alliance Greater China '97 Fund, Inc. (the "Fund"), including the portfolio of
investments, as of July 31, 1998, and the related statements of operations and
changes in net assets and financial highlights for the period from September 3,
1997 (commencement of operations) to July 31, 1998. These financial statements
and financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assur-ance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of July
31, 1998, by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Alliance Greater China '97 Fund, Inc. at July 31, 1998, and the results of its
operations, changes in its net assets and the financial highlights for the
period from September 3, 1997 to July 31, 1998, in conformity with generally
accepted accounting principles.
New York, New York
September 4, 1998
16
ALLIANCE GREATER CHINA '97 FUND
_______________________________________________________________________________
BOARD OF DIRECTORS
JOHN D. CARIFA, CHAIRMAN AND PRESIDENT
DAVID H. DIEVLER (1)
WILLIAM H. FOULK, JR. (1)
TAK-LUNG TSIM
OFFICERS
MATTHEW W. S. LEE, CHIEF INVESTMENT OFFICER
KATHLEEN A. CORBET, SENIOR VICE PRESIDENT
MAMURO YAMAOKA, VICE PRESIDENT
EDMUND P. BERGAN, JR., SECRETARY
MARK D. GERSTEN, TREASURER AND CHIEF FINANCIAL OFFICER
VINCENT S. NOTO, CONTROLLER
DISTRIBUTOR
ALLIANCE FUND DISTRIBUTORS, INC.
1345 Avenue of the Americas
New York, NY 10105
CUSTODIAN
BROWN BROTHERS HARRIMAN & CO.
40 Water Street
Boston, MA 02109
LEGAL COUNSEL
SEWARD & KISSEL
One Battery Park Plaza
New York, NY10004
TRANSFER AGENT
ALLIANCE FUND SERVICES, INC.
P.O. Box 1520
Secaucus, NJ 07096-1520
Toll-free 1-(800) 221-5672
INDEPENDENT AUDITORS
ERNST & YOUNG LLP
787 Seventh Avenue
New York, NY10019
(1) Member of the Audit Committee
17
THE ALLIANCE FAMILY OF MUTUAL FUNDS
_______________________________________________________________________________
FIXED INCOME
Alliance Bond Fund
U.S. Government Portfolio
Corporate Bond Portfolio
Alliance Global Dollar Government Fund
Alliance Global Strategic Income Trust
Alliance High Yield Fund
Alliance Mortgage Securities Income Fund
Alliance Limited Maturity Government Fund
Alliance Multi-Market Strategy Trust
Alliance North American Government Income Trust
Alliance Short-Term Multi-Market Trust
Alliance Short-Term U.S. Government Fund
Alliance World Income Trust
TAX-FREE INCOME
Alliance Municipal Income Fund
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
MONEY MARKET
AFD Exchange Reserves
GROWTH
The Alliance Fund
Alliance Global Environment Fund
Alliance Growth Fund
Alliance Premier Growth Fund
Alliance/Regent Sector Opportunity Fund
GROWTH & INCOME
Alliance Balanced Shares
Alliance Conservative Investors Fund
Alliance Growth & Income Fund
Alliance Growth Investors Fund
Alliance Income Builder Fund
Alliance Real Estate Investment Fund
Alliance Strategic Balanced Fund
Alliance Utility Income Fund
AGGRESSIVE GROWTH
Alliance Global Small Cap Fund
Alliance Quasar Fund
Alliance Technology Fund
INTERNATIONAL
Alliance All-Asia Investment Fund
Alliance Greater China '97 Fund
Alliance International Fund
Alliance International Premier Growth Fund
Alliance New Europe Fund
Alliance Worldwide Privatization Fund
CLOSED-END FUNDS
Alliance All-Market Advantage Fund
ACM Government Income Fund
ACM Government Opportunity Fund
ACM Government Securities Fund
ACM Government Spectrum Fund
ACM Managed Dollar Income Fund
ACM Managed Income Fund
ACM Municipal Securities Income Fund
Alliance World Dollar Government Fund
Alliance World Dollar Government Fund II
The Austria Fund
The Korean Investment Fund
The Spain Fund
The Southern Africa Fund
CASH MANAGEMENT SERVICES
ACM Institutional Reserves
Government Portfolio
Prime Portfolio
Tax-Free Portfolio
Trust Portfolio
Alliance Capital Reserves
Alliance Government Reserves
Alliance Insured Account
Alliance Money Reserves
Alliance Municipal Trust
California Portfolio
Connecticut Portfolio
Florida Portfolio
General Portfolio
Massachusetts Portfolio
New Jersey Portfolio
New York Portfolio
Virginia Portfolio
Alliance Treasury Reserves
Alliance Money Market Fund
Prime Portfolio
Government Portfolio
General Municipal Portfolio
18
ALLIANCE GREATER CHINA '97 FUND
1345 AVENUE OF THE AMERICAS
NEW YORK, NY 10105
(800) 221-5672
ALLIANCE CAPITAL
THIS REPORT IS INTENDED SOLELY FOR DISTRIBUTION TO CURRENT SHAREHOLDERS
OF THE FUND.
(r) THESE REGISTERED SERVICE MARKS USED UNDER LICENSE FROM THE OWNER,
ALLIANCE CAPITAL MANAGEMENT L.P.
GCFAR
