<PAGE>
As filed with the Securities and Exchange Commission
on October 29, 1999
File No. 333-26229
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.
Post-Effective Amendment No. 5 X
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 7 X
ALLIANCE GREATER CHINA '97 FUND INC.
(Exact Name of Registrant as Specified in Charter)
1345 Avenue of the Americas, New York, N.Y. 10105
(Address of Principal Executive Office) (Zip Code)
(800) 221-5672
(Registrant's Telephone Number, including Area Code)
EDMUND P. BERGAN, JR.
Alliance Capital Management L.P.
1345 Avenue of the Americas, New York, N.Y. 10105
(Name and address of Agent for Service)
Copies of communications to:
Thomas G. MacDonald
Seward & Kissel LLP
One Battery Park Plaza
New York, New York 10004
It is proposed that this filing will become effective (check
appropriate box)
immediately upon filing pursuant to paragraph (b)
X on November 1, 1999 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)
<PAGE>
on (date) pursuant to paragraph (a)(2) of Rule 485.
<PAGE>
THE ALLIANCE STOCK FUNDS
The Alliance Stock Funds provide a broad selection of investment alternatives
to investors seeking capital growth or high total return.
The Securities and Exchange Commission has not approved or disapproved these
securities or passed upon the adequacy of this prospectus. Any representation
to the contrary is a criminal offense.
Prospectus and Application
November 1, 1999
DOMESTIC STOCK FUNDS
o Alliance Premier Growth Fund
o Alliance Health Care Fund
o Alliance Growth Fund
o Alliance Technology Fund
o Alliance Quasar Fund
o The Alliance Fund
TOTAL RETURN FUNDS
o Alliance Growth & Income Fund
o Alliance Balanced Shares
o Alliance Utility Income Fund
o Alliance Real Estate
Investment Fund
GLOBAL STOCK FUNDS
o Alliance New Europe Fund
o Alliance Worldwide
Privatization Fund
o Alliance International
Premier Growth Fund
o Alliance Global Small Cap Fund
o Alliance International Fund
o Alliance Greater China '97 Fund
o Alliance All-Asia Investment Fund
o Alliance Global Environment Fund
AllianceCapital [logo]
1
INVESTMENT PRODUCTS OFFERED
o ARE NOT FDIC INSURED
o MAY LOSE VALUE
o ARE NOT BANK GUARANTEED
2
TABLE OF CONTENTS
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Page
RISK/RETURN SUMMARY 3
Domestic Stock Funds 4
Total Return Funds 10
Global Stock Funds 14
Summary of Principal Risks 22
Principal Risks by Fund 23
FEES AND EXPENSES OF THE FUNDS 24
GLOSSARY 27
DESCRIPTION OF THE FUNDS 28
Investment Objectives and Policies 28
Description of Investment Practices 41
Additional Risk Considerations 48
MANAGEMENT OF THE FUNDS 53
PURCHASE AND SALE OF SHARES 56
How The Funds Value Their Shares 56
How To Buy Shares 57
How to Exchange Shares 57
How To Sell Shares 57
DIVIDENDS, DISTRIBUTIONS AND TAXES 58
DISTRIBUTION ARRANGEMENTS 58
GENERAL INFORMATION 59
FINANCIAL HIGHLIGHTS 61
APPENDIX A--ADDITIONAL INFORMATION ABOUT
THE UNITED KINGDOM, JAPAN, AND GREATER CHINA COUNTRIES 73
The Funds' investment adviser is Alliance Capital Management L.P., a global
investment manager providing diversified services to institutions and
individuals through a broad line of investments including more than 100 mutual
funds.
RISK/RETURN SUMMARY
The following is a summary of certain key information about the Alliance Stock
Funds. You will find additional information about each Fund, including a
detailed description of the risks of an investment in each Fund, after this
Summary.
The Risk/Return Summary describes the Funds' objectives, principal investment
strategies, principal risks and fees. Each Fund's Summary page includes a short
discussion of some of the principal risks of investing in that Fund. A further
discussion of these and other risks begins on page 22.
More detailed descriptions of the Funds, including the risks associated with
investing in the Funds, can be found further back in this Prospectus. Please be
sure to read this additional information BEFORE you invest. Each of the Funds
may at times use certain types of investment derivatives such as options,
futures, forwards and swaps. The use of these techniques involves special risks
that are discussed in this Prospectus.
The Risk/Return Summary includes a table for each Fund showing its average
annual returns and a bar chart showing its annual returns. The table and bar
chart provide an indication of the historical risk of an investment in each
Fund by showing:
. how the Fund's average annual returns for one, five, and 10 years (or over
the life of the Fund if the Fund is less than 10 years old) compare to those of
a broad based securities market index; and
. changes in the Fund's performance from year to year over 10 years (or over
the life of the Fund if the Fund is less than 10 years old).
A Fund's past performance, of course, does not necessarily indicate how it will
perform in the future. As with all investments, you may lose money by investing
in the Funds.
3
DOMESTIC STOCK FUNDS
The Domestic Stock Funds offer investors seeking capital appreciation a range
of alternative approaches to investing primarily in U.S. equity markets.
ALLIANCE PREMIER GROWTH FUND
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OBJECTIVE:
THE FUND'S INVESTMENT OBJECTIVE IS LONG-TERM GROWTH OF CAPITAL BY INVESTING
PREDOMINANTLY IN EQUITY SECURITIES OF A LIMITED NUMBER OF LARGE, CAREFULLY
SELECTED, HIGH-QUALITY U.S. COMPANIES THAT ARE JUDGED LIKELY TO ACHIEVE
SUPERIOR EARNINGS GROWTH.
PRINCIPAL INVESTMENT STRATEGIES AND RISKS:
The Fund invests primarily in equity securities of U.S. companies. Unlike most
equity funds, the Fund focuses on a relatively small number of intensively
researched companies. Alliance selects the Fund's investments from a research
universe of more than 600 companies that have strong management, superior
industry positions, excellent balance sheets and superior earnings growth
prospects.
Normally, the Fund invests in about 40-60 companies, with the 25 most highly
regarded of these companies usually constituting approximately 70% of the
Fund's net assets. During market declines, while adding to positions in favored
stocks, the Fund becomes somewhat more aggressive, gradually reducing the
number of companies represented in its portfolio. Conversely, in rising
markets, while reducing or eliminating fully valued positions, the Fund becomes
somewhat more conservative, gradually increasing the number of companies
represented in its portfolio. Through this approach, Alliance seeks to gain
positive returns in good markets while providing some measure of protection in
poor markets. The Fund also may invest up to 20% of its net assets in
convertible securities.
Among the principal risks of investing in the Fund is market risk. Because the
Fund invests in a smaller number of securities than many other equity funds,
your investment has the risk that changes in the value of a single security may
have a more significant effect, either negative or positive, on the Fund's net
asset value.
The table and bar chart provide an indication of the historical risk of an
investment in the Fund.
PERFORMANCE TABLE
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SINCE
1 YEAR 5 YEARS INCEPTION
CLASS A 42.97% 26.65% 24.38%
CLASS B 44.33% 26.95% 24.48%
CLASS C 47.31% 26.97% 24.48%
RUSSELL 1000 GROWTH INDEX 38.71% 25.70% 21.94%
Average annual total returns are for the periods ended December 31, 1998 and
reflect imposition of the maximum front-end or contingent deferred sales
charges as well as conversion of Class B shares to Class A shares after the
applicable period. Inception date of Class A and Class B shares is 9/28/92.
Index returns are from month-end of applicable class inception date.
Performance information for periods prior to the inception of Class C shares
(5/3/93) is the performance of the Fund's Class A shares adjusted to reflect
the higher expense ratio of Class C shares. The average annual total return for
Class C since its actual inception date was 26.35%. Index return for the
comparable period was 23.66%.
BAR CHART
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The annual returns in the bar chart are for the Fund's Class A shares and do not
reflect sales loads. If sales loads were reflected, returns would be less than
those shown. Through 9/30/99, the year-to-date unannualized return for Class A
shares was 7.07%.
n/a n/a n/a n/a 9.98 -5.80 46.87 24.14 32.67 49.31
- -------------------------------------------------------------------------------
89 90 91 92 93 94 95 96 97 98
Calendar Year End
You should consider an investment in the Fund as a long-term investment. The
Fund's returns will fluctuate over long and short periods. For example, during
the period shown in the bar chart, the Fund's:
BEST QUARTER WAS UP 31.05%, 4TH QUARTER, 1998; AND WORST QUARTER WAS DOWN
- -12.10%, 3RD QUARTER, 1998.
4
ALLIANCE HEALTH CARE FUND
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OBJECTIVE:
THE FUND'S INVESTMENT OBJECTIVE IS CAPITAL APPRECIATION AND, SECONDARILY,
CURRENT INCOME.
PRINCIPAL INVESTMENT STRATEGIES AND RISKS:
Under normal circumstances the Fund invests at least 65%, and normally
substantially all, of the value of its total assets in securities issued by
companies principally engaged in health care and health care-related industries
("Health Care Industries") (companies principally engaged in the discovery,
development, provision, production or distribution of products and services
that relate to the diagnosis, treatment and prevention of diseases or other
medical disorders). Although the payment of dividends will be a factor
considered in the selection of investments for the Fund, the Fund seeks
primarily to take advantage of capital appreciation opportunities identified by
Alliance in emerging technologies and services in Health Care Industries by
investing in companies which are expected to profit from the development of new
products and services for these industries. Under normal circumstances the Fund
invests primarily in the equity securities of U.S. companies. The Fund may
invest up to 40% of its total assets in securities of non-U.S. companies and
other foreign securities. The Fund may invest in new, smaller or less-seasoned
companies as well as in larger, established companies in Health Care Industries.
Among the principal risks of investing in the Fund are market risk and sector
risk. Unlike many other equity funds, the Fund invests in the securities of
companies principally engaged in Health Care Industries. As a result, certain
economic conditions and market changes that affect those industries may have a
more significant effect on the Fund's net asset value than on the value of a
more broadly diversified fund. For example, the Fund's share price could be
affected by changes in competition, legislation or government regulation,
government funding, product liability and other litigation, the obsolescence or
development of products, or other factors specific to the health care and
health sciences industries. The Fund's investments in foreign securities have
foreign risk and currency risk. The Fund's investment in small- to
mid-capitalization companies have capitalization risk. These investments may be
more volatile than investments in large-cap companies.
BAR CHART AND PERFORMANCE TABLE:
There is no bar chart or performance table for the Fund because it has not
completed a full calendar year of operations.
5
ALLIANCE GROWTH FUND
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OBJECTIVE:
THE FUND'S INVESTMENT OBJECTIVE IS LONG-TERM GROWTH OF CAPITAL. CURRENT INCOME
IS INCIDENTAL TO THE FUND'S OBJECTIVE.
PRINCIPAL INVESTMENT STRATEGIES AND RISKS:
The Fund invests primarily in equity securities of companies with favorable
earnings outlooks and whose long-term growth rates are expected to exceed that
of the U.S. economy over time. The Fund emphasizes investments in large- and
mid-cap companies. The Fund also may invest up to 25% of its total assets in
lower-rated fixed-income securities and convertible bonds and generally up to
15% of its total assets in foreign securities.
Among the principal risks of investing in the Fund is market risk. Investments
in mid-cap companies may be more volatile than investments in large-cap
companies. To the extent the Fund invests in lower-rated fixed-income
securities and convertible bonds, your investment may have interest rate or
credit risk. The Fund's investments in foreign securities have foreign risk and
currency risk.
The table and bar chart provide an indication of the historical risk of an
investment in the Fund.
PERFORMANCE TABLE
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1 YEAR 5 YEARS 10 YEARS
CLASS A 22.71% 19.72% 21.54%
CLASS B 23.23% 19.93% 20.91%
CLASS C 26.25% 19.92% 20.91%
S&P 500 INDEX 28.60% 24.05% 19.19%
Average annual total returns are for the periods ended December 31, 1998 and
reflect imposition of the maximum front-end or contingent deferred sales
charges as well as conversion of Class B shares to Class A shares after the
applicable period. Index returns are from 12/31/88.
Performance information for periods prior to the inception of Class A shares
(9/4/90) and Class C shares (8/2/93) is the performance of the Fund's Class B
shares adjusted, in the case of Class A shares, to reflect the lower expense
ratio of Class A shares. The average annual total returns for Class A and Class
C shares since their actual inception dates were 23.34% and 20.22%,
respectively. Index returns for the comparable periods (which date from
month-end following applicable Class inception date) were 21.37% and 22.76%,
respectively.
BAR CHART
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The annual returns in the bar chart are for the Fund's Class B shares and do not
reflect sales loads. If sales loads were reflected, returns would be less than
those shown. Through 9/30/99, the year-to-date unannualized return for Class B
shares was 2.42%.
27.94 -7.96 62.39 9.81 28.21 -1.84 28.65 22.32 26.22 27.23
- -----------------------------------------------------------------------------
89 90 91 92 93 94 95 96 97 98
Calendar Year End
You should consider an investment in the Fund as a long-term investment. The
Fund's returns will fluctuate over long and short periods. For example, during
the period shown in the bar chart, the Fund's:
BEST QUARTER WAS UP 29.47%, 1ST QUARTER, 1991; AND WORST QUARTER WAS DOWN
- -20.45%, 3RD QUARTER, 1990.
6
ALLIANCE TECHNOLOGY FUND
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OBJECTIVE:
THE FUND'S INVESTMENT OBJECTIVE IS GROWTH OF CAPITAL. CURRENT INCOME IS
INCIDENTAL TO THE FUND'S OBJECTIVE.
PRINCIPAL INVESTMENT STRATEGIES AND RISKS:
The Fund invests primarily in securities of companies that use technology
extensively in the development of new or improved products or processes. Within
this framework, the Fund may invest in any company and industry and in any type
of security with potential for capital appreciation. It invests in well-known,
established companies or in new or unseasoned companies. The Fund also may
invest in debt securities and up to 10% of its total assets in foreign
securities.
Among the principal risks of investing in the Fund is market risk. In addition,
technology stocks, especially those of smaller, less-seasoned companies, tend
to be more volatile than the overall stock market. To the extent the Fund
invests in debt and foreign securities, your investment has interest rate risk,
credit risk, currency risk and foreign risk.
The table and bar chart provide an indication of the historical risk of an
investment in the Fund.
PERFORMANCE TABLE
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1 YEAR 5 YEARS 10 YEARS
CLASS A 56.22% 29.58% 23.32%
CLASS B 57.98% 29.81% 23.38%
CLASS C 60.94% 29.81% 23.21%
S&P 500 INDEX 28.60% 24.05% 19.19%
Average annual total returns are for the periods ended December 31, 1998 and
reflect imposition of the maximum front-end or contingent deferred sales
charges as well as conversion of Class B shares to Class A shares after the
applicable period. Index returns are from 12/31/88.
Performance information for periods prior to the inception of Class B and Class
C shares (5/3/93) is the performance of the Fund's Class A shares adjusted to
reflect the higher expense ratio of Class B and Class C shares. The average
annual total returns for Class B and Class C since their actual inception dates
were 30.89% and 30.88%, respectively. Index returns for the comparable periods
(which date from month-end following applicable Class inception date) were
22.38%.
BAR CHART
- -------------------------------------------------------------------------------
The annual returns in the bar chart are for the Fund's Class A shares and do not
reflect sales loads. If sales loads were reflected, returns would be less than
those shown. Through 9/30/99, the year-to-date unannualized return for Class A
shares was 18.82%.
6.00 -3.08 54.24 15.50 21.63 28.51 45.80 19.41 4.54 63.14
- -----------------------------------------------------------------------------
89 90 91 92 93 94 95 96 97 98
Calendar Year Ended
You should consider an investment in the Fund as a long-term investment. The
Fund's returns will fluctuate over long and short periods. For example, during
the period shown in the bar chart, the Fund's:
BEST QUARTER WAS UP 39.86%, 4TH QUARTER, 1998; AND WORST QUARTER WAS DOWN
- -33.21%, 3RD QUARTER, 1990.
7
ALLIANCE QUASAR FUND
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OBJECTIVE:
THE FUND'S INVESTMENT OBJECTIVE IS GROWTH OF CAPITAL BY PURSUING AGGRESSIVE
INVESTMENT POLICIES. CURRENT INCOME IS INCIDENTAL TO THE FUND'S OBJECTIVE.
PRINCIPAL INVESTMENT STRATEGIES AND RISKS:
The Fund generally invests in a widely diversified portfolio of equity
securities spread among many industries that offer the possibility of
above-average earnings growth. The Fund currently emphasizes investment in
small-cap companies. The Fund invests in well-known and established companies
and in new and unseasoned companies. The Fund can invest in the equity
securities of any company and industry and in any type of security with
potential for capital appreciation. When selecting securities, Alliance
considers the economic and political outlook, the values of specific securities
relative to other investments, trends in the determinants of corporate profits,
and management capabilities and practices. The Fund also may invest in
non-convertible bonds, preferred stocks, and foreign securities.
Among the principal risks of investing in the Fund is market risk. Investments
in smaller companies tend to be more volatile than investments in large-cap or
mid-cap companies. To the extent the Fund invests in non-convertible bonds,
preferred stocks, and foreign stocks, your investment has interest rate risk,
credit risk, foreign risk and currency risk.
The table and bar chart provide an indication of the historical risk of an
investment in the Fund.
PERFORMANCE TABLE
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1 YEAR 5 YEARS 10 YEARS
CLASS A -8.64% 14.23% 11.84%
CLASS B -8.90% 14.35% 11.70%
CLASS C -6.19% 14.36% 11.55%
RUSSELL 2000 INDEX -2.55% 11.87% 12.92%
Average annual total returns are for the periods ended December 31, 1998 and
reflect imposition of the maximum front-end or contingent deferred sales charge
as well as conversion of Class B shares to Class A shares after the applicable
period. Index returns are from 12/31/88.
Performance information for periods prior to the inception of Class B shares
(9/17/90) and Class C shares (5/3/93) is the performance of the Fund's Class A
shares adjusted to reflect the higher expense ratio of Class B and Class C
shares. The average annual total returns for Class B and Class C since their
actual inception dates were 13.66% and 15.96%, respectively. Index returns for
the comparable periods (which date from month-end following applicable Class
inception date) were 17.50% and 12.86%, respectively.
BAR CHART
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The annual returns in the bar chart are for the Fund's Class A shares and do not
reflect sales loads. If sales loads were reflected, returns would be less than
those shown. Through 9/30/99, the year-to-date unannualized return for Class A
shares was -4.64%.
28.20 -23.44 34.27 2.81 16.16 -7.27 47.64 32.62 17.24 -4.56
- -----------------------------------------------------------------------------
89 90 91 92 93 94 95 96 97 98
Calendar Year Ended
You should consider an investment in the Fund as a long-term investment. The
Fund's returns will fluctuate over long and short periods. For example, during
the period shown in the bar chart, the Fund's:
BEST QUARTER WAS UP 23.10%, 1ST QUARTER, 1991; AND WORST QUARTER WAS DOWN
- -28.46%, 3RD QUARTER, 1998.
8
THE ALLIANCE FUND
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OBJECTIVE:
THE FUND'S INVESTMENT OBJECTIVE IS LONG-TERM GROWTH OF CAPITAL AND INCOME
PRIMARILY THROUGH INVESTMENTS IN COMMON STOCKS.
PRINCIPAL INVESTMENT STRATEGIES AND RISKS:
The Fund normally invests substantially all of its assets in high-quality
common stocks that Alliance expects to increase in value. The Fund may invest
in a broad range of companies, from large to small, but tends to emphasize
attractive opportunities in mid-cap companies. While the Fund's diversified and
high-quality investments cannot prevent fluctuations in market values, they
tend to limit investment risk and contribute to achieving the Fund's objective.
The Fund also may invest in convertible securities, U.S. Government securities,
and foreign securities.
Among the principal risks of investing in the Fund is market risk. Investments
in mid-cap companies may be more volatile than investments in large-cap
companies. To the extent the Fund invests in convertible securities and U.S.
Government securities, your investment may have interest rate or credit risk.
The Fund's investments in foreign securities have foreign risk and currency
risk.
The table and bar chart provide an indication of the historical risk of an
investment in the Fund.
PERFORMANCE TABLE
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1 YEAR 5 YEARS 10 YEARS
CLASS A -6.90% 14.39% 15.02%
CLASS B -7.00% 14.43% 14.87%
CLASS C -4.62% 14.35% 14.85%
S&P MIDCAP 400 INDEX 19.11% 18.84% 19.29%
Average annual total returns are for the periods ended December 31, 1998 and
reflect imposition of the maximum front-end or contingent deferred sales
charges as well as conversion of Class B shares to Class A shares after the
applicable period. Index returns are from 12/31/88.
Performance information for periods prior to the inception of Class B shares
(3/4/91) and Class C shares (5/3/93) is the performance of the Fund's Class A
shares adjusted to reflect the higher expense ratio of Class B and Class C
shares. The average annual total returns for Class B and Class C since their
actual inception dates were 14.38% and 15.19%, respectively. Index returns for
the comparable periods (which date from month-end following applicable Class
inception date) were 18.35% and 18.39%, respectively.
BAR CHART
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The annual returns in the bar chart are for the Fund's Class A shares and do not
reflect sales loads. If sales loads were reflected, returns would be less than
those shown. Through 9/30/99, the year-to-date unannualized return for Class A
shares was 5.92%.
23.42 -4.36 33.91 14.70 14.26 -2.51 34.84 17.54 36.01 -2.72
- -----------------------------------------------------------------------------
89 90 91 92 93 94 95 96 97 98
Calendar Year Ended
You should consider an investment in the Fund as a long-term investment. The
Fund's returns will fluctuate over long and short periods. For example, during
the period shown in the bar chart, the Fund's:
BEST QUARTER WAS UP 23.72%, 4TH QUARTER, 1998; AND WORST QUARTER WAS DOWN
- -24.32%, 3RD QUARTER, 1998.
9
TOTAL RETURN FUNDS
The Total Return Funds offer investors seeking both growth of capital and
current income a range of investment alternatives.
ALLIANCE GROWTH & INCOME FUND
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OBJECTIVE:
THE FUND'S INVESTMENT OBJECTIVE IS APPRECIATION THROUGH INVESTMENTS PRIMARILY
IN DIVIDEND-PAYING COMMON STOCKS OF GOOD QUALITY, ALTHOUGH THE FUND ALSO MAY
INVEST IN FIXED-INCOME AND CONVERTIBLE SECURITIES.
PRINCIPAL INVESTMENT STRATEGIES AND RISKS:
The Fund invests primarily in dividend-paying common stocks of large,
well-established "blue-chip" companies. The Fund also may invest in
fixed-income and convertible securities and in securities of foreign issuers.
Among the principal risks of investing in the Fund are market risk, interest
rate risk and credit risk. The Fund's investments in foreign securities have
currency risk and foreign risk.
The table and bar chart provide an indication of the historical risk of an
investment in the Fund.
PERFORMANCE TABLE
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1 YEAR 5 YEARS 10 YEARS
CLASS A 16.14% 19.62% 16.03%
CLASS B 16.24% 19.73% 15.80%
CLASS C 19.59% 19.79% 15.64%
RUSSELL 1000 VALUE INDEX 15.63% 20.85% 17.39%
Average annual total returns are for the periods ended December 31, 1998 and
reflect imposition of the maximum front-end or contingent deferred sales
charges as well as conversion of Class B shares to Class A shares after the
applicable period. Index returns are from 12/31/88.
Performance information for periods prior to the inception of Class B shares
(2/8/91) and Class C shares (5/3/93) is the performance of the Fund's Class A
shares adjusted to reflect the higher expense ratio of Class B and Class C
shares. The average annual total returns for Class B and Class C since their
actual inception dates were 15.76% and 18.76%, respectively. Index returns for
the comparable periods (which date from month-end following applicable Class
inception date) were 18.86% and 19.90%, respectively.
BAR CHART
- -------------------------------------------------------------------------------
The annual returns in the bar chart are for the Fund's Class A shares and do not
reflect sales loads. If sales loads were reflected, returns would be less than
those shown. Through 9/30/99, the year-to-date unannualized return for Class A
shares was 3.15%.
25.56 -1.69 27.08 4.52 9.96 -4.20 37.86 24.13 28.86 21.23
- -----------------------------------------------------------------------------
89 90 91 92 93 94 95 96 97 98
Calendar Year Ended
You should consider an investment in the Fund as a long-term investment. The
Fund's returns will fluctuate over long and short periods. For example, during
the period shown in the bar chart, the Fund's:
BEST QUARTER WAS UP 23.25%, 4TH QUARTER, 1998; AND WORST QUARTER WAS DOWN
- -13.82%, 3RD QUARTER, 1998.
10
ALLIANCE BALANCED SHARES
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OBJECTIVE:
THE FUND'S INVESTMENT OBJECTIVE IS HIGH RETURN THROUGH A COMBINATION OF CURRENT
INCOME AND CAPITAL APPRECIATION.
PRINCIPAL INVESTMENT STRATEGIES AND RISKS:
The Fund invests in a diversified portfolio of equity and fixed-income
securities. The percentage of the Fund's assets invested in each type of
security will vary, but the Fund will not purchase a security if as a result
less than 25% of the Fund's total assets will be invested in fixed-income
senior securities. The Fund invests in common and preferred stocks, U.S.
Government and agency securities, bonds and senior debt securities. The Fund's
investments in each type of security depends on current economic conditions and
market outlooks. The Fund also may invest up to 15% of its total assets in
foreign equity and fixed-income securities.
Among the principal risks of investing in the Fund are market risk, interest
rate risk, allocation risk and credit risk. To the extent the Fund invests in
foreign securities, your investment has currency risk and foreign risk.
The table and bar chart provide an indication of the historical risk of an
investment in the Fund.
PERFORMANCE TABLE
- -------------------------------------------------------------------------------
1 YEAR 5 YEARS 10 YEARS
CLASS A 10.84% 12.95% 11.25%
CLASS B 10.78% 13.04% 11.11%
CLASS C 13.89% 13.08% 10.96%
S&P 500 INDEX 28.60% 24.05% 19.19%
Average annual total returns are for the periods ended December 31, 1998 and
reflect imposition of the maximum front-end or contingent deferred sales
charges as well as conversion of Class B shares to Class A shares after the
applicable period. Index returns are from 12/31/88.
Performance information for periods prior to the inception of Class B shares
(2/4/91) and Class C shares (5/3/93) is the performance of the Fund's Class A
shares adjusted to reflect the higher expense ratio of Class B and Class C
shares. The average annual total returns for Class B and Class C since their
actual inception dates were 11.87% and 12.75%, respectively. Index returns for
the comparable periods (which date from month-end following applicable Class
inception date) were 19.56% and 22.38%, respectively.
BAR CHART
- -------------------------------------------------------------------------------
The annual returns in the bar chart are for the Fund's Class A shares and do not
reflect sales loads. If sales loads were reflected, returns would be less than
those shown. Through 9/30/99, the year-to-date unannualized return for Class A
shares was -0.17%.
14.12 -2.20 20.47 6.81 9.93 -5.79 26.64 9.36 27.13 15.75
- -----------------------------------------------------------------------------
89 90 91 92 93 94 95 96 97 98
Calendar Year Ended
You should consider an investment in the Fund as a long-term investment. The
Fund's returns will fluctuate over long and short periods. For example, during
the period shown in the bar chart, the Fund's:
BEST QUARTER WAS UP 13.45%, 4TH QUARTER, 1998; AND WORST QUARTER WAS DOWN
- -8.21%, 3RD QUARTER, 1990.
11
ALLIANCE UTILITY INCOME FUND
- -------------------------------------------------------------------------------
OBJECTIVE:
THE FUND'S INVESTMENT OBJECTIVE IS CURRENT INCOME AND CAPITAL APPRECIATION BY
INVESTING PRIMARILY IN EQUITY AND FIXED-INCOME SECURITIES OF COMPANIES IN THE
UTILITIES INDUSTRY.
PRINCIPAL INVESTMENT STRATEGIES AND RISKS:
The Fund invests primarily in income-producing equity securities. The Fund
invests in securities of utility companies in the electric, telecommunications,
gas, and water utility industries. The Fund may invest in both U.S. and foreign
utility companies, although the Fund will limit its investments in issuers in
any one foreign country to no more than 15% of its total assets. The Fund may
maintain up to 35% of its net assets in lower-rated securities and up to 30% of
its net assets in convertible securities.
Among the principal risks of investing in the Fund are market risk, interest
rate risk and credit risk. Because the Fund invests a substantial portion of
its assets in companies in a specific industry, there is the risk that factors
affecting utility companies will have a significant effect on the value of the
Fund's investments. To the extent the Fund invests in lower-rated securities,
your investment is subject to more credit risk than a fund that invests in
higher-rated securities.
The table and bar chart provide an indication of the historical risk of an
investment in the Fund.
PERFORMANCE TABLE
- -------------------------------------------------------------------------------
SINCE
1 YEAR 5 YEARS INCEPTION
CLASS A 19.09% 13.02% 13.44%
CLASS B 19.46% 13.23% 13.56%
CLASS C 22.42% 13.25% 13.65%
NYSE UTILITIES INDEX 33.04% 14.17% 12.58%
Average annual total returns are for the periods ended December 31, 1998 and
reflect imposition of the maximum front-end or contingent deferred sales
charges as well as conversion of Class B shares to Class A shares after the
applicable period. Inception dates are 10/18/93 for Class A shares and Class B
shares and 10/27/93 for Class C shares. Index return is from 10/31/93.
BAR CHART
The annual returns in the bar chart are for the Fund's Class A shares and do
not reflect sales loads. If sales loads were reflected, returns would be less
than those shown. Through 9/30/99, the year-to-date unannualized return for
Class A shares was 7.69%.
n/a n/a n/a n/a n/a -10.94 22.93 8.28 30.65 24.38
- -----------------------------------------------------------------------------
89 90 91 92 93 94 95 96 97 98
Calendar Year Ended
You should consider an investment in the Fund as a long-term investment. The
Fund's returns will fluctuate over long and short periods. For example, during
the period shown in the bar chart, the Fund's:
BEST QUARTER WAS UP 15.65%, 4TH QUARTER, 1997; AND WORST QUARTER WAS DOWN
- -7.50%, 1ST QUARTER, 1994.
12
ALLIANCE REAL ESTATE INVESTMENT FUND
- -------------------------------------------------------------------------------
OBJECTIVE:
THE FUND'S INVESTMENT OBJECTIVE IS TOTAL RETURN FROM LONG-TERM GROWTH OF
CAPITAL AND INCOME PRINCIPALLY THROUGH INVESTING IN EQUITY SECURITIES OF
COMPANIES THAT ARE PRIMARILY ENGAGED IN OR RELATED TO THE REAL ESTATE INDUSTRY.
PRINCIPAL INVESTMENT STRATEGIES AND RISKS:
The Fund invests primarily in equity securities of real estate investment
trusts or "REITs" and other real estate industry companies. The Fund invests in
real estate companies that Alliance believes have strong property fundamentals
and management teams. The Fund seeks to invest in real estate companies whose
underlying portfolios are diversified geographically and by property type. The
Fund may invest up to 35% of its total assets in mortgage-backed securities,
which are securities that directly or indirectly represent participations in,
or are collateralized by and payable from, mortgage loans secured by real
property.
Among the principal risks of investing in the Fund are market risk, interest
rate risk and credit risk. Because the Fund invests a substantial portion of
its assets in the real estate market, it has many of the same risks as direct
ownership of real estate including the risk that the value of real estate could
decline due to a variety of factors affecting the real estate market. In
addition, REITs are dependent on the capability of their managers, may have
limited diversification, and could be significantly affected by changes in tax
laws. Because the Fund invests in mortgage-backed securities, it is subject to
the risk that mortgage loans will be prepaid when interest rates decline,
forcing the Fund to reinvest in securities with lower interest rates. For this
and other reasons, mortgage-backed securities may have significantly greater
price and yield volatility than traditional debt securities.
The table and bar chart provide an indication of the historical risk of an
investment in the Fund.
PERFORMANCE TABLE
- -------------------------------------------------------------------------------
SINCE
1 YEAR INCEPTION
CLASS A -23.59% 5.43%
CLASS B -23.85% 5.91%
CLASS C -21.52% 6.77%
S&P 500 INDEX 28.60% 31.37%
Average annual total returns are for the periods ended December 31, 1998 and
reflect imposition of the maximum front-end or contingent deferred sales
charges as well as conversion of Class B shares to Class A shares after the
applicable period. Inception dates are 10/1/96 for Class A, Class B and Class C
shares. Index return is from 10/31/96.
BAR CHART
- -------------------------------------------------------------------------------
The annual returns in the bar chart are for the Fund's Class A shares and do not
reflect sales loads. If sales loads were reflected, returns would be less than
those shown. Through 9/30/99, the year-to-date unannualized return for Class A
shares was -5.26%.
n/a n/a n/a n/a n/a n/a n/a n/a 22.98 -20.22
- -----------------------------------------------------------------------------
89 90 91 92 93 94 95 96 97 98
Calendar Year Ended
You should consider an investment in the Fund as a long-term investment. The
Fund's returns will fluctuate over long and short periods. For example, during
the period shown in the bar chart, the Fund's:
BEST QUARTER WAS UP 14.55%, 3RD QUARTER, 1997; AND WORST QUARTER WAS DOWN
- -12.33%, 3RD QUARTER, 1998.
13
GLOBAL STOCK FUNDS
The Global Stock Funds offer investors seeking long-term capital appreciation a
range of alternative approaches to investing in foreign securities.
ALLIANCE NEW EUROPE FUND
- -------------------------------------------------------------------------------
OBJECTIVE:
THE FUND'S INVESTMENT OBJECTIVE IS LONG-TERM CAPITAL APPRECIATION THROUGH
INVESTMENTS PRIMARILY IN THE EQUITY SECURITIES OF COMPANIES BASED IN EUROPE.
PRINCIPAL INVESTMENT STRATEGIES AND RISKS:
The Fund invests primarily in equity securities of European companies. The Fund
diversifies its investments among a number of European countries and normally
invests in companies based in at least three of these countries, although it
may invest 25% or more of its assets in issuers in a single country. The Fund
may invest up to 35% of its total assets in high-quality U.S. Dollar or foreign
currency denominated fixed-income securities issued or guaranteed by European
governmental entities, European or multinational companies, or supranational
organizations. At December 31, 1998, the Fund had approximately 26% of its
assets invested in securities of United Kingdom issuers.
Among the principal risks of investing in the Fund are market risk, foreign
risk and currency risk. In addition, the Fund's investments in U.S. Dollar or
foreign currency denominated fixed-income securities have interest rate and
credit risk.
The table and bar chart provide an indication of the historical risk of an
investment in the Fund.
PERFORMANCE TABLE
- -------------------------------------------------------------------------------
SINCE
1 YEAR 5 YEARS INCEPTION
CLASS A 19.67% 15.92% 11.28%
CLASS B 20.12% 16.10% 11.43%
CLASS C 23.10% 16.11% 11.26%
MSCI EUROPE INDEX 28.91% 19.53% 15.40%
Average annual total returns are for the periods ended December 31, 1998 and
reflect imposition of the maximum front-end or contingent deferred sales
charges as well as conversion of Class B shares to Class A shares after the
applicable period. Inception date of Class A shares is 4/2/90. Index returns
are from month-end of applicable class inception date.
Performance information for periods prior to the inception of Class B shares
(3/5/91) and Class C shares (5/3/93) is the performance of the Fund's Class A
shares adjusted to reflect the higher expense ratio of Class B and Class C
shares. The average annual total returns for Class B and Class C since their
actual inception dates were 13.28% and 17.74%, respectively. Index returns for
the comparable periods were 16.58% and 20.78%, respectively.
BAR CHART
- -------------------------------------------------------------------------------
The annual returns in the bar chart are for the Fund's Class A shares and do not
reflect sales loads. If sales loads were reflected, returns would be less than
those shown. Through 9/30/99, the year-to-date unannualized return for Class A
shares was 1.03%.
n/a n/a 3.30 -0.53 34.57 4.64 18.63 20.58 16.83 24.99
- -----------------------------------------------------------------------------
89 90 91 92 93 94 95 96 97 98
Calendar Year Ended
You should consider an investment in the Fund as a long-term investment. The
Fund's returns will fluctuate over long and short periods. For example, during
the period shown in the bar chart, the Fund's:
BEST QUARTER WAS UP 22.41%, 1ST QUARTER, 1998; AND WORST QUARTER WAS DOWN
- -19.73%, 3RD QUARTER, 1998.
14
ALLIANCE WORLDWIDE PRIVATIZATION FUND
- -------------------------------------------------------------------------------
OBJECTIVE:
THE FUND'S INVESTMENT OBJECTIVE IS LONG-TERM CAPITAL APPRECIATION.
PRINCIPAL INVESTMENT STRATEGIES AND RISKS:
The Fund invests primarily in equity securities of companies that are
undergoing, or have undergone, privatization. The Fund also invests in
securities of companies that will benefit from privatizations. The Fund takes
advantage of investment opportunities, historically inaccessible to U.S.
individual investors, that result from the privatization of state enterprises
in both established and developing economies. Because privatizations are
integral to a country's economic restructuring, securities sold in initial
public offerings often are attractively priced to secure the issuer's
transition to private sector ownership. In addition, these enterprises often
dominate their local markets and have the potential for significant managerial
and operational efficiency gains.
The Fund diversifies its investments among a number of countries and normally
invests in issuers based in four, and usually considerably more, countries. The
Fund may invest up to 30% of its total assets in any one of France, Germany,
Great Britain, Italy, and Japan and may invest all of its assets in a single
world region. The Fund also may invest up to 35% of its total assets in debt
securities and convertible debt securities of privatized companies.
Among the principal risks of investing in the Fund are market risk, foreign
risk and currency risk. Investments in companies that are undergoing, or have
undergone, privatization could have more risk because they have no operating
history as a private company. In addition, the Fund's investments in U.S.
Dollar or foreign currency denominated fixed-income securities have interest
rate and credit risk.
The table and bar chart provide an indication of the historical risk of an
investment in the Fund.
PERFORMANCE TABLE
- -------------------------------------------------------------------------------
SINCE
1 YEAR INCEPTION
CLASS A 4.25% 9.61%
CLASS B 4.55% 9.88%
CLASS C 7.22% 9.88%
MSCI WORLD INDEX (MINUS THE U.S.) 19.11% 8.72%
Average annual total returns are for the periods ended December 31, 1998 and
reflect imposition of the maximum front-end or contingent deferred sales
charges as well as conversion of Class B shares to Class A shares after the
applicable period. Inception date of Class A and Class B shares is 6/2/94.
Index returns are from month-end of applicable class inception date.
Performance information for periods prior to the inception of Class C shares
(2/8/95) is the performance of the Fund's Class A shares adjusted to reflect
the higher expense ratio of Class C shares. The average annual total return for
Class C since its actual inception date was 13.11%. Index return for the
comparable period was 11.60%.
BAR CHART
- -------------------------------------------------------------------------------
The annual returns in the bar chart are for the Fund's Class A shares and do not
reflect sales loads. If sales loads were reflected, returns would be less than
those shown. Through 9/30/99, the year-to-date unannualized return for Class A
shares was 16.54%.
n/a n/a n/a n/a n/a n/a 4.91 23.14 13.18 8.92
- -----------------------------------------------------------------------------
89 90 91 92 93 94 95 96 97 98
Calendar Year Ended
You should consider an investment in the Fund as a long-term investment. The
Fund's returns will fluctuate over long and short periods. For example, during
the period shown in the bar chart, the Fund's:
BEST QUARTER WAS UP 16.49%, 1ST QUARTER, 1998; AND WORST QUARTER WAS DOWN
- -17.44%, 3RD QUARTER, 1998.
15
ALLIANCE INTERNATIONAL PREMIER GROWTH FUND
- -------------------------------------------------------------------------------
OBJECTIVE:
THE FUND'S INVESTMENT OBJECTIVE IS LONG-TERM GROWTH OF CAPITAL BY INVESTING
PREDOMINANTLY IN EQUITY SECURITIES OF A LIMITED NUMBER OF CAREFULLY SELECTED
NON-U.S. COMPANIES THAT ARE JUDGED LIKELY TO ACHIEVE SUPERIOR EARNINGS GROWTH.
CURRENT INCOME IS INCIDENTAL TO THE FUND'S OBJECTIVE.
PRINCIPAL INVESTMENT STRATEGIES AND RISKS:
The Fund invests primarily in equity securities of comparatively large,
high-quality, non-U.S. companies. The Fund invests in at least four, and
usually considerably more, countries. Normally, the Fund invests no more than
15% of its total assets in issuers of any one foreign country, but may invest
up to 25% of its total assets in each of Canada, France, Germany, Italy, Japan,
The Netherlands, Switzerland and the United Kingdom. Unlike more typical
international equity funds, the Fund focuses on a relatively small number of
intensively researched companies. Alliance selects the Fund's investments from
a research universe of approximately 900 companies.
Normally, the Fund invests in about 40 companies, with the 30 most highly
regarded of these companies usually constituting approximately 70%, and often
more, of the Fund's net assets. The Fund invests in companies with market
values generally in excess of $10 billion. Alliance may take advantage of
market volatility to adjust the Fund's portfolio positions. To the extent
consistent with local market liquidity considerations, the Fund strives to
capitalize on apparently unwarranted price fluctuations, both to purchase or
increase positions on weakness and to sell or reduce overpriced holdings. The
Fund invests primarily in equity securities and also may invest in convertible
securities.
Among the principal risks of investing in the Fund are market risk, foreign
risk and currency risk. In addition, since the Fund invests in a smaller number
of securities than many other international equity funds, changes in the value
of a single security may have a more significant effect, either negative or
positive, on the Fund's net asset value.
BAR CHART AND PERFORMANCE TABLE:
There is no bar chart or performance table for the Fund because it has not
completed a full calendar year of operations.
16
ALLIANCE GLOBAL SMALL CAP FUND
- -------------------------------------------------------------------------------
OBJECTIVE:
THE FUND'S INVESTMENT OBJECTIVE IS LONG-TERM GROWTH OF CAPITAL THROUGH
INVESTMENT IN A GLOBAL PORTFOLIO OF EQUITY SECURITIES OF SELECTED COMPANIES
WITH RELATIVELY SMALL MARKET CAPITALIZATIONS.
PRINCIPAL INVESTMENT STRATEGIES AND RISKS:
The Fund invests primarily in equity securities of global companies, both
domestic and foreign, with relatively small market capitalizations. The Fund's
investments emphasize companies that are in the smallest 20% of the U.S. stock
market (or less than approximately $1.5 billion). Although these companies are
small by U.S. standards, they may be among the largest companies in their own
countries. The Fund may invest up to 35% of its total assets in securities of
companies whose market capitalizations exceed the Fund's size standard. The
Fund invests in at least three countries, including the U.S.
Among the principal risks of investing in the Fund are market risk, foreign
risk and currency risk. Investments in smaller companies tend to be more
volatile than investments in large-cap or mid-cap companies.
The table and bar chart provide an indication of the historical risk of an
investment in the Fund.
PERFORMANCE TABLE
- -------------------------------------------------------------------------------
1 YEAR 5 YEARS 10 YEARS
CLASS A -0.85% 9.19% 7.59%
CLASS B -0.86% 9.37% 7.46%
CLASS C 1.86% 9.37% 7.30%
MSCI WORLD INDEX 24.80% 16.19% 11.21%
Average annual total returns are for the periods ended December 31, 1998 and
reflect imposition of the maximum front-end or contingent deferred sales charge
as well as conversion of Class B shares to Class A shares after the applicable
period. Index returns are from 12/31/88.
Performance information for periods prior to the inception of Class B shares
(9/17/90) and Class C shares (5/3/93) is the performance of the Fund's Class A
shares adjusted to reflect the higher expense ratio of Class B and Class C
shares. The average annual total returns for Class B and Class C since their
actual inception dates were 8.99% and 10.97%, respectively. Index returns for
the comparable periods (which date from month-end following applicable class
inception date) were 15.35% and 15.52%, respectively.
BAR CHART
- -------------------------------------------------------------------------------
The annual returns in the bar chart are for the Fund's Class A shares and do not
reflect sales loads. If sales loads were reflected, returns would be less than
those shown. Through 9/30/99, the year-to-date unannualized return for Class A
shares was 11.16%.
24.60 -24.89 25.29 -4.89 20.04 -4.55 27.18 19.37 8.08 3.56
- -----------------------------------------------------------------------------
89 90 91 92 93 94 95 96 97 98
Calendar Year Ended
You should consider an investment in the Fund as a long-term investment. The
Fund's returns will fluctuate over long and short periods. For example, during
the period shown in the bar chart, the Fund's:
BEST QUARTER WAS UP 18.10%, 1ST QUARTER, 1991; AND WORST QUARTER WAS DOWN
- -26.77%, 3RD QUARTER, 1990.
17
ALLIANCE INTERNATIONAL FUND
- -------------------------------------------------------------------------------
OBJECTIVE:
THE FUND'S INVESTMENT OBJECTIVE IS TOTAL RETURN FROM LONG-TERM GROWTH OF
CAPITAL AND INCOME PRIMARILY THROUGH INVESTMENT IN A BROAD PORTFOLIO OF
MARKETABLE SECURITIES OF ESTABLISHED NON-U.S. COMPANIES, COMPANIES
PARTICIPATING IN FOREIGN ECONOMIES WITH PROSPECTS FOR GROWTH, INCLUDING U.S.
COMPANIES HAVING THEIR PRINCIPAL ACTIVITIES AND INTERESTS OUTSIDE THE U.S. AND
IN FOREIGN GOVERNMENT SECURITIES.
PRINCIPAL INVESTMENT STRATEGIES AND RISKS:
The Fund invests primarily in equity securities of established non-U.S.
companies, companies participating in foreign economies with prospects for
growth, including U.S. companies having their principal activities and
interests outside the U.S., and foreign government securities. The Fund
diversifies its investments broadly among countries and normally invests in
companies in at least three foreign countries, although it may invest a
substantial portion of its assets in companies in one or more foreign countries.
Among the principal risks of investing in the Fund are market risk, foreign
risk and currency risk.
The table and bar chart provide an indication of the historical risk of an
investment in the Fund.
PERFORMANCE TABLE
- -------------------------------------------------------------------------------
1 YEAR 5 YEARS 10 YEARS
CLASS A 5.00% 5.84% 5.81%
CLASS B 4.90% 5.91% 5.60%
CLASS C 7.81% 5.88% 5.51%
MSCI EAFE INDEX 20.33% 9.50% 5.85%
Average annual total returns are for the periods ended December 31, 1998 and
reflect imposition of the maximum front-end or contingent deferred sales
charges as well as conversion of Class B shares to Class A shares after the
applicable period. Index returns are from 12/31/88.
Performance information for periods prior to the inception of Class B shares
(9/17/90) and Class C shares (5/3/93) is the performance of the Fund's Class A
shares adjusted to reflect the higher expense ratio of Class B and Class C
shares. The average annual total returns for Class B and Class C since their
actual inception dates were 5.47% and 6.76%, respectively. Index returns for
the comparable periods (which date from month-end following applicable class
inception date) were 10.60% and 9.60%, respectively.
BAR CHART
- -------------------------------------------------------------------------------
The annual returns in the bar chart are for the Fund's Class A shares and do not
reflect sales loads. If sales loads were reflected, returns would be less than
those shown. Through 9/30/99, the year-to-date unannualized return for Class A
shares was 6.97%.
29.62 -20.95 7.72 -5.86 27.51 5.68 10.10 7.20 1.41 9.64
- -----------------------------------------------------------------------------
89 90 91 92 93 94 95 96 97 98
Calendar Year Ended
You should consider an investment in the Fund as a long-term investment. The
Fund's returns will fluctuate over long and short periods. For example, during
the period shown in the bar chart, the Fund's:
BEST QUARTER WAS UP 15.69%, 4TH QUARTER, 1998; AND WORST QUARTER WAS DOWN
- -22.29%, 3RD QUARTER, 1990.
18
ALLIANCE GREATER CHINA '97 FUND
- -------------------------------------------------------------------------------
OBJECTIVE:
THE FUND'S INVESTMENT OBJECTIVE IS LONG-TERM CAPITAL APPRECIATION THROUGH
INVESTMENT OF AT LEAST 80% OF ITS TOTAL ASSETS IN EQUITY SECURITIES OF GREATER
CHINA COMPANIES.
PRINCIPAL INVESTMENT STRATEGIES AND RISKS:
The Fund invests in equity securities of Greater China companies, which are
companies in China, Hong Kong, and Taiwan. Of these countries, the Fund expects
to invest a significant portion of its assets, which may be greater than 50%,
in Hong Kong companies and may invest all of its assets in Hong Kong companies
or companies of either of the other Greater China countries. The Fund also may
invest in convertible securities and equity-linked debt securities issued or
guaranteed by Greater China companies or Greater China Governments, their
agencies, or instrumentalities. As of December 31, 1998, the Fund had
approximately 75% of its assets invested in securities of Hong Kong companies.
Among the principal risks of investing in the Fund are market risk, foreign
risk and currency risk. Because it invests in Greater China companies, the
Fund's returns will be significantly more volatile and differ substantially
from U.S. markets generally. Your investment also has the risk that market
changes or other events affecting the Greater China countries, including
political instability and unpredictable economic conditions, may have a more
significant effect on the Fund's net asset value. In addition, the Fund is
"non-diversified," meaning that it invests its assets in a smaller number of
companies than many other international funds. As a result, changes in the
value of a single security may have a more significant effect, either negative
or positive, on the Fund's net asset value. The Fund's investments in debt
securities have interest rate and credit risk.
The table and bar chart provide an indication of the historical risk of an
investment in the Fund.
PERFORMANCE TABLE
- -------------------------------------------------------------------------------
SINCE
1 YEAR INCEPTION
CLASS A -11.98% -29.28%
CLASS B -12.36% -29.07%
CLASS C -9.89% -27.52%
MSCI CHINA FREE INDEX -43.83% -54.48%
MSCI HONG KONG INDEX -2.92% -25.58%
MSCI TAIWAN INDEX -20.64% -30.14%
Average annual total returns are for the periods ended December 31, 1998 and
reflect imposition of the maximum front-end or contingent deferred sales charge
as well as conversion of Class B shares to Class A shares after the applicable
period. Inception dates are 9/3/97 for Class A, Class B, and Class C shares.
Index returns are from 9/30/97.
BAR CHART
- -------------------------------------------------------------------------------
The annual returns in the bar chart are for the Fund's Class A shares and do not
reflect sales loads. If sales loads were reflected, returns would be less than
those shown. Through 9/30/99, the year-to-date unannualized return for Class A
shares was 22.48%.
n/a n/a n/a n/a n/a n/a n/a n/a n/a -8.02
- -----------------------------------------------------------------------------
89 90 91 92 93 94 95 96 97 98
Calendar Year Ended
You should consider an investment in the Fund as a long-term investment. The
Fund's returns will fluctuate over long and short periods. For example, during
the period shown in the bar chart, the Fund's:
BEST QUARTER WAS UP 27.48%, 4TH QUARTER, 1998; AND WORST QUARTER WAS DOWN
- -26.95%, 2ND QUARTER, 1998.
19
ALLIANCE ALL-ASIA INVESTMENT FUND
- -------------------------------------------------------------------------------
OBJECTIVE:
THE FUND'S INVESTMENT OBJECTIVE IS LONG-TERM CAPITAL APPRECIATION.
PRINCIPAL INVESTMENT STRATEGIES AND RISKS:
The Fund primarily invests in securities of various types of companies based in
Asia. The Fund invests in equity securities, preferred stocks, and
equity-linked debt securities issued by Asian companies and may invest more
than 50% of its total assets in equity securities of Japanese issuers. The Fund
also may invest up to 35% of its total assets in debt securities issued or
guaranteed by Asian companies or by Asian governments, their agencies or
instrumentalities, and may invest up to 25% of its net assets in convertible
securities. At December 31, 1998, the Fund had approximately 60% of its total
assets invested in securities of Japanese companies.
Among the principal risks of investing in the Fund are market risk, foreign
risk and currency risk. Because it invests in Asian and Pacific region
countries and emerging markets, the Fund's returns will be significantly more
volatile and may differ substantially from the overall U.S. market generally.
Your investment has the risk that market changes or other factors affecting
Asian and Pacific region countries and other emerging markets, including
political instability and unpredictable economic conditions, may have a more
significant effect on the Fund's net asset value. To the extent that the Fund
invests a substantial amount of its assets in Japanese companies, your
investment has the risk that market changes or other events affecting that
country may have a more significant effect on the Fund's net asset value. In
addition, the Fund's investments in debt securities have interest rate and
credit risk.
The table and bar chart provide an indication of the historical risk of an
investment in the Fund.
PERFORMANCE TABLE
- -------------------------------------------------------------------------------
SINCE
1 YEAR INCEPTION
CLASS A -16.07% -10.73%
CLASS B -16.63% -10.41%
CLASS C -13.74% -10.34%
MSCI ALL COUNTRY ASIA PACIFIC INDEX 2.03% -8.49%
Average annual total returns are for the periods ended December 31, 1998 and
reflect imposition of the maximum front-end or contingent deferred sales
charges as well as conversion of Class B shares to Class A shares after the
applicable period. Inception dates are 11/28/94 for Class A, Class B, and Class
C shares. Index return is from 11/30/94.
BAR CHART
The annual returns in the bar chart are for the Fund's Class A shares and do
not reflect sales loads. If sales loads were reflected, returns would be less
than those shown. Through 9/30/99, the year-to-date unannualized return for
Class A shares was 57.59%.
n/a n/a n/a n/a n/a n/a 10.21 4.58 -35.10 -12.34
- -----------------------------------------------------------------------------
89 90 91 92 93 94 95 96 97 98
Calendar Year Ended
You should consider an investment in the Fund as a long-term investment. The
Fund's returns will fluctuate over long and short periods. For example, during
the period shown in the bar chart, the Fund's:
BEST QUARTER WAS UP 13.67%, 4TH QUARTER, 1998; AND WORST QUARTER WAS DOWN
- -18.81%, 4TH QUARTER, 1997.
20
ALLIANCE GLOBAL ENVIRONMENT FUND
- -------------------------------------------------------------------------------
OBJECTIVE:
THE FUND'S INVESTMENT OBJECTIVE IS LONG-TERM CAPITAL APPRECIATION THROUGH
INVESTMENT OF SUBSTANTIALLY ALL OF ITS ASSETS IN EQUITY SECURITIES OF COMPANIES
THAT ARE EXPECTED TO BENEFIT FROM ADVANCES OR IMPROVEMENTS IN PRODUCTS,
PROCESSES OR SERVICES INTENDED TO FOSTER THE PROTECTION OF THE ENVIRONMENT.
PRINCIPAL INVESTMENT STRATEGIES AND RISKS:
The Fund invests primarily in environmental companies, which are companies
whose principal business involves the sale of environmental protection systems
or services. The Fund also invests in companies whose principal business lies
outside the environmental sector but who anticipate environmental regulations
or consumer preferences through the development of new products or services
that would contribute to a cleaner and healthier environment. The Fund will
invest substantially all of its assets in these two types of companies. The
Fund invests in securities of companies in at least three, and normally
considerably more, countries. At December 31, 1998, the Fund had approximately
82% invested in equity securities of U.S. companies.
Among the principal risks of investing in the Fund are market risk, foreign
risk and currency risk. Because it invests in non-U.S. companies and in
specific types of companies that provide environmental services, the Fund's
returns will be more volatile and differ, sometimes substantially, from the
overall U.S. market generally. The Fund's investments also have the risk that
government regulations or other action could negatively affect the business of
environmental companies.
The table and bar chart provide an indication of the historical risk of an
investment in the Fund.
PERFORMANCE TABLE
- -------------------------------------------------------------------------------
SINCE
1 YEAR 5 YEARS INCEPTION
CLASS A -7.60% 11.03% 4.29%
CLASS B -6.16% 11.83% 4.46%
CLASS C -4.72% 11.83% 4.44%
S&P 500 INDEX 28.60% 24.05% 18.61%
Average annual total returns are for the periods ended December 31, 1998 and
reflect imposition of the maximum front-end or contingent deferred sales
charges as well as conversion of Class B shares to Class A shares after the
applicable period. Inception date of Class A shares is 6/1/90. Index returns
are from month-end of applicable class inception date.
Performance information for periods prior to the inception of Class B shares
(10/6/97) and Class C shares (11/5/97) is the performance of the Fund's Class A
shares adjusted to reflect the higher expense ratio of Class B and Class C
shares. The average annual total returns for Class B and Class C since their
actual inception dates were -7.39%, and -4.28%, respectively. Index returns for
the comparable periods were 30.76% and 28.23%, respectively.
BAR CHART
The annual returns in the bar chart are for the Fund's Class A shares and do
not reflect sales loads. If sales loads were reflected, returns would be less
than those shown. Through 9/30/99, the year-to-date unannualized return for
Class A shares was 1.40%.
n/a n/a 5.99 -15.18 -0.44 -2.12 19.30 29.95 20.28 -3.49
- -----------------------------------------------------------------------------
89 90 91 92 93 94 95 96 97 98
Calendar Year Ended
You should consider an investment in the Fund as a long-term investment. The
Fund's returns will fluctuate over long and short periods. For example, during
the period shown in the bar chart, the Fund's:
BEST QUARTER WAS UP 13.50%, 2ND QUARTER, 1996; AND WORST QUARTER WAS DOWN
- -19.87%, 3RD QUARTER, 1998.
21
SUMMARY OF PRINCIPAL RISKS
The value of your investment in a Fund will change with changes in the values
of that Fund's investments. Many factors can affect those values. In this
Summary, we describe the principal risks that may affect a Fund's portfolio as
a whole. These risks and the Funds particularly subject to these risks appear
in a chart at the end of the section. All Funds could be subject to additional
principal risks because the types of investments made by each Fund can change
over time. This Prospectus has additional descriptions of the types of
investments that appear in bold type in the discussions under "Description of
Investment Practices" or "Additional Risk Considerations." These sections also
include more information about the Funds, their investments, and related risks.
MARKET RISK
This is the risk that the value of a Fund's investments will fluctuate as the
stock or bond markets fluctuate and that prices overall will decline over
short- or long-term periods. All of the Alliance Stock Funds are subject to
market risk.
SECTOR RISK
This is the risk of investments in a particular industry sector. Market or
economic factors affecting that industry sector could have a major effect on
the value of a Fund's investments. Funds particularly subject to this risk are
ALLIANCE HEALTH CARE FUND, ALLIANCE TECHNOLOGY FUND, ALLIANCE UTILITY INCOME
FUND, ALLIANCE REAL ESTATE INVESTMENT FUND, ALLIANCE WORLDWIDE PRIVATIZATION
FUND and ALLIANCE GLOBAL ENVIRONMENT FUND. This risk may be greater for
ALLIANCE TECHNOLOGY FUND because technology stocks, especially those of
smaller, less-seasoned companies, tend to be more volatile than the overall
market.
CAPITALIZATION RISK
This is the risk of investments in small- to mid-capitalization companies.
Investments in mid-cap companies may be more volatile than investments in
large-cap companies. ALLIANCE GROWTH FUND and THE ALLIANCE FUND are
particularly subject to this risk. Investments in small-cap companies tend to
be more volatile than investments in large-cap or mid-cap companies. A Fund's
investments in smaller capitalization stocks may have additional risks because
these companies often have limited product lines, markets, or financial
resources. ALLIANCE HEALTH CARE FUND, ALLIANCE QUASAR FUND and ALLIANCE GLOBAL
SMALL CAP FUND are particularly subject to this risk.
INTEREST RATE RISK
This is the risk that changes in interest rates will affect the value of a
Fund's investments in income-producing, fixed-income (i.e., debt) securities.
Increases in interest rates may cause the value of a Fund's investments to
decline and this decrease in value may not be offset by the higher interest
rate income. Interest rate risk is particularly applicable to Funds that invest
in fixed-income securities and is greater for those Alliance Stock Funds that
invest a substantial portion of their assets in fixed-income securities, such
as ALLIANCE GROWTH AND INCOME FUND, ALLIANCE BALANCED SHARES and ALLIANCE
UTILITY INCOME FUND. Interest rate risk is greater for those Funds that invest
in LOWER-RATED SECURITIES or comparable unrated securities ("junk bonds") such
as ALLIANCE UTILITY INCOME FUND. ALLIANCE REAL ESTATE INVESTMENT FUND also has
more exposure to interest rate risk because it invests in real estate industry
companies and in mortgage-backed securities.
CREDIT RISK
This is the risk that the issuer of a security or the other party to an
over-the-counter transaction will be unable or unwilling to make timely
payments of interest or principal, or to otherwise honor its obligations. The
degree of risk for a particular security may be reflected in its CREDIT RATING.
Credit risk is applicable to Funds that invest in fixed-income securities and
is greater for those Alliance Stock Funds that invest a substantial portion of
their assets in LOWER-RATED SECURITIES, such as ALLIANCE UTILITY INCOME FUND.
FOREIGN RISK
This is the risk of investments in issuers located in foreign countries. All
Alliance Stock Funds with FOREIGN SECURITIES are subject to this risk,
including, in particular, ALLIANCE HEALTH CARE FUND, ALLIANCE NEW EUROPE FUND,
ALLIANCE WORLDWIDE PRIVATIZATION FUND, ALLIANCE INTERNATIONAL PREMIER GROWTH
FUND, ALLIANCE GLOBAL SMALL CAP FUND, ALLIANCE INTERNATIONAL FUND, ALLIANCE
GREATER CHINA '97 FUND, ALLIANCE ALL-ASIA INVESTMENT FUND and ALLIANCE GLOBAL
ENVIRONMENT FUND. Funds investing in foreign securities may experience more
rapid and extreme changes in value than Funds with investments solely in
securities of U.S. companies. This is because the securities markets of many
foreign countries are relatively small, with a limited number of companies
representing a small number of industries. Additionally, foreign securities
issuers are usually not subject to the same degree of regulation as U.S.
issuers. Reporting, accounting, and auditing standards of foreign countries
differ, in some cases significantly, from U.S. standards. Also,
nationalization, expropriation or confiscatory taxation, currency blockage, or
political changes or diplomatic developments could adversely affect a Fund's
investments in a foreign country. In the event of nationalization,
expropriation, or other confiscation, a Fund could lose its entire investment.
COUNTRY OR GEOGRAPHIC RISK
This is the risk of investments in issuers located in a particular country or
geographic region. Market changes or other factors affecting that country or
region, including political instability and unpredictable economic conditions,
may have a particularly significant effect on a Fund's net asset value. The
Funds particularly subject to this risk are ALLIANCE NEW EUROPE FUND, ALLIANCE
WORLDWIDE PRIVATIZATION FUND, ALLIANCE INTERNATIONAL FUND, ALLIANCE GREATER
CHINA '97 FUND and ALLIANCE ALL-ASIA INVESTMENT FUND.
22
CURRENCY RISK
This is the risk that fluctuations in the exchange rates between the U.S.
Dollar and foreign currencies may negatively affect the value of a Fund's
investments. Funds with FOREIGN SECURITIES are subject to this risk, including,
in particular, ALLIANCE HEALTH CARE FUND, ALLIANCE NEW EUROPE FUND, ALLIANCE
WORLDWIDE PRIVATIZATION FUND, ALLIANCE INTERNATIONAL PREMIER GROWTH FUND,
ALLIANCE GLOBAL SMALL CAP FUND, ALLIANCE INTERNATIONAL FUND, ALLIANCE GREATER
CHINA '97 FUND, ALLIANCE ALL-ASIA INVESTMENT FUND and ALLIANCE GLOBAL
ENVIRONMENT FUND.
MANAGEMENT RISK
Each Alliance Stock Fund is subject to management risk because it is an
actively managed investment portfolio. Alliance will apply its investment
techniques and risk analyses in making investment decisions for the Funds, but
there is no guarantee that its decisions will produce the intended result.
FOCUSED PORTFOLIO RISK
Funds, such as ALLIANCE PREMIER GROWTH FUND and ALLIANCE INTERNATIONAL PREMIER
GROWTH FUND, that invest in a limited number of companies, may have more risk
because changes in the value of a single security may have a more significant
effect, either negative or positive, on the Fund's net asset value. Similarly,
ALLIANCE GREATER CHINA '97 FUND may have more risk because it is
"non-diversified," meaning that it can invest more of its assets in a smaller
number of companies than many other international funds.
ALLOCATION RISK
ALLIANCE BALANCED SHARES has the risk that the allocation of its investments
between equity and debt securities may have a more significant effect on the
Fund's net asset value when one of these asset classes is performing more
poorly than the other.
PRINCIPAL RISKS BY FUND
- -------------------------------------------------------------------------------
The following chart summarizes the principal risks of each Fund. Risks not
marked for a particular Fund may, however, still apply to some extent to that
Fund at various times.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
CAPITAL- INTEREST COUNTRY OR FOCUSED
MARKET SECTOR IZATION RATE CREDIT FOREIGN GEOGRAPHIC CURRENCY MANAGE- PORTFOLIO ALLOCATION
FUND RISK RISK RISK RISK RISK RISK RISK RISK MENT RISK RISK RISK
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ALLIANCE PREMIER
GROWTH FUND o o o
- -----------------------------------------------------------------------------------------------------------------------------------
ALLIANCE HEALTH
CARE FUND o o o o o o
- -----------------------------------------------------------------------------------------------------------------------------------
ALLIANCE GROWTH FUND o o o o o o o
- -----------------------------------------------------------------------------------------------------------------------------------
ALLIANCE TECHNOLOGY FUND o o o
- -----------------------------------------------------------------------------------------------------------------------------------
ALLIANCE QUASAR FUND o o o
- -----------------------------------------------------------------------------------------------------------------------------------
THE ALLIANCE FUND o o o
- -----------------------------------------------------------------------------------------------------------------------------------
ALLIANCE GROWTH AND
INCOME FUND o o o o
- -----------------------------------------------------------------------------------------------------------------------------------
ALLIANCE BALANCED SHARES o o o o o
- -----------------------------------------------------------------------------------------------------------------------------------
ALLIANCE UTILITY INCOME FUND o o o o o
- -----------------------------------------------------------------------------------------------------------------------------------
ALLIANCE REAL ESTATE
INVESTMENT FUND o o o o o
- -----------------------------------------------------------------------------------------------------------------------------------
ALLIANCE NEW EUROPE FUND o o o o o
- -----------------------------------------------------------------------------------------------------------------------------------
ALLIANCE WORLDWIDE
PRIVATIZATION FUND o o o o o o
- -----------------------------------------------------------------------------------------------------------------------------------
ALLIANCE INTERNATIONAL
PREMIER GROWTH FUND o o o o o
- -----------------------------------------------------------------------------------------------------------------------------------
ALLIANCE GLOBAL
SMALL CAP FUND o o o o o
- -----------------------------------------------------------------------------------------------------------------------------------
ALLIANCE INTERNATIONAL FUND o o o o o
- -----------------------------------------------------------------------------------------------------------------------------------
ALLIANCE GREATER
CHINA '97 FUND o o o o o o
- -----------------------------------------------------------------------------------------------------------------------------------
ALLIANCE ALL-ASIA
INVESTMENT FUND o o o o o
- -----------------------------------------------------------------------------------------------------------------------------------
ALLIANCE GLOBAL
ENVIRONMENT FUND o o o o o
- -----------------------------------------------------------------------------------------------------------------------------------
23
- -------------------------------------------------------------------------------
FEES AND EXPENSES OF THE FUNDS
- -------------------------------------------------------------------------------
This table describes the fees and expenses that you may pay if you buy and
hold shares of the Funds.
SHAREHOLDER FEES (fees paid directly from your investment)
</TABLE>
<TABLE>
<CAPTION>
CLASS A SHARES CLASS B SHARES CLASS C SHARES
-------------- -------------- --------------
<S> <C> <C> <C>
Maximum Sales Charge (Load) Imposed on Purchases
(as a percentage of offering price) 4.25% None None
Maximum Deferred Sales Charge (Load) None 4.0%* 1.0%*
(as a percentage of original purchase
price or redemption proceeds,
whichever is lower)
Exchange Fee None None None
</TABLE>
* Class B shares automatically convert to Class A shares after 8 years. The
CDSC decreases over time. For Class B shares the CDSC DECREASES 1.00% ANNUALLY
TO 0% AFTER THE 4TH YEAR. For Class C shares the CDSC IS 0% after the first
year.
ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from Fund assets)
and EXAMPLES
The Examples are to help you compare the cost of investing in the Funds with
the cost of investing in other funds. They assume that you invest $10,000 in
each Fund for the time periods indicated and then redeem all of your shares at
the end of those periods. They also assume that your investment has a 5% return
each year, that the Fund's operating expenses stay the same and that all
dividends and distributions are reinvested. Your actual costs may be higher or
lower.
<TABLE>
<CAPTION>
OPERATING EXPENSES EXAMPLES
- -------------------------------------------------------- -----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ALLIANCE PREMIER
GROWTH FUND CLASS A CLASS B CLASS C CLASS A CLASS B+ CLASS B++ CLASS C+ CLASS C++
------- ------- ------- ------- -------- --------- -------- --------
Management fees 1.00% 1.00% 1.00% After 1 year $ 580 $ 631 $ 231 $ 331 $ 231
Distribution (12b-1) fees .33% 1.00% 1.00% After 3 years $ 906 $ 912 $ 712 $ 712 $ 712
Other expenses .26% .28% .28% After 5 years $1,254 $1,220 $1,220 $1,220 $1,220
---- ---- ---- After 10 years $2,234 $2,442(b) $2,442(b) $2,615 $2,615
Total fund
operating expenses 1.59% 2.28% 2.28%
==== ==== ====
ALLIANCE HEALTH CARE FUND CLASS A CLASS B CLASS C CLASS A CLASS B+ CLASS B++ CLASS C+ CLASS C++
------- ------- ------- ------- -------- --------- -------- --------
Management fees .95% .95% .95% After 1 year $ 667 $ 723 $ 323 $ 423 $ 323
Distribution (12b-1) fees .30% 1.00% 1.00% After 3 years(c) $1,199 $1,215 $1,015 $1,015 $1,015
Other expenses 1.40% 1.40% 1.40% After 5 years(c) $1,756 $1,731 $1,731 $1,731 $1,731
---- ---- ---- After 10 years(c) $3,271 $3,472(b) $3,472(b) $3,630 $3,630
Total fund
operating expenses 2.65% 3.35% 3.35%
==== ==== ====
Fee waiver and/or expense
reimbursement (a) (.15)% (.15)% (.15)%
Net expenses 2.50% 3.20% 3.20%
ALLIANCE GROWTH FUND CLASS A CLASS B CLASS C CLASS A CLASS B+ CLASS B++ CLASS C+ CLASS C++
------- ------- ------- ------- -------- --------- -------- ---------
Management fees .70% .70% .70% After 1 year $ 544 $ 597 $ 197 $ 296 $ 196
Distribution (12b-1) fees .30% 1.00% 1.00% After 3 years $ 796 $ 809 $ 609 $ 606 $ 606
Other expenses .22% .24% .23% After 5 years $1,067 $1,047 $1,047 $1,042 $1,042
---- ---- ---- After 10 years $1,840 $2,078(b) $2,078(b) $2,254 $2,254
Total fund
operating expenses 1.22% 1.94% 1.93%
==== ==== ====
ALLIANCE TECHNOLOGY FUND CLASS A CLASS B CLASS C CLASS A CLASS B+ CLASS B++ CLASS C+ CLASS C++
------- ------- ------- ------- -------- --------- -------- ---------
Management fees 1.02% 1.02% 1.02% After 1 year $ 587 $ 642 $ 242 $ 343 $ 243
Distribution (12b-1) fees .30% 1.00% 1.00% After 3 years $ 926 $ 945 $ 745 $ 748 $ 748
Other expenses .34% .37% .38% After 5 years $1,289 $1,275 $1,275 $1,280 $1,280
---- ---- ---- After 10 years $2,307 $2,545(b) $2,545(b) $2,736 $2,736
Total fund
operating expenses 1.66% 2.39% 2.40%
==== ==== ====
</TABLE>
PLEASE REFER TO THE FOOTNOTES ON PAGE 26.
24
<TABLE>
<CAPTION>
Operating Expenses Examples
- -------------------------------------------------------- -----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ALLIANCE QUASAR FUND CLASS A CLASS B CLASS C CLASS A CLASS B+ CLASS B++ CLASS C+ CLASS C++
------- ------- ------- ------- -------- --------- -------- ---------
Management fees 1.04% 1.04% 1.04% After 1 year $ 582 $ 642 $ 242 $ 341 $ 241
Distribution (12b-1) fees .26% 1.00% 1.00% After 3 years $ 911 $ 945 $ 745 $ 742 $ 742
Other expenses .31% .35% .34% After 5 years $1,264 $1,275 $1,275 $1,270 $1,270
---- ---- ---- After 10 years $2,255 $2,533(b) $2,533(b) $2,716 $2,716
Total fund
operating expenses 1.61% 2.39% 2.38%
==== ==== ====
THE ALLIANCE FUND CLASS A CLASS B CLASS C CLASS A CLASS B+ CLASS B++ CLASS C+ CLASS C++
------- ------- ------- ------- -------- --------- -------- ---------
Management fees .67% .67% .67% After 1 year $ 526 $ 587 $ 187 $ 287 $ 187
Distribution (12b-1) fees .20% 1.00% 1.00% After 3 years $ 739 $ 779 $ 579 $ 579 $ 579
Other expenses .16% .17% .17% After 5 years $ 969 $ 995 $ 995 $ 995 $ 995
---- ---- ---- After 10 years $1,631 $1,946(b) $1,946(b) $2,159 $2,159
Total fund
operating expenses 1.03% 1.84% 1.84%
==== ==== ====
ALLIANCE GROWTH AND
INCOME FUND CLASS A CLASS B CLASS C CLASS A CLASS B+ CLASS B++ CLASS C+ CLASS C++
------- ------- ------- ------- -------- --------- -------- ---------
Management fees .48% .48% .48% After 1 year $ 516 $ 575 $ 175 $ 275 $ 175
Distribution (12b-1) fees .23% 1.00% 1.00% After 3 years $ 709 $ 742 $ 542 $ 542 $ 542
Other expenses .22% .24% .24% After 5 years $ 918 $ 933 $ 933 $ 933 $ 933
---- ---- ---- After 10 years $1,519 $1,821(b) $1,821(b) $2,030 $2,030
Total fund
operating expenses .93% 1.72% 1.72%
==== ==== ====
ALLIANCE BALANCED SHARES CLASS A CLASS B CLASS C CLASS A CLASS B+ CLASS B++ CLASS C+ CLASS C++
------- ------- ------- ------- -------- --------- -------- ---------
Management fees .59% .59% .59% After 1 year $ 544 $ 600 $ 200 $ 299 $ 199
Distribution (12b-1) fees .25% 1.00% 1.00% After 3 years $ 796 $ 818 $ 618 $ 615 $ 615
Other expenses .38% .38% .37% After 5 years $1,067 $1,062 $1,062 $1,057 $1,057
---- ---- ---- After 10 years $1,840 $2,102(b) $2,102(b) $2,285 $2,285
Total fund
operating expenses 1.22% 1.97% 1.96%
==== ==== ====
ALLIANCE UTILITY
INCOME FUND CLASS A CLASS B CLASS C CLASS A CLASS B+ CLASS B++ CLASS C+ CLASS C++
------- ------- ------- ------- -------- --------- -------- ---------
Management fees .75% .75% .75% After 1 year $ 571 $ 623 $ 223 $ 323 $ 223
Distribution (12b-1) fees .30% 1.00% 1.00% After 3 years(c) $1,075 $1,095 $ 895 $ 897 $ 897
Other expenses 1.43% 1.46% 1.47% After 5 years(c) $1,605 $1,591 $1,591 $1,595 $1,595
---- ---- ---- After 10 years(c) $3,051 $3,275(b) $3,275(b) $3,452 $3,452
Total fund
operating expenses 2.48% 3.21% 3.22%
==== ==== ====
Waiver and/or expense
reimbursement (a) (.98)% (1.01)% (1.02)%
Net expenses 1.50% 2.20% 2.20%
==== ==== ====
ALLIANCE REAL ESTATE
INVESTMENT FUND CLASS A CLASS B CLASS C CLASS A CLASS B+ CLASS B++ CLASS C+ CLASS C++
------- ------- ------- ------- -------- --------- -------- ---------
Management fees .90% .90% .90% After 1 year $ 579 $ 634 $ 234 $ 333 $ 233
Distribution (12b-1) fees .30% 1.00% 1.00% After 3 years $ 903 $ 921 $ 721 $ 718 $ 718
Other expenses .38% .41% .40% After 5 years $1,249 $1,235 $1,235 $1,230 $1,230
---- ---- ---- After 10 years $2,223 $2,463(b) $2,463(b) $2,636 $2,636
Total fund
operating expenses 1.58% 2.31% 2.30%
==== ==== ====
ALLIANCE NEW EUROPE FUND CLASS A CLASS B CLASS C CLASS A CLASS B+ CLASS B++ CLASS C+ CLASS C++
------- ------- ------- ------- -------- --------- -------- ---------
Management fees .95% .95% .95% After 1 year $ 600 $ 653 $ 253 $ 353 $ 253
Distribution (12b-1) fees .30% 1.00% 1.00% After 3 years $ 967 $ 979 $ 779 $ 779 $ 779
Other expenses .55% .55% .55% After 5 years $1,358 $1,331 $1,331 $1,331 $1,331
---- ---- ---- After 10 years $2,451 $2,664(b) $2,664(b) $2,836 $2,836
Total fund
operating expenses 1.80% 2.50% 2.50%
==== ==== ====
ALLIANCE WORLDWIDE
PRIVATIZATION FUND CLASS A CLASS B CLASS C CLASS A CLASS B+ CLASS B++ CLASS C+ CLASS C++
------- ------- ------- ------- -------- --------- -------- ---------
Management fees 1.00% 1.00% 1.00% After 1 year $ 612 $ 666 $ 266 $ 366 $ 266
Distribution (12b-1) fees .30% 1.00% 1.00% After 3 years $1,002 $1,017 $ 817 $ 817 $ 817
Other expenses .62% .63% .63% After 5 years $1,418 $1,395 $1,395 $1,395 $1,395
---- ---- ---- After 10 years $2,573 $2,792(b) $2,792(b) $2,964 $2,964
Total fund
operating expenses 1.92% 2.63% 2.63%
==== ==== ====
</TABLE>
PLEASE REFER TO THE FOOTNOTES ON PAGE 26.
25
<TABLE>
<CAPTION>
Operating Expenses Examples
- -------------------------------------------------------- -----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ALLIANCE INTERNATIONAL
PREMIER GROWTH FUND CLASS A CLASS B CLASS C CLASS A CLASS B+ CLASS B++ CLASS C+ CLASS C++
------- ------- ------- ------- -------- --------- -------- ---------
Management fees 1.00% 1.00% 1.00% After 1 year $ 667 $ 723 $ 323 $ 423 $ 323
Distribution (12b-1) fees .30% 1.00% 1.00% After 3 years (c) $1,684 $1,759 $1,559 $1,532 $1,532
Other expenses 3.89% 4.14% 4.00% After 5 years (c) $2,697 $2,767 $2,767 $2,718 $2,718
---- ---- ---- After 10 years (c) $5,213 $5,501(b) $5,501(b) $5,579 $5,579
Total fund
operating expenses 5.19% 6.14% 6.00%
==== ==== ====
Waiver and/or expense
reimbursement (a) (2.69)% (2.94)% (2.80)%
Net expenses 2.50% 3.20% 3.20%
==== ==== ====
ALLIANCE GLOBAL
SMALL CAP FUND CLASS A CLASS B CLASS C CLASS A CLASS B+ CLASS B++ CLASS C+ CLASS C++
------- ------- ------- ------- -------- --------- -------- ---------
Management fees 1.00% 1.00% 1.00% After 1 year $ 655 $ 717 $ 317 $ 418 $ 318
Distribution (12b-1) fees .30% 1.00% 1.00% After 3 years $1,133 $1,169 $ 969 $ 971 $ 971
Other expenses 1.07% 1.14% 1.15% After 5 years $1,637 $1,645 $1,645 $1,649 $1,649
---- ---- ---- After 10 years $3,016 $3,271(b) $3,271(b) $3,457 $3,457
Total fund
operating expenses 2.37% 3.14% 3.15%
==== ==== ====
ALLIANCE INTERNATIONAL FUND CLASS A CLASS B CLASS C CLASS A CLASS B+ CLASS B++ CLASS C+ CLASS C++
------- ------- ------- ------- -------- --------- -------- ---------
Management fees .95% .95% .95% After 1 year $ 600 $ 664 $ 264 $ 364 $ 264
Distribution (12b-1) fees .23% 1.00% 1.00% After 3 years (c) $ 989 $1,037 $ 837 $ 839 $ 839
Other expenses .73% .79% .80% After 5 years (c) $1,402 $1,436 $1,436 $1,440 $1,440
---- ---- ---- After 10 years (c) $2,552 $2,858(b) $2,858(b) $3,066 $3,066
Total fund
operating expenses 1.91% 2.74% 2.75%
==== ==== ====
Waiver and/or expense
reimbursement (a) (.11)% (.13)% (.14)%
Net expenses 1.80% 2.61% 2.61%
==== ==== ====
ALLIANCE GREATER
CHINA '97 FUND CLASS A CLASS B CLASS C CLASS A CLASS B+ CLASS B++ CLASS C+ CLASS C++
------- ------- ------- ------- -------- --------- -------- ---------
Management fees 1.00% 1.00% 1.00% After 1 year $ 669 $ 725 $ 325 $ 425 $ 325
Distribution (12b-1) fees .30% 1.00% 1.00% After 3 years (c) $3,430 $3,452 $3,252 $3,266 $3,266
Other expenses 18.38% 18.22% 18.41% After 5 years (c) $5,439 $5,355 $5,355 $5,371 $5,371
---- ---- ---- After 10 years (c) $8,386 $8,357(b) $8,357(b) $8,372 $8,372
Total fund
operating expenses 19.68% 20.22% 20.41%
Waiver and/or expense
reimbursement (a) (17.16)% (17.00)% (17.19)%
Net expenses 2.52% 3.22% 3.22%
==== ==== ====
ALLIANCE ALL-ASIA
INVESTMENT FUND CLASS A CLASS B CLASS C CLASS A CLASS B+ CLASS B++ CLASS C+ CLASS C++
------- ------- ------- ------- -------- --------- -------- ---------
Management fees 1.00% 1.00% 1.00% After 1 year $ 715 $ 772 $ 372 $ 472 $ 372
Distribution (12b-1) fees .30% 1.00% 1.00% After 3 years (c) $1,623 $1,660 $1,460 $1,466 $1,466
Other expenses After 5 years (c) $2,537 $2,539 $2,539 $2,550 $2,550
Administration fees .15% .15% .15% After 10 years (c) $4,853 $5,059(b) $5,059(b) $5,221 $5,221
Other operating expenses 3.18% 3.24% 3.27%
Total other expenses 3.33% 3.39% 3.42%
Total fund
operating expenses 4.63% 5.39% 5.42%
Waiver and/or expense
reimbursement (a) (1.63)% (1.69)% (1.72)%
Net expenses 3.00% 3.70% 3.70%
==== ==== ====
ALLIANCE GLOBAL
ENVIRONMENT FUND CLASS A CLASS B CLASS C CLASS A CLASS B+ CLASS B++ CLASS C+ CLASS C++
------- ------- ------- ------- -------- --------- -------- ---------
Management fees 1.10% 1.10% 1.10% After 1 year $ 899 $ 974 $ 574 $ 661 $ 561
Distribution (12b-1) fees .30% 1.00% 1.00% After 3 years $1,848 $1,908 $1,708 $1,673 $1,673
Other expenses 3.55% 3.66% 3.53% After 5 years $2,798 $2,826 $2,826 $2,771 $2,771
---- ---- ---- After 10 years $5,176 $5,402(b) $5,402(b) $5,456 $5,456
Total fund
operating expenses 4.95% 5.76% 5.63%
==== ==== ====
</TABLE>
+ ASSUMES REDEMPTION AT END OF PERIOD.
++ ASSUMES NO REDEMPTION AT END OF PERIOD.
(A) REFLECTS ALLIANCE'S CONTRACTUAL WAIVER OF A PORTION OF ITS ADVISORY FEE
AND/OR REIMBURSEMENT OF A PORTION OF THE FUND'S OPERATING EXPENSES. THIS WAIVER
EXTENDS THROUGH THE FUND'S CURRENT FISCAL YEAR AND MAY BE EXTENDED BY ALLIANCE
FOR ADDITIONAL ONE-YEAR TERMS.
(B) ASSUMES CLASS B SHARES CONVERT TO CLASS A SHARES AFTER EIGHT YEARS.
(C) THESE EXAMPLES ASSUME THAT ALLIANCE'S AGREEMENT TO WAIVE MANAGEMENT FEES
AND/OR BEAR FUND EXPENSES IS NOT EXTENDED BEYOND ITS INITIAL PERIOD.
26
- -------------------------------------------------------------------------------
GLOSSARY
- -------------------------------------------------------------------------------
This Prospectus uses the following terms.
TYPES OF SECURITIES
CONVERTIBLE SECURITIES are fixed-income securities that are convertible into
common stock.
DEBT SECURITIES are bonds, debentures, notes, bills, loans, other direct debt
instruments, and other fixed, floating and variable rate debt obligations, but
do not include convertible securities.
DEPOSITARY RECEIPTS include American Depositary Receipts ("ADRS"), Global
Depositary Receipts ("GDRS") and other types of depositary receipts.
EQUITY SECURITIES include (i) common stocks, partnership interests, business
trust shares and other equity or ownership interests in business enterprises
and (ii) securities convertible into, and rights and warrants to subscribe for
the purchase of, such stocks, shares and interests.
FIXED-INCOME SECURITIES are debt securities and dividend-paying preferred
stocks, including floating rate and variable rate instruments.
FOREIGN GOVERNMENT SECURITIES are securities issued or guaranteed, as to
payment of principal and interest, by foreign governments, quasi-governmental
entities, governmental agencies or other governmental entities.
QUALIFYING BANK DEPOSITS are certificates of deposit, bankers' acceptances and
interest-bearing savings deposits of banks that have total assets of more than
$1 billion and are members of the Federal Deposit Insurance Corporation.
RULE 144A SECURITIES are securities that may be resold under Rule 144A of the
Securities Act.
U.S. GOVERNMENT SECURITIES are securities issued or guaranteed by the United
States Government, its agencies or instrumentalities.
TYPES OF COMPANIES
ASIAN COMPANY is an entity that (i) is organized under the laws of an Asian
country and conducts business in an Asian country, (ii) derives 50% or more of
its total revenues from business in Asian countries, or (iii) issues equity or
debt securities that are traded principally on a stock exchange in an Asian
country.
ASIAN COUNTRIES are Australia, the Democratic Socialist Republic of Sri Lanka,
the Hong Kong Special Administrative Region of the People's Republic of China
(Hong Kong), the Islamic Republic of Pakistan, Japan, the Kingdom of Thailand,
Malaysia, Negara Brunei Darussalam (Brunei), New Zealand, the People's Republic
of China, the People's Republic of Kampuchea (Cambodia), the Republic of China
(Taiwan), the Republic of India, the Republic of Indonesia, the Republic of
Korea (South Korea), the Republic of the Philippines, the Republic of
Singapore, the Socialist Republic of Vietnam and the Union of Myanmar.
BENEFICIARY COMPANIES are Eligible Companies whose principal businesses lie
outside the environmental sector but nevertheless anticipate environmental
regulations or consumer preferences through the development of new products,
processes or services that are intended to contribute to a cleaner and
healthier environment, such as companies that anticipate the demand for plastic
substitutes, aerosol substitutes, alternative fuels and processes that generate
less hazardous waste.
ELIGIBLE COMPANIES are companies expected to benefit from advances or
improvements in products, processes or services intended to foster the
protection of the environment.
ENVIRONMENTAL COMPANIES are Eligible Companies that have a principal business
involving the sale of systems or services intended to foster environmental
protection, such as waste treatment and disposal, remediation, air pollution
control and recycling.
EUROPEAN COMPANY is a company (i) organized under the laws of a European
country that issues equity or debt securities that are traded principally on a
European stock exchange, or (ii) a company that derives 50% or more of its
total revenues or profits from businesses in Europe.
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 businesses 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.
HEALTH CARE INDUSTRIES include the health care and health care-related
(including health sciences) industries. These industries are principally
engaged in the discovery, development, provision, production or distribution of
products and services that relate to the diagnosis, treatment and prevention of
diseases or other medical disorders. Companies in these fields include, but are
not limited to, pharmaceutical firms; companies that design, manufacture or
sell medical supplies, equipment and support services; companies that operate
hospitals and other health care facilities; and companies engaged in medical,
diagnostic, biochemical, biotechnological or other health sciences research and
development.
GREATER CHINA COUNTRIES are the People's Republic of China ("China"), the Hong
Kong Special Administrative Region of the People's Republic of China ("Hong
Kong") and the Republic of China ("Taiwan").
NON-U.S. COMPANY is an entity that (i) is organized under the laws of a foreign
country and conducts business in a foreign country, (ii) derives 50% or more of
its total revenues from business in foreign countries, or (iii) issues equity
or debt
27
securities that are traded principally on a stock exchange in a foreign country.
RATING AGENCIES, RATED SECURITIES AND INDEXES
DUFF & PHELPS is Duff & Phelps Credit Rating Co.
EAFE INDEX is Morgan Stanley Capital International Europe, Australasia and Far
East ("EAFE") Index.
FITCH is Fitch IBCA, Inc.
INVESTMENT GRADE SECURITIES are fixed-income securities rated Baa and above by
Moody's or BBB and above by S&P, Duff & Phelps or Fitch, or determined by
Alliance to be of equivalent quality.
LOWER-RATED SECURITIES are fixed-income securities rated Ba or below by Moody's
or BB or below by S&P, Duff & Phelps or Fitch, or determined by Alliance to be
of equivalent quality, and are commonly referred to as "JUNK BONDS."
MOODY'S is Moody's Investors Service, Inc.
PRIME COMMERCIAL PAPER is commercial paper rated Prime 1 by Moody's or A-1 or
higher by S&P or, if not rated, issued by companies that have an outstanding
debt issue rated Aa or higher by Moody's or AA or higher by S&P.
S&P is Standard & Poor's Ratings Services.
S&P 500 INDEX is S&P's 500 Composite Stock Price Index, a widely recognized
unmanaged index of market activity.
OTHER
1940 ACT is the Investment Company Act of 1940, as amended.
CODE is the Internal Revenue Code of 1986, as amended.
COMMISSION is the Securities and Exchange Commission.
EXCHANGE is the New York Stock Exchange.
SECURITIES ACT is the Securities Act of 1933, as amended.
- -------------------------------------------------------------------------------
DESCRIPTION OF THE FUNDS
- -------------------------------------------------------------------------------
This section of the Prospectus provides a more complete description of each
Fund's investment objectives, principal strategies and risks. Of course, there
can be no assurance that any Fund will achieve its investment objective.
Please note that:
. Additional discussion of the Funds' investments, including the risks of the
investments, can be found in the discussion under DESCRIPTION OF INVESTMENT
PRACTICES following this section.
. The description of the principal risks for a Fund may include risks
described in the SUMMARY OF PRINCIPAL RISKS above. Additional information about
the risks of investing in a Fund can be found in the discussion under
ADDITIONAL RISK CONSIDERATIONS.
. Additional descriptions of each Fund's strategies, investments and risks can
be found in the Fund's Statement of Additional Information or SAI.
. Except as noted, (i) the Funds' investment objectives are "fundamental" and
cannot be changed without a shareholder vote, and (ii) the Funds' investment
policies are not fundamental and thus can be changed without a shareholder vote.
INVESTMENT OBJECTIVES AND POLICIES
DOMESTIC STOCK FUNDS
The Domestic Stock Funds offer investors seeking capital appreciation a range
of alternative approaches to investing in the U.S. equity markets.
ALLIANCE PREMIER GROWTH FUND
ALLIANCE PREMIER GROWTH FUND seeks long-term growth of capital by investing
predominantly in the equity securities of a limited number of large, carefully
selected, high-quality U.S. companies that are judged likely to achieve
superior earnings growth. As a matter of fundamental policy, the Fund normally
invests at least 85% of its total assets in the equity securities of U.S.
companies. A U.S. company is a company that is organized under United States
law, has its principal office in the United States and issues equity securities
that are traded principally in the United States. Normally, about 40-60
companies will be represented in the Fund's portfolio, with the 25 most highly
regarded of these companies usually constituting approximately 70% of the
Fund's net assets. The Fund is thus atypical from most equity mutual funds in
its focus on a relatively small number of intensively researched companies. The
Fund is designed for those seeking to accumulate capital over time with less
volatility than that associated with investment in smaller companies.
Alliance's investment strategy for the Fund emphasizes stock selection and
investment in the securities of a limited number of issuers. Alliance relies
heavily upon the fundamental analysis and research of its large internal
research staff, which generally follows a primary research universe of more
than 500 companies that have strong management, superior industry positions,
excellent balance sheets and superior earnings growth prospects. An emphasis is
placed on identifying companies whose substantially above average prospective
earnings growth is not fully reflected in current market valuations.
In managing the Fund, Alliance seeks to utilize market volatility judiciously
(assuming no change in company fundamentals), striving to capitalize on
apparently unwarranted price fluctuations, both to purchase or increase
positions on weakness and to sell or reduce overpriced holdings. The Fund
normally remains nearly fully invested and does not take significant cash
positions for market timing purposes. During market declines, while adding to
positions in favored stocks, the Fund becomes somewhat more aggressive,
gradually reducing the number of companies represented in its portfolio.
28
Conversely, in rising markets, while reducing or eliminating fully valued
positions, the Fund becomes somewhat more conservative, gradually increasing
the number of companies represented in its portfolio. Alliance thus seeks to
gain positive returns in good markets while providing some measure of
protection in poor markets.
Alliance expects the average market capitalization of companies represented in
the Fund's portfolio normally to be in the range, or in excess, of the average
market capitalization of companies included in the S&P 500 Index.
The Fund also may:
. invest up to 20% of its net assets in CONVERTIBLE SECURITIES;
. invest up to 5% of its net assets in RIGHTS OR WARRANTS;
. invest up to 15% of its total assets in FOREIGN SECURITIES;
. purchase and sell exchange-traded index OPTIONS and stock index FUTURES
CONTRACTS; and
. write covered exchange-traded call OPTIONS on its securities of up to 15% of
its total assets, and purchase and sell exchange-traded call and put options on
common stocks written by others of up to, for all options, 10% of its total
assets.
Because the Fund invests in a smaller number of securities than many other
equity funds, your investment has the risk that changes in the value of a
single security may have a more significant effect, either negative or
positive, on the Fund's net asset value.
ALLIANCE HEALTH CARE FUND
ALLIANCE HEALTH CARE FUND seeks capital appreciation and, secondarily, current
income. In seeking to achieve its investment objective, under normal
circumstances the Fund invests at least 65%, and normally substantially all, of
the value of its total assets in securities issued by companies principally
engaged in Health Care Industries.
The Fund seeks investments in both new, smaller and less seasoned companies and
well-known, larger and established companies. Whenever possible, investments in
new, smaller or less seasoned companies will be made with a view to benefiting
from the development and growth of new products and markets in Health Care
Industries. Investments in these companies may offer more reward but may also
entail more risk than is generally true of larger, established companies.
While the Fund anticipates that a substantial portion of its portfolio will be
invested in the securities of U.S. companies, the Fund is not limited to
investing in such securities. Many companies in the forefront of world medical
technology are located outside the United States, primarily in Japan and
Europe. Accordingly, the Fund may invest up to 40% of the value of its total
assets in foreign securities, including up to 25% in issuers located in any one
foreign country. However, no more than 5% of the value of the Fund's total net
assets may be invested in securities of issuers located in emerging market
countries. All percentage limitations are applied at the time of investment.
Although the payment of dividends will be a factor considered in the selection
of investments for the Fund, the Fund seeks primarily to take advantage of
capital appreciation opportunities identified by Alliance in emerging
technologies and services in Health Care Industries by investing in companies
that are expected to profit from the development of new products and services
for these industries. Examples of such emerging technologies and services
include:
. New methods for administering drugs to a patient, such as surgical implants
and skin patches that enhance the effectiveness of the drugs and may reduce
patient side effects by delivering the drugs in precise quantities over a
prolonged time period or by evading natural body defense mechanisms which delay
the effect of the drugs;
. Developments in medical imaging such as the application of computer
technology to the output of conventional x-ray systems that allow for
cross-sectional images of soft tissue and organs (CT scanning) and continuous
imaging (digital radiography) as well as more advanced nuclear medicine,
ultrasound and magnetic resonance imaging (MRI);
. Advances in minimally invasive surgical techniques, such as angioplasty and
related technologies for diseased blood vessels and laser beams for the eye,
general and cardiovascular surgery, which provide greater effectiveness, lower
cost and improved patient safety than more traditional surgical techniques;
. New therapeutic pharmaceutical compounds that control or alleviate disease,
including prescription and non-prescription drugs and treatment regimes for
conditions not controlled, alleviated or treatable by existing medications or
treatments and chemical or biological pharmaceuticals for use in diagnostic
testing;
. Advances in molecular biology such as signal transduction, cell adhesion and
cell to cell communication which have facilitated a rapid increase in new
classes of drugs. These have included monoclonal antibodies, bio-engineered
proteins and small molecules from novel synthesis and screening techniques;
. Genomics, which allows scientists to better understand the causes of human
diseases, and in some cases has led to the manufacture of proteins for use as
therapeutic drugs;
. Gene chips and other equipment that provides for the screening, diagnosis
and treatment of diseases;
. The introduction of large scale business efficiencies to the management of
nursing homes, acute and specialty hospitals as well as free-standing
outpatient facilities, surgical centers and rehabilitation centers;
. Adaptations of microprocessors for use by pharmaceutical manufacturers,
hospitals, doctors and others in Health Care Industries to increase
distribution efficiency;
29
. Health care delivery organizations that combine cost effectiveness with high
quality medical care and help address the rising cost of health care; and
. The sale of prescription drugs and other pharmaceuticals to consumers via
the Internet.
The Fund's portfolio may also include companies that provide traditional
products and services currently in use in Health Care Industries and that are
likely to benefit from any increases in the general demand for such products
and services. The following are examples of the products and services that may
be offered by companies in Health Care Industries:
. DRUGS OR PHARMACEUTICALS, including both ethical and proprietary drugs, drug
administration products and pharmaceutical components used in diagnostic
testing;
. MEDICAL EQUIPMENT AND SUPPLIES, including equipment and supplies used by
health service companies and individual practitioners, such as electronic
equipment used for diagnosis and treatment, surgical and medical instruments
and other products designed especially for Health Care Industries;
. HEALTH CARE SERVICES, including the services of clinical testing
laboratories, hospitals, nursing homes, clinics, centers for convalescence and
rehabilitation, and products and services for home health care; and
. MEDICAL RESEARCH, including scientific research to develop drugs, processes
or technologies with possible commercial application in Health Care Industries.
The Fund also may:
. purchase or sell FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS;
. enter into FORWARD COMMITMENTS for the purchase or sale of securities;
. make SECURED LOANS OF SECURITIES of up to 20% of its total assets; and
. enter into REPURCHASE AGREEMENTS.
ALLIANCE GROWTH FUND
ALLIANCE GROWTH FUND seeks long-term growth of capital. Current income is only
an incidental consideration. The Fund seeks to achieve its objective by
investing primarily in equity securities of companies with favorable earnings
outlooks and long-term growth rates that are expected to exceed that of the
U.S. economy over time. The Fund's investment objective is not fundamental.
The Fund also may invest up to 25% of its total assets in lower-rated
fixed-income securities and convertible bonds. The Fund generally will not
invest in securities rated at the time of purchase below Caa- by Moody's and
CCC- by S&P, Duff & Phelps or Fitch or in securities judged by Alliance to be
of comparable investment quality. From time to time, however, the Fund may
invest in securities rated in the lowest grades (i.e., C by Moody's or D or
equivalent by S&P, Duff & Phelps or Fitch) or securities of comparable
investment quality if there are prospects for an upgrade or a favorable
conversion into equity securities. If the credit rating of a security held by
the Fund falls below its rating at the time of purchase (or Alliance determines
that the credit quality of the security has deteriorated), the Fund may
continue to hold the security if such investment is considered appropriate
under the circumstances.
The Fund also may:
. invest in ZERO-COUPON and PAYMENT-IN-KIND BONDS;
. invest in FOREIGN SECURITIES although not generally in excess of 15% of its
total assets;
. buy or sell foreign currencies, OPTIONS ON FOREIGN CURRENCIES, and FOREIGN
CURRENCY FUTURES CONTRACTS (and related options) and deal in FORWARD FOREIGN
CURRENCY EXCHANGE CONTRACTS;
. enter into FORWARD COMMITMENTS;
. buy and sell stock index FUTURES CONTRACTS and OPTIONS ON FUTURES CONTRACTS
and on stock indices;
. purchase and sell FUTURES CONTRACTS and OPTIONS ON FUTURES CONTRACTS and
U.S. Treasury securities;
. write covered call and put OPTIONS;
. purchase and sell put and call OPTIONS;
. make LOANS OF PORTFOLIO SECURITIES of up to 25% of its total assets; and
. enter into REPURCHASE AGREEMENTS of up to 25% of its total assets.
ALLIANCE TECHNOLOGY FUND
ALLIANCE TECHNOLOGY FUND emphasizes growth of capital and invests for capital
appreciation. Current income is only an incidental consideration. The Fund may
seek income by writing listed call options. The Fund invests primarily in
securities of companies expected to benefit from technological advances and
improvements (i.e., companies that use technology extensively in the
development of new or improved products or processes). The Fund normally will
have at least 80% of its assets invested in the securities of these companies.
The Fund normally will have substantially all its assets invested in equity
securities, but it also invests in debt securities offering an opportunity for
price appreciation. The Fund will invest in listed and unlisted securities, in
U.S. securities and up to 10% of its total assets in foreign securities.
The Fund's policy is to invest in any company and industry and in any type of
security with potential for capital appreciation. It invests in well-known and
established companies and in new and unseasoned companies.
The Fund also may:
. write covered call OPTIONS on its securities of up to 15% of its total
assets and purchase exchange-listed call and put options, including
exchange-traded index put options of up to, for all options, 10% of its total
assets;
. invest up to 10% of its total assets in WARRANTS; and
30
. make LOANS OF PORTFOLIO SECURITIES of up to 30% of its total assets.
Because the Fund invests primarily in technology companies, factors affecting
those types of companies could have a significant effect on the Fund's net
asset value. In addition, the Fund's investments in technology stocks,
especially those of smaller, less seasoned companies, tend to be more volatile
than the overall market. The Fund's investments in debt and foreign securities
have credit risk and foreign risk.
ALLIANCE QUASAR FUND
ALLIANCE QUASAR FUND seeks growth of capital by pursuing aggressive investment
policies. The Fund invests for capital appreciation and only incidentally for
current income. The Fund's practice of selecting securities based on the
possibility of appreciation cannot, of course, ensure against a loss in value.
Moreover, because the Fund's investment policies are aggressive, an investment
in the Fund is risky and investors who want assured income or preservation of
capital should not invest in the Fund.
The Fund invests in any company and industry and in any type of security with
potential for capital appreciation. It invests in well-known and established
companies and in new and unseasoned companies. When selecting securities for
the Fund, Alliance considers the economic and political outlook, the values of
specific securities relative to other investments, trends in the determinants
of corporate profits and management capability and practices.
The Fund invests principally in equity securities, but it also invests to a
limited degree in non-convertible bonds and preferred stocks. The Fund invests
in listed and unlisted U.S. and foreign securities. The Fund can periodically
invest in the securities of companies that are expected to appreciate due to a
development particularly or uniquely applicable to that company regardless of
general business conditions or movements of the market as a whole.
The Fund also may:
. make SHORT SALES OF SECURITIES AGAINST THE BOX but not more than 15% of its
net assets may be deposited on short sales; and
. write covered call OPTIONS of up to 15% of its total assets and purchase and
sell put and call options written by others of up to, for all options, 10% of
its total assets.
Investments in smaller companies may have more risk because they tend to be
more volatile than the overall stock market. The Fund's investments in
non-convertible bonds, preferred stocks and foreign stocks may have credit risk
and foreign risk.
THE ALLIANCE FUND
THE ALLIANCE FUND seeks long-term growth of capital and income primarily
through investment in common stocks. The Fund normally invests substantially
all of its assets in common stocks that Alliance believes will appreciate in
value. The Fund also may invest in other types of securities such as
convertible securities, investment grade instruments, U.S. Government
securities and high quality, short-term obligations such as repurchase
agreements, bankers' acceptances and domestic certificates of deposit. The Fund
may invest without limit in foreign securities. The Fund generally does not
effect portfolio transactions in order to realize short-term trading profits or
exercise control.
The Fund also may:
. write exchange-traded covered call OPTIONS on up to 25% of its total assets;
. make SECURED LOANS OF PORTFOLIO SECURITIES of up to 25% of its total assets;
and
. enter into REPURCHASE AGREEMENTS of up to seven days' duration with
commercial banks, but only if those agreements together with any restricted
securities and any securities which do not have readily available market
quotations do not exceed 10% of its net assets.
While the diversification and generally high quality of the Fund's investments
cannot prevent fluctuations in market values, they tend to limit investment
risk and contribute to achieving the Fund's objective.
TOTAL RETURN FUNDS
The Total Return Funds provide a range of investment alternatives to investors
seeking both growth of capital and current income.
ALLIANCE GROWTH AND INCOME FUND
ALLIANCE GROWTH AND INCOME FUND seeks appreciation through investments
primarily in dividend-paying common stocks of good quality. The Fund also may
invest in fixed-income securities and convertible securities.
The Fund also may try to realize income by writing covered call options listed
on domestic securities exchanges. The Fund also invests in foreign securities.
Since the purchase of foreign securities entails certain political and economic
risks, the Fund restricts its investments in these securities to issues of high
quality. The Fund also may purchase and sell financial forward and futures
contracts and options on these securities for hedging purposes.
ALLIANCE BALANCED SHARES
ALLIANCE BALANCED SHARES seeks a high return through a combination of current
income and capital appreciation. Although the Fund's investment objective is
not fundamental, the Fund is a "balanced" fund as a matter of fundamental
policy. The Fund invests in equity securities of high-quality, financially
strong, dividend-paying companies. Normally, the Fund's investments will
consist of about 60% in stocks, but stocks may make up to 75% of its
investments. The Fund will not purchase a security if as a result less than 25%
of its total assets will be in fixed income senior securities. These
investments may include short- and long-term debt securities, preferred stocks,
convertible debt securities and convertible preferred stocks to the extent that
their values are attributable to their fixed-income characteristics. Other than
this restriction,
31
the percentage of the Fund's assets invested in each type of security will vary.
The Fund invests in U.S. Government securities, bonds, senior debt securities,
and preferred and common stocks in such proportions and of such type as
Alliance deems best adapted to the current economic and market outlooks. The
Fund may invest up to 15% of the value of its total assets in foreign equity
and fixed-income securities eligible for purchase by the Fund under its
investment policies described above.
The Fund also may:
. enter into contracts for the purchase or sale for future delivery of foreign
currencies;
. purchase and write put and call OPTIONS on foreign currencies and enter into
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS for hedging purposes; and
. subject to market conditions, write covered call OPTIONS listed on a
domestic exchange to realize income.
As a balanced fund, the Fund has the risk that the allocation of its
investments between equity and debt securities may have a more significant
effect on the Fund's net asset value when one of these asset classes is
performing more poorly than the other.
ALLIANCE UTILITY INCOME FUND
ALLIANCE UTILITY INCOME FUND seeks current income and capital appreciation by
investing primarily in equity and fixed-income securities of companies in the
utilities industry. As a fundamental policy, the Fund normally invests at least
65% of its total assets in securities of companies in the utilities industry.
The Fund seeks to take advantage of the characteristics and historical
performance of securities of utility companies, many of which pay regular
dividends and increase their common stock dividends over time. The Fund
considers a company to be in the utilities industry if, during the most recent
twelve-month period, at least 50% of the company's gross revenues, on a
consolidated basis, were derived from its utilities activities.
The Fund may invest in securities of both U.S. and foreign issuers, although
the Fund will invest no more than 15% of its total assets in issuers in any one
foreign country. The Fund invests at least 65% of its total assets in
income-producing securities, but there is otherwise no limit on the allocation
of the Fund's investments between equity securities and fixed-income
securities. The Fund may maintain up to 35% of its net assets in lower-rated
securities. The Fund will not retain a security that is downgraded below B or
determined by Alliance to have undergone similar credit quality deterioration
following purchase.
The Fund may invest up to 35% of its total assets in equity and fixed-income
securities of domestic and foreign corporate and governmental issuers other
than utility companies. These securities include U.S. Government securities and
repurchase agreements for those securities, foreign government securities,
corporate fixed-income securities of domestic issuers, corporate fixed-income
securities of foreign issuers denominated in foreign currencies or in U.S.
Dollars (in each case including fixed-income securities of an issuer in one
country denominated in the currency of another country), qualifying bank
deposits, and prime commercial paper.
The Fund also may:
. invest up to 30% of its net assets in CONVERTIBLE SECURITIES;
. invest up to 5% of its net assets in RIGHTS OR WARRANTS;
. invest in DEPOSITARY RECEIPTS, securities of supranational entities
denominated in the currency of any country, securities denominated in European
Currency Units, and "semi-governmental securities";
. write covered call and put OPTIONS, purchase call and put options on
securities of the types in which it is permitted to invest that are
exchange-traded and over-the-counter, and write uncovered call options for
cross-hedging purposes;
. purchase and sell exchange-traded OPTIONS on any securities index composed
of the types of securities in which it may invest;
. 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 an index of U.S. Government securities, foreign government
securities, corporate fixed-income securities, or common stock, and may
purchase and write options on futures contracts;
. purchase and write call and put OPTIONS on foreign currencies traded on U.S.
and foreign exchanges or over-the-counter for hedging purposes;
. purchase or sell FORWARD CONTRACTS;
. enter into INTEREST RATE SWAPS and purchase or sell INTEREST RATE CAPS and
FLOORS;
. enter into FORWARD COMMITMENTS;
. enter into STANDBY COMMITMENT AGREEMENTS;
. make SHORT SALES of securities or maintain a short position;
. make SECURED LOANS OF PORTFOLIO SECURITIES of up to 20% of its total assets;
and
. enter into REPURCHASE AGREEMENTS for U.S. Government securities.
The Fund's principal risks include those that arise from its investing
primarily in electric utility companies. Factors affecting that industry sector
can have a significant effect on the Fund's net asset value. The U.S. utilities
industry has experienced significant changes in recent years. Electric utility
companies in general have been favorably affected by lower fuel costs, the full
or near completion of major construction programs and lower financing costs. In
addition, many utility companies have generated cash flows in excess of current
operating expenses and construction expenditures, permitting some degree of
diversification into unregulated businesses. Regulatory changes, however, could
increase costs or impair the ability of nuclear and conventionally fueled
generating facilities to operate their
32
facilities and reduce their ability to make dividend payments on their
securities. Rates of return of utility companies generally are subject to
review and limitation by state public utilities commissions and tend to
fluctuate with marginal financing costs. Rate changes ordinarily lag behind
changes in financing costs and can favorably or unfavorably affect the earnings
or dividend pay-outs of utilities stocks depending upon whether the rates and
costs are declining or rising.
Utility companies historically have been subject to the risks of increases in
fuel and other operating costs, high interest costs, costs associated with
compliance with environmental and nuclear safety regulations, service
interruptions, economic slowdowns, surplus capacity, competition, and
regulatory changes. There also can be no assurance that regulatory policies or
accounting standards changes will not negatively affect utility companies'
earnings or dividends. Utility companies are subject to regulation by various
authorities and may be affected by the imposition of special tariffs and
changes in tax laws. To the extent that rates are established or reviewed by
governmental authorities, utility companies are subject to the risk that such
authorities will not authorize increased rates. Because of the Fund's policy of
concentrating its investments in utility companies, the Fund is more
susceptible than most other mutual funds to economic, political or regulatory
occurrences affecting the utilities industry.
Foreign utility companies, like those in the U.S., are generally subject to
regulation, although the regulation may or may not be comparable to domestic
regulations. Foreign utility companies in certain countries may be more heavily
regulated by their respective governments than utility companies located in the
U.S. As in the U.S., foreign utility companies generally are required to seek
government approval for rate increases. In addition, many foreign utility
companies use fuels that cause more pollution than those used in the U.S. and
may yet be required to invest in pollution control equipment. Foreign utility
regulatory systems vary from country to country and may evolve in ways
different from regulation in the U.S. The percentage of the Fund's assets
invested in issuers of particular countries will vary.
Increases in interest rates may cause the value of the Fund's investments to
decline and the decrease in value may not be offset by higher interest rate
income. The Fund's investments in lower-rated securities may be subject to more
credit risk than a fund that invests in higher-rated securities.
ALLIANCE REAL ESTATE INVESTMENT FUND
ALLIANCE REAL ESTATE INVESTMENT FUND seeks a total return from long-term growth
of capital and from income principally through investing in a portfolio of
equity securities of issuers that are primarily engaged in or related to the
real estate industry.
The Fund normally invests at least 65% of its total assets in equity securities
of real estate investment trusts, or REITs, and other real estate industry
companies. A "real estate industry company" is a company that derives at least
50% of its gross revenues or net profits from the ownership, development,
construction, financing, management, or sale of commercial, industrial, or
residential real estate or interests in these properties. The Fund invests in
equity securities that include common stock, shares of beneficial interest of
REITs, and securities with common stock characteristics, such as preferred
stock or convertible securities ("Real Estate Equity Securities").
The Fund may invest up to 35% of its total assets in (a) securities that
directly or indirectly represent participations in, or are collateralized by
and payable from, mortgage loans secured by real property ("Mortgage-Backed
Securities"), such as mortgage pass-through certificates, real estate mortgage
investment conduit certificates ("REMICs") and collateralized mortgage
obligations ("CMOs") and (b) short-term investments. These securities are
described below.
In selecting Real Estate Equity Securities, Alliance's analysis will focus on
determining the degree to which the company involved can achieve sustainable
growth in cash flow and dividend paying capability. Alliance believes that the
primary determinant of this capability is the economic viability of property
markets in which the company operates and that the secondary determinant of
this capability is the ability of management to add value through strategic
focus and operating expertise. The Fund will purchase Real Estate Equity
Securities when, in the judgment of Alliance, their market price does not
adequately reflect this potential. In making this determination, Alliance will
take into account fundamental trends in underlying property markets as
determined by proprietary models, site visits conducted by individuals
knowledgeable in local real estate markets, price-earnings ratios (as defined
for real estate companies), cash flow growth and stability, the relationship
between asset value and market price of the securities, dividend payment
history, and such other factors that Alliance may determine from time to time
to be relevant. Alliance will attempt to purchase for the Fund Real Estate
Equity Securities of companies whose underlying portfolios are diversified
geographically and by property type.
The Fund may invest without limitation in shares of REITs. REITs are pooled
investment vehicles that invest primarily in income producing real estate or
real estate related loans or interests. REITs are generally classified as
equity REITs, mortgage REITs, or a combination of equity and mortgage REITs.
Equity REITs invest the majority of their assets directly in real property and
derive income primarily from the collection of rents. Equity REITs can also
realize capital gains by selling properties that have appreciated in value.
Mortgage REITs invest the majority of their assets in real estate mortgages and
derive income from the collection of interest payments. Similar to investment
companies such as the Fund, REITs are not taxed on income distributed to
shareholders provided they comply with several requirements of the Code. The
Fund will indirectly bear its proportionate share of expenses incurred by REITs
in which the Fund invests in addition to the expenses incurred directly by the
Fund.
The Fund's investment strategy with respect to Real Estate Equity Securities is
based on the premise that property market fundamentals are the primary
determinant of growth underlying the performance of Real Estate Equity
Securities. Value and
33
management further distinguishes the most attractive Real
Estate Equity Securities. The Fund's research and investment process is
designed to identify those companies with strong property fundamentals and
strong management teams. This process is comprised of real estate market
research, specific property inspection, and securities analysis. Alliance
believes that this process will result in a portfolio that will consist of Real
Estate Equity Securities of companies that own assets in the most desirable
markets across the country, diversified geographically and by property type.
To implement the Fund's research and investment process, Alliance has retained
the consulting services of CB Richard Ellis, Inc. ("CBRE"), a publicly held
company and the largest real estate services company in the United States.
CBRE's business includes real estate brokerage, property and facilities
management, and real estate finance and investment advisory activities. The
universe of property-owning real estate industry firms consists of
approximately 142 companies of sufficient size and quality to merit
consideration for investment by the Fund. As consultant to Alliance, CBRE
provides access to its proprietary model, REIT-Score, which analyzes the
approximately 18,000 properties owned by these 142 companies. Using proprietary
databases and algorithms, CBRE analyzes local market rent, expenses, occupancy
trends, market specific transaction pricing, demographic and economic trends,
and leading indicators of real estate supply such as building permits. Over
1,000 asset-type specific geographic markets are analyzed and ranked on a
relative scale by CBRE in compiling its REIT-Score database. The relative
attractiveness of these real estate industry companies is similarly ranked
based on the composite rankings of the properties they own.
Once the universe of real estate industry companies has been distilled through
the market research process, CBRE's local market presence provides the
capability to perform site specific inspections of key properties. This
analysis examines specific location, condition, and sub-market trends. CBRE's
use of locally based real estate professionals provides Alliance with a window
on the operations of the portfolio companies as information can immediately be
put in the context of local market events. Only those companies whose specific
property portfolios reflect the promise of their general markets will be
considered for investment by the Fund.
Alliance further screens the universe of real estate industry companies by
using rigorous financial models and by engaging in regular contact with
management of targeted companies. Each management's strategic plan and ability
to execute the plan are determined and analyzed. Alliance makes extensive use
of CBRE's network of industry analysts in order to assess trends in tenant
industries. This information is then used to further evaluate management's
strategic plans. Financial ratio analysis is used to isolate those companies
with the ability to make value-added acquisitions. This information is combined
with property market trends and used to project future earnings potential.
The Fund may invest in short-term investments including: corporate commercial
paper and other short-term commercial obligations, in each case rated or issued
by companies with similar securities outstanding that are rated Prime-1, Aa or
better by Moody's or A-1, AA or better by S&P; obligations (including
certificates of deposit, time deposits, demand deposits and bankers'
acceptances) of banks with securities outstanding that are rated Prime-1, Aa or
better by Moody's or A-1, AA or better by S&P; and obligations issued or
guaranteed by the U.S. Government or its agencies or instrumentalities with
remaining maturities not exceeding 18 months.
The Fund may invest in debt securities rated BBB or higher by S&P or Baa or
higher by Moody's or, if not rated, of equivalent credit quality as determined
by Alliance. The Fund expects that it will not retain a debt security that is
downgraded below BBB or Baa or, if unrated, determined by Alliance to have
undergone similar credit quality deterioration, subsequent to purchase by the
Fund.
The Fund also may:
. invest up to 15% of its net assets in CONVERTIBLE SECURITIES;
. enter into FORWARD COMMITMENTS;
. enter into STANDBY COMMITMENT AGREEMENTS;
. make SHORT SALES of securities or maintain a short position but only if at
all times when a short position is open not more than 25% of the Fund's net
assets is held as collateral for such sales;
. invest up to 10% of its net assets in RIGHTS OR WARRANTS;
. make LOANS OF PORTFOLIO SECURITIES of up to 25% of its total assets; and
. enter into REPURCHASE AGREEMENTS of up to seven days' duration.
Because the Fund invests a substantial portion of its assets in the real estate
market, it is subject to many of the same risks involved in direct ownership of
real estate. For example, the value of real estate could decline due to a
variety of factors affecting the real estate market generally, such as
overbuilding, increases in interest rates, or declines in rental rates. In
addition, REITs are dependent on the capability of their managers, may have
limited diversification, and could be significantly affected by changes in tax
laws.
The Fund's investments in mortgage-backed securities have prepayment risk,
which is the risk that mortgage loans will be prepaid when interest rates
decline and the Fund will have to reinvest in securities with lower interest
rates. This risk causes mortgage-backed securities to have significantly
greater price and yield volatility than traditional fixed-income securities.
The Fund's investments in REMICs, CMOs and other types of mortgage-backed
securities may be subject to special risks that are described under
"Description of Investment Practices."
GLOBAL STOCK FUNDS
The Global Stock Funds offer investors the opportunity to participate in the
potential for long-term capital appreciation available from investment in
foreign securities.
34
ALLIANCE NEW EUROPE FUND
ALLIANCE NEW EUROPE FUND seeks long-term capital appreciation through
investment primarily in the equity securities of companies based in Europe. The
Fund intends to invest substantially all of its assets in the equity securities
of European companies and has a fundamental policy of normally investing at
least 65% of its total assets in these securities. The Fund may invest up to
35% of its total assets in high-quality U.S. Dollar or foreign currency
denominated fixed-income securities issued or guaranteed by European
governmental entities, or by European or multinational companies or
supranational organizations.
The Fund expects that it will invest primarily in the more established and
liquid markets in Europe. However, the Fund may also invest in the
lesser-developed markets in Europe including those countries in Southern and
Eastern Europe, as well as the former communist countries in the Soviet Union.
The Fund does not expect to invest more than 20% of its total assets in these
developing markets under normal circumstances or more than 10% of its total
assets in issuers based in any one of these developing countries.
In managing the Fund, Alliance utilizes a disciplined approach to invest on a
bottom-up basis in those companies exhibiting the best available combination of
sustainable fundamental growth at a reasonable price. Alliance's approach
emphasizes proprietary qualitative and quantitative inputs provided by its
in-house analysts. Internal analysis focuses primarily on large to upper-medium
capitalization stocks (those with a market value of $3 billion and above).
Country and industry exposures are by-products of the stock selection process.
Alliance does not actively manage currency exposures for this Fund but may
hedge underlying exposures back to US Dollars when conditions are perceived to
be extreme.
Stock selection focuses on companies in growth industries that exhibit
above-average growth based on a competitive or sustainable advantage based on
brand, technology, or market share. A stock is typically sold when its relative
fundamentals are no longer as attractive as other investment opportunities
available to the Fund. This may be a function of the stock having achieved its
fair market value, deterioration in fundamentals relative to Alliance's
expectations, or because the management team looses confidence in company
management.
The Fund diversifies its investments among a number of European countries and
normally invests in companies based in at least three of these countries. The
Fund's investment policies do not require that the Fund concentrate its
investments in any single country. However, these policies also do not prevent
the Fund from concentrating its investments in a single country and in recent
years the Fund has invested more than 25% of its total assets in the United
Kingdom. The Fund may invest without limit in any single European country.
During such times, the Fund would be subject to a correspondingly greater risk
of loss due to adverse political or regulatory developments, or an economic
downturn, within that country.
The Fund also may:
. invest up to 20% of its total assets in RIGHTS OR WARRANTS;
. invest in DEPOSITARY RECEIPTS or other securities convertible into
securities of companies based in European countries, debt securities of
supranational entities denominated in the Euro or the currency of any European
country, debt securities denominated in the Euro of an issuer in a European
country (including supranational issuers), and "semi-governmental securities";
. purchase and sell FORWARD CONTRACTS;
. write covered call or put OPTIONS and sell and purchase exchange-traded put
and call options, including exchange-traded index options;
. enter into financial FUTURES CONTRACTS, including contracts for the purchase
or sale for future delivery of foreign currencies and futures contracts based
on stock indices, and purchase and write options on futures contracts;
. purchase and write put options on foreign currencies traded on securities
exchanges or boards of trade or over-the-counter;
. enter into FORWARD COMMITMENTS;
. enter into STANDBY COMMITMENT AGREEMENTS; and
. make SECURED LOANS OF PORTFOLIO SECURITIES of up to 30% of its total assets.
The Fund's investments in non-U.S. countries and smaller countries may have
more risk because they tend to be more volatile than the overall stock market.
To the extent the Fund invests a substantial amount of its assets in a
particular European country, your investment is subject to the risk that market
changes or other events affecting that country may have a more significant
effect on the Fund's net asset value. The Fund's investments in U.S. Dollar- or
foreign currency-denominated fixed-income securities have interest rate and
credit risk.
ALLIANCE WORLDWIDE PRIVATIZATION FUND
ALLIANCE WORLDWIDE PRIVATIZATION FUND seeks long-term capital appreciation. As
a fundamental policy, the Fund invests at least 65% of its total assets in
equity securities issued by enterprises that are undergoing, or have undergone,
privatization (as described below), although normally significantly more of its
assets will be invested in such securities. The balance of its investments will
include securities of companies believed by Alliance to be beneficiaries of
privatizations. The Fund is designed for investors desiring to take advantage
of investment opportunities, historically inaccessible to U.S. individual
investors, that are created by privatizations of state enterprises in both
established and developing economies. These companies include those in Western
Europe and Scandinavia, Australia, New Zealand, Latin America, Asia, Eastern
and Central Europe and, to a lesser degree, Canada and the United States.
The Fund's investments in enterprises undergoing privatization may comprise
three distinct situations. First, the Fund may
35
invest in the initial offering of publicly traded equity securities (an
"initial equity offering") of a government- or state-owned or controlled
company or enterprise (a "state enterprise"). Secondly, the Fund may
purchase securities of a current or former state enterprise following its
initial equity offering. Finally, the Fund may make privately negotiated
purchases of stock or other equity interests in a state enterprise that has not
yet conducted an initial equity offering. Alliance believes that substantial
potential for capital appreciation exists as privatizing enterprises
rationalize their management structures, operations and business strategies in
order to compete efficiently in a market economy and the Fund will thus
emphasize investments in such enterprises.
Privatization is a process through which the ownership and control of companies
or assets changes in whole or in part from the public sector to the private
sector. Through privatization a government or state divests or transfers all or
a portion of its interest in a state enterprise to some form of private
ownership. Governments and states with established economies, including France,
Great Britain, Germany, and Italy, and those with developing economies,
including Argentina, Mexico, Chile, Indonesia, Malaysia, Poland, and Hungary,
are engaged in privatizations. The Fund will invest in any country believed to
present attractive investment opportunities.
A major premise of the Fund's approach is that the equity securities of
privatized companies offer opportunities for significant capital appreciation.
In particular, because privatizations are integral to a country's economic
restructuring, securities sold in initial equity offerings often are priced
attractively to secure the issuer's successful transition to private sector
ownership. Additionally, these enterprises often dominate their local markets
and typically have the potential for significant managerial and operational
efficiency gains.
The Fund diversifies its investments among a number of countries and normally
invests in issuers based in at least four, and usually considerably more,
countries. The Fund may invest up to 15% of its total assets in issuers in any
one foreign country, except that the Fund may invest up to 30% of its total
assets in issuers in any one of France, Germany, Great Britain, Italy and
Japan. The Fund may invest all of its assets within a single region of the
world.
The Fund may invest up to 35% of its total assets in debt securities and
convertible debt securities. The Fund may maintain no more than 5% of its net
assets in lower-rated securities. The Fund will not retain a non-convertible
security that is downgraded below C or determined by Alliance to have undergone
similar credit quality deterioration following purchase.
The Fund also may:
. invest up to 20% of its total assets in RIGHTS OR WARRANTS;
. write covered call and put OPTIONS, purchase put and call options on
securities of the types in which it is permitted to invest and on
exchange-traded index options, and write uncovered options for cross-hedging
purposes;
. 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, foreign government
securities, or common stock, and may purchase and write options on future
contracts;
. purchase and write put and call OPTIONS on foreign currencies for hedging
purposes;
. purchase or sell FORWARD CONTRACTS;
. enter into FORWARD COMMITMENTS;
. enter into STANDBY COMMITMENT AGREEMENTS;
. enter into CURRENCY SWAPS for hedging purposes;
. make SHORT SALES of securities or maintain a short position;
. make SECURED LOANS OF PORTFOLIO SECURITIES of up to 30% of its total assets;
and
. enter into REPURCHASE AGREEMENTS for U.S. Government securities.
Investments in non-U.S. companies and smaller companies may have more risk
because they tend to be more volatile than the overall stock market. The Fund's
investments in debt securities and convertible securities have interest risk
and credit risk.
ALLIANCE INTERNATIONAL PREMIER GROWTH FUND
ALLIANCE INTERNATIONAL PREMIER GROWTH FUND seeks long-term capital appreciation
by investing predominately in the equity securities of a limited number of
carefully selected non-U.S. companies that are judged likely to achieve
superior earnings growth. As a matter of fundamental policy, the Fund will
invest under normal circumstances at least 85% of its total assets in equity
securities. The Fund makes investments based upon their potential for capital
appreciation. Current income is incidental to that objective.
In the main, the Fund's investments will be in comparatively large,
high-quality companies. Normally, about 40 companies will be represented in the
Fund's portfolio, and the 30 most highly regarded of these companies usually
will constitute approximately 70%, and often more, of the Fund's net assets.
The Fund thus differs from more typical international equity mutual funds by
focusing on a relatively small number of intensively researched companies. The
Fund is designed for investors seeking to accumulate capital over time. Because
of market risks inherent in any investment, the selection of securities on the
basis of their appreciation possibilities cannot ensure against possible loss
in value. There is, of course, no assurance that the Fund's investment
objective will be met.
Alliance expects the market capitalization of the companies represented in the
Fund's portfolio will generally be in excess of $10 billion.
Within the investment framework of the Fund, Alliance's Large Cap Growth Group,
headed by Alfred Harrison, Alliance's Vice Chairman, has responsibility for
managing the Fund's portfolio. As discussed below, in selecting the Fund's
portfolio
36
investments Alliance's Large Cap Growth Group will follow a
structured, disciplined research and investment process that is
essentially similar to that which it employs in managing the PREMIER GROWTH
FUND.
In managing the Fund's assets, Alliance's investment strategy will emphasize
stock selection and investment in the securities of a limited number of
issuers. Alliance depends heavily upon the fundamental analysis and research of
its large global equity research team situated in numerous locations around the
world. Its global equity analysts follow a research universe of approximately
900 companies. As one of the largest multinational investment management firms,
Alliance has access to considerable information concerning the companies in its
research universe, an in-depth understanding of the products, services, markets
and competition of these companies, and a good knowledge of their management.
Research emphasis is placed on the identification of companies whose superior
prospective earnings growth is not fully reflected in current market valuations.
Alliance constantly adds to and deletes from this universe as fundamentals and
valuations change. Alliance's global equity analysts rate companies in three
categories. The performance of each analyst's ratings is an important
determinant of his or her incentive compensation. The equity securities of
"one-rated" companies are expected to significantly outperform the local market
in local currency terms. All equity securities purchased for the Fund's
portfolio will be selected from the universe of approximately 100 "one-rated"
companies. As noted above, the Fund usually invests approximately 70% of its
net assets in the approximately 30 of the most highly regarded of these
companies. The Fund's portfolio emphasis upon particular industries or sectors
will be a by-product of the stock selection process rather than the result of
assigned targets or ranges.
The Fund diversifies its investments among at least four, and usually
considerably more, countries. No more than 15% of the Fund's total assets will
be invested in issuers in any one foreign country, except that the Fund may
invest up to 25% of its total assets in issuers in each of Canada, France,
Germany, Italy, Japan, The Netherlands, Switzerland, and the United Kingdom.
Within these limits, geographic distribution of the Fund's investments among
countries or regions also will be a product of the stock selection process
rather than a predetermined allocation. To the extent that the Fund
concentrates its assets within one region, the Fund may be subject to any
special risks associated with that region. While the Fund may engage in
currency hedging programs in periods in which Alliance perceives extreme
exchange rate risk, the Fund normally will not make significant use of currency
hedging strategies.
In the management of the Fund's investment portfolio, Alliance will seek to
utilize market volatility judiciously (assuming no change in company
fundamentals) to adjust the Fund's portfolio positions. To the extent
consistent with local market liquidity considerations, the Fund will strive to
capitalize on apparently unwarranted price fluctuations, both to purchase or
increase positions on weakness and to sell or reduce overpriced holdings. Under
normal circumstances, the Fund will remain substantially fully invested in
equity securities and will not take significant cash positions for market
timing purposes. Rather, through "buying into declines" and "selling into
strength," Alliance seeks superior relative returns over time.
The Fund also may:
. invest up to 20% of its total assets in CONVERTIBLE SECURITIES;
. invest up to 20% of its total assets in RIGHTS OR WARRANTS;
. write covered call and put OPTIONS, purchase put and call options on
securities of the types in which it is permitted to invest and on
exchange-traded index options, and write uncovered options for cross hedging
purposes;
. 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, foreign government
securities, or common stock and may purchase and write options on such future
contracts;
. purchase and write put and call OPTIONS on foreign currencies for hedging
purposes;
. purchase or sell FORWARD CONTRACTS;
. enter into STANDBY COMMITMENT AGREEMENTS;
. enter into FORWARD COMMITMENTS;
. enter into CURRENCY SWAPS for hedging purposes;
. make SHORT SALES of securities or maintain short positions of no more than
5% of its net assets as collateral for short sales;
. make SECURED LOANS OF PORTFOLIO SECURITIES of up to 30% of its total assets;
and
. enter into REPURCHASE AGREEMENTS for U.S. Government securities.
Because the Fund invests in a smaller number of securities than many other
equity funds, your investment also has the risk that changes in the value of a
single security may have a more significant effect, either negative or
positive, on the Fund's net asset value.
ALLIANCE GLOBAL SMALL CAP FUND
ALLIANCE GLOBAL SMALL CAP FUND seeks long-term growth of capital through
investment in a global portfolio of the equity securities of selected companies
with relatively small market capitalization. The Fund's portfolio emphasizes
companies with market capitalizations that would have placed them (when
purchased) in about the smallest 20% by market capitalization of actively
traded U.S. companies, or market capitalizations of up to about $1.5 billion.
Because the Fund applies the U.S. size standard on a global basis, its foreign
investments might rank above the lowest 20%, and, in fact, might in some
countries rank among the largest, by market capitalization in local markets.
Normally, the Fund invests at least 65% of its assets in equity securities of
these smaller capitalization companies. These companies are located in at least
three countries, one of
37
which may be the U.S. The Fund may invest up to 35% of its total assets in
securities of companies whose market capitalizations exceed the Fund's size
standard. The Fund's portfolio securities may be listed on a U.S. or
foreign exchange or traded over-the-counter.
The Fund also may:
. invest up to 20% of its total assets in WARRANTS to purchase equity
securities;
. invest in DEPOSITARY RECEIPTS or other securities representing securities of
companies based in countries other than the U.S.;
. purchase or sell FORWARD FOREIGN CURRENCY CONTRACTS;
. write covered call OPTIONS on its securities of up to 15% of its total
assets, and purchase exchange-traded call and put options, including put
options on market indices of up to, for all options, 10% of its total assets;
and
. make SECURED LOANS OF PORTFOLIO SECURITIES of up to 30% of its total assets.
One of the Fund's principal risks is its investments in smaller capitalization
companies. Alliance believes that smaller capitalization companies often have
sales and earnings growth rates exceeding those of larger companies and that
these growth rates tend to cause more rapid share price appreciation. Investing
in smaller capitalization stocks, however, involves greater risk than is
associated with larger, more established companies. For example, smaller
capitalization companies often have limited product lines, markets, or
financial resources. They may be dependent for management on one or a few key
persons and can be more susceptible to losses and risks of bankruptcy. Their
securities may be thinly traded (and therefore have to be sold at a discount
from current market prices or sold in small lots over an extended period of
time), may be followed by fewer investment research analysts, and may be
subject to wider price swings. For these reasons, the Fund's investments may
have a greater chance of loss than investments in securities of larger
capitalization companies. In addition, transaction costs in small
capitalization stocks may be higher than in those of larger capitalization
companies.
The Fund's investments in non-U.S. companies and in smaller companies will be
more volatile and may differ substantially from the overall U.S. market.
ALLIANCE INTERNATIONAL FUND
ALLIANCE INTERNATIONAL FUND seeks a total return on its assets from long-term
growth of capital and from income primarily through a broad portfolio of
marketable securities of established non-U.S. companies, companies
participating in foreign economies with prospects for growth, including U.S.
companies having their principal activities and interests outside the U.S., and
foreign government securities. Normally, the Fund will invest more than 80% of
its assets in these types of companies.
The Fund expects to invest primarily in common stocks of established non-U.S.
companies that Alliance believes have potential for capital appreciation or
income or both, but the Fund is not required to invest exclusively in common
stocks or other equity securities. The Fund may invest in any other type of
investment grade security, including convertible securities, as well as in
warrants, or obligations of the U.S. or foreign governments and their political
subdivisions.
The Fund intends to diversify its investments broadly among countries and
normally invests in at least three foreign countries, although it may invest a
substantial portion of its assets in one or more of these countries. The Fund
may invest in companies, wherever organized, that Alliance judges have their
principal activities and interests outside the U.S. These companies may be
located in developing countries, which involves exposure to economic structures
that are generally less diverse and mature, and to political systems that can
be expected to have less stability than those of developed countries. The Fund
currently does not intend to invest more than 10% of its total assets in
companies in, or governments of, developing countries.
The Fund also may:
. purchase or sell FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS;
. write covered call or put OPTIONS, sell and purchase U.S. or foreign
exchange-listed put and call options, including exchange-traded index options;
. enter into FINANCIAL FUTURES CONTRACTS, including contracts for the purchase
or sale for future delivery of foreign currencies and stock index futures, and
purchase and write put and call options on futures contracts traded on U.S. or
foreign exchanges or over-the-counter;
. purchase and write put OPTIONS on foreign currencies traded on securities
exchanges or boards of trade or over-the-counter;
. make LOANS OF PORTFOLIO SECURITIES of up to 30% of its total assets; and
. enter into REPURCHASE AGREEMENTS of up to seven days' duration for up to 10%
of the Fund's total assets.
Investments in non-U.S. countries may have more risk because they tend to be
more volatile than the U.S. stock market. To the extent that the Fund invests a
substantial amount of its assets in a particular foreign country, an investment
in the Fund has the risk that market changes or other events affecting that
country may have a more significant effect, either negative or positive, on the
Fund's net asset value.
ALLIANCE GREATER CHINA '97 FUND
ALLIANCE GREATER CHINA '97 FUND is a non-diversified investment company that
seeks long-term capital appreciation through investment of at least 80% of its
total assets in equity securities issued by Greater China companies. 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
38
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, although growth is expected to slow in 1999.
This growth has resulted 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.
With China's growth has come an increasing direct and indirect economic
involvement of all three Greater China countries. For some time, Hong Kong, a
world financial and trade center in its own right, with a large stock exchange
and offices of many of the world's multinational companies, has been the
gateway to trade with and foreign investment in China. With the 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 continue to intensify, 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 20 largest
and its foreign exchange reserves are the third largest in the world 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 over the long term 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. Appendix A has additional
information about the Greater China countries.
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 invest only in
investment grade securities. The Fund will normally sell a security that is
downgraded below investment grade or is determined by Alliance to have
undergone a similar credit quality deterioration.
The Fund also may:
. invest up to 25% of its net assets in the CONVERTIBLE SECURITIES;
. invest up to 20% of its net assets in RIGHTS OR WARRANTS;
. invest in DEPOSITARY RECEIPTS, instruments of supranational entities
denominated in the currency of any country, securities of multinational
companies and "semi-governmental securities";
. invest up to 25% of its net assets in EQUITY-LINKED DEBT SECURITIES with the
objective of realizing capital appreciation;
. invest up to 20% of its net assets in LOANS AND OTHER DIRECT DEBT SECURITIES;
. write covered call and put OPTIONS, sell or purchase exchange-traded index
options, and write uncovered options for cross-hedging purposes;
. 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;
. purchase and write put and call OPTIONS on foreign currencies for hedging
purposes;
. purchase or sell FORWARD CONTRACTS;
. enter into INTEREST RATE SWAPS and purchase or sell INTEREST RATE CAPS and
FLOORS;
. enter into FORWARD COMMITMENTS;
. enter into STANDBY COMMITMENT AGREEMENTS;
. enter into CURRENCY SWAPS for hedging purposes;
. make SHORT SALES of securities or maintain a short position, in each case
only if AGAINST THE BOX;
. make SECURED LOANS OF PORTFOLIO SECURITIES of up to 30% of its total assets;
and
. enter into REPURCHASE AGREEMENTS for U.S. Government securities.
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.
39
The Fund's investments in Greater China companies will be significantly more
volatile and will differ from the overall U.S. market. Your investment also has
the risk that market changes or other events affecting the Greater China
countries may have a more significant effect on the Fund's net asset value. In
addition, the Fund is "non-diversified," meaning that it invests its assets in
a smaller number of companies than many other international funds. As a result,
changes in the value of a single security may have a more significant effect,
either negative or positive, on the Fund's net asset value.
ALLIANCE ALL-ASIA INVESTMENT FUND
ALLIANCE ALL-ASIA INVESTMENT FUND'S investment objective is long-term capital
appreciation. The Fund invests at least 65% of its total assets in equity
securities (for the purposes of this investment policy, rights, warrants, and
options to purchase common stocks are not deemed to be equity securities),
preferred stocks and equity-linked debt securities issued by Asian companies.
The Fund may invest up to 35% of its total assets in debt securities issued or
guaranteed by Asian companies or by Asian governments, their agencies or
instrumentalities. The Fund will invest at least 80% of its total assets in
Asian companies and Asian debt securities, but also may invest in securities
issued by non-Asian issuers. The Fund expects to invest, from time to time, a
significant portion, which may be in excess of 50%, of its assets in equity
securities of Japanese companies.
In the past decade, Asian countries generally have experienced a high level of
real economic growth due to political and economic changes, including foreign
investment and reduced government intervention in the economy. Alliance
believes that certain conditions exist in Asian countries that create the
potential for continued rapid economic growth. These conditions include
favorable demographics and competitive wage rates, increasing levels of foreign
direct investment, rising per capita incomes and consumer demand, a high
savings rate, and numerous privatization programs. Asian countries also are
becoming more industrialized and are increasing their intra-Asian exports while
reducing their dependence on Western export demand. Alliance believes that
these conditions are important to the long-term economic growth of Asian
countries.
As the economies of many Asian countries move through the "emerging market"
stage, thus increasing the supply of goods, services and capital available to
less developed Asian markets and helping to spur economic growth in those
markets, the potential is created for many Asian companies to experience rapid
growth. In addition, many Asian companies that have securities listed on
exchanges in more developed Asian countries will be participants in the rapid
economic growth of the less-developed countries. These companies generally
offer the advantages of more experienced management and more developed market
regulation.
As their economies have grown, the securities markets in Asian countries have
also expanded. New exchanges have been created and the number of listed
companies, annual trading volume, and overall market capitalization have
increased significantly. Additionally, new markets continue to open to foreign
investments. The Fund also offers investors the opportunity to access
relatively restricted markets. Alliance believes that investment opportunities
in Asian countries will continue to expand.
The Fund will invest in companies believed to possess rapid growth potential.
Thus, the Fund will invest in smaller, emerging companies, but will also invest
in larger, more established companies in such growing economic sectors as
capital goods, telecommunications, and consumer services.
The Fund will invest primarily in investment grade debt securities, but may
maintain not more than 5% of its net assets in lower-rated securities,
lower-rated loans, and other lower-rated direct debt instruments. The Fund will
not retain a security that is downgraded below C or determined by Alliance to
have undergone similar credit quality deterioration following purchase.
The Fund also may:
. invest up to 25% of its net assets in the CONVERTIBLE SECURITIES;
. invest up to 20% of its net assets in RIGHTS OR WARRANTS;
. invest in DEPOSITARY RECEIPTS, instruments of supranational entities
denominated in the currency of any country, securities of multinational
companies and "semi-governmental securities";
. invest up to 25% of its net assets in EQUITY-LINKED DEBT SECURITIES with the
objective of realizing capital appreciation;
. invest up to 25% of its net assets in LOANS AND OTHER DIRECT DEBT
INSTRUMENTS;
. write covered call and put OPTIONS, sell or purchase exchange-traded index
options, and write uncovered options for cross-hedging purposes;
. 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;
. purchase and write put and call OPTIONS on foreign currencies for hedging
purposes;
. purchase or sell FORWARD CONTRACTS;
. enter into INTEREST RATE SWAPS and purchase or sell INTEREST RATE CAPS and
FLOORS;
. enter into FORWARD COMMITMENTS;
. enter into STANDBY COMMITMENT AGREEMENTS;
. enter into CURRENCY SWAPS for hedging purposes;
. make SHORT SALES of securities or maintain a short position, in each case
only if AGAINST THE BOX;
. make SECURED LOANS OF PORTFOLIO SECURITIES of up to 30% of its total assets;
and
40
. enter into REPURCHASE AGREEMENTS for U.S. Government securities.
The Fund's investments in Asian and Pacific region countries will be
significantly more volatile and may differ significantly from the overall U.S.
market. To the extent the Fund invests a substantial amount of its assets in
Japanese companies, your investment has the risk that market changes or other
events affecting that country may have a more significant effect on the Fund's
net asset value. The Fund's investments in debt securities have interest rate
and credit risk.
ALLIANCE GLOBAL ENVIRONMENT FUND
ALLIANCE GLOBAL ENVIRONMENT FUND is a non-diversified investment company that
seeks long-term capital appreciation through investment in equity securities of
Eligible Companies. For purposes of the Fund's investment objective and
investment policies, "equity securities" are common stocks (but not preferred
stocks), rights or warrants to subscribe for or purchase common stocks, and
preferred stocks or debt securities that are convertible into common stocks
without the payment of any further consideration.
The Fund invests in two categories of Eligible Companies--Environmental
Companies and Beneficiary Companies. The Fund may invest in a company with a
broadly diversified business only a part of which provides such products,
processes, or services, when Alliance believes that these products, processes
or services will yield a competitive advantage that significantly enhances the
issuer's growth prospects. As a matter of fundamental policy, the Fund will,
under normal circumstances, invest substantially all of its total assets in
equity securities of Eligible Companies.
A major premise of the Fund's investment approach is that environmental
concerns will be a significant source of future growth opportunities, and that
Environmental Companies will see an increased demand for their systems and
services. Environmental Companies operate in the areas of pollution control,
clean energy, solid waste management, hazardous waste treatment and disposal,
pulp and paper recycling, waste-to-energy alternatives, biodegradable cartons,
packages, plastics and other products, remedial projects and emergency cleanup
efforts, manufacture of environmental supplies and equipment, the achievement
of purer air, groundwater and foods, and the detection, evaluation and
treatment of both existing and potential environmental problems including,
among others, air pollution and acid rain.
The environmental services industry generally is positively affected by
increasing governmental action intended to foster environmental protection. As
environmental regulations are developed and enforced, Environmental Companies
providing the means of compliance with such regulations are afforded
substantial opportunities for growth. Beneficiary Companies may also derive an
advantage to the extent that they have anticipated environmental regulation and
are therefore at a competitive advantage.
In the view of Alliance, increasing public and political awareness of
environmental concerns and resultant environmental regulations are long-term
phenomena that are driven by an emerging global consensus that environmental
protection is a vital and increasingly immediate priority. Alliance believes
that Eligible Companies based in the United States and other economically
developed countries will have increasing opportunities for earnings growth
resulting not only from an increased demand for their existing products or
services but also from innovative responses to changing regulations and
priorities and enforcement policies. Such opportunities will arise, in the
opinion of Alliance, not only within developed countries but also within many
economically developing countries, such as those of Eastern Europe and the
Pacific Rim. These countries lag well behind developed countries in the
conservation and efficient use of natural resources and in their implementation
of policies that protect the environment.
Alliance believes that global investing offers opportunities for superior
investment returns. The Fund spreads investment risk among the capital markets
of a number of countries and invests in equity securities of companies based in
at least three, and normally considerably more, such countries. The percentage
of the Fund's assets invested in securities of companies in a particular
country or denominated in a particular currency will vary in accordance with
Alliance's assessment of the appreciation potential of such securities and the
strength of that currency.
The Fund also may:
. invest up to 20% of its total assets in WARRANTS to purchase equity
securities;
. invest in DEPOSITARY RECEIPTS;
. purchase and write put and call OPTIONS on foreign currencies for hedging
purposes;
. enter into FORWARD FOREIGN CURRENCY TRANSACTIONS for hedging purposes;
. invest in CURRENCY FUTURES and options on such futures for hedging purposes;
and
. make SECURED LOANS OF PORTFOLIO SECURITIES of up to 30% of its total assets.
The Fund's investments in non-U.S. companies and in specific types of companies
that provide environmental services will be more volatile and may differ
substantially from the overall U.S. market. The Fund's investments also have
the risk that government regulations or other action could negatively affect
the business of environmental companies.
DESCRIPTION OF INVESTMENT PRACTICES
This section describes the Funds' investment practices and associated risks.
Unless otherwise noted, a Fund's use of any of these practices was specified in
the previous section.
ASSET-BACKED SECURITIES. Asset-backed securities (unrelated to first mortgage
loans) represent fractional interests in pools of leases, retail installment
loans, revolving credit receivables, and other payment obligations, both
secured and unsecured. These assets are generally held by a trust and payments
of principal
41
and interest or interest only are passed through monthly or quarterly to
certificate holders and may be guaranteed up to certain amounts by letters of
credit issued by a financial institution affiliated or unaffiliated with the
trustee or originator of the trust.
Like mortgages underlying mortgage-backed securities, underlying automobile
sales contracts or credit card receivables are subject to prepayment, which may
reduce the overall return to certificate holders. Certificate holders may also
experience delays in payment on the certificates if the full amounts due on
underlying sales contracts or receivables are not realized by the trust because
of unanticipated legal or administrative costs of enforcing the contracts or
because of depreciation or damage to the collateral (usually automobiles)
securing certain contracts, or other factors.
CONVERTIBLE SECURITIES. Prior to conversion, convertible securities have the
same general characteristics as non-convertible debt securities, which
generally provide a stable stream of income with yields that are generally
higher than those of equity securities of the same or similar issuers. The
price of a convertible security will normally vary with changes in the price of
the underlying equity security, although the higher yield tends to make the
convertible security less volatile than the underlying equity security. As with
debt securities, the market value of convertible securities tends to decrease
as interest rates rise and increase as interest rates decline. While
convertible securities generally offer lower interest or dividend yields than
non-convertible debt securities of similar quality, they offer investors the
potential to benefit from increases in the market price of the underlying
common stock. Convertible debt securities that are rated Baa or lower by
Moody's or BBB or lower by S&P, Duff & Phelps or Fitch and comparable unrated
securities as determined by Alliance may share some or all of the risks of
non-convertible debt securities with those ratings.
CURRENCY SWAPS. Currency swaps involve the individually negotiated exchange by
a 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. A Fund will not enter into any currency swap
unless the credit quality of the unsecured senior debt or the claims-paying
ability of the counterparty is rated in the highest rating category of at least
one nationally recognized rating organization at the time of entering into the
transaction. If there is a default by the counterparty to the transaction, the
Fund will have contractual remedies under the transaction agreements.
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 issued by an 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 an 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, investments in depositary receipts of either type are deemed to be
investments in the underlying securities, except with respect to ALLIANCE
GROWTH FUND, where investments in ADRs are deemed to be investments in
securities issued by U.S. issuers and those in GDRs and other types of
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. A European Currency Unit is a basket of specified
amounts of the currencies of the member states of the European Economic
Community. "Semi-governmental securities" are securities issued by entities
owned by either a national, state or equivalent government or are obligations
of one of such government jurisdictions that are not backed by its full faith
and credit and general taxing powers.
EQUITY-LINKED DEBT SECURITIES. Equity-linked debt securities are securities on
which the issuer is obligated to pay interest and/or principal that is linked
to the performance of a specified index of equity securities. The interest or
principal payments may be significantly greater or less than payment
obligations for 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 a Fund. As with any debt securities, the values of
equity-linked debt securities will generally vary inversely with changes in
interest rates. A 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.
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 a Fund may negotiate settlements beyond
42
two months. Securities purchased or sold under a forward commitment are subject
to market fluctuations and no interest or dividends accrue to the purchaser
prior to the settlement date.
The use of forward commitments enables a Fund to protect against anticipated
changes in interest rates and prices. For instance, in periods of rising
interest rates and falling bond prices, a Fund might sell securities in its
portfolio on a forward commitment basis to limit its exposure to falling
prices. In periods of falling interest rates and rising bond prices, a Fund
might sell a security in its portfolio and purchase the same or a similar
security on a when-issued or forward commitment basis to obtain the benefit of
currently higher cash yields. If, however, Alliance were to forecast
incorrectly the direction of interest rate movements, a Fund might be required
to complete such when-issued or forward transactions at prices inferior to the
then current market values. When-issued securities and forward commitments may
be sold prior to the settlement date, but a Fund enters into when-issued and
forward commitments only with the intention of actually receiving securities or
delivering them, as the case may be. If a Fund chooses to dispose of the right
to acquire a when-issued security prior to its acquisition or dispose of its
right to deliver or receive against a forward commitment, it may incur a gain
or loss. Any significant commitment of Fund assets to the purchase of
securities on a "when, as and if issued" basis may increase the volatility of
the Fund's net asset value. No forward commitments will be made by ALLIANCE
HEALTH CARE FUND, ALLIANCE UTILITY INCOME FUND, ALLIANCE REAL ESTATE INVESTMENT
FUND, ALLIANCE NEW EUROPE FUND, ALLIANCE WORLDWIDE PRIVATIZATION FUND, ALLIANCE
INTERNATIONAL PREMIER GROWTH FUND, ALLIANCE GREATER CHINA '97 FUND or ALLIANCE
ALL-ASIA INVESTMENT FUND if, as a result, the Fund's aggregate commitments
under the transactions would be more than 30% of its total assets. In the event
the other party to a forward commitment transaction were to default, a Fund
might lose the opportunity to invest money at favorable rates or to dispose of
securities at favorable prices.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS. A Fund may purchase or sell
forward foreign currency exchange contracts to minimize the risk of adverse
changes in the relationship between the U.S. Dollar and other currencies. A
forward contract is an obligation to purchase or sell a specific currency for
an agreed price at a future date, and is individually negotiated and privately
traded.
A Fund may enter into a forward contract, for example, when it enters into a
contract for the purchase or sale of a security denominated in a foreign
currency in order to "lock in" the U.S. Dollar price of the security
("transaction hedge"). A Fund will not engage in transaction hedges with
respect to the currency of a particular country to an extent greater than the
aggregate amount of the Fund's transactions in that currency. When a Fund
believes that a foreign currency may suffer a substantial decline against the
U.S. Dollar, it may enter into a forward sale contract to sell an amount of
that foreign currency approximating the value of some or all of the Fund's
portfolio securities denominated in such foreign currency, or when the Fund
believes that the U.S. Dollar may suffer a substantial decline against a
foreign currency, it may enter into a forward purchase contract to buy that
foreign currency for a fixed dollar amount ("position hedge"). A Fund will not
position hedge with respect to a particular currency 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 currency. Instead of
entering into a position hedge, a Fund may, in the alternative, enter into a
forward contract to sell a different foreign currency for a fixed U.S. dollar
amount where the Fund believes that the U.S. Dollar value of the currency to be
sold pursuant to the forward contract will fall whenever there is a decline in
the U.S. Dollar value of the currency in which portfolio securities of the Fund
are denominated ("cross-hedge"). Unanticipated changes in currency prices may
result in poorer overall performance for the Fund than if it had not entered
into such forward contracts.
Hedging against a decline in the value of a currency does not eliminate
fluctuations in the prices of portfolio securities or prevent losses if the
prices of such securities decline. Such transactions also preclude the
opportunity for gain if the value of the hedged currency should rise. Moreover,
it may not be possible for a Fund to hedge against a devaluation that is so
generally anticipated that the Fund is not able to contract to sell the
currency at a price above the devaluation level it anticipates. ALLIANCE NEW
EUROPE FUND, ALLIANCE GLOBAL SMALL CAP FUND and ALLIANCE INTERNATIONAL FUND
will not enter into a forward contract with a term of more than one year or if,
as a result, more than 50% of its total assets would be committed to such
contracts. ALLIANCE NEW EUROPE FUND'S, ALLIANCE GLOBAL SMALL CAP FUND'S and
ALLIANCE INTERNATIONAL FUND'S investments in forward contracts will be limited
to hedging involving either specific transactions or portfolio positions.
ALLIANCE GROWTH FUND also may purchase and sell foreign currency on a spot
basis.
ILLIQUID SECURITIES. The Funds will limit their investments in illiquid
securities to no more than 15% of their net assets, except that the limit is
10% for ALLIANCE HEALTH CARE FUND, ALLIANCE INTERNATIONAL FUND, ALLIANCE
TECHNOLOGY FUND, ALLIANCE QUASAR FUND, ALLIANCE NEW EUROPE FUND, and ALLIANCE
GLOBAL SMALL CAP FUND and 5% for THE ALLIANCE FUND and ALLIANCE GROWTH FUND.
Illiquid securities generally include: (i) direct placements or other
securities that are subject to legal or contractual restrictions on resale or
for which there is no readily available market (e.g., when trading in the
security is suspended or, in the case of unlisted securities, when market
makers do not exist or will not entertain bids or offers), including many
individually negotiated currency swaps and any assets used to cover currency
swaps and most privately negotiated investments in state enterprises that have
not yet conducted an initial equity offering, (ii) over-the-counter options and
assets used to cover over-the-counter options, and (iii) repurchase agreements
not terminable within seven days.
Because of the absence of a trading market for illiquid securities, a Fund may
not be able to realize their full value upon sale. Alliance will monitor the
liquidity of a Fund's investments in illiquid securities. Except with respect
to
43
ALLIANCE QUASAR FUND, Rule 144A securities will not be treated as "illiquid"
for purposes of this limit on investments.
A Fund that invests in securities for which there is no ready market may not be
able to readily sell such securities. Such securities are unlike securities
that are traded in the open market and can be expected to be sold immediately
if the market is adequate. The sale price of illiquid securities may be lower
or higher than Alliance's most recent estimate of their fair value. Generally,
less public information is available about the issuers of such securities than
about companies whose securities are traded on an exchange. To the extent that
these securities are foreign securities, there is no law in many of the
countries in which a Fund may invest similar to the Securities Act requiring an
issuer to register the sale of securities with a governmental agency or
imposing legal restrictions on resales of securities, either as to length of
time the securities may be held or manner of resale. However, there may be
contractual restrictions on resales of non-publicly traded foreign securities.
INTEREST RATE TRANSACTIONS (SWAPS, CAPS, AND FLOORS). Each Fund that may enter
into interest rate transactions expects to do so primarily to preserve a return
or spread on a particular investment or portion of its portfolio or to protect
against any increase in the price of securities the Fund anticipates purchasing
at a later date. The Funds do not intend to use these transactions in a
speculative manner.
Interest rate swaps involve the exchange by a 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 ALLIANCE UTILITY INCOME FUND, ALLIANCE GREATER CHINA
'97 FUND and ALLIANCE ALL-ASIA INVESTMENT 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.
A 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. A Fund will not enter into an interest rate swap, cap,
or floor transaction unless the unsecured senior debt or the claims-paying
ability of the other party is 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 were to incorrectly
forecast market values, interest rates and other applicable factors, the
investment performance of a 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 a
Fund that is permitted to enter into such transactions. These transactions do
not involve the delivery of securities or other underlying assets or principal.
Accordingly, the risk of loss with respect to interest rate transactions is
limited to the net amount of interest payments that a Fund is contractually
obligated to make. If the counterparty to an interest rate transaction
defaults, a Fund's risk of loss consists of the net amount of interest payments
that the Fund contractually is entitled to receive.
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 legal protection to a 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 a 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. Failure to receive scheduled interest or principal payments on
these types of investments could adversely affect a Fund's net asset value and
yield. Loans that are fully secured offer a 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. Making loans to 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 government issuers will
44
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 a Fund. For
example, if a loan is foreclosed, a 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, a 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 a Fund were determined to be
subject to the claims of the agent's general creditors, the Fund might incur
certain 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 a Fund may include letters of credit,
revolving credit facilities, or other standby financing commitments obligating
a Fund to pay additional cash on demand. These commitments may have the effect
of requiring a 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.
LOANS OF PORTFOLIO SECURITIES. The risk in lending portfolio securities, as
with other extensions of credit, consists of the possible loss of rights in the
collateral should the borrower fail financially. In determining whether to lend
securities to a particular borrower, Alliance will consider all relevant facts
and circumstances, including the creditworthiness of the borrower. While
securities are on loan, the borrower will pay the Fund any income from the
securities. The Fund may invest any cash collateral in portfolio securities and
earn additional income or receive an agreed-upon amount of income from a
borrower who has delivered equivalent collateral. Each Fund will have the right
to regain record ownership of loaned securities or equivalent securities in
order to exercise ownership rights such as voting rights, subscription rights
and rights to dividends, interest, or distributions. A Fund may pay reasonable
finders', administrative, and custodial fees in connection with a loan.
MORTGAGE-BACKED SECURITIES AND ASSOCIATED RISKS. Interest and principal
payments (including prepayments) on the mortgages underlying mortgage-backed
securities are passed through to the holders of the securities. As a result of
the pass-through of prepayments of principal on the underlying securities,
mortgage-backed securities are often subject to more rapid prepayment of
principal than their stated maturity would indicate. Prepayments occur when the
mortgagor on a mortgage prepays the remaining principal before the mortgage's
scheduled maturity date. Because the prepayment characteristics of the
underlying mortgages vary, it is impossible to predict accurately the realized
yield or average life of a particular issue of pass-through certificates.
Prepayments are important because of their effect on the yield and price of the
mortgage-backed securities. During periods of declining interest rates,
prepayments can be expected to accelerate and a Fund that invests in these
securities would be required to reinvest the proceeds at the lower interest
rates then available. Conversely, during periods of rising interest rates, a
reduction in prepayments may increase the effective maturity of the securities,
subjecting them to a greater risk of decline in market value in response to
rising interest rates. In addition, prepayments of mortgages underlying
securities purchased at a premium could result in capital losses.
Mortgage-Backed Securities include mortgage pass-through certificates and
multiple-class pass-through securities, such as REMIC pass-through
certificates, CMOs and stripped mortgage-backed securities ("SMBS"), and other
types of Mortgage-Backed Securities that may be available in the future.
GUARANTEED MORTGAGE PASS-THROUGH SECURITIES. ALLIANCE REAL ESTATE INVESTMENT
FUND may invest in guaranteed mortgage pass-through securities which represent
participation interests in pools of residential mortgage loans and are issued
by U.S. governmental or private lenders and guaranteed by the U.S. Government
or one of its agencies or instrumentalities, including but not limited to the
Government National Mortgage Association ("Ginnie Mae"), the Federal National
Mortgage Association ("Fannie Mae") and the Federal Home Loan Mortgage
Corporation ("Freddie Mac"). Ginnie Mae certificates are guaranteed by the full
faith and credit of the United States Government for timely payment of
principal and interest on the certificates. Fannie Mae certificates are
guaranteed by Fannie Mae, a federally chartered and privately-owned
corporation, for full and timely payment of principal and interest on the
certificates. Freddie Mac certificates are guaranteed by Freddie Mac, a
corporate instrumentality of the United States Government, for timely payment
of interest and the ultimate collection of all principal of the related
mortgage loans.
MULTIPLE-CLASS PASS-THROUGH SECURITIES AND COLLATERALIZED MORTGAGE OBLIGATIONS.
Mortgage-Backed Securities also include CMOs and REMIC pass-through or
participation certificates that may be issued by, among others, U.S. Government
agencies and instrumentalities as well as private lenders. CMOs and REMIC
certificates are issued in multiple classes and the principal of and interest
on the mortgage assets may be allocated among the several classes of CMOs or
REMIC certificates in various ways. Each class of CMOs or REMIC certificates,
often referred to as a "tranche," is issued at a specific adjustable or fixed
interest rate and must be fully retired no later than its final distribution
date. Generally, interest is paid or accrues on all classes of CMOs or REMIC
certificates on a monthly basis. ALLIANCE REAL ESTATE INVESTMENT FUND will not
invest in the lowest tranche of CMOs and REMIC certificates.
Typically, CMOs are collateralized by Ginnie Mae or Freddie Mac certificates
but also may be collateralized by other mortgage assets such as whole loans or
private mortgage pass-through securities. Debt service on CMOs is provided from
payments of
45
principal and interest on collateral of mortgaged assets and any reinvestment
income.
A REMIC is a CMO that qualifies for special tax treatment under the Code and
invests in certain mortgages primarily secured by interests in real property
and other permitted investments. Investors may purchase "regular" and
"residual" interest shares of beneficial interest in REMIC trusts, although
ALLIANCE REAL ESTATE INVESTMENT FUND does not intend to invest in residual
interests.
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 a Fund
is "covered" if the Fund owns the underlying security, has an absolute and
immediate right to acquire that security upon conversion or exchange of another
security it holds, or holds a call option on the underlying security with an
exercise price equal to or less than that of the call option it has written. A
put option written by a Fund is covered if the Fund holds a put option on the
underlying securities with an exercise price equal to or greater than that of
the put option it has written.
A call option is for cross-hedging purposes if a 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. A
Fund would write a call option for cross-hedging purposes, instead of writing a
covered call option, when the premium to be received from the cross-hedge
transaction would exceed that which would be received from writing a covered
call option, while at the same time achieving the desired hedge.
In purchasing an option, a Fund would be in a position to realize a gain if,
during the option period, the price of the underlying security increased (in
the case of a call) or decreased (in the case of a put) by an amount in excess
of the premium paid; otherwise the Fund would experience a loss equal to the
premium paid for the option.
If an option written by a Fund were exercised, the Fund would be obligated to
purchase (in the case of a put) or sell (in the case of a call) the underlying
security at the exercise price. The risk involved in writing an option is that,
if the option were exercised, the underlying security would then be purchased
or sold by the Fund at a disadvantageous price. Entering into a closing
transaction (i.e., by disposing of the option prior to its exercise) could
reduce these risks. A Fund retains the premium received from writing a put or
call option whether or not the option is exercised. The writing of covered call
options could result in increases in a Fund's portfolio turnover rate,
especially during periods when market prices of the underlying securities
appreciate.
ALLIANCE TECHNOLOGY FUND and ALLIANCE GLOBAL SMALL CAP FUND will not write a
call option if the premium to be received by the Fund would not produce an
annualized return of at least 15% of the then current market value of the
securities subject to the option (without giving effect to commissions, stock
transfer taxes and other expenses that are deducted from premium receipts).
Options purchased or written by a Fund in negotiated transactions are illiquid
and it may not be possible for the Fund to effect a closing transaction at an
advantageous time.
OPTIONS ON SECURITIES INDICES. An option on a securities index is similar to an
option on a security except that, rather than the right to take or make
delivery of a security at a specified price, an option on a securities index
gives the holder the right to receive, upon exercise of the option, an amount
of cash if the closing level of the chosen index is greater than (in the case
of a call) or less than (in the case of a put) the exercise price of the option.
OPTIONS ON FOREIGN CURRENCIES. As in the case of other kinds of options, the
writing of an option on a foreign currency constitutes only a partial hedge, up
to the amount of the premium received, and a Fund could be required to purchase
or sell foreign currencies at disadvantageous exchange rates and incur losses.
The purchase of an option on a foreign currency may constitute an effective
hedge against fluctuations in exchange rates although, in the event of rate
movements adverse to a Fund's position, it may forfeit the entire amount of the
premium plus related transaction costs. For Funds that may invest in options on
foreign currencies, see the Fund's SAI for further discussion of the use,
risks, and costs of options on foreign currencies.
FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS. A "sale" of a futures
contract means the acquisition of a contractual obligation to deliver the
securities or foreign currencies or other commodity called for by the contract
at a specified price on a specified date. A "purchase" of a futures contract
means the incurring of an obligation to acquire the securities, foreign
currencies or other commodity called for by the contract at a specified price
on a specified date. The purchaser of a futures contract on an index agrees to
take or make delivery of an amount of cash equal to the difference between a
specified dollar multiple of the value of the index on the expiration date of
the contract ("current contract value") and the price at which the contract was
originally struck. No physical delivery of the securities underlying the index
is made.
A Fund may purchase options on futures contracts written or purchased by a
Fund that are traded on U.S. or foreign exchanges or over-the-counter. These
investment techniques will be used only to hedge against anticipated future
changes in market conditions and interest or exchange rates which otherwise
might either adversely affect the value of the Fund's portfolio securities or
adversely affect the prices of securities which the Fund intends to purchase at
a later date.
No Fund will enter into any futures contracts or options on futures contracts
if immediately thereafter the market values of the outstanding futures
contracts of the Fund and the currencies and futures contracts subject to
outstanding options written by the Fund would exceed 50% of its total assets,
or in the case of ALLIANCE INTERNATIONAL PREMIER GROWTH FUND 100% of its total
assets. ALLIANCE PREMIER GROWTH FUND and ALLIANCE GROWTH AND
46
INCOME FUND may not purchase or sell a stock index future if immediately
thereafter more than 30% of its total assets would be hedged by stock index
futures. ALLIANCE PREMIER GROWTH FUND and ALLIANCE GROWTH AND INCOME FUND may
not purchase or sell a stock index future if, immediately thereafter, the sum
of the amount of margin deposits on the Fund's existing futures positions would
exceed 5% of the market value of the Fund's total assets.
REPURCHASE AGREEMENTS. A repurchase agreement arises when a buyer purchases a
security and simultaneously agrees to resell it to the vendor at an agreed-upon
future date, normally a day or a few days later. The resale price is greater
than the purchase price, reflecting an agreed-upon interest rate for the period
the buyer's money is invested in the security. Such agreements permit a Fund to
keep all of its assets at work while retaining "overnight" flexibility in
pursuit of investments of a longer-term nature. If a vendor defaults on its
repurchase obligation, a Fund would suffer a loss to the extent that the
proceeds from the sale of the collateral were less than the repurchase price.
If a vendor goes bankrupt, a Fund might be delayed in, or prevented from,
selling the collateral for its benefit. Alliance monitors the creditworthiness
of the vendors with which the Fund enters into repurchase agreements.
RIGHTS AND WARRANTS. A Fund will invest in rights or warrants only if Alliance
deems the underlying equity securities themselves appropriate for inclusion in
the Fund's portfolio. Rights and warrants entitle the holder to buy equity
securities at a specific price for a specific period of time. Rights are
similar to warrants except that they have a substantially shorter duration.
Rights and warrants may be considered more speculative than certain other types
of investments in that they do not entitle a holder to dividends or voting
rights with respect to the underlying securities nor do they represent any
rights in the assets of the issuing company. The value of a right or warrant
does not necessarily change with the value of the underlying security, although
the value of a right or warrant may decline because of a decrease in the value
of the underlying security, the passage of time or a change in perception as to
the potential of the underlying security, or any combination of these factors.
If the market price of the underlying security is below the exercise price of
the warrant on the expiration date, the warrant will expire worthless.
Moreover, a right or warrant ceases to have value if it is not exercised prior
to the expiration date.
SHORT SALES. A short sale is effected by selling a security that a Fund does
not own, or, if the Fund does own such security, it is not to be delivered upon
consummation of the sale. A short sale is "against the box" to the extent that
a Fund contemporaneously owns or has the right to obtain securities identical
to those sold short without payment. ALLIANCE UTILITY INCOME FUND, ALLIANCE
WORLDWIDE PRIVATIZATION FUND, ALLIANCE GREATER CHINA '97 FUND and ALLIANCE
ALL-ASIA INVESTMENT FUND, each 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, each of
those Funds may not make a short sale if as a result more than 10% of the
Fund's net assets would be held as collateral for short sales, except that
ALLIANCE REAL ESTATE INVESTMENT FUND, ALLIANCE GREATER CHINA '97 FUND and
ALLIANCE ALL-ASIA INVESTMENT FUND may not make a short sale if as a result more
than 25% of the Fund's net assets would be held as collateral for short sales.
If the price of the security sold short increases between the time of the short
sale and the time a Fund replaces the borrowed security, the Fund will incur a
loss; conversely, if the price declines, the Fund will realize a capital gain.
STANDBY COMMITMENT AGREEMENTS. Standby commitment agreements commit a Fund, for
a stated period of time, to purchase a stated amount of a security that may be
issued and sold to the Fund at the option of the issuer. The price and coupon
of the security are fixed at the time of the commitment. At the time of
entering into the agreement, the Fund is paid a commitment fee, regardless of
whether the security ultimately is issued, typically equal to approximately
0.5% of the aggregate purchase price of the security the Fund has committed to
purchase. A Fund will enter into such agreements only for the purpose of
investing in the security underlying the commitment at a yield and price
considered advantageous to the Fund and unavailable on a firm commitment basis.
Investments in standby commitments will be limited so that the aggregate
purchase price of the securities subject to the commitments will not exceed 25%
with respect to ALLIANCE REAL ESTATE INVESTMENT FUND and ALLIANCE NEW EUROPE
FUND, 50% with respect to ALLIANCE WORLDWIDE PRIVATIZATION FUND, ALLIANCE
INTERNATIONAL PREMIER GROWTH FUND, ALLIANCE GREATER CHINA '97 FUND and ALLIANCE
ALL-ASIA INVESTMENT FUND and 20% with respect to ALLIANCE UTILITY INCOME FUND,
of the Fund's assets at the time of making the commitment.
There is no guarantee that a security subject to a standby commitment will be
issued and the value of the security, if issued, on the delivery date may be
more or less than its purchase price. Since the issuance of the security
underlying the commitment is at the option of the issuer, a Fund will bear the
risk of capital loss in the event the value of the security declines and may
not benefit from an appreciation in the value of the security during the
commitment period if the issuer decides not to issue and sell the security to
the Fund.
ZERO-COUPON AND PAYMENT-IN-KIND BONDS. Zero-coupon bonds are issued at a
significant discount from their principal amount in lieu of paying interest
periodically. Payment-in-kind bonds allow the issuer to make current interest
payments on the bonds in additional bonds. Because zero-coupon bonds and
payment-in-kind bonds do not pay current interest in cash, their value is
generally subject to greater fluctuation in response to changes in market
interest rates than bonds that pay interest in cash currently. Both zero-coupon
and payment-in-kind bonds allow an issuer to avoid the need to generate cash to
meet current interest payments. These bonds may involve greater credit risks
than bonds paying interest currently. Although these bonds do not pay current
interest in cash, a Fund is nonetheless required to accrue interest income on
such
47
investments and to distribute such amounts at least annually to shareholders.
Thus, a Fund could be required at times to liquidate other investments in order
to satisfy its dividend requirements.
FUTURE DEVELOPMENTS. A Fund may, following written notice to its shareholders,
take advantage of other investment practices that are not currently
contemplated for use by the Fund, or are not available but may yet be
developed, to the extent such investment practices are consistent with the
Fund's investment objective and legally permissible for the Fund. Such
investment practices, if they arise, may involve risks that exceed those
involved in the activities described above.
GENERAL. The successful use of the investment practices described above draws
upon Alliance's special skills and experience and usually depends on Alliance's
ability to forecast price movements, interest rates, or currency exchange rate
movements correctly. Should interest rates, prices or exchange rates move
unexpectedly, a Fund may not achieve the anticipated benefits of the
transactions or may realize losses and thus be in a worse position than if such
strategies had not been used. Unlike many exchange-traded futures contracts and
options on futures contracts, there are no daily price fluctuation limits for
certain options and forward contracts, and adverse market movements could
therefore continue to an unlimited extent over a period of time. In addition,
the correlation between movements in the prices of futures contracts, options
and forward contracts and movements in the prices of the securities and
currencies hedged or used for cover will not be perfect and could produce
unanticipated losses.
A Fund's ability to dispose of its position in futures contracts, options, and
forward contracts depends on the availability of liquid markets in such
instruments. Markets in options and futures with respect to a number of types
of securities and currencies are relatively new and still developing, and there
is no public market for forward contracts. It is impossible to predict the
amount of trading interest that may exist in various types of futures
contracts, options, and forward contracts. If a secondary market does not exist
for an option purchased or written by a Fund, it might not be possible to
effect a closing transaction in the option (i.e., dispose of the option), with
the result that (i) an option purchased by the Fund would have to be exercised
in order for the Fund to realize any profit and (ii) the Fund may not be able
to sell currencies or portfolio securities covering an option written by the
Fund until the option expires or it delivers the underlying security, futures
contract or currency upon exercise. Therefore, no assurance can be given that
the Funds will be able to utilize these instruments effectively. In addition, a
Fund's ability to engage in options and futures transactions may be limited by
tax considerations and the use of certain hedging techniques may adversely
impact the characterization of income to a Fund for U.S. federal income tax
purposes.
PORTFOLIO TURNOVER. The portfolio turnover rate for each Fund is included in
the FINANCIAL HIGHLIGHTS section. The Funds are actively managed and, in some
cases in response to market conditions, a Fund's portfolio turnover may exceed
100%. A higher rate of portfolio turnover increases brokerage and other
expenses, 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, which, when distributed, are taxable to shareholders.
TEMPORARY DEFENSIVE POSITION. For temporary defensive purposes, each Fund may
reduce its position in equity securities and invest in, without limit, certain
types of short-term, liquid, high grade or high quality (depending on the Fund)
debt securities. These securities may include U.S. Government securities,
qualifying bank deposits, money market instruments, prime commercial paper and
other types of short-term debt securities including notes and bonds. For Funds
that may invest in foreign countries, such securities also may include
short-term, foreign-currency denominated securities of the type mentioned above
issued by foreign governmental entities, companies, and supranational
organizations. While the Funds are investing for temporary defensive purposes,
they may not meet their investment objectives.
ADDITIONAL RISK CONSIDERATIONS
Investment in certain of the Funds involves the special risk considerations
described below. Certain of these risks may be heightened when investing in
emerging markets.
CURRENCY CONSIDERATIONS. Substantially all of the assets of ALLIANCE NEW EUROPE
FUND, ALLIANCE WORLDWIDE PRIVATIZATION FUND, ALLIANCE INTERNATIONAL PREMIER
GROWTH FUND, ALLIANCE INTERNATIONAL FUND, ALLIANCE GREATER CHINA '97 FUND and
ALLIANCE ALL-ASIA INVESTMENT FUND, and a substantial portion of the assets of
ALLIANCE GLOBAL SMALL CAP FUND and ALLIANCE GLOBAL ENVIRONMENT FUND are
invested in securities denominated in foreign currencies. The Funds receive a
corresponding portion of their revenues in foreign currencies. Therefore, the
dollar equivalent of their net assets, distributions, and income will be
adversely affected by reductions in the value of certain foreign currencies
relative to the U.S. Dollar. If the value of the foreign currencies in which a
Fund receives its income falls relative to the U.S. Dollar between receipt of
the income and the making of Fund distributions, the Fund may be required to
liquidate securities in order to make distributions if it has insufficient cash
in U.S. Dollars to meet distribution requirements that the Fund must satisfy to
qualify as a regulated investment company for federal income tax purposes.
Similarly, if an exchange rate declines between the time a 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. In light of these risks, a Fund may
engage in currency hedging transactions, as described above, which involve
certain special risks.
FOREIGN SECURITIES. The securities markets of many foreign countries are
relatively small, with the majority of market capitalization and trading volume
concentrated in a limited number of companies representing a small number of
industries. Consequently, a Fund whose investment portfolio
48
includes foreign securities may experience greater price volatility and
significantly lower liquidity than a portfolio invested solely in equity
securities of U.S. companies. These markets may be subject to greater influence
by adverse events generally affecting the market, and by large investors
trading significant blocks of securities, than is usual in the United States.
Securities settlements may in some instances be subject to delays and related
administrative uncertainties.
Certain foreign countries require governmental approval prior to investments by
foreign persons or limit investment by foreign persons to only a specified
percentage of an issuer's outstanding securities or a specific class of
securities that may have less advantageous terms (including price) than
securities of the company available for purchase by nationals. These
restrictions or controls may at times limit or preclude investment in certain
securities and may increase the costs and expenses of a Fund. In addition, the
repatriation of investment income, capital, or the proceeds of sales of
securities from certain countries is controlled under regulations, including in
some cases the need for certain advance government notification or authority.
If a deterioration occurs in a country's balance of payments, the country could
impose temporary restrictions on foreign capital remittances.
A Fund also could be adversely affected by delays in, or a refusal to grant,
any required governmental approval for repatriation, as well as by the
application of other restrictions on investment. Investing in local markets may
require a Fund to adopt special procedures that may involve additional costs to
a Fund. These factors may affect the liquidity of a Fund's investments in any
country and Alliance will monitor the effect of any such factor or factors on a
Fund's investments. Furthermore, transaction costs including brokerage
commissions for transactions both on and off the securities exchanges in many
foreign countries are generally higher than in the United States.
Issuers of securities in foreign jurisdictions are generally not subject to the
same degree of regulation as are U.S. issuers with respect to such matters as
insider trading rules, restrictions on market manipulation, shareholder proxy
requirements, and timely disclosure of information. The reporting, accounting
and auditing standards of foreign countries may differ, in some cases
significantly, from U.S. standards in important respects and less information
may be available to investors in foreign securities than to investors in U.S.
securities. Substantially less information is publicly available about certain
non-U.S. issuers than is available about U.S. issuers.
The economies of individual foreign countries may differ favorably or
unfavorably from the U.S. economy in such respects as growth of gross domestic
product or gross national product, rate of inflation, capital reinvestment,
resource self-sufficiency, and balance of payments position. Nationalization,
expropriation or confiscatory taxation, currency blockage, political changes,
government regulation, political or social instability, or diplomatic
developments could affect adversely the economy of a foreign country and the
Fund's investments. In the event of expropriation, nationalization or other
confiscation, a Fund could lose its entire investment in the country involved.
In addition, laws in foreign countries governing business organizations,
bankruptcy and insolvency may provide less protection to security holders such
as the Fund than that provided by U.S. laws.
ALLIANCE INTERNATIONAL FUND, ALLIANCE NEW EUROPE FUND, ALLIANCE GREATER CHINA
'97 FUND and ALLIANCE ALL-ASIA INVESTMENT FUND may invest substantial amounts
of their assets in United Kingdom issuers, Japanese issuers, and/or Greater
China issuers. Please refer to Appendix A for a discussion of risks associated
with investments in these countries.
INVESTMENT IN PRIVATIZED ENTERPRISES BY ALLIANCE WORLDWIDE PRIVATIZATION FUND.
In certain jurisdictions, the ability of foreign entities, such as the Fund, to
participate in privatizations may be limited by local law, or the price or
terms on which the Fund may be able to participate may be less advantageous
than for local investors. Moreover, there can be no assurance that governments
that have embarked on privatization programs will continue to divest their
ownership of state enterprises, that proposed privatizations will be successful
or that governments will not re-nationalize enterprises that have been
privatized. Furthermore, in the case of certain of the enterprises in which the
Fund may invest, large blocks of the stock of those enterprises may be held by
a small group of stockholders, even after the initial equity offerings by those
enterprises. The sale of some portion or all of those blocks could have an
adverse effect on the price of the stock of any such enterprise.
Most state enterprises or former state enterprises go through an internal
reorganization of management prior to conducting an initial equity offering in
an attempt to better enable these enterprises to compete in the private sector.
However, certain reorganizations could result in a management team that does
not function as well as the enterprise's prior management and may have a
negative effect on such enterprise. After making an initial equity offering,
enterprises that may have enjoyed preferential treatment from the respective
state or government that owned or controlled them may no longer receive such
preferential treatment and may become subject to market competition from which
they were previously protected. Some of these enterprises may not be able to
effectively operate in a competitive market and may suffer losses or experience
bankruptcy due to such competition. In addition, the privatization of an
enterprise by its government may occur over a number of years, with the
government continuing to hold a controlling position in the enterprise even
after the initial equity offering for the enterprise.
INVESTMENT IN SMALLER, EMERGING COMPANIES. The Funds may invest in smaller,
emerging companies. ALLIANCE NEW EUROPE FUND and ALLIANCE GLOBAL SMALL CAP FUND
will emphasize investment in, and ALLIANCE ALL-ASIA INVESTMENT FUND, ALLIANCE
GREATER CHINA '97 FUND and ALLIANCE GLOBAL ENVIRONMENT FUND may emphasize
investment in, smaller, emerging companies. Investment in such companies
involves greater risks than is customarily associated with securities of more
established
49
companies. Companies in the earlier stages of their development often
have products and management personnel which have not been thoroughly
tested by time or the marketplace; their financial resources may not
be as substantial as those of more established companies. The securities of
smaller companies may have relatively limited marketability and may be subject
to more abrupt or erratic market movements than securities of larger companies
or broad market indices. The revenue flow of such companies may be erratic and
their results of operations may fluctuate widely and may also contribute to
stock price volatility.
EXTREME GOVERNMENTAL ACTION; LESS PROTECTIVE LAWS. In contrast to investing in
the U.S., 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 a Fund's
investments. In the event of certain such actions, a 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 provide less
protection to investors such as the Fund than provided under United States laws.
INVESTMENTS IN ENVIRONMENTAL COMPANIES BY ALLIANCE GLOBAL ENVIRONMENT FUND.
Governmental regulations or other action can inhibit an Environmental Company's
performance, and it may take years to translate environmental legislation into
sales and profits. Environmental Companies generally face competition in fields
often characterized by relatively short product cycles and competitive pricing
policies. Losses may result from large product development or expansion costs,
unprotected marketing or distribution systems, erratic revenue flows and low
profit margins. Additional risks that Environmental Companies may face include
difficulty in financing the high cost of technological development,
uncertainties due to changing governmental regulation or rapid technological
advances, potential liabilities associated with hazardous components and
operations, and difficulty in finding experienced employees.
THE REAL ESTATE INDUSTRY. Although ALLIANCE REAL ESTATE INVESTMENT FUND does
not invest directly in real estate, it invests primarily in Real Estate Equity
Securities and has a policy of concentration of its investments in the real
estate industry. Therefore, an investment in the Fund is subject to certain
risks associated with the direct ownership of real estate and with the real
estate industry in general. These risks include, among others: possible
declines in the value of real estate; risks related to general and local
economic conditions; possible lack of availability of mortgage funds;
overbuilding; extended vacancies of properties; increases in competition,
property taxes and operating expenses; changes in zoning laws; costs resulting
from the clean-up of, and liability to third parties for damages resulting
from, environmental problems; casualty or condemnation losses; uninsured
damages from floods, earthquakes or other natural disasters; limitations on and
variations in rents; and changes in interest rates. To the extent that assets
underlying the Fund's investments are concentrated geographically, by property
type or in certain other respects, the Fund may be subject to certain of the
foregoing risks to a greater extent.
In addition, if ALLIANCE REAL ESTATE INVESTMENT FUND receives rental income or
income from the disposition of real property acquired as a result of a default
on securities the Fund owns, the receipt of such income may adversely affect
the Fund's ability to retain its tax status as a regulated investment company.
Investments by the Fund in securities of companies providing mortgage servicing
will be subject to the risks associated with refinancings and their impact on
servicing rights.
REITS. Investing in REITs involves certain unique risks in addition to those
risks associated with investing in the real estate industry in general. Equity
REITs may be affected by changes in the value of the underlying property owned
by the REITs, while mortgage REITs may be affected by the quality of any credit
extended. REITs are dependent upon management skills, are not diversified, and
are subject to heavy cash flow dependency, default by borrowers and
self-liquidation. REITs are also subject to the possibilities of failing to
qualify for tax-free pass-through of income under the Code and failing to
maintain their exemptions from registration under the 1940 Act.
REITs (especially mortgage REITs) also are subject to interest rate risks. When
interest rates decline, the value of a REIT's investment in fixed rate
obligations can be expected to rise. Conversely, when interest rates rise, the
value of a REIT's investment in fixed rate obligations can be expected to
decline. In contrast, as interest rates on adjustable rate mortgage loans are
reset periodically, yields on a REIT's investments in such loans will gradually
align themselves to reflect changes in market interest rates, causing the value
of such investments to fluctuate less dramatically in response to interest rate
fluctuations than would investments in fixed rate obligations.
Investing in REITs involves risks similar to those associated with investing in
small capitalization companies. REITs may have limited financial resources, may
trade less frequently and in a limited volume and may be subject to more abrupt
or erratic price movements than larger company securities. Historically, small
capitalization stocks, such as REITs, have been more volatile in price than the
larger capitalization stocks included in the S&P 500 Index.
MORTGAGE-BACKED SECURITIES. Investing in Mortgage-Backed Securities involves
certain unique risks in addition to those risks associated with investment in
the real estate industry in general. These risks include the failure of a
counterparty to meet its commitments, adverse interest rate changes and the
effects of prepayments on mortgage cash flows. When interest rates decline, the
value of an investment in fixed rate obligations can be expected to rise.
Conversely, when interest rates rise, the value of an investment in fixed rate
obligations can be expected to decline. In contrast, as interest rates on
adjustable rate mortgage loans are reset periodically, yields on investments in
such loans will gradually align themselves to
50
reflect changes in market interest rates, causing the value of such
investments to fluctuate less dramatically in response to interest rate
fluctuations than would investments in fixed rate obligations.
Further, the yield characteristics of Mortgage-Backed Securities, such as those
in which ALLIANCE REAL ESTATE INVESTMENT FUND may invest, differ from those of
traditional fixed-income securities. The major differences typically include
more frequent interest and principal payments (usually monthly), the
adjustability of interest rates, and the possibility that prepayments of
principal may be made substantially earlier than their final distribution dates.
Prepayment rates are influenced by changes in current interest rates and a
variety of economic, geographic, social, and other factors, and cannot be
predicted with certainty. Both adjustable rate mortgage loans and fixed rate
mortgage loans may be subject to a greater rate of principal prepayments in a
declining interest rate environment and to a lesser rate of principal
prepayments in an increasing interest rate environment. Early payment
associated with Mortgage-Backed Securities causes these securities to
experience significantly greater price and yield volatility than that
experienced by traditional fixed-income securities. Under certain interest rate
and prepayment rate scenarios, the Fund may fail to recoup fully its investment
in Mortgage-Backed Securities notwithstanding any direct or indirect
governmental or agency guarantee. When the Fund reinvests amounts representing
payments and unscheduled prepayments of principal, it may receive a rate of
interest that is lower than the rate on existing adjustable rate mortgage
pass-through securities. Thus, Mortgage-Backed Securities, and adjustable rate
mortgage pass-through securities in particular, may be less effective than
other types of U.S. Government securities as a means of "locking in" interest
rates.
U.S. AND FOREIGN TAXES. A Fund's investment in foreign securities may be
subject to taxes withheld at the source on dividend or interest payments.
Foreign taxes paid by a Fund may be creditable or deductible by U.S.
shareholders for U.S. income tax purposes. No assurance can be given that
applicable tax laws and interpretations will not change in the future.
Moreover, non-U.S. investors may not be able to credit or deduct such foreign
taxes.
FIXED-INCOME SECURITIES. The value of each Fund's shares will fluctuate with
the value of its investments. The value of each Fund's investments in
fixed-income securities will change as the general level of interest rates
fluctuates. During periods of falling interest rates, the values of
fixed-income securities generally rise. Conversely, during periods of rising
interest rates, the values of fixed-income securities generally decline.
Under normal market conditions, the average dollar-weighted maturity of a
Fund's portfolio of debt or other fixed-income securities is expected to vary
between five and 30 years in the case of ALLIANCE ALL-ASIA INVESTMENT FUND,
between five and 25 years in the case of ALLIANCE UTILITY INCOME FUND, and
between one year or less and 30 years in the case of all other Funds that
invest in such securities. In periods of increasing interest rates, each of the
Funds may, to the extent it holds mortgage-backed securities, be subject to the
risk that the average dollar-weighted maturity of the Fund's portfolio of debt
or other fixed-income securities may be extended as a result of lower than
anticipated prepayment rates.
INVESTMENT IN LOWER-RATED FIXED-INCOME SECURITIES. Lower-rated securities,
i.e., those rated Ba and lower by Moody's or BB and lower by S&P, Duff & Phelps
or Fitch, are subject to greater credit risk or loss of principal and interest
than higher-rated securities. They also are generally considered to be subject
to greater market risk than higher-rated securities. The capacity of issuers of
lower-rated securities to pay interest and repay principal is more likely to
weaken than is that of issuers of higher-rated securities in times of
deteriorating economic conditions or rising interest rates. In addition,
lower-rated securities may be more susceptible to real or perceived adverse
economic conditions than investment grade securities.
The market for lower-rated securities may be thinner and less active than that
for higher-rated securities, which can adversely affect the prices at which
these securities can be sold. To the extent that there is no established
secondary market for lower-rated securities, a Fund may experience difficulty
in valuing the securities for the purpose of computing a Fund's net asset
value. In addition, adverse publicity and investor perceptions about
lower-rated securities, whether or not factual, may tend to impair their market
value and liquidity.
Alliance will try to reduce the risk inherent in investment in lower-rated
securities through credit analysis, diversification and attention to current
developments and trends in interest rates and economic and political
conditions. However, there can be no assurance that losses will not occur.
Since the risk of default is higher for lower-rated securities, Alliance's
research and credit analysis are a correspondingly more important aspect of its
program for managing a Fund's securities than would be the case if a Fund did
not invest in lower-rated securities.
In seeking to achieve a Fund's investment objective, there will be times, such
as during periods of rising interest rates, when depreciation and realization
of capital losses on securities in a Fund's portfolio will be unavoidable.
Moreover, medium- and lower-rated securities and non-rated securities of
comparable quality may be subject to wider fluctuations in yield and market
values than higher-rated securities under certain market conditions. Such
fluctuations after a security is acquired do not affect the cash income
received from that security but are reflected in the net asset value of a Fund.
Certain lower-rated securities may contain call or buy-back features that
permit the issuers thereof to call or repurchase such securities. Such
securities may present risks based on prepayment expectations. If an issuer
exercises such a provision, a Fund may have to replace the called security with
a lower-yielding security, resulting in a decreased rate of return to the Fund.
YEAR 2000. Many computer systems and applications that process transactions use
two-digit date fields for the year of a transaction, rather than the full four
digits. If these systems are not modified or replaced, transactions occurring
after 1999
51
could be processed as the year "1900," which could result in processing
inaccuracies and inoperability at or after the year 2000. The Funds and their
major service providers, including Alliance, utilize a number of computer
systems and applications that have been either developed internally or licensed
from third party suppliers. In addition, the Funds and their major service
providers, including Alliance, are dependent on third party suppliers for
certain systems applications and for electronic receipt of information critical
to their business. Should any of the computer systems employed by the Funds or
their major service providers, including Alliance, fail to process Year 2000
related information properly, that could have a significant negative impact on
the Funds' operations and the services that are provided to the Funds'
shareholders. To the extent that the operations of issuers of securities held
by the Funds are impaired by the Year 2000 problem, the value of the Fund's
shares may be materially affected. In addition, for the Funds' investments in
foreign markets, it is possible that foreign companies and markets will not be
as prepared for Year 2000 as domestic companies and markets.
The Year 2000 issue is a high priority for the Funds and Alliance. During 1997,
Alliance began a formal Year 2000 initiative which established a structured and
coordinated process to deal with the Year 2000 issue. As part of its
initiative, Alliance established a Year 2000 project office to manage the Year
2000 initiative, focusing on both information technology and non-information
technology systems. The Year 2000 project office meets periodically with the
audit committee of the board of directors of Alliance Capital Management
Corporation, Alliance's general partner, and with Alliance's executive
management to review the status of the Year 2000 efforts. Alliance has also
retained the services of a number of consulting firms which have expertise in
advising and assisting with regard to Year 2000 issues. Alliance reports that
by June 30, 1998 it had completed its inventory and assessment of its domestic
and international computer systems and applications, identified mission
critical systems (those systems where loss of their function would result in
immediate stoppage or significant impairment to core business units) and
nonmission critical systems and determined which of these systems were not Year
2000 compliant. All third party suppliers of mission critical computer systems
and applications and nonmission critical systems have been contacted to verify
whether their systems and applications will be Year 2000 compliant and their
responses are being evaluated. Substantially all of those contacted have
responded and approximately 90% have informed Alliance that their systems and
applications are or will be Year 2000 compliant. All mission critical and
nonmission critical systems supplied by third parties have been tested with the
exception of those third parties not able to comply with Alliance's testing
schedule. Alliance reports that it expects that all testing will be completed
before the end of 1999.
Alliance has remediated, replaced or retired all of its non-compliant mission
critical systems and applications that can affect the Funds. All nonmission
critical systems have been remediated. After each system has been remediated,
it is tested with 19XX dates to determine if it still performs its intended
business function correctly. Next, each system undergoes a simulation test
using dates occurring after December 31, 1999. Inclusive of the replacement and
retirement of some of its systems, Alliance has completed these testing phases
for approximately 98% of mission critical systems and 100% of nonmission
critical systems. Integrated systems tests were conducted to verify that the
systems would continue to work together. Full integration testing of all
mission critical and nonmission critical systems is complete. Testing of
interfaces with third-party suppliers has begun and will continue throughout
1999. Alliance reports that it has completed an inventory of its facilities and
related technology applications and has begun to evaluate and test these
systems. Alliance reports that it anticipates that these systems will be fully
operable in the year 2000. Alliance has deferred certain other planned
information technology projects until after the Year 2000 initiative is
completed. Such delay is not expected to have a material adverse effect on
Alliance's financial condition or results of operations. Alliance, with the
assistance of a consulting firm, is developing Year 2000 specific contingency
plans with emphasis on mission critical functions. These plans seek to provide
alternative methods of processing in the event of a failure that is outside
Alliance's control.
The estimated current cost to Alliance of the Year 2000 initiative ranges from
approximately $40 million to $45 million. These costs consist principally of
modification and testing and costs to develop formal Year 2000 specific
contingency plans. These costs, which will generally be expensed as incurred,
will be funded from Alliance's operations and the issuance of debt. Through
June 30, 1999, Alliance had incurred approximately $36.0 million of costs
related to the Year 2000 initiative. At this time, management of Alliance
believes that the costs associated with resolving the Year 2000 issue will not
have a material adverse effect on Alliance's results of operations, liquidity
or capital resources.
There are many risks associated with Year 2000 issues, including the risks that
the computer systems and applications used by the Funds and their major service
providers will not operate as intended and that the systems and applications of
third-party providers to the Funds and their service providers will not be Year
2000 compliant. Likewise there can be no assurance the compliance schedules
outlined above will be met or that the actual cost incurred will not exceed
current cost estimates. Should the significant computer systems and
applications used by the Funds or their major service providers, or the systems
of their important third-party suppliers, be unable to process date-sensitive
information accurately after 1999, the Funds and their service providers may be
unable to conduct their normal business operations and to provide shareholders
with required services. In addition, the Funds and their service providers may
incur unanticipated expenses, regulatory actions and legal liabilities. The
Funds and Alliance cannot determine which risks, if any, are most reasonably
likely to occur or the effects of any particular failure to be Year 2000
compliant. Certain statements provided by Alliance in this section entitled
"Year 2000", as such statements relate to Alliance, are "forward-looking
statements" within the meaning
52
of the Private Securities Litigation Reform Act of 1995. To the fullest extent
permitted by law, the foregoing Year 2000 discussion is a "Year 2000 Readiness
Disclosure" within the meaning of the Year 2000 Information and Readiness
Disclosure Act, 15 U.S.C. Sec. 1 (1998).
- -------------------------------------------------------------------------------
MANAGEMENT OF THE FUNDS
- -------------------------------------------------------------------------------
INVESTMENT ADVISER
Each Fund's Adviser is Alliance Capital Management, L.P., 1345 Avenue of the
Americas, New York, NY 10105. Alliance is a leading international investment
adviser supervising client accounts with assets as of September 30, 1999
totaling more than $317 billion (of which more than $143 billion represented
assets of investment companies). As of September 30, 1999, Alliance managed
retirement assets for many of the largest public and private employee benefit
plans (including 28 of the nation's FORTUNE 100 companies), for public employee
retirement funds in 31 states, for investment companies, and for foundations,
endowments, banks and insurance companies worldwide. The 52 registered
investment companies managed by Alliance, comprising 118 separate investment
portfolios, currently have more than 4.8 million shareholder accounts.
Alliance provides investment advisory services and order placement facilities
for the Funds. For these advisory services, the Funds paid Alliance as a
percentage of average daily net assets:
FEE AS A PERCENTAGE OF FISCAL
FUND AVERAGE DAILY NET ASSETS* YEAR ENDING
Alliance Premier Growth Fund 1.00% 11/30/98
Alliance Health Care Fund .95** 6/30/00
Alliance Growth Fund .70 10/31/98
Alliance Technology Fund 1.02 11/30/98
Alliance Quasar Fund 1.04 9/30/98
The Alliance Fund .67 11/30/98
Alliance Growth and Income Fund .48 10/31/98
Alliance Balanced Shares Fund .586 7/31/99
Alliance Utility Income Fund -0- 11/30/98
Alliance Real Estate Investment Fund .90 8/31/99
Alliance New Europe Fund .95 7/31/99
Alliance Worldwide Privatization Fund 1.00 6/30/99
Alliance International Premier Growth Fund -0- 11/30/98
Alliance Global Small Cap Fund 1.00 7/31/99
Alliance International Fund .81 6/30/99
Alliance Greater China '97 Fund -0- 7/31/99
Alliance All-Asia Investment Fund .24 10/31/98
Alliance Global Environment Fund 1.10 10/31/98
* FEES ARE STATED NET OF ANY WAIVERS AND/OR REIMBURSEMENTS. SEE THE "FEE
TABLE" AT THE BEGINNING OF THE PROSPECTUS FOR MORE INFORMATION ABOUT FEE
WAIVERS.
** PRIOR TO ANY WAIVER BY ALLIANCE. SEE "FEE TABLE" AT THE BEGINNING OF THE
PROSPECTUS.
In connection with providing advisory services to ALLIANCE GREATER CHINA '97
FUND, Alliance has, at its expense, retained 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. New Alliance provides Alliance
with ongoing, current, and comprehensive information and analysis of conditions
and developments in Greater China countries.
In connection with investments in real estate securities, Alliance has, at its
expense, retained as a consultant CB Richard Ellis, Inc. ("CBRE"). CBRE is a
publicly held company and the largest real estate services company in the
United States, comprised of real estate brokerage, property and facilities
management, real estate finance, and investment advisory services.
PORTFOLIO MANAGERS
The following table lists the person or persons who are primarily responsible
for the day-to-day management of each Fund's portfolio, the length of time that
each person has been primarily responsible for the Fund, and each person's
principal occupation during the past five years.
Principal Occupation
During the Past
Fund Employee; Year; Title Five (5) Years*]
- -------------------------------------------------------------------------------
Alliance Premier Alfred Harrison; since Associated with
Growth Fund inception--Vice Chairman Alliance
of Alliance Capital
Management Corporation
(ACMC)**
Alliance Health Care Norman Fidel; since inception Associated with
Fund --Senior Vice President Alliance
of ACMC
Alliance Growth Tyler Smith; since inception Associated with
Fund --Senior Vice President Alliance
of ACMC
Alliance Technology Peter Anastos; since 1992 Associated with
Fund --Senior Vice President Alliance
of ACMC
Gerald T. Malone; since 1992 Associated with
--Senior Vice President Alliance
of ACMC
Alliance Quasar Alden M. Stewart; since 1994 Associated with
Fund --Executive Vice President Alliance
of ACMC
53
Principal Occupation
During the Past
Fund Employee; Year; Title Five (5) Years*
- -------------------------------------------------------------------------------
Randall E. Haase; since 1994 Associated with
--Senior Vice President Alliance
of ACMC
The Alliance Fund Alden M. Stewart; since 1997 (see above)
--(see above)
Randall E. Haase; since 1997 (see above)
--(see above)
Alliance Growth and Paul Rissman; since 1994 Associated with
Income Fund --Senior Vice President Alliance
of ACMC
Alliance Balanced Paul Rissman; since 1997 (see above)
Shares --(see above)
Alliance Utility Paul Rissman; since 1996 (see above)
Income Fund --(see above)
Alliance Real Estate Daniel G. Pine; since 1996 Associated with
Investment Fund --Senior Vice President Alliance since 1996;
of ACMC prior thereto; Senior
Vice President of
Desai Capital
Management
David Kruth; since 1997 Associated with
--Vice President of ACMC Alliance since 1997;
prior thereto; Senior
Vice President of
Yarmouth Group
Alliance New Steven Beinhacker; since 1997 Associated with
Europe Fund --Senior Vice President Alliance
of ACMC
Alliance Worldwide Mark H. Breedon; since Associated with
Privatization Fund inception Vice Alliance
President of ACMC and
Director and Senior Vice
President of Alliance Capital
Limited***
Alliance International Alfred Harrison; since 1998 (see above)
Premier Growth --(see above)
Fund
Thomas Kamp; since 1998 Associated with
--Senior Vice President Alliance
of ACMC
Alliance Global Alden M. Stewart; since 1994 (see above)
Small Cap Fund --(see above)
Randall E. Haase; since 1994 (see above)
--(see above)
Mark H. Breedon; since 1998 (see above)
--(see above)
Alliance Nicholas D.P. Carn; Associated with
International Fund since 1998 Alliance since 1995:
--Senior Vice President prior thereto; Chief
of ACMC Investment Officer of
Draycott Partners, Ltd.
Alliance Greater Matthew W.S. Lee; since 1997 Associated with
China '97 Fund --Vice President of ACMC Alliance since 1997;
prior thereto;
associated with
National Mutual Funds
Management (Asia) and
James Capel and Co.
since prior to 1994
Alliance All-Asia Hiroshi Motoki; since 1998 Associated with
Investment Fund --Senior Vice President Alliance since 1994;
of ACMC and director of prior thereto;
Japanese/Asian Equity associated with
research Ford Motor Company
Alliance Global Linda Bolton Weiser; Associated with
Environment Fund since 1998--Vice President Alliance
of ACMC
* UNLESS INDICATED OTHERWISE, PERSONS ASSOCIATED WITH ALLIANCE HAVE BEEN
EMPLOYED IN A PORTFOLIO MANAGEMENT, RESEARCH OR INVESTMENT CAPACITY.
** THE SOLE GENERAL PARTNER OF ALLIANCE.
*** AN INDIRECT WHOLLY-OWNED SUBSIDIARY OF ALLIANCE.
PERFORMANCE OF SIMILARLY MANAGED PORTFOLIOS. In addition to managing the assets
of ALLIANCE PREMIER GROWTH FUND, Mr. Harrison has ultimate responsibility for
the management of discretionary tax-exempt accounts of institutional clients
managed as described below without significant client-imposed restrictions
("Historical Portfolios"). These accounts have substantially the same
investment objectives and policies and are managed in accordance with
essentially the same investment strategies and techniques as those for ALLIANCE
PREMIER GROWTH FUND, except for the ability of ALLIANCE PREMIER GROWTH FUND to
use futures and options as hedging tools and to invest in warrants. The
Historical Portfolios also are not subject to certain limitations,
diversification requirements and other restrictions imposed under the 1940 Act
and the Code to which ALLIANCE PREMIER GROWTH FUND, as a registered investment
company, is subject and which, if applicable to the Historical Portfolios, may
have adversely affected the performance results of the Historical Portfolios.
Set forth below is performance data provided by Alliance relating to the
Historical Portfolios for each of the twenty full calendar years during which
Mr. Harrison has managed the Historical Portfolios as an employee of Alliance
and cumulatively through September 30, 1999. As of September 30, 1999, the
assets in the Historical Portfolios totaled approximately $14.3 billion and the
average size of an institutional account in the Historical Portfolio was $492
million. Each Historical Portfolio has a nearly identical composition of
investment holdings and related percentage weightings.
The performance data is net of all fees (including brokerage commissions)
charged to those accounts. The performance data is computed in accordance with
standards formulated by the Association of Investment Management and Research
and has not been adjusted to reflect any fees that will be payable by ALLIANCE
PREMIER GROWTH FUND, which are higher than the fees imposed on the Historical
Portfolio and will result in a higher expense ratio and lower returns for
ALLIANCE PREMIER GROWTH FUND. Expenses associated with the distribution of
Class A, Class B, and Class C shares of ALLIANCE PREMIER GROWTH FUND in
accordance with the plan adopted by ALLIANCE PREMIER GROWTH FUND's Board of
Directors under Commission Rule 12b-1 are also excluded. The performance
data has also not been adjusted for corporate or individual taxes,
if any, payable by the account owners.
54
Alliance has calculated the investment performance of the Historical Portfolios
on a trade-date basis. Dividends have been accrued at the end of the month and
cash flows weighted daily. Composite investment performance for all portfolios
has been determined on an asset weighted basis. New accounts are included in
the composite investment performance computations at the beginning of the
quarter following the initial contribution. The total returns set forth below
are calculated using a method that links the monthly return amounts for the
disclosed periods, resulting in a time-weighted rate of return.
As reflected below, the Historical Portfolios have over time performed
favorably when compared with the performance of recognized performance indices.
The S&P 500 Index is a widely recognized, unmanaged index of market activity
based upon the aggregate performance of a selected portfolio of publicly traded
common stocks, including monthly adjustments to reflect the reinvestment of
dividends and other distributions. The S&P 500 Index reflects the total return
of securities comprising the Index, including changes in market prices as well
as accrued investment income, which is presumed to be reinvested. The Russell
1000 universe of securities is compiled by Frank Russell Company and is
segmented into two style indices, based on the capitalization-weighted median
book-to-price ratio of each of the securities. At each reconstitution, the
Russell 1000 constituents are ranked by their book-to-price ratio. Once so
ranked, the breakpoint for the two styles is determined by the median market
capitalization of the Russell 1000. Thus, those securities falling within the
top fifty percent of the cumulative market capitalization (as ranked by
descending book-to-price) become members of the Russell Price-Driven Indices.
The Russell 1000 Growth Index is, accordingly, designed to include those
Russell 1000 securities with a greater-than-average growth orientation. In
contrast with the securities in the Russell Price-Driven Indices, companies in
the Growth Index tend to exhibit higher price-to-book and price-earnings
ratios, lower dividend yield and higher forecasted growth values.
To the extent ALLIANCE PREMIER GROWTH FUND does not invest in U.S. common
stocks or utilizes investment techniques such as futures or options, the S&P
500 Index and Russell 1000 Growth Index may not be substantially comparable to
ALLIANCE PREMIER GROWTH FUND. The S&P 500 Index and Russell 1000 Growth Index
are included to illustrate material economic and market factors that existed
during the time period shown. The S&P 500 Index and Russell 1000 Growth Index
do not reflect the deduction of any fees. If ALLIANCE PREMIER GROWTH FUND were
to purchase a portfolio of securities substantially identical to the securities
comprising the S&P 500 Index or the Russell 1000 Growth Index, ALLIANCE PREMIER
GROWTH FUND's performance relative to the index would be reduced by ALLIANCE
PREMIER GROWTH FUND's expenses, including brokerage commissions, advisory fees,
distribution fees, custodial fees, transfer agency costs and other
administrative expenses, as well as by the impact on ALLIANCE PREMIER GROWTH
FUND's shareholders of sales charges and income taxes.
The Lipper Large Cap Growth Fund Index is prepared by Lipper, Inc. and
represents a composite index of the investment performance for the 30 largest
large capitalization growth mutual funds. The composite investment performance
of the Lipper Large Cap Growth Fund Index reflects investment management and
administrative fees and other operating expenses paid by these mutual funds and
reinvested income dividends and capital gain distributions, but excludes the
impact of any income taxes and sales charges.
The following performance data is provided solely to illustrate Mr. Harrison's
performance in managing the Historical Portfolios and the ALLIANCE PREMIER
GROWTH FUND as measured against certain broad based market indices and against
the composite performance of other open-end growth mutual funds. Investors
should not rely on the following performance data of the Historical Portfolios
as an indication of future performance of ALLIANCE PREMIER GROWTH FUND. The
composite investment performance for the periods presented may not be
indicative of future rates of return. Other methods of computing investment
performance may produce different results, and the results for different
periods may vary.
SCHEDULE OF COMPOSITE INVESTMENT PERFORMANCE--HISTORICAL PORTFOLIOS*
<TABLE>
<CAPTION>
LIPPER
RUSSELL LARGE CAP
PREMIER HISTORICAL S&P 500 1000 GROWTH
GROWTH PORTFOLIOS INDEX GROWTH INDEX FUND INDEX
FUND TOTAL RETURN** TOTAL RETURN TOTAL RETURN TOTAL RETURN
<S> <C> <C> <C> <C> <C>
1/1/99-
9/30/99*** 2.53% 7.35% 5.37% 6.40% 7.39%
Year ended December:
1998*** 42.97 52.16 28.60 38.71 36.47
1997*** 27.05 34.64 33.36 30.49 27.59
1996*** 18.84 22.06 22.96 23.12 20.56
1995*** 40.66 39.83 37.58 37.19 34.92
1994 (9.78) (4.82) 1.32 2.66 (0.82)
1993 5.35 10.54 10.08 2.90 10.66
1992 -- 12.18 7.62 5.00 6.89
1991 -- 38.91 30.47 41.16 37.34
1990 -- (1.57) (3.10) (0.26) (1.82)
1989 -- 38.80 31.69 35.92 32.30
1988 -- 10.88 16.61 11.27 10.84
1987 -- 8.49 5.25 5.31 3.33
1986 -- 27.40 18.67 15.36 16.75
1985 -- 37.41 31.73 32.85 32.85
1984 -- (3.31) 6.27 (.95) (4.25)
1983 -- 20.80 22.56 15.98 22.63
1982 -- 28.02 21.55 20.46 28.91
1981 -- (1.09) (4.92) (11.31) (0.06)
1980 -- 50.73 32.50 39.57 47.73
1979 -- 30.76 18.61 23.91 29.90
Cumulative total
return for
the period
January 1, 1979 to
September 30,
1999 -- 5061% 2665% 2532% 3182%
</TABLE>
* TOTAL RETURN IS A MEASURE OF INVESTMENT PERFORMANCE THAT IS BASED UPON THE
CHANGE IN VALUE OF AN INVESTMENT FROM THE BEGINNING TO THE END OF A SPECIFIED
PERIOD AND ASSUMES REINVESTMENT OF ALL DIVIDENDS AND OTHER DISTRIBUTIONS. THE
BASIS OF PREPARATION OF THIS DATA IS DESCRIBED IN THE PRECEDING DISCUSSION.
TOTAL RETURNS FOR ALLIANCE PREMIER GROWTH FUND ARE FOR CLASS A SHARES, WITH
IMPOSITION OF THE MAXIMUM 4.25% SALES CHARGE.
** ASSUMES IMPOSITION OF THE MAXIMUM ADVISORY FEE CHARGED BY ALLIANCE FOR
ANY HISTORICAL PORTFOLIO FOR THE PERIOD INVOLVED.
55
*** DURING THIS PERIOD, THE HISTORICAL PORTFOLIOS DIFFERED FROM ALLIANCE
PREMIER GROWTH FUND IN THAT ALLIANCE PREMIER GROWTH FUND INVESTED A PORTION OF
ITS NET ASSETS IN WARRANTS ON EQUITY SECURITIES IN WHICH THE HISTORICAL
PORTFOLIOS WERE UNABLE, BY THEIR INVESTMENT RESTRICTIONS, TO PURCHASE. IN LIEU
OF WARRANTS, THE HISTORICAL PORTFOLIOS ACQUIRED THE COMMON STOCK UPON WHICH THE
WARRANTS WERE BASED.
The average annual total returns presented below are based upon the cumulative
total return as of September 30, 1999 and, for more than one year, assume a
steady compounded rate of return and are not year-by-year results, which
fluctuated over the periods as shown.
AVERAGE ANNUAL TOTAL RETURNS
LIPPER
RUSSELL
LARGE CAP
PREMIER HISTORICAL S&P 500 1000
GROWTH
GROWTH PORTFOLIOS INDEX GROWTH INDEX
FUND INDEX
One year 34.34% 41.47% 27.79% 34.85%
35.60%
Three years 31.81 35.08 25.09 26.87
25.27
Five years 29.25 29.85 25.03 26.79
24.80
Ten years 22.71+ 19.80 16.80 17.96
16.98
Since January 1,
1979 -- 20.93 17.35 17.07
18.32
+ SINCE INCEPTION ON 9/28/92
PERFORMANCE OF A SIMILARLY MANAGED FUND. Alliance is the investment adviser of
an investment company organized and operated under the laws of the Grand Duchy
of Luxembourg, ACM International Health Care Fund (the "ACM Fund"), that has
substantially the same investment objective and policies as those of ALLIANCE
HEALTH CARE FUND. The ACM Fund has been managed in accordance with
substantially the same investment strategies and techniques as are employed
with respect to the ALLIANCE HEALTH CARE FUND.
Norman Fidel, the portfolio manager of ALLIANCE HEALTH CARE FUND, is also the
person who has been primarily responsible for the day-to-day management of the
ACM Fund since 1988. Mr. Fidel manages approximately $1.1 billion of Health
Care Industries assets, including approximately $320 million of assets in the
ACM Fund as of September 30, 1999.
The ACM Fund is not subject to certain limitations, diversification
requirements and other restrictions imposed under the 1940 Act and the Code to
which ALLIANCE HEALTH CARE FUND, as a registered investment company, is subject
and which, if applicable to the ACM Fund, may have adversely affected the
performance results of the ACM Fund.
Set forth below are performance data provided by Alliance relating to the Class
AX shares of the ACM Fund since 1988, when Mr. Fidel began managing that fund.
Performance data are shown annually and cumulatively through September 30, 1999.
The performance data are net of all fees imposed by the ACM Fund. The
performance data have not been adjusted to reflect the fees that are payable by
ALLIANCE HEALTH CARE FUND, which, at comparable asset levels, may be lower than
the fees imposed on the ACM Fund and may result in a lower expense ratio for
ALLIANCE HEALTH CARE FUND. Expenses associated with the distribution of Class
A, Class B and Class C shares of ALLIANCE HEALTH CARE FUND in accordance with
the plan adopted by ALLIANCE HEALTH CARE FUND'S Board of Directors under
Commission to Rule 12b-1 also are not reflected in the data below relating to
the ACM Fund. See "Fees and Expenses of the Funds." The performance data have
also not been adjusted for corporate or individual taxes, if any, payable by
the ACM Fund shareholders.
The following performance data are provided solely to illustrate Mr. Fidel's
performance in managing the ACM Fund. Investors should not rely on the
following performance data of the ACM Fund as an indication of future
performance of the ALLIANCE HEALTH CARE FUND. The investment performance for
the periods presented may not be indicative of future rates of return.
ACM INTERNATIONAL HEALTH CARE FUND
TOTAL RETURNS
1988 21.82%
1989 46.75%
1990 25.96%
1991 83.07%
1992 -10.46%
1993 -1.38%
1994 13.84%
1995 46.49%
1996 2.18%
1997 23.07%
1998 24.29%
1999* -11.82%
AVERAGE ANNUAL TOTAL RETURN
(FOR PERIODS ENDED 9/30/99)
One year 2.69%
Five years 15.38%
Ten years 16.92%
Cumulative Total Return of the ACM Fund from
12/31/87 to 9/30/99: 736.69%
* THROUGH SEPTEMBER 30, 1999 (UNANNUALIZED)
The Funds' SAIs have more detailed information about Alliance and other Fund
service providers.
- -------------------------------------------------------------------------------
PURCHASE AND SALE OF SHARES
- -------------------------------------------------------------------------------
HOW THE FUNDS VALUE THEIR SHARES
The Funds' net asset value or NAV is calculated at 4 p.m. Eastern time each day
the Exchange is open for business. To calculate NAV, a Fund's assets are valued
and totaled, liabilities are subtracted, and the balance, called net assets, is
divided by the number of shares outstanding. The Funds value their securities
at their current market value determined on the basis of market quotations, or,
if such quotations are not readily available, such other methods as the
Funds' directors believe accurately reflect fair market value.
56
Your order for purchase, sale, or exchange of shares is priced at the next NAV
calculated after your order is received in proper form by the Fund. Your
purchase of Fund shares may be subject to an initial sales charge. Sales of
Fund shares may be subject to a contingent deferred sales charge or CDSC. See
the next section of this Prospectus, Distribution Arrangements, for details.
HOW TO BUY SHARES
You may purchase a Fund's shares through broker-dealers, banks, or other
financial intermediaries. You also may purchase shares directly from the Funds'
principal underwriter, Alliance Fund Distributors, Inc., or AFD.
Minimum investment amounts are:
- --Initial: $250
- --Subsequent: $ 50
- --Automatic Investment Program: $ 25
If you are an existing Fund shareholder, you may purchase shares by electronic
funds transfer in amounts not exceeding $500,000 if you have completed the
appropriate section of the Shareholder Application. Call 800-221-5672 to
arrange a transfer from your bank account.
A Fund is required to withhold 31% of taxable dividends, capital gains
distributions, and redemptions paid to shareholders who have not provided the
Fund with their certified taxpayer identification number. To avoid this, you
must provide your correct Tax Identification Number (Social Security Number for
most investors) on your account application.
A Fund may refuse any order to purchase shares. In particular, the Funds
reserve the right to restrict purchases of shares (including through exchanges)
when they appear to evidence a pattern of frequent purchases and sales made in
response to short-term considerations.
HOW TO EXCHANGE SHARES
You may exchange your Fund shares 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 next determined NAV,
without sales or service charges. You may request an exchange by mail or
telephone. You must call by 4:00 p.m. Eastern time to receive that day's NAV.
The Funds may change, suspend, or terminate the exchange service on 60 days'
written notice.
HOW TO SELL SHARES
You may "redeem" your shares (i.e., sell your shares to a Fund) on any day the
Exchange is open, either directly or through your financial intermediary. Your
sales price will be the next-determined NAV, less any applicable CDSC, after
the Fund receives your sales request in proper form. Normally, proceeds will be
sent to you within 7 days. If you recently purchased your shares by check or
electronic funds transfer, your redemption payment may be delayed until the
Fund is reasonably satisfied that the check or electronic funds transfer has
been collected (which may take up to 15 days).
. SELLING SHARES THROUGH YOUR BROKER
Your broker must receive your sales request by 4:00 p.m., Eastern time, and
submit it to the Fund by 5:00 p.m., Eastern time, for you to receive that day's
NAV, less any applicable CDSC. Your broker is responsible for submitting all
necessary documentation to the Fund and may charge you for this service.
. SELLING SHARES DIRECTLY TO THE FUND
BY MAIL:
- -- Send a signed letter of instruction or stock power, along with certificates,
to:
Alliance Fund Services, Inc.
P.O. Box 1520
Secaucus, N.J. 07906-1520
800-221-5672
- -- For your protection, a bank, a member firm of a national stock exchange, or
other eligible guarantor institution, must guarantee signatures. Stock power
forms are available from your financial intermediary, AFS, and many commercial
banks. Additional documentation is required for the sale of shares by
corporations, intermediaries, fiduciaries, and surviving joint owners. If you
have any questions about these procedures, contact AFS.
BY TELEPHONE:
- -- You may redeem your shares for which no stock certificates have been issued
by telephone request. Call AFS at 800-221-5672 with instructions on how you
wish to receive your sale proceeds.
- -- A telephone redemption request must be received by 4:00 p.m. Eastern time
for you to receive that day's NAV, less any applicable CDSC.
- -- If you have selected electronic funds transfer in your Shareholder
Application, the redemption proceeds will be sent directly to your bank.
Otherwise, the proceeds will be mailed to you.
- -- Redemption requests by electronic funds transfer may not exceed $100,000 per
day and redemption requests by check cannot exceed $50,000 per day.
- -- Telephone redemption is not available for shares held in nominee or "street
name" accounts, retirement plan accounts, or shares held by a shareholder who
has changed his or her address of record within the previous 30 calendar days.
57
- -------------------------------------------------------------------------------
DIVIDENDS, DISTRIBUTIONS AND TAXES
- -------------------------------------------------------------------------------
Each Fund's income dividends and capital gains distributions, if any, declared
by a Fund on its outstanding shares will, at the election of each shareholder,
be paid in cash or in additional shares of the same class of shares of that
Fund. If paid in additional shares, the shares will have an aggregate net asset
value as of the close of business on the day following the declaration date of
the dividend or distribution equal to the cash amount of the dividend or
distribution. You may make an election to receive dividends and distributions
in cash or in shares at the time you purchase shares. Your election can be
changed at any time prior to a record date for a dividend. There is no sales or
other charge in connection with the reinvestment of dividends or capital gains
distributions. Cash dividends may be paid in check, or at your election,
electronically via the ACH network. There is no sales or other charge on the
reinvestment of Fund dividends and distributions.
If you receive an income dividend or capital gains distribution in cash you
may, within 120 days following the date of its payment, reinvest the dividend
or distribution in additional shares of that Fund without charge by returning
to Alliance, with appropriate instructions, the check representing the dividend
or distribution. Thereafter, unless you otherwise specify, you will be deemed
to have elected to reinvest all subsequent dividends and distributions in
shares of that Fund.
For federal income tax purposes, the Fund's dividend distributions of net
income (or short-term taxable gains) will be taxable to you as ordinary income.
Distributions of long-term capital gains generally will be taxable to you as
long-term capital gains. A Fund's distributions also may be subject to certain
state and local taxes.
While it is the intention of each Fund to distribute to its shareholders
substantially all of each fiscal year's net income and net realized capital
gains, if any, the amount and time of any dividend or distribution will depend
on 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 a Fund will
pay any dividends or realize any capital gains. Since REITs pay distributions
based on cash flow, without regard to depreciation and amortization, it is
likely that a portion of the distributions paid to ALLIANCE REAL ESTATE
INVESTMENT FUND and subsequently distributed to shareholders may be a
nontaxable return of capital. The final determination of the amount of a Fund's
return of capital distributions for the period will be made after the end of
each calendar year.
Investment income received by a Fund from sources within foreign countries may
be subject to foreign income taxes withheld at the source. To the extent that
any Fund is liable for foreign income taxes withheld at the source, each Fund
intends, if possible, to operate so as to meet the requirements of the Code to
"pass through" to the Fund's shareholders credits for foreign income taxes paid
(or to permit shareholders to claim a deduction for such foreign taxes), but
there can be no assurance that any Fund will be able to do so. Furthermore, a
shareholder's ability to claim a foreign tax credit or deduction for foreign
taxes paid by a Fund may be subject to certain limitations imposed by the Code,
as a result of which a shareholder may not be permitted to claim a credit or
deduction for all or a portion of the amount of such taxes.
Under certain circumstances, if a Fund realizes losses (e.g., 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. Returns of
capital are generally nontaxable, but will reduce a shareholder's basis in
shares of a Fund. If that basis is reduced to zero (which could happen if the
shareholder does not reinvest distributions and returns of capital are
significant), any further returns of capital will be taxable as capital gain.
See the Fund's SAI for a further explanation of these tax issues.
If you buy shares just before a Fund deducts a distribution from its net asset
value, you will pay the full price for the shares and then receive a portion of
the price back as a taxable distribution.
The sale or exchange of Fund shares is a taxable transaction for Federal income
tax purposes.
Each year shortly after December 31, the Funds will send you tax information
stating the amount and type of all its distributions for the year. Consult your
tax adviser about the federal, state, and local tax consequences in your
particular circumstances.
- -------------------------------------------------------------------------------
DISTRIBUTION ARRANGEMENTS
- -------------------------------------------------------------------------------
SHARE CLASSES. The Funds offer three classes of shares.
CLASS A SHARES--INITIAL SALES CHARGE ALTERNATIVE
You can purchase Class A shares at NAV with an initial sales charge as follows:
INITIAL SALES CHARGE
AS % OF AS % OF COMMISSION
NET AMOUNT OFFERING TO DEALER/
INVESTED PRICE AGENT AS
% OF
OFFERING
AMOUNT PURCHASED PRICE
Up to $100,000 4.44% 4.25% 4.00%
$100,000 up to $250,000 3.36 3.25 3.00
$250,000 up to $500,000 2.30 2.25 2.00
$500,000 up to $1,000,000 1.78 1.75 1.50
You pay no initial sales charge on purchases of Class A Shares in the amount of
$1,000,000 or more, but may pay a 1% CDSC if you redeem your shares within 1
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 under a Fund's Combined Purchase Privilege,
Cumulative Quantity Discount, Statement of Intention, Privilege for Certain
Retirement Plans, Reinstatement
58
Privilege and Sales at Net Asset Value Programs. Consult the Subscription
Application and a Fund's SAI for additional information about these options.
CLASS B SHARES--DEFERRED SALES CHARGE ALTERNATIVE
You can purchase Class B Shares at NAV without an initial sales charge. A Fund
will thus receive the full amount of your purchase. Your investment, however,
will be subject to a CDSC if you redeem shares within 4 years of purchase. The
CDSC varies depending on the number of years you hold the shares. The CDSC
amounts are:
YEARS SINCE PURCHASE CDSC
First 4.0%
Second 3.0%
Third 2.0%
Fourth 1.0%
Fifth None
If you exchange your shares for the Class B shares of another Alliance Mutual
Fund, the CDSC also will apply to those Class B shares. The CDSC period begins
with the date of your original purchase, not the date of exchange for the other
Class B shares.
The Fund's Class B shares purchased for cash automatically convert to Class A
shares eight years after the end of the month of your purchase. If you purchase
shares by exchange for the Class B shares of another Alliance Mutual Fund, the
conversion period runs from the date of your original purchase.
CLASS C SHARES--ASSET-BASED SALES CHARGE ALTERNATIVE
You can purchase shares at NAV without an initial sales charge. A Fund will
thus receive the full amount of your purchase. Your investment, however, will
be subject to a 1% CDSC if you redeem your shares within 1 year. If you
exchange your shares for the Class C shares of another Alliance Mutual Fund,
the 1% CDSC also will apply to those Class C shares. The 1-year period for the
CDSC begins with the date of your original purchase, not the date of the
exchange for the other Class C shares.
Class C shares do not convert to any other class of shares of the Fund.
ASSET-BASED SALES CHARGE OR RULE 12B-1 FEES. Each Fund has adopted a plan under
Commission Rule 12b-1 that allows the Fund to pay asset-based sales charges or
distribution and service fees for the distribution and sale of its shares. The
amount of these fees for each class of the Fund's shares is:
RULE 12B-1 FEE (AS A PERCENTAGE OF
AGGREGATE AVERAGE DAILY NET ASSETS)
Class A .30%*
Class B 1.00%
Class C 1.00%
* THE FEE UNDER THE RULE 12B-1 PLAN FOR THE CLASS A SHARES OF ALLIANCE
GROWTH FUND AND ALLIANCE PREMIER GROWTH FUND IS .50% OF THE AGGREGATE AVERAGE
DAILY NET ASSETS. THE DIRECTORS OF ALLIANCE GROWTH FUND CURRENTLY LIMIT THE
PAYMENTS TO .30%. THE DIRECTORS OF ALLIANCE PREMIER GROWTH FUND LIMIT PAYMENTS
FOR CLASS A SHARES PURCHASED AFTER NOVEMBER 1993 TO .30% OF AGGREGATE AVERAGE
DAILY NET ASSETS.
Because these fees are paid out of the Fund's assets on an on-going basis, over
time these fees will increase the cost of your investment and may cost you more
than paying other types of sales fees. Class B and Class C shares are subject
to higher distribution fees than Class A shares (Class B shares are subject to
these higher fees 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 and
Class C shares pay correspondingly lower dividends and may have a lower net
asset value than Class A shares.
CHOOSING A CLASS OF SHARES. 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 purchasing Class A shares. If you are making a
smaller investment, you might consider purchasing Class B shares because 100%
of your purchase is invested 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 no CDSC as long as the shares are held for one year or more.
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.
You should consult your financial agent to assist in choosing a class of Fund
shares.
APPLICATION OF THE CDSC. The CDSC is applied to the lesser of the original cost
of shares being redeemed or NAV at the time of redemption (or, as to Fund
shares acquired through an exchange, the cost of the Alliance Mutual Fund
shares originally purchased for cash). Shares obtained from dividend or
distribution reinvestment are not subject to the CDSC. The Fund may waive the
CDSC on redemptions of shares following the death or disability of a
shareholder, to meet the requirements of certain qualified retirement plans, or
under a monthly, bimonthly, or quarterly systematic withdrawal plan. See the
Fund's SAI for further information about CDSC waivers.
OTHER. 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 your financial representative.
The financial intermediaries also may impose requirements on the purchase,
sale, or exchange of shares that are different from, or in addition to, those
imposed by a Fund, including requirements as to the minimum initial and
subsequent investment amounts.
- -------------------------------------------------------------------------------
GENERAL INFORMATION
- -------------------------------------------------------------------------------
Under unusual circumstances, a Fund may suspend redemptions or postpone payment
for up to seven days or
59
longer, as permitted by federal securities law. The Funds reserve 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 in
reaching AFS by telephone, in which event you should issue written instructions
to AFS. AFS is not responsible for the authenticity of telephone 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 telephone 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. You also may request a shareholder's manual explaining all
available services by calling 800-227-4618.
EMPLOYEE BENEFIT PLANS. Certain employee benefit plans, including
employer-sponsored tax-qualified 401(k) plans and other defined contribution
retirement plans ("Employee Benefit Plans"), may establish requirements as to
the purchase, sale or exchange of shares, including maximum and minimum initial
investment requirements, that are different from those described in this
Prospectus. Employee Benefit Plans also may not offer all classes of shares of
the Funds. In order to enable participants investing through Employee Benefit
Plans to purchase shares of the Funds, the maximum and minimum investment
amounts may be different for shares purchased through Employee Benefit Plans
from those described in this Prospectus. In addition, the Class A, Class B, and
Class C CDSC may be waived for investments made through Employee Benefit Plans.
60
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- -------------------------------------------------------------------------------
The financial highlights table is intended to help you understand each Fund's
financial performance for the past 5 years (or, if shorter, the period of the
Fund's operations). Certain information reflects financial results for a single
share of each Fund. The total returns in the table represent the rate that an
investor would have earned (or lost) on an investment in the Fund (assuming
reinvestment of all dividends and distributions). Except as otherwise
indicated, this information has been audited by PricewaterhouseCoopers LLP, the
independent accountants for THE ALLIANCE FUND, ALLIANCE GROWTH FUND, ALLIANCE
PREMIER GROWTH FUND, ALLIANCE INTERNATIONAL PREMIER GROWTH FUND, ALLIANCE
BALANCED SHARES, ALLIANCE UTILITY INCOME FUND, ALLIANCE WORLDWIDE PRIVATIZATION
FUND, and ALLIANCE GROWTH AND INCOME FUND, and by Ernst & Young LLP, the
independent accountants for ALLIANCE ALL-ASIA INVESTMENT FUND, ALLIANCE
TECHNOLOGY FUND, ALLIANCE QUASAR FUND, ALLIANCE INTERNATIONAL FUND, ALLIANCE
NEW EUROPE FUND, ALLIANCE GLOBAL SMALL CAP FUND, ALLIANCE GLOBAL ENVIRONMENT
FUND, ALLIANCE GREATER CHINA '97 FUND and ALLIANCE REAL ESTATE INVESTMENT FUND,
whose reports, along with each Fund's financial statements, are included in the
SAI, which is available upon request.
61
<TABLE>
<CAPTION>
INCOME FROM INVESTMENT OPERATIONS LESS DIVIDENDS AND DISTRIBUTIONS
------------------------------------------ ---------------------------------------
NET GAINS
NET ASSET OR LOSSES ON DIVIDENDS DISTRIBUTIONS
VALUE, SECURITIES TOTAL FROM FROM NET IN EXCESS OF DISTRIBUTIONS
BEGINNING NET INVESTMENT (BOTH REALIZED INVESTMENT INVESTMENT NET INVESTMENT FROM
FISCAL YEAR OR PERIOD OF PERIOD INCOME (LOSS) AND UNREALIZED) OPERATIONS INCOME INCOME CAPITAL GAINS
- --------------------- --------- -------------- -------------- ---------- ---------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
ALLIANCE PREMIER
GROWTH FUND
CLASS A
12/1/98 to 5/31/99+++ $27.50 $ (.13)(b) $ 4.57 $ 4.44 $0.00 $0.00 $ (.61)
Year ended 11/30/98 22.00 (.15)(b) 7.11 6.96 0.00 0.00 (1.46)
Year ended 11/30/97 17.98 (.10)(b) 5.20 5.10 0.00 0.00 (1.08)
Year ended 11/30/96 16.09 (.04)(b) 3.20 3.16 0.00 0.00 (1.27)
Year ended 11/30/95 11.41 (.03) 5.38 5.35 0.00 0.00 (.67)
Year ended 11/30/94 11.78 (.09) (.28) (.37) 0.00 0.00 0.00
CLASS B
12/1/98 to 5/31/99+++ $26.33 $ (.22)(b) $ 4.38 $ 4.16 $0.00 $0.00 $ (.61)
Year ended 11/30/98 21.26 (.30)(b) 6.83 6.53 0.00 0.00 (1.46)
Year ended 11/30/97 17.52 (.23)(b) 5.05 4.82 0.00 0.00 (1.08)
Year ended 11/30/96 15.81 (.14)(b) 3.12 2.98 0.00 0.00 (1.27)
Year ended 11/30/95 11.29 (.11) 5.30 5.19 0.00 0.00 (.67)
Year ended 11/30/94 11.72 (.15) (.28) (.43) 0.00 0.00 0.00
CLASS C
12/1/98 to 5/31/99+++ $26.36 $ (.22)(b) $ 4.39 $ 4.17 $0.00 $0.00 $ (.61)
Year ended 11/30/98 21.29 (.31)(b) 6.84 6.53 0.00 0.00 (1.46)
Year ended 11/30/97 17.54 (.24)(b) 5.07 4.83 0.00 0.00 (1.08)
Year ended 11/30/96 15.82 (.14)(b) 3.13 2.99 0.00 0.00 (1.27)
Year ended 11/30/95 11.30 (.08) 5.27 5.19 0.00 0.00 (.67)
Year ended 11/30/94 11.72 (.09) (.33) (.42) 0.00 0.00 0.00
ALLIANCE GROWTH FUND
CLASS A
11/1/98 to 4/30/99+++ $47.17 $ (.06)(b) $ 10.80 $ 10.74 $0.00 $0.00 $ (3.71)
Year ended 10/31/98 43.95 (.05)(b) 6.18 6.13 0.00 0.00 (2.91)
Year ended 10/31/97 34.91 (.10)(b) 10.17 10.07 0.00 0.00 (1.03)
Year ended 10/31/96 29.48 .05 6.20 6.25 (.19) 0.00 (.63)
Year ended 10/31/95 25.08 .12 4.80 4.92 (.11) 0.00 (.41)
5/1/94 to 10/31/94** 23.89 .09 1.10 1.19 0.00 0.00 0.00
Year ended 4/30/94 22.67 (.01)(c) 3.55 3.54 0.00 0.00 (2.32)
CLASS B
11/1/98 to 4/30/99+++ $38.15 $ (.20)(b) $ 8.63 $ 8.43 $0.00 $0.00 $ (3.71)
Year ended 10/31/98 36.31 (.31)(b) 5.06 4.75 0.00 0.00 (2.91)
Year ended 10/31/97 29.21 (.31)(b) 8.44 8.13 0.00 0.00 (1.03)
Year ended 10/31/96 24.78 (.12) 5.18 5.06 0.00 0.00 (.63)
Year ended 10/31/95 21.21 (.02) 4.01 3.99 (.01) 0.00 (.41)
5/1/94 to 10/31/94** 20.27 .01 .93 .94 0.00 0.00 0.00
Year ended 4/30/94 19.68 (.07)(c) 2.98 2.91 0.00 0.00 (2.32)
CLASS C
11/1/98 to 4/30/99+++ $38.17 $ (.20)(b) $ 8.64 $ 8.44 $0.00 $0.00 $ (3.71)
Year ended 10/31/98 36.33 (.31)(b) 5.06 4.75 0.00 0.00 (2.91)
Year ended 10/31/97 29.22 (.31)(b) 8.45 8.14 0.00 0.00 (1.03)
Year ended 10/31/96 24.79 (.12) 5.18 5.06 0.00 0.00 (.63)
Year ended 10/31/95 21.22 (.03) 4.02 3.99 (.01) 0.00 (.41)
5/1/94 to 10/31/94** 20.28 .01 .93 .94 0.00 0.00 0.00
8/2/93++ to 4/30/94 21.47 (.02)(c) 1.15 1.13 0.00 0.00 (2.32)
ALLIANCE TECHNOLOGY FUND
CLASS A
12/1/98 to 5/31/99+++ $68.60 $ (.37)(b) $ 18.72 $ 18.35 $0.00 $0.00 $ (5.17)
Year ended 11/30/98 54.44 (.68)(b) 15.42 14.74 0.00 0.00 (.58)
Year ended 11/30/97 51.15 (.51)(b) 4.22 3.71 0.00 0.00 (.42)
Year ended 11/30/96 46.64 (.39)(b) 7.28 6.89 0.00 0.00 (2.38)
Year ended 11/30/95 31.98 (.30)(b) 18.13 17.83 0.00 0.00 (3.17)
1/1/94 to 11/30/94** 26.12 (.32) 6.18 5.86 0.00 0.00 0.00
CLASS B
12/1/98 to 5/31/99+++ $65.75 $ (.63)(b) $ 17.90 $ 17.27 $0.00 $0.00 $ (5.17)
Year ended 11/30/98 52.58 (1.08)(b) 14.83 13.75 0.00 0.00 (.58)
Year ended 11/30/97 49.76 (.88)(b) 4.12 3.24 0.00 0.00 (.42)
Year ended 11/30/96 45.76 (.70)(b) 7.08 6.38 0.00 0.00 (2.38)
Year ended 11/30/95 31.61 (.60)(b) 17.92 17.32 0.00 0.00 (3.17)
1/1/94 to 11/30/94** 25.98 (.23) 5.86 5.63 0.00 0.00 0.00
CLASS C
12/1/98 to 5/31/99+++ $65.74 $ (.62)(b) $ 17.88 $ 17.26 $0.00 $0.00 $ (5.17)
Year ended 11/30/98 52.57 (1.08)(b) 14.83 13.75 0.00 0.00 (.58)
Year ended 11/30/97 49.76 (.88)(b) 4.11 3.23 0.00 0.00 (.42)
Year ended 11/30/96 45.77 (.70)(b) 7.07 6.37 0.00 0.00 (2.38)
Year ended 11/30/95 31.61 (.58)(b) 17.91 17.33 0.00 0.00 (3.17)
1/1/94 to 11/30/94** 25.98 (.24) 5.87 5.63 0.00 0.00 0.00
</TABLE>
PLEASE REFER TO THE FOOTNOTES ON PAGE 72.
62
<TABLE>
<CAPTION>
LESS DISTRIBUTIONS RATIOS/SUPPLEMENTAL DATA
---------------- ---------------------------------------------------------
TOTAL NET ASSET RATIO OF RATIO OF NET
DIVIDENDS VALUE, NET ASSETS, EXPENSES INCOME (LOSS)
AND END OF TOTAL END OF PERIOD TO AVERAGE TO AVERAGE PORTFOLIO
FISCAL YEAR OR PERIOD DISTRIBUTIONS PERIOD RETURN(A) (000'S OMITTED) NET ASSETS NET ASSETS TURNOVER RATE
- --------------------- ------------- ------------- -------- -------------- ----------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
ALLIANCE PREMIER
GROWTH FUND
CLASS A
12/1/98 to 5/31/99+++ $ (.61) $31.33 16.44% $2,900,593 1.48%* (.79)%* 39%
Year ended 11/30/98 (1.46) 27.50 33.94 1,418,262 1.59(f) (.59) 82
Year ended 11/30/97 (1.08) 22.00 30.46 373,099 1.57 (.52) 76
Year ended 11/30/96 (1.27) 17.98 21.52 172,870 1.65 (.27) 95
Year ended 11/30/95 (.67) 16.09 49.95 72,366 1.75 (.28) 114
Year ended 11/30/94 0.00 11.41 (3.14) 35,146 1.96 (.67) 98
CLASS B
12/1/98 to 5/31/99+++ $ (.61) $29.88 16.10% $5,737,435 2.16%* (1.47)%* 39%
Year ended 11/30/98 (1.46) 26.33 33.04 2,799,288 2.28(f) (1.27) 82
Year ended 11/30/97 (1.08) 21.26 29.62 858,449 2.25 (1.20) 76
Year ended 11/30/96 (1.27) 17.52 20.70 404,137 2.32 (.94) 95
Year ended 11/30/95 (.67) 15.81 49.01 238,088 2.43 (.95) 114
Year ended 11/30/94 0.00 11.29 (3.67) 139,988 2.47 (1.19) 98
CLASS C
12/1/98 to 5/31/99+++ $ (.61) $29.92 16.12% $2,061,862 2.16%* (1.47)%* 39%
Year ended 11/30/98 (1.46) 26.36 32.99 862,193 2.28(f) (1.30) 82
Year ended 11/30/97 (1.08) 21.29 29.64 177,923 2.24 (1.22) 76
Year ended 11/30/96 (1.27) 17.54 20.76 60,194 2.32 (.94) 95
Year ended 11/30/95 (.67) 15.82 48.96 20,679 2.42 (.97) 114
Year ended 11/30/94 0.00 11.30 (3.58) 7,332 2.47 (1.16) 98
ALLIANCE GROWTH FUND
CLASS A
11/1/98 to 4/30/99+++ $ (3.71) $54.20 23.84% $1,284,500 1.18%* (.24)%* 35%
Year ended 10/31/98 (2.91) 47.17 14.56 1,008,093 1.22(f) (.11) 61
Year ended 10/31/97 (1.03) 43.95 29.54 783,110 1.26(f) (.25) 48
Year ended 10/31/96 (.82) 34.91 21.65 499,459 1.30 .15 46
Year ended 10/31/95 (.52) 29.48 20.18 285,161 1.35 .56 61
5/1/94 to 10/31/94** 0.00 25.08 4.98 167,800 1.35* .86* 24
Year ended 4/30/94 (2.32) 23.89 15.66 102,406 1.40(d) .32 87
CLASS B
11/1/98 to 4/30/99+++ $ (3.71) $42.87 23.39% $5,158,813 1.90%* (.97)%* 35%
Year ended 10/31/98 (2.91) 38.15 13.78 4,230,756 1.94(f) (.83) 61
Year ended 10/31/97 (1.03) 36.31 28.64 3,578,806 1.96(f) (.94) 48
Year ended 10/31/96 (.63) 29.21 20.82 2,498,097 1.99 (.54) 46
Year ended 10/31/95 (.42) 24.78 19.33 1,052,020 2.05 (.15) 61
5/1/94 to 10/31/94** 0.00 21.21 4.64 751,521 2.05* .16* 24
Year ended 4/30/94 (2.32) 20.27 14.79 394,227 2.10(d) (.36) 87
CLASS C
11/1/98 to 4/30/99+++ $ (3.71) $42.90 23.41% $ 880,100 1.89%* (.96)%* 35%
Year ended 10/31/98 (2.91) 38.17 13.76 718,688 1.93(f) (.83) 61
Year ended 10/31/97 (1.03) 36.33 28.66 599,449 1.97(f) (.95) 48
Year ended 10/31/96 (.63) 29.22 20.81 403,478 2.00 (.55) 46
Year ended 10/31/95 (.42) 24.79 19.32 226,662 2.05 (.15) 61
5/1/94 to 10/31/94** 0.00 21.22 4.64 114,455 2.05* .16* 24
8/2/93++ to 4/30/94 (2.32) 20.28 5.27 64,030 2.10*(d) (.31)* 87
ALLIANCE TECHNOLOGY FUND
CLASS A
12/1/98 to 5/31/99+++ $ (5.17) $81.78 28.16% $1,307,309 1.57%* (.90)%* 27%
Year ended 11/30/98 (.58) 68.60 27.36 824,636 1.66(f) (1.13) 67
Year ended 11/30/97 (.42) 54.44 7.32 624,716 1.67(f) (.97) 51
Year ended 11/30/96 (2.38) 51.15 16.05 594,861 1.74 (.87) 30
Year ended 11/30/95 (3.17) 46.64 61.93 398,262 1.75 (.77) 55
1/1/94 to 11/30/94** 0.00 31.98 22.43 202,929 1.66* (1.22)* 55
CLASS B
12/1/98 to 5/31/99+++ $ (5.17) $77.85 27.70% $2,377,311 2.29%* (1.62)%* 27%
Year ended 11/30/98 (.58) 65.75 26.44 1,490,578 2.39(f) (1.86) 67
Year ended 11/30/97 (.42) 52.58 6.57 1,053,436 2.38(f) (1.70) 51
Year ended 11/30/96 (2.38) 49.76 15.20 660,921 2.44 (1.61) 30
Year ended 11/30/95 (3.17) 45.76 60.95 277,111 2.48 (1.47) 55
1/1/94 to 11/30/94** 0.00 31.61 21.67 18,397 2.43* (1.95)* 55
CLASS C
12/1/98 to 5/31/99+++ $ (5.17) $77.83 27.69% $ 521,911 2.28%* (1.61)%* 27%
Year ended 11/30/98 (.58) 65.74 26.44 271,320 2.40(f) (1.87) 67
Year ended 11/30/97 (.42) 52.57 6.55 184,194 2.38(f) (1.70) 51
Year ended 11/30/96 (2.38) 49.76 15.17 108,488 2.44 (1.60) 30
Year ended 11/30/95 (3.17) 45.77 60.98 43,161 2.48 (1.47) 55
1/1/94 to 11/30/94** 0.00 31.61 21.67 7,470 2.41* (1.94)* 55
</TABLE>
63
<TABLE>
<CAPTION>
INCOME FROM INVESTMENT OPERATIONS LESS DIVIDENDS AND DISTRIBUTIONS
------------------------------------------ ---------------------------------------
NET GAINS
NET ASSET OR LOSSES ON DIVIDENDS DISTRIBUTIONS
VALUE, SECURITIES TOTAL FROM FROM NET IN EXCESS OF DISTRIBUTIONS
BEGINNING NET INVESTMENT (BOTH REALIZED INVESTMENT INVESTMENT NET INVESTMENT FROM
FISCAL YEAR OR PERIOD OF PERIOD INCOME (LOSS) AND UNREALIZED) OPERATIONS INCOME INCOME CAPITAL GAINS
- --------------------- --------- -------------- -------------- ---------- ---------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
ALLIANCE QUASAR FUND
CLASS A
10/1/98 to 3/31/99+++ $22.27 $(.08)(b) $ 2.06 $ 1.98 $0.00 $0.00 $ (1.01)
Year ended 9/30/98 30.37 (.17)(b) (6.70) (6.87) 0.00 0.00 (1.23)
Year ended 9/30/97 27.92 (.24)(b) 6.80 6.56 0.00 0.00 (4.11)
Year ended 9/30/96 24.16 (.25) 8.82 8.57 0.00 0.00 (4.81)
Year ended 9/30/95 22.65 (.22)(b) 5.59 5.37 0.00 0.00 (3.86)
Year ended 9/30/94 24.43 (.60) (.36) (.96) 0.00 0.00 (.82)
CLASS B
10/1/98 to 3/31/99+++ $20.17 $(.15)(b) $ 1.86 $ 1.71 $0.00 $0.00 $ (1.01)
Year ended 9/30/98 27.83 (.36)(b) (6.07) (6.43) 0.00 0.00 (1.23)
Year ended 9/30/97 26.13 (.42)(b) 6.23 5.81 0.00 0.00 (4.11)
Year ended 9/30/96 23.03 (.20) 8.11 7.91 0.00 0.00 (4.81)
Year ended 9/30/95 21.92 (.37)(b) 5.34 4.97 0.00 0.00 (3.86)
Year ended 9/30/94 23.88 (.53) (.61) (1.14) 0.00 0.00 (.82)
CLASS C
10/1/98 to 3/31/99+++ $20.18 $(.15)(b) $ 1.87 $ 1.72 $0.00 $0.00 $ (1.01)
Year ended 9/30/98 27.85 (.35)(b) (6.09) (6.44) 0.00 0.00 (1.23)
Year ended 9/30/97 26.14 (.42)(b) 6.24 5.82 0.00 0.00 (4.11)
Year ended 9/30/96 23.05 (.20) 8.10 7.90 0.00 0.00 (4.81)
Year ended 9/30/95 21.92 (.37)(b) 5.36 4.99 0.00 0.00 (3.86)
Year ended 9/30/94 23.88 (.36) (.78) (1.14) 0.00 0.00 (.82)
THE ALLIANCE FUND
CLASS A
12/1/98 to 5/31/99+++ $ 5.97 $(.01)(b) $ 1.40 $ 1.39 $0.00 $0.00 $ (.39)
Year ended 11/30/98 8.70 (.02)(b) (.54) (.56) 0.00 0.00 (2.17)
Year ended 11/30/97 7.71 (.02)(b) 2.09 2.07 (.02) 0.00 (1.06)
Year ended 11/30/96 7.72 .02 1.06 1.08 (.02) 0.00 (1.07)
Year ended 11/30/95 6.63 .02(b) 2.08 2.10 (.01) 0.00 (1.00)
1/1/94 to 11/30/94** 6.85 .01 (.23) (.22) 0.00 0.00 0.00
CLASS B
12/1/98 to 5/31/99+++ $ 5.51 $(.04)(b) $ 1.29 $ 1.25 $0.00 $0.00 $ (.39)
Year ended 11/30/98 8.25 (.07)(b) (.50) (.57) 0.00 0.00 (2.17)
Year ended 11/30/97 7.40 (.08)(b) 1.99 1.91 0.00 0.00 (1.06)
Year ended 11/30/96 7.49 (.01) .99 .98 0.00 0.00 (1.07)
Year ended 11/30/95 6.50 (.03)b) 2.02 1.99 0.00 0.00 (1.00)
1/1/94 to 11/30/94** 6.76 (.03) (.23) (.26) 0.00 0.00 0.00
CLASS C
12/1/98 to 5/31/99+++ $ 5.50 $(.03)(b) $ 1.28 $ 1.25 $0.00 $0.00 $ (.39)
Year ended 11/30/98 8.26 (.07)(b) (.52) (.59) 0.00 0.00 (2.17)
Year ended 11/30/97 7.41 (.08)(b) 1.99 1.91 0.00 0.00 (1.06)
Year ended 11/30/96 7.50 (.02) 1.00 .98 0.00 0.00 (1.07)
Year ended 11/30/95 6.50 (.03)(b) 2.03 2.00 0.00 0.00 (1.00)
1/1/94 to 11/30/94** 6.77 (.03) (.24) (.27) 0.00 0.00 0.00
5/3/93++ to 12/31/93 6.67 (.02) .88 .86 0.00 0.00 (.76)
ALLIANCE GROWTH AND
INCOME FUND
CLASS A
11/1/98 to 4/30/99+++ $ 3.44 $ .02(b) $ .71 $ .73 $ (.02) $0.00 $ (.35)
Year ended 10/31/98 3.48 .03(b) .43 .46 (.04) 0.00 (.46)
Year ended 10/31/97 3.00 .04(b) .87 .91 (.05) 0.00 (.38)
Year ended 10/31/96 2.71 .05 .50 .55 (.05) 0.00 (.21)
Year ended 10/31/95 2.35 .02 .52 .54 (.06) 0.00 (.12)
Year ended 10/31/94 2.61 .06 (.08) (.02) (.06) 0.00 (.18)
CLASS B
11/1/98 to 4/30/99+++ $ 3.41 $ .00(b) $ .71 $ .71 $ (.01) $0.00 $ (.35)
Year ended 10/31/98 3.45 .01(b) .43 .44 (.02) 0.00 (.46)
Year ended 10/31/97 2.99 .02(b) .85 .87 (.03) 0.00 (.38)
Year ended 10/31/96 2.69 .03 .51 .54 (.03) 0.00 (.21)
Year ended 10/31/95 2.34 .01 .49 .50 (.03) 0.00 (.12)
Year ended 10/31/94 2.60 .04 (.08) (.04) (.04) 0.00 (.18)
CLASS C
11/1/98 to 4/30/99+++ $ 3.41 $ .00(b) $ .71 $ .71 $ (.01) $0.00 $ (.35)
Year ended 10/31/98 3.45 .01(b) .43 .44 (.02) 0.00 (.46)
Year ended 10/31/97 2.99 .02(b) .85 .87 (.03) 0.00 (.38)
Year ended 10/31/96 2.70 .03 .50 .53 (.03) 0.00 (.21)
Year ended 10/31/95 2.34 .01 .50 .51 (.03) 0.00 (.12)
Year ended 10/31/94 2.60 .04 (.08) (.04) (.04) 0.00 (.18)
</TABLE>
PLEASE REFER TO THE FOOTNOTES ON PAGE 72.
64
<TABLE>
<CAPTION>
LESS DISTRIBUTIONS RATIOS/SUPPLEMENTAL DATA
---------------- ---------------------------------------------------------
TOTAL NET ASSET RATIO OF RATIO OF NET
DIVIDENDS VALUE, NET ASSETS, EXPENSES INCOME (LOSS)
AND END OF TOTAL END OF PERIOD TO AVERAGE TO AVERAGE PORTFOLIO
FISCAL YEAR OR PERIOD DISTRIBUTIONS PERIOD RETURN(A) (000'S OMITTED) NET ASSETS NET ASSETS TURNOVER RATE
- --------------------- ------------- ------------- -------- -------------- ----------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
ALLIANCE QUASAR FUND
CLASS A
10/1/98 to 3/31/99+++ $(1.01) $ 23.24 9.07% $ 540,632 1.67%* (.69)%* 49%
Year ended 9/30/98 (1.23) 22.27 (23.45) 495,070 1.61(f) (.59) 109
Year ended 9/30/97 (4.11) 30.37 27.81 402,081 1.67 (.91) 135
Year ended 9/30/96 (4.81) 27.92 42.42 229,798 1.79 (1.11) 168
Year ended 9/30/95 (3.86) 24.16 30.73 146,663 1.83 (1.06) 160
Year ended 9/30/94 (.82) 22.65 (4.05) 155,470 1.67 (1.15) 110
CLASS B
10/1/98 to 3/31/99+++ $(1.01) $ 20.87 8.67% $ 629,718 2.44%* (1.47)%* 49%
Year ended 9/30/98 (1.23) 20.17 (24.03) 625,147 2.39(f) (1.36) 109
Year ended 9/30/97 (4.11) 27.83 26.70 503,037 2.51 (1.73) 135
Year ended 9/30/96 (4.81) 26.13 41.48 112,490 2.62 (1.96) 168
Year ended 9/30/95 (3.86) 23.03 29.78 16,604 2.65 (1.88) 160
Year ended 9/30/94 (.82) 21.92 (4.92) 13,901 2.50 (1.98) 110
CLASS C
10/1/98 to 3/31/99+++ $(1.01) $ 20.89 8.71% $ 185,632 2.43%* (1.45)%* 49%
Year ended 9/30/98 (1.23) 20.18 (24.05) 182,110 2.38(f) (1.35) 109
Year ended 9/30/97 (4.11) 27.85 26.74 145,494 2.50 (1.72) 135
Year ended 9/30/96 (4.81) 26.14 41.46 28,541 2.61 (1.94) 168
Year ended 9/30/95 (3.86) 23.05 29.87 1,611 2.64 (1.76) 160
Year ended 9/30/94 (.82) 21.92 (4.92) 1,220 2.48 (1.96) 110
THE ALLIANCE FUND
CLASS A
12/1/98 to 5/31/99+++ $ (.39) $ 6.97 24.97% $1,075,099 1.08%* (.40)%* 53%
Year ended 11/30/98 (2.17) 5.97 (8.48) 953,181 1.03 (.36) 106
Year ended 11/30/97 (1.08) 8.70 31.82 1,201,435 1.03 (.29) 158
Year ended 11/30/96 (1.09) 7.71 16.49 999,067 1.04 .30 80
Year ended 11/30/95 (1.01) 7.72 37.87 945,309 1.08 .31 81
1/1/94 to 11/30/94** 0.00 6.63 (3.21) 760,679 1.05* .21* 63
CLASS B
12/1/98 to 5/31/99+++ $ (.39) $ 6.37 24.47% $ 94,466 1.90%* (1.22)%* 53%
Year ended 11/30/98 (2.17) 5.51 (9.27) 85,456 1.84 (1.17) 106
Year ended 11/30/97 (1.06) 8.25 30.74 70,461 1.85 (1.12) 158
Year ended 11/30/96 (1.07) 7.40 15.47 44,450 1.87 (.53) 80
Year ended 11/30/95 (1.00) 7.49 36.61 31,738 1.90 (.53) 81
1/1/94 to 11/30/94** 0.00 6.50 (3.85) 18,138 1.89* (.60)* 63
CLASS C
12/1/98 to 5/31/99+++ $ (.39) $ 6.36 24.52% $ 31,427 1.87%* (1.21)%* 53%
Year ended 11/30/98 (2.17) 5.50 (9.58) 21,231 1.84 (1.18) 106
Year ended 11/30/97 (1.06) 8.26 30.72 18,871 1.83 (1.10) 158
Year ended 11/30/96 (1.07) 7.41 15.48 13,899 1.86 (.51) 80
Year ended 11/30/95 (1.00) 7.50 36.79 10,078 1.89 (.51) 81
1/1/94 to 11/30/94** 0.00 6.50 (3.99) 6,230 1.87* (.59)* 63
5/3/93++ to 12/31/93 (.76) 6.77 13.95 4,006 1.94* (.74)* 66
ALLIANCE GROWTH AND
INCOME FUND
CLASS A
11/1/98 to 4/30/99+++ $ (.37) $ 3.80 23.08% $1,283,362 .95%* .91%* 29%
Year ended 10/31/98 (.50) 3.44 14.70 988,965 .93(f) .96 89
Year ended 10/31/97 (.43) 3.48 33.28 787,566 .92(f) 1.39 88
Year ended 10/31/96 (.26) 3.00 21.51 553,151 .97 1.73 88
Year ended 10/31/95 (.18) 2.71 24.21 458,158 1.05 1.88 142
Year ended 10/31/94 (.24) 2.35 (.67) 414,386 1.03 2.36 68
CLASS B
11/1/98 to 4/30/99+++ $ (.36) $ 3.76 22.56% $1,231,085 1.73%* .14%* 29%
Year ended 10/31/98 (.48) 3.41 14.07 787,730 1.72(f) .17 89
Year ended 10/31/97 (.41) 3.45 31.83 456,399 1.72(f) .56 88
Year ended 10/31/96 (.24) 2.99 21.20 235,263 1.78 .91 88
Year ended 10/31/95 (.15) 2.69 22.84 136,758 1.86 1.05 142
Year ended 10/31/94 (.22) 2.34 (1.50) 102,546 1.85 1.56 68
CLASS C
11/1/98 to 4/30/99+++ $ (.36) $ 3.76 22.56% $ 299,123 1.71%* .16%* 29%
Year ended 10/31/98 (.48) 3.41 14.07 179,487 1.72(f) .18 89
Year ended 10/31/97 (.41) 3.45 31.83 106,526 1.71(f) .58 88
Year ended 10/31/96 (.24) 2.99 20.72 61,356 1.76 .93 88
Year ended 10/31/95 (.15) 2.70 23.30 35,835 1.84 1.04 142
Year ended 10/31/94 (.22) 2.34 (1.50) 19,395 1.84 1.61 68
</TABLE>
65
<TABLE>
<CAPTION>
INCOME FROM INVESTMENT OPERATIONS LESS DIVIDENDS AND DISTRIBUTIONS
------------------------------------------ ---------------------------------------
NET GAINS
NET ASSET OR LOSSES ON DIVIDENDS DISTRIBUTIONS
VALUE, SECURITIES TOTAL FROM FROM NET IN EXCESS OF DISTRIBUTIONS
BEGINNING NET INVESTMENT (BOTH REALIZED INVESTMENT INVESTMENT NET INVESTMENT FROM
FISCAL YEAR OR PERIOD OF PERIOD INCOME (LOSS) AND UNREALIZED) OPERATIONS INCOME INCOME CAPITAL GAINS
- --------------------- --------- -------------- -------------- ---------- ---------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
ALLIANCE BALANCED SHARES
CLASS A
Year ended 7/31/99 $15.97 $ .36(b) $ 1.29 $ 1.65 $ (.34) $0.00 $(1.65)
Year ended 7/31/98 16.17 .33(b) 1.86 2.19 (.32) 0.00 (2.07)
Year ended 7/31/97 14.01 .31(b) 3.97 4.28 (.32) 0.00 (1.80)
Year ended 7/31/96 15.08 .37 .45 .82 (.41) 0.00 (1.48)
Year ended 7/31/95 13.38 .46 1.62 2.08 (.36) 0.00 (.02)
CLASS B
Year ended 7/31/99 $15.54 $ .23(b) $ 1.25 $ 1.48 $ (.26) $0.00 $(1.65)
Year ended 7/31/98 15.83 .21(b) 1.81 2.02 (.24) 0.00 (2.07)
Year ended 7/31/97 13.79 .19(b) 3.89 4.08 (.24) 0.00 (1.80)
Year ended 7/31/96 14.88 .28 .42 .70 (.31) 0.00 (1.48)
Year ended 7/31/95 13.23 .30 1.65 1.95 (.28) 0.00 (.02)
CLASS C
Year ended 7/31/99 $15.57 $ .24(b) $ 1.25 $ 1.49 $ (.26) $0.00 $(1.65)
Year ended 7/31/98 15.86 .21(b) 1.81 2.02 (.24) 0.00 (2.07)
Year ended 7/31/97 13.81 .20(b) 3.89 4.09 (.24) 0.00 (1.80)
Year ended 7/31/96 14.89 .26 .45 .71 (.31) 0.00 (1.48)
Year ended 7/31/95 13.24 .30 1.65 1.95 (.28) 0.00 (.02)
ALLIANCE UTILITY INCOME FUND
CLASS A
12/1/98 to 5/31/99+++ $14.68 $ .17(b)(c) $ 2.37 $ 2.54 $ (.16) $0.00 $ (.34)
Year ended 11/30/98 12.48 .30(b)(c) 2.69 2.99 (.32) 0.00 (.47)
Year ended 11/30/97 10.59 .32(b)(c) 2.04 2.36 (.34) 0.00 (.13)
Year ended 11/30/96 10.22 .18(b)(c) .65 .83 (.46) 0.00 0.00
Year ended 11/30/95 8.97 .27(c) 1.43 1.70 (.45) 0.00 0.00
Year ended 11/30/94 9.92 .42(c) (.89) (.47) (.48) 0.00 0.00
CLASS B
12/1/98 to 5/31/99+++ $14.62 $ .12(b)(c) $ 2.36 $ 2.48 $ (.12) $0.00 $ (.34)
Year ended 11/30/98 12.46 .21(b)(c) 2.67 2.88 (.25) 0.00 (.47)
Year ended 11/30/97 10.57 .25(b)(c) 2.04 2.29 (.27) 0.00 (.13)
Year ended 11/30/96 10.20 .10(b)(c) .67 .77 (.40) 0.00 0.00
Year ended 11/30/95 8.96 .18(c) 1.45 1.63 (.39) 0.00 0.00
Year ended 11/30/94 9.91 .37(c) (.91) (.54) (.41) 0.00 0.00
CLASS C
12/1/98 to 5/31/99+++ $14.65 $ .12(b)(c) $ 2.35 $ 2.47 $ (.12) $0.00 $ (.34)
Year ended 11/30/98 12.47 .21(b)(c) 2.69 2.90 (.25) 0.00 (.47)
Year ended 11/30/97 10.59 .25(b)(c) 2.03 2.28 (.27) 0.00 (.13)
Year ended 11/30/96 10.22 .11(b)(c) .66 .77 (.40) 0.00 0.00
Year ended 11/30/95 8.97 .18(c) 1.46 1.64 (.39) 0.00 0.00
Year ended 11/30/94 9.92 .39(c) (.93) (.54) (.41) 0.00 0.00
ALLIANCE REAL ESTATE
INVESTMENT FUND
CLASS A
Year ended 8/31/99 $10.47 $ .46(b) $ (.06) $ .40 $ (.48)(g) $ .10 $ (.10)
Year ended 8/31/98 12.80 .52(b) (2.33) (1.81) (.51) 0.00 (.01)
10/1/96+ to 8/31/97 10.00 .30(b) 2.88 3.18 (.38)(g) 0.00 0.00
CLASS B
Year ended 8/31/99 $10.44 $ .38(b) $ (.05) $ .33 $ (.40)(g) $ .10 $ (.10)
Year ended 8/31/98 12.79 .42(b) (2.33) (1.91) (.43) 0.00 (.01)
10/1/96+ to 8/31/97 10.00 .23(b) 2.89 3.12 (.33)(g) 0.00 0.00
CLASS C
Year ended 8/31/99 $10.44 $ .38(b) $ (.05) $ .33 $ (.40)(g) $ .10 $ (.10)
Year ended 8/31/98 12.79 .42(b) (2.33) (1.91) (.43) 0.00 (.01)
10/1/96+ to 8/31/97 10.00 .23(b) 2.89 3.12 (.33)(g) 0.00 0.00
ALLIANCE NEW EUROPE FUND
CLASS A
Year ended 7/31/99 $21.85 $ .07(b) $ (.79) $ (.72) $0.00 $0.00 $(2.56)
Year ended 7/31/98 18.61 .05(b) 5.28 5.33 0.00 (.04) (2.05)
Year ended 7/31/97 15.84 .07(b) 4.20 4.27 (.15) (.03) (1.32)
Year ended 7/31/96 15.11 .18 1.02 1.20 0.00 0.00 (.47)
Year ended 7/31/95 12.66 .04 2.50 2.54 (.09) 0.00 0.00
CLASS B
Year ended 7/31/99 $20.76 $(.06)(b) $ (.75) $ (.81) $0.00 $0.00 $(2.56)
Year ended 7/31/98 17.87 (.08)(b) 5.02 4.94 0.00 0.00 (2.05)
Year ended 7/31/97 15.31 (.04)(b) 4.02 3.98 0.00 (.10) (1.32)
Year ended 7/31/96 14.71 .08 .99 1.07 0.00 0.00 (.47)
Year ended 7/31/95 12.41 (.05) 2.44 2.39 (.09) 0.00 0.00
CLASS C
Year ended 7/31/99 $20.77 $(.05)(b) $ (.75) $ (.80) $0.00 $0.00 $(2.56)
Year ended 7/31/98 17.89 (.08)(b) 5.01 4.93 0.00 0.00 (2.05)
Year ended 7/31/97 15.33 (.04)(b) 4.02 3.98 0.00 (.10) (1.32)
Year ended 7/31/96 14.72 .08 1.00 1.08 0.00 0.00 (.47)
Year ended 7/31/95 12.42 (.07) 2.46 2.39 (.09) 0.00 0.00
</TABLE>
PLEASE REFER TO THE FOOTNOTES ON PAGE 72.
66
<TABLE>
<CAPTION>
LESS DISTRIBUTIONS RATIOS/SUPPLEMENTAL DATA
---------------- ---------------------------------------------------------
TOTAL NET ASSET RATIO OF RATIO OF NET
DIVIDENDS VALUE, NET ASSETS, EXPENSES INCOME (LOSS)
AND END OF TOTAL END OF PERIOD TO AVERAGE TO AVERAGE PORTFOLIO
FISCAL YEAR OR PERIOD DISTRIBUTIONS PERIOD RETURN(A) (000'S OMITTED) NET ASSETS NET ASSETS TURNOVER RATE
- --------------------- ------------- ------------- -------- -------------- ----------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
ALLIANCE BALANCED SHARES
CLASS A
Year ended 7/31/99 $(1.99) $15.63 11.44% $ 189,953 1.22%(f) 2.31% 105%
Year ended 7/31/98 (2.39) 15.97 14.99 123,623 1.30(f) 2.07 145
Year ended 7/31/97 (2.12) 16.17 33.46 115,500 1.47(f) 2.11 207
Year ended 7/31/96 (1.89) 14.01 5.23 102,567 1.38 2.41 227
Year ended 7/31/95 (.38) 15.08 15.99 122,033 1.32 3.12 179
CLASS B
Year ended 7/31/99 $(1.91) $15.11 10.56% $ 136,384 1.97%(f) 1.56% 105%
Year ended 7/31/98 (2.31) 15.54 14.13 47,728 2.06(f) 1.34 145
Year ended 7/31/97 (2.04) 15.83 32.34 24,192 2.25(f) 1.32 207
Year ended 7/31/96 (1.79) 13.79 4.45 18,393 2.16 1.61 227
Year ended 7/31/95 (.30) 14.88 15.07 15,080 2.11 2.30 179
CLASS C
Year ended 7/31/99 $(1.91) $15.15 10.60% $ 63,517 1.96%(f) 1.57% 105%
Year ended 7/31/98 (2.31) 15.57 14.09 10,855 2.05(f) 1.36 145
Year ended 7/31/97 (2.04) 15.86 32.37 5,510 2.23(f) 1.37 207
Year ended 7/31/96 (1.79) 13.81 4.52 6,096 2.15 1.63 227
Year ended 7/31/95 (.30) 14.89 15.06 5,108 2.09 2.32 179
ALLIANCE UTILITY INCOME FUND
CLASS A
12/1/98 to 5/31/99+++ $ (.50) $16.72 17.77% $ 17,414 1.51%* 2.23%* 4%
Year ended 11/30/98 (.79) 14.68 24.99 9,793 1.50(d) 2.23 16
Year ended 11/30/97 (.47) 12.48 23.10 4,117 1.50(d) 2.89 37
Year ended 11/30/96 (.46) 10.59 8.47 3,294 1.50(d) 1.67 98
Year ended 11/30/95 (.45) 10.22 19.58 2,748 1.50(d) 2.48 162
Year ended 11/30/94 (.48) 8.97 (4.86) 1,068 1.50(d) 4.13 30
CLASS B
12/1/98 to 5/31/99+++ $ (.46) $16.64 17.42% $ 59,339 2.21%* 1.53%* 4%
Year ended 11/30/98 (.72) 14.62 24.02 35,550 2.20(d) 1.56 16
Year ended 11/30/97 (.40) 12.46 22.35 14,782 2.20(d) 2.27 37
Year ended 11/30/96 (.40) 10.57 7.82 13,561 2.20(d) .95 98
Year ended 11/30/95 (.39) 10.20 18.66 10,988 2.20(d) 1.60 162
Year ended 11/30/94 (.41) 8.96 (5.59) 2,353 2.20(d) 3.53 30
CLASS C
12/1/98 to 5/31/99+++ $ (.46) $16.66 17.32% $ 13,631 2.21%* 1.55%* 4%
Year ended 11/30/98 (.72) 14.65 24.16 7,298 2.20(d) 1.54 16
Year ended 11/30/97 (.40) 12.47 22.21 3,413 2.20(d) 2.27 37
Year ended 11/30/96 (.40) 10.59 7.81 3,376 2.20(d) .94 98
Year ended 11/30/95 (.39) 10.22 18.76 3,500 2.20(d) 1.88 162
Year ended 11/30/94 (.41) 8.97 (5.58) 2,651 2.20(d) 3.60 30
ALLIANCE REAL ESTATE
INVESTMENT FUND
CLASS A
Year ended 8/31/99 $ (.68) $10.19 3.86% $ 35,299 1.58% 4.57% 29%
Year ended 8/31/98 (.52) 10.47 (14.90) 51,214 1.55 3.87 23
10/1/96+ to 8/31/97 (.38) 12.80 32.24 37,638 1.77*(f) 2.73* 20
CLASS B
Year ended 8/31/99 $ (.60) $10.17 3.20% $ 168,741 2.31% 3.82% 29%
Year ended 8/31/98 (.44) 10.44 (15.56) 268,856 2.26 3.16 23
10/1/96+ to 8/31/97 (.33) 12.79 31.49 186,802 2.44*(f) 2.08* 20
CLASS C
Year ended 8/31/99 $ (.60) $10.17 3.20% $ 44,739 2.30% 3.77% 29%
Year ended 8/31/98 (.44) 10.44 (15.56) 69,575 2.26 3.15 23
10/1/96+ to 8/31/97 (.33) 12.79 31.49 42,719 2.43*(f) 2.06* 20
ALLIANCE NEW EUROPE FUND
CLASS A
Year ended 7/31/99 $(2.56) $18.57 (2.87)% $ 125,729 1.80%(f) .39% 89%
Year ended 7/31/98 (2.09) 21.85 32.21 130,777 1.85(f) .25 99
Year ended 7/31/97 (1.50) 18.61 28.78 78,578 2.05(f) .40 89
Year ended 7/31/96 (.47) 15.84 8.20 74,026 2.14 1.10 69
Year ended 7/31/95 (.09) 15.11 20.22 86,112 2.09 .37 74
CLASS B
Year ended 7/31/99 $(2.56) $17.39 (3.52)% $ 144,570 2.50%(f) (.34)% 89%
Year ended 7/31/98 (2.05) 20.76 31.22 137,425 2.56(f) (.40) 99
Year ended 7/31/97 (1.42) 17.87 27.76 66,032 2.75(f) (.23) 89
Year ended 7/31/96 (.47) 15.31 7.53 42,662 2.86 .59 69
Year ended 7/31/95 (.09) 14.71 19.42 34,527 2.79 (.33) 74
CLASS C
Year ended 7/31/99 $(2.56) $17.41 (3.46)% $ 45,845 2.50%(f) (.28)% 89%
Year ended 7/31/98 (2.05) 20.77 31.13 39,618 2.56(f) (.41) 99
Year ended 7/31/97 (1.42) 17.89 27.73 16,907 2.74(f) (.23) 89
Year ended 7/31/96 (.47) 15.33 7.59 10,141 2.87 .58 69
Year ended 7/31/95 (.09) 14.72 19.40 7,802 2.78 (.33) 74
</TABLE>
67
<TABLE>
<CAPTION>
INCOME FROM INVESTMENT OPERATIONS LESS DIVIDENDS AND DISTRIBUTIONS
------------------------------------------ ---------------------------------------
NET GAINS
NET ASSET OR LOSSES ON DIVIDENDS DISTRIBUTIONS
VALUE, SECURITIES TOTAL FROM FROM NET IN EXCESS OF DISTRIBUTIONS
BEGINNING NET INVESTMENT (BOTH REALIZED INVESTMENT INVESTMENT NET INVESTMENT FROM
FISCAL YEAR OR PERIOD OF PERIOD INCOME (LOSS) AND UNREALIZED) OPERATIONS INCOME INCOME CAPITAL GAINS
- --------------------- --------- -------------- -------------- ---------- ---------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
ALLIANCE WORLDWIDE
PRIVATIZATION FUND
CLASS A
Year ended 6/30/99 $12.67 $ .00 (b) $ .93 $ .93 $ (.12) $0.00 $(1.64)
Year ended 6/30/98 13.26 .10 (b) .85 .95 (.18) 0.00 (1.36)
Year ended 6/30/97 12.13 .15 (b) 2.55 2.70 (.15) 0.00 (1.42)
Year ended 6/30/96 10.18 .10 (b) 1.85 1.95 0.00 0.00 0.00
Year ended 6/30/95 9.75 .06 .37 .43 0.00 0.00 0.00
CLASS B
Year ended 6/30/99 $12.37 $.(08)(b) $ .89 $ .81 $ (.04) $0.00 $(1.64)
Year ended 6/30/98 13.04 .02(b) .82 .84 (.15) 0.00 (1.36)
Year ended 6/30/97 11.96 .08(b) 2.50 2.58 (.08) 0.00 (1.42)
Year ended 6/30/96 10.10 (.02)(b) 1.88 1.86 0.00 0.00 0.00
Year ended 6/30/95 9.74 .02 .34 .36 0.00 0.00 0.00
CLASS C
Year ended 6/30/99 $12.37 $.(08)(b) $ .89 $ .81 $ (.04) $0.00 $(1.64)
Year ended 6/30/98 13.04 .05 (b) .79 .84 (.15) 0.00 (1.36)
Year ended 6/30/97 11.96 .12 (b) 2.46 2.58 (.08) 0.00 (1.42)
Year ended 6/30/96 10.10 .03(b) 1.83 1.86 0.00 0.00 0.00
2/8/95++ to 6/30/95 9.53 .05 .52 .57 0.00 0.00 0.00
ALLIANCE INTERNATIONAL
PREMIER GROWTH
CLASS A
12/1/98 to 5/31/99+++ $ 9.63 $(.06)(b)(c) $ .69 $ .63 $0.00 $0.00 $ 0.00
3/3/98+ to 11/30/98 10.00 (.08)(b)(c) (.29) (.37) 0.00 0.00 0.00
CLASS B
12/1/98 to 5/31/99+++ $ 9.58 $(.09)(b)(c) $ .68 $ .59 $0.00 $0.00 $ 0.00
3/3/98+ to 11/30/98 10.00 (.13)(b)(c) (.29) (.42) 0.00 0.00 0.00
CLASS C
12/1/98 to 5/31/99+++ $ 9.57 $(.09)(b)(c) $ .68 $ .59 $0.00 $0.00 $ 0.00
3/3/98+ to 11/30/98 10.00 (.15)(b)(c) (.28) (.43) 0.00 0.00 0.00
ALLIANCE GLOBAL
SMALL CAP FUND
CLASS A
Year ended 7/31/99 $12.14 $(.08)(b) $ .76 $ .68 $0.00 $0.00 $(1.16)
Year ended 7/31/98 12.87 (.11)(b) .37 .26 0.00 0.00 (.99)
Year ended 7/31/97 11.61 (.15)(b) 2.97 2.82 0.00 0.00 (1.56)
Year ended 7/31/96 10.38 (.14)(b) 1.90 1.76 0.00 0.00 (.53)
Year ended 7/31/95 11.08 (.09) 1.50 1.41 0.00 0.00 (2.11)(e)
CLASS B
Year ended 7/31/99 $11.20 $(.15)(b) $ .68 $ .53 $0.00 $0.00 $(1.16)
Year ended 7/31/98 12.03 (.18)(b) .34 .16 0.00 0.00 (.99)
Year ended 7/31/97 11.03 (.21)(b) 2.77 2.56 0.00 0.00 (1.56)
Year ended 7/31/96 9.95 (.20)(b) 1.81 1.61 0.00 0.00 (.53)
Year ended 7/31/95 10.78 (.12) 1.40 1.28 0.00 0.00 (2.11)(e)
CLASS C
Year ended 7/31/99 $11.22 $(.16)(b) $ .69 $ .53 $0.00 $0.00 $(1.16)
Year ended 7/31/98 12.05 (.19)(b) .35 .16 0.00 0.00 (.99)
Year ended 7/31/97 11.05 (.22)(b) 2.78 2.56 0.00 0.00 (1.56)
Year ended 7/31/96 9.96 (.20)(b) 1.82 1.62 0.00 0.00 (.53)
Year ended 7/31/95 10.79 (.17) 1.45 1.28 0.00 0.00 (2.11)(e)
ALLIANCE INTERNATIONAL FUND
CLASS A
Year ended 6/30/99 $18.55 $(.04)(b)(c) $ (.75) $ (.79) $0.00 $(.48) $(1.04)
Year ended 6/30/98 18.69 (.01)(b)(c) 1.13 1.12 0.00 (.05) (1.21)
Year ended 6/30/97 18.32 .06 (b) 1.51 1.57 (.12) 0.00 (1.08)
Year ended 6/30/96 16.81 .05 (b) 2.51 2.56 0.00 0.00 (1.05)
Year ended 6/30/95 18.38 .04 .01 .05 0.00 0.00 (1.62)
CLASS B
Year ended 6/30/99 $17.41 $(.16)(b)(c) $ (.68) $ (.84) $0.00 $(.34) $(1.04)
Year ended 6/30/98 17.71 (.16)(b)(c) 1.07 .91 0.00 0.00 (1.21)
Year ended 6/30/97 17.45 (.09)(b) 1.43 1.34 0.00 0.00 (1.08)
Year ended 6/30/96 16.19 (.07)(b) 2.38 2.31 0.00 0.00 (1.05)
Year ended 6/30/95 17.90 (.01) (.08) (.09) 0.00 0.00 (1.62)
CLASS C
Year ended 6/30/99 $17.42 $(.16)(b)(c) $ (.69) $ (.85) $0.00 $(.34) $(1.04)
Year ended 6/30/98 17.73 (.15)(b)(c) 1.05 .90 0.00 0.00 (1.21)
Year ended 6/30/97 17.46 (.09)(b) 1.44 1.35 0.00 0.00 (1.08)
Year ended 6/30/96 16.20 (.07)(b) 2.38 2.31 0.00 0.00 (1.05)
Year ended 6/30/95 17.91 (.14) .05 (.09) 0.00 0.00 (1.62)
</TABLE>
PLEASE REFER TO THE FOOTNOTES ON PAGE 72.
68
<TABLE>
<CAPTION>
LESS DISTRIBUTIONS RATIOS/SUPPLEMENTAL DATA
---------------- ---------------------------------------------------------
TOTAL NET ASSET RATIO OF RATIO OF NET
DIVIDENDS VALUE, NET ASSETS, EXPENSES INCOME (LOSS)
AND END OF TOTAL END OF PERIOD TO AVERAGE TO AVERAGE PORTFOLIO
FISCAL YEAR OR PERIOD DISTRIBUTIONS PERIOD RETURN(A) (000'S OMITTED) NET ASSETS NET ASSETS TURNOVER RATE
- --------------------- ------------- ------------- -------- -------------- ----------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
ALLIANCE WORLDWIDE
PRIVATIZATION FUND
CLASS A
Year ended 6/30/99 $(1.76) $11.84 9.86% $ 340,194 1.92%(f) (.01)% 58%
Year ended 6/30/98 (1.54) 12.67 9.11 467,960 1.73 .80 53
Year ended 6/30/97 (1.57) 13.26 25.16 561,793 1.72 1.27 48
Year ended 6/30/96 0.00 12.13 19.16 672,732 1.87 .95 28
Year ended 6/30/95 0.00 10.18 4.41 13,535 2.56 .66 36
CLASS B
Year ended 6/30/99 $(1.68) $11.50 8.91% $ 117,420 2.63%(f) (1.43)% 58%
Year ended 6/30/98 (1.51) 12.37 8.34 156,348 2.45 .20 53
Year ended 6/30/97 (1.50) 13.04 24.34 121,173 2.43 .66 48
Year ended 6/30/96 0.00 11.96 18.42 83,050 2.83 (.20) 28
Year ended 6/30/95 0.00 10.10 3.70 79,359 3.27 .01 36
CLASS C
Year ended 6/30/99 $(1.68) $11.50 8.91% $ 20,397 2.63%(f) (1.44)% 58%
Year ended 6/30/98 (1.51) 12.37 8.34 26,635 2.44 .38 53
Year ended 6/30/97 (1.50) 13.04 24.33 12,929 2.42 1.06 48
Year ended 6/30/96 0.00 11.96 18.42 2,383 2.57 .63 28
2/8/95++ to 6/30/95 0.00 10.10 5.98 338 1.03* 1.04* 36
ALLIANCE INTERNATIONAL
PREMIER GROWTH
CLASS A
12/1/98 to 5/31/99+++ $ 0.00 $10.26 6.54% $ 10,256 2.52%(d) (1.09)% 121%
3/3/98+ to 11/30/98 0.00 9.63 (3.70) 7,255 2.50*(d) (.90)* 151
CLASS B
12/1/98 to 5/31/99+++ $ 0.00 $10.17 6.16% $ 14,807 3.22%(d) (1.80)% 121%
3/3/98+ to 11/30/98 0.00 9.58 (4.20) 11,710 3.20*(d) (1.41)* 151
CLASS C
12/1/98 to 5/31/99+++ $ 0.00 $10.16 6.16% $ 4,721 3.22%(d) (1.76)% 121%
3/3/98+ to 11/30/98 0.00 9.57 (4.30) 3,120 3.20*(d) (1.69)* 151
ALLIANCE GLOBAL
SMALL CAP FUND
CLASS A
Year ended 7/31/99 $(1.16) $11.66 7.51% $ 77,164 2.37%(f) (.79)% 120%
Year ended 7/31/98 (.99) 12.14 2.49 82,843 2.16(f) (.88) 113
Year ended 7/31/97 (1.56) 12.87 26.47 85,217 2.41(f) (1.25) 129
Year ended 7/31/96 (.53) 11.61 17.46 68,623 2.51 (1.22) 139
Year ended 7/31/95 (2.11) 10.38 16.62 60,057 2.54(d) (1.17) 128
CLASS B
Year ended 7/31/99 $(1.16) $10.57 6.74% $ 30,205 3.14%(f) (1.59)% 120%
Year ended 7/31/98 (.99) 11.20 1.80 38,827 2.88(f) (1.58) 113
Year ended 7/31/97 (1.56) 12.03 25.42 31,946 3.11(f) (1.92) 129
Year ended 7/31/96 (.53) 11.03 16.69 14,247 3.21 (1.88) 139
Year ended 7/31/95 (2.11) 9.95 15.77 5,164 3.20(d) (1.92) 128
CLASS C
Year ended 7/31/99 $(1.16) $10.59 6.72% $ 7,058 3.15%(f) (1.61)% 120%
Year ended 7/31/98 (.99) 11.22 1.79 9,471 2.88(f) (1.59) 113
Year ended 7/31/97 (1.56) 12.05 25.37 8,718 3.10(f) (1.93) 129
Year ended 7/31/96 (.53) 11.05 16.77 4,119 3.19 (1.85) 139
Year ended 7/31/95 (2.11) 9.96 15.75 1,407 3.25(d) (2.10) 128
ALLIANCE INTERNATIONAL FUND
CLASS A
Year ended 6/30/99 $(1.52) $16.24 (3.95)% $ 78,303 1.80%(d)(f) (.25)%(c) 178%
Year ended 6/30/98 (1.26) 18.55 6.79 131,565 1.65(d) (.05)(c) 121
Year ended 6/30/97 (1.20) 18.69 9.30 190,173 1.74(f) .31 94
Year ended 6/30/96 (1.05) 18.32 15.83 196,261 1.72 .31 78
Year ended 6/30/95 (1.62) 16.81 .59 165,584 1.73 .26 119
CLASS B
Year ended 6/30/99 $(1.38) $15.19 (4.56)% $ 55,724 2.61%(d)(f) (1.02)%(c) 178%
Year ended 6/30/98 (1.21) 17.41 5.92 71,370 2.49(d) (.90)(c) 121
Year ended 6/30/97 (1.08) 17.71 8.37 77,725 2.58(f) (.51) 94
Year ended 6/30/96 (1.05) 17.45 14.87 72,470 2.55% (.46) 78
Year ended 6/30/95 (1.62) 16.19 (.22) 48,998 2.57 (.62) 119
CLASS C
Year ended 6/30/99 $(1.38) $15.19 (4.62)% $ 16,876 2.61%(d)(f) (1.02)%(c) 178%
Year ended 6/30/98 (1.21) 17.42 5.85 20,428 2.48(d) (.90)(c) 121
Year ended 6/30/97 (1.08) 17.73 8.42 23,268 2.56(f) (.51) 94
Year ended 6/30/96 (1.05) 17.46 14.85 26,965 2.53 (.47) 78
Year ended 6/30/95 (1.62) 16.20 (.22) 19,395 2.54 (.88) 119
</TABLE>
69
<TABLE>
<CAPTION>
INCOME FROM INVESTMENT OPERATIONS LESS DIVIDENDS AND DISTRIBUTIONS
------------------------------------------ ---------------------------------------
NET GAINS
NET ASSET OR LOSSES ON DIVIDENDS DISTRIBUTIONS
VALUE, SECURITIES TOTAL FROM FROM NET IN EXCESS OF DISTRIBUTIONS
BEGINNING NET INVESTMENT (BOTH REALIZED INVESTMENT INVESTMENT NET INVESTMENT FROM
FISCAL YEAR OR PERIOD OF PERIOD INCOME (LOSS) AND UNREALIZED) OPERATIONS INCOME INCOME CAPITAL GAINS
- --------------------- --------- -------------- -------------- ---------- ---------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
ALLIANCE GREATER
CHINA '97 FUND
CLASS A
Year ended 7/31/99 $ 4.84 $ .02(b)(c) $ 3.34 $ 3.36 $0.00 $0.00 $ 0.00
9/3/97+ to 7/31/98 10.00 .08(b)(c) (5.18) (5.10) (.06) 0.00 0.00
CLASS B
Year ended 7/31/99 $ 4.82 $(.01)(b)(c) $ 3.31 $ 3.30 $0.00 $0.00 $ 0.00
9/3/97+ to 7/31/98 10.00 .03(b)(c) (5.17) (5.14) (.03) (.01) 0.00
CLASS C
Year ended 7/31/99 $ 4.82 $(.03)(b)(c) $ 3.32 $ 3.29 $0.00 $0.00 $ 0.00
9/3/97+ to 7/31/98 10.00 .03(b)(c) (5.17) (5.14) (.03) (.01) 0.00
ALLIANCE ALL-ASIA
INVESTMENT FUND
CLASS A
11/1/98 to 4/30/99+++ $ 5.86 $(.07)(b)(c) $ 1.88 $ 1.81 $0.00 $0.00 $ 0.00
Year ended 10/31/98 7.54 (.10)(b)(c) (1.58) (1.68) 0.00 0.00 0.00
Year ended 10/31/97 11.04 (.21)(b)(c) (2.95) (3.16) 0.00 0.00 (.34)
Year ended 10/31/96 10.45 (.21)(b)(c) .88 .67 0.00 0.00 (.08)
11/28/94+ to 10/31/95 10.00 (.19)(c)(b) .64 .45 0.00 0.00 0.00
CLASS B
11/1/98 to 4/30/99+++ $ 5.71 $(.09)(b)(c) $ 1.82 $ 1.73 $0.00 $0.00 $ 0.00
Year ended 10/31/98 7.39 (.14)(b)(c) (1.54) (1.68) 0.00 0.00 0.00
Year ended 10/31/97 10.90 (.28)(b)(c) (2.89) (3.17) 0.00 0.00 (.34)
Year ended 10/31/96 10.41 (.28)(b)(c) .85 .57 0.00 0.00 (.08)
11/28/94+ to 10/31/95 10.00 (.25)(b)(c) .66 .41 0.00 0.00 0.00
CLASS C
11/1/98 to 4/30/99+++ $ 5.72 $(.09)(b)(c) $ 1.83 $ 1.74 $0.00 $0.00 $ 0.00
Year ended 10/31/98 7.40 (.14)(b)(c) (1.54) (1.68) 0.00 0.00 0.00
Year ended 10/31/97 10.91 (.27)(b)(c) (2.90) (3.17) 0.00 0.00 (.34)
Year ended 10/31/96 10.41 (.28)(b)(c) .86 .58 0.00 0.00 (.08)
11/28/94+ to 10/31/95 10.00 (.35)(b)(c) .76 .41 0.00 0.00 0.00
ALLIANCE GLOBAL
ENVIRONMENT FUND (H)
CLASS A
11/1/98 to 4/30/99+++ $ 8.34 $(.11)(b)(c) $ 1.44 $ 1.33 $0.00 $0.00 $(3.10)
Year ended 10/31/98 18.77 (.24)(b) (1.12) (1.36) 0.00 0.00 (9.07)
Year ended 10/31/97 16.48 (.23)(b) 3.65 3.42 0.00 0.00 (1.13)
Year ended 10/31/96 12.37 (.13)(b) 4.26 4.13 (.02) 0.00 0.00
Year ended 10/31/95 11.74 .03 .60 .63 0.00 0.00 0.00
Year ended 10/31/94 10.97 0.00 .77 .77 0.00 0.00 0.00
CLASS B
11/1/98 to 4/30/99+++ $ 8.30 $(.13)(b)(c) $ 1.43 $ 1.30 $0.00 $0.00 $(3.10)
Year ended 10/31/98 18.76 (.27)(b) (1.12) (1.39) 0.00 0.00 (9.07)
10/3/97++ to 10/31/97 19.92 (.20)(b) (.96) (1.16) 0.00 0.00 0.00
CLASS C
11/1/98 to 4/30/99+++ $ 8.27 $(.12)(b)(c) $ 1.41 $ 1.29 $0.00 $0.00 $(3.10)
11/5/97++ to 10/31/98 19.15 (.27)(b) (1.54) (1.81) 0.00 0.00 (9.07)
</TABLE>
PLEASE REFER TO THE FOOTNOTES ON PAGE 72.
70
<TABLE>
<CAPTION>
LESS DISTRIBUTIONS RATIOS/SUPPLEMENTAL DATA
---------------- ---------------------------------------------------------
TOTAL NET ASSET RATIO OF RATIO OF NET
DIVIDENDS VALUE, NET ASSETS, EXPENSES INCOME (LOSS)
AND END OF TOTAL END OF PERIOD TO AVERAGE TO AVERAGE PORTFOLIO
FISCAL YEAR OR PERIOD DISTRIBUTIONS PERIOD RETURN(A) (000'S OMITTED) NET ASSETS NET ASSETS TURNOVER RATE
- --------------------- ------------- ------------- -------- -------------- ----------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
ALLIANCE GREATER
CHINA '97 FUND
CLASS A
Year ended 7/31/99 $ 0.00 $ 8.20 69.42% $ 1,011 2.52%(d)(f) .36% 94%
9/3/97+ to 7/31/98 (.06) 4.84 (51.20) 445 2.52(d)(f)* 1.20* 58
CLASS B
Year ended 7/31/99 $ 0.00 $ 8.12 68.46% $ 1,902 3.22%(d)(f) (.22)% 94%
9/3/97+ to 7/31/98 (.04) 4.82 (51.53) 1,551 3.22(d)(f)* .53* 58
CLASS C
Year ended 7/31/99 $ 0.00 $ 8.11 68.26% $ 162 3.22%(d)(f) (.49)% 94%
9/3/97+ to 7/31/98 (.04) 4.82 (51.53) 102 3.22(d)(f)* .50* 58
ALLIANCE ALL-ASIA
INVESTMENT FUND
CLASS A
11/1/98 to 4/30/99+++ $ 0.00 $ 7.67 30.89% $ 6,878 3.03%* (2.24)%* 210%
Year ended 10/31/98 0.00 5.86 (22.28) 3,778 3.74(d)(f) (1.50) 93
Year ended 10/31/97 (.34) 7.54 (29.61) 5,916 3.45(d) (1.97) 70
Year ended 10/31/96 (.08) 11.04 6.43 12,284 3.37*(d) (1.75) 66
11/28/94+ to 10/31/95 0.00 10.45 4.50 2,870 4.42*(d) (1.87)* 90
CLASS B
11/1/98 to 4/30/99+++ $ 0.00 $ 7.44 30.30% $ 13,042 3.73%* (2.94)%* 210%
Year ended 10/31/98 0.00 5.71 (22.73) 8,844 4.49(d)(f) (2.22) 93
Year ended 10/31/97 (.34) 7.39 (30.09) 11,439 4.15(d) (2.67) 70
Year ended 10/31/96 (.08) 10.90 5.49 23,784 4.07(d) (2.44) 66
11/28/94+ to 10/31/95 0.00 10.41 4.10 5,170 5.20*(d) (2.64)* 90
CLASS C
11/1/98 to 4/30/99+++ $ 0.00 $ 7.46 30.42% $ 3,262 3.73%* (2.95)%* 210%
Year ended 10/31/98 0.00 5.72 (22.70) 1,717 4.48(d)(f) (2.20) 93
Year ended 10/31/97 (.34) 7.40 (30.06) 1,859 4.15(d) (2.66) 70
Year ended 10/31/96 (.08) 10.91 5.59 4,228 4.07(d) (2.42) 66
11/28/94+ to 10/31/95 0.00 10.41 4.10 597 5.84*(d) (3.41)* 90
ALLIANCE GLOBAL
ENVIRONMENT FUND (H)
CLASS A
11/1/98 to 4/30/99+++ $(3.10) $ 6.57 25.60% $ 10,500 4.12%* (3.56)%* 86%
Year ended 10/31/98 (9.07) 8.34 (10.51) 13,295 2.80(f) (2.27) 205
Year ended 10/31/97 (1.13) 18.77 23.51 52,378 2.39 (1.35) 145
Year ended 10/31/96 (.02) 16.48 33.48 100,271 1.60 (.85) 268
Year ended 10/31/95 0.00 12.37 5.37 85,416 1.57 .21 109
Year ended 10/31/94 0.00 11.74 7.02 81,102 1.67 (.04) 42
CLASS B
11/1/98 to 4/30/99+++ $(3.10) $ 6.50 25.22% $ 220 4.78%* (4.22)%* 86%
Year ended 10/31/98 (9.07) 8.30 (10.79) 152 3.52(f) (2.93) 205
10/3/97++ to 10/31/97 0.00 18.76 (5.82) 235 20.84* (1.03)* 145
CLASS C
11/1/98 to 4/30/99+++ $(3.10) $ 6.46 25.18% $ 39 4.61%* (4.07)%* 86%
11/5/97++ to 10/31/98 (9.07) 8.27 (12.88) 31 3.39(f)* (2.75)* 205
</TABLE>
71
+ COMMENCEMENT OF OPERATIONS.
++ COMMENCEMENT OF DISTRIBUTION.
+++ UNAUDITED.
* ANNUALIZED.
** REFLECTS A CHANGE IN FISCAL YEAR END.
(A) 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 THE NET ASSET VALUE DURING THE PERIOD, AND A
REDEMPTION ON THE LAST DAY OF THE PERIOD. INITIAL SALES CHARGES OR CONTINGENT
DEFERRED SALES CHARGES ARE NOT REFLECTED IN THE CALCULATION OF TOTAL INVESTMENT
RETURN. TOTAL INVESTMENT RETURNS CALCULATED FOR PERIODS OF LESS THAN ONE YEAR
ARE NOT ANNUALIZED.
(B) BASED ON AVERAGE SHARES OUTSTANDING.
(C) NET OF FEE WAIVER AND EXPENSE REIMBURSEMENT.
(D) NET OF EXPENSES ASSUMED AND/OR WAIVED/REIMBURSED. IF THE FOLLOWING FUNDS
HAD BORNE ALL EXPENSES IN THEIR MOST RECENT FIVE FISCAL YEARS, THEIR EXPENSE
RATIOS, WITHOUT GIVING EFFECT TO THE EXPENSE OFFSET ARRANGEMENT DESCRIBED IN
(F) BELOW, WOULD HAVE BEEN AS FOLLOWS:
<TABLE>
<CAPTION>
1994 1995 1996 1997 1998 1999
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
ALLIANCE ALL-ASIA
INVESTMENT FUND
CLASS A - 10.57%* 3.61% 3.57% 4.63% -
CLASS B - 11.32%* 4.33% 4.27% 5.39% -
CLASS C - 11.38%* 4.30% 4.27% 5.42% -
ALLIANCE GROWTH
FUND
CLASS A 1.46% - - - - -
CLASS B 2.13% - - - - -
CLASS C 2.13%* - - - - -
ALLIANCE GLOBAL
SMALL CAP FUND
CLASS A - 2.61% - - - -
CLASS B - 3.27% - - - -
CLASS C - 3.31% - - - -
ALLIANCE UTILITY
INCOME FUND
CLASS A 13.72% 4.86%* 3.38% 3.55% 2.48% -
CLASS B 14.42% 5.34%* 4.08% 4.28% 3.21% -
CLASS C 14.42% 5.99%* 4.07% 4.28% 3.22% -
ALLIANCE INTERNATIONAL
FUND
CLASS A - - - - 1.80% 1.91%
CLASS B - - - - 2.64% 2.74%
CLASS C - - - - 2.63% 2.75%
ALLIANCE GREATER
CHINA '97 FUND
CLASS A - - - - 18.27%* 19.68%
CLASS B - - - - 19.18%* 20.22%
CLASS C - - - - 19.37%* 20.41%
ALLIANCE INTERNATIONAL
PREMIER GROWTH FUND
CLASS A - - - - 5.19% 3.75%
CLASS B - - - - 6.14% 4.43%
CLASS C - - - - 6.00% 4.44%
</TABLE>
FOR THE EXPENSE RATIOS OF THE FUNDS IN YEARS PRIOR TO FISCAL YEAR 1994,
ASSUMING THE FUNDS HAD BORNE ALL EXPENSES, PLEASE SEE THE FINANCIAL STATEMENTS
IN EACH FUND'S STATEMENT OF ADDITIONAL INFORMATION.
(E) "DISTRIBUTIONS FROM NET REALIZED GAINS" INCLUDES A RETURN OF CAPITAL OF
$(.12).
(F) AMOUNTS DO NOT REFLECT THE IMPACT OF EXPENSE OFFSET ARRANGEMENTS WITH THE
TRANSFER AGENT. TAKING INTO ACCOUNT SUCH EXPENSE OFFSET ARRANGEMENTS, THE RATIO
OF EXPENSES TO AVERAGE NET ASSETS, ASSUMING THE ASSUMPTION AND/OR
WAIVER/REIMBURSEMENT OF EXPENSES DESCRIBED IN (D) ABOVE, WOULD HAVE BEEN AS
FOLLOWS:
ALLIANCE BALANCED
SHARES 1997 1998 1999
CLASS A 1.46% 1.29% 1.21%
CLASS B 2.24% 2.05% 1.96%
CLASS C 2.22% 2.04% 1.94%
ALLIANCE REAL ESTATE
INVESTMENT FUND 1997 1998 1999
CLASS A 1.77% -
CLASS B 2.43% -
CLASS C 2.42% -
ALLIANCE GROWTH FUND 1997 1998 1999
CLASS A 1.25% 1.21% -
CLASS B 1.95% 1.93% -
CLASS C 1.95% 1.92% -
ALLIANCE INTERNATIONAL
FUND 1997 1998 1999
CLASS A 1.73% - 1.78%
CLASS B 2.58% - 2.59%
CLASS C 2.56% - 2.59%
ALLIANCE GLOBAL
SMALL CAP FUND 1997 1998 1999
CLASS A 2.38% 2.14% 2.33%
CLASS B 3.08% 2.86% 3.11%
CLASS C 3.08% 2.85% 3.12%
ALLIANCE TECHNOLOGY
FUND 1997 1998 1999
CLASS A 1.66% 1.65% -
CLASS B 2.36% 2.38% -
CLASS C 2.37% 2.38% -
ALLIANCE WORLDWIDE
PRIVATIZATION FUND 1997 1998 1999
CLASS A - - 1.91%
CLASS B - - 2.62%
CLASS C - - 2.61%
ALLIANCE GREATER
CHINA '97 FUND 1997 1998 1999
CLASS A - 2.50% 2.50%
CLASS B - 3.20% 3.20%
CLASS C - 3.20% 3.20%
ALLIANCE NEW EUROPE
FUND 1997 1998 1999
CLASS A 2.04% 1.84% 1.78%
CLASS B 2.74% 2.54% 2.49%
CLASS C 2.73% 2.54% 2.49%
ALLIANCE GROWTH AND
INCOME FUND 1997 1998 1999
CLASS A .91% .92% -
CLASS B 1.71% 1.71% -
CLASS C 1.70% 1.71% -
ALLIANCE QUASAR FUND 1997 1998 1999
CLASS A - 1.60% -
CLASS B - 2.38% -
CLASS C - 2.37% -
ALLIANCE PREMIER
GROWTH FUND 1997 1998 1999
CLASS A - 1.58% -
CLASS B - 2.27% -
CLASS C - 2.27% -
ALLIANCE GLOBAL
ENVIRONMENT 1997 1998 1999
CLASS A - 2.79% -
CLASS B - 3.51% -
CLASS C - 3.38% -
ALLIANCE ALL-ASIA 1997 1998 1999
CLASS A - 3.70% -
CLASS B - 4.44% -
CLASS C - 4.44% -
(G) DISTRIBUTIONS FROM NET INVESTMENT INCOME FOR THE YEARS ENDED 1999 AND 1997
INCLUDE A TAX RETURN OF CAPITAL OF $.02 AND $.08 FOR CLASS A SHARES, $.02 AND
$.09 FOR CLASS B SHARES AND $.02 AND $.08 FOR CLASS C SHARES, RESPECTIVELY.
(H) ALLIANCE GLOBAL ENVIRONMENT FUND OPERATED AS A CLOSED-END INVESTMENT
COMPANY THROUGH OCTOBER 3, 1997, WHEN IT CONVERTED TO AN OPEN-END INVESTMENT
COMPANY AND ALL SHARES OF ITS COMMON STOCK THEN OUTSTANDING WERE RECLASSIFIED
AS CLASS A SHARES.
72
- -------------------------------------------------------------------------------
APPENDIX A
- -------------------------------------------------------------------------------
The following is additional information about the United Kingdom, Japan and
Greater China countries.
INVESTMENT IN UNITED KINGDOM ISSUERS. Investment in securities of United
Kingdom issuers involves certain considerations not present with investment in
securities of U.S. issuers. As with any investment not denominated in the U.S.
Dollar, the U.S. dollar value of the Fund's investment denominated in the
British pound sterling will fluctuate with pound sterling-dollar exchange rate
movements. Between 1972, when the pound sterling was allowed to float against
other currencies, and the end of 1992, the pound sterling generally depreciated
against most major currencies, including the U.S. Dollar. Between September and
December 1992, after the United Kingdom's exit from the Exchange Rate Mechanism
of the European Monetary System, the value of the pound sterling fell by almost
20% against the U.S. Dollar. The pound sterling has since recovered due to
interest rate cuts throughout Europe and an upturn in the economy of the United
Kingdom. The average exchange rate of the U.S. Dollar to the pound sterling was
1.50 in 1993 and 1.66 in 1998. On October 25, 1999 the U.S. Dollar-pound
sterling exchange rate was 1.66.
The United Kingdom's largest stock exchange is the London Stock Exchange, which
is the third largest exchange in the world. As measured by the FT-SE 100 index,
the performance of the 100 largest companies in the United Kingdom reached
5,882.6 at the end of 1998, up approximately 15% from the end of 1997. The
FT-SE 100 index closed at 6009.40 on October 25, 1999.
The Economic and Monetary Union ("EMU") became effective on January 1, 1999.
When fully implemented in 2002, the EMU will establish a common currency for
European countries that meet the eligibility criteria and choose to
participate. Although the United Kingdom meets the eligibility criteria, the
government has not taken any action to join the EMU.
From 1979 until 1997 the Conservative Party controlled Parliament. In the May
1, 1997 general elections, however, the Labour Party, led by Tony Blair, won a
majority in Parliament, gaining 418 of 659 seats in the House of Commons. Mr.
Blair, who was appointed Prime Minister, has launched a number of reform
initiatives, including an overhaul of the monetary policy framework intended to
protect monetary policy from political forces by vesting responsibility for
setting interest rates in a new Monetary Policy Committee headed by the
Governor of the Bank of England, as opposed to the Treasury. Prime Minister
Blair has also undertaken a comprehensive restructuring of the regulation of
the financial services industry. For further information regarding the United
Kingdom, see the SAI of New Europe Fund.
INVESTMENT IN JAPANESE ISSUERS. Investment in securities of Japanese issuers
involves certain considerations not present with investment in securities of
U.S. issuers. As with any investment not denominated in the U.S. Dollar, the
U.S. dollar value of each Fund's investments denominated in the Japanese yen
will fluctuate with yen-dollar exchange rate movements. Between 1985 and 1995,
the Japanese yen generally appreciated against the U.S. dollar. Thereafter, the
Japanese yen generally depreciated against the U.S. Dollar until mid-1998, when
it began to appreciate. In September 1999 the Japanese yen reached a 43-month
high against the U.S. Dollar.
Japan's largest stock exchange is the Tokyo Stock Exchange, the First Section
of which is reserved for larger, established companies. As measured by the
TOPIX, a capitalization-weighted composite index of all common stocks listed in
the First Section, the performance of the First Section reached a peak in 1989.
Thereafter, the TOPIX declined approximately 50% through the end of 1997. On
December 31, 1998 the TOPIX closed at 1086.99, down approximately 7% from the
end of 1997. On October 25, 1999 the TOPIX closed at 1534.27 up approximately
41% from the end of 1998.
Since the early 1980s, Japan has consistently recorded large current account
trade surpluses with the U.S. that have caused difficulties in the relations
between the two countries. On October 1, 1994, the U.S. and Japan reached an
agreement that was expected to more open Japanese markets with respect to trade
in certain goods and services. Since then, the two countries have agreed in
principle to increase Japanese imports of American automobiles and automotive
parts, as well as other goods and services. Nevertheless, the surpluses have
persisted and it is expected that continuing the friction between the U.S. and
Japan with respect to trade issues will continue for the foreseeable future.
Each Fund's investments in Japanese issuers will be subject to uncertainty
resulting from the instability of recent Japanese ruling coalitions. From 1955
to 1993, Japan's government was controlled by a single political party. Between
August 1993 and October 1996, Japan was ruled by a series of four coalition
governments. As the result of a general election on October 20, 1996, however,
Japan returned to a single-party government led by Ryutaro Hashimoto, a member
of the Liberal Democratic Party ("LDP"). While the LDP does not control a
majority of the seats in the parliament, subsequent to the 1996 elections it
established a majority in the House of Representatives as individual members
joined the ruling party. The popularity of the LDP declined, however, due to
the dissatisfaction with Mr. Hashimoto's leadership. In the July 1998 House of
Councillors election, the LDP's representation fell to 103 seats from 120
seats. As a result of the LDP's defeat, Mr. Hashimoto resigned as prime
minister and leader of the LDP. Mr. Hashimoto was replaced by Keizo Obuchi. On
January 14, 1999, the LDP formed a coalition government with a major opposition
party. As a result, Mr. Obuchi's administration strengthened its position in
the parliament, where it increased its majority in the House of Representatives
and reduced its shortfall in the House of Councillors. The LDP formed a new
three-party coalition government on October 5, 1999 that further strengthens
the position of Mr. Obuchi's administration in the parliament. For the past
several years, Japan's banking industry has been
73
weakened by a significant amount of problem loans. Japan's banks also have had
significant exposure to the recent financial turmoil in other Asian markets.
Following the insolvency of one of Japan's largest banks in November 1997, the
government proposed several plans designed to strengthen the weakened banking
sector. In October 1998, the Japanese parliament approved several new laws that
made $508 billion in public funds available to increase the capital of Japanese
banks, to guarantee depositors' accounts and to nationalize the weakest banks.
It is unclear whether these laws will achieve their intended effect. For
further information regarding Japan, see the SAIs of ALLIANCE INTERNATIONAL
FUND and ALLIANCE ALL-ASIA INVESTMENT FUND.
INVESTMENT IN GREATER CHINA ISSUERS. 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 economic, political and
social 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 China's 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.
Following the death of Deng Xiaoping in February 1997, Jiang Zemin became the
leader of China's Communist Party. The transfer of political power has
progressed smoothly and Jiang's popularity and credibility have gradually
increased. Jiang continues to consolidate his power, but as of yet does not
appear to have the same degree of control as did Deng Xiaoping. Jiang has
continued the market-oriented policies of Deng. Currently, China's major
economic challenge centers on reforming or eliminating inefficient state-owned
enterprises without creating an unacceptable level of unemployment. Recent
capitalistic policies have in many respects effectively outdated the Communist
Party and the governmental structure, but both remain entrenched. The Communist
Party still controls access to governmental positions and closely monitors
governmental action.
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 also be significant.
China is heavily dependent on foreign trade, particularly with Hong Kong,
Japan, the U.S., South Korea and Taiwan. Political developments adverse to its
trading partners, as well as political and social repression, could cause the
U.S. and others to alter their trading policy towards China. For example, in
the U.S. the continued extension of normal trade relations (formerly known
as most favored nation trading status) with China, which is reviewed regularly
and was reviewed in 1999, is an issue of significant controversy. 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
through Hong Kong's markets as well.
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 from Great Britain to China. Hong Kong is headed by a
chief executive, appointed by the central government of China, whose power is
checked by both the government of China and a Legislative Council. Although
Hong Kong voters voted overwhelmingly for pro-democracy candidates in the
recent election, it remains possible that China could exert its authority so as
to alter the economic structure, political structure or existing social policy
of Hong Kong. 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.
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 number of companies representing a small number of
industries. Consequently, ALLIANCE GREATER CHINA '97 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.
74
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 ALLIANCE GREATER CHINA '97 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.
ALLIANCE GREATER CHINA '97 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. It is also
anticipated that transaction costs, including brokerage commissions for
transactions both on and off the securities exchanges in Greater China
countries, will 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 investors in securities of Greater China country issuers
than to investors in securities of U.S. issuers.
Investment in Greater China companies that 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.
75
For more information about the Funds, the following documents are available
upon request:
. ANNUAL/SEMI-ANNUAL REPORTS TO SHAREHOLDERS
The Funds' annual and semi-annual reports to shareholders contain additional
information on the Funds' investments. In the annual report, you will find a
discussion of the market conditions and investment strategies that
significantly affected a Fund's performance during its last fiscal year.
. STATEMENT OF ADDITIONAL INFORMATION (SAI)
Each Fund has an SAI, which contains more detailed information about the Fund,
including its operations and investment policies. The Funds' SAIs are
incorporated by reference into (and are legally part of) this prospectus.
You may request a free copy of the current annual/semi-annual report or the
SAI, or make inquiries concerning the Funds, by contacting your broker or other
financial intermediary, or by contacting Alliance:
BY MAIL: c/o Alliance Fund Services, Inc.
P.O. Box 1520
Secaucus, NJ 07096-1520
BY PHONE: For Information: (800) 221-5672
For Literature: (800) 227-4618
Or you may view or obtain these documents from the Commission:
. Call the SEC at 1-202-942-8090 for information on the operation of the
Public Reference Room.
. Reports and other information about the Fund are available on the EDGAR
Database on the Commission's Internet site at http://www.sec.gov
. Copies of the information may be obtained, after paying a duplicating fee,
by electronic request at [email protected], or by writing the Commission's
Public Reference Section, Wash. DC 20549-0102
ON THE INTERNET: www.sec.gov
Your also may find more information about Alliance and the Funds on the
Internet at: www.Alliancecapital.com
Fund SEC File No.
Alliance Premier Growth Fund 811-06730
Alliance Health Care Fund 811-09329
Alliance Growth Fund 811-05088
Alliance Technology Fund 811-03131
Alliance Quasar Fund 811-01716
The Alliance Fund 811-00204
Alliance Growth & Income 811-00126
Alliance Balanced Shares 811-00134
Alliance Utility Income Fund 811-07916
Alliance Real Estate Investment Fund 811-07707
Alliance New Europe Fund 811-06028
Alliance Worldwide Privatization Fund 811-08426
Alliance International Premier Growth Fund 811-08527
Alliance Global Small Cap Fund 811-01415
Alliance International Fund 811-03130
Alliance Greater China '97 Fund 811-08201
Alliance All-Asia Investment Fund 811-08776
Alliance Global Environment Fund 811-05993
76
<PAGE>
THE ALLIANCE STOCK FUNDS
The Alliance Stock Funds provide a broad selection of investment alternatives
to investors seeking capital growth or high total return.
Advisor Class Prospectus and Application
November 1, 1999
DOMESTIC STOCK FUNDS
> Alliance Premier Growth Fund
> Alliance Health Care Fund
> Alliance Growth Fund
> Alliance Technology Fund
> Alliance Quasar Fund
> The Alliance Fund
TOTAL RETURN FUNDS
> Alliance Growth & Income Fund
> Alliance Balanced Shares
> Alliance Utility Income Fund
> Alliance Real Estate Investment Fund
GLOBAL STOCK FUNDS
> Alliance New Europe Fund
> Alliance Worldwide Privatization Fund
> Alliance International Premier Growth Fund
> Alliance Global Small Cap Fund
> Alliance International Fund
> Alliance Greater China '97 Fund
> Alliance All-Asia Investment Fund
> Alliance Global Environment Fund
The Securities and Exchange Commission has not approved or disapproved these
securities or passed upon the adequacy of this prospectus. Any representation
to the contrary is a criminal offense.
ALLIANCE CAPITAL
INVESTMENT PRODUCTS OFFERED
> ARE NOT FDIC INSURED
> MAY LOSE VALUE
> ARE NOT BANK GUARANTEED
2
TABLE OF CONTENTS
Page
RISK/RETURN SUMMARY 3
Domestic Stock Funds 4
Total Return Funds 10
Global Stock Funds 14
Summary of Principal Risks 22
Principal Risks by Fund 23
FEES AND EXPENSES OF THE FUNDS 24
GLOSSARY 27
DESCRIPTION OF THE FUNDS 28
Investment Objectives and Policies 28
Description of Investment Practices 41
Additional Risk Considerations 48
MANAGEMENT OF THE FUNDS 53
PURCHASE AND SALE OF SHARES 56
How The Funds Value Their Shares 56
How To Buy Shares 57
How to Exchange Shares 57
How To Sell Shares 57
DIVIDENDS, DISTRIBUTIONS AND TAXES 58
CONVERSION FEATURE 59
GENERAL INFORMATION 59
FINANCIAL HIGHLIGHTS 61
APPENDIX A--ADDITIONAL INFORMATION
ABOUT THE UNITED KINGDOM, JAPAN, AND
GREATER CHINA COUNTRIES 67
The Funds' investment adviser is Alliance Capital Management L.P., a global
investment manager providing diversified services to institutions and
individuals through a broad line of investments including more than 100 mutual
funds.
RISK/RETURN SUMMARY
The following is a summary of certain key information about the Alliance Stock
Funds. You will find additional information about each Fund, including a
detailed description of the risks of an investment in each Fund, after this
Summary.
The Risk/Return Summary describes the Funds' objectives, principal investment
strategies, principal risks and fees. Each Fund's Summary page includes a short
discussion of some of the principal risks of investing in that Fund. A further
discussion of these and other risks begins on page 22.
More detailed descriptions of the Funds, including the risks associated with
investing in the Funds, can be found further back in this Prospectus. Please be
sure to read this additional information BEFORE you invest. Each of the Funds
also may at times use certain types of investment derivatives such as options,
futures, forwards, and swaps. The use of these techniques involves special
risks that are discussed in this Prospectus.
The Summary includes a table for each Fund showing its average annual returns
and a bar chart showing its annual returns. The table and bar chart provide an
indication of the historical risk of an investment in each Fund by showing:
- how the Fund's average annual returns for one, five, and 10 years (or over
the life of the Fund if the Fund is less than 10 years old) compare to those of
a broad based securities market index; and
- changes in the Fund's performance from year to year over 10 years (or over
the life of the Fund if the Fund is less than 10 years old).
A Fund's past performance, of course, does not necessarily indicate how it will
perform in the future. As with all investments you may lose money by investing
in the Funds.
3
DOMESTIC STOCK FUNDS
The Domestic Stock Funds offer investors seeking capital appreciation a range
of alternative approaches to investing primarily in U.S. equity markets.
ALLIANCE PREMIER GROWTH FUND
OBJECTIVE:
THE FUND'S INVESTMENT OBJECTIVE IS LONG-TERM GROWTH OF CAPITAL BY INVESTING
PREDOMINANTLY IN EQUITY SECURITIES OF A LIMITED NUMBER OF LARGE, CAREFULLY
SELECTED, HIGH-QUALITY U.S. COMPANIES THAT ARE JUDGED LIKELY TO ACHIEVE
SUPERIOR EARNINGS GROWTH.
PRINCIPAL INVESTMENT STRATEGIES AND RISKS:
The Fund invests primarily in equity securities of U.S. companies. Unlike most
equity funds, the Fund focuses on a relatively small number of intensively
researched companies. Alliance selects the Fund's investments from a research
universe of more than 600 companies that have strong management, superior
industry positions, excellent balance sheets and superior earnings growth
prospects.
Normally, the Fund invests in about 40-60 companies, with the 25 most highly
regarded of these companies usually constituting approximately 70% of the
Fund's net assets. During market declines, while adding to positions in favored
stocks, the Fund becomes somewhat more aggressive, gradually reducing the
number of companies represented in its portfolio. Conversely, in rising
markets, while reducing or eliminating fully-valued positions, the Fund becomes
somewhat more conservative, gradually increasing the number of companies
represented in its portfolio. Through this approach, Alliance seeks to gain
positive returns in good markets while providing some measure of protection in
poor markets. The Fund also may invest up to 20% of its net assets in
convertible securities.
Among the principal risks of investing in the Fund is market risk. Because the
Fund invests in a smaller number of securities than many other equity funds,
your investment has the risk that changes in the value of a single security may
have a more significant effect, either negative or positive, on the Fund's net
asset value.
The table and bar chart provide an indication of the historical risk of an
investment in the Fund.
PERFORMANCE TABLE
SINCE
1 YEAR INCEPTION
- ----------------------------------------------------
ADVISOR CLASS 49.85% 42.97%
RUSSELL 1000 GROWTH INDEX 38.71% 34.67%
Average annual total returns are for the periods ended December 31, 1998.
Advisor Class shares inception date is 10/1/96. Index return is from 10/31/96.
BAR CHART
The following chart shows the annual returns for the Advisor Class shares since
inception. Through 9/30/99, the year-to-date unannualized return for Advisor
Class shares was 7.37%.
[GRAPHIC OMITTED]
n/a n/a n/a n/a n/a n/a n/a n/a 33.11 49.85
- -------------------------------------------------------------------------------
89 90 91 92 93 94 95 96 97 98
You should consider an investment in the Fund as a long-term investment. The
Fund's returns will fluctuate over long and short periods. For example, during
the period shown in the bar chart, the Fund's:
BEST QUARTER WAS UP 31.15%, 4TH QUARTER, 1998; AND WORST QUARTER WAS DOWN
- -12.02%, 3RD QUARTER, 1998.
4
ALLIANCE HEALTH CARE FUND
OBJECTIVE:
THE FUND'S INVESTMENT OBJECTIVE IS CAPITAL APPRECIATION AND, SECONDARILY,
CURRENT INCOME.
PRINCIPAL INVESTMENT STRATEGIES AND RISKS:
Under normal circumstances the Fund invests at least 65%, and normally
substantially all, of the value of its total assets in securities issued by
companies principally engaged in health care and health care-related industries
("Health Care Industries") (companies principally engaged in the discovery,
development, provision, production or distribution of products and services
that relate to the diagnosis, treatment and prevention of diseases or other
medical disorders). Although the payment of dividends will be a factor
considered in the selection of investments for the Fund, the Fund seeks
primarily to take advantage of capital appreciation opportunities identified by
Alliance in emerging technologies and services in Health Care Industries by
investing in companies which are expected to profit from the development of new
products and services for these industries. Under normal circumstances the Fund
invests primarily in the equity securities of U.S. companies. The Fund may
invest up to 40% of its total assets in securities of non-U.S. companies and
other foreign securities. The Fund may invest in new, smaller or less-seasoned
companies as well as in larger, established companies in the Health Care
Industries.
Among the principal risks of investing in the Fund are market risk and sector
risk. Unlike many other equity funds, the Fund invests in the securities of
companies principally engaged in Health Care Industries. As a result, certain
economic conditions and market changes that affect those industries may have a
more significant effect on the Fund's net asset value than on the value of a
more broadly diversified fund. For example, the Fund's share price could be
affected by changes in competition, legislation or government regulation,
government funding, product liability and other litigation, the obsolescence or
development of products, or other factors specific to the health care and
health sciences industries. The Fund's investments in foreign securities have
foreign risk and currency risk. The Fund's investment in small- to
mid-capitalization companies have capitalization risk. These investments may
be more volatile than investments in large-cap companies.
BAR CHART AND PERFORMANCE TABLE:
There is no bar chart or performance table for the Fund because it has not
completed a full calendar year of operations.
5
ALLIANCE GROWTH FUND
OBJECTIVE:
THE FUND'S INVESTMENT OBJECTIVE IS LONG-TERM GROWTH OF CAPITAL. CURRENT INCOME
IS INCIDENTAL TO THE FUND'S OBJECTIVE.
PRINCIPAL INVESTMENT STRATEGIES AND RISKS:
The Fund invests primarily in equity securities of companies with favorable
earnings outlooks and whose long-term growth rates are expected to exceed that
of the U.S. economy over time. The Fund emphasizes investments in large- and
mid-cap companies. The Fund also may invest up to 25% of its total assets in
lower-rated fixed-income securities and convertible bonds and generally up to
15% of its total assets in foreign securities.
Among the principal risks of investing in the Fund is market risk. Investments
in mid-cap companies may be more volatile than investments in large-cap
companies. To the extent the Fund invests in lower-rated fixed-income
securities and convertible bonds, your investment may have interest rate or
credit risk. The Fund's investments in foreign securities have foreign risk and
currency risk.
The table and bar chart provide an indication of the historical risk of an
investment in the Fund.
PERFORMANCE TABLE
SINCE
1 YEAR INCEPTION
- ----------------------------------------------------
ADVISOR CLASS 28.55% 29.34%
S&P 500 INDEX 28.60% 31.37%
Average annual total returns are for the periods ended December 31, 1998.
Advisor Class shares inception date is 10/1/96. Index return is from 10/31/96.
BAR CHART
The following chart shows the annual returns for the Advisor Class shares since
inception. Through 9/30/99, the year-to-date unannualized return for Advisor
Class shares was 3.19%.
[GRAPHIC OMITTED]
n/a n/a n/a n/a n/a n/a n/a n/a 27.46 28.55
- -------------------------------------------------------------------------------
89 90 91 92 93 94 95 96 97 98
You should consider an investment in the Fund as a long-term investment. The
Fund's returns will fluctuate over long and short periods. For example, during
the period shown in the bar chart, the Fund's:
BEST QUARTER WAS UP 28.97%, 4TH QUARTER, 1998; AND WORST QUARTER WAS DOWN
- -16.20%, 3RD QUARTER, 1998.
6
ALLIANCE TECHNOLOGY FUND
OBJECTIVE:
THE FUND'S INVESTMENT OBJECTIVE IS GROWTH OF CAPITAL. CURRENT INCOME IS
INCIDENTAL TO THE FUND'S OBJECTIVE.
PRINCIPAL INVESTMENT STRATEGIES AND RISKS:
The Fund invests primarily in securities of companies that use technology
extensively in the development of new or improved products or processes. Within
this framework, the Fund may invest in any company and industry and in any type
of security with potential for capital appreciation. It invests in well-known,
established companies or in new or unseasoned companies. The Fund also may
invest in debt securities and up to 10% of its total assets in foreign
securities.
Among the principal risks of investing in the Fund is market risk. In addition,
technology stocks, especially those of smaller, less-seasoned companies, tend
to be more volatile than the overall stock market. To the extent the Fund
invests in debt and foreign securities, your investment has interest rate risk,
credit risk, currency risk and foreign risk.
The table and bar chart provide an indication of the historical risk of an
investment in the Fund.
PERFORMANCE TABLE
SINCE
1 YEAR INCEPTION
- -----------------------------------------------------
ADVISOR CLASS 63.68% 30.01%
S&P 500 INDEX 28.60% 31.37%
Average annual total returns are for the periods ended December 31, 1998.
Advisor Class shares inception date is 10/1/96. Index return is from 10/31/96.
BAR CHART
The following chart shows the annual returns for the Advisor Class shares since
inception. Through 9/30/99, the year-to-date unannualized return for Advisor
Class shares was 19.09%.
[GRAPHIC OMITTED]
n/a n/a n/a n/a n/a n/a n/a n/a 4.84 63.68
- -------------------------------------------------------------------------------
89 90 91 92 93 94 95 96 97 98
You should consider an investment in the Fund as a long-term investment. The
Fund's returns will fluctuate over long and short periods. For example, during
the period shown in the bar chart, the Fund's:
BEST QUARTER WAS UP 39.98%, 4TH QUARTER, 1998; AND WORST QUARTER WAS DOWN
- -16.43%, 4TH QUARTER, 1997.
7
ALLIANCE QUASAR FUND
OBJECTIVE:
THE FUND'S INVESTMENT OBJECTIVE IS GROWTH OF CAPITAL BY PURSUING AGGRESSIVE
INVESTMENT POLICIES. CURRENT INCOME IS INCIDENTAL TO THE FUND'S OBJECTIVE.
PRINCIPAL INVESTMENT STRATEGIES AND RISKS:
The Fund generally invests in a widely-diversified portfolio of equity
securities spread among many industries that offer the possibility of
above-average earnings growth. The Fund currently emphasizes investment in
small cap companies. The Fund invests in well-known and established companies
and in new and unseasoned companies. The Fund can invest in the equity
securities of any company and industry and in any type of security with
potential for capital appreciation. When selecting securities, Alliance
considers the economic and political outlook, the values of specific securities
relative to other investments, trends in the determinants of corporate profits,
and management capabilities and practices. The Fund also may invest in
non-convertible bonds, preferred stocks, and foreign securities.
Among the principal risks of investing in the Fund is market risk. Investments
in smaller companies tend to be more volatile than investments in large-cap or
mid-cap companies. To the extent the Fund invests in non-convertible bonds,
preferred stocks, and foreign stocks, your investment has interest rate risk,
credit risk, foreign risks and currency risk.
The table and bar chart provide an indication of the historical risk of an
investment in the Fund.
PERFORMANCE TABLE
SINCE
1 YEAR INCEPTION
- -----------------------------------------------------
ADVISOR CLASS -4.30% 6.74%
RUSSELL 2000 INDEX -2.55% 11.81%
Average annual total returns are for the periods ended December 31, 1998.
Advisor Class shares inception date is 10/1/96. Index return is from 10/31/96.
BAR CHART
The following chart shows the annual returns for the Advisor Class shares since
inception. Through 9/30/99, the year-to-date unannualized return for Advisor
Class shares was -4.49%.
[GRAPHIC OMITTED]
n/a n/a n/a n/a n/a n/a n/a n/a 17.48 -4.30
- -------------------------------------------------------------------------------
89 90 91 92 93 94 95 96 97 98
You should consider an investment in the Fund as a long-term investment. The
Fund's returns will fluctuate over long and short periods. For example, during
the period shown in the bar chart, the Fund's:
BEST QUARTER WAS UP 17.44%, 4TH QUARTER, 1998; AND WORST QUARTER WAS DOWN
- -28.39%, 3RD QUARTER, 1998.
8
THE ALLIANCE FUND
OBJECTIVE:
THE FUND'S INVESTMENT OBJECTIVE IS LONG-TERM GROWTH OF CAPITAL AND INCOME
PRIMARILY THROUGH INVESTMENTS IN COMMON STOCKS.
PRINCIPAL INVESTMENT STRATEGIES AND RISKS:
The Fund normally invests substantially all of its assets in high-quality
common stocks that Alliance expects to increase in value. The Fund may invest
in a broad range of companies, from large to small, but tends to emphasize
attractive opportunities in mid-cap companies. While the Fund's diversified and
high-quality investments cannot prevent fluctuations in market values, they
tend to limit investment risk and contribute to achieving the Fund's objective.
The Fund also may invest in convertible securities, U.S. Government securities,
and foreign securities.
Among the principal risks of investing in the Fund is market risk. Investments
in mid-cap companies may be more volatile than investments in large-cap
companies. To the extent the Fund invests in convertible securities and U.S.
Government securities, your investment may have interest rate or credit risk.
The Fund's investments in foreign securities have currency risk and foreign
risk.
The table and bar chart provide an indication of the historical risk of an
investment in the Fund.
PERFORMANCE TABLE
SINCE
1 YEAR INCEPTION
- -----------------------------------------------------
ADVISOR CLASS -2.41% 18.30%
S&P 400 MID-CAP INDEX 19.11% 26.51%
Average annual total returns are for the periods ended December 31, 1998.
Advisor Class shares inception date is 10/1/96. Index return is from 10/31/96.
BAR CHART
The following chart shows the annual returns for the Advisor Class shares since
inception. Through 9/30/99, the year-to-date unannualized return for Advisor
Class shares was 6.07%.
[GRAPHIC OMITTED]
n/a n/a n/a n/a n/a n/a n/a n/a 36.27 -2.41
- -------------------------------------------------------------------------------
89 90 91 92 93 94 95 96 97 98
You should consider an investment in the Fund as a long-term investment. The
Fund's returns will fluctuate over long and short periods. For example, during
the period shown in the bar chart, the Fund's:
BEST QUARTER WAS UP 23.88%, 4TH QUARTER, 1998; AND WORST QUARTER WAS DOWN
- -24.17%, 3RD QUARTER, 1998.
9
TOTAL RETURN FUNDS
The Total Return Funds offer investors seeking both growth of capital and
current income a range of investment alternatives.
ALLIANCE GROWTH & INCOME FUND
OBJECTIVE:
THE FUND'S INVESTMENT OBJECTIVE IS APPRECIATION THROUGH INVESTMENTS PRIMARILY
IN DIVIDEND-PAYING COMMON STOCKS OF GOOD QUALITY, ALTHOUGH THE FUND ALSO MAY
INVEST IN FIXED-INCOME AND CONVERTIBLE SECURITIES.
PRINCIPAL INVESTMENT STRATEGIES AND RISKS:
The Fund invests primarily in dividend-paying common stocks of large,
well-established "blue-chip" companies. The Fund also may invest in
fixed-income and convertible securities and in securities of foreign issuers.
Among the principal risks of investing in the Fund are market risk, interest
rate risk and credit risk. The Fund's investments in foreign securities have
foreign risk and currency risk.
The table and bar chart provide an indication of the historical risk of an
investment in the Fund.
PERFORMANCE TABLE
SINCE
1 YEAR INCEPTION
- -----------------------------------------------------
ADVISOR CLASS 21.48% 27.57%
RUSSELL 1000 VALUE INDEX 15.63% 26.14%
Average annual total returns are for the periods ended December 31, 1998.
Advisor Class shares inception date is 10/1/96. Index return is from 10/31/96.
BAR CHART
The following chart shows the annual returns for the Advisor Class shares since
inception. Through 9/30/99, the year-to-date unannualized return for Advisor
Class shares was 3.32%.
[GRAPHIC OMITTED]
n/a n/a n/a n/a n/a n/a n/a n/a 29.57 21.48
- -------------------------------------------------------------------------------
89 90 91 92 93 94 95 96 97 98
You should consider an investment in the Fund as a long-term investment. The
Fund's returns will fluctuate over long and short periods. For example, during
the period shown in the bar chart, the Fund's:
BEST QUARTER WAS UP 23.28%, 4TH QUARTER, 1998; AND WORST QUARTER WAS DOWN
- -13.76%, 3RD QUARTER, 1998.
10
ALLIANCE BALANCED SHARES
OBJECTIVE:
THE FUND'S INVESTMENT OBJECTIVE IS HIGH RETURN THROUGH A COMBINATION OF CURRENT
INCOME AND CAPITAL APPRECIATION.
PRINCIPAL INVESTMENT STRATEGIES AND RISKS:
The Fund invests in a diversified portfolio of equity and fixed-income
securities. The percentage of the Fund's assets invested in each type of
security will vary, but the Fund will not purchase a security if as a result
less than 25% of the Fund's total assets will be invested in fixed-income
senior securities. The Fund invests in common and preferred stocks, U.S.
Government and agency securities, bonds and senior debt securities. The Fund's
investments in each type of security depends on current economic conditions and
market outlooks. The Fund also may invest up to 15% of its total assets in
foreign equity and fixed-income securities.
Among the principal risks of investing in the Fund are market risk, interest
rate risk, allocation risk and credit risk. To the extent the Fund invests in
foreign securities, your investment has currency risk and foreign risk.
The table and bar chart provide an indication of the historical risk of an
investment in the Fund.
PERFORMANCE TABLE
SINCE
1 YEAR INCEPTION
- -----------------------------------------------------
ADVISOR CLASS 16.03% 21.61%
S&P 500 INDEX 28.60% 31.37%
Average annual total returns are for the periods ended December 31, 1998.
Advisor Class shares inception date is 10/1/96. Index return is from 10/31/96.
BAR CHART
The following chart shows the annual returns for the Advisor Class shares since
inception. Through 9/30/99, the year-to-date unannualized return for Advisor
Class shares was 0.07%.
[GRAPHIC OMITTED]
n/a n/a n/a n/a n/a n/a n/a n/a 27.43 16.03
- -------------------------------------------------------------------------------
89 90 91 92 93 94 95 96 97 98
You should consider an investment in the Fund as a long-term investment. The
Fund's returns will fluctuate over long and short periods. For example, during
the period shown in the bar chart, the Fund's:
BEST QUARTER WAS UP 13.52%, 4TH QUARTER, 1998; AND WORST QUARTER WAS DOWN
- -6.36%, 3RD QUARTER, 1998.
11
ALLIANCE UTILITY INCOME FUND
OBJECTIVE:
THE FUND'S INVESTMENT OBJECTIVE IS CURRENT INCOME AND CAPITAL APPRECIATION BY
INVESTING PRIMARILY IN EQUITY AND FIXED-INCOME SECURITIES OF COMPANIES IN THE
UTILITIES INDUSTRY.
PRINCIPAL INVESTMENT STRATEGIES AND RISKS:
The Fund invests primarily in income-producing equity securities. The Fund
invests in securities of utility companies in the electric, telecommunications,
gas, and water utility industries. The Fund may invest in both U.S. and foreign
utility companies, although the Fund will limit its investments in issuers in
any one foreign country to no more than 15% of its total assets. The Fund may
maintain up to 35% of its net assets in lower-rated securities and up to 30% of
its net assets in convertible securities.
Among the principal risks of investing in the Fund are market risk, interest
rate risk and credit risk. Because the Fund invests a substantial portion of
its assets in companies in a specific industry, there is the risk that factors
affecting utility companies will have a significant effect on the value of the
Fund's investments. To the extent the Fund invests in lower-rated securities,
your investment is subject to more credit risk than a fund that invests in
higher rated securities.
The table and bar chart provide an indication of the historical risk of an
investment in the Fund.
PERFORMANCE TABLE
SINCE
1 YEAR INCEPTION
- -----------------------------------------------------
ADVISOR CLASS 24.83% 28.57%
NYSE UTILITY 33.04% 30.08%
Average annual total returns are for the periods ended December 31, 1998.
Advisor Class shares inception date is 10/1/96. Index return is from 10/31/96.
BAR CHART
The following chart shows the annual returns for the Advisor Class shares since
inception. Through 9/30/99, the year-to-date unannualized return for Advisor
Class shares was 7.97%.
[GRAPHIC OMITTED]
n/a n/a n/a n/a n/a n/a n/a n/a 31.16 24.83
- -------------------------------------------------------------------------------
89 90 91 92 93 94 95 96 97 98
You should consider an investment in the Fund as a long-term investment. The
Fund's returns will fluctuate over long and short periods. For example, during
the period shown in the bar chart, the Fund's:
BEST QUARTER WAS UP 15.63%, 4TH QUARTER, 1997; AND WORST QUARTER WAS DOWN
- -3.01%, 1ST QUARTER, 1997.
12
ALLIANCE REAL ESTATE INVESTMENT FUND
OBJECTIVE:
THE FUND'S INVESTMENT OBJECTIVE IS TOTAL RETURN FROM LONG-TERM GROWTH OF
CAPITAL AND INCOME PRINCIPALLY THROUGH INVESTING IN EQUITY SECURITIES OF
COMPANIES THAT ARE PRIMARILY ENGAGED IN OR RELATED TO THE REAL ESTATE INDUSTRY.
PRINCIPAL INVESTMENT STRATEGIES AND RISKS:
The Fund invests primarily in equity securities of real estate investment
trusts or "REITs" and other real estate industry companies. The Fund invests in
real estate companies that Alliance believes have strong property fundamentals
and management teams. The Fund seeks to invest in real estate companies whose
underlying portfolios are diversified geographically and by property type. The
Fund may invest up to 35% of its total assets in mortgage-backed securities,
which are securities that directly or indirectly represent participations in,
or are collateralized by and payable from, mortgage loans secured by real
property.
Among the principal risks of investing in the Fund are market risk, interest
rate risk and credit risk. Because the Fund invests a substantial portion of
its assets in the real estate market, it has many of the same risks as direct
ownership of real estate including the risk that the value of real estate could
decline due to a variety of factors affecting the real estate market. In
addition, REITs are dependent on the capability of their managers, may have
limited diversification, and could be significantly affected by changes in tax
laws. Because the Fund invests in mortgage-backed securities, it is subject to
the risk that mortgage loans will be prepaid when interest rates decline,
forcing the Fund to reinvest in securities with lower interest rates. For this
and other reasons, mortgage-backed securities may have significantly greater
price and yield volatility than traditional debt securities.
The table and bar chart provide an indication of the historical risk of an
investment in the Fund.
PERFORMANCE TABLE
SINCE
1 YEAR INCEPTION
- -----------------------------------------------------
ADVISOR CLASS -20.05% 7.79%
S&P 500 INDEX 28.60% 31.37%
Average annual total returns are for the periods ended December 31, 1998.
Advisor Class shares inception date is 10/1/96. Index return is from 10/31/96.
BAR CHART
The following chart shows the annual returns for the Advisor Class shares since
inception. Through 9/30/99, the year-to-date unannualized return for Advisor
Class shares was -5.04%.
[GRAPHIC OMITTED]
n/a n/a n/a n/a n/a n/a n/a n/a 23.27 -20.05
- -------------------------------------------------------------------------------
89 90 91 92 93 94 95 96 97 98
You should consider an investment in the Fund as a long-term investment. The
Fund's returns will fluctuate over long and short periods. For example, during
the period shown in the bar chart, the Fund's:
BEST QUARTER WAS UP 14.51%, 3RD QUARTER, 1997; AND WORST QUARTER WAS DOWN
- -12.33%, 3RD QUARTER, 1998.
13
GLOBAL STOCK FUNDS
The Global Stock Funds offer investors seeking long-term capital appreciation a
range of alternative approaches to investing in foreign securities.
ALLIANCE NEW EUROPE FUND
OBJECTIVE:
THE FUND'S INVESTMENT OBJECTIVE IS LONG-TERM CAPITAL APPRECIATION THROUGH
INVESTMENTS PRIMARILY IN THE EQUITY SECURITIES OF COMPANIES BASED IN EUROPE.
PRINCIPAL INVESTMENT STRATEGIES AND RISKS:
The Fund invests primarily in equity securities of European companies. The Fund
diversifies its investments among a number of European countries and normally
invests in companies based in at least three of these countries, although it
may invest 25% or more of its assets in issuers in a single country. The Fund
may invest up to 35% of its total assets in high-quality U.S. Dollar or foreign
currency denominated fixed-income securities issued or guaranteed by European
governmental entities, European or multinational companies, or supranational
organizations. At December 31, 1998, the Fund had approximately 26% of its
assets invested in securities of United Kingdom issuers.
Among the principal risks of investing in the Fund are market risk, foreign
risk and currency risk. In addition, the Fund's investments in U.S. Dollar or
foreign currency denominated fixed-income securities have interest rate and
credit risks.
The table and bar chart provide an indication of the historical risk of an
investment in the Fund.
PERFORMANCE TABLE
SINCE
1 YEAR INCEPTION
- -----------------------------------------------------
ADVISOR CLASS 25.39% 23.61%
MSCI EUROPE INDEX 28.91% 28.25%
Average annual total returns are for the periods ended December 31, 1998.
Advisor Class shares inception date is 10/1/96. Index return is from 10/31/96.
BAR CHART
The following chart shows the annual returns for the Advisor Class shares since
inception. Through 9/30/99, the year-to-date unannualized return for Advisor
Class shares was 1.30%.
[GRAPHIC OMITTED]
n/a n/a n/a n/a n/a n/a n/a n/a 17.08 25.39
- -------------------------------------------------------------------------------
89 90 91 92 93 94 95 96 97 98
You should consider an investment in the Fund as a long-term investment. The
Fund's returns will fluctuate over long and short periods. For example, during
the period shown in the bar chart, the Fund's:
BEST QUARTER WAS UP 22.56%, 1ST QUARTER, 1998; AND WORST QUARTER WAS DOWN
- -19.61%, 3RD QUARTER, 1998.
14
ALLIANCE WORLDWIDE PRIVATIZATION FUND
OBJECTIVE:
THE FUND'S INVESTMENT OBJECTIVE IS LONG-TERM CAPITAL APPRECIATION.
PRINCIPAL INVESTMENT STRATEGIES AND RISKS:
The Fund invests primarily in equity securities of companies that are
undergoing, or have undergone, privatization. The Fund also invests in
securities of companies that will benefit from privatizations. The Fund takes
advantage of investment opportunities, historically inaccessible to U.S.
individual investors, that result from the privatization of state enterprises
in both established and developing economies. Because privatizations are
integral to a country's economic restructuring, securities sold in initial
public offerings often are attractively priced to secure the issuer's
transition to private sector ownership. In addition, these enterprises often
dominate their local markets and have the potential for significant managerial
and operational efficiency gains.
The Fund diversifies its investments among a number of countries and normally
invests in issuers based in four, and usually considerably more, countries. The
Fund may invest up to 30% of its total assets in any one of France, Germany,
Great Britain, Italy, and Japan and may invest all of its assets in a single
world region. The Fund also may invest up to 35% of its total assets in debt
securities and convertible debt securities of privatized companies.
Among the principal risks of investing in the Fund are market risk, foreign
risk and currency risk. Investments in companies that are undergoing, or have
undergone, privatization could have more risk because they have no operating
history as a private company. In addition, the Fund's investments in U.S.
Dollar or foreign currency denominated fixed-income securities have interest
rate and credit risks.
The table and bar chart provide an indication of the historical risk of an
investment in the Fund.
PERFORMANCE TABLE
SINCE
1 YEAR INCEPTION
- -----------------------------------------------------
ADVISOR CLASS 9.33% 13.04%
MSCI WORLD INDEX
(MINUS THE U.S.) 19.11% 11.03%
Average annual total returns are for the periods ended December 31, 1998.
Advisor Class shares inception date is 10/1/96. Index return is from 10/31/96.
BAR CHART
The following chart shows the annual returns for the Advisor Class shares since
inception. Through 9/30/99, the year-to-date unannualized return for Advisor
Class shares was 16.65%.
[GRAPHIC OMITTED]
n/a n/a n/a n/a n/a n/a n/a n/a 13.45 9.33
- -------------------------------------------------------------------------------
89 90 91 92 93 94 95 96 97 98
You should consider an investment in the Fund as a long-term investment. The
Fund's returns will fluctuate over long and short periods. For example, during
the period shown in the bar chart, the Fund's:
BEST QUARTER WAS UP 16.58%, 1ST QUARTER, 1998; AND WORST QUARTER WAS DOWN
- -17.42%, 3RD QUARTER, 1998.
15
ALLIANCE INTERNATIONAL PREMIER GROWTH FUND
OBJECTIVE:
THE FUND'S INVESTMENT OBJECTIVE IS LONG-TERM GROWTH OF CAPITAL BY INVESTING
PREDOMINANTLY IN EQUITY SECURITIES OF A LIMITED NUMBER OF CAREFULLY SELECTED
NON-U.S. COMPANIES THAT ARE JUDGED LIKELY TO ACHIEVE SUPERIOR EARNINGS GROWTH.
CURRENT INCOME IS INCIDENTAL TO THE FUND'S OBJECTIVE.
PRINCIPAL INVESTMENT STRATEGIES AND RISKS:
The Fund invests primarily in equity securities of comparatively large,
high-quality, non-U.S. companies. The Fund invests in at least four, and
usually considerably more, countries. Normally, the Fund invests no more than
15% of its total assets in issuers of any one foreign country, but may invest
up to 25% of its total assets in each of Canada, France, Germany, Italy, Japan,
The Netherlands, Switzerland and the United Kingdom. Unlike more typical
international equity funds, the Fund focuses on a relatively small number of
intensively researched companies. Alliance selects the Fund's investments from
a research universe of approximately 900 companies.
Normally, the Fund invests in about 40 companies, with the 30 most highly
regarded of these companies usually constituting approximately 70%, and often
more, of the Fund's net assets. The Fund invests in companies with market
values generally in excess of $10 billion. Alliance may take advantage of
market volatility to adjust the Fund's portfolio positions. To the extent
consistent with local market liquidity considerations, the Fund strives to
capitalize on apparently unwarranted price fluctuations, both to purchase or
increase positions on weakness and to sell or reduce overpriced holdings. The
Fund invests primarily in equity securities and also may invest in convertible
securities.
Among the principal risks of investing in the Fund are market risk, foreign
risk and currency risk. In addition, since the Fund invests in a smaller number
of securities than many other international equity funds, changes in the value
of a single security may have a more significant effect, either negative or
positive, on the Fund's net asset value.
BAR CHART AND PERFORMANCE TABLE:
There is no bar chart or performance table for the Fund because it has not
completed a full calendar year of operations.
16
ALLIANCE GLOBAL SMALL CAP FUND
OBJECTIVE:
THE FUND'S INVESTMENT OBJECTIVE IS LONG-TERM GROWTH OF CAPITAL THROUGH
INVESTMENT IN A GLOBAL PORTFOLIO OF EQUITY SECURITIES OF SELECTED COMPANIES
WITH RELATIVELY SMALL MARKET CAPITALIZATIONS.
PRINCIPAL INVESTMENT STRATEGIES AND RISKS:
The Fund invests primarily in equity securities of global companies, both
domestic and foreign, with relatively small market capitalizations. The Fund's
investments emphasize companies that are in the smallest 20% of the U.S. stock
market (or less than approximately $1.5 billion). Although these companies are
small by U.S. standards, they may be among the largest companies in their own
countries. The Fund may invest up to 35% of its total assets in securities of
companies whose market capitalizations exceed the Fund's size standard. The
Fund invests in at least three countries including the U.S.
Among the principal risks of investing in the Fund are market risk, foreign
risk and currency risk. Investments in smaller companies tend to be more
volatile than investments in large-cap or mid-cap companies.
The table and bar chart provide an indication of the historical risk of an
investment in the Fund.
PERFORMANCE TABLE
SINCE
1 YEAR INCEPTION
- -----------------------------------------------------
ADVISOR CLASS 3.81% 6.59%
MSCI WORLD INDEX 24.80% 20.83%
Average annual total returns are for the periods ended December 31, 1998.
Advisor Class shares inception date is 10/1/96. Index return is from 10/31/96.
BAR CHART
The following chart shows the annual returns for the Advisor Class shares since
inception. Through 9/30/99, the year-to-date unannualized return for Advisor
Class shares was 11.19%.
[GRAPHIC OMITTED]
n/a n/a n/a n/a n/a n/a n/a n/a 8.44 3.81
- -------------------------------------------------------------------------------
89 90 91 92 93 94 95 96 97 98
You should consider an investment in the Fund as a long-term investment. The
Fund's returns will fluctuate over long and short periods. For example, during
the period shown in the bar chart, the Fund's:
BEST QUARTER WAS UP 17.82%, 4TH QUARTER, 1998; AND WORST QUARTER WAS DOWN
- -22.96%, 3RD QUARTER, 1998.
17
ALLIANCE INTERNATIONAL FUND
OBJECTIVE:
THE FUND'S INVESTMENT OBJECTIVE IS TOTAL RETURN FROM LONG-TERM GROWTH OF
CAPITAL AND INCOME PRIMARILY THROUGH INVESTMENT IN A BROAD PORTFOLIO OF
MARKETABLE SECURITIES OF ESTABLISHED NON-U.S. COMPANIES, COMPANIES
PARTICIPATING IN FOREIGN ECONOMIES WITH PROSPECTS FOR GROWTH, INCLUDING U.S.
COMPANIES HAVING THEIR PRINCIPAL ACTIVITIES AND INTERESTS OUTSIDE THE U.S. AND
IN FOREIGN GOVERNMENT SECURITIES.
PRINCIPAL INVESTMENT STRATEGIES AND RISKS:
The Fund invests primarily in equity securities of established non-U.S.
companies, companies participating in foreign economies with prospects for
growth, including U.S. companies having their principal activities and
interests outside the U.S., and foreign government securities. The Fund
diversifies its investments broadly among countries and normally invests in
companies in at least three foreign countries, although it may invest a
substantial portion of its assets in companies in one or more foreign countries.
Among the principal risks of investing in the Fund are market risk, foreign
risk and currency risk.
The table and bar chart provide an indication of the historical risk of an
investment in the Fund.
PERFORMANCE TABLE
SINCE
1 YEAR INCEPTION
- -----------------------------------------------------
ADVISOR CLASS 9.96% 5.85%
MSCI EAFE INDEX 20.33% 11.28%
Average annual total returns are for the periods ended December 31, 1998.
Advisor Class shares inception date is 10/1/96. Index return is from 10/31/96.
BAR CHART
The following chart shows the annual returns for the Advisor Class shares since
inception. Through 9/30/99, the year-to-date unannualized return for Advisor
Class shares was 7.17%.
[GRAPHIC OMITTED]
n/a n/a n/a n/a n/a n/a n/a n/a 1.59 9.96
- -------------------------------------------------------------------------------
89 90 91 92 93 94 95 96 97 98
You should consider an investment in the Fund as a long-term investment. The
Fund's returns will fluctuate over long and short periods. For example, during
the period shown in the bar chart, the Fund's:
BEST QUARTER WAS UP 15.81%, 4TH QUARTER, 1998; AND WORST QUARTER WAS DOWN
- -17.80%, 3RD QUARTER, 1998.
18
ALLIANCE GREATER CHINA '97 FUND
OBJECTIVE:
The Fund's investment objective is long-term capital appreciation through
investment of at least 80% of its total assets in equity securities of Greater
China companies.
PRINCIPAL INVESTMENT STRATEGIES AND RISKS:
The Fund invests in equity securities of Greater China companies, which are
companies in China, Hong Kong, and Taiwan. Of these countries, the Fund expects
to invest a significant portion of its assets, which may be greater than 50%,
in Hong Kong companies and may invest all of its assets in Hong Kong companies
or companies of either of the other Greater China countries. The Fund also may
invest in convertible securities and equity-linked debt securities issued or
guaranteed by Greater China companies or Greater China Governments, their
agencies, or instrumentalities. As of December 31, 1998 the Fund had
approximately 75% of its assets invested in securities of Hong Kong companies.
Among the principal risks of investing in the Fund are market risk, foreign
risk and currency rate risk. Because it invests in Greater China companies, the
Fund's returns will be significantly more volatile and differ substantially
from U.S. markets generally. Your investment also has the risk that market
changes or other events affecting the Greater China countries, including
political instability and unpredictable economic conditions, may have a more
significant effect on the Fund's net asset value. In addition, the Fund is
"non-diversified," meaning that it invests its assets in a smaller number of
companies than many other international funds. As a result, changes in the
value of a single security may have a more significant effect, either negative
or positive, on the Fund's net asset value. The Fund's investments in debt
securities have interest rate and credit risks.
The table and bar chart provide an indication of the historical risk of an
investment in the Fund.
PERFORMANCE TABLE
SINCE
1 YEAR INCEPTION
- -----------------------------------------------------
ADVISOR CLASS -7.87% -26.74%
MSCI CHINA FREE INDEX -43.83% -54.48%
MSCI HONG KONG INDEX -2.92% -25.58%
MSCI TAIWAN INDEX -20.64% -30.14%
Average annual total returns are for the periods ended December 31, 1998.
Advisor Class shares inception date is 9/3/97. Index returns are from 9/30/97.
BAR CHART
The following chart shows the annual returns for the Advisor Class shares since
inception. Through 9/30/99, the year-to-date unannualized return for Advisor
Class shares was 22.71%.
[GRAPHIC OMITTED]
n/a n/a n/a n/a n/a n/a n/a n/a n/a -7.87
- -------------------------------------------------------------------------------
89 90 91 92 93 94 95 96 97 98
You should consider an investment in the Fund as a long-term investment. The
Fund's returns will fluctuate over long and short periods. For example, during
the period shown in the bar chart, the Fund's:
BEST QUARTER WAS UP 27.38%, 4TH QUARTER, 1998; AND WORST QUARTER WAS DOWN
- -26.92%, 2ND QUARTER, 1998.
19
ALLIANCE ALL-ASIA INVESTMENT FUND
OBJECTIVE:
THE FUND'S INVESTMENT OBJECTIVE IS LONG-TERM CAPITAL APPRECIATION.
PRINCIPAL INVESTMENT STRATEGIES AND RISKS:
The Fund primarily invests in securities of various types of companies based in
Asia. The Fund invests in equity securities, preferred stocks, and
equity-linked debt securities issued by Asian companies and may invest more
than 50% of its total assets in equity securities of Japanese issuers. The Fund
also may invest up to 35% of its total assets in debt securities issued or
guaranteed by Asian companies or by Asian governments, their agencies or
instrumentalities, and may invest up to 25% of its net assets in convertible
securities. At December 31, 1998, the Fund had approximately 60% of its total
assets invested in securities of Japanese companies.
Among the principal risks of investing in the Fund are market risk, foreign
risk and currency risk. Because it invests in Asian and Pacific region
countries and emerging markets, the Fund's returns will be significantly more
volatile and may differ substantially from the overall U.S. market generally.
Your investment has the risk that market changes or other factors affecting
Asian and Pacific region countries and other emerging markets, including
political instability and unpredictable economic conditions, may have a more
significant effect on the Fund's net asset value. To the extent that the Fund
invests a substantial amount of its assets in Japanese companies, your
investment has the risk that market changes or other events affecting that
country may have a more significant effect on the Fund's net asset value. In
addition, the Fund's investments in debt securities have interest rate and
credit risks.
The table and bar chart provide an indication of the historical risk of an
investment in the Fund.
PERFORMANCE TABLE
SINCE
1 YEAR INCEPTION
- -----------------------------------------------------
ADVISOR CLASS -12.15% -22.56%
MSCI ALL COUNTRY ASIA
PACIFIC INDEX 2.03% -13.47%
Average annual total returns are for the periods ended December 31, 1998.
Advisor Class shares inception date is 10/1/96. Index return is from 10/31/96.
BAR CHART
The following chart shows the annual returns for the Advisor Class shares since
inception. Through 9/30/99, the year-to-date unannualized return for Advisor
Class shares was 57.86%.
[GRAPHIC OMITTED]
n/a n/a n/a n/a n/a n/a n/a n/a -34.83 -12.15
- -------------------------------------------------------------------------------
89 90 91 92 93 94 95 96 97 98
You should consider an investment in the Fund as a long-term investment. The
Fund's returns will fluctuate over long and short periods. For example, during
the period shown in the bar chart, the Fund's:
BEST QUARTER WAS UP 13.57%, 4TH QUARTER, 1998; AND WORST QUARTER WAS DOWN
- -18.65%, 4TH QUARTER, 1997.
20
ALLIANCE GLOBAL ENVIRONMENT FUND
OBJECTIVE:
THE FUND'S INVESTMENT OBJECTIVE IS LONG-TERM CAPITAL APPRECIATION THROUGH
INVESTMENT OF SUBSTANTIALLY ALL OF ITS ASSETS IN EQUITY SECURITIES OF COMPANIES
THAT ARE EXPECTED TO BENEFIT FROM ADVANCES OR IMPROVEMENTS IN PRODUCTS,
PROCESSES OR SERVICES INTENDED TO FOSTER THE PROTECTION OF THE ENVIRONMENT.
PRINCIPAL INVESTMENT STRATEGIES AND RISKS:
The Fund invests primarily in environmental companies, which are companies
whose principal business involves the sale of environmental protection systems
or services. The Fund also invests in companies whose principal business lies
outside the environmental sector but who anticipate environmental regulations
or consumer preferences through the development of new products or services
that would contribute to a cleaner and healthier environment. The Fund will
invest substantially all of its assets in these two types of companies. The
Fund invests in securities of companies in at least three, and normally
considerably more, countries. At December 31, 1998, the Fund had approximately
82% invested in equity securities of U.S. companies.
Among the principal risks of investing in the Fund are market risk, foreign
risk and currency risk. Because it invests in non-U.S. companies and in
specific types of companies that provide environmental services, the Fund's
returns will be more volatile and differ, sometimes substantially, from the
overall U.S. market generally. The Fund's investments also have the risk that
government regulations or other action could negatively affect the business of
environmental companies.
The table and bar chart provide an indication of the historical risk of an
investment in the Fund.
PERFORMANCE TABLE
SINCE
1 YEAR INCEPTION
- -----------------------------------------------------
ADVISOR CLASS -2.99% 0.09%
S&P 500 INDEX 28.60% 28.60%
Average annual total returns are for the periods ended December 31, 1998.
Advisor Class shares inception date is 12/29/97. Index return is from 12/31/97.
BAR CHART
The following chart shows the annual return for the Advisor Class shares since
inception. Through 9/30/99, the year-to-date unannualized return for Advisor
Class shares was 1.74%.
[GRAPHIC OMITTED]
n/a n/a n/a n/a n/a n/a n/a n/a n/a -2.99
- -------------------------------------------------------------------------------
89 90 91 92 93 94 95 96 97 98
You should consider an investment in the Fund as a long-term investment. The
Fund's returns will fluctuate over long and short periods. For example, during
the period shown in the bar chart, the Fund's:
BEST QUARTER WAS UP 15.74%, 1ST QUARTER, 1998; AND WORST QUARTER WAS DOWN
- -19.83%, 3RD QUARTER, 1998.
21
SUMMARY OF PRINCIPAL RISKS
The value of your investment in a Fund will change with changes in the values
of that Fund's investments. Many factors can affect those values. In this
Summary, we describe the principal risks that may affect a Fund's portfolio as
a whole. These risks and the Funds particularly subject to these risks appear
in a chart at the end of the section. All Funds could be subject to additional
principal risks because the types of investments made by each Fund can change
over time. This Prospectus has additional descriptions of the types of
investments that appear in bold type in the discussions under "Description of
Investment Practices" or "Additional Risk Considerations." These sections also
include more information about the Funds, their investments, and related risks.
MARKET RISK
This is the risk that the value of a Fund's investments will fluctuate as the
stock or bond markets fluctuate and that prices overall will decline over
short- or long-term periods. All of the Alliance Stock Funds are subject to
market risk.
SECTOR RISK
This is the risk of investments in a particular industry sector. Market or
economic factors affecting that industry sector could have a major effect on
the value of a Fund's investments. Funds particularly subject to this risk are
ALLIANCE HEALTH CARE FUND, ALLIANCE TECHNOLOGY FUND, ALLIANCE UTILITY INCOME
FUND, ALLIANCE REAL ESTATE INVESTMENT FUND, ALLIANCE WORLDWIDE PRIVATIZATION
FUND and ALLIANCE GLOBAL ENVIRONMENT FUND. This risk may be greater for
ALLIANCE TECHNOLOGY FUND because technology stocks, especially those of
smaller, less-seasoned companies, tend to be more volatile than the overall
market.
CAPITALIZATION RISK
This is the risk of investments in small- to mid-capitalization companies.
Investments in mid-cap companies may be more volatile than investments in
large-cap companies. ALLIANCE GROWTH FUND and THE ALLIANCE FUND are
particularly subject to this risk. Investments in small-cap companies tend to
be more volatile than investments in large-cap or mid-cap companies. A Fund's
investments in smaller capitalization stocks may have additional risks because
these companies often have limited product lines, markets or financial
resources. ALLIANCE HEALTH CARE FUND, ALLIANCE QUASAR FUND and ALLIANCE GLOBAL
SMALL CAP FUND are particularly subject to this risk.
INTEREST RATE RISK
This is the risk that changes in interest rates will affect the value of a
Fund's investments in income-producing, fixed-income (I.E., debt) securities.
Increases in interest rates may cause the value of a Fund's investments to
decline and this decrease in value may not be offset by the higher interest
rate income. Interest rate risk is particularly applicable to Funds that invest
in fixed-income securities and is greater for those Alliance StockFunds that
invest a substantial portion of their assets in fixed-income securities, such
as ALLIANCE GROWTH AND INCOME FUND, ALLIANCE BALANCED SHARES and ALLIANCE
UTILITY INCOME FUND. Interest rate risk is greater for those Funds that invest
in LOWER-RATED SECURITIES or comparable unrated securities ("junk bonds") such
as ALLIANCE UTILITY INCOME FUND. ALLIANCE REAL ESTATE INVESTMENT FUND also has
more exposure to interest rate risk because it invests in real estate industry
companies and in mortgage-backed securities.
CREDIT RISK
This is the risk that the issuer of a security, or the other party to an
over-the-counter transaction, will be unable or unwilling to make timely
payments of interest or principal, or to otherwise honor its obligations. The
degree of risk for a particular security may be reflected in its CREDIT RATING.
Credit risk is applicable to Funds that invest in fixed-income securities and
is greater for those Alliance Stock Funds that invest a substantial portion of
their assets in LOWER-RATED SECURITIES, such as ALLIANCE UTILITY INCOME FUND.
FOREIGN RISK
This is the risk of investments in issuers located in foreign countries. All
Alliance Stock Funds with FOREIGN SECURITIES are subject to this risk,
including, in particular, ALLIANCE HEALTH CARE FUND, ALLIANCE NEW EUROPE FUND,
ALLIANCE WORLDWIDE PRIVATIZATION FUND, ALLIANCE INTERNATIONAL PREMIER GROWTH
FUND, ALLIANCE GLOBAL SMALL CAP FUND, ALLIANCE INTERNATIONAL FUND, ALLIANCE
GREATER CHINA '97 FUND, ALLIANCE ALL-ASIA INVESTMENT FUND and ALLIANCE GLOBAL
ENVIRONMENT FUND. Funds investing in foreign securities may experience more
rapid and extreme changes in value than Funds with investments solely in
securities of U.S. companies. This is because the securities markets of many
foreign countries are relatively small, with a limited number of companies
representing a small number of industries. Additionally, foreign securities
issuers are usually not subject to the same degree of regulation as U.S.
issuers. Reporting, accounting, and auditing standards of foreign countries
differ, in some cases significantly, from U.S. standards. Also,
nationalization, expropriation or confiscatory taxation, currency blockage, or
political changes or diplomatic developments could adversely affect a Fund's
investments in a foreign country. In the event of nationalization,
expropriation, or other confiscation, a Fund could lose its entire investment.
COUNTRY OR GEOGRAPHIC RISK
This is the risk of investments in issuers located in a particular country or
geographic region. Market changes or other factors affecting that country or
region, including political instability and unpredictable economic conditions,
may have a particularly significant effect on a Fund's net asset value. The
Funds particularly subject to this risk are ALLIANCE NEW EUROPE FUND,
22
ALLIANCE WORLDWIDE PRIVATIZATION FUND, ALLIANCE INTERNATIONAL FUND, ALLIANCE
GREATER CHINA '97 FUND and ALLIANCE ALL-ASIA INVESTMENT FUND.
CURRENCY RISK
This is the risk that fluctuations in the exchange rates between the U.S.
Dollar and foreign currencies may negatively affect the value of a Fund's
investments. Funds with FOREIGN SECURITIES are subject to this risk, including,
in particular, ALLIANCE HEALTH CARE FUND, ALLIANCE NEW EUROPE FUND, ALLIANCE
WORLDWIDE PRIVATIZATION FUND, ALLIANCE INTERNATIONAL PREMIER GROWTH FUND,
ALLIANCE GLOBAL SMALL CAP FUND, ALLIANCE INTERNATIONAL FUND, ALLIANCE GREATER
CHINA '97 FUND, ALLIANCE ALL-ASIA INVESTMENT FUND and ALLIANCE GLOBAL
ENVIRONMENT FUND.
MANAGEMENT RISK
Each Alliance Stock Fund is subject to management risk because it is an
actively managed investment portfolio. Alliance will apply its investment
techniques and risk analyses in making investment decisions for the Funds, but
there is no guarantee that its decisions will produce the intended result.
FOCUSED PORTFOLIO RISK
Funds, such as ALLIANCE PREMIER GROWTH FUND and ALLIANCE INTERNATIONAL PREMIER
GROWTH FUND, that invest in a limited number of companies, may have more risk
because changes in the value of a single security may have a more significant
effect, either negative or positive, on the Fund's net asset value. Similarly,
ALLIANCE GREATER CHINA '97 FUND may have more risk because it is
"non-diversified," meaning that it can invest more of its assets in a smaller
number of companies than many other international funds.
ALLOCATION RISK
ALLIANCE BALANCED SHARES has the risk that the allocation of its investments
between equity and debt securities may have a more significant effect on the
Fund's net asset value when one of these asset classes is performing more
poorly than the other.
PRINCIPAL RISKS BY FUND
The following chart summarizes the principal risks of each Fund. Risks not
marked for a particular Fund may, however, still apply to some extent to that
Fund at various times.
<TABLE>
<CAPTION>
CAPITAL- INTEREST COUNTRY OR FOCUSED
MARKET SECTOR IZATION RATE CREDIT FOREIGN GEOGRAPHIC CURRENCY MANAGE- PORTFOLIO ALLOCATION
FUND RISK RISK RISK RISK RISK RISK RISK RISK MENT RISK RISK RISK
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ALLIANCE PREMIER
GROWTH FUND x x x
- ----------------------------------------------------------------------------------------------------------------------------------
ALLIANCE HEALTH
CARE FUND x x x x x x
- ----------------------------------------------------------------------------------------------------------------------------------
ALLIANCE GROWTH FUND x x x x x x
- ----------------------------------------------------------------------------------------------------------------------------------
ALLIANCE TECHNOLOGY
FUND x x x
- ----------------------------------------------------------------------------------------------------------------------------------
ALLIANCE QUASAR FUND x x x
- ----------------------------------------------------------------------------------------------------------------------------------
THE ALLIANCE FUND x x x
- ----------------------------------------------------------------------------------------------------------------------------------
ALLIANCE GROWTH AND
INCOME FUND x x x x
- ----------------------------------------------------------------------------------------------------------------------------------
ALLIANCE BALANCED
SHARES x x x x x
- ----------------------------------------------------------------------------------------------------------------------------------
ALLIANCE UTILITY
INCOME FUND x x x x x
- ----------------------------------------------------------------------------------------------------------------------------------
ALLIANCE REAL ESTATE
INVESTMENT FUND x x x x x
- ----------------------------------------------------------------------------------------------------------------------------------
ALLIANCE NEW EUROPE
FUND x x x x x
- ----------------------------------------------------------------------------------------------------------------------------------
ALLIANCE WORLDWIDE
PRIVATIZATION FUND x x x x x
- ----------------------------------------------------------------------------------------------------------------------------------
ALLIANCE INTERNATIONAL
PREMIER GROWTH FUND x x x x x
- ----------------------------------------------------------------------------------------------------------------------------------
ALLIANCE GLOBAL
SMALL CAP FUND x x x x x
- ----------------------------------------------------------------------------------------------------------------------------------
ALLIANCE INTERNATIONAL
FUND x x x x x
- ----------------------------------------------------------------------------------------------------------------------------------
ALLIANCE GREATER
CHINA '97 FUND x x x x x x
- ----------------------------------------------------------------------------------------------------------------------------------
ALLIANCE ALL-ASIA
INVESTMENT FUND x x x x x
- ----------------------------------------------------------------------------------------------------------------------------------
ALLIANCE GLOBAL
ENVIRONMENT FUND x x x x x
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
23
FEES AND EXPENSES OF THE FUNDS
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Funds.
SHAREHOLDER FEES (fees paid directly from your investment)
ADVISOR CLASS SHARE
Maximum Front-end or Deferred Sales Charge (Load) None
(as a percentage of original purchase
price or redemption proceeds,
whichever is lower)
ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from Fund assets)
and EXAMPLES
The Examples are to help you compare the cost of investing in the Funds with
the cost of investing in other funds. They assume that you invest $10,000 in
each Fund for the time periods indicated and then redeem all of your shares at
the end of those periods. They also assume that your investment has a 5% return
each year, that the Fund's operating expenses stay the same and that all
dividends and distributions are reinvested. Your actual costs may be higher or
lower.
OPERATING EXPENSES EXAMPLES
- -------------------------------------------- --------------------------
ALLIANCE PREMIER GROWTH FUND
Management fees 1.00% After 1 year $ 128
Distribution (12b-1) fees None After 3 years $ 400
Other expenses .26% After 5 years $ 692
Total fund operating expenses 1.26% After 10 years $1,523
ALLIANCE HEALTH CARE FUND
Management fees .95% After 1 year $ 223
Distribution (12b-1) fees None After 3 years (b) $ 718
Other expenses 1.40% After 5 years (b) $1,240
Total fund operating expenses 2.35% After 10 years (b) $2,675
Waiver and/or expense
reimbursement (a) (.15%)
Net expenses 2.20%
ALLIANCE GROWTH FUND
Management fees .70% After 1 year $ 95
Distribution (12b-1) fees None After 3 years $ 296
Other expenses .23% After 5 years $ 515
Total fund operating expenses 0.93% After 10 years $1,143
ALLIANCE TECHNOLOGY FUND
Management fees 1.02% After 1 year $ 139
Distribution (12b-1) fees None After 3 years $ 434
Other expenses .35% After 5 years $ 750
Total fund operating expenses 1.37% After 10 years $1,646
ALLIANCE QUASAR FUND
Management fees 1.04% After 1 year $ 140
Distribution (12b-1) fees None After 3 years $ 437
Other expenses .34% After 5 years $ 755
Total fund operating expenses 1.38% After 10 years $1,657
THE ALLIANCE FUND
Management fees .67% After 1 year $ 85
Distribution (12b-1) fees None After 3 years $ 265
Other expenses .16% After 5 years $ 460
Total fund operating expenses 0.83% After 10 years $1,025
PLEASE REFER TO FOOTNOTES ON PAGE 26.
24
OPERATING EXPENSES EXAMPLES
- -------------------------------------------- --------------------------
ALLIANCE GROWTH AND
INCOME FUND
Management fees .48% After 1 year $ 78
Distribution (12b-1) fees None After 3 years $ 243
Other expenses .28% After 5 years $ 422
Total fund operating expenses 0.76% After 10 years $ 942
ALLIANCE BALANCED SHARES FUND
Management fees .59% After 1 year $ 99
Distribution (12b-1) fees None After 3 years $ 309
Other expenses .38% After 5 years $ 536
Total fund operating expenses .97% After 10 years $1,190
ALLIANCE UTILITY INCOME FUND
Management fees .75% After 1 year $ 122
Distribution (12b-1) fees None After 3 years (b) $ 594
Other expenses 1.46% After 5 years (b) $1,092
Total fund operating expenses 2.21% After 10 years (b) $2,465
Waiver and/or expense
reimbursement (a) (1.01)%
Net expenses 1.20%
ALLIANCE REAL ESTATE
INVESTMENT FUND
Management fees .90% After 1 year $ 132
Distribution (12b-1) fees None After 3 years $ 412
Other expenses .40% After 5 years $ 713
Total fund operating expenses 1.30% After 10 years $1,568
ALLIANCE NEW EUROPE FUND
Management fees .95% After 1 year $ 154
Distribution (12b-1) fees None After 3 years $ 477
Other expenses .56% After 5 years $ 824
Total fund operating expenses 1.51% After 10 years $1,802
ALLIANCE WORLDWIDE
PRIVATIZATION FUND
Management fees 1.00% After 1 year $ 165
Distribution (12b-1) fees None After 3 years $ 511
Other expenses .62% After 5 years $ 881
Total fund operating expenses 1.62% After 10 years $1,922
ALLIANCE INTERNATIONAL
PREMIER GROWTH FUND
Management fees 1.00% After 1 year $ 223
Distribution (12b-1) fees None After 3 years (b) $1,498
Other expenses 5.28% After 5 years (b) $2,740
Total fund operating expenses 6.28% After 10 years (b) $5,709
Waiver and/or expense
reimbursement (a) (4.08)%
Net expenses 2.20%
ALLIANCE GLOBAL
SMALL CAP FUND
Management Fees 1.00% After 1 year $ 216
Distribution (12b-1) Fees None After 3 years $ 667
Other Expenses 1.13% After 5 years $1,144
Total fund operating expenses 2.13% After 10 years $2,462
PLEASE REFER TO FOOTNOTES ON PAGE 26.
25
OPERATING EXPENSES EXAMPLES
- -------------------------------------------- --------------------------
ALLIANCE INTERNATIONAL FUND
Management fees .95% After 1 year $ 160
Distribution (12b-1) fees None After 3 years (b) $ 523
Other expenses .75% After 5 years (b) $ 910
Total fund operating expenses 1.70% After 10 years (b) $1,996
Waiver and/or expense
reimbursement (a) (.13)%
Net expenses 1.57%
ALLIANCE GREATER
CHINA '97 FUND
Management fees 1.00% After 1 year $ 225
Distribution (12b-1) fees None After 3 years (b) $3,588
Other expenses 18.01% After 5 years (b) $6,075
Total fund operating expenses 19.01% After 10 years (b) $9,815
Waiver and/or expense
reimbursement (a) (16.79)%
Net expenses 2.22%
ALLIANCE ALL-ASIA
INVESTMENT FUND
Management fees 1.00% After 1 year $ 273
Distribution (12b-1) fees None After 3 years (b) $1,177
Administration fees .15% After 5 years (b) $2,092
Other operating expenses 3.24% After 10 years (b) $4,428
Total fund operating expenses 4.39%
Waiver and/or expense
reimbursement (a) (1.69)%
Net Expenses 2.70%
ALLIANCE GLOBAL
ENVIRONMENT FUND
Management Fees 1.10% After 1 year $ 472
Distribution (12b-1) Fees None After 3 years $1,419
Other Expenses 3.61% After 5 years $2,372
Total fund operating expenses 4.71% After 10 years $4,779
(A) REFLECTS ALLIANCE'S CONTRACTUAL WAIVER OF A PORTION OF ITS ADVISORY FEE
AND/OR REIMBURSEMENT OF A PORTION OF THE FUND'S OPERATING EXPENSES. THIS WAIVER
EXTENDS THROUGH THE END OF THE FUND'S CURRENT FISCAL YEAR AND MAY BE EXTENDED
BY ALLIANCE FOR ADDITIONAL ONE YEAR TERMS.
(B) THESE EXAMPLES ASSUME THAT ALLIANCE'S AGREEMENT TO WAIVE MANAGEMENT FEES
AND/OR REIMBURSE FUND EXPENSES IS NOT EXTENDED BEYOND ITS INITIAL PERIOD.
26
GLOSSARY
This Prospectus uses the following terms.
TYPES OF SECURITIES
CONVERTIBLE SECURITIES are fixed-income securities that are convertible into
common stock.
DEBT SECURITIES are bonds, debentures, notes, bills, loans, other direct debt
instruments, and other fixed, floating and variable rate debt obligations, but
do not include convertible securities.
DEPOSITARY RECEIPTS include American Depositary Receipts ("ADRS"), Global
Depositary Receipts ("GDRS") and other types of depositary receipts.
EQUITY SECURITIES include (i) common stocks, partnership interests, business
trust shares and other equity or ownership interests in business enterprises
and (ii) securities convertible into, and rights and warrants to subscribe for
the purchase of, such stocks, shares and interests.
FIXED-INCOME SECURITIES are debt securities and dividend-paying preferred
stocks, including floating rate and variable rate instruments.
FOREIGN GOVERNMENT SECURITIES are securities issued or guaranteed, as to
payment of principal and interest, by foreign governments, quasi-governmental
entities, governmental agencies or other governmental entities.
QUALIFYING BANK DEPOSITS are certificates of deposit, bankers' acceptances and
interest-bearing savings deposits of banks that have total assets of more than
$1 billion and are members of the Federal Deposit Insurance Corporation.
RULE 144A SECURITIES are securities that may be resold under Rule 144A of the
Securities Act.
U.S. GOVERNMENT SECURITIES are securities issued or guaranteed by the United
States Government, its agencies or instrumentalities.
TYPES OF COMPANIES
ASIAN COMPANY is an entity that (i) is organized under the laws of an Asian
country and conducts business in an Asian country, (ii) derives 50% or more of
its total revenues from business in Asian countries, or (iii) issues equity or
debt securities that are traded principally on a stock exchange in an Asian
country.
ASIAN COUNTRIES are Australia, the Democratic Socialist Republic of Sri Lanka,
the Hong Kong Special Administrative Region of the People's Republic of China
(Hong Kong), the Islamic Republic of Pakistan, Japan, the Kingdom of Thailand,
Malaysia, Negara Brunei Darussalam (Brunei), New Zealand, the People's Republic
of China, the People's Republic of Kampuchea (Cambodia), the Republic of China
(Taiwan), the Republic of India, the Republic of Indonesia, the Republic of
Korea (South Korea), the Republic of the Philippines, the Republic of
Singapore, the Socialist Republic of Vietnam and the Union of Myanmar.
BENEFICIARY COMPANIES are Eligible Companies whose principal businesses lie
outside the environmental sector but nevertheless anticipate environmental
regulations or consumer preferences through the development of new products,
processes or services that are intended to contribute to a cleaner and
healthier environment, such as companies that anticipate the demand for plastic
substitutes, aerosol substitutes, alternative fuels and processes that generate
less hazardous waste.
ELIGIBLE COMPANIES are companies expected to benefit from advances or
improvements in products, processes or services intended to foster the
protection of the environment.
ENVIRONMENTAL COMPANIES are Eligible Companies that have a principal business
involving the sale of systems or services intended to foster environmental
protection, such as waste treatment and disposal, remediation, air pollution
control and recycling.
EUROPEAN COMPANY is a company (i) organized under the laws of a European
country that issues equity or debt securities that are traded principally on a
European stock exchange, or (ii) a company that derives 50% or more of its
total revenues or profits from businesses in Europe.
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 businesses 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.
HEALTH CARE INDUSTRIES include the health care and health care-related
(including health sciences) industries. These industries are principally
engaged in the discovery, development, provision, production or distribution of
products and services that relate to the diagnosis, treatment and prevention of
diseases or other medical disorders. Companies in these fields include, but are
not limited to, pharmaceutical firms; companies that design, manufacture or
sell medical supplies, equipment and support services; companies that operate
hospitals and other health care facilities; and companies engaged in medical,
diagnostic, biochemical, biotechnological or other health sciences research and
development.
GREATER CHINA COUNTRIES are the People's Republic of China ("China"), the Hong
Kong Special Administrative Region of the People's Republic of China ("Hong
Kong") and the Republic of China ("Taiwan").
NON-U.S. COMPANY is an entity that (i) is organized under the laws of a foreign
country and conducts business in a foreign country, (ii) derives 50% or more of
its total revenues from business in foreign countries, or (iii) issues equity
or debt securities that are traded principally on a stock exchange in a foreign
country.
27
RATING AGENCIES, RATED SECURITIES AND INDEXES
DUFF & PHELPS is Duff & Phelps Credit Rating Co.
EAFE INDEX is Morgan Stanley Capital International Europe, Australasia and Far
East ("EAFE") Index.
FITCH is Fitch IBCA, Inc.
INVESTMENT GRADE SECURITIES are fixed-income securities rated Baa and above by
Moody's or BBB and above by S&P, Duff & Phelps or Fitch, or determined by
Alliance to be of equivalent quality.
LOWER-RATED SECURITIES are fixed-income securities rated Ba or below by Moody's
or BB or below by S&P, Duff & Phelps or Fitch, or determined by Alliance to be
of equivalent quality, and are commonly referred to as "JUNK BONDS."
MOODY'S is Moody's Investors Service, Inc.
PRIME COMMERCIAL PAPER is commercial paper rated Prime 1 by Moody's or A-1 or
higher by S&P or, if not rated, issued by companies that have an outstanding
debt issue rated Aa or higher by Moody's or AA or higher by S&P.
S&P is Standard & Poor's Ratings Services.
S&P 500 INDEX is S&P's 500 Composite Stock Price Index, a widely recognized
unmanaged index of market activity.
OTHER
1940 ACT is the Investment Company Act of 1940, as amended.
CODE is the Internal Revenue Code of 1986, as amended.
COMMISSION is the Securities and Exchange Commission.
EXCHANGE is the New York Stock Exchange.
SECURITIES ACT is the Securities Act of 1933, as amended.
DESCRIPTION OF THE FUNDS
This section of the Prospectus provides a more complete description of the
Funds' investment objectives, principal strategies and risks. Of course, there
can be no assurance that any Fund will achieve its investment objective.
Please note that:
- - Additional discussion of the Funds' investments, including the risks of
the investments, can be found in the discussion under DESCRIPTION OF INVESTMENT
PRACTICES following this section.
- - The description of the principal risks for a Fund may include risks
described in the SUMMARY OF PRINCIPAL RISKS above. Additional information about
the risks of investing in a Fund can be found in the discussion under
ADDITIONAL RISK CONSIDERATIONS.
- - Additional descriptions of each Fund's strategies, investments and risks
can be found in the Fund's Statement of Additional Information or SAI.
- - Except as noted, (i) the Funds' investment objectives are "fundamental"
and cannot be changed without a shareholder vote, and (ii) the Funds'
investment policies are not fundamental and thus can be changed without a
shareholder vote.
INVESTMENT OBJECTIVES AND POLICIES
DOMESTIC STOCK FUNDS
The Domestic Stock Funds offer investors seeking capital appreciation a range
of alternative approaches to investing in the U.S. equity markets.
ALLIANCE PREMIER GROWTH FUND
ALLIANCE PREMIER GROWTH FUND seeks long-term growth of capital by investing
predominantly in the equity securities of a limited number of large, carefully
selected, high-quality U.S. companies that are judged likely to achieve
superior earnings growth. As a matter of fundamental policy, the Fund normally
invests at least 85% of its total assets in the equity securities of U.S.
companies. A U.S. company is a company that is organized under United States
law, has its principal office in the United States and issues equity securities
that are traded principally in the United States. Normally, about 40-60
companies will be represented in the Fund's portfolio, with the 25 most highly
regarded of these companies usually constituting approximately 70% of the
Fund's net assets. The Fund is thus atypical from most equity mutual funds in
its focus on a relatively small number of intensively researched companies. The
Fund is designed for those seeking to accumulate capital over time with less
volatility than that associated with investment in smaller companies.
Alliance's investment strategy for the Fund emphasizes stock selection and
investment in the securities of a limited number of issuers. Alliance relies
heavily upon the fundamental analysis and research of its large internal
research staff, which generally follows a primary research universe of more
than 500 companies that have strong management, superior industry positions,
excellent balance sheets and superior earnings growth prospects. An emphasis is
placed on identifying companies whose substantially above average prospective
earnings growth is not fully reflected in current market valuations.
In managing the Fund, Alliance seeks to utilize market volatility judiciously
(assuming no change in company fundamentals), striving to capitalize on
apparently unwarranted price fluctuations, both to purchase or increase
positions on weakness and to sell or reduce overpriced holdings. The Fund
normally remains nearly fully invested and does not take significant cash
positions for market timing purposes. During market declines, while adding to
positions in favored stocks, the Fund becomes somewhat more aggressive,
gradually reducing the number of companies represented in its portfolio.
Conversely, in rising markets, while reducing or eliminating fully valued
positions, the Fund becomes somewhat more
28
conservative, gradually increasing the number of companies represented in its
portfolio. Alliance thus seeks to gain positive returns in good markets while
providing some measure of protection in poor markets.
Alliance expects the average market capitalization of companies represented in
the Fund's portfolio normally to be in the range, or in excess, of the average
market capitalization of companies included in the S&P 500 Index.
The Fund also may:
- - invest up to 20% of its net assets in CONVERTIBLE SECURITIES;
- - invest up to 5% of its net assets in RIGHTS OR WARRANTS;
- - invest up to 15% of its total assets in FOREIGN SECURITIES;
- - purchase and sell exchange-traded index OPTIONS and stock index FUTURES
CONTRACTS; and
- - write covered exchange-traded call OPTIONS on its securities of up to 15%
of its total assets, and purchase and sell exchange-traded call and put options
on common stocks written by others of up to, for all options, 10% of its total
assets.
Because the Fund invests in a smaller number of securities than many other
equity funds, your investment has the risk that changes in the value of a
single security may have a more significant effect, either negative or
positive, on the Fund's net asset value.
ALLIANCE HEALTH CARE FUND
ALLIANCE HEALTH CARE FUND seeks capital appreciation and, secondarily, current
income. In seeking to achieve its investment objective, under normal
circumstances the Fund invests at least 65%, and normally substantially all, of
the value of its total assets in securities issued by companies principally
engaged in Health Care Industries.
The Fund seeks investments in both new, smaller and less seasoned companies and
well-known, larger and established companies. Whenever possible, investments in
new, smaller or less seasoned companies will be made with a view to benefiting
from the development and growth of new products and markets in Health Care
Industries. Investments in these companies may offer more reward but may also
entail more risk than is generally true of larger, established companies.
While the Fund anticipates that a substantial portion of its portfolio will be
invested in the securities of U.S. companies, the Fund is not limited to
investing in such securities. Many companies in the forefront of world medical
technology are located outside the United States, primarily in Japan and
Europe. Accordingly, the Fund may invest up to 40% of the value of its total
assets in foreign securities, including up to 25% in issuers located in any one
foreign country. However, no more than 5% of the value of the Fund's total net
assets may be invested in securities of issuers located in emerging market
countries. All percentage limitations are applied at the time of investment.
Although the payment of dividends will be a factor considered in the selection
of investments for the Fund, the Fund seeks primarily to take advantage of
capital appreciation opportunities identified by Alliance in emerging
technologies and services in Health Care Industries by investing in companies
that are expected to profit from the development of new products and services
for these industries. Examples of such emerging technologies and services
include:
- - New methods for administering drugs to a patient, such as surgical
implants and skin patches that enhance the effectiveness of the drugs and may
reduce patient side effects by delivering the drugs in precise quantities over
a prolonged time period or by evading natural body defense mechanisms which
delay the effect of the drugs;
- - Developments in medical imaging such as the application of computer
technology to the output of conventional x-ray systems that allow for
cross-sectional images of soft tissue and organs (CT scanning) and continuous
imaging (digital radiography) as well as more advanced nuclear medicine,
ultrasound and magnetic resonance imaging (MRI);
- - Advances in minimally invasive surgical techniques, such as angioplasty
and related technologies for diseased blood vessels and laser beams for the
eye, general and cardiovascular surgery, which provide greater effectiveness,
lower cost and improved patient safety than more traditional surgical
techniques;
- - New therapeutic pharmaceutical compounds that control or alleviate
disease, including prescription and non-prescription drugs and treatment
regimes for conditions not controlled, alleviated or treatable by existing
medications or treatments and chemical or biological pharmaceuticals for use in
diagnostic testing;
- - Advances in molecular biology such as signal transduction, cell adhesion
and cell to cell communication which have facilitated a rapid increase in new
classes of drugs. These have included monoclonal antibodies, bio-engineered
proteins and small molecules from novel synthesis and screening techniques;
- - Genomics, which allows scientists to better understand the causes of human
diseases, and in some cases has led to the manufacture of proteins for use as
therapeutic drugs;
- - Gene chips and other equipment that provide for the screening, diagnosis
and treatment of diseases;
- - The introduction of large scale business efficiencies to the management of
nursing homes, acute and specialty hospitals, as well as free-standing
outpatient facilities, surgical centers and rehabilitation centers;
- - Adaptations of microprocessors for use by pharmaceutical manufacturers,
hospitals, doctors and others in Health Care Industries to increase
distribution efficiency;
- - Health care delivery organizations that combine cost effectiveness with
high quality medical care and help address the rising cost of health care; and
29
- - The sale of prescription drugs and pharmaceuticals to consumers via the
Internet.
The Fund's portfolio may also include companies that provide traditional
products and services currently in use in Health Care Industries and that are
likely to benefit from any increases in the general demand for such products
and services. The following are examples of the products and services that may
be offered by companies in Health Care Industries:
- - DRUGS OR PHARMACEUTICALS, including both ethical and proprietary drugs,
drug administration products and pharmaceutical components used in diagnostic
testing;
- - MEDICAL EQUIPMENT AND SUPPLIES, including equipment and supplies used by
health service companies and individual practitioners, such as electronic
equipment used for diagnosis and treatment, surgical and medical instruments
and other products designed especially for Health Care Industries;
- - HEALTH CARE SERVICES, including the services of clinical testing
laboratories, hospitals, nursing homes, clinics, centers for convalescence and
rehabilitation, and products and services for home health care; and
- - MEDICAL RESEARCH, including scientific research to develop drugs,
processes or technologies with possible commercial application in Health Care
Industries.
The Fund also may:
- - purchase or sell FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS;
- - enter into FORWARD COMMITMENTS for the purchase or sale of securities;
- - make SECURED LOANS OF SECURITIES of up to 20% of its total assets; and
- - enter into REPURCHASE AGREEMENTS.
ALLIANCE GROWTH FUND
ALLIANCE GROWTH FUND seeks long-term growth of capital. Current income is only
an incidental consideration. The Fund seeks to achieve its objective by
investing primarily in equity securities of companies with favorable earnings
outlooks and long-term growth rates that are expected to exceed that of the
U.S. economy over time. The Fund's investment objective is not fundamental.
The Fund also may invest up to 25% of its total assets in lower-rated
fixed-income securities and convertible bonds. The Fund generally will not
invest in securities rated at the time of purchase below Caa- by Moody's and
CCC- by S&P, Duff & Phelps or Fitch or in securities judged by Alliance to be
of comparable investment quality. From time to time, however, the Fund may
invest in securities rated in the lowest grades (i.e., C by Moody's or D or
equivalent by S&P, Duff & Phelps or Fitch) or securities of comparable
investment quality if there are prospects for an upgrade or a favorable
conversion into equity securities. If the credit rating of a security held by
the Fund falls below its rating at the time of purchase (or Alliance determines
that the credit quality of the security has deteriorated), the Fund may
continue to hold the security if such investment is considered appropriate
under the circumstances.
The Fund also may:
- - invest in ZERO-COUPON and PAYMENT-IN-KIND BONDS;
- - invest in FOREIGN SECURITIES although not generally in excess of 15% of
its total assets;
- - buy or sell foreign currencies, OPTIONS ON FOREIGN CURRENCIES, and FOREIGN
CURRENCY FUTURES CONTRACTS (and related options) and deal in FORWARD FOREIGN
CURRENCY EXCHANGE CONTRACTS;
- - enter into FORWARD COMMITMENTS;
- - buy and sell stock index FUTURES CONTRACTS and OPTIONS ON FUTURE CONTRACTS
and on stock indices;
- - purchase and sell FUTURES CONTRACTS and OPTIONS ON FUTURES CONTRACTS and
U.S. Treasury securities;
- - write covered call and put OPTIONS;
- - purchase and sell put and call OPTIONS;
- - make LOANS OF PORTFOLIO SECURITIES of up to 25% of its total assets; and
- - enter into REPURCHASE AGREEMENTS of up to 25% of its total assets;
ALLIANCE TECHNOLOGY FUND
ALLIANCE TECHNOLOGY FUND emphasizes growth of capital and invests for capital
appreciation. Current income is only an incidental consideration. The Fund may
seek income by writing listed call options. The Fund invests primarily in
securities of companies expected to benefit from technological advances and
improvements (i.e., companies that use technology extensively in the
development of new or improved products or processes). The Fund normally will
have at least 80% of its assets invested in the securities of these companies.
The Fund normally will have substantially all its assets invested in equity
securities, but it also invests in debt securities offering an opportunity for
price appreciation. The Fund will invest in listed and unlisted securities, in
U.S. securities, and up to 10% of its total assets in foreign securities.
The Fund's policy is to invest in any company and industry and in any type of
security with potential for capital appreciation. It invests in well-known and
established companies and in new and unseasoned companies.
The Fund also may:
- - write covered call OPTIONS on its securities of up to 15% of its total
assets and purchase exchange-listed call and put options, including
exchange-traded index put options of up to, for all options, 10% of its total
assets;
- - invest up to 10% of its total assets in WARRANTS; and
- - make LOANS OF PORTFOLIO SECURITIES of up to 30% of its total assets.
30
Because the Fund invests primarily in technology companies, factors affecting
those types of companies could have a significant effect on the Fund's net
asset value. In addition, the Fund's investments in technology stocks,
especially those of smaller, less seasoned companies, tend to be more volatile
than the overall market. The Fund's investments in debt and foreign securities
have credit risk and foreign risk.
ALLIANCE QUASAR FUND
ALLIANCE QUASAR FUND seeks growth of capital by pursuing aggressive investment
policies. The Fund invests for capital appreciation and only incidentally for
current income. The Fund's practice of selecting securities based on the
possibility of appreciation cannot, of course, ensure against a loss in value.
Moreover, because the Fund's investment policies are aggressive, an investment
in the Fund is risky and investors who want assured income or preservation of
capital should not invest in the Fund.
The Fund invests in any company and industry and in any type of security with
potential for capital appreciation. It invests in well-known and established
companies and in new and unseasoned companies. When selecting securities for
the Fund, Alliance considers the economic and political outlook, the values of
specific securities relative to other investments, trends in the determinants
of corporate profits, and management capability and practices.
The Fund invests principally in equity securities, but it also invests to a
limited degree in non-convertible bonds and preferred stocks. The Fund invests
in listed and unlisted U.S. and foreign securities. The Fund can periodically
invest in the securities of companies that are expected to appreciate due to a
development particularly or uniquely applicable to a company regardless of
general business conditions or movements of the market as a whole.
The Fund also may:
- - make SHORT SALES OF SECURITIES AGAINST THE BOX but not more than 15% of
its net assets may be deposited on short sales; and
- - write covered call OPTIONS of up to 15% of its total assets and purchase
and sell put and call options written by others of up to, for all options, 10%
of its total assets.
Investments in smaller companies may have more risk because they tend to be
more volatile than the overall stock market. The Fund's investments in
non-convertible bonds, preferred stocks and foreign stocks may have credit risk
and foreign risk.
THE ALLIANCE FUND
THE ALLIANCE FUND seeks long-term growth of capital and income primarily
through investment in common stocks. The Fund normally invests substantially
all of its assets in common stocks that Alliance believes will appreciate in
value. The Fund also may invest in other types of securities such as
convertible securities, investment grade instruments, U.S. Government
securities and high quality, short-term obligations such as repurchase
agreements, bankers' acceptances and domestic certificates of deposit. The Fund
may invest without limit in foreign securities. The Fund generally does not
effect portfolio transactions in order to realize short-term trading profits or
exercise control.
The Fund also may:
- - write exchange-traded covered call OPTIONS on up to 25% of its total
assets;
- - make SECURED LOANS OF PORTFOLIO SECURITIES of up to 25% of its total
assets; and
- - enter into REPURCHASE AGREEMENTS of up to seven days' duration with
commercial banks, but only if those agreements together with any restricted
securities and any securities which do not have readily available market
quotations do not exceed 10% of its net assets.
While the diversification and generally high quality of the Fund's investments
cannot prevent fluctuations in market values, they tend to limit investment
risk and contribute to achieving the Fund's objective.
TOTAL RETURN FUNDS
The Total Return Funds provide a range of investment alternatives to investors
seeking both growth of capital and current income.
ALLIANCE GROWTH AND INCOME FUND
ALLIANCE GROWTH AND INCOME FUND seeks appreciation through investments
primarily in dividend-paying common stocks of good quality. The Fund also may
invest in fixed-income securities and convertible securities.
The Fund also may try to realize income by writing covered call options listed
on domestic securities exchanges. The Fund also invests in foreign securities.
Since the purchase of foreign securities entails certain political and economic
risks, the Fund restricts its investments in these securities to issues of high
quality. The Fund also may purchase and sell financial forward and futures
contracts and options on these securities for hedging purposes.
ALLIANCE BALANCED SHARES
ALLIANCE BALANCED SHARES seeks a high return through a combination of current
income and capital appreciation. Although the Fund's investment objective is
not fundamental, the Fund is a "balanced" fund as a matter of fundamental
policy. The Fund invests in equity securities of high-quality, financially
strong, dividend-paying companies. Normally, the Fund's investments will
consist of about 60% in stocks, but stocks may make up to 75% of its
investments. The Fund will not purchase a security if as a result less than 25%
of its total assets will be in fixed income senior securities. These
investments may include short- and long-term debt securities, preferred stocks,
convertible debt securities and convertible preferred stocks to the extent that
their values are attributable to their fixed-income characteristics. Other than
this restriction, the percentage of the Fund's assets invested in each type of
security will vary.
The Fund invests in U.S. Government securities, bonds, senior debt securities,
and preferred and common stocks in such
31
proportions and of such type as Alliance deems best adapted to the current
economic and market outlooks. The Fund may invest up to 15% of the value of its
total assets in foreign equity and fixed-income securities eligible for
purchase by the Fund under its investment policies described above.
The Fund also may:
- - enter into contracts for the purchase or sale for future delivery of
foreign currencies;
- - purchase and write put and call OPTIONS on foreign currencies and enter
into FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS for hedging purposes; and
- - subject to market conditions, write covered call OPTIONS listed on a
domestic exchange to realize income.
As a balanced fund, the Fund has the risk that the allocation of its
investments between equity and debt securities may have a more significant
effect on the Fund's net asset value when one of these asset classes is
performing more poorly than the other.
ALLIANCE UTILITY INCOME FUND
ALLIANCE UTILITY INCOME FUND seeks current income and capital appreciation by
investing primarily in equity and fixed-income securities of companies in the
utilities industry. As a fundamental policy, the Fund normally invests at least
65% of its total assets in securities of companies in the utilities industry.
The Fund seeks to take advantage of the characteristics and historical
performance of securities of utility companies, many of which pay regular
dividends and increase their common stock dividends over time. The Fund
considers a company to be in the utilities industry if, during the most recent
twelve-month period, at least 50% of the company's gross revenues, on a
consolidated basis, were derived from its utilities activities.
The Fund may invest in securities of both U.S. and foreign issuers, although
the Fund will invest no more than 15% of its total assets in issuers in any one
foreign country. The Fund invests at least 65% of its total assets in
income-producing securities, but there is otherwise no limit on the allocation
of the Fund's investments between equity securities and fixed-income
securities. The Fund may maintain up to 35% of its net assets in lower-rated
securities. The Fund will not retain a security that is downgraded below B or
determined by Alliance to have undergone similar credit quality deterioration
following purchase.
The Fund may invest up to 35% of its total assets in equity and fixed-income
securities of domestic and foreign corporate and governmental issuers other
than utility companies. These securities include U.S. Government securities and
repurchase agreements for those securities, foreign government securities,
corporate fixed-income securities of domestic issuers, corporate fixed-income
securities of foreign issuers denominated in foreign currencies or in U.S.
Dollars (in each case including fixed-income securities of an issuer in one
country denominated in the currency of another country), qualifying bank
deposits, and prime commercial paper.
The Fund also may:
- - invest up to 30% of its net assets in CONVERTIBLE SECURITIES;
- - invest up to 5% of its net assets in RIGHTS OR WARRANTS;
- - invest in DEPOSITARY RECEIPTS, securities of supranational entities
denominated in the currency of any country, securities denominated in European
Currency Units, and "semi-governmental securities";
- - write covered call and put OPTIONS, purchase call and put options on
securities of the types in which it is permitted to invest that are
exchange-traded and over-the-counter, and write uncovered call options for
cross-hedging purposes;
- - purchase and sell exchange-traded OPTIONS on any securities index composed
of the types of securities in which it may invest;
- - 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 an index of U.S. Government securities, foreign government
securities, corporate fixed-income securities, or common stock, and may
purchase and write options on futures contracts;
- - purchase and write call and put OPTIONS on foreign currencies traded on
U.S. and foreign exchanges or over-the-counter for hedging purposes;
- - purchase or sell FORWARD CONTRACTS;
- - enter into INTEREST RATE SWAPS and purchase or sell INTEREST RATE CAPS and
FLOORS;
- - enter into FORWARD COMMITMENTS;
- - enter into STANDBY COMMITMENT AGREEMENTS;
- - enter into REPURCHASE AGREEMENTS for U.S. Government securities;
- - make SHORT SALES of securities or maintain a short position; and
- - make SECURED LOANS OF PORTFOLIO SECURITIES of up to 20% of its total
assets.
The Fund's principal risks include those that arise from its investing
primarily in electric utility companies. Factors affecting that industry sector
can have a significant effect on the Fund's net asset value. The U.S. utilities
industry has experienced significant changes in recent years. Electric utility
companies in general have been favorably affected by lower fuel costs, the full
or near completion of major construction programs and lower financing costs. In
addition, many utility companies have generated cash flows in excess of current
operating expenses and construction expenditures, permitting some degree of
diversification into unregulated businesses. Regulatory changes, however, could
increase costs or impair the ability of nuclear and conventionally fueled
generating facilities to operate their facilities and reduce their ability to
make dividend payments on their securities. Rates of return of utility
companies generally are subject to review and limitation by state public
utilities
32
commissions and tend to fluctuate with marginal financing costs. Rate changes
ordinarily lag behind changes in financing costs and can favorably or
unfavorably affect the earnings or dividend pay-outs of utilities stocks
depending upon whether the rates and costs are declining or rising.
Utility companies historically have been subject to the risks of increases in
fuel and other operating costs, high interest costs, costs associated with
compliance with environmental and nuclear safety regulations, service
interruptions, economic slowdowns, surplus capacity, competition, and
regulatory changes. There also can be no assurance that regulatory policies or
accounting standards changes will not negatively affect utility companies'
earnings or dividends. Utility companies are subject to regulation by various
authorities and may be affected by the imposition of special tariffs and
changes in tax laws. To the extent that rates are established or reviewed by
governmental authorities, utility companies are subject to the risk that such
authorities will not authorize increased rates. Because of the Fund's policy of
concentrating its investments in utility companies, the Fund is more
susceptible than most other mutual funds to economic, political or regulatory
occurrences affecting the utilities industry.
Foreign utility companies, like those in the U.S., are generally subject to
regulation, although the regulation may or may not be comparable to domestic
regulations. Foreign utility companies in certain countries may be more heavily
regulated by their respective governments than utility companies located in the
U.S. As in the U.S., foreign utility companies generally are required to seek
government approval for rate increases. In addition, many foreign utility
companies use fuels that cause more pollution than those used in the U.S. and
may yet be required to invest in pollution control equipment. Foreign utility
regulatory systems vary from country to country and may evolve in ways
different from regulation in the U.S. The percentage of the Fund's assets
invested in issuers of particular countries will vary.
Increases in interest rates may cause the value of the Fund's investments to
decline and the decrease in value may not be offset by higher interest rate
income. The Fund's investments in lower-rated securities may be subject to more
credit risk than a fund that invests in higher-rated securities.
ALLIANCE REAL ESTATE INVESTMENT FUND
ALLIANCE REAL ESTATE INVESTMENT FUND seeks a total return from long-term growth
of capital and from income principally through investing in a portfolio of
equity securities of issuers that are primarily engaged in or related to the
real estate industry.
The Fund normally invests at least 65% of its total assets in equity securities
of real estate investment trusts, or REITs, and other real estate industry
companies. A "real estate industry company" is a company that derives at least
50% of its gross revenues or net profits from the ownership, development,
construction, financing, management, or sale of commercial, industrial, or
residential real estate or interests in these properties. The Fund invests in
equity securities that include common stock, shares of beneficial interest of
REITs, and securities with common stock characteristics, such as preferred
stock or convertible securities ("Real Estate Equity Securities").
The Fund may invest up to 35% of its total assets in (a) securities that
directly or indirectly represent participations in, or are collateralized by
and payable from, mortgage loans secured by real property ("Mortgage-Backed
Securities"), such as mortgage pass-through certificates, real estate mortgage
investment conduit certificates ("REMICs") and collateralized mortgage
obligations ("CMOs") and (b) short-term investments. These securities are
described below.
In selecting Real Estate Equity Securities, Alliance's analysis will focus on
determining the degree to which the company involved can achieve sustainable
growth in cash flow and dividend paying capability. Alliance believes that the
primary determinant of this capability is the economic viability of property
markets in which the company operates and that the secondary determinant of
this capability is the ability of management to add value through strategic
focus and operating expertise. The Fund will purchase Real Estate Equity
Securities when, in the judgment of Alliance, their market price does not
adequately reflect this potential. In making this determination, Alliance will
take into account fundamental trends in underlying property markets as
determined by proprietary models, site visits conducted by individuals
knowledgeable in local real estate markets, price-earnings ratios (as defined
for real estate companies), cash flow growth and stability, the relationship
between asset value and market price of the securities, dividend payment
history, and such other factors that Alliance may determine from time to time
to be relevant. Alliance will attempt to purchase for the Fund Real Estate
Equity Securities of companies whose underlying portfolios are diversified
geographically and by property type.
The Fund may invest without limitation in shares of REITs. REITs are pooled
investment vehicles that invest primarily in income producing real estate or
real estate related loans or interests. REITs are generally classified as
equity REITs, mortgage REITs, or a combination of equity and mortgage REITs.
Equity REITs invest the majority of their assets directly in real property and
derive income primarily from the collection of rents. Equity REITs can also
realize capital gains by selling properties that have appreciated in value.
Mortgage REITs invest the majority of their assets in real estate mortgages and
derive income from the collection of interest payments. Similar to investment
companies such as the Fund, REITs are not taxed on income distributed to
shareholders provided they comply with several requirements of the Code. The
Fund will indirectly bear its proportionate share of expenses incurred by REITs
in which the Fund invests in addition to the expenses incurred directly by the
Fund.
The Fund's investment strategy with respect to Real Estate Equity Securities is
based on the premise that property market fundamentals are the primary
determinant of growth underlying the performance of Real Estate Equity
Securities. Value and management further distinguishes the most attractive Real
Estate Equity Securities. The Fund's research and investment process is
designed to identify those companies with strong
33
property fundamentals and strong management teams. This process is comprised of
real estate market research, specific property inspection, and securities
analysis. Alliance believes that this process will result in a portfolio that
will consist of Real Estate Equity Securities of companies that own assets in
the most desirable markets across the country, diversified geographically and
by property type.
To implement the Fund's research and investment process, Alliance has retained
the consulting services of CB Richard Ellis, Inc. ("CBRE"), a publicly held
company and the largest real estate services company in the United States.
CBRE's business includes real estate brokerage, property and facilities
management, and real estate finance and investment advisory activities. The
universe of property-owning real estate industry firms consists of
approximately 142 companies of sufficient size and quality to merit
consideration for investment by the Fund. As consultant to Alliance, CBRE
provides access to its proprietary model, REIT-Score, which analyzes the
approximately 18,000 properties owned by these 142 companies. Using proprietary
databases and algorithms, CBRE analyzes local market rent, expenses, occupancy
trends, market specific transaction pricing, demographic and economic trends,
and leading indicators of real estate supply such as building permits. Over
1,000 asset-type specific geographic markets are analyzed and ranked on a
relative scale by CBRE in compiling its REIT-Score database. The relative
attractiveness of these real estate industry companies is similarly ranked
based on the composite rankings of the properties they own.
Once the universe of real estate industry companies has been distilled through
the market research process, CBRE's local market presence provides the
capability to perform site specific inspections of key properties. This
analysis examines specific location, condition, and sub-market trends. CBRE's
use of locally based real estate professionals provides Alliance with a window
on the operations of the portfolio companies as information can immediately be
put in the context of local market events. Only those companies whose specific
property portfolios reflect the promise of their general markets will be
considered for investment by the Fund.
Alliance further screens the universe of real estate industry companies by
using rigorous financial models and by engaging in regular contact with
management of targeted companies. Each management's strategic plan and ability
to execute the plan are determined and analyzed. Alliance makes extensive use
of CBRE's network of industry analysts in order to assess trends in tenant
industries. This information is then used to further evaluate management's
strategic plans. Financial ratio analysis is used to isolate those companies
with the ability to make value-added acquisitions. This information is combined
with property market trends and used to project future earnings potential.
The Fund may invest in short-term investments including: corporate commercial
paper and other short-term commercial obligations, in each case rated or issued
by companies with similar securities outstanding that are rated Prime-1, Aa or
better by Moody's or A-1, AA or better by S&P; obligations (including
certificates of deposit, time deposits, demand deposits and bankers'
acceptances) of banks with securities outstanding that are rated Prime-1, Aa or
better by Moody's or A-1, AA or better by S&P; and obligations issued or
guaranteed by the U.S. Government or its agencies or instrumentalities with
remaining maturities not exceeding 18 months.
The Fund may invest in debt securities rated BBB or higher by S&P or Baa or
higher by Moody's or, if not rated, of equivalent credit quality as determined
by Alliance. The Fund expects that it will not retain a debt security that is
downgraded below BBB or Baa or, if unrated, determined by Alliance to have
undergone similar credit quality deterioration, subsequent to purchase by the
Fund.
The Fund also may:
- - invest up to 15% of its net assets in CONVERTIBLE SECURITIES;
- - enter into FORWARD COMMITMENTS;
- - enter into STANDBY COMMITMENT AGREEMENTS;
- - make SHORT SALES of securities or maintain a short position but only if at
all times when a short position is open not more than 25% of the Fund's net
assets is held as collateral for such sales;
- - invest up to 10% of its net assets in RIGHTS OR WARRANTS;
- - make LOANS OF PORTFOLIO SECURITIES of up to 25% of its total assets; and
- - enter into REPURCHASE AGREEMENTS of up to seven days' duration.
Because the Fund invests a substantial portion of its assets in the real estate
market, it is subject to many of the same risks involved in direct ownership of
real estate. For example, the value of real estate could decline due to a
variety of factors affecting the real estate market generally, such as
overbuilding, increases in interest rates, or declines in rental rates. In
addition, REITs are dependent on the capability of their managers, may have
limited diversification, and could be significantly affected by changes in tax
laws.
The Fund's investments in mortgage-backed securities have prepayment risk,
which is the risk that mortgage loans will be prepaid when interest rates
decline and the Fund will have to reinvest in securities with lower interest
rates. This risk causes mortgage-backed securities to have significantly
greater price and yield volatility than traditional fixed-income securities.
The Fund's investments in REMICs, CMOs and other types of mortgage-backed
securities may be subject to special risks that are described under
"Description of Investment Practices."
GLOBAL STOCK FUNDS
The Global Stock Funds offer investors the opportunity to participate in the
potential for long-term capital appreciation available from investment in
foreign securities.
ALLIANCE NEW EUROPE FUND
ALLIANCE NEW EUROPE FUND seeks long-term capital appreciation through
investment primarily in the equity securities of
34
companies based in Europe. The Fund intends to invest substantially all of its
assets in the equity securities of European companies and has a fundamental
policy of normally investing at least 65% of its total assets in these
securities. The Fund may invest up to 35% of its total assets in high-quality
U.S. Dollar or foreign currency denominated fixed-income securities issued or
guaranteed by European governmental entities, or by European or multinational
companies or supranational organizations.
The Fund expects that it will invest primarily in the more established and
liquid markets in Europe. However, the Fund may also invest in the
lesser-developed markets in Europe including those countries in Southern and
Eastern Europe, as well as the former communist countries in the Soviet Union.
The Fund does not expect to invest more than 20% of its total assets in these
developing markets under normal circumstances or more than 10% of its total
assets in issuers based in any one of these developing countries.
In managing the Fund, Alliance utilizes a disciplined approach to invest on a
bottom-up basis in those companies exhibiting the best available combination of
sustainable fundamental growth at a reasonable price. Alliance's approach
emphasizes proprietary qualitative and quantitative inputs provided by its
in-house analysts. Internal analysis focuses primarily on large to upper-medium
capitalization stocks (those with a market value of $3 billion and above).
Country and industry exposures are by-products of the stock selection process.
Alliance does not actively manage currency exposures for this Fund but may
hedge underlying exposures back to US Dollars when conditions are perceived to
be extreme.
Stock selection focuses on companies in growth industries that exhibit
above-average growth based on a competitive or sustainable advantage based on
brand, technology, or market share. A stock is typically sold when its relative
fundamentals are no longer as attractive as other investment opportunities
available to the Fund. This may be a function of the stock having achieved its
fair market value, deterioration in fundamentals relative to Alliance's
expectations, or because the management team loses confidence in company
management.
The Fund diversifies its investments among a number of European countries and
normally invests in companies based in at least three of these countries. The
Fund's investment policies do not require that the Fund concentrate its
investments in any single country. However, these policies also do not prevent
the Fund from concentrating its investments in a single country and in recent
years the Fund has invested more than 25% of its total assets in the United
Kingdom. The Fund may invest without limit in any single European country.
During such times, the Fund would be subject to a correspondingly greater risk
of loss due to adverse political or regulatory developments, or an economic
downturn, within that country.
The Fund also may:
- - invest up to 20% of its total assets in RIGHTS OR WARRANTS;
- - invest in DEPOSITARY RECEIPTS or other securities convertible into
securities of companies based in European countries, debt securities of
supranational entities denominated in the Euro or the currency of any European
country, debt securities denominated in the Euro of an issuer in a European
country (including supranational issuers), and "semi-governmental securities";
- - purchase and sell FORWARD CONTRACTS;
- - write covered call or put OPTIONS and sell and purchase exchange-traded
put and call options, including exchange-traded index options;
- - enter into financial FUTURES CONTRACTS, including contracts for the
purchase or sale for future delivery of foreign currencies and futures
contracts based on stock indices, and purchase and write options on futures
contracts;
- - purchase and write put options on foreign currencies traded on securities
exchanges or boards of trade or over-the-counter;
- - enter into STANDBY COMMITMENT AGREEMENTS;
- - make SECURED LOANS OF PORTFOLIO SECURITIES of up to 30% of its total
assets; and
- - enter into FORWARD COMMITMENTS.
The Fund's investments in non-U.S. countries and smaller countries may have
more risk because they tend to be more volatile than the overall stock market.
To the extent the Fund invests a substantial amount of its assets in a
particular European country, your investment is subject to the risk that market
changes or other events affecting that country may have a more significant
effect on the Fund's net asset value. The Fund's investments in U.S. Dollar- or
foreign currency-denominated fixed-income securities have interest rate and
credit risk.
ALLIANCE WORLDWIDE PRIVATIZATION FUND
ALLIANCE WORLDWIDE PRIVATIZATION FUND seeks long-term capital appreciation. As
a fundamental policy, the Fund invests at least 65% of its total assets in
equity securities issued by enterprises that are undergoing, or have undergone,
privatization (as described below), although normally significantly more of its
assets will be invested in such securities. The balance of its investments will
include securities of companies believed by Alliance to be beneficiaries of
privatizations. The Fund is designed for investors desiring to take advantage
of investment opportunities, historically inaccessible to U.S. individual
investors, that are created by privatizations of state enterprises in both
established and developing economies. These companies include those in Western
Europe and Scandinavia, Australia, New Zealand, Latin America, Asia, Eastern
and Central Europe and, to a lesser degree, Canada and the United States.
The Fund's investments in enterprises undergoing privatization may comprise
three distinct situations. First, the Fund may invest in the initial offering
of publicly traded equity securities (an "initial equity offering") of a
government- or state-owned or controlled company or enterprise (a "state
enterprise"). Secondly, the Fund may purchase securities of a current or
35
former state enterprise following its initial equity offering. Finally, the
Fund may make privately negotiated purchases of stock or other equity interests
in a state enterprise that has not yet conducted an initial equity offering.
Alliance believes that substantial potential for capital appreciation exists as
privatizing enterprises rationalize their management structures, operations and
business strategies in order to compete efficiently in a market economy and the
Fund will thus emphasize investments in such enterprises.
Privatization is a process through which the ownership and control of companies
or assets changes in whole or in part from the public sector to the private
sector. Through privatization a government or state divests or transfers all or
a portion of its interest in a state enterprise to some form of private
ownership. Governments and states with established economies, including France,
Great Britain, Germany, and Italy, and those with developing economies,
including Argentina, Mexico, Chile, Indonesia, Malaysia, Poland, and Hungary,
are engaged in privatizations. The Fund will invest in any country believed to
present attractive investment opportunities.
A major premise of the Fund's approach is that the equity securities of
privatized companies offer opportunities for significant capital appreciation.
In particular, because privatizations are integral to a country's economic
restructuring, securities sold in initial equity offerings often are priced
attractively to secure the issuer's successful transition to private sector
ownership. Additionally, these enterprises often dominate their local markets
and typically have the potential for significant managerial and operational
efficiency gains.
The Fund diversifies its investments among a number of countries and normally
invests in issuers based in at least four, and usually considerably more,
countries. The Fund may maintain no more than 15% of its total assets in
issuers in any one foreign country, except that the Fund may invest up to 30%
of its total assets in issuers in any one of France, Germany, Great Britain,
Italy and Japan. The Fund may invest all of its assets within a single region
of the world.
The Fund may invest up to 35% of its total assets in debt securities and
convertible debt securities. The Fund may invest up to 5% of its net assets in
lower-rated securities. The Fund will not retain a non-convertible security
that is downgraded below C or determined by Alliance to have undergone similar
credit quality deterioration following purchase.
The Fund also may:
- - invest up to 20% of its total assets in RIGHTS OR WARRANTS;
- - write covered call and put OPTIONS, purchase put and call options on
securities of the types in which it is permitted to invest and on
exchange-traded index options, and write uncovered options for cross-hedging
purposes;
- - 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, foreign government
securities, or common stock, and may purchase and write options on future
contracts;
- - purchase and write put and call OPTIONS on foreign currencies for hedging
purposes;
- - purchase or sell FORWARD CONTRACTS;
- - enter into FORWARD COMMITMENTS;
- - enter into STANDBY COMMITMENT AGREEMENTS;
- - enter into CURRENCY SWAPS for hedging purposes;
- - make SHORT SALES of securities or maintain a short position;
- - make SECURED LOANS OF PORTFOLIO SECURITIES of up to 30% of its total
assets; and
- - enter into REPURCHASE AGREEMENTS for U.S. Government securities.
Investments in non-U.S. companies and smaller companies may have more risk
because they tend to be more volatile than the overall stock market. The Fund's
investments in debt securities and convertible securities have interest risk
and credit risk.
ALLIANCE INTERNATIONAL PREMIER GROWTH FUND
ALLIANCE INTERNATIONAL PREMIER GROWTH FUND seeks long-term capital appreciation
by investing predominately in the equity securities of a limited number of
carefully selected non-U.S. companies that are judged likely to achieve
superior earnings growth. As a matter of fundamental policy, the Fund will
invest under normal circumstances at least 85% of its total assets in equity
securities. The Fund makes investments based upon their potential for capital
appreciation. Current income is incidental to that objective.
In the main, the Fund's investments will be in comparatively large,
high-quality companies. Normally, about 40 companies will be represented in the
Fund's portfolio, and the 30 most highly regarded of these companies usually
will constitute approximately 70%, and often more, of the Fund's net assets.
The Fund thus differs from more typical international equity mutual funds by
focusing on a relatively small number of intensively researched companies. The
Fund is designed for investors seeking to accumulate capital over time. Because
of market risks inherent in any investment, the selection of securities on the
basis of their appreciation possibilities cannot ensure against possible loss
in value. There is, of course, no assurance that the Fund's investment
objective will be met.
Alliance expects the market capitalization of the companies represented in the
Fund's portfolio will generally be in excess of $10 billion.
Within the investment framework of the Fund, Alliance's Large Cap Growth Group,
headed by Alfred Harrison, Alliance's Vice Chairman, has responsibility for
managing the Fund's portfolio. As discussed below, in selecting the Fund's
portfolio investments, Alliance's Large Cap Growth Group will follow a
structured, disciplined research and investment process that is essentially
similar to that which it employs in managing the PREMIER GROWTH FUND.
36
In managing the Fund's assets, Alliance's investment strategy will emphasize
stock selection and investment in the securities of a limited number of
issuers. Alliance depends heavily upon the fundamental analysis and research of
its large global equity research team situated in numerous locations around the
world. Its global equity analysts follow a research universe of approximately
900 companies. As one of the largest multinational investment management firms,
Alliance has access to considerable information concerning the companies in its
research universe, an in-depth understanding of the products, services, markets
and competition of these companies, and a good knowledge of their management.
Research emphasis is placed on the identification of companies whose superior
prospective earnings growth is not fully reflected in current market valuations.
Alliance constantly adds to and deletes from this universe as fundamentals and
valuations change. Alliance's global equity analysts rate companies in three
categories. The performance of each analyst's ratings is an important
determinant of his or her incentive compensation. The equity securities of
"one-rated" companies are expected to significantly outperform the local market
in local currency terms. All equity securities purchased for the Fund's
portfolio will be selected from the universe of approximately 100 "one-rated"
companies. As noted above, the Fund usually invests approximately 70% of its
net assets in approximately 30 of the most highly regarded of these companies.
The Fund's portfolio emphasis upon particular industries or sectors will be a
by-product of the stock selection process rather than the result of assigned
targets or ranges.
The Fund diversifies its investments among at least four, and usually
considerably more, countries. No more than 15% of the Fund's total assets will
be invested in issuers in any one foreign country, except that the Fund may
invest up to 25% of its total assets in issuers in each of Canada, France,
Germany, Italy, Japan, The Netherlands, Switzerland, and the United Kingdom.
Within these limits, geographic distribution of the Fund's investments among
countries or regions also will be a product of the stock selection process
rather than a predetermined allocation. To the extent that the Fund
concentrates its assets within one region, the Fund may be subject to any
special risks associated with that region. While the Fund may engage in
currency hedging programs in periods in which Alliance perceives extreme
exchange rate risk, the Fund normally will not make significant use of currency
hedging strategies.
In the management of the Fund's investment portfolio, Alliance will seek to
utilize market volatility judiciously (assuming no change in company
fundamentals) to adjust the Fund's portfolio positions. To the extent
consistent with local market liquidity considerations, the Fund will strive to
capitalize on apparently unwarranted price fluctuations, both to purchase or
increase positions on weakness and to sell or reduce overpriced holdings. Under
normal circumstances, the Fund will remain substantially fully invested in
equity securities and will not take significant cash positions for market
timing purposes. Rather, through "buying into declines" and "selling into
strength," Alliance seeks superior relative returns over time.
The Fund also may:
- - invest up to 20% of its total assets in CONVERTIBLE SECURITIES;
- - invest up to 20% of its total assets in RIGHTS OR WARRANTS;
- - write covered call and put OPTIONS, purchase put and call options on
securities of the types in which it is permitted to invest and on
exchange-traded index options, and write uncovered options for cross hedging
purposes;
- - 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, foreign government
securities, or common stock and may purchase and write options on such future
contracts;
- - purchase and write put and call OPTIONS on foreign currencies for hedging
purposes;
- - purchase or sell FORWARD CONTRACTS;
- - enter into STANDBY COMMITMENT AGREEMENTS;
- - enter into FORWARD COMMITMENTS;
- - enter into CURRENCY SWAPS for hedging purposes;
- - make SHORT SALES of securities or maintain short positions of no more than
5% of its net assets as collateral for short sales;
- - make SECURED LOANS OF PORTFOLIO SECURITIES of up to 30% of its total
assets; and
- - enter into REPURCHASE AGREEMENTS for U.S. Government securities.
Because the Fund invests in a smaller number of securities than many other
equity funds, your investment also has the risk that changes in the value of a
single security may have a more significant effect, either negative or
positive, on the Fund's net asset value.
ALLIANCE GLOBAL SMALL CAP FUND
ALLIANCE GLOBAL SMALL CAP FUND seeks long-term growth of capital through
investment in a global portfolio of the equity securities of selected companies
with relatively small market capitalization. The Fund's portfolio emphasizes
companies with market capitalizations that would have placed them (when
purchased) in about the smallest 20% by market capitalization of actively
traded U.S. companies, or market capitalizations of up to about $1.5 billion.
Because the Fund applies the U.S. size standard on a global basis, its foreign
investments might rank above the lowest 20%, and, in fact, might in some
countries rank among the largest, by market capitalization in local markets.
Normally, the Fund invests at least 65% of its assets in equity securities of
these smaller capitalization companies. These companies are located in at least
three countries, one of which may be the U.S. The Fund may invest up to 35% of
its total assets in securities of companies whose market capitalizations exceed
the Fund's size standard. The Fund's
37
portfolio securities may be listed on a U.S. or foreign exchange or traded
over-the-counter.
The Fund also may:
- - invest up to 20% of its total assets in WARRANTS to purchase equity
securities;
- - invest in DEPOSITARY RECEIPTS or other securities representing securities
of companies based in countries other than the U.S.;
- - purchase or sell FORWARD FOREIGN CURRENCY CONTRACTS;
- - write covered call OPTIONS on its securities of up to 15% of its total
assets, and purchase exchange-traded call and put options, including put
options on market indices of up to, for all options, 10% of its total assets;
and
- - make SECURED LOANS OF PORTFOLIO SECURITIES of up to 30% of its total
assets.
One of the Fund's principal risks is its investments in smaller capitalization
companies. Alliance believes that smaller capitalization companies often have
sales and earnings growth rates exceeding those of larger companies and that
these growth rates tend to cause more rapid share price appreciation. Investing
in smaller capitalization stocks, however, involves greater risk than is
associated with larger, more established companies. For example, smaller
capitalization companies often have limited product lines, markets, or
financial resources. They may be dependent for management on one or a few key
persons and can be more susceptible to losses and risks of bankruptcy. Their
securities may be thinly traded (and therefore have to be sold at a discount
from current market prices or sold in small lots over an extended period of
time), may be followed by fewer investment research analysts, and may be
subject to wider price swings. For these reasons, the Fund's investments may
have a greater chance of loss than investments in securities of larger
capitalization companies. In addition, transaction costs in small
capitalization stocks may be higher than in those of larger capitalization
companies.
The Fund's investments in non-U.S. companies and in smaller companies will be
more volatile and may differ substantially from the overall U.S. market.
ALLIANCE INTERNATIONAL FUND
ALLIANCE INTERNATIONAL FUND seeks a total return on its assets from long-term
growth of capital and from income primarily through a broad portfolio of
marketable securities of established non-U.S. companies, companies
participating in foreign economies with prospects for growth, including U.S.
companies having their principal activities and interests outside the U.S. and
foreign government securities. Normally, the Fund will invest more than 80% of
its assets in these types of companies.
The Fund expects to invest primarily in common stocks of established non-U.S.
companies that Alliance believes have potential for capital appreciation or
income or both, but the Fund is not required to invest exclusively in common
stocks or other equity securities. The Fund may invest in any other type of
investment grade security, including convertible securities, as well as in
warrants, or obligations of the U.S. or foreign governments and their political
subdivisions.
The Fund intends to diversify its investments broadly among countries and
normally invests in at least three foreign countries, although it may invest a
substantial portion of its assets in one or more of these countries. The Fund
may invest in companies, wherever organized, that Alliance judges have their
principal activities and interests outside the U.S. These companies may be
located in developing countries, which involves exposure to economic structures
that are generally less diverse and mature and to political systems that can be
expected to have less stability than those of developed countries. The Fund
currently does not intend to invest more than 10% of its total assets in
companies in, or governments of, developing countries.
The Fund also may:
- - purchase or sell FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS;
- - write covered call or put OPTIONS, sell and purchase U.S. or foreign
exchange-listed put and call options, including exchange-traded index options;
- - enter into FINANCIAL FUTURES CONTRACTS, including contracts for the
purchase or sale for future delivery of foreign currencies and stock index
futures, and purchase and write put and call options on futures contracts
traded on U.S. or foreign exchanges or over-the-counter;
- - purchase and write put OPTIONS on foreign currencies traded on securities
exchanges or boards of trade or over-the-counter;
- - make LOANS OF PORTFOLIO SECURITIES of up to 30% of its total assets; and
- - enter into REPURCHASE AGREEMENTS of up to seven days' duration for up to
10% of the Fund's total assets.
Investments in non-U.S. countries may have more risk because they tend to be
more volatile than the U.S. stock market. To the extent that the Fund invests a
substantial amount of its assets in a particular foreign country, an investment
in the Fund has the risk that market changes or other events affecting that
country may have a more significant effect, either negative or positive, on the
Fund's net asset value.
ALLIANCE GREATER CHINA '97 FUND
ALLIANCE GREATER CHINA '97 FUND is a non-diversified investment company that
seeks long-term capital appreciation through investment of at least 80% of its
total assets in equity securities issued by Greater China companies. 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.
38
In recent years, China, Hong Kong and Taiwan have each experienced a high level
of real economic growth, although growth is expected to slow in 1999. This
growth has resulted 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.
With China's growth has come an increasing direct and indirect economic
involvement of all three Greater China countries. For some time, Hong Kong, a
world financial and trade center in its own right, with a large stock exchange
and offices of many of the world's multinational companies, has been the
gateway to trade with and foreign investment in China. With the 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 continue to intensify, 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 20 largest
and its foreign exchange reserves are the third largest in the world 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 over the long term 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. Appendix A has additional
information about the Greater China countries.
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 invest only in
investment grade securities. The Fund will sell a security that is downgraded
below investment grade or is determined by Alliance to have undergone a similar
credit quality deterioration, the Fund will sell of that security.
The Fund also may:
- - invest up to 25% of its net assets in the CONVERTIBLE SECURITIES;
- - invest up to 20% of its net assets in RIGHTS OR WARRANTS;
- - invest in DEPOSITARY RECEIPTS, instruments of supranational entities
denominated in the currency of any country, securities of multinational
companies and "semi-governmental securities";
- - invest up to 25% of its net assets in EQUITY-LINKED DEBT SECURITIES with
the objective of realizing capital appreciation;
- - invest up to 20% of its net assets in LOANS AND OTHER DIRECT DEBT
SECURITIES;
- - write covered call and put OPTIONS, sell or purchase exchange-traded index
options, and write uncovered options for cross-hedging purposes;
- - 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;
- - purchase and write put and call OPTIONS on foreign currencies for hedging
purposes;
- - purchase or sell FORWARD CONTRACTS;
- - enter into INTEREST RATE SWAPS and purchase or sell INTEREST RATE CAPS and
FLOORS;
- - enter into FORWARD COMMITMENTS;
- - enter into STANDBY COMMITMENT AGREEMENTS;
- - enter into CURRENCY SWAPS for hedging purposes;
- - make SHORT SALES of securities or maintain a short position, in each case
only if AGAINST THE BOX;
- - make SECURED LOANS OF PORTFOLIO SECURITIES of up to 30% of its total
assets; and
- - enter into REPURCHASE AGREEMENTS for U.S. Government securities.
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.
39
The Fund's investments in Greater China companies will be significantly more
volatile and will differ from the overall U.S. market. Your investment also has
the risk that market changes or other events affecting the Greater China
countries may have a more significant effect on the Fund's net asset value. In
addition, the Fund is "non-diversified," meaning that it invests its assets in
a smaller number of companies than many other international funds. As a result,
changes in the value of a single security may have a more significant effect,
either negative or positive, on the Fund's net asset value.
ALLIANCE ALL-ASIA INVESTMENT FUND
ALLIANCE ALL-ASIA INVESTMENT FUND'S investment objective is long-term capital
appreciation. The Fund invests at least 65% of its total assets in equity
securities (for the purposes of this investment policy, rights, warrants, and
options to purchase common stocks are not deemed to be equity securities),
preferred stocks and equity-linked debt securities issued by Asian companies.
The Fund may invest up to 35% of its total assets in debt securities issued or
guaranteed by Asian companies or by Asian governments, their agencies or
instrumentalities. The Fund will invest at least 80% of its total assets in
Asian companies and Asian debt securities, but also may invest in securities
issued by non-Asian issuers. The Fund expects to invest, from time to time, a
significant portion, which may be in excess of 50%, of its assets in equity
securities of Japanese companies.
In the past decade, Asian countries generally have experienced a high level of
real economic growth due to political and economic changes, including foreign
investment and reduced government intervention in the economy. Alliance
believes that certain conditions exist in Asian countries that create the
potential for continued rapid economic growth. These conditions include
favorable demographics and competitive wage rates, increasing levels of foreign
direct investment, rising per capita incomes and consumer demand, a high
savings rate, and numerous privatization programs. Asian countries also are
becoming more industrialized and are increasing their intra-Asian exports while
reducing their dependence on Western export demand. Alliance believes that
these conditions are important to the long-term economic growth of Asian
countries.
As the economies of many Asian countries move through the "emerging market"
stage, thus increasing the supply of goods, services and capital available to
less developed Asian markets and helping to spur economic growth in those
markets, the potential is created for many Asian companies to experience rapid
growth. In addition, many Asian companies that have securities listed on
exchanges in more developed Asian countries will be participants in the rapid
economic growth of the lesser-developed countries. These companies generally
offer the advantages of more experienced management and more developed market
regulation.
As their economies have grown, the securities markets in Asian countries have
also expanded. New exchanges have been created and the number of listed
companies, annual trading volume, and overall market capitalization have
increased significantly. Additionally, new markets continue to open to foreign
investments. The Fund also offers investors the opportunity to access
relatively restricted markets. Alliance believes that investment opportunities
in Asian countries will continue to expand.
The Fund will invest in companies believed to possess rapid growth potential.
Thus, the Fund will invest in smaller, emerging companies, but will also invest
in larger, more established companies in such growing economic sectors as
capital goods, telecommunications, and consumer services.
The Fund will primarily invest in investment grade debt securities, but may
maintain no more than 5% of its net assets in lower-rated securities,
lower-rated loans, and other lower-rated direct debt instruments. The Fund will
not retain a security that is downgraded below C or determined by Alliance to
have undergone similar credit quality deterioration following purchase.
The Fund also may:
- - invest up to 25% of its net assets in the CONVERTIBLE SECURITIES;
- - invest up to 20% of its net assets in RIGHTS OR WARRANTS;
- - invest in DEPOSITARY RECEIPTS, instruments of supranational entities
denominated in the currency of any country, securities of multinational
companies and "semi-governmental securities";
- - invest up to 25% of its net assets in EQUITY-LINKED DEBT SECURITIES with
the objective of realizing capital appreciation;
- - invest up to 25% of its net assets in LOANS AND OTHER DIRECT DEBT
INSTRUMENTS;
- - write covered call and put OPTIONS, sell or purchase exchange-traded index
options, and write uncovered options for cross-hedging purposes;
- - 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;
- - purchase and write put and call OPTIONS on foreign currencies for hedging
purposes;
- - purchase or sell FORWARD CONTRACTS;
- - enter into INTEREST RATE SWAPS and purchase or sell INTEREST RATE CAPS and
FLOORS;
- - enter into FORWARD COMMITMENTS;
- - enter into STANDBY COMMITMENT AGREEMENTS;
- - enter into CURRENCY SWAPS for hedging purposes;
- - make SHORT SALES of securities or maintain a short position, in each case
only if AGAINST THE BOX;
- - make SECURED LOANS OF PORTFOLIO SECURITIES of up to 30% of its total
assets; and
40
- - enter into REPURCHASE AGREEMENTS for U.S. Government securities.
The Fund's investments in Asian and Pacific region countries will be
significantly more volatile and may differ significantly from the overall U.S.
market. To the extent the Fund invests a substantial amount of its assets in
Japanese companies, your investment has the risk that market changes or other
events affecting that country may have a more significant effect on the Fund's
net asset value. The Fund's investments in debt securities have interest rate
and credit risk.
ALLIANCE GLOBAL ENVIRONMENT FUND
ALLIANCE GLOBAL ENVIRONMENT FUND is a non-diversified investment company that
seeks long-term capital appreciation through investment in equity securities of
Eligible Companies. For purposes of the Fund's investment objective and
investment policies, "equity securities" are common stocks (but not preferred
stocks), rights or warrants to subscribe for or purchase common stocks, and
preferred stocks or debt securities that are convertible into common stocks
without the payment of any further consideration.
The Fund invests in two categories of Eligible Companies--Environmental
Companies and Beneficiary Companies. The Fund may invest in a company with a
broadly diversified business only a part of which provides such products,
processes, or services, when Alliance believes that these products, processes
or services will yield a competitive advantage that significantly enhances the
issuer's growth prospects. As a matter of fundamental policy, the Fund will,
under normal circumstances, invest substantially all of its total assets in
equity securities of Eligible Companies.
A major premise of the Fund's investment approach is that environmental
concerns will be a significant source of future growth opportunities, and that
Environmental Companies will see an increased demand for their systems and
services. Environmental Companies operate in the areas of pollution control,
clean energy, solid waste management, hazardous waste treatment and disposal,
pulp and paper recycling, waste-to-energy alternatives, biodegradable cartons,
packages, plastics and other products, remedial projects and emergency cleanup
efforts, manufacture of environmental supplies and equipment, the achievement
of purer air, groundwater and foods, and the detection, evaluation and
treatment of both existing and potential environmental problems including,
among others, air pollution and acid rain.
The environmental services industry generally is positively affected by
increasing governmental action intended to foster environmental protection. As
environmental regulations are developed and enforced, Environmental Companies
providing the means of compliance with such regulations are afforded
substantial opportunities for growth. Beneficiary Companies may also derive an
advantage to the extent that they have anticipated environmental regulation and
are therefore at a competitive advantage.
In the view of Alliance, increasing public and political awareness of
environmental concerns and resultant environmental regulations are long-term
phenomena that are driven by an emerging global consensus that environmental
protection is a vital and increasingly immediate priority. Alliance believes
that Eligible Companies based in the United States and other economically
developed countries will have increasing opportunities for earnings growth
resulting not only from an increased demand for their existing products or
services but also from innovative responses to changing regulations and
priorities and enforcement policies. Such opportunities will arise, in the
opinion of Alliance, not only within developed countries but also within many
economically developing countries, such as those of Eastern Europe and the
Pacific Rim. These countries lag well behind developed countries in the
conservation and efficient use of natural resources and in their implementation
of policies that protect the environment.
Alliance believes that global investing offers opportunities for superior
investment returns. The Fund spreads investment risk among the capital markets
of a number of countries and invests in equity securities of companies based in
at least three, and normally considerably more, such countries. The percentage
of the Fund's assets invested in securities of companies in a particular
country or denominated in a particular currency will vary in accordance with
Alliance's assessment of the appreciation potential of such securities and the
strength of that currency.
The Fund also may:
- - invest up to 20% of its total assets in WARRANTS to purchase equity
securities;
- - invest in DEPOSITARY RECEIPTS;
- - purchase and write put and call options on foreign currencies for hedging
purposes;
- - enter into FORWARD FOREIGN CURRENCY TRANSACTIONS for hedging purposes;
- - invest in CURRENCY FUTURES and options on such futures for hedging
purposes; and
- - make SECURED LOANS OF PORTFOLIO SECURITIES of up to 30% of its total
assets.
The Fund's investments in non-U.S. companies and in specific types of companies
that provide environmental services will be more volatile and may differ
substantially from the overall market. The Fund's investments also have the
risk that government regulations or other action could negatively affect the
business of environmental companies.
DESCRIPTION OF INVESTMENT PRACTICES
This section describes the Funds' investment practices and associated risks.
Unless otherwise noted, a Fund's use of any of these practices was specified in
the previous section.
ASSET-BACKED SECURITIES. Asset-backed securities (unrelated to first mortgage
loans) represent fractional interests in pools of leases, retail installment
loans, revolving credit receivables, and other payment obligations, both
secured and unsecured. These assets are generally held by a trust and payments
of principal
41
and interest or interest only are passed through monthly or quarterly to
certificate holders and may be guaranteed up to certain amounts by letters of
credit issued by a financial institution affiliated or unaffiliated with the
trustee or originator of the trust.
Like mortgages underlying mortgage-backed securities, underlying automobile
sales contracts or credit card receivables are subject to prepayment, which may
reduce the overall return to certificate holders. Certificate holders may also
experience delays in payment on the certificates if the full amounts due on
underlying sales contracts or receivables are not realized by the trust because
of unanticipated legal or administrative costs of enforcing the contracts or
because of depreciation or damage to the collateral (usually automobiles)
securing certain contracts, or other factors.
CONVERTIBLE SECURITIES. Prior to conversion, convertible securities have the
same general characteristics as non-convertible debt securities, which
generally provide a stable stream of income with yields that are generally
higher than those of equity securities of the same or similar issuers. The
price of a convertible security will normally vary with changes in the price of
the underlying equity security, although the higher yield tends to make the
convertible security less volatile than the underlying equity security. As with
debt securities, the market value of convertible securities tends to decrease
as interest rates rise and increase as interest rates decline. While
convertible securities generally offer lower interest or dividend yields than
non-convertible debt securities of similar quality, they offer investors the
potential to benefit from increases in the market price of the underlying
common stock. Convertible debt securities that are rated Baa or lower by
Moody's or BBB or lower by S&P, Duff & Phelps or Fitch and comparable unrated
securities as determined by Alliance may share some or all of the risks of
non-convertible debt securities with those ratings.
CURRENCY SWAPS. Currency swaps involve the individually negotiated exchange by
a 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. A Fund will not enter into any currency swap
unless the credit quality of the unsecured senior debt or the claims-paying
ability of the counterparty is rated in the highest rating category of at least
one nationally recognized rating organization at the time of entering into the
transaction. If there is a default by the counterparty to the transaction, the
Fund will have contractual remedies under the transaction agreements.
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 issued by an 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 an 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, investments in depositary receipts of either type are deemed to be
investments in the underlying securities, except with respect to ALLIANCE
GROWTH FUND, where investments in ADRs are deemed to be investments in
securities issued by U.S. issuers and those in GDRs and other types of
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. A European Currency Unit is a basket of specified
amounts of the currencies of the member states of the European Economic
Community. "Semi-governmental securities" are securities issued by entities
owned by either a national, state or equivalent government or are obligations
of one of such government jurisdictions that are not backed by its full faith
and credit and general taxing powers.
EQUITY-LINKED DEBT SECURITIES. Equity-linked debt securities are securities on
which the issuer is obligated to pay interest and/or principal that is linked
to the performance of a specified index of equity securities. The interest or
principal payments may be significantly greater or less than payment
obligations for 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 a Fund. As with any debt securities, the values of
equity-linked debt securities will generally vary inversely with changes in
interest rates. A 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.
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 a Fund may negotiate settlements beyond
42
two months. Securities purchased or sold under a forward commitment are subject
to market fluctuations and no interest or dividends accrue to the purchaser
prior to the settlement date.
The use of forward commitments enables a Fund to protect against anticipated
changes in interest rates and prices. For instance, in periods of rising
interest rates and falling bond prices, a Fund might sell securities in its
portfolio on a forward commitment basis to limit its exposure to falling
prices. In periods of falling interest rates and rising bond prices, a Fund
might sell a security in its portfolio and purchase the same or a similar
security on a when-issued or forward commitment basis to obtain the benefit of
currently higher cash yields. If, however, Alliance were to forecast
incorrectly the direction of interest rate movements, a Fund might be required
to complete such when-issued or forward transactions at prices inferior to the
then current market values. When-issued securities and forward commitments may
be sold prior to the settlement date, but a Fund enters into when-issued and
forward commitments only with the intention of actually receiving securities or
delivering them, as the case may be. If a Fund chooses to dispose of the right
to acquire a when-issued security prior to its acquisition or dispose of its
right to deliver or receive against a forward commitment, it may incur a gain
or loss. Any significant commitment of Fund assets to the purchase of
securities on a "when, as and if issued" basis may increase the volatility of
the Fund's net asset value. No forward commitments will be made by ALLIANCE
HEALTH CARE FUND, ALLIANCE UTILITY INCOME FUND, ALLIANCE REAL ESTATE INVESTMENT
FUND, ALLIANCE NEW EUROPE FUND, ALLIANCE WORLDWIDE PRIVATIZATION FUND, ALLIANCE
INTERNATIONAL PREMIER GROWTH FUND, ALLIANCE GREATER CHINA '97 FUND or ALLIANCE
ALL-ASIA INVESTMENT FUND if, as a result, the Fund's aggregate commitments
under the transactions would be more than 30% of its total assets. In the event
the other party to a forward commitment transaction were to default, a Fund
might lose the opportunity to invest money at favorable rates or to dispose of
securities at favorable prices.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS. A Fund may purchase or sell
forward foreign currency exchange contracts to minimize the risk of adverse
changes in the relationship between the U.S. Dollar and other currencies. A
forward contract is an obligation to purchase or sell a specific currency for
an agreed price at a future date, and is individually negotiated and privately
traded.
A Fund may enter into a forward contract, for example, when it enters into a
contract for the purchase or sale of a security denominated in a foreign
currency in order to "lock in" the U.S. Dollar price of the security
("transaction hedge"). A Fund will not engage in transaction hedges with
respect to the currency of a particular country to an extent greater than the
aggregate amount of the Fund's transactions in that currency. When a Fund
believes that a foreign currency may suffer a substantial decline against the
U.S. Dollar, it may enter into a forward sale contract to sell an amount of
that foreign currency approximating the value of some or all of the Fund's
portfolio securities denominated in such foreign currency, or when the Fund
believes that the U.S. Dollar may suffer a substantial decline against a
foreign currency, it may enter into a forward purchase contract to buy that
foreign currency for a fixed dollar amount ("position hedge"). A Fund will not
position hedge with respect to a particular currency 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 currency. Instead of
entering into a position hedge, a Fund may, in the alternative, enter into a
forward contract to sell a different foreign currency for a fixed U.S. dollar
amount where the Fund believes that the U.S. Dollar value of the currency to be
sold pursuant to the forward contract will fall whenever there is a decline in
the U.S. Dollar value of the currency in which portfolio securities of the Fund
are denominated ("cross-hedge"). Unanticipated changes in currency prices may
result in poorer overall performance for the Fund than if it had not entered
into such forward contracts.
Hedging against a decline in the value of a currency does not eliminate
fluctuations in the prices of portfolio securities or prevent losses if the
prices of such securities decline. Such transactions also preclude the
opportunity for gain if the value of the hedged currency should rise. Moreover,
it may not be possible for a Fund to hedge against a devaluation that is so
generally anticipated that the Fund is not able to contract to sell the
currency at a price above the devaluation level it anticipates. ALLIANCE NEW
EUROPE FUND, ALLIANCE GLOBAL SMALL CAP FUND and ALLIANCE INTERNATIONAL FUND
will not enter into a forward contract with a term of more than one year or if,
as a result, more than 50% of its total assets would be committed to such
contracts. ALLIANCE NEW EUROPE FUND'S, ALLIANCE GLOBAL SMALL CAP FUND'S and
ALLIANCE INTERNATIONAL FUND'S investments in forward contracts will be limited
to hedging involving either specific transactions or portfolio positions.
ALLIANCE GROWTH FUND also may purchase and sell foreign currency on a spot
basis.
ILLIQUID SECURITIES. The Funds will limit their investments in illiquid
securities to no more than 15% of their net assets, except the limit is 10% for
ALLIANCE HEALTH CARE FUND, ALLIANCE INTERNATIONAL FUND, ALLIANCE TECHNOLOGY
FUND, ALLIANCE QUASAR FUND, ALLIANCE NEW EUROPE FUND, and ALLIANCE GLOBAL SMALL
CAP FUND and 5% for THE ALLIANCE FUND and ALLIANCE GROWTH FUND. Illiquid
securities generally include: (i) direct placements or other securities that
are subject to legal or contractual restrictions on resale or for which there
is no readily available market (E.G., when trading in the security is suspended
or, in the case of unlisted securities, when market makers do not exist or will
not entertain bids or offers), including many individually negotiated currency
swaps and any assets used to cover currency swaps and most privately negotiated
investments in state enterprises that have not yet conducted an initial equity
offering, (ii) over-the-counter options and assets used to cover
over-the-counter options, and (iii) repurchase agreements not terminable within
seven days.
Because of the absence of a trading market for illiquid securities, a Fund may
not be able to realize their full value upon sale. Alliance will monitor the
liquidity of a Fund's investments in illiquid securities. Except with respect
to ALLIANCE
43
QUASAR FUND, Rule 144A securities will not be treated as "illiquid" for
purposes of this limit on investments.
A Fund that invests in securities for which there is no ready market may not be
able to readily sell such securities. Such securities are unlike securities
that are traded in the open market and can be expected to be sold immediately
if the market is adequate. The sale price of illiquid securities may be lower
or higher than Alliance's most recent estimate of their fair value. Generally,
less public information is available about the issuers of such securities than
about companies whose securities are traded on an exchange. To the extent that
these securities are foreign securities, there is no law in many of the
countries in which a Fund may invest similar to the Securities Act requiring an
issuer to register the sale of securities with a governmental agency or
imposing legal restrictions on resales of securities, either as to length of
time the securities may be held or manner of resale. However, there may be
contractual restrictions on resales of non-publicly traded foreign securities.
INTEREST RATE TRANSACTIONS (SWAPS, CAPS, AND FLOORS). Each Fund that may enter
into interest rate transactions expects to do so primarily to preserve a return
or spread on a particular investment or portion of its portfolio or to protect
against any increase in the price of securities the Fund anticipates purchasing
at a later date. The Funds do not intend to use these transactions in a
speculative manner.
Interest rate swaps involve the exchange by a 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 ALLIANCE UTILITY INCOME FUND, ALLIANCE GREATER CHINA
'97 FUND and ALLIANCE ALL-ASIA INVESTMENT 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.
A 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. A Fund will not enter into an interest rate swap, cap,
or floor transaction unless the unsecured senior debt or the claims-paying
ability of the other party is 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 were to incorrectly
forecast market values, interest rates and other applicable factors, the
investment performance of a 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 a
Fund that is permitted to enter into such transactions. These transactions do
not involve the delivery of securities or other underlying assets or principal.
Accordingly, the risk of loss with respect to interest rate transactions is
limited to the net amount of interest payments that a Fund is contractually
obligated to make. If the counterparty to an interest rate transaction
defaults, a Fund's risk of loss consists of the net amount of interest payments
that the Fund contractually is entitled to receive.
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 legal protection to a 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 a 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. Failure to receive scheduled interest or principal payments on
these types of investments could adversely affect a Fund's net asset value and
yield. Loans that are fully secured offer a 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. Making loans to 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 government issuers will
44
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 a Fund. For
example, if a loan is foreclosed, a 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, a 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 a Fund were determined to be
subject to the claims of the agent's general creditors, the Fund might incur
certain 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 a Fund may include letters of credit,
revolving credit facilities, or other standby financing commitments obligating
a Fund to pay additional cash on demand. These commitments may have the effect
of requiring a 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.
LOANS OF PORTFOLIO SECURITIES. The risk in lending portfolio securities, as
with other extensions of credit, consists of the possible loss of rights in the
collateral should the borrower fail financially. In determining whether to lend
securities to a particular borrower, Alliance will consider all relevant facts
and circumstances, including the creditworthiness of the borrower. While
securities are on loan, the borrower will pay the Fund any income from the
securities. The Fund may invest any cash collateral in portfolio securities and
earn additional income or receive an agreed-upon amount of income from a
borrower who has delivered equivalent collateral. Each Fund will have the right
to regain record ownership of loaned securities or equivalent securities in
order to exercise ownership rights such as voting rights, subscription rights
and rights to dividends, interest, or distributions. A Fund may pay reasonable
finders', administrative, and custodial fees in connection with a loan.
MORTGAGE-BACKED SECURITIES AND ASSOCIATED RISKS. Interest and principal
payments (including prepayments) on the mortgages underlying mortgage-backed
securities are passed through to the holders of the securities. As a result of
the pass-through of prepayments of principal on the underlying securities,
mortgage-backed securities are often subject to more rapid prepayment of
principal than their stated maturity would indicate. Prepayments occur when the
mortgagor on a mortgage prepays the remaining principal before the mortgage's
scheduled maturity date. Because the prepayment characteristics of the
underlying mortgages vary, it is impossible to predict accurately the realized
yield or average life of a particular issue of pass-through certificates.
Prepayments are important because of their effect on the yield and price of the
mortgage-backed securities. During periods of declining interest rates,
prepayments can be expected to accelerate and a Fund that invests in these
securities would be required to reinvest the proceeds at the lower interest
rates then available. Conversely, during periods of rising interest rates, a
reduction in prepayments may increase the effective maturity of the securities,
subjecting them to a greater risk of decline in market value in response to
rising interest rates. In addition, prepayments of mortgages underlying
securities purchased at a premium could result in capital losses.
Mortgage-Backed Securities include mortgage pass-through certificates and
multiple-class pass-through securities, such as REMIC pass-through
certificates, CMOs and stripped mortgage-backed securities ("SMBS"), and other
types of Mortgage-Backed Securities that may be available in the future.
GUARANTEED MORTGAGE PASS-THROUGH SECURITIES. ALLIANCE REAL ESTATE INVESTMENT
FUND may invest in guaranteed mortgage pass-through securities which represent
participation interests in pools of residential mortgage loans and are issued
by U.S. governmental or private lenders and guaranteed by the U.S. Government
or one of its agencies or instrumentalities, including but not limited to the
Government National Mortgage Association ("Ginnie Mae"), the Federal National
Mortgage Association ("Fannie Mae") and the Federal Home Loan Mortgage
Corporation ("Freddie Mac"). Ginnie Mae certificates are guaranteed by the full
faith and credit of the United States Government for timely payment of
principal and interest on the certificates. Fannie Mae certificates are
guaranteed by Fannie Mae, a federally chartered and privately-owned
corporation, for full and timely payment of principal and interest on the
certificates. Freddie Mac certificates are guaranteed by Freddie Mac, a
corporate instrumentality of the United States Government, for timely payment
of interest and the ultimate collection of all principal of the related
mortgage loans.
MULTIPLE-CLASS PASS-THROUGH SECURITIES AND COLLATERALIZED MORTGAGE OBLIGATIONS.
Mortgage-Backed Securities also include CMOs and REMIC pass-through or
participation certificates that may be issued by, among others, U.S. Government
agencies and instrumentalities as well as private lenders. CMOs and REMIC
certificates are issued in multiple classes and the principal of and interest
on the mortgage assets may be allocated among the several classes of CMOs or
REMIC certificates in various ways. Each class of CMOs or REMIC certificates,
often referred to as a "tranche," is issued at a specific adjustable or fixed
interest rate and must be fully retired no later than its final distribution
date. Generally, interest is paid or accrues on all classes of CMOs or REMIC
certificates on a monthly basis. ALLIANCE REAL ESTATE INVESTMENT FUND will not
invest in the lowest tranche of CMOs and REMIC certificates.
Typically, CMOs are collateralized by Ginnie Mae or Freddie Mac certificates
but also may be collateralized by other mortgage assets such as whole loans or
private mortgage pass-through securities. Debt service on CMOs is provided from
payments of
45
principal and interest on collateral of mortgaged assets and any reinvestment
income.
A REMIC is a CMO that qualifies for special tax treatment under the Code and
invests in certain mortgages primarily secured by interests in real property
and other permitted investments. Investors may purchase "regular" and
"residual" interest shares of beneficial interest in REMIC trusts, although
ALLIANCE REAL ESTATE INVESTMENT FUND does not intend to invest in residual
interests.
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 a Fund
is "covered" if the Fund owns the underlying security, has an absolute and
immediate right to acquire that security upon conversion or exchange of another
security it holds, or holds a call option on the underlying security with an
exercise price equal to or less than that of the call option it has written. A
put option written by a Fund is covered if the Fund holds a put option on the
underlying securities with an exercise price equal to or greater than that of
the put option it has written.
A call option is for cross-hedging purposes if a 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. A
Fund would write a call option for cross-hedging purposes, instead of writing a
covered call option, when the premium to be received from the cross-hedge
transaction would exceed that which would be received from writing a covered
call option, while at the same time achieving the desired hedge.
In purchasing an option, a Fund would be in a position to realize a gain if,
during the option period, the price of the underlying security increased (in
the case of a call) or decreased (in the case of a put) by an amount in excess
of the premium paid; otherwise the Fund would experience a loss equal to the
premium paid for the option.
If an option written by a Fund were exercised, the Fund would be obligated to
purchase (in the case of a put) or sell (in the case of a call) the underlying
security at the exercise price. The risk involved in writing an option is that,
if the option were exercised, the underlying security would then be purchased
or sold by the Fund at a disadvantageous price. Entering into a closing
transaction (i.e., by disposing of the option prior to its exercise) could
reduce these risks. A Fund retains the premium received from writing a put or
call option whether or not the option is exercised. The writing of covered call
options could result in increases in a Fund's portfolio turnover rate,
especially during periods when market prices of the underlying securities
appreciate.
ALLIANCE TECHNOLOGY FUND and ALLIANCE GLOBAL SMALL CAP FUND will not write a
call option if the premium to be received by the Fund would not produce an
annualized return of at least 15% of the then current market value of the
securities subject to the option (without giving effect to commissions, stock
transfer taxes and other expenses that are deducted from premium receipts).
Options purchased or written by a Fund in negotiated transactions are illiquid
and it may not be possible for the Fund to effect a closing transaction at an
advantageous time.
OPTIONS ON SECURITIES INDICES. An option on a securities index is similar to an
option on a security except that, rather than the right to take or make
delivery of a security at a specified price, an option on a securities index
gives the holder the right to receive, upon exercise of the option, an amount
of cash if the closing level of the chosen index is greater than (in the case
of a call) or less than (in the case of a put) the exercise price of the option.
OPTIONS ON FOREIGN CURRENCIES. As in the case of other kinds of options, the
writing of an option on a foreign currency constitutes only a partial hedge, up
to the amount of the premium received, and a Fund could be required to purchase
or sell foreign currencies at disadvantageous exchange rates and incur losses.
The purchase of an option on a foreign currency may constitute an effective
hedge against fluctuations in exchange rates although, in the event of rate
movements adverse to a Fund's position, it may forfeit the entire amount of the
premium plus related transaction costs. For Funds that may invest in options on
foreign currencies, see the Fund's SAI for further discussion of the use,
risks, and costs of options on foreign currencies.
FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS. A "sale" of a futures
contract means the acquisition of a contractual obligation to deliver the
securities or foreign currencies or other commodity called for by the contract
at a specified price on a specified date. A "purchase" of a futures contract
means the incurring of an obligation to acquire the securities, foreign
currencies or other commodity called for by the contract at a specified price
on a specified date. The purchaser of a futures contract on an index agrees to
take or make delivery of an amount of cash equal to the difference between a
specified dollar multiple of the value of the index on the expiration date of
the contract ("current contract value") and the price at which the contract was
originally struck. No physical delivery of the securities underlying the index
is made.
A Fund will purchase options on futures contracts written or purchased by a
Fund that are traded on U.S. or foreign exchanges or over-the-counter. These
investment techniques will be used only to hedge against anticipated future
changes in market conditions and interest or exchange rates which otherwise
might either adversely affect the value of the Fund's portfolio securities or
adversely affect the prices of securities which the Fund intends to purchase at
a later date.
No Fund will enter into any futures contracts or options on futures contracts
if immediately thereafter the market values of the outstanding futures
contracts of the Fund and the currencies and futures contracts subject to
outstanding options written by the Fund would exceed 50% of its total assets,
or in the case of ALLIANCE INTERNATIONAL PREMIER GROWTH FUND 100% of its total
assets. ALLIANCE PREMIER GROWTH FUND and ALLIANCE GROWTH AND
46
INCOME FUND may not purchase or sell a stock index future if immediately
thereafter more than 30% of its total assets would be hedged by stock index
futures. ALLIANCE PREMIER GROWTH FUND and ALLIANCE GROWTH AND INCOME FUND may
not purchase or sell a stock index future if, immediately thereafter, the sum
of the amount of margin deposits on the Fund's existing futures positions would
exceed 5% of the market value of the Fund's total assets.
REPURCHASE AGREEMENTS. A repurchase agreement arises when a buyer purchases a
security and simultaneously agrees to resell it to the vendor at an agreed-upon
future date, normally a day or a few days later. The resale price is greater
than the purchase price, reflecting an agreed-upon interest rate for the period
the buyer's money is invested in the security. Such agreements permit a Fund to
keep all of its assets at work while retaining "overnight" flexibility in
pursuit of investments of a longer-term nature. If a vendor defaults on its
repurchase obligation, a Fund would suffer a loss to the extent that the
proceeds from the sale of the collateral were less than the repurchase price.
If a vendor goes bankrupt, a Fund might be delayed in, or prevented from,
selling the collateral for its benefit. Alliance monitors the creditworthiness
of the vendors with which the Fund enters into repurchase agreements.
RIGHTS AND WARRANTS. A Fund will invest in rights or warrants only if Alliance
deems the underlying equity securities themselves appropriate for inclusion in
the Fund's portfolio. Rights and warrants entitle the holder to buy equity
securities at a specific price for a specific period of time. Rights are
similar to warrants except that they have a substantially shorter duration.
Rights and warrants may be considered more speculative than certain other types
of investments in that they do not entitle a holder to dividends or voting
rights with respect to the underlying securities nor do they represent any
rights in the assets of the issuing company. The value of a right or warrant
does not necessarily change with the value of the underlying security, although
the value of a right or warrant may decline because of a decrease in the value
of the underlying security, the passage of time or a change in perception as to
the potential of the underlying security, or any combination of these factors.
If the market price of the underlying security is below the exercise price of
the warrant on the expiration date, the warrant will expire worthless.
Moreover, a right or warrant ceases to have value if it is not exercised prior
to the expiration date.
SHORT SALES. A short sale is effected by selling a security that a Fund does
not own, or, if the Fund does own such security, it is not to be delivered upon
consummation of the sale. A short sale is "against the box" to the extent that
a Fund contemporaneously owns or has the right to obtain securities identical
to those sold short without payment. ALLIANCE UTILITY INCOME FUND, ALLIANCE
WORLDWIDE PRIVATIZATION FUND, ALLIANCE GREATER CHINA '97 FUND and ALLIANCE
ALL-ASIA INVESTMENT FUND, each 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, each of
those Funds may not make a short sale if as a result more than 10% of the
Fund's net assets would be held as collateral for short sales, except that
ALLIANCE REAL ESTATE INVESTMENT FUND, ALLIANCE GREATER CHINA '97 FUND and
ALLIANCE ALL-ASIA INVESTMENT FUND may not make a short sale if as a result more
than 25% of the Fund's net assets would be held as collateral for short sales.
If the price of the security sold short increases between the time of the short
sale and the time a Fund replaces the borrowed security, the Fund will incur a
loss; conversely, if the price declines, the Fund will realize a capital gain.
STANDBY COMMITMENT AGREEMENTS. Standby commitment agreements commit a Fund, for
a stated period of time, to purchase a stated amount of a security that may be
issued and sold to the Fund at the option of the issuer. The price and coupon
of the security are fixed at the time of the commitment. At the time of
entering into the agreement, the Fund is paid a commitment fee, regardless of
whether the security ultimately is issued, typically equal to approximately
0.5% of the aggregate purchase price of the security the Fund has committed to
purchase. A Fund will enter into such agreements only for the purpose of
investing in the security underlying the commitment at a yield and price
considered advantageous to the Fund and unavailable on a firm commitment basis.
Investments in standby commitments will be limited so that the aggregate
purchase price of the securities subject to the commitments will not exceed 25%
with respect to ALLIANCE REAL ESTATE INVESTMENT FUND and ALLIANCE NEW EUROPE
FUND, 50% with respect to ALLIANCE WORLDWIDE PRIVATIZATION FUND, ALLIANCE
INTERNATIONAL PREMIER GROWTH FUND, ALLIANCE GREATER CHINA '97 FUND and ALLIANCE
ALL-ASIA INVESTMENT FUND and 20% with respect to ALLIANCE UTILITY INCOME FUND,
of the Fund's assets at the time of making the commitment.
There is no guarantee that a security subject to a standby commitment will be
issued and the value of the security, if issued, on the delivery date may be
more or less than its purchase price. Since the issuance of the security
underlying the commitment is at the option of the issuer, a Fund will bear the
risk of capital loss in the event the value of the security declines and may
not benefit from an appreciation in the value of the security during the
commitment period if the issuer decides not to issue and sell the security to
the Fund.
ZERO-COUPON AND PAYMENT-IN-KIND BONDS. Zero-coupon bonds are issued at a
significant discount from their principal amount in lieu of paying interest
periodically. Payment-in-kind bonds allow the issuer to make current interest
payments on the bonds in additional bonds. Because zero-coupon bonds and
payment-in-kind bonds do not pay current interest in cash, their value is
generally subject to greater fluctuation in response to changes in market
interest rates than bonds that pay interest in cash currently. Both zero-coupon
and payment-in-kind bonds allow an issuer to avoid the need to generate cash to
meet current interest payments. These bonds may involve greater credit risks
than bonds paying interest currently. Although these bonds do not pay current
interest in cash, a Fund is nonetheless required to accrue interest income on
such
47
investments and to distribute such amounts at least annually to shareholders.
Thus, a Fund could be required at times to liquidate other investments in order
to satisfy its dividend requirements.
FUTURE DEVELOPMENTS. A Fund may, following written notice to its shareholders,
take advantage of other investment practices that are not currently
contemplated for use by the Fund, or are not available but may yet be
developed, to the extent such investment practices are consistent with the
Fund's investment objective and legally permissible for the Fund. Such
investment practices, if they arise, may involve risks that exceed those
involved in the activities described above.
GENERAL. The successful use of the investment practices described above draws
upon Alliance's special skills and experience and usually depends on Alliance's
ability to forecast price movements, interest rates, or currency exchange rate
movements correctly. Should interest rates, prices or exchange rates move
unexpectedly, a Fund may not achieve the anticipated benefits of the
transactions or may realize losses and thus be in a worse position than if such
strategies had not been used. Unlike many exchange-traded futures contracts and
options on futures contracts, there are no daily price fluctuation limits for
certain options and forward contracts, and adverse market movements could
therefore continue to an unlimited extent over a period of time. In addition,
the correlation between movements in the prices of futures contracts, options
and forward contracts and movements in the prices of the securities and
currencies hedged or used for cover will not be perfect and could produce
unanticipated losses.
A Fund's ability to dispose of its position in futures contracts, options, and
forward contracts depends on the availability of liquid markets in such
instruments. Markets in options and futures with respect to a number of types
of securities and currencies are relatively new and still developing, and there
is no public market for forward contracts. It is impossible to predict the
amount of trading interest that may exist in various types of futures
contracts, options, and forward contracts. If a secondary market does not exist
for an option purchased or written by a Fund, it might not be possible to
effect a closing transaction in the option (i.e., dispose of the option), with
the result that (i) an option purchased by the Fund would have to be exercised
in order for the Fund to realize any profit and (ii) the Fund may not be able
to sell currencies or portfolio securities covering an option written by the
Fund until the option expires or it delivers the underlying security, futures
contract or currency upon exercise. Therefore, no assurance can be given that
the Funds will be able to utilize these instruments effectively. In addition, a
Fund's ability to engage in options and futures transactions may be limited by
tax considerations and the use of certain hedging techniques may adversely
impact the characterization of income to a Fund for U.S. federal income tax
purposes.
PORTFOLIO TURNOVER. The portfolio turnover rate for each Fund is included in
the FINANCIAL HIGHLIGHTS section. The Funds are actively managed and, in some
cases in response to market conditions, a Fund's portfolio turnover may exceed
100%. A higher rate of portfolio turnover increases brokerage and other
expenses, 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, which, when distributed, are taxable to shareholders.
TEMPORARY DEFENSIVE POSITION. For temporary defensive purposes, each Fund may
reduce its position in equity securities and invest in, without limit, certain
types of short-term, liquid, high grade or high quality (depending on the Fund)
debt securities. These securities may include U.S. Government securities,
qualifying bank deposits, money market instruments, prime commercial paper and
other types of short-term debt securities including notes and bonds. For Funds
that may invest in foreign countries, such securities also may include
short-term, foreign-currency denominated securities of the type mentioned above
issued by foreign governmental entities, companies, and supranational
organizations. While the Funds are investing for temporary defensive purposes,
they may not achieve their investment objectives.
ADDITIONAL RISK CONSIDERATIONS
Investment in certain of the Funds involves the special risk considerations
described below. These risks may be heightened when investing in emerging
markets.
CURRENCY CONSIDERATIONS. Substantially all of the assets of ALLIANCE NEW EUROPE
FUND, ALLIANCE WORLDWIDE PRIVATIZATION FUND, ALLIANCE INTERNATIONAL PREMIER
GROWTH FUND, ALLIANCE INTERNATIONAL FUND, ALLIANCE GREATER CHINA '97 FUND and
ALLIANCE ALL-ASIA INVESTMENT FUND, and a substantial portion of the assets of
ALLIANCE GLOBAL SMALL CAP FUND and ALLIANCE GLOBAL ENVIRONMENT FUND are
invested in securities denominated in foreign currencies. The Funds receive a
corresponding portion of their revenues in foreign currencies. Therefore, the
dollar equivalent of their net assets, distributions, and income will be
adversely affected by reductions in the value of certain foreign currencies
relative to the U.S. Dollar. If the value of the foreign currencies in which a
Fund receives its income falls relative to the U.S. Dollar between receipt of
the income and the making of Fund distributions, the Fund may be required to
liquidate securities in order to make distributions if it has insufficient cash
in U.S. Dollars to meet distribution requirements that the Fund must satisfy to
qualify as a regulated investment company for federal income tax purposes.
Similarly, if an exchange rate declines between the time a 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. In light of these risks, a Fund may
engage in currency hedging transactions, as described above, which involve
certain special risks.
FOREIGN SECURITIES. The securities markets of many foreign countries are
relatively small, with the majority of market capitalization and trading volume
concentrated in a limited number of companies representing a small number of
industries. Consequently, a Fund whose investment portfolio
48
includes foreign securities may experience greater price volatility and
significantly lower liquidity than a portfolio invested solely in equity
securities of U.S. companies. These markets may be subject to greater influence
by adverse events generally affecting the market, and by large investors
trading significant blocks of securities, than is usual in the United States.
Securities settlements may in some instances be subject to delays and related
administrative uncertainties.
Certain foreign countries require governmental approval prior to investments by
foreign persons or limit investment by foreign persons to only a specified
percentage of an issuer's outstanding securities or a specific class of
securities that may have less advantageous terms (including price) than
securities of the company available for purchase by nationals. These
restrictions or controls may at times limit or preclude investment in certain
securities and may increase the costs and expenses of a Fund. In addition, the
repatriation of investment income, capital, or the proceeds of sales of
securities from certain countries is controlled under regulations, including in
some cases the need for certain advance government notification or authority.
If a deterioration occurs in a country's balance of payments, the country could
impose temporary restrictions on foreign capital remittances.
A Fund also could be adversely affected by delays in, or a refusal to grant,
any required governmental approval for repatriation, as well as by the
application of other restrictions on investment. Investing in local markets may
require a Fund to adopt special procedures that may involve additional costs to
a Fund. These factors may affect the liquidity of a Fund's investments in any
country and Alliance will monitor the effect of any such factor or factors on a
Fund's investments. Furthermore, transaction costs including brokerage
commissions for transactions both on and off the securities exchanges in many
foreign countries are generally higher than in the United States.
Issuers of securities in foreign jurisdictions are generally not subject to the
same degree of regulation as are U.S. issuers with respect to such matters as
insider trading rules, restrictions on market manipulation, shareholder proxy
requirements, and timely disclosure of information. The reporting, accounting
and auditing standards of foreign countries may differ, in some cases
significantly, from U.S. standards in important respects and less information
may be available to investors in foreign securities than to investors in U.S.
securities. Substantially less information is publicly available about certain
non-U.S. issuers than is available about U.S. issuers.
The economies of individual foreign countries may differ favorably or
unfavorably from the U.S. economy in such respects as growth of gross domestic
product or gross national product, rate of inflation, capital reinvestment,
resource self-sufficiency, and balance of payments position. Nationalization,
expropriation or confiscatory taxation, currency blockage, political changes,
government regulation, political or social instability, or diplomatic
developments could affect adversely the economy of a foreign country and the
Fund's investments. In the event of expropriation, nationalization or other
confiscation, a Fund could lose its entire investment in the country involved.
In addition, laws in foreign countries governing business organizations,
bankruptcy and insolvency may provide less protection to security holders such
as the Fund than that provided by U.S. laws.
ALLIANCE INTERNATIONAL FUND, ALLIANCE NEW EUROPE FUND, ALLIANCE GREATER CHINA
'97 FUND and ALLIANCE ALL-ASIA INVESTMENT FUND may invest substantial amounts
of their assets in United Kingdom issuers, Japanese issuers, and/or Greater
China issuers. Please refer to Appendix A for a discussion of risks associated
with investments in these countries.
INVESTMENT IN PRIVATIZED ENTERPRISES BY ALLIANCE WORLDWIDE PRIVATIZATION FUND.
In certain jurisdictions, the ability of foreign entities, such as the Fund, to
participate in privatizations may be limited by local law, or the price or
terms on which the Fund may be able to participate may be less advantageous
than for local investors. Moreover, there can be no assurance that governments
that have embarked on privatization programs will continue to divest their
ownership of state enterprises, that proposed privatizations will be successful
or that governments will not re-nationalize enterprises that have been
privatized. Furthermore, in the case of certain of the enterprises in which the
Fund may invest, large blocks of the stock of those enterprises may be held by
a small group of stockholders, even after the initial equity offerings by those
enterprises. The sale of some portion or all of those blocks could have an
adverse effect on the price of the stock of any such enterprise.
Most state enterprises or former state enterprises go through an internal
reorganization of management prior to conducting an initial equity offering in
an attempt to better enable these enterprises to compete in the private sector.
However, certain reorganizations could result in a management team that does
not function as well as the enterprise's prior management and may have a
negative effect on such enterprise. After making an initial equity offering,
enterprises that may have enjoyed preferential treatment from the respective
state or government that owned or controlled them may no longer receive such
preferential treatment and may become subject to market competition from which
they were previously protected. Some of these enterprises may not be able to
effectively operate in a competitive market and may suffer losses or experience
bankruptcy due to such competition. In addition, the privatization of an
enterprise by its government may occur over a number of years, with the
government continuing to hold a controlling position in the enterprise even
after the initial equity offering for the enterprise.
INVESTMENT IN SMALLER, EMERGING COMPANIES. The Funds may invest in smaller,
emerging companies. ALLIANCE NEW EUROPE FUND and ALLIANCE GLOBAL SMALL CAP FUND
will emphasize investment in, and ALLIANCE ALL-ASIA INVESTMENT FUND, ALLIANCE
GREATER CHINA '97 FUND and ALLIANCE GLOBAL ENVIRONMENT FUND may emphasize
investment in, smaller, emerging companies. Investment in such companies
involves greater risks than is customarily associated with securities of more
established companies. Companies in the earlier stages of their
49
development often have products and management personnel which have not been
thoroughly tested by time or the marketplace; their financial resources may not
be as substantial as those of more established companies. The securities of
smaller companies may have relatively limited marketability and may be subject
to more abrupt or erratic market movements than securities of larger companies
or broad market indices. The revenue flow of such companies may be erratic and
their results of operations may fluctuate widely and may also contribute to
stock price volatility.
EXTREME GOVERNMENTAL ACTION; LESS PROTECTIVE LAWS. In contrast to investing in
the U.S., 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 a Fund's
investments. In the event of certain such actions, a 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 provide less
protection to investors such as the Fund than provided under United States laws.
INVESTMENTS IN ENVIRONMENTAL COMPANIES BY ALLIANCE GLOBAL ENVIRONMENT FUND.
Governmental regulations or other action can inhibit an Environmental Company's
performance, and it may take years to translate environmental legislation into
sales and profits. Environmental Companies generally face competition in fields
often characterized by relatively short product cycles and competitive pricing
policies. Losses may result from large product development or expansion costs,
unprotected marketing or distribution systems, erratic revenue flows and low
profit margins. Additional risks that Environmental Companies may face include
difficulty in financing the high cost of technological development,
uncertainties due to changing governmental regulation or rapid technological
advances, potential liabilities associated with hazardous components and
operations, and difficulty in finding experienced employees.
THE REAL ESTATE INDUSTRY. Although ALLIANCE REAL ESTATE INVESTMENT FUND does
not invest directly in real estate, it invests primarily in Real Estate Equity
Securities and has a policy of concentration of its investments in the real
estate industry. Therefore, an investment in the Fund is subject to certain
risks associated with the direct ownership of real estate and with the real
estate industry in general. These risks include, among others: possible
declines in the value of real estate; risks related to general and local
economic conditions; possible lack of availability of mortgage funds;
overbuilding; extended vacancies of properties; increases in competition,
property taxes and operating expenses; changes in zoning laws; costs resulting
from the clean-up of, and liability to third parties for damages resulting
from, environmental problems; casualty or condemnation losses; uninsured
damages from floods, earthquakes or other natural disasters; limitations on and
variations in rents; and changes in interest rates. To the extent that assets
underlying the Fund's investments are concentrated geographically, by property
type or in certain other respects, the Fund may be subject to certain of the
foregoing risks to a greater extent.
In addition, if ALLIANCE REAL ESTATE INVESTMENT FUND receives rental income or
income from the disposition of real property acquired as a result of a default
on securities the Fund owns, the receipt of such income may adversely affect
the Fund's ability to retain its tax status as a regulated investment company.
Investments by the Fund in securities of companies providing mortgage servicing
will be subject to the risks associated with refinancings and their impact on
servicing rights.
REITS. Investing in REITs involves certain unique risks in addition to those
risks associated with investing in the real estate industry in general. Equity
REITs may be affected by changes in the value of the underlying property owned
by the REITs, while mortgage REITs may be affected by the quality of any credit
extended. REITs are dependent upon management skills, are not diversified, and
are subject to heavy cash flow dependency, default by borrowers and
self-liquidation. REITs are also subject to the possibilities of failing to
qualify for tax-free pass-through of income under the Code and failing to
maintain their exemptions from registration under the 1940 Act.
REITs (especially mortgage REITs) also are subject to interest rate risks. When
interest rates decline, the value of a REIT's investment in fixed rate
obligations can be expected to rise. Conversely, when interest rates rise, the
value of a REIT's investment in fixed rate obligations can be expected to
decline. In contrast, as interest rates on adjustable rate mortgage loans are
reset periodically, yields on a REIT's investments in such loans will gradually
align themselves to reflect changes in market interest rates, causing the value
of such investments to fluctuate less dramatically in response to interest rate
fluctuations than would investments in fixed rate obligations.
Investing in REITs involves risks similar to those associated with investing in
small capitalization companies. REITs may have limited financial resources, may
trade less frequently and in a limited volume and may be subject to more abrupt
or erratic price movements than larger company securities. Historically, small
capitalization stocks, such as REITs, have been more volatile in price than the
larger capitalization stocks included in the S&P 500 Index.
MORTGAGE-BACKED SECURITIES. Investing in Mortgage-Backed Securities involves
certain unique risks in addition to those risks associated with investment in
the real estate industry in general. These risks include the failure of a
counterparty to meet its commitments, adverse interest rate changes and the
effects of prepayments on mortgage cash flows. When interest rates decline, the
value of an investment in fixed rate obligations can be expected to rise.
Conversely, when interest rates rise, the value of an investment in fixed rate
obligations can be expected to decline. In contrast, as interest rates on
adjustable rate mortgage loans are reset periodically, yields on investments in
such loans will gradually align themselves to reflect changes in market
interest rates, causing the value of
50
such investments to fluctuate less dramatically in response to interest rate
fluctuations than would investments in fixed rate obligations.
Further, the yield characteristics of Mortgage-Backed Securities, such as those
in which ALLIANCE REAL ESTATE INVESTMENT FUND may invest, differ from those of
traditional fixed-income securities. The major differences typically include
more frequent interest and principal payments (usually monthly), the
adjustability of interest rates, and the possibility that prepayments of
principal may be made substantially earlier than their final distribution dates.
Prepayment rates are influenced by changes in current interest rates and a
variety of economic, geographic, social, and other factors, and cannot be
predicted with certainty. Both adjustable rate mortgage loans and fixed rate
mortgage loans may be subject to a greater rate of principal prepayments in a
declining interest rate environment and to a lesser rate of principal
prepayments in an increasing interest rate environment. Early payment
associated with Mortgage-Backed Securities causes these securities to
experience significantly greater price and yield volatility than that
experienced by traditional fixed-income securities. Under certain interest rate
and prepayment rate scenarios, the Fund may fail to recoup fully its investment
in Mortgage-Backed Securities notwithstanding any direct or indirect
governmental or agency guarantee. When the Fund reinvests amounts representing
payments and unscheduled prepayments of principal, it may receive a rate of
interest that is lower than the rate on existing adjustable rate mortgage
pass-through securities. Thus, Mortgage-Backed Securities, and adjustable rate
mortgage pass-through securities in particular, may be less effective than
other types of U.S. Government securities as a means of "locking in" interest
rates.
U.S. AND FOREIGN TAXES. A Fund's investment in foreign securities may be
subject to taxes withheld at the source on dividend or interest payments.
Foreign taxes paid by a Fund may be creditable or deductible by U.S.
shareholders for U.S. income tax purposes. No assurance can be given that
applicable tax laws and interpretations will not change in the future.
Moreover, non-U.S. investors may not be able to credit or deduct such foreign
taxes.
FIXED-INCOME SECURITIES. The value of each Fund's shares will fluctuate with
the value of its investments. The value of each Fund's investments in
fixed-income securities will change as the general level of interest rates
fluctuates. During periods of falling interest rates, the values of
fixed-income securities generally rise. Conversely, during periods of rising
interest rates, the values of fixed-income securities generally decline.
Under normal market conditions, the average dollar-weighted maturity of a
Fund's portfolio of debt or other fixed-income securities is expected to vary
between five and 30 years in the case of ALLIANCE ALL-ASIA INVESTMENT FUND,
between five and 25 years in the case of ALLIANCE UTILITY INCOME FUND, and
between one year or less and 30 years in the case of all other Funds that
invest in such securities. In periods of increasing interest rates, each of the
Funds may, to the extent it holds mortgage-backed securities, be subject to the
risk that the average dollar-weighted maturity of the Fund's portfolio of debt
or other fixed-income securities may be extended as a result of lower than
anticipated prepayment rates.
INVESTMENT IN LOWER-RATED FIXED-INCOME SECURITIES. Lower-rated securities,
i.e., those rated Ba and lower by Moody's or BB and lower by S&P, Duff & Phelps
or Fitch, are subject to greater credit risk or loss of principal and interest
than higher-rated securities. They also are generally considered to be subject
to greater market risk than higher-rated securities. The capacity of issuers of
lower-rated securities to pay interest and repay principal is more likely to
weaken than is that of issuers of higher-rated securities in times of
deteriorating economic conditions or rising interest rates. In addition,
lower-rated securities may be more susceptible to real or perceived adverse
economic conditions than investment grade securities.
The market for lower-rated securities may be thinner and less active than that
for higher-rated securities, which can adversely affect the prices at which
these securities can be sold. To the extent that there is no established
secondary market for lower-rated securities, a Fund may experience difficulty
in valuing the securities for the purpose of computing a Fund's net asset
value. In addition, adverse publicity and investor perceptions about
lower-rated securities, whether or not factual, may tend to impair their market
value and liquidity.
Alliance will try to reduce the risk inherent in investment in lower-rated
securities through credit analysis, diversification and attention to current
developments and trends in interest rates and economic and political
conditions. However, there can be no assurance that losses will not occur.
Since the risk of default is higher for lower-rated securities, Alliance's
research and credit analysis are a correspondingly more important aspect of its
program for managing a Fund's securities than would be the case if a Fund did
not invest in lower-rated securities.
In seeking to achieve a Fund's investment objective, there will be times, such
as during periods of rising interest rates, when depreciation and realization
of capital losses on securities in a Fund's portfolio will be unavoidable.
Moreover, medium- and lower-rated securities and non-rated securities of
comparable quality may be subject to wider fluctuations in yield and market
values than higher-rated securities under certain market conditions. Such
fluctuations after a security is acquired do not affect the cash income
received from that security but are reflected in the net asset value of a Fund.
Certain lower-rated securities may contain call or buy-back features that
permit the issuers thereof to call or repurchase such securities. Such
securities may present risks based on prepayment expectations. If an issuer
exercises such a provision, a Fund may have to replace the called security with
a lower-yielding security, resulting in a decreased rate of return to the Fund.
YEAR 2000: Many computer systems and applications that process transactions use
two-digit date fields for the year of a transaction, rather than the full four
digits. If these systems are not modified or replaced, transactions occurring
after 1999
51
could be processed as the year "1900," which could result in processing
inaccuracies and inoperability at or after the year 2000. The Funds and its
major service providers, including Alliance, utilize a number of computer
systems and applications that have been either developed internally or licensed
from third-party suppliers. In addition, the Funds and its major service
providers, including Alliance, are dependent on third-party suppliers for
certain systems applications and for electronic receipt of information critical
to their business. Should any of the computer systems employed by the Funds or
their major service providers, including Alliance, fail to process Year 2000
related information properly, that could have a significant negative impact on
the Funds' operations and the services that are provided to the Funds'
shareholders. To the extent that the operations of issuers of securities held
by the Funds are impaired by the Year 2000 problem, the value of the Funds'
shares may be materially affected. In addition, for the Funds' investments in
foreign markets, it is possible that foreign companies and markets will not be
as prepared for Year 2000 as domestic companies and markets.
The Year 2000 issue is a high priority for the Funds and Alliance. During 1997,
Alliance began a formal Year 2000 initiative which established a structured and
coordinated process to deal with the Year 2000 issue. As part of its
initiative, Alliance established a Year 2000 project office to manage the Year
2000 initiative, focusing on both information technology and non-information
technology systems. The Year 2000 project office meets periodically with the
audit committee of the board of directors of Alliance Capital Management
Corporation, Alliance's general partner, and with Alliance's executive
management to review the status of the Year 2000 efforts. Alliance has also
retained the services of a number of consulting firms which have expertise in
advising and assisting with regard to Year 2000 issues. Alliance reports that
by June 30, 1998 it had completed its inventory and assessment of its domestic
and international computer systems and applications, identified mission
critical systems (those systems where loss of their function would result in
immediate stoppage or significant impairment to core business units) and
nonmission critical systems and determined which of these systems were not Year
2000 compliant. All third-party suppliers of mission critical computer systems
and nonmission critical systems applications have been contacted to verify
whether their systems and applications will be Year 2000 compliant and their
responses are being evaluated. Substantially all of those contacted have
responded and approximately 90% have informed Alliance that their systems and
applications are or will be Year 2000 compliant. All mission and nonmission
critical systems supplied by third parties have been tested with the exception
of those third parties not able to comply with Alliance's testing schedule.
Alliance reports that it expects that all testing will be completed before the
end of 1999.
Alliance has remediated, replaced or retired all of its non-compliant mission
critical systems and applications that can affect the Funds. All nonmission
critical systems have been remediated. After each system has been remediated,
it is tested with 19XX dates to determine if it still performs its intended
business function correctly. Next, each system undergoes a simulation test
using dates occurring after December 31, 1999. Inclusive of the replacement and
retirement of some of its systems, Alliance has completed these testing phases
for 98% of mission critical systems and 100% of nonmission critical systems.
Integrated systems tests were conducted to verify that the systems would
continue to work together. Full integration testing of all mission critical and
nonmission critical systems is complete. Testing of interfaces with third-party
suppliers has begun and will continue throughout 1999. Alliance reports that it
has completed an inventory of its facilities and related technology
applications and has begun to evaluate and test these systems. Alliance reports
that it anticipates that these systems will be fully operable in the year 2000.
Alliance has deferred certain other planned information technology projects
until after the Year 2000 initiative is completed. Such delay is not expected
to have a material adverse effect on Alliance's financial condition or results
of operations. Alliance, with the assistance of a consulting firm, is
developing Year 2000 specific contingency plans with emphasis on mission
critical functions. These plans seek to provide alternative methods of
processing in the event of a failure that is outside Alliance's control.
The estimated current cost to Alliance of the Year 2000 initiative ranges from
approximately $40 million to $45 million. These costs consist principally of
modification and testing and costs to develop formal Year 2000 specific
contingency plans. These costs, which will generally be expensed as incurred,
will be funded from Alliance's operations and the issuance of debt. Through
June 30, 1999, Alliance had incurred approximately $36.0 million of costs
related to the Year 2000 initiative. At this time, management of Alliance
believes that the costs associated with resolving the Year 2000 issue will not
have a material adverse effect on Alliance's results of operations, liquidity
or capital resources.
There are many risks associated with Year 2000 issues, including the risks that
the computer systems and applications used by the Funds and their major service
providers will not operate as intended and that the systems and applications of
third-party suppliers to the Funds and their service providers will not be Year
2000 compliant. Likewise there can be no assurance the compliance schedules
outlined above will be met or that the actual cost incurred will not exceed
current cost estimates. Should the significant computer systems and
applications used by the Funds or their major service providers, or the systems
of their important third-party suppliers, be unable to process date-sensitive
information accurately after 1999, the Funds and their service providers may be
unable to conduct their normal business operations and to provide shareholders
with required services. In addition, the Funds and their service providers may
incur unanticipated expenses, regulatory actions and legal liabilities. The
Funds and Alliance cannot determine which risks, if any, are most reasonably
likely to occur or the effects of any particular failure to be Year 2000
compliant. Certain statements provided by Alliance in this section entitled
"Year 2000", as such statements relate to Alliance, are "forward-looking
statements" within the meaning
52
of the Private Securities Litigation Reform Act of 1995. To the fullest extent
permitted by law, the foregoing Year 2000 discussion is a "Year 2000 Readiness
Disclosure" within the meaning of the Year 2000 Information and Readiness
Disclosure Act, 15 U.S.C. Sec. 1 (1998).
MANAGEMENT OF THE FUNDS
INVESTMENT ADVISER
Each Fund's Adviser is Alliance Capital Management, L.P., 1345 Avenue of the
Americas, New York, NY 10105. Alliance is a leading international investment
adviser supervising client accounts with assets as of September 30, 1999
totaling more than $317 billion (of which more than $143 billion represented
assets of investment companies). As of September 30, 1999, Alliance managed
retirement assets for many of the largest public and private employee benefit
plans (including 28 of the nation's FORTUNE 100 companies), for public employee
retirement funds in 31 states, for investment companies, and for foundations,
endowments, banks and insurance companies worldwide. The 52 registered
investment companies managed by Alliance, comprising 118 separate investment
portfolios, currently have more than 4.8 million shareholder accounts.
Alliance provides investment advisory services and order placement facilities
for the Funds. For these advisory services, the Funds paid Alliance as a
percentage of average daily net assets:
FEE AS A PERCENTAGE OF FISCAL
FUND AVERAGE DAILY NET ASSETS* YEAR ENDING
- -------------------------------------------------------------------------------
Alliance Premier Growth
Fund 1.00% 11/30/98
Alliance Health Care
Fund .95** 6/30/00
Alliance Growth Fund .70 10/31/98
Alliance Technology Fund 1.02 11/30/98
Alliance Quasar Fund 1.04 9/30/98
The Alliance Fund .67 11/30/98
Alliance Growth and Income
Fund .48 10/31/98
Alliance Balanced Shares
Fund .586 7/31/99
Alliance Utility Income
Fund -0- 11/30/98
Alliance Real Estate
Investment Fund .90 8/31/99
Alliance New Europe
Fund .95 7/31/99
Alliance Worldwide
Privatization Fund 1.00 6/30/99
Alliance International
Premier Growth Fund -0- 11/30/98
Alliance Global Small
Cap Fund 1.00% 7/31/99
Alliance International
Fund .81 6/30/99
Alliance Greater China
'97 Fund -0- 7/31/99
Alliance All-Asia Investment
Fund .24 10/31/98
Alliance Global Environment
Fund 1.10 10/31/98
* FEES ARE STATED NET OF ANY WAIVERS AND/OR REIMBURSEMENTS. SEE THE "FEE
TABLE" AT THE BEGINNING OF THE PROSPECTUS FOR MORE INFORMATION ABOUT FEE
WAIVERS.
** PRIOR TO ANY WAIVER BY ALLIANCE. SEE "FEE TABLE" AT THE BEGINNING OF THE
PROSPECTUS.
In connection with providing advisory services to ALLIANCE GREATER CHINA '97
FUND, Alliance has, at its expense, retained 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. New Alliance provides Alliance
with ongoing, current, and comprehensive information and analysis of conditions
and developments in Greater China countries.
In connection with investments in real estate securities, Alliance has, at its
expense, retained as a consultant CB Richard Ellis, Inc. ("CBRE"). CBRE is a
publicly held company and the largest real estate services company in the
United States, comprised of real estate brokerage, property, and facilities
management, and real estate finance, and investment advisory services.
PORTFOLIO MANAGERS
The following table lists the person or persons who are primarily responsible
for the day-to-day management of each Fund's portfolio, the length of time that
each person has been primarily responsible for the Fund, and each person's
principal occupation during the past five years.
Principal Occupation
During the Past
Fund Employee; Year; Title Five (5) Years*
- -------------------------------------------------------------------------------
Alliance Premier Alfred Harrison; since Associated with
Growth Fund inception--Vice Chairman Alliance
of Alliance Capital
Management Corporation
(ACMC)**
Alliance Health Norman Fidel; since inception Associated with
Care Fund --Senior Vice President Alliance
of ACMC
Alliance Growth Tyler Smith; since inception Associated with
Fund --Senior Vice President Alliance
Alliance Technology Peter Anastos; since 1992 Associated with
Fund --Senior Vice President Alliance
of ACMC
Gerald T. Malone; since 1992 Associated with
--Senior Vice President Alliance
of ACMC
53
Principal Occupation
During the Past
Fund Employee; Year; Title Five (5) Years*
- -------------------------------------------------------------------------------
Alliance Quasar Alden M. Stewart; since 1994 Associated with
Fund --Executive Vice President Alliance
of ACMC
Randall E. Haase; since 1994 Associated with
--Senior Vice President Alliance
of ACMC
The Alliance Fund Alden M. Stewart; since 1997 (see above)
--(see above)
Randall E. Haase; since 1997 (see above)
--(see above)
Alliance Growth and Paul Rissman; since 1994 Associated with
Income Fund --Senior Vice President Alliance
of ACMC
Alliance Balanced Paul Rissman; since 1997 (see above)
Shares Fund --(see above)
Alliance Utility Paul Rissman; since 1996 (see above)
Income Fund --(see above)
Alliance Real Estate Daniel G. Pine; since 1996 Associated with
Investment Fund --Senior Vice President Alliance since 1996;
of ACMC prior thereto; Senior
Vice President of
Desai Capital
Management
David Kruth; since 1997 Associated with
--Vice President of ACMC Alliance since 1997;
prior thereto; Senior
Vice President of
Yarmouth Group
Alliance New Europe Steven Beinhacker; since 1997 Associated with
Fund --Senior Vice President Alliance
of ACMC
Alliance Worldwide Mark H. Breedon; since Associated with
Privatization Fund inception Vice President Alliance
of ACMC and Director
and Senior Vice President
of Alliance Capital Limited***
Alliance International Alfred Harrison; since 1998 (see above)
Premier Growth Fund --(see above)
Thomas Kamp; since 1998 Associated with
--Senior Vice President Alliance
of ACMC
Alliance Global Alden M. Stewart; since 1994 (see above)
Small Cap Fund --(see above)
Randall E. Haase; since 1994 (see above)
--(see above)
Mark D. Breedon; since 1998 (see above)
--(see above)
Alliance Nicholas D.P.Carn; since 1998 Associated with
International Fund --Senior Vice President Alliance since 1995;
of ACMC prior thereto, Chief
Investment Officer of
Draycott Partners, Ltd.
Alliance Greater Matthew W.S. Lee; since 1997 Associated with
China '97 Fund --Vice President of ACMC Alliance since 1997;
prior thereto;
associated with
National Mutual Funds
Management (Asia) and
James Capel and Co.
since prior to 1994
Alliance All-Asia Hiroshi Motoki; since 1998 Associated with
Investment Fund --Senior Vice President Alliance since 1994;
of ACMC and director of prior thereto;
Japanese/Asian Equity associated with
research Ford Motor Company
Alliance Global Linda Bolton Weiser; Associated with
Environment Fund since 1998--Vice President Alliance
of ACMC
* UNLESS INDICATED OTHERWISE, PERSONS ASSOCIATED WITH ALLIANCE HAVE BEEN
EMPLOYED IN A PORTFOLIO MANAGEMENT, RESEARCH OR INVESTMENT CAPACITY.
** THE SOLE GENERAL PARTNER OF ALLIANCE.
*** AN INDIRECT WHOLLY-OWNED SUBSIDIARY OF ALLIANCE.
PERFORMANCE OF SIMILARLY MANAGED PORTFOLIOS. In addition to managing the assets
of ALLIANCE PREMIER GROWTH FUND, Mr. Harrison has ultimate responsibility for
the management of discretionary tax-exempt accounts of institutional clients
managed as described below without significant client-imposed restrictions
("Historical Portfolios"). These accounts have substantially the same
investment objectives and policies and are managed in accordance with
essentially the same investment strategies and techniques as those for ALLIANCE
PREMIER GROWTH FUND, except for the ability of ALLIANCE PREMIER GROWTH FUND to
use futures and options as hedging tools and to invest in warrants. The
Historical Portfolios also are not subject to certain limitations,
diversification requirements and other restrictions imposed under the 1940 Act
and the Code to which ALLIANCE PREMIER GROWTH FUND, as a registered investment
company, is subject and which, if applicable to the Historical Portfolios, may
have adversely affected the performance results of the Historical Portfolios.
Set forth below is performance data provided by Alliance relating to the
Historical Portfolios for each of the twenty full calendar years during which
Mr. Harrison has managed the Historical Portfolios as an employee of Alliance
and cumulatively through September 30, 1999. As of September 30, 1999, the
assets in the Historical Portfolios totaled approximately $14.3 billion and the
average size of an institutional account in the Historical Portfolio was $492
million. Each Historical Portfolio has a nearly identical composition of
investment holdings and related percentage weightings.
The performance data is net of all fees (including brokerage commissions)
charged to those accounts. The performance data is computed in accordance with
standards formulated by the Association of Investment Management and Research
and has not been adjusted to reflect any fees that will be payable by ALLIANCE
PREMIER GROWTH FUND, which are higher than the fees imposed on the Historical
Portfolio and will result in a higher expense ratio and lower returns for
ALLIANCE PREMIER GROWTH FUND. Expenses associated with the distribution of
Class A, Class B, and Class C shares of ALLIANCE PREMIER GROWTH FUND in
accordance with the plan adopted by ALLIANCE PREMIER GROWTH FUND's Board of
Directors under Commission Rule 12b-1 are also excluded. The
54
performance data has also not been adjusted for corporate or individual taxes,
if any, payable by the account owners.
Alliance has calculated the investment performance of the Historical Portfolios
on a trade-date basis. Dividends have been accrued at the end of the month and
cash flows weighted daily. Composite investment performance for all portfolios
has been determined on an asset weighted basis. New accounts are included in
the composite investment performance computations at the beginning of the
quarter following the initial contribution. The total returns set forth below
are calculated using a method that links the monthly return amounts for the
disclosed periods, resulting in a time-weighted rate of return.
As reflected below, the Historical Portfolios have over time performed
favorably when compared with the performance of recognized performance indices.
The S&P 500 Index is a widely recognized, unmanaged index of market activity
based upon the aggregate performance of a selected portfolio of publicly traded
common stocks, including monthly adjustments to reflect the reinvestment of
dividends and other distributions. The S&P 500 Index reflects the total return
of securities comprising the Index, including changes in market prices as well
as accrued investment income, which is presumed to be reinvested. The Russell
1000 universe of securities is compiled by Frank Russell Company and is
segmented into two style indices, based on the capitalization-weighted median
book-to-price ratio of each of the securities. At each reconstitution, the
Russell 1000 constituents are ranked by their book-to-price ratio. Once so
ranked, the breakpoint for the two styles is determined by the median market
capitalization of the Russell 1000. Thus, those securities falling within the
top fifty percent of the cumulative market capitalization (as ranked by
descending book-to-price) become members of the Russell Price-Driven Indices.
The Russell 1000 Growth Index is, accordingly, designed to include those
Russell 1000 securities with a greater-than-average growth orientation. In
contrast with the securities in the Russell Price-Driven Indices, companies in
the Growth Index tend to exhibit higher price-to-book and price-earnings
ratios, lower dividend yield and higher forecasted growth values.
To the extent ALLIANCE PREMIER GROWTH FUND does not invest in U.S. common
stocks or utilizes investment techniques such as futures or options, the S&P
500 Index and Russell 1000 Growth Index may not be substantially comparable to
ALLIANCE PREMIER GROWTH FUND. The S&P 500 Index and Russell 1000 Growth Index
are included to illustrate material economic and market factors that existed
during the time period shown. The S&P 500 Index and Russell 1000 Growth Index
do not reflect the deduction of any fees. If ALLIANCE PREMIER GROWTH FUND were
to purchase a portfolio of securities substantially identical to the securities
comprising the S&P 500 Index or the Russell 1000 Growth Index, ALLIANCE PREMIER
GROWTH FUND's performance relative to the index would be reduced by ALLIANCE
PREMIER GROWTH FUND's expenses, including brokerage commissions, advisory fees,
distribution fees, custodial fees, transfer agency costs and other
administrative expenses, as well as by the impact on ALLIANCE PREMIER GROWTH
FUND's shareholders of sales charges and income taxes.
The Lipper Large Cap Growth Fund Index is prepared by Lipper, Inc. and
represents a composite index of the investment performance for the 30 largest
large capitalization growth mutual funds. The composite investment performance
of the Lipper Large Cap Growth Fund Index reflects investment management and
administrative fees and other operating expenses paid by these mutual funds and
reinvested income dividends and capital gain distributions, but excludes the
impact of any income taxes and sales charges.
The following performance data is provided solely to illustrate Mr. Harrison's
performance in managing the Historical Portfolios and the ALLIANCE PREMIER
GROWTH FUND as measured against certain broad based market indices and against
the composite performance of other open-end growth mutual funds. Investors
should not rely on the following performance data of the Historical Portfolios
as an indication of future performance of ALLIANCE PREMIER GROWTH FUND. The
composite investment performance for the periods presented may not be
indicative of future rates of return. Other methods of computing investment
performance may produce different results, and the results for different
periods may vary.
SCHEDULE OF COMPOSITE INVESTMENT PERFORMANCE--HISTORICAL PORTFOLIOS*
LIPPER
RUSSELL LARGE CAP
1000 GROWTH
HISTORICAL S&P500 GROWTH FUND
PREMIER PORTFOLIOS INDEX INDEX INDEX
GROWTH TOTAL TOTAL TOTAL TOTAL
FUND RETURN** RETURN RETURN RETURN
1/1/99-
9/30/99*** 2.53% 7.35 5.37% 6.40% 7.39%
Year ended December:
1998*** 42.97 52.16% 28.60 38.71 36.47
1997*** 27.05 34.64 33.36 30.49 27.59
1996*** 18.84 22.06 22.96 23.12 20.56
1995*** 40.66 39.83 37.58 37.19 34.92
1994 (9.78) (4.82) 1.32 2.66 (0.82)
1993 5.35 10.54 10.08 2.90 10.66
1992 -- 12.18 7.62 5.00 6.89
1991 -- 38.91 30.47 41.16 37.34
1990 -- (1.57) (3.10) (0.26) (1.82)
1989 -- 38.80 31.69 35.92 32.30
1988 -- 10.88 16.61 11.27 10.84
1987 -- 8.49 5.25 5.31 3.33
1986 -- 27.40 18.67 15.36 16.75
1985 -- 37.41 31.73 32.85 32.85
1984 -- (3.31) 6.27 (.95) (4.25)
1983 -- 20.80 22.56 15.98 22.63
1982 -- 28.02 21.55 20.46 28.91
1981 -- (1.09) (4.92) (11.31) (0.06)
1980 -- 50.73 32.50 39.57 47.73
1979 -- 30.76 18.61 23.91 29.90
Cumulative total
return for
the period
January 1, 1979 to
September 30, 1999 -- 5061% 2665% 2532% 3182%
* TOTAL RETURN IS A MEASURE OF INVESTMENT PERFORMANCE THAT IS BASED UPON THE
CHANGE IN VALUE OF AN INVESTMENT FROM THE BEGINNING TO THE END OF A SPECIFIED
PERIOD AND ASSUMES REINVESTMENT OF ALL DIVIDENDS AND OTHER DISTRIBUTIONS. THE
BASIS OF PREPARATION OF THIS DATA IS DESCRIBED IN THE PRECEDING DISCUSSION.
TOTAL RETURNS FOR ALLIANCE PREMIER GROWTH FUND ARE FOR CLASS A SHARES, WITH
IMPOSITION OF THE MAXIMUM 4.25% SALES CHARGE.
55
** ASSUMES IMPOSITION OF THE MAXIMUM ADVISORY FEE CHARGED BY ALLIANCE FOR ANY
HISTORICAL PORTFOLIO FOR THE PERIOD INVOLVED.
*** DURING THIS PERIOD, THE HISTORICAL PORTFOLIOS DIFFERED FROM ALLIANCE
PREMIER GROWTH FUND IN THAT ALLIANCE PREMIER GROWTH FUND INVESTED A PORTION OF
ITS NET ASSETS IN WARRANTS ON EQUITY SECURITIES IN WHICH THE HISTORICAL
PORTFOLIOS WERE UNABLE, BY THEIR INVESTMENT RESTRICTIONS, TO PURCHASE. IN LIEU
OF WARRANTS, THE HISTORICAL PORTFOLIOS ACQUIRED THE COMMON STOCK UPON WHICH THE
WARRANTS WERE BASED.
The average annual total returns presented below are based upon the cumulative
total return as of September 30, 1999 and, for more than one year, assume a
steady compounded rate of return and are not year-by-year results, which
fluctuated over the periods as shown.
AVERAGE ANNUAL TOTAL RETURNS
LIPPER
RUSSELL LARGE CAP
1000 GROWTH
PREMIER HISTORICAL S&P 500 GROWTH FUND
GROWTH PORTFOLIOS INDEX INDEX INDEX
One year 34.34% 41.47% 27.79% 34.85% 35.60%
Three years 31.81 35.08 25.09 26.87 25.27
Five years 29.25 29.85 25.03 26.79 24.80
Ten years 22.71+ 19.80 16.80 17.96 16.98
Since January 1,
1979 -- 20.93 17.35 17.07 18.32
+ SINCE INCEPTION ON 9/28/92
PERFORMANCE OF A SIMILARLY MANAGED FUND. Alliance is the investment adviser of
an investment company organized and operated under the laws of the Grand Duchy
of Luxembourg, ACM International Health Care Fund (the "ACM Fund"), that has
substantially the same investment objective and policies as those of ALLIANCE
HEALTH CARE FUND. The ACM Fund has been managed in accordance with
substantially the same investment strategies and techniques as are employed
with respect to ALLIANCE HEALTH CARE FUND.
Norman Fidel, the portfolio manager of ALLIANCE HEALTH CARE FUND, is also the
person who has been primarily responsible for the day-to-day management of the
ACM Fund since 1988. Mr. Fidel manages approximately $1.1 billion of Health
Care Industries assets, including approximately $320 million of assets in the
ACM Fund as of September 30, 1999.
The ACM Fund is not subject to certain limitations, diversification
requirements and other restrictions imposed under the 1940 Act and the Code to
which ALLIANCE HEALTH CARE FUND, as a registered investment company, is subject
and which, if applicable to the ACM Fund, may have adversely affected the
performance results of the ACM Fund.
Set forth below are performance data provided by Alliance relating to the Class
AX shares of the ACM Fund since 1998, when Mr. Fidel began managing that fund.
Performance data are shown annually and cumulatively through September 30, 1999.
The performance data are net of all fees imposed by the ACM Fund. The
performance data have not been adjusted to reflect the fees that are payable by
ALLIANCE HEALTH CARE FUND, which, at comparable asset levels, may be lower than
the fees imposed on the ACM Fund and may result in a lower expense ratio for
ALLIANCE HEALTH CARE FUND. Expenses associated with the distribution of Class
A, Class B and Class C shares of ALLIANCE HEALTH CARE FUND in accordance with
the plan adopted by ALLIANCE HEALTH CARE FUND's Board of Directors under
Commission Rule 12b-1 also are not reflected in the data below relating
to the ACM Fund. See "Fees and Expenses of the Funds." The performance data
have also not been adjusted for corporate or individual taxes, if any, payable
by the ACM Fund shareholders.
The following performance data are provided solely to illustrate Mr. Fidel's
performance in managing the ACM Fund. Investors should not rely on the
following performance data of the ACM Fund as an indication of future
performance of the ALLIANCE HEALTH CARE FUND. The investment performance for
the periods presented may not be indicative of future rates of return.
ACM INTERNATIONAL HEALTH CARE FUND
----------------------------------
TOTAL RETURNS
1988 21.82%
1989 46.75%
1990 25.96%
1991 83.07%
1992 -10.46%
1993 -1.38%
1994 13.84%
1995 46.49%
1996 2.18%
1997 23.07%
1998 24.29%
1999* -11.82%
AVERAGE ANNUAL TOTAL RETURN
(FOR PERIODS ENDED 9/30/99)
----------------------------
One year 2.69%
Five years 15.38%
Ten years 16.92%
Cumulative Total Return of the ACM Fund from
12/31/87 to 9/30/99: 736.69%
* THROUGH SEPTEMBER 30, 1999 (UNANNUALIZED)
The Funds' SAIs have more detailed information about Alliance and other Fund
service providers.
PURCHASE AND SALE OF SHARES
HOW THE FUNDS VALUE THEIR SHARES
The Funds' net asset value or NAV is calculated at 4 p.m. Eastern time each day
the Exchange is open for business. To calculate NAV, a Fund's assets are valued
and totaled, liabilities are subtracted, and the balance, called net assets, is
divided by the number of shares outstanding. The Funds value their securities
at their current market value determined on the basis of market quotations, or,
if such quotations are not readily
56
available, such other methods as the Funds' directors believe accurately
reflect fair market value.
Your order for purchase, sale, or exchange of shares is priced at the next NAV
calculated after your order is received in proper form by the Fund.
HOW TO BUY SHARES
You may purchase Advisor Class shares through your financial representative at
NAV. Advisor Class shares are not subject to any initial or contingent sales
charges or distribution expenses. You may purchase and hold shares solely:
- - through accounts established under a fee-based program, sponsored and
maintained by a registered broker-dealer or other financial intermediary and
approved by the Fund's principal underwriter, Alliance Fund Distributors, Inc.
or AFD;
- - 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;
- - by investment advisory clients of, and certain other persons associated
with, Alliance and its affiliates or the Funds; and
- - through registered investment advisers or other financial intermediaries
who charge a management, consulting or other fee for their services 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.
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 to be approved by AFD
for investment in Advisor Class shares. The Fund's Statement of Additional
Information has more detailed information about who may purchase and hold
Advisor Class shares.
A Fund may refuse any order to purchase Advisor Class shares. In particular,
the Funds reserve 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 TO EXCHANGE SHARES
You may exchange your Advisor Class shares for Advisor Class shares of other
Alliance Mutual Funds. Exchanges of Advisor Class shares are made at the
next-determined NAV, without any sales or service charge. You may request an
exchange by mail or telephone. You must call by 4:00 p.m. Eastern time to
receive that day's NAV. The Funds may change, suspend, or terminate the
exchange service on 60 days' written notice.
HOW TO SELL SHARES
You may "redeem" your shares (i.e., sell your shares to a Fund) on any day the
Exchange is open, either directly or through your financial intermediary. Your
sales price will be the next-determined NAV after the Fund receives your sales
request in proper form. Normally, proceeds will be sent to you within 7 days.
If you recently purchased your shares by check or electronic funds transfer,
your redemption payment may be delayed until the Fund is reasonably satisfied
that the check or electronic funds transfer has been collected (which may take
up to 15 days). If you are in doubt about what procedures or documents are
required by your fee-based program or employee benefit plan to sell your
shares, you should contact your financial representative.
- - SELLING SHARES THROUGH YOUR FINANCIAL REPRESENTATIVE
Your financial representative must receive your sales request by 4:00 p.m.,
Eastern time, and submit it to the Fund by 5:00 p.m., Eastern time, for you to
receive that day's NAV. Your financial representative is responsible for
submitting all necessary documentation to the Fund and may charge you for this
service.
- - SELLING SHARES DIRECTLY TO THE FUND
BY MAIL:
-- Send a signed letter of instruction or stock power, along with
certificates, to:
Alliance Fund Services, Inc.
P.O. Box 1520
Secaucus, N.J. 07906-1520
800-221-5672
-- For your protection, a bank, a member firm of a national stock exchange,
or other eligible guarantor institution, must guarantee signatures. Stock power
forms are available from your financial intermediary, AFS, and many commercial
banks. Additional documentation is required for the sale of shares by
corporations, intermediaries, fiduciaries, and surviving joint owners. If you
have any questions about these procedures, contact AFS.
BY TELEPHONE:
-- You may redeem your shares for which no stock certificates have been
issued by telephone request. Call AFS at 800-221-5672 with instructions on how
you wish to receive your sale proceeds.
-- A telephone redemption request must be received by 4:00 p.m. Eastern time
for you to receive that day's NAV.
-- If you have selected electronic funds transfer in your Shareholder
Application, the redemption proceeds will be sent directly to your bank.
Otherwise, the proceeds will be mailed to you.
-- Redemption requests by electronic funds transfer may not exceed $100,000
per day and redemption requests by check cannot exceed $50,000 per day.
-- Telephone redemption is not available for shares held in nominee or
"street name" accounts, retirement plan accounts, or shares held by a
shareholder who has changed his or her address of record within the previous 30
calendar days.
OTHER
If you are a Fund shareholder through an account established under a fee-based
program, your fee-based program may impose
57
requirements with respect to the purchase, sale, or exchange of Advisor Class
shares of a Fund that are different from those described in this prospectus. A
transaction, service, administrative or other similar fee may be charged by
your broker-dealer, agent, financial intermediary or other financial
representative with respect to the purchase, sale or exchange of Advisor Class
shares made through such financial representative. Such financial
intermediaries may also impose requirements with respect to the purchase, sale
or exchange of shares that are different from, or in addition to, those imposed
by a Fund, including requirements as to the minimum initial and subsequent
investment amounts.
DIVIDENDS, DISTRIBUTIONS AND TAXES
Each Fund's income dividends and capital gains distributions, if any, declared
by a Fund on its outstanding shares will, at the election of each shareholder,
be paid in cash or in additional shares of the same class of shares of that
Fund. If paid in additional shares, the shares will have an aggregate NAV as of
the close of business on the day following the declaration date of the dividend
or distribution equal to the cash amount of the dividend or distribution. You
may make an election to receive dividends and distributions in cash or in
shares at the time you purchase shares. Your election can be changed at any
time prior to a record date for a dividend. There is no sales or other charge
in connection with the reinvestment of dividends or capital gains
distributions. Cash dividends may be paid in check, or at your election,
electronically via the ACH network. There is no sales or other charge on the
reinvestment of Fund dividends and distributions.
If you receive an income dividend or capital gains distribution in cash you
may, within 120 days following the date of its payment, reinvest the dividend
or distribution in additional shares of that Fund without charge by returning
to Alliance, with appropriate instructions, the check representing the dividend
or distribution. Thereafter, unless you otherwise specify, you will be deemed
to have elected to reinvest all subsequent dividends and distributions in
shares of that Fund.
For federal income tax purposes, the Fund's dividend distributions of net
income (or short-term taxable gains) will be taxable to you as ordinary income.
Distributions of long-term capital gains generally will be taxable to you
as long-term capital gains. A Fund's distributions also may be subject to
certain state and local taxes.
While it is the intention of each Fund to distribute to its shareholders
substantially all of each fiscal year's net income and net realized capital
gains, if any, the amount and time of any dividend or distribution will depend
on 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 a Fund will
pay any dividends or realize any capital gains. Since REITs pay distributions
based on cash flow, without regard to depreciation and amortization, it is
likely that a portion of the distributions paid to ALLIANCE REAL ESTATE
INVESTMENT FUND and subsequently distributed to shareholders may be a
nontaxable return of capital. The final determination of the amount of a Fund's
return of capital distributions for the period will be made after the end of
each calendar year.
Investment income received by a Fund from sources within foreign countries may
be subject to foreign income taxes withheld at the source. To the extent that
any Fund is liable for foreign income taxes withheld at the source, each Fund
intends, if possible, to operate so as to meet the requirements of the Code to
"pass through" to the Fund's shareholders credits for foreign income taxes paid
(or to permit shareholders to claim a deduction for such foreign taxes), but
there can be no assurance that any Fund will be able to do so. Furthermore, a
shareholder's ability to claim a foreign tax credit or deduction for foreign
taxes paid by a Fund may be subject to certain limitations imposed by the Code,
as a result of which a shareholder may not be permitted to claim a credit or
deduction for all or a portion of the amount of such taxes.
Under certain circumstances, if a Fund realizes losses (e.g., 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. Returns of
capital are generally nontaxable, but will reduce a shareholder's basis in
shares of a Fund. If that basis is reduced to zero (which could happen if the
shareholder does not reinvest distributions and returns of capital are
significant), any further returns of capital will be taxable as capital gain.
See the Fund's SAI for a further explanation of these tax issues.
If you buy shares just before a Fund deducts a distribution from its NAV, you
will pay the full price for the shares and then receive a portion of the price
back as a taxable distribution.
The sale or exchange of Fund shares is a taxable transaction for Federal income
tax purposes.
Each year shortly after December 31, the Funds will send you tax information
stating the amount and type of all its distributions for the year. Consult your
tax adviser about the federal, state, and local tax consequences in your
particular circumstances.
58
CONVERSION FEATURE
CONVERSION
As described above, Advisor Class shares may be held solely through certain
fee-based program accounts, employee benefit plans and registered investment
advisory or other financial intermediary relationships, and by investment
advisory clients of, and certain persons associated with, Alliance and its
affiliates or the Funds. If a holder of Advisor Class shares (i) ceases to
participate in the fee-based program or plan, or to be associated with an
eligible investment advisor or financial intermediary or (ii) is otherwise no
longer eligible to purchase Advisor Class shares (each a "Conversion Event"),
then all Advisor Class shares held by the shareholder will convert
automatically to Class A shares of the same Fund. The Fund will provide the
shareholder with at least 30 days advance notice of such conversion. The
failure of a shareholder or a fee-based program to satisfy the minimum
investment requirements to purchase Advisor Class shares will not constitute a
Conversion Event. The conversion would occur on the basis of the relative NAV
of the two classes and without the imposition of any sales load, fee or other
charge.
DESCRIPTION OF CLASS A SHARES
The Class A shares of each Fund have a distribution fee of .30% under the
Fund's Rule 12b-1 plan that allows the Fund to pay distribution and service
fees for the distribution and sale of its shares. Because this fee is paid out
of the Fund's assets, Class A shares have a higher expense ratio and may pay
lower dividends and may have a lower NAV than Advisor Class shares.
GENERAL INFORMATION
Under unusual circumstances, a Fund may suspend redemptions or postpone payment
for up to seven days or longer, as permitted by federal securities law. The
Funds reserve 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 in
reaching AFS by telephone, in which event you should issue written instructions
to AFS. AFS is not responsible for the authenticity of telephone 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 telephone requests. The telephone
service may be suspended or terminated at any time without notice.
59
60
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand each Fund's
financial performance for the past 5 years (or, if shorter, the period of the
Fund's operations). Certain information reflects financial results for a single
share of each Fund. The total returns in the table represent the rate that an
investor would have earned (or lost) on an investment in the Fund (assuming
reinvestment of all dividends and distributions). Except as otherwise
indicated, this information has been audited by PricewaterhouseCoopers LLP, the
independent accountants for THE ALLIANCE FUND, ALLIANCE GROWTH FUND, ALLIANCE
PREMIER GROWTH FUND, ALLIANCE INTERNATIONAL PREMIER GROWTH FUND, ALLIANCE
BALANCED SHARES, ALLIANCE UTILITY INCOME FUND, ALLIANCE WORLDWIDE PRIVATIZATION
FUND, and ALLIANCE GROWTH AND INCOME FUND, and by Ernst & Young LLP, the
independent accountants for ALLIANCE ALL-ASIA INVESTMENT FUND, ALLIANCE
TECHNOLOGY FUND, ALLIANCE QUASAR FUND, ALLIANCE INTERNATIONAL FUND, ALLIANCE
NEW EUROPE FUND, ALLIANCE GLOBAL SMALL CAP FUND, ALLIANCE GLOBAL ENVIRONMENT
FUND, ALLIANCE GREATER CHINA '97 FUND and ALLIANCE REAL ESTATE INVESTMENT FUND,
whose reports, along with each Fund's financial statements, are included in the
SAI, which is available upon request.
61
<TABLE>
<CAPTION>
INCOME FROM INVESTMENT OPERATIONS LESS DIVIDENDS AND DISTRIBUTIONS
-------------------------------------- ---------------------------------------
NET GAINS
OR LOSSES ON
SECURITIES DISTRIBUTIONS
NET ASSET NET (BOTH DIVIDENDS IN EXCESS DISTRIBUTIONS
VALUE, INVESTMENT REALIZED TOTAL FROM FROM NET OF NET FROM
BEGINNING INCOME AND INVESTMENT INVESTMENT INVESTMENT CAPITAL
FISCAL YEAR OR PERIOD OF PERIOD (LOSS) UNREALIZED) OPERATIONS INCOME INCOME GAINS
- ---------------------------- ---------- --------- ----------- ----------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
ALLIANCE PREMIER GROWTH FUND
12/1/98 to 5/31/99++ $27.71 $ (.07)(b) $ 4.62 $ 4.55 $ 0.00 $ 0.00 $ (.61)
Year ended 11/30/98 22.10 (.07)(b) 7.14 7.07 0.00 0.00 (1.46)
Year ended 11/30/97 17.99 (.06)(b) 5.25 5.19 0.00 0.00 (1.08)
10/2/96+ to 11/30/96 15.94 (.01)(b) 2.06 2.05 0.00 0.00 0.00
ALLIANCE GROWTH FUND
11/1/98 to 4/30/99++ $47.47 $ .01(b) $10.87 $10.88 $ 0.00 $ 0.00 $ (3.71)
Year ended 10/31/98 44.08 .08(b) 6.22 6.30 0.00 0.00 (2.91)
Year ended 10/31/97 34.91 (.05)(b) 10.25 10.20 0.00 0.00 (1.03)
10/2/96+ to 10/31/96 34.14 0.00(b) .77 .77 0.00 0.00 0.00
ALLIANCE TECHNOLOGY FUND
12/1/98 to 5/31/99++ $69.04 $ (.25)(b) $18.86 $18.61 $ 0.00 $ 0.00 $ (5.17)
Year ended 11/30/98 54.63 (.50)(b) 15.49 14.99 0.00 0.00 (.58)
Year ended 11/30/97 51.17 (.45)(b) 4.33 3.88 0.00 0.00 (.42)
10/2/96+ to 11/30/96 47.32 (.05)(b) 3.90 3.85 0.00 0.00 0.00
ALLIANCE QUASAR FUND
10/1/98 to 3/31/99++ $22.37 $ (.05)(b) $ 2.07 $ 2.02 $ 0.00 $ 0.00 $ (1.01)
Year ended 9/30/98 30.42 (.09)(b) (6.73) (6.82) 0.00 0.00 (1.23)
10/2/96+ TO 9/30/97 27.82 (.17)(b) 6.88 6.71 0.00 0.00 (4.11)
THE ALLIANCE FUND
12/1/98 to 5/31/99++ $ 5.98 $ (.01)(b) $ 1.42 $ 1.41 $ 0.00 $ 0.00 $ (.39)
Year ended 11/30/98 8.69 (.01)(b) (.53) (.54) 0.00 0.00 (2.17)
Year ended 11/30/97 7.71 (.02)(b) 2.10 2.08 (.04) 0.00 (1.06)
10/2/96+ to 11/30/96 6.99 0.00 .72 .72 0.00 0.00 0.00
ALLIANCE GROWTH AND
INCOME FUND
11/1/98 to 4/30/99++ $ 3.44 $ .02(b) $ .72 $ .74 $ (.02) $ 0.00 $ (.35)
Year ended 10/31/98 3.48 .04(b) .43 .47 (.05) 0.00 (.46)
Year ended 10/31/97 3.00 .05(b) .87 .92 (0.06) 0.00 (.38)
10/2/96+ to 10/31/96 2.97 0.00 .03 .03 0.00 0.00 0.00
ALLIANCE BALANCED SHARES
Year ended 7/31/99 $15.98 $ .39(b) $ 1.29 $ 1.68 $ (.37) $ 0.00 $(1.65)
Year ended 7/31/98 16.17 .37(b) 1.87 2.24 (.36) 0.00 (2.07)
10/2/96+ to 7/31/97 14.79 .23(b) 3.22 3.45 (.27) 0.00 (1.80)
ALLIANCE UTILITY INCOME FUND
12/1/98 to 5/31/99++ $14.70 $ .20(b)(c) $ 2.36 $ 2.56 $ (.17) $ 0.00 $ (.34)
Year ended 11/30/98 12.49 .37(b)(c) 2.66 3.03 (.35) 0.00 (.47)
Year ended 11/30/97 10.59 .36(b)(c) 2.04 2.40 (.37) 0.00 (.13)
10/2/96+ to 11/30/96 9.95 .03(b)(c) .61 .64 0.00 0.00 0.00
ALLIANCE REAL ESTATE
INVESTMENT FUND
Year ended 8/31/99 $10.48 $ .48(b) $ (.05) $ .43 $ (.50)(f) $ (.11) $ (.10)
Year ended 8/31/98 12.82 .55(b) (2.34) (1.79) (.54) 0.00 (.01)
10/1/96+ to 8/31/97 10.00 .35(b) 2.88 3.23 (.41)(f) 0.00 0.00
ALLIANCE NEW EUROPE FUND
Year ended 7/31/99 $21.79 $ .13(b) $ (.78) $ (.65) $ 0.00 $ 0.00 $ (2.56)
Year ended 7/31/98 18.57 .08(b) 5.28 5.36 0.00 (.09) (2.05)
10/2/96+ to 7/31/97 16.25 .11(b) 3.76 3.87 (.09) (.14) (1.32)
ALLIANCE WORLDWIDE
PRIVATIZATION FUND
Year ended 6/30/99 $12.63 $ .02(b) $ .93 $ .95 $ (.17) $ 0.00 $ (1.64)
Year ended 6/30/98 13.23 .19(b) .80 .99 (.23) 0.00 (1.36)
10/2/96+ to 6/30/97 12.14 .18(b) 2.52 2.70 (.19) 0.00 (1.42)
ALLIANCE INTERNATIONAL
PREMIER GROWTH FUND
12/1/98 to 5/31/99++ $ 9.64 $ (.04)(b)(c) $ .68 $ .64 $ 0.00 $ 0.00 $ 0.00
3/3/98+ to 11/30/98 10.00 .01(b)(c) (.37) (.36) 0.00 0.00 0.00
ALLIANCE GLOBAL
SMALL CAP FUND
Year ended 7/31/99 $12.20 $ (.07)(b) $ .77 $ .70 $ 0.00 $ 0.00 $ (1.16)
Year ended 7/31/98 12.89 (.07)(b) .37 .30 0.00 0.00 (.99)
10/2/96+ to 7/31/97 12.56 (.08)(b) 1.97 1.89 0.00 0.00 (1.56)
ALLIANCE INTERNATIONAL FUND
Year ended 6/30/99 $18.54 $ .01(b)(c) $ (.75) $ (.74) $ (.01) $ (.51) $ (1.04)
Year ended 6/30/98 18.67 .02(b)(c) 1.13 1.15 (.02) (.05) (1.21)
10/2/96+ to 6/30/97 17.96 .16(b) 1.78 1.94 (.15) 0.00 (1.08)
ALLIANCE GREATER
CHINA '97 FUND
Year ended 7/31/99 $ 4.85 $ .04(b)(c) $ 3.35 $ 3.39 $ 0.00 $ 0.00 $ 0.00
9/3/97+ to 7/31/98 10.00 .10(b)(c) (5.18) (5.08) (.07) 0.00 0.00
<CAPTION>
LESS DISTRIBUTIONS RATIOS/SUPPLEMENTAL DATA
------------------ ------------------------------------------------------
NET ASSETS, RATIO OF
TOTAL NET ASSET END OF RATIO OF NET INCOME
DIVIDENDS VALUE, PERIOD EXPENSES (LOSS) TO PORTFOLIO
AND END OF TOTAL (000'S TO AVERAGE AVERAGE TURNOVER
DISTRIBUTIONS PERIOD RETURN (A) OMITTED) NET ASSETS NET ASSETS RATE
---------- --------- ----------- ----------- ---------- ---------- -------------
<C> <C> <C> <C> <C> <C> <C>
$ (.61) $31.65 16.72% $427,542 1.15%* (.46)%* 39%
(1.46) 27.71 34.31 271,661 1.26(e) (.28) 82
(1.08) 22.10 30.98 53,459 1.25 (.28) 76
0.00 17.99 12.86 1,922 1.50 (.48) 95
$(3.71) $54.64 24.00% $212,589 .88%* .06%* 35%
(2.91) 47.47 14.92 174,745 .93(e) .17 61
(1.03) 44.08 29.92 101,205 .98(e) (.12) 48
0.00 34.91 2.26 946 1.26* 0.50 46
$(5.17) $82.48 28.36% $279,264 1.27%* (.62)%* 27%
(.58) 69.04 27.73 230,295 1.37(e) (.84) 67
(.42) 54.63 7.65 167,120 1.39(e) (.81) 51
0.00 51.17 8.14 566 1.75* (1.21)* 30
$(1.01) $23.38 9.22% $215,234 1.40%* (.41)%* 49%
(1.23) 22.37 (23.24) 175,037 1.38(e) (.32) 109
(4.11) 30.42 28.47 62,455 1.58* (.74)* 135
$ (.39) $ 7.00 25.28% $ 11,642 .87%* (.19)%* 53%
(2.17) 5.98 (8.19) 11,305 .83 (.16) 106
(1.10) 8.69 32.00 10,275 .83 (.21) 158
0.00 7.71 10.30 1,083 .89* 0.38* 80
$ (.37) $ 3.81 23.50% $ 33,920 .71%* 1.16%* 29%
(.51) 3.44 14.96 22,786 .76(e) 1.14 89
(.44) 3.48 33.61 3,207 .71(e) 1.42 88
0.00 3.00 1.01 87 0.37* 3.40* 88
$(2.02) $15.64 11.71% $ 2,627 .97%(e) 2.56% 105%
(2.43) 15.98 15.32 2,079 1.06(e) 2.33 145
(2.07) 16.17 25.96 1,565 1.30*(e) 2.15* 207
$ (.51) $16.75 17.94% $ 1,327 1.21%* 2.55% 4%
(.82) 14.70 25.34 523 1.20(d) 2.83 16
(.50) 12.49 23.57 42 1.20(d) 3.28 37
0.00 10.59 6.33 33 1.20(d) 4.02 98
$ (.71) $10.20 4.18% $ 2,270 1.30% 4.75% 29%
(.55) 10.48 (14.74) 2,899 1.25 4.08 23
(.41) 12.82 32.72 2,313 1.45*(d)(e) 3.07* 20
$(2.56) $18.58 (2.54)% $ 4,778 1.51%(e) .68% 89%
(2.14) 21.79 32.55 3,143 1.56(e) .39 99
(1.55) 18.57 25.76 4,130 1.71* .77* 89
$(1.81) $11.77 10.12% $ 1,610 1.62%(e) .37% 58%
(1.59) 12.63 9.48 1,716 1.45 1.48 53
(1.61) 13.23 25.24 374 1.96* 2.97* 48
$ 0.00 $10.28 6.64% $ 1,583 2.22%* (.83)%* 121%
0.00 $ 9.64 (3.60) 1,386 2.20(d)* .13* 151
$(1.16) $11.74 7.63% $ 189 2.13(e) (.63)% 120%
(.99) 12.20 2.82 392 1.87(e) (.57) 113
(1.56) 12.89 17.08 333 2.05*(e) (.84)* 129
$(1.56) $16.24 (3.62)% $ 33,949 1.57%(e) .04%(c) 178%
(1.28) 18.54 6.98 47,154 1.47(d) .13 121
(1.23) 18.67 11.57 8,697 1.69(d)* 1.47* 94
$ 0.00 $ 8.24 69.90% $ 161 2.22%(d)(e) .58% 94%
(.07) 4.85 (51.06) 60 2.22(d)(e)* 1.51* 58
</TABLE>
PLEASE REFER TO FOOTNOTES ON PAGE 64.
62
63
<TABLE>
<CAPTION>
INCOME FROM INVESTMENT OPERATIONS LESS DIVIDENDS AND DISTRIBUTIONS
-------------------------------------- ---------------------------------------
NET GAINS
OR LOSSES ON
SECURITIES DISTRIBUTIONS
NET ASSET NET (BOTH DIVIDENDS IN EXCESS DISTRIBUTIONS
VALUE, INVESTMENT REALIZED TOTAL FROM FROM NET OF NET FROM
BEGINNING INCOME AND INVESTMENT INVESTMENT INVESTMENT CAPITAL
FISCAL YEAR OR PERIOD OF PERIOD (LOSS) UNREALIZED) OPERATIONS INCOME INCOME GAINS
- ---------------------------- ---------- --------- ----------- ----------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
ALLIANCE ALL-ASIA
INVESTMENT FUND
11/1/98 to 4/30/99++ $ 5.90 $ (.06)(b)(c)$ 1.89 $ 1.83 $ 0.00 $ 0.00 $ 0.00
Year ended 10/31/98 7.56 (.08)(b)(c) (1.58) (1.66) 0.00 0.00 0.00
Year ended 10/31/97 11.04 (.15)(b)(c) (2.99) (3.14) 0.00 0.00 (.34)
10/2/96+ to 10/31/96 11.65 0.00(c) (.61) (.61) 0.00 0.00 0.00
ALLIANCE GLOBAL
ENVIRONMENT FUND
11/1/98 to 4/30/99++ $ 8.37 $ (.10)(b)(c)$ 1.46 $ 1.36 $ 0.00 $ 0.00 $ (3.10)
12/29/97+ to 10/31/98 9.15 (.20) (.58) (.78) 0.00 0.00 0.00
<CAPTION>
LESS DISTRIBUTIONS RATIOS/SUPPLEMENTAL DATA
------------------ ------------------------------------------------------
NET ASSETS, RATIO OF
TOTAL NET ASSET END OF RATIO OF NET INCOME
DIVIDENDS VALUE, PERIOD EXPENSES (LOSS) TO PORTFOLIO
AND END OF TOTAL (000'S TO AVERAGE AVERAGE TURNOVER
DISTRIBUTIONS PERIOD RETURN (A) OMITTED) NET ASSETS NET ASSETS RATE
---------- --------- ----------- ----------- ---------- ---------- -------------
<C> <C> <C> <C> <C> <C> <C>
$ 0.00 $ 7.73 31.02% $ 2,200 2.74%* (1.93)% 210%
0.00 5.90 (21.96) 2,012 3.46(d)(e) 1.22 93
(.34) 7.56 (29.42) 1,338 3.21(d) (1.51) 70
0.00 11.04 (5.24) 27 4.97*(d) 1.63 66
$(3.10) $ 6.63 25.94% $ 6 3.73%* (3.16)% 86%
0.00 8.37 (8.52) 5 3.04*(e) (2.39)* 205
</TABLE>
+ COMMENCEMENT OF DISTRIBUTION.
++ UNAUDITED
* ANNUALIZED.
(A) 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 THE NET ASSET VALUE DURING THE PERIOD, AND A
REDEMPTION ON THE LAST DAY OF THE PERIOD. INITIAL SALES CHARGES OR CONTINGENT
DEFERRED SALES CHARGES ARE NOT REFLECTED IN THE CALCULATION OF TOTAL INVESTMENT
RETURN. TOTAL INVESTMENT RETURNS CALCULATED FOR PERIODS OF LESS THAN ONE YEAR
ARE NOT ANNUALIZED.
(B) BASED ON AVERAGE SHARES OUTSTANDING.
(C) NET OF FEE WAIVER AND EXPENSE REIMBURSEMENT.
(D) NET OF EXPENSES ASSUMED AND/OR WAIVED/REIMBURSED. IF THE FOLLOWING FUNDS
HAD BORNE ALL EXPENSES IN THEIR MOST RECENT FIVE FISCAL YEARS, THEIR EXPENSE
RATIOS, WITHOUT GIVING EFFECT TO THE EXPENSE OFFSET ARRANGEMENT DESCRIBED IN
(E) BELOW, WOULD HAVE BEEN AS FOLLOWS:
1996 1997 1998 1999
- -------------------------------------------------------------------------------
ALLIANCE ALL-ASIA
INVESTMENT FUND
ADVISOR CLASS 5.54%* 3.43% 4.39% --
ALLIANCE UTILITY
INCOME FUND
ADVISOR CLASS 3.48%* 3.29% 2.21% --
ALLIANCE REAL ESTATE
INVESTMENT FUND
ADVISOR CLASS -- 1.47%* -- --
ALLIANCE INTERNATIONAL
PREMIER GROWTH FUND
ADVISOR CLASS -- -- 6.28% 3.48%*
1997 1998 1999
- -------------------------------------------------------------------------------
ALLIANCE INTERNATIONAL FUND
ADVISOR CLASS -- 1.62% 1.70%
ALLIANCE GREATER CHINA '97 FUND
ADVISOR CLASS -- 18.13%* 19.01%
(E) AMOUNTS DO NOT REFLECT THE IMPACT OF EXPENSE OFFSET ARRANGEMENTS WITH THE
TRANSFER AGENT. TAKING INTO ACCOUNT SUCH EXPENSE OFFSET ARRANGEMENTS, THE RATE
OF EXPENSES TO AVERAGE NET ASSETS ASSUMING THE ASSUMPTION AND/OR WAIVED
REIMBURSEMENT OF EXPENSES DESCRIBED IN NOTE (D) ABOVE WOULD HAVE BEEN AS
FOLLOWS:
1997 1998 1999
- -------------------------------------------------------------------------------
ALLIANCE INTERNATIONAL FUND
ADVISOR CLASS 1.69%* -- 1.55%
ALLIANCE GLOBAL SMALL CAP FUND
ADVISOR CLASS 2.04%* 1.84% 2.10%
ALLIANCE NEW EUROPE FUND
ADVISOR CLASS 1.71%* 1.54% 1.50%
ALLIANCE ALL-ASIA INVESTMENT FUND
ADVISOR CLASS -- 3.41% --
ALLIANCE BALANCED SHARES
ADVISOR CLASS 1.29%* 1.05% .96%
ALLIANCE WORLDWIDE PRIVATIZATION FUND
ADVISOR CLASS -- -- 1.61%
ALLIANCE QUASAR FUND
ADVISOR CLASS -- 1.37% --
ALLIANCE REAL ESTATE INVESTMENT
FUND
ADVISOR CLASS 1.44%* -- --
ALLIANCE GROWTH AND INCOME
FUND
ADVISOR CLASS .70% .75% --
ALLIANCE GROWTH FUND
ADVISOR CLASS .96% .92% --
ALLIANCE TECHNOLOGY FUND
ADVISOR CLASS 1.38% 1.36% --
ALLIANCE GREATER CHINA '97 FUND
ADVISOR CLASS -- 2.20%* 2.20%
ALLIANCE PREMIER GROWTH FUND
ADVISOR CLASS -- 1.25% --
ALLIANCE GLOBAL ENVIRONMENT FUND
ADVISOR CLASS -- 3.03% --
(F) DISTRIBUTIONS FROM NET INVESTMENT INCOME FOR THE YEARS ENDED 1999 AND
1997 INCLUDE A TAX RETURN OF CAPITAL OF $.02 AND $.03 RESPECTIVELY.
64
65
66
APPENDIX A
The following is additional information about the United Kingdom, Japan and
Greater China countries.
INVESTMENT IN UNITED KINGDOM ISSUERS. Investment in securities of United
Kingdom issuers involves certain considerations not present with investment in
securities of U.S. issuers. As with any investment not denominated in the U.S.
Dollar, the U.S. dollar value of the Fund's investment denominated in the
British pound sterling will fluctuate with pound sterling-dollar exchange rate
movements. Between 1972, when the pound sterling was allowed to float against
other currencies, and the end of 1992, the pound sterling generally depreciated
against most major currencies, including the U.S. Dollar. Between September and
December 1992, after the United Kingdom's exit from the Exchange Rate Mechanism
of the European Monetary System, the value of the pound sterling fell by almost
20% against the U.S. Dollar. The pound sterling has since recovered due to
interest rate cuts throughout Europe and an upturn in the economy of the United
Kingdom. The average exchange rate of the U.S. Dollar to the pound sterling was
1.50 in 1993 and 1.66 in 1998. On October 25, 1999 the U.S. dollar-pound
sterling exchange rate was 1.66.
The United Kingdom's largest stock exchange is the London Stock Exchange, which
is the third largest exchange in the world. As measured by the FT-SE 100 index,
the performance of the 100 largest companies in the United Kingdom reached
5,882.6 at the end of 1998, up approximately 15% from the end of 1997. The
FT-SE 100 index closed at 6009.40 on October 25, 1999.
The Economic and Monetary Union ("EMU") became effective on January 1, 1999.
When fully implemented in 2002, the EMU will establish a common currency for
European countries that meet the eligibility criteria and choose to
participate. Although the United Kingdom meets the eligibility criteria, the
government has not taken any action to join the EMU.
From 1979 until 1997 the Conservative Party controlled Parliament. In the May
1, 1997 general elections, however, the Labour Party, led by Tony Blair, won a
majority in Parliament, gaining 418 of 659 seats in the House of Commons. Mr.
Blair, who was appointed Prime Minister, has launched a number of reform
initiatives, including an overhaul of the monetary policy framework intended to
protect monetary policy from political forces by vesting responsibility for
setting interest rates in a new Monetary Policy Committee headed by the
Governor of the Bank of England, as opposed to the Treasury. Prime Minister
Blair has also undertaken a comprehensive restructuring of the regulation of
the financial services industry. For further information regarding the United
Kingdom, see the SAI of New Europe Fund.
INVESTMENT IN JAPANESE ISSUERS. Investment in securities of Japanese issuers
involves certain considerations not present with investment in securities of
U.S. issuers. As with any investment not denominated in the U.S. Dollar, the
U.S. Dollar value of each Fund's investments denominated in the Japanese yen
will fluctuate with yen-dollar exchange rate movements. Between 1985 and 1995,
the Japanese yen generally appreciated against the U.S. dollar. Thereafter, the
Japanese yen generally depreciated against the U.S. Dollar until mid-1998, when
it began to appreciate. In September 1999 the Japanese yen reached a 43-month
high against the U.S. Dollar.
Japan's largest stock exchange is the Tokyo Stock Exchange, the First Section
of which is reserved for larger, established companies. As measured by the
TOPIX, a capitalization-weighted composite index of all common stocks listed in
the First Section, the performance of the First Section reached a peak in 1989.
Thereafter, the TOPIX declined approximately 50% through the end of 1997. On
December 31, 1998 the TOPIX closed at 1086.99, down approximately 7% from the
end of 1997. On October 25, 1999 the TOPIX closed at 1534.27 up approximately
41% from the end of 1998.
Since the early 1980s, Japan has consistently recorded large current account
trade surpluses with the U.S. that have caused difficulties in the relations
between the two countries. On October 1, 1994, the U.S. and Japan reached an
agreement that was expected to to more open Japanese markets with respect to
trade in certain goods and services. Since then, the two countries have agreed
in principle to increase Japanese imports of American automobiles and
automotive parts, as well as other goods and services. Nevertheless, the
surpluses have persisted and it is expected that the friction between the U.S.
and Japan with respect to trade issues will continue for the foreseeable future.
Each Fund's investments in Japanese issuers will be subject to uncertainty
resulting from the instability of recent Japanese ruling coalitions. From 1955
to 1993, Japan's government was controlled by a single political party. Between
August 1993 and October 1996, Japan was ruled by a series of four coalition
governments. As the result of a general election on October 20, 1996, however,
Japan returned to a single-party government led by Ryutaro Hashimoto, a member
of the Liberal Democratic Party ("LDP"). While the LDP does not control a
majority of the seats in the parliament, subsequent to the 1996 elections it
established a majority in the House of Representatives as individual members
joined the ruling party. The popularity of the LDP declined, however, due to
the dissatisfaction with Mr. Hashimoto's leadership. In the July 1998 House of
Councillors election, the LDP's representation fell to 103 seats from 120
seats. As a result of the LDP's defeat, Mr. Hashimoto resigned as prime
minister and leader of the LDP. Mr. Hashimoto was replaced by Keizo Obuchi. On
January 14, 1999, the LDP formed a coalition government with a major opposition
party. As a result, Mr. Obuchi's administration strengthened its position in
the parliament, where it increased its majority in the House of Representatives
and reduced its shortfall in the House of Councillors. The LDP formed a new
three-party coalition government on October 5, 1999 that further strengthens
the position of Mr. Obuchi's administration in the parliament. For the past
several years, Japan's banking industry
67
has been weakened by a significant amount of problem loans. Japan's banks also
have had significant exposure to the recent financial turmoil in other Asian
markets. Following the insolvency of one of Japan's largest banks in November
1997, the government proposed several plans designed to strengthen the weakened
banking sector. In October 1998, the Japanese parliament approved several new
laws that made $508 billion in public funds available to increase the capital
of Japanese banks, to guarantee depositors' accounts and to nationalize the
weakest banks. It is unclear whether these laws will achieve their intended
effect. For further information regarding Japan, see the SAIs of ALLIANCE
INTERNATIONAL FUND and ALLIANCE ALL-ASIA INVESTMENT FUND.
INVESTMENT IN GREATER CHINA ISSUERS. 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 economic, political and
social 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 China's 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.
Following the death of Deng Xiaoping in February 1997, Jiang Zemin became the
leader of China's Communist Party. The transfer of political power has
progressed smoothly and Jiang's popularity and credibility have gradually
increased. Jiang continues to consolidate his power, but as of yet does not
appear to have the same degree of control as did Deng Xiaoping. Jiang has
continued the market-oriented policies of Deng. Currently, China's major
economic challenge centers on reforming or eliminating inefficient state-owned
enterprises without creating an unacceptable level of unemployment. Recent
capitalistic policies have in many respects effectively outdated the Communist
Party and the governmental structure, but both remain entrenched. The Communist
Party still controls access to governmental positions and closely monitors
governmental action.
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 also be significant.
China is heavily dependent on foreign trade, particularly with Hong Kong,
Japan, the U.S., South Korea and Taiwan. Political developments adverse to its
trading partners, as well as political and social repression, could cause the
U.S. and others to alter their trading policy towards China. For example, in
the U.S. the continued extension of normal trade relations (formerly known as
most favored nation trading status) with China, which is reviewed regularly and
was reviewed in 1999, is an issue of significant controversy. 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
through Hong Kong's markets as well.
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 from Great Britain to China. Hong Kong is headed by a
chief executive, appointed by the central government of China, whose power is
checked by both the government of China and a Legislative Council. Although
Hong Kong voters voted overwhelmingly for pro-democracy candidates in the
recent election, it remains possible that China could exert its authority so as
to alter the economic structure, political structure or existing social policy
of Hong Kong. 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. 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 number of companies representing a
small number of industries. Consequently, ALLIANCE GREATER CHINA '97 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.
68
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 ALLIANCE GREATER CHINA '97 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.
ALLIANCE GREATER CHINA '97 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. It is also
anticipated that transaction costs, including brokerage commissions for
transactions both on and off the securities exchanges in Greater China
countries, will 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 investors in securities of Greater China country issuers
than to investors in securities of U.S. issuers.
Investment in Greater China companies that 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.
69
For more information about the Funds, the following documents are available
upon request:
- - ANNUAL/SEMI-ANNUAL REPORTS TO SHAREHOLDERS
The Funds' annual and semi-annual reports to shareholders contain additional
information on the Funds' investments. In the annual report, you will find a
discussion of the market conditions and investment strategies that
significantly affected a Fund's performance during its last fiscal year.
- - STATEMENT OF ADDITIONAL INFORMATION (SAI)
Each Fund has an SAI, which contains more detailed information about the Fund,
including its operations and investment policies. The Funds' SAIs are
incorporated by reference into (and are legally part of) this prospectus.
You may request a free copy of the current annual/semi-annual report or the
SAI, or make inquiries concerning the Funds, by contacting your broker or other
financial intermediary, or by contacting Alliance:
BY MAIL: c/o Alliance Fund Services, Inc.
P.O. Box 1520
Secaucus, N.J. 07096-1520
BY PHONE: For Information: (800) 221-5672
For Literature: (800) 227-4618
Or you may view or obtain these documents from the Commission:
o Call the SEC at 1-202-942-8090 for information on the operation of the
Public Reference Room.
o Reports and other information about the Fund are available on the EDGAR
Database on the Commission's Internet site at http://www.sec.gov
o Copies of the information may be obtained, after paying a duplicating fee,
by electronic request at [email protected], or by writing the
Commission's Public Reference Section, Wash. DC 20549-0102
You also may find more information about Alliance and the Funds on the internet
at www.Alliancecapital.com
Fund SEC File No.
- ------------------------------------------------------------------------------
Alliance Premier Growth Fund 811-06730
Alliance Health Care Fund 811-09329
Alliance Growth Fund 811-05088
Alliance Technology Fund 811-03131
Alliance Quasar Fund 811-01716
The Alliance Fund 811-00204
Alliance Growth & Income 811-00126
Alliance Balanced Shares 811-00134
Alliance Utility Income Fund 811-07916
Alliance Real Estate Investment Fund 811-07707
Alliance New Europe Fund 811-06028
Alliance Worldwide Privatization Fund 811-08426
Alliance International Premier Growth Fund 811-08527
Alliance Global Small Cap Fund 811-01415
Alliance International Fund 811-03130
Alliance Greater China '97 Fund 811-08201
Alliance All-Asia Investment Fund 811-08776
Alliance Global Environment Fund 811-05993
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(LOGO) ALLIANCE GREATER CHINA '97 FUND, INC.
_________________________________________________________________
c/o Alliance Fund Services, Inc.
P.O. Box 1520, Secaucus, New Jersey 07096-1520
Toll Free (800) 221-5672
For Literature: Toll Free (800) 227-4618
_________________________________________________________________
STATEMENT OF ADDITIONAL INFORMATION
November 1, 1999
_________________________________________________________________
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.....................
Portfolio Transactions.................................
General Information....................................
Financial Statements and Report of Independent.........
Auditors.............................................
Appendix A: Additional Information About China,
Hong Kong and Taiwan.................... A-1
Appendix B: Certain Investment Practices.............. B-1
Appendix C: Debt Securities Ratings................... C-1
Appendix D: Certain Employee Benefit Plans............ D-1
(R): This registered service mark used under license from the
owner, Alliance Capital Management L.P.
<PAGE>
____________________________________________________________
DESCRIPTION OF THE FUND
____________________________________________________________
Alliance Greater China '97 Fund, Inc. (the "Fund") is a
non-diversified, open-end investment company. Except as
otherwise indicated, the investment policies of 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
Capital Management L.P. the Fund's investment adviser (the
"Adviser") to have undergone a similar credit quality
deterioration, the Fund will dispose of that security. See
"Appendix C--Debt Securities Ratings."
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;"
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<PAGE>
(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 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 account 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 sell any security whenever,
in the judgment of the Adviser, its appreciation possibilities
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<PAGE>
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 or losses.
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) 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
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;
(iii) pledge, hypothecate, mortgage or otherwise
encumber its assets, except to secure permitted borrowings;
(iv) make loans except through (a) the purchase of debt
obligations in accordance with its investment objectives and
4
<PAGE>
policies; (b) the lending of portfolio securities; or (c) the use
of repurchase agreements;
(v) participate on a joint or joint and several basis in
any securities trading account;
(vi) invest in companies for the purpose of exercising
control;
(vii) issue any senior security within the meaning of
the Act;
(viii) 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); or
(ix) (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 business and affairs of the Fund are managed under
the direction of the Board of Directors. 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
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<PAGE>
the Adviser. Unless otherwise specified, the address of each of
the following persons is 1345 Avenue of the Americas, New York,
New York 10105.
DIRECTORS
JOHN D. CARIFA,* 54, Chairman of the Board, is the
President, Chief Operating Officer and a Director of Alliance
Capital Management Corporation ("ACMC"), with which he has been
associated since prior to 1994.
DAVID H. DIEVLER, 70, is an independent consultant. He
was formerly a Senior Vice President of ACMC until December 1994.
His address is P.O. Box 167, Spring Lake, New Jersey 07762.
WILLIAM H. FOULK, JR., 67, 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 1994. His address is
Room 100, 2 Greenwich Plaza, Greenwich, Connecticut 06830.
TAK-LUNG TSIM,* 52, is a consultant of T.L. Tsim &
Associates Limited, with which he has been associated since 1994.
He is a trustee of Shaw College of The Chinese University of Hong
Kong and is a member of L. Po Chun United World College. His
address is Suite 906-907, Sun Hung Kai Center, 30 Halbour Road,
Hong Kong.
OFFICERS
JOHN D. CARIFA, Chairman and President, see biography
above.
KATHLEEN A. CORBET, 39, Senior Vice President, is an
Executive Vice President of ACMC, with which she has been
associated since prior to 1994.
MATTHEW W.S. LEE, 36, Chief Investment Officer, is a
Vice President of ACMC, with which he has been associated since
1997. Prior thereto, he was a director of National Mutual Funds
Management (ASIA), and an employee of James Capel & Co. since
prior to 1994.
EDMUND P. BERGAN, JR., 49, Secretary, is a Senior Vice
President and the General Counsel of Alliance Fund Distributors,
____________________
* An interested person of the Fund as defined in the
Investment Company Act of 1940, as amended (the "1940
Act").
6
<PAGE>
Inc. ("AFD") and Alliance Fund Services, Inc. ("AFS"), with which
he has been associated since prior to 1994.
MARK D. GERSTEN, 49, Treasurer, and Chief Financial
Officer, is Senior Vice President of AFS and a Vice President of
AFD, with which he has been associated since prior to 1994.
VINCENT S. NOTO, 34, Controller, is a Vice President of
AFS, with which he has been associated since prior to 1994.
ANDREW L. GANGOLF, 45, 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.
DOMENICK PUGLIESE, 38, 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 1994.
EMILIE D. WRAPP, 43, Assistant Secretary, is a Vice
President and Assistant General Counsel of AFD, with which she
has been associated since prior to 1994.
The aggregate compensation paid by the Fund to each of
the Directors during its current fiscal year ended July 31, 1999
and the aggregate compensation paid to each of the Directors
during calendar year 1998 by all of the registered investment
companies to which the Adviser provides investment advisory
services (collectively, the "Alliance Fund Complex"), and the
total number of registered investment companies (and separate
investment portfolios within those Companies) in the Alliance
Fund Complex with respect to which each of the Directors serves
as a director or trustee, are set forth below. Neither the Fund
nor any other registered investment company in the Alliance Fund
Complex provides compensation in the form of pensions or
retirement benefits to any of its directors or trustees. Some of
the Directors are a director or trustee of one or more other
registered investment companies in the Alliance Fund Complex.
7
<PAGE>
Total Number
Total Number of Investment
of Investment Portfolios
Companies in Within the
the Alliance Alliance Fund
Total Fund Complex, Complex,
Compensation Including the Including the
from the Fund, as to Fund, as to
Alliance Fund which the which the
Name of Aggregate Complex, Director is a Director is
Director Compensation Including the Director or a Director
of the Fund from the Fund Fund Trustee or Trustee
___________ ____________ ______________ _____________ _____________
John D. Carifa $0 $0 50 116
David H. Dievler $2,518 $216,288 44 86
William H. Foulk, Jr. $3,021 $241,003 45 111
T.L. Tsim $3,000 $3,500 1 1
As of October 8, 1999, the Directors and officers of the
Fund as a group owned less than 1% of the shares of the Fund.
Adviser
Alliance Capital Management L.P. a Delaware limited
partnership 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.
The Adviser is a leading international adviser managing
client accounts with assets as of September 30, 1999 totaling
more than $317 billion (of which more than $143 billion
represented assets of investment companies). As of September 30,
1999, the Adviser managed retirement assets for many of the
largest public and private employee benefit plans (including 28
of the nation's FORTUNE 100 companies), for public employee
retirement funds in 31 states, for investment companies, and for
foundations, endowments, banks and insurance companies worldwide.
The 52 registered investment companies managed by the Adviser,
comprising 118 separate investment portfolios, currently have
approximately 4.8 million shareholder accounts.
ACMC is the general partner of the Adviser. As of
September 30, 1999, The Equitable Life Assurance Society of the
United States ("Equitable"), ACMC, Inc. and Equitable Capital
Management Corporation ("ECMC") were the beneficial owners of
approximately 56% of the outstanding Units of the Adviser. ACMC,
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<PAGE>
ECMC and ACMC, Inc. are wholly owned subsidiaries of Equitable,
one of the largest life insurance companies in the United States.
ECMC is a registered investment adviser and ACMC, Inc. is a
holding company for Units of the Adviser. Equitable is a wholly
owned subsidiary of AXA Financial, Inc. ("AXA Financial"), a
Delaware corporation whose shares are traded on the New York
Stock Exchange. AXA Financial serves as the holding company for
the Adviser, Equitable and Donaldson, Lufkin & Jenrette, Inc., a
broker-dealer holding company. As of September 30, 1999, AXA, a
French insurance holding company, owned approximately 56% of the
issued and outstanding shares of the common stock of AXA
Financial.
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 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.
For the year ended July 31, 1999, the cost of certain legal and
accounting series amounting to $127,000, provided to the Fund by
the Adviser were waived.
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. The fee is accrued daily and paid
monthly. For its fiscal period ended July 31, 1999, the Adviser
was entitled to receive $27,234 pursuant to the Advisory
Agreement, all of which was voluntarily waived by the Adviser.
The Adviser has agreed for the current fiscal year to 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 Class A, Class B, Class C
and Advisor Class shares. For the year ended July 31, 1999, such
waiver of management fees amounted to $331,024.
The Advisory Agreement became effective on July 29, 1997
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
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<PAGE>
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 until
June 30, 2000 and thereafter 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 1940
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,
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 AFD Exchange Reserves, Alliance
All-Asia Investment Fund, Inc., Alliance Balanced Shares, Inc.,
Alliance Bond Fund, Inc., Alliance Capital Reserves, 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 Health Care Fund,
Inc., Alliance High Yield Fund, Inc., Alliance International
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<PAGE>
Fund, Alliance International Premier Growth Fund, Inc., Alliance
Institutional Funds, Inc., Alliance Institutional Reserves, Inc.,
Alliance Limited Maturity Government Fund, Inc., Alliance Money
Market Fund, Alliance Mortgage Securities Income Fund, Inc.,
Alliance Multi-Market Strategy Trust, Inc., Alliance Municipal
Income Fund, Inc., Alliance Municipal Income Fund II, Alliance
Municipal Trust, Alliance New Europe Fund, Inc., Alliance North
American Government Income Trust, Inc., Alliance Premier Growth
Fund, Inc., Alliance Quasar Fund, Inc., Alliance Real Estate
Investment Fund, Inc., Alliance Select Investor Series, Inc.,
Alliance Technology Fund, Inc., Alliance Utility Income Fund,
Inc., Alliance Variable Products Series Fund, Inc., Alliance
Worldwide Privatization Fund, Inc., The Alliance Fund, Inc., The
Alliance Portfolios, 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 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 preeminent
property and business groups. SHKP is one of the largest
enterprises in Hong Kong measured by market capitalization at
over HK$78.6 billion as of June 30, 1998 and has considerable
expertise in evaluating business and market conditions in Hong
Kong and the other Greater China countries. Although SHKP is
best known for its strength in the residential sector, its
developments span every major property use, including shopping
centers, office and industrial properties, hotels and warehouses.
Its activities complementary to property development include
11
<PAGE>
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 under the 1940 Act (the "Rule 12b-1 Plan").
During the Fund's fiscal year ended July 31, 1999, the
Fund paid distribution services fees for expenditures under the
Agreement, with respect to Class A shares, in amounts aggregating
$1,963 which constituted 0.30%, annualized, of the Fund's
aggregate average daily net assets attributable to Class A shares
during the period, and the Adviser made payments from its own
resources as described above aggregating $315,201. Of the
$317,164 paid by the Fund and the Adviser under the Rule 12b-1
Plan with respect to the Class A shares, $32,325 was spent on
advertising, $6,219 on the printing and mailing of prospectuses
for persons other than current shareholders, $138,925 for
compensation to broker-dealers and other financial intermediaries
(including, $86,133 to the Fund's Principal Underwriters), $543
for compensation to sales personnel, $139,152 was spent on
printing of sales literature, travel, entertainment, due
diligence and other promotional expenses.
During the Fund's fiscal year ended October 31, 1999,
the Fund paid distribution services fees for expenditures under
the Agreement, with respect to Class B shares, in amounts
aggregating $18,363, which constituted 1.00%, annualized, of the
Fund's aggregate average daily net assets attributable to Class B
shares during the period, and the Adviser made payments from its
own resources as described above aggregating $454,205. Of the
$472,568 paid by the Fund and the Adviser under the Rule 12b-1
Plan with respect to the Class B shares, $48,292 was spent on
advertising, $28,965 on the printing and mailing of prospectuses
for persons other than current shareholders, $202,875 for
compensation to broker-dealers and other financial intermediaries
(including, $123,902 to the Fund's Principal Underwriters), $245
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<PAGE>
for compensation to sales personnel, $188,489 was spent on
printing of sales literature, travel, entertainment, due
diligence and other promotional expenses, and $3,702 was spent on
interest on Class B shares financing.
During the Fund's fiscal year ended October 31, 1999,
the Fund paid distribution services fees for expenditures under
the Agreement, with respect to Class C shares, in amounts
aggregating $1,174, which constituted 1.00%, annualized, of the
Fund's aggregate average daily net assets attributable to Class C
shares during the period, and the Adviser made payments from its
own resources as described above aggregating $22,721. Of the
$23,895 paid by the Fund and the Adviser under the Rule 12b-1
Plan with respect to the Class C shares, $1,583 was spent on
advertising, $2,133 on the printing and mailing of prospectuses
for persons other than current shareholders, $10,226 for
compensation to broker-dealers and other financial intermediaries
(including, $6,153 to the Fund's Principal Underwriters), $32 for
compensation to sales personnel, $9,848 was spent on printing of
sales literature, travel, entertainment, due diligence and other
promotional expenses, and $73 was spent on interest on Class C
shares financing.
Distribution services fees are accrued daily and paid
monthly and are charged as expenses of the Fund as accrued. The
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.
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 for any given year, however, will probably exceed
the distribution services fee payable under the Rule 12b-1 Plan
with respect to the class involved and, in the case of Class B
and Class C shares, payments received from contingent deferred
sales charges ("CDSCs"). The excess will be carried forward by
AFD and reimbursed from distribution services fees payable under
the Rule 12b-1 Plan with respect to the class involved and, in
the case of Class B and Class C shares, payments subsequently
13
<PAGE>
received through CDSCs, so long as the Rule 12b-1 Plan is in
effect.
Unreimbursed distribution expenses incurred as of the
end of the Fund's most recently completed fiscal period, and
carried over for reimbursement in future years in respect of the
Class B and Class C shares for the Fund were, respectively,
$31,995 (1.68% of the net assets of Class B) and $-0- (-0-% of
the net assets of Class C).
In approving the 12b-1 Plan, the Directors of the Fund
determined that there was a reasonable likelihood that the Rule
12b-1 Plan would benefit the Fund and its shareholders. The
distribution services fee of a particular class will not be used
to subsidize the provision of distribution services with respect
to any other class.
The Adviser may from time to time and from its own funds
or such other resources as may be permitted by rules of the
Commission make payments for distribution services to the
Principal Underwriter; the latter may in turn pay part or all of
such compensation to brokers or other persons for their
distribution assistance.
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. Most recently,
continuance of the Agreement was approved for the period ending
June 30, 2000 by the Board of Directors, including a majority of
the Directors who are not interested persons, as defined in the
1940 Act, at their Annual Meeting held on April 14, 1999.
In the event that the Rule 12b-1 Plan 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
(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.
14
<PAGE>
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
Agreements. In the event that a change in these laws prevented a
bank from providing such services, it is expected that other
services arrangements would be made and that shareholders would
not be adversely affected.
Transfer Agency Agreement
Alliance Fund Services, Inc., an indirect wholly-owned
subsidiary of the Adviser located at 500 Plaza Drive, Secaucus,
New Jersey 07094, 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. For the fiscal period ended July 31, 1999, the Transfer
Agent was entitled to receive $6,591 under the Transfer Agent
Agreement, all of which was waived voluntarily by the Transfer
Agent.
_______________________________________________________________
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
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
15
<PAGE>
("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
CB Richard Ellis, Inc. 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.
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,
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
16
<PAGE>
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
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 (certain selected dealers, agents or
financial representatives may enter into operating agreements
permitting them to transmit purchase information to the Principal
Underwriter after 5:00 p.m. Eastern time and receive that day's
net asset value). 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
17
<PAGE>
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,
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, 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, such cash or other
incentives may take the form of payment for attendance at
seminars, meals, sporting events or theater performances, or
payment for travel, lodging and entertainment incurred in
connection with travel taken by persons associated with a dealer
or agent to urban 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.
18
<PAGE>
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.
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 Shares**
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
____________________
** Advisor Class shares are sold only to investors described
above in this section under "General."
19
<PAGE>
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) and certain employee benefit plans for
more than $250,000 for Class B shares. (See Appendix D for
information concerning the eligibility of certain employee
benefit plans to Purchase Class B shares at net asset value
without being subject to a contingent deferred sales charge and
the ineligibility of certain such plans to purchase Class A
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
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.
20
<PAGE>
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.
During the Fund's fiscal period ended July 31, 1999 and
1998, the aggregate amount of underwriting commission payable
with respect to shares of the Fund were $33,100 and $159,184,
respectively. Of that amount, the Principal Underwriter received
the amounts of $2,204 and $146, respectively, which represented
that portion of the sales charges paid on shares of the Fund sold
during the period which was not reallowed to selected dealers
(and was, accordingly, retained by the Principal Underwriter).
During the Fund's fiscal period ended July 31, 1999, the
Principal Underwriter received contingent deferred sales charges
of $0 and $0, respectively, on Class A shares, $21,655 and
$9,615, respectively, on Class B shares and $0 and $0,
respectively, on 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.
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.
21
<PAGE>
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
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
22
<PAGE>
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.
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 such 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
Alliance All-Asia Investment Fund, Inc.
Alliance Balanced Shares, Inc.
Alliance Bond Fund, Inc.
-Corporate Bond Portfolio
-Quality Bond Portfolio
-U.S. Government Portfolio
23
<PAGE>
Alliance Global Dollar Government Fund, Inc.
Alliance Global Environment Fund, Inc.
Alliance Global Small Cap Fund, Inc.
Alliance Global Strategic Income Trust, Inc.
Alliance Greater China '97 Fund, Inc.
Alliance Growth and Income Fund, Inc.
Alliance Health Care Fund, Inc.
Alliance High Yield Fund, Inc.
Alliance International Fund
Alliance International Premier Growth Fund, Inc.
Alliance Limited Maturity Government Fund, Inc.
Alliance Mortgage Securities Income Fund, Inc.
Alliance Multi-Market Strategy Trust, Inc.
Alliance Municipal Income Fund, Inc.
-California Portfolio
-Insured California Portfolio
-Insured National Portfolio
-National Portfolio
-New York Portfolio
Alliance Municipal Income Fund II
-Arizona Portfolio
-Florida Portfolio
-Massachusetts Portfolio
-Michigan Portfolio
-Minnesota Portfolio
-New Jersey Portfolio
-Ohio Portfolio
-Pennsylvania Portfolio
-Virginia Portfolio
Alliance New Europe Fund, Inc.
Alliance North American Government Income Trust, Inc.
Alliance Premier Growth Fund, Inc.
Alliance Quasar Fund, Inc.
Alliance Real Estate Investment Fund, Inc.
Alliance Technology Fund, Inc.
Alliance Utility Income Fund, Inc.
Alliance Worldwide Privatization Fund, Inc.
The Alliance Fund, Inc.
The Alliance Portfolios
-Alliance Growth Fund
-Alliance Conservative Investors Fund
-Alliance Growth Investors Fund
-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.
24
<PAGE>
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:
(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.
25
<PAGE>
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
$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
26
<PAGE>
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
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. and their
affiliates; officers and directors of
ACMC, the Principal Underwriter, Alliance
Fund Services, Inc. and their affiliates;
officers, directors and present full-time
employees of selected dealers or agents;
or the spouse, or a sibling, direct
27
<PAGE>
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
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. and their
affiliates; certain employee benefit
plans for employees of the Adviser, the
Principal Underwriter, Alliance Fund
Services, Inc. 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 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
28
<PAGE>
from time to time by the Principal
Underwriter; and
(vii) employer-sponsored qualified pensions or
profit-sharing plans (including Section
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.
29
<PAGE>
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
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
30
<PAGE>
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
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
31
<PAGE>
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
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
32
<PAGE>
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
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 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 Fund will provide the shareholder with at
least 30 days' notice of the conversion. The failure of a
shareholder or a fee-based program to satisfy the minimum
investment requirements to purchase 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.
Advisor Class shares do not have any distribution services fee.
As a result, Class A shares have a higher expense ratio and 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.
33
<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.
34
<PAGE>
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 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 by electronic funds transfer 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. Each Fund shareholder is
eligible to request redemption by check 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. A shareholder otherwise eligible for telephone redemption
by check may cancel the privilege by written instruction to
Alliance Fund Services, Inc. or by checking the appropriate box
on the Subscription Application found in the Prospectus.
Telephone Redemptions - General. During periods of
drastic economic or market developments, such as the market break
of October 1987, it is possible that shareholders would have
difficulty in reaching Alliance Fund Services, Inc. by telephone
(although no such difficulty was apparent at any time in
connection with the 1987 market break). If a shareholder were to
experience such difficulty, the shareholder should issue written
instructions to Alliance Fund Services, Inc. at the address shown
on the cover of this Statement of Additional Information. The
Fund reserves the right to suspend or terminate its telephone
35
<PAGE>
redemption service at any time without notice. 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.
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 (certain
selected dealers, agents or financial representatives may enter
into operating agreements permitting them to transmit purchase
information to the Principal Underwriter after 5:00 p.m. Eastern
time and receive that day's net asset value). 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
36
<PAGE>
selected dealer or agent, who may charge the shareholder for this
service. The repurchase of shares of the Fund as described above
is a voluntary service of the Fund and the Fund may suspend or
terminate this practice at any time.
General
The 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
37
<PAGE>
contact Alliance Fund Services, Inc. at the address or telephone
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
38
<PAGE>
(ii) a telephone request for such exchange in accordance with the
procedures set forth in the following paragraph. Exchanges
involving the redemption of shares recently purchased by check
will be permitted only after the 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. Exchanges of Shares of Alliance Mutual Funds
will generally result in the realization of a capital gain or
loss for federal income tax purposes.
Each Fund shareholder and the shareholder's 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
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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, 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
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initial investment requirement may be waived with respect to
certain of these qualified plans.
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
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their initial investment should complete the appropriate section
of the Subscription Application found in the Prospectus. Current
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
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form by contacting Alliance Fund Services, Inc. at the address or
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
_______________________________________________________________
The per share net asset value is computed in accordance
with the Fund's Articles of Incorporation and By-Laws at the next
close of regular trading on the Exchange (ordinarily 4:00 p.m.
Eastern time) following receipt of a purchase or redemption order
by the Fund on each Fund business day on which such an order is
received and on such other days as the Board of Directors of the
Fund deems appropriate or necessary in order to comply with Rule
22c-1 under the 1940 Act. The Fund's per share net asset value
is calculated by dividing the value of the Fund's total assets,
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less its liabilities, by the total number of its shares then
outstanding. A Fund business day is any weekday on which the
Exchange is open for trading.
In accordance with applicable rules under the 1940 Act,
portfolio securities are valued at current market value or at
fair value as determined in good faith by the Board of Directors.
The Board of Directors has delegated to the Adviser certain of
the Board's duties with respect to the following procedures.
Readily marketable securities listed on the Exchange or on a
foreign securities exchange (other than foreign securities
exchanges whose operations are similar to those of the United
States over-the-counter market) are valued, except as indicated
below, at the last sale price reflected on the consolidated tape
at the close of the Exchange or, in the case of a foreign
securities exchange, at the last quoted sale price, in each case
on the business day as of which such value is being determined.
If there has been no sale on such day, the securities are valued
at the mean of the closing bid and asked prices on such day. If
no bid or asked prices are quoted on such day, then the security
is valued in good faith at fair value by, or in accordance with,
procedures established by, the Board of Directors. Readily
marketable securities not listed on the Exchange or on a foreign
securities exchange are valued in like manner. Portfolio
securities traded on the Exchange and on one or more other
foreign or other national securities exchanges, and portfolio
securities not traded on the Exchange but traded on one or more
foreign or other national securities exchanges are valued in
accordance with these procedures by reference to the principal
exchange on which the securities are traded.
Readily marketable securities traded only in the over-
the-counter market, securities listed on a foreign securities
exchange whose operations are similar to those of the United
States over-the-counter market, and securities listed on a
national securities exchange whose primary market is believed to
be over-the-counter (but excluding securities traded on the
Nasdaq Stock Market, Inc.), are valued at the mean of the current
bid and asked prices as reported by Nasdaq or, in the case of
securities not quoted by Nasdaq, the National Quotation Bureau or
comparable source.
Listed put and call options purchased by the Fund are
valued at the last sale price. If there has been no sale on that
day, such securities will be valued at the closing bid prices on
that day.
Open futures contracts and options thereon will be
valued using the closing settlement price or, in the absence of
such a price, the most recent quoted bid price. If there are no
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quotations available for the day of valuations, the last
available closing settlement price will be used.
U.S. Government Securities and other debt instruments
having 60 days or less remaining until maturity are valued at
amortized cost if their original maturity was 60 days or less, or
by amortizing their fair value as of the 61st day prior to
maturity if their original term to maturity exceeded 60 days
(unless in either case the Board of Directors determines that
this method does not represent fair value).
Fixed-income securities may be valued on the basis of
prices provided by a pricing service when such prices are
believed to reflect the fair market value of such securities.
The prices provided by a pricing service take into account many
factors, including institutional size trading in similar groups-
of securities and any developments related to specific
securities.
All other assets of the Fund are valued in good faith at
fair value by, or in accordance with procedures established by,
the Board of Directors.
Trading in securities on Far Eastern and European
securities exchanges and over-the-counter markets is normally
completed well before the close of business of each Fund business
day. In addition, trading in foreign markets may not take place
on all Fund business days. Furthermore, trading may take place
in various foreign markets on days that are not Fund business
days. The Fund's calculation of the net asset value per share,
therefore, does not always take place contemporaneously with the
most recent determination of the prices of portfolio securities
in these markets. Events affecting the values of these portfolio
securities that occur between the time their prices are
determined in accordance with the above procedures and the close
of the Exchange will not be reflected in the Fund's calculation
of net asset value unless it is believe that these prices do not
reflect current market value, in which case the securities will
be valued in good faith at fair value by, or in accordance with
procedures established by, the Board of Directors.
The Board of Directors may suspend the determination of
the Fund's net asset value (and the offering and sales of
shares), subject to the rules of the Commission and other
governmental rules and regulations, at a time when: (1) the
Exchange is closed, other than customary weekend and holiday
closings, (2) an emergency exists as a result of which it is not
reasonably practicable for the Fund to dispose of securities
owned by it or to determine fairly the value of its net assets,
or (3) for the protection of shareholders, the Commission by
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order permits a suspension of the right of redemption or a
postponement of the date of payment on redemption.
For purposes of determining the Fund's net asset value
per share, all assets and liabilities initially expressed in a
foreign currency will be converted into U.S. Dollars at the mean
of the current bid-and asked prices of such currency against the
U.S. Dollar last quoted by a major bank that is a regular
participant in the relevant foreign exchange market or on the
basis of a pricing service that takes into account the quotes
provided by a number of such major banks. If such quotations are
not available as of the close of the Exchange, the rate of
exchange will be determined in good faith by, or under the
direction of, the Board of Directors.
The assets attributable to the Class A shares, Class B
shares, Class C shares and 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
liabilities allocated to that class from the assets belonging to
that class in conformance with the provisions of a plan adopted
by the Fund in accordance with Rule 18f-3 under the 1940 Act.
_______________________________________________________________
DIVIDENDS, DISTRIBUTIONS AND TAXES
_______________________________________________________________
Dividends paid by the Fund, if any, with respect to
Class A, Class B, Class C and Advisor Class 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 applicable to Class B and C shares, and any
incremental transfer agency costs relating to Class B and Class C
shares, will be borne exclusively by the class to which they
relate.
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
are 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
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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 to be taxed 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; and (ii) diversify
its holdings so that, at the end of each quarter of its taxable
year, the following two conditions 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.
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.
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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
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. Distributions of net capital gain are taxable as long-
term capital gain, regardless of how long a shareholder has held
shares in the Fund. 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. The investment
objective of the Fund is such that only a small portion, if any,
of the Fund's distributions is expected to qualify for the
dividends-received deduction for corporate shareholders.
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.
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A 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, generally will not be
taxable to the plan. Distributions from such plans will be
taxable to individual participants under applicable tax rules
without regard to the character of the income earned by the
qualified plan.
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. Such gain or loss will be long-term capital gain
or loss if the shareholder has held such shares for more than one
year at the time of the sale or redemption; and otherwise short-
term capital gain or loss. If a shareholder has held shares in
the Fund for six months or less and during that period has
received a distribution of net capital gain, any loss recognized
by the shareholder on the sale of those shares during the six-
month period will be treated as a long-term capital loss to the
extent of the distribution. In determining the holding period of
such shares for this purpose, any period during which a
shareholder's risk of loss is offset by means of options, short
sales or similar transactions is not counted.
Any loss realized by a shareholder on a sale or exchange
of shares of 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
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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 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
shareholder who does not itemize deductions. In addition,
certain shareholders may be subject to rules which limit or
reduce their ability to fully deduct, or claim a credit for,
their pro rata share of the foreign taxes paid by the Fund. A
shareholder's foreign tax credit with respect to a dividend
received from the Fund will be disallowed unless the shareholder
holds shares in the Fund on the ex-dividend date and for at least
15 other days during the 30-day period beginning 15 days prior to
the ex-dividend date. Each shareholder will be notified within
60 days after the close of 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.
Backup Withholding. The Fund may be required to
withhold United States federal income tax at the rate of 31% of
all distributions payable to shareholders who fail to provide the
Fund with their correct taxpayer identification numbers or to
make required certifications, or who have been notified by the
Internal Revenue Service that they are subject to backup
withholding. Corporate shareholders and certain other
shareholders specified in the Code are exempt from such backup
withholding. Backup withholding is not an additional tax; any
amounts so withheld may be credited against a shareholder's
federal income tax liability or refunded.
United States Federal Income Taxation of the Fund
The following discussion relates to certain significant
United States federal income tax consequences to 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.
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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." 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 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.
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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 income 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
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
52
<PAGE>
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,
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
53
<PAGE>
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.
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.
54
<PAGE>
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 Shenzhen
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 0.4% of the
transaction price imposed on each of the buyer and seller.
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 .25% 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%
55
<PAGE>
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.
_______________________________________________________________
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
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
56
<PAGE>
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
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.
During the Fund's fiscal year ended July 31, 1999 and
the period from September 3, 1997 (commencement of operations)
through July 31, 1998, the Fund incurred brokerage commissions
amounting in the aggregate to $23,040 and $34,049. During the
Fund's fiscal year ended July 31, 1999 and the period from
September 3, 1997 (commencement of operations) through July 31,
1998, no brokerage commissions were paid to DLJ and no brokerage
commissions were paid to brokers utilizing the Pershing Division
of DLJ. During the Fund's fiscal year ended July 31, 1999 and
the period from September 3, 1997 (commencement of operations)
through July 31, 1998, the brokerage commissions paid to DLJ
57
<PAGE>
constituted -0-% of the Fund's aggregate brokerage commissions
and the brokerage commissions paid to brokers utilizing the
Pershing Division of DLJ constituted -0-% and -0-% of the Fund's
aggregate brokerage commissions. During the Fund's fiscal year
ended July 31, 1999 and the period from September 3, 1997
(commencement of operations) through July 31, 1998, the Fund's
aggregate dollar amount of brokerage transactions involving the
payment of commissions, -0-% were effected through DLJ and -0-%
and -0-% were effected through brokers utilizing the Pershing
Division of DLJ. During the Fund's fiscal year ended July 31,
1999 and the period from September 3, 1997 (commencement of
operations) through July 31, 1998, transactions in portfolio
securities of the fund aggregating $5,324,352 and with associated
brokerage commissions of approximately $23,040 and $-0- were
allocated to persons of firms supplying research services to the
Fund or 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 Fund is a Maryland corporation organized in 1997.
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,
58
<PAGE>
for reasons such as the desire to establish one or more
additional portfolios with different investment objectives,
policies or restrictions, may create additional classes or series
of shares. Any issuance of shares of another class or series
would be governed by the 1940 Act and the law of the State of
Maryland. If shares of another series were issued in connection
with the creation of a 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.
It is anticipated that annual shareholder meetings will
not be held; shareholder meetings will be held only when required
by federal or state law. Shareholders have available certain
procedures for the removal of Directors.
A shareholder will be entitled to share pro rata with
other holders of the same class of shares all dividends and
distributions arising from the Fund's assets and, upon redeeming
shares, will receive the then current net asset value of the Fund
represented by the redeemed shares less any applicable CDSC. The
Fund is empowered to establish, without shareholder approval,
additional portfolios, which may have different investment
objectives and policies than those of the Fund, and additional
classes of shares within the Fund. If an additional portfolio or
class were established in the Fund, each share of the portfolio
or class would normally be entitled to one vote for all purposes.
Generally, shares of each portfolio and class would vote together
as a single class on matters, such as the election of Directors,
that affect each portfolio and class in substantially the same
manner. Class A, B, 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 of the Fund bears its own distribution
expenses and Class B shares and Advisor Class shares convert to
Class A shares under certain circumstances. Each class of shares
of the Fund 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 as determined by the
59
<PAGE>
Directors and, in liquidation of the Fund, are entitled to
receive the net assets of the Fund.
As of the close of business on October 8, 1999, there
were 424,460 shares of common stock of the Fund outstanding,
including 137,011 Class A shares, 238,332 Class B shares, 29,458,
Class C shares and 19,659 Advisor Class shares. To the knowledge
of the Fund, the following persons owned of record or
beneficially 5% or more of the outstanding shares of the Fund as
of October 8, 1999.
No. of % of
Name and Address Shares Class
Class A
Merrill Lynch, Pierce, Fenner
& Smith for the Sole Benefit
of Its Customers
Attn: Fund Admin. (97RU8)
4800 Deer Lake Dr. East
2nd Floor
Jacksonville, FL 32246-6484 35,747 26.02%
Donaldson Lufkin Jenrette
Securities Corp. Inc.
P.O. Box 2052
Jersey City, NJ 07303-2052 8,278 6.03%
Class B
Merrill Lynch, Pierce, Fenner
& Smith For the Sole Benefit
of Its Customers
Attn: Fund Admin. (97RO1)
4800 Deer Lake Dr. East
2nd Floor
Jacksonville, FL 32246-6484 69,042 29.19%
Wexford Clearing Services
Corp.
Michael S. Weinstock TTEE
Michael s. Weinstock
Liv Trust UA DT 4/13/90 15,282 6.46%
c/o Grill Concepts Inc.
Los Angeles, CA 90049
Class C
60
<PAGE>
Wexford Clearing Services
Corp. FBO
Horace R. Medieros, Connie
Medieros Co-TTEES, Horace
Medieros and Connie Medieros
Trust UA DTD 7/21/83 7,139 24.24%
Torrance, CA 90505
Wexford Clearing Services
Corp. FBO
David L. Dollins, Linda M.
Dollins Co TTEES Dollins
Family Trust UA DTD 12/07/96 2,513 8.53%
Escondido, CA 92025
Prudential Securities Inc. FBO
Paul M. Atlas
IRA DTD 04/24/96
212 Old Mill Path
Nissequogue, NY 11780-1352 1,683 5.71%
Wexford Clearing Services
Corp. FBO Norman W. Kermode &
Karen D. Schaffer JTTEN
608 Alameda Dr.
Cortez, CO 81321-4005 3,071 10.43%
NFSC FEBO #BMA-864455
Donald J. Capuano
FMT Ttee NFRP PS
2640 Ridgeway Avenue
Rochester, NY 14626-4109 3,816 12.96%
Advisor Class
Alliance Capital Mgmt. LP
Attn: Sarah Powell
1345 Avenue of the Americas
New York, NY 10105-0302 10,000 50.87%
Robert A. deLucia
249-1/2 West Norwalk Rd
Norwalk, CT 06850-4320 2,586 13.16%
Amy M. Levin
151 W. 86th Street, Apt. 8D
New York 10024-3401 5,836 29.69%
61
<PAGE>
Custodian
Brown Brothers Harriman & Co. ("Brown Brothers"), 40
Water Street, Boston, Massachusetts, will act as the Fund's
custodian for the assets of the Fund but plays no part in
deciding the purchase or sale of portfolio securities. Subject
to the supervision of the Fund's Directors, Brown Brothers
Harriman & Co. may enter into sub-custodial agreements for the
holding of the Fund's foreign securities.
Principal Underwriter
Alliance Fund Distributors, Inc., an indirect wholly-
owned subsidiary of the Adviser, located at 1345 Avenue of the
Americas, New York, New York 10105, is the principal underwriter
of shares of the Fund. Under the Agreement, the 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 LLP, New
York, New York. Seward & Kissel LLP has relied upon the opinion
of Venable, Baetjer and Howard, LLP, Baltimore, Maryland, for
matters relating to Maryland law.
Independent Auditors
Ernst & Young LLP, New York, New York, has been
appointed as independent auditors for the Fund.
Performance Information
From time to time, the Fund advertises its "total
return," which is computed separately for Class A, Class B,
Class C and Advisor Class 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 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.
62
<PAGE>
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.
The Fund's average annual compounded total return for
the one-, five- and ten-year periods ended July 31, 1999 (or
since inception through the date, as noted) were as follows:
5 Years 10 Years
Year Ended Ended Ended
7/31/99 7/31/99 7/31/99
---------- ------- --------
Class A 69.42% (9.48%)* N/A
Class B 68.46% (10.07%)* N/A
Class C 68.26% (10.13%)* N/A
Advisor Class 69.90% (9.21%)* N/A
*Inception Dates: Class A - September 3, 1997
Class B - September 3, 1997
Class C - September 3, 1997
Advisor Class - September 3, 1997
Advertisements quoting performance rankings of the Fund
as measured by financial publications or by independent
organizations such as Lipper, Inc., and 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
63
<PAGE>
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.
64
<PAGE>
____________________________________________________________
FINANCIAL STATEMENTS AND REPORT
OF INDEPENDENT AUDITORS
____________________________________________________________
65
<PAGE>
ALLIANCE GREATER CHINA '97 FUND
ANNUAL REPORT
JULY 31, 1999
PORTFOLIO OF INVESTMENTS
JULY 31, 1999 ALLIANCE GREATER CHINA '97 FUND
_______________________________________________________________________________
COMPANY SHARES U.S. $ VALUE
- -------------------------------------------------------------------------
COMMON STOCKS & OTHER INVESTMENTS-100.7%
HONG KONG-88.4%
ABC Communications
Holdings, Ltd. 100,000 $ 32,210
Bank of East Asia, Ltd. 25,000 60,555
Cable & Wireless HKT,
Ltd. 88,400 207,857
Cathay Pacific Airways 20,000 28,473
Cheung Kong Holdings,
Ltd. 32,000 279,324
Cheung Kong Infrastructure
Holdings, Ltd. 45,000 92,764
China National Aviation
Co., Ltd. 200,000 31,179
China Resources Enterprise,
Ltd. 80,000 124,717
China Telecom
(Hong Kong), Ltd. (a) 54,000 161,410
Cosco Pacific, Ltd. 40,000 36,075
Dah Sing Financial Group,
Ltd. 20,000 81,942
Dao Heng Bank Group,
Ltd. 30,000 152,675
Denway Investments,
Ltd. (a) 500,000 84,390
Guangdong Kelon
Electrical Holdings Co.,
Ltd. "H" Shares 62,000 69,895
Hang Seng Bank, Ltd. 7,000 77,110
Henderson Land
Development Co., Ltd. 13,000 73,529
Hengan International Group
Co., Ltd. (a) 110,000 47,123
HKCB Bank Holding Co.,
Ltd. 150,000 56,045
HKR International, Ltd. 44,800 36,075
HSBC Holdings Plc. 18,000 212,198
Hutchison Whampoa, Ltd. 24,000 228,046
Jardine Matheson Holdings,
Ltd. 6,800 35,020
Legend Holdings, Ltd. 100,000 94,053
New World Development
Co., Ltd. 40,000 105,648
Ng Fung Hong, Ltd. 80,000 58,235
Regal Hotels International
Holdings, Ltd. (a) 300,000 30,921
Shanghai Petrochemical
Co., Ltd. Cl. H 200,000 38,394
Sino Land Co., Ltd. 50,000 26,412
Swire Pacific, Ltd. Cl. A 7,000 32,468
Union Bank of Hong Kong,
Ltd. 70,000 53,662
Wharf Holdings, Ltd. 40,000 119,048
Wheelock & Co., Ltd. 45,000 61,166
Zhejiang Expressway Co.,
Ltd. Cl. H 180,000 31,772
------------
2,860,391
SINGAPORE-5.1%
Pacific Century Regional
Developments, Ltd. (a) 45,000 164,487
TAIWAN-7.2%
Asustek Computer, Inc. 2,800 29,789
Formosa Plastics Corp. 10,700 17,258
Hon Hai Precision Industry
Co., Ltd. 7,840 42,070
Siliconware Precision
Industries Co. (a) 11,070 17,340
Synnex Technology
International Corp. 5,200 22,903
Taiwan Semiconductor
Manufacturing Co.,
Ltd. (a) 19,680 68,978
United World Chinese
Commercial Bank 28,000 34,305
------------
232,643
------------
3,257,521
7
PORTFOLIO OF INVESTMENTS (CONTINUED) ALLIANCE GREATER CHINA '97 FUND
_______________________________________________________________________________
COMPANY SHARES U.S. $ VALUE
- -------------------------------------------------------------------------
WARRANTS-0.0%
Hong Kong & China Gas
Warrants, expiring
9/30/99 (a) 1,000 $ 77
RIGHTS-0.0%
Asustek Computer, Inc.
Rts 8/21/99 (a) 2,800 13
TOTAL INVESTMENTS-100.7%
(cost $2,499,183) 3,257,611
Other assets less
liabilities-(0.7)% (22,216)
NET ASSETS-100% $ 3,235,395
(a) Non-income producing security.
See notes to financial statements.
8
STATEMENT OF ASSETS AND LIABILITIES
JULY 31, 1999 ALLIANCE GREATER CHINA '97 FUND
_______________________________________________________________________________
ASSETS
Investments in securities, at value (cost $2,499,183) $ 3,257,611
Cash 53,974
Foreign cash, at value (cost $83,539) 83,782
Deferred organization expenses 207,614
Receivable for investment securities sold 46,333
Receivable from Adviser 34,093
Receivable for capital stock sold 13,651
Total assets 3,697,058
LIABILITIES
Payable to Adviser (reimbursement to Adviser for
organizational expenses) 326,500
Payable for capital stock redeemed 8,238
Distribution fee payable 2,197
Accrued expenses 124,728
Total liabilities 461,663
NET ASSETS $ 3,235,395
COMPOSITION OF NET ASSETS
Capital stock, at par $ 397
Additional paid-in capital 3,974,342
Undistributed net investment income 6,167
Accumulated net realized loss on investments and foreign
currency transactions (1,504,185)
Net unrealized appreciation of investments and foreign
currency denominated assets and liabilities 758,674
$ 3,235,395
CALCULATION OF MAXIMUM OFFERING PRICE
CLASS A SHARES
Net asset value and redemption price per share
($1,010,648/123,202 shares of beneficial interest issued
and outstanding) $8.20
Sales Charge--4.25% of public offering price .36
Maximum offering price $8.56
CLASS B SHARES
Net asset value and offering price per share
($1,901,750/234,257 shares of beneficial interest issued
and outstanding) $8.12
CLASS C SHARES
Net asset value and offering price per share
($161,837/19,951 shares of beneficial interest issued
and outstanding) $8.11
ADVISOR CLASS SHARES
Net asset value, redemption, and offering price per share
($161,160/19,554 shares of beneficial interest issued
and outstanding) $8.24
See notes to financial statements.
9
STATEMENT OF OPERATIONS
YEAR ENDED JULY 31, 1999 ALLIANCE GREATER CHINA '97 FUND
_______________________________________________________________________________
INVESTMENT INCOME
Dividends (net of foreign taxes withheld
of $1,667) $ 76,279
Interest 3,542 $ 79,821
EXPENSES
Advisory fee 27,234
Distribution fee - Class A 1,963
Distribution fee - Class B 18,368
Distribution fee - Class C 1,174
Custodian 151,464
Administrative 127,000
Audit and legal 64,531
Amortization of organizational expenses 62,325
Registration 41,145
Transfer agency 13,648
Printing 13,528
Director's fees 10,500
Miscellaneous 13,662
Total expenses 546,542
Less: expenses waived and reimbursed
(see Note B) (464,615)
Less: expense offset arrangement (see Note B) (506)
Net expenses 81,421
Net investment loss (1,600)
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
AND FOREIGN CURRENCY TRANSACTIONS
Net realized loss on investment transactions (631,179)
Net realized gain on foreign currency
transactions 1,542
Net change in unrealized appreciation of:
Investments 1,987,160
Foreign currency denominated assets and
liabilities 242
Net gain on investments and foreign currency
transactions 1,357,765
NET INCREASE IN NET ASSETS FROM OPERATIONS $ 1,356,165
See notes to financial statements.
10
STATEMENT OF CHANGES IN NET ASSETS ALLIANCE GREATER CHINA '97 FUND
_______________________________________________________________________________
SEPTEMBER 3,
YEAR ENDED 1997*
JULY 31, TO
1999 JULY 31, 1998
------------ -------------
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS
Net investment income (loss) $ (1,600) $ 18,810
Net realized loss on investments and foreign
currency transactions (629,637) (877,930)
Net change in unrealized appreciation
(depreciation) of investments and foreign
currency denominated assets and liabilities 1,987,402 (1,228,728)
Net increase (decrease) in net assets from
operations 1,356,165 (2,087,848)
DIVIDENDS AND DISTRIBUTIONS TO
SHAREHOLDERS FROM:
Net investment income
Class A -0- (5,303)
Class B -0- (10,749)
Class C -0- (619)
Advisor Class -0- (714)
Distributions in excess of net investment
income
Class B -0- (1,442)
Class C -0- (191)
CAPITAL STOCK TRANSACTIONS
Net increase (decrease) (279,240) 4,165,036
Total increase 1,076,925 2,058,170
NET ASSETS
Beginning of period 2,158,470 100,300
End of period (including undistributed net
investment income of $6,167, at
July 31, 1999) $ 3,235,395 $ 2,158,470
* Commencement of operations.
See notes to financial statements.
11
NOTES TO FINANCIAL STATEMENTS
JULY 31, 1999 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 may 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 into U.S. dollars at rates of exchange prevailing when
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.
12
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 and net operating losses resulted in a net increase in
accumulated net realized loss on investments and foreign currency transactions
and undistributed net investment income, and a corresponding decrease in
additional paid-in-capital. 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 for the current fiscal year to 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 year ended July 31, 1999,
such waiver of management fees, amounted to $331,024 and the waiver of the cost
of certain legal and accounting services provided to the Fund by the Adviser
amounted to $127,000.
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 year ended
July 31, 1999, the Transfer Agent voluntarily waived all of its fees under the
Agreement which amounted to $6,591.
In addition, for the year ended July 31, 1999, the Fund's expenses were reduced
by $506 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 $2,204 from the sale of Class A shares and $21,655
in contingent deferred sales charges imposed upon redemptions by shareholders
of Class B shares for the year ended July 31, 1999.
Brokerage commissions paid on investment transactions for the year ended July
31, 1999, amounted to $23,040, 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 to DLJ directly.
13
NOTES TO FINANCIAL STATEMENTS (CONTINUED) 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 advised the Fund that it
has incurred expenses in excess of the distribution costs reimbursed by the
Fund in the amounts of $31,995 for Class B shares. 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 $2,522,252 and $2,802,100, respectively, for
the year ended July 31, 1999. There were no purchases or sales of U.S.
government or government agency obligations for the year ended July 31, 1999.
At July 31, 1999, the cost of investments for federal income tax purposes was
$2,706,145. Accordingly, gross unrealized appreciation of investments was
$822,422 and gross unrealized depreciation of investments was $270,956
resulting in net unrealized appreciation of $551,466 (excluding foreign
currency transactions).
At July 31, 1999, the Fund had a net capital loss carryforward for federal
income tax purposes of $1,132,756, which expires in the year 2007.
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, 1999.
14
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, SEPTEMBER 3,
1997* 1997*
YEAR ENDED TO YEAR ENDED TO
JULY 31, 1999 JULY 31, 1998 JULY 31, 1999 JULY 31, 1998
------------ ------------ -------------- --------------
CLASS A
Shares sold 107,452 112,520 $ 813,635 $ 971,684
Shares issued in
reinvestment of
dividends -0- 502 -0- 3,613
Shares redeemed (76,310) (20,972) (563,178) (132,177)
Net increase 31,142 92,050 $ 250,457 $ 843,120
CLASS B
Shares sold 327,834 398,593 $ 2,338,138 $ 3,556,766
Shares issued in
reinvestment of
dividends and
distributions -0- 1,205 -0- 8,686
Shares redeemed (415,218) (78,167) (2,923,975) (463,301)
Net increase
(decrease) (87,384) 321,631 $ (585,837) $ 3,102,151
CLASS C
Shares sold 13,684 21,183 $ 106,827 $ 201,955
Shares issued in
reinvestment of
dividends and
distributions -0- 84 -0- 604
Shares redeemed (14,842) (168) (107,177) (1,054)
Net increase
(decrease) (1,158) 21,099 $ (350) $ 201,505
ADVISOR CLASS
Shares sold 30,587 2,622 $ 250,877 $ 20,507
Shares issued in
reinvestment of
dividends -0- 9 -0- 64
Shares redeemed (23,385) (279) (194,387) (2,311)
Net increase 7,202 2,352 $ 56,490 $ 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")
intended to provide short-term financing if necessary, subject to certain
restrictions in connection with abnormal redemption activity. Commitment fees
related to the Facility are paid by the participating funds and are included in
the miscellaneous expenses in the statement of operations. The Fund did not
utilize the Facility during the year ended July 31, 1999.
* Commencement of operations.
15
NOTES TO FINANCIAL STATEMENTS (CONTINUED) ALLIANCE GREATER CHINA '97 FUND
_______________________________________________________________________________
NOTE G: CONCENTRATION OF RISK
Investing in securities of foreign companies involves special risks which
include the possibility of future political and economic developments which
could adversely affect the value of such securities. Moreover, securities of
many foreign companies and their markets may be less liquid and their prices
more volatile than those of United States companies.
16
FINANCIAL HIGHLIGHTS ALLIANCE GREATER CHINA '97 FUND
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
CLASS A
-----------------------------
SEPTEMBER 3,
1997(A)
YEAR ENDED TO
JULY 31, 1999 JULY 31, 1998
------------- -------------
Net asset value, beginning of period $ 4.84 $10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income (b)(c) .02 .08
Net realized and unrealized gain (loss) on
investments and foreign currency
transactions 3.34 (5.18)
Net increase (decrease) in net asset value
from operations 3.36 (5.10)
LESS: DIVIDENDS
Dividends from net investment income -0- (.06)
Net asset value, end of period $ 8.20 $ 4.84
TOTAL RETURN
Total investment return based on net asset
value (d) 69.42% (51.20)%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $1,011 $445
Ratio to average net assets of:
Expenses, net of waivers/reimbursements (c)(e) 2.52% 2.52%(f)
Expenses, before waivers/reimbursements 19.68% 18.27%(f)
Net investment income .36% 1.20%(f)
Portfolio turnover rate 94% 58%
See footnote summary on page 20.
17
FINANCIAL HIGHLIGHTS (CONTINUED) ALLIANCE GREATER CHINA '97 FUND
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
CLASS B
-----------------------------
SEPTEMBER 3,
1997(A)
YEAR ENDED TO
JULY 31, 1999 JULY 31, 1998
------------- -------------
Net asset value, beginning of period $ 4.82 $10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income (loss) (b)(c) (.01) .03
Net realized and unrealized gain (loss) on
investments and foreign currency
transactions 3.31 (5.17)
Net increase (decrease) in net asset value
from operations 3.30 (5.14)
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income -0- (.03)
Distributions in excess of net investment
income -0- (.01)
Total dividends and distributions -0- (.04)
Net asset value, end of period $ 8.12 $ 4.82
TOTAL RETURN
Total investment return based on net asset
value (d) 68.46% (51.53)%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $1,902 $1,551
Ratio to average net assets of:
Expenses, net of waivers/reimbursements (c)(e) 3.22% 3.22%(f)
Expenses, before waivers/reimbursements 20.22% 19.18%(f)
Net investment income (.22)% .53%(f)
Portfolio turnover rate 94% 58%
See footnote summary on page 20.
18
ALLIANCE GREATER CHINA '97 FUND
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
CLASS C
-----------------------------
SEPTEMBER 3,
1997(A)
YEAR ENDED TO
JULY 31, 1999 JULY 31, 1998
------------- -------------
Net asset value, beginning of period $ 4.82 $10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income (loss) (b)(c) (.03) .03
Net realized and unrealized gain (loss) on
investments and foreign currency
transactions 3.32 (5.17)
Net increase (decrease) in net asset value
from operations 3.29 (5.14)
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income -0- (.03)
Distributions in excess of net investment
income -0- (.01)
Total dividends and distributions -0- (.04)
Net asset value, end of period $ 8.11 $ 4.82
TOTAL RETURN
Total investment return based on net asset
value (d) 68.26% (51.53)%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $162 $102
Ratio to average net assets of:
Expenses, net of waivers/reimbursements (c)(e) 3.22% 3.22%(f)
Expenses, before waivers/reimbursements 20.41% 19.37%(f)
Net investment income (.49)% .50%(f)
Portfolio turnover rate 94% 58%
See footnote summary on page 20.
19
FINANCIAL HIGHLIGHTS (CONTINUED) ALLIANCE GREATER CHINA '97 FUND
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
ADVISOR CLASS
-----------------------------
SEPTEMBER 3,
1997(A)
YEAR ENDED TO
JULY 31, 1999 JULY 31, 1998
------------- -------------
Net asset value, beginning of period $ 4.85 $10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income (b)(c) .04 .10
Net realized and unrealized gain (loss) on
investments and foreign currency
transactions 3.35 (5.18)
Net increase (decrease) in net asset value
from operations 3.39 (5.08)
LESS: DIVIDENDS
Dividends from net investment income -0- (.07)
Net asset value, end of period $ 8.24 $ 4.85
TOTAL RETURN
Total investment return based on net asset
value (d) 69.90% (51.06)%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $161 $60
Ratio to average net assets of:
Expenses, net of waivers/reimbursements (c)(e) 2.22% 2.22%(f)
Expenses, before waivers/reimbursements 19.01% 18.13%(f)
Net investment income .58% 1.51%(f)
Portfolio turnover rate 94% 58%
(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 charges 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) Ratios reflect expenses grossed up for expense offset arrangement with the
Transfer Agent. For the periods shown below, the net expense ratios were as
follows:
SEPTEMBER 3,
1997
YEAR ENDED TO
JULY 31, 1999 JULY 31, 1998
------------- -------------
Class A 2.50% 2.50%
Class B 3.20% 3.20%
Class C 3.20% 3.20%
Advisor Class 2.20% 2.20%
(f) Annualized
20
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, 1999, and the related statements of operations for
the year then ended, and the statement of changes in net assets and financial
highlights for the year then ended and 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 assurance 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 and financial highlights. Our procedures included confirmation of
securities owned as of July 31, 1999, 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, 1999, the results of its
operations for the year then ended, and the changes in its net assets and the
financial highlights for the year then ended and for the period from September
3, 1997 to July 31, 1998, in conformity with generally accepted accounting
principles.
New York, New York
September 8, 1999
21
<PAGE>
___________________________________________________________
APPENDIX A: INFORMATION CONCERNING
CHINA, HONG KONG AND TAIWAN
___________________________________________________________
The information in this Appendix 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. Many of the
indicated numbers, including percentage information, is, whether
or not so specified, estimated or approximate. 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, the People's Republic of China is home to approximately
21% of the world's population. It is the world's third largest
nation in terms of land area, next only to Russia and Canada,
with approximately 3.7 million square miles; it shares borders
with 16 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 22 provinces, five autonomous
regions and four 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 revolutionaries 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 as described below
toward capitalism, private ownership and an easing of
restrictions on foreign investment.
Government
China is officially designated as a "people's republic",
defined by the Chinese government as a dictatorship of the
working classes. It has a one-party political system controlled
by the CCP, which currently consists of an estimated 58 million
members. The highest ranking legislative body in the State
A-1
<PAGE>
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. The NPC, which meets
once a year for two or three weeks, is empowered to amend the
Chinese Constitution, enact and amend laws, and examine and
approve national economic and social plans. Historically,
however, 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
an 188-member Central Committee, elected every five years. The
Central Committee normally convenes twice a year. When not in
session, the Politburo is vested with the Central Committee's
power. The power of the Politburo, which currently consists of
22 members, is further centralized in the Politburo Standing
Committee. 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 Jiang
Zemin, who holds the positions of President, Party General
Secretary and Chairman of the Central Military Committee and Zhu
Rongji, the new Prime Minister.
Following the death of Deng Xiaoping in February 1997,
Jiang Zemin became the leader of the CCP. The transfer of
political power has progressed smoothly and Jiang's popularity
and credibility have continued to increase. 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
establishes 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 its gross domestic
product from 1990 to 1995, and a 9.7% increase during 1996. In
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1997 and 1998, gross domestic product ("GDP") growth slowed to
approximately 8.8% and 7.8%, respectively. During the first half
of 1999, GDP growth rate was an estimated 7.6% year-on-year. It
is estimated that GDP growth will be approximately 7% for the
year 1999.
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. With more than half of China's SOEs reporting losses,
a major economic challenge for China is to reform inefficient
SOEs without creating an unacceptable level of unemployment.
China made great progress in the reform of SOEs in 1997.
President Zemin announced plans to sell, merge, or close most
SOEs at the September 1997 meeting of the National Congress of
the CCP. As part of the government's plan for increased public
ownership (a euphemism for privatization), 675 SOEs were declared
bankrupt and closed, and an additional 1022 SOEs were merged.
Losses were curbed and net industrial profits for the remaining
SOEs increased by 11.9% in 1997. By the end of 1998, only one-
third of the large and medium sized SOEs, which make up
approximately 20% of all SOEs, were reporting losses. Overall,
net industrial profits for SOEs increased by 4.9% in 1998 and
8.3% in the first quarter of 1999. The reform of SOEs has slowed
since mid-1998 due to an effort to stimulate production and
prevent a rapid rise in unemployment, but in July 1999 President
Zemin reconfirmed his commitment to intensifying efforts to
restructure China's SOEs. The official urban unemployment rate
was 3.1% in 1997 and 1998 (with higher rates reported locally),
and is expected to continue to rise due to the lay-offs resulting
from SOE reform. China is combating the effects of unemployment
with a newly established national "social public pension fund"
and accelerated reform of its social security system.
Additionally, a minimum-income security system has been
established in more than 300 cities. The income gap between
urban and rural residents, as well as between the wealthier
coastal provinces and the interior, has begun to widen and is
expected to persist. After decades of double digit inflation,
the consumer price index rose by only 2.8% in 1997. During 1998,
the consumer price index fell by 0.8%. As a result of this
deflation, the government has placed a floor on the price of
several products in an attempt to thwart competition between
domestic companies and imports.
The collective and private sectors have played an
increasingly important role in China's economic development. The
collective sector includes township and village enterprises often
combined with some measure of foreign investment or privately
owned enterprises. The private sector showed the strongest
growth in 1997, with a 14% increase in value-added industrial
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output, as compared to an 11.7% increase for the collective
sector and a 5.4% increase for SOEs. In 1998, the private sector
increased 11.9% in value-added industrial output, compared to an
8.7% increase for the collective sector and a 4.9% increase for
SOEs. Growth in the collective and private sectors is expected
to continue. 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. Foreign direct
investment in China totaled approximately US$20.5 billion during
the first half of 1998, a decline of 1.3% from the first half of
1997. During the first half of 1999, foreign investment in China
totaled approximately US$18.6 billion, a decline of 9.2% from the
first half of 1998. Manufacturing jobs have been moving into
China from other Asian nations as a result of, among other
factors, China's low wages and large pool of comparatively 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. In
early 1998 the government decided to accelerate the construction
of certain infrastructure projects and formulated policies to
support these priority projects, chosen to increase investment in
key fixed assets. However, only one-third of a bond issue for
infrastructure and flood rebuilding had been invested as the end
of September 1998. The environmental impact of the Three Gorges
Dam project, which is among the largest of the projects in
progress, is currently being criticized because of the issue of
silt levels. This criticism comes on the wake of severe flooding
that occurred during mid-1998. The severity of the flooding,
which caused 4,610 deaths and an estimated US$36.4 billion in
damage, was dramatically increased by the effects of silting
caused by man-made activities. Other infrastructure projects
include road-building, low-cost housing, rural power power and
urban facilities projects. The government also intends to reduce
its use of coal and rely more on natural gas and nuclear powers.
In this regard China has embarked on the construction of a large-
scale liquefied natural gas import complex and expects to have 11
nuclear power plants in operation by 2005.
China's foreign trade grew by 12.1% in 1997, to
US$325.06 billion, making China the world's tenth largest trading
nation. China accrued an estimated trade surplus of
approximately US$46.3 billion in 1997. Foreign trade volume
remained about the same in 1998. Exports grew by 0.4% and
imports fell by 1.3%, leaving an estimated trade surplus of
US$48.8 billion for 1998. In the first half of 1999, exports
fell by 4.6% and imports rose by 16.6%, leaving a trade surplus
of US$7.7 billion, compared to a surplus of US$22.6 billion in
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the first half of 1998. During the same period, SOE exports fell
by 13% and their imports rose by 30.4%. Although China's exports
to other Asian countries have been affected by the recent
financial crises in that region, signs of recovery have been
reported.
China has been negotiating for admission to the World
Trade Organization ("WTO") for more than ten years, although it
is not clear when, if ever, China will gain entry. Recent
negotiations regarding China's admission have focused on what
commitments China would make to provide market access and whether
China would be accorded developing member status. 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 would
be open to increased foreign competition because China would be
forced to lower tariffs under WTO regulations. In preparation
for entry into the WTO, China which had recently reduced its
average tariff rate to 23%, furthered reduced tariffs to an
average of 17% effective October 1, 1997. In June 1999, the
government announced that whether China becomes a WTO member or
not, tariffs will be lowered to an average of 15% in 2000. China
plans to lower its average tariff rate on industrial imports to
10% by the year 2005.
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. In the summer of 1998, the PBC
announced that it would set up six major regional branches while
at the same time cutting the number of existing branches. The
move is aimed at improving central monitoring and reducing local
interference.
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 the
past, the State has mandated that more than half of the PBC's
lending be in the form of policy loans, many of which are in
essence government expenditures. The practice of using loans to
subsidize unprofitable SOEs was decreasing in accordance with the
move to reform SOEs. However, in an attempt to bolster SOE
productivity and boost the economy, state-owned banks were
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recently ordered to increase lending to SOEs. Historically, SOEs
have defaulted on repayment of these loans. In March 1999, the
PBC announced that 10% of Chinese banks' loans were
"unrecoverable," much higher than the official figure of 2.9%
that had been reported for the end of 1998. Foreign analysts
however, estimate an even higher figure. In May 1999 the Bank of
China, one of China's four major commercial banks, announced
plans to establish an asset management company to take over its
bad loans. The other three major banks are expected to follow
suit. Debt-for-equity swaps are being used, at least initially,
to dispose of the bad debt. Currently there is no deposit
insurance system to protect depositors.
China expected to reduce its budget deficit 17% to
US$5.5 billion for 1998, but has since reported an actual budget
deficit of US$11.6 billion for 1998. The actual deficit may be
much larger than this official amount however, as non-performing
loans to SOEs are not reflected in the official numbers. 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 has estimated that China's CGD amounts to 5%-6% of
China's GDP. Nevertheless, China's external payment position is
believed by observers to be sound as China boasts one of the
world's largest foreign exchange reserves. China's foreign
exchange reserves increased by 33.3% during 1997 to US$142.8
billion, and by 4.5% in 1998 to reach US$149.2 billion.
China is attempting to reform its banking system, with
the goal of making the financial system a more effective means of
macroeconomic control. The ceiling on bank loans by commercial
banks was revoked in January 1998, and the deposit reserve ratio
was decreased from 13% to 8% in March 1998. Since May 1996, the
PBC has cut interest rates seven times, most recently in June
1999, when time deposit rates were cut by 1.53% taking the
interest rate on one-year deposits to 2.2%. The PBC instructed
commercial banks to cut dollar interest rates by 50 basis points
in October 1998. Additionally, the PBC has permitted more
foreign banks to do RMB based business. These reforms have
helped in maintaining the stability of China's financial markets.
Deposits at all of China's financial institutions at the end of
1998 were up 16.1% year on year, and lending was up 15.5% year on
year. The M2 (broad money supply) grew 17.7% year on year in the
first six months of 1999; while the M1 (narrow money supply)
increased 15.0% for the same period. The M0 (cash in
circulation) rose 9.1% year on year during the first five months
of 1999. The monetary unit of China is the Renminbi ("RMB"), and
the rate of exchange has averaged 8.3 RMB per U.S. dollar since
1995, and was exchanged at 8.28 RMB per U.S. dollar as of October
15, 1999. In 1986, to help solve the foreign exchange problems
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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 ("FIEs") may, under the supervision
and control of the State Administration of Foreign Exchange
("SAFE") engage in mutual adjustment of their foreign exchange
surpluses and shortfalls. The RMB is not yet fully convertible,
however, as only "current account" items, as described below, may
be converted freely. Under the rules implemented by SAFE, the
Fund, as a 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 RMB or through a foreign exchange swap
center.
Since 1994, the foreign exchange rate has not been set
by the Chinese government. Trading of RMB and foreign currencies
is conducted at a rate within a range set daily by the Chinese
government determined by reference to supply and demand. Such
market exchange rates can be highly volatile and are subject to
sharp fluctuations depending on market conditions. The initial
effect of the abolition of the government's official exchange
rate 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. On November 21, 1998
Premier Zhu Rongi promised not to devalue the RMB in 1999 as a
result of the Asian financial crisis. By mid-1999, however, in
light of the stability of China's external debt situation, the
need to stimulate domestic demand and the apparent beginnings of
economic recovery in the region, it was expected by some
economists that the currency would be devalued early in 2000,
probably by 10% or less.
China has numerous international trust and investment
corporations ("ITICs"), which are sponsored by government
agencies and state banks. ITICs take corporate deposits and make
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commercial investments. During October 1998, the PBC closed the
Guangdong ITIC ("GITIC") because it could not make required
interest and principal payments on its US$2 billion foreign debt.
The closure was seen by the foreign lending community as
indicative of the over-indebted state of ITICs and the illiquid
condition of their investments generally. As a result of the
closure, many fear that problems with ITICs could threaten the
economy, even though regulators stress that ITICs hold only a
small percentage of total deposits. In response to such fears,
new rules were drafted, and became effective in March 1999, to
curb speculative securities investment practices by ITICs, to
prohibit banks from providing loans or guarantees for such
transactions and to strengthen PBC's regulatory authority over
ITICs. In the meantime, formal bankruptcy proceedings have been
initiated to settle the affairs of the GITIC. All domestic
depositors have been paid off but creditors have been advised
that registered debt (which represents about one-half of all its
debt) will be paid off first. GITIC's assets are currently
valued at US$2.7 billion and its liabilities are put at US$4.3
billion. As anticipated, other Chinese financial institutions
have experienced financial difficulties as well.
Securities Markets
China has two officially recognized securities
exchanges, the Shanghai Stock Exchange opened in December 1990
and the Shenzhen Stock 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, and the Exchanges continue
to be very volatile and prone to wide fluctuations, although the
listing of four securities investment funds during the first half
of 1998 has helped to stabilize the market. In order to ensure
stability and protect investor's interests the Shanghai Stock
Exchange is demanding greater financial disclosure from listed
companies. The exchange issued new guidelines regulating annual
reports of listed companies in January 1998. Additionally, both
Exchanges have issued new rules pertaining to listed companies.
The rules give the Exchanges the right to suspend trading if: a
company reports a loss for two consecutive years; a company's net
asset value falls below par value; or if there is any unusual and
potential misleading trading.
In addition, the new Securities Law, which took effect
in July 1999, has established more stringent reporting
requirements for listed companies and minimum capital
requirements for securities firms. Further, the State Economic
and Trade Commission issued a notice recently confirming the
independence of Chinese companies listed overseas from their
mainland parents, which is designed to prevent subsidiaries from
being used to fund mainland parents in difficulty.
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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. During 1997, 215 A-share companies were listed on the
Exchanges. An additional 65 companies were listed on the
Exchanges during the first half of 1998, bringing the total
number of listed companies up to 810. Currently, there are
approximately 900 listed companies. The market for B-shares is
much smaller and less liquid, but it is growing. Approximately
106 companies list B-shares. While full merger of "A" and "B"
share markets is not likely in the near future, joint ventures
comprised of foreign financial houses and mainland Chinese
investors are allowed to purchase "A" shares, and Chinese
investors have been given 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 nine companies listed on
the New York Stock Exchange and two on the London Stock Exchange.
As of May 1999, H-shares of 41 Chinese issuers were listed on the
Hong Kong Stock Exchange, and while there were plans to add more,
the Hong Kong Stock Exchange's strict listing requirements have
prevented many Chinese companies, which do not follow
internationally accepted accounting standards, from being listed
(see "--Additional Information About Hong Kong--Securities
Markets" for additional information on H-shares). These
companies, together with an additional 59 China-related
companies, contributed 17% of the market capitalization and 32%
of the turnover value of the Hong Kong securities market.
In July 1999, the government announced an agenda whereby
it will eventually relinquish control in most of the
approximately 900 listed companies. The government currently
holds 60-70% of all shares, either directly or indirectly.
The stock trading turnover on the Exchanges hit a record
US$361 billion during 1997. The key index for the Shanghai Stock
Exchange, the Shanghai Stock Exchange Composite Index, closed at
1,194.1 on December 31, 1997, and increased to 1,339 at the end
of June 1998. The Shanghai Stock Exchange-30 index, which is
based on 30 representative blue chips stocks, closed at 3772,36
on December 31, 1997. The Shenzhen Stock Exchange All-Share
Index closed at 381.29 on December 30, 1997, and finished at 403
on June 30, 1998. The market has since turned bearish,
reflecting the general economy, and the total value of Class A
shares had fallen by approximately 7% as of early October 1998.
B-share trading has also been bearish due to the uncertain Asian
financial situation and new restrictions on foreign exchange.
The Shanghai B-share index closed at 55.88 on December 31, 1997,
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a drop of 25.59 points since June 30, 1997. The Shenzhen B-share
index fell 45.75 points during the same period to 98.96 points.
Both B-share indexes continued to fall during the first half of
1998. The B-share markets had dropped by approximately 40% by
mid-October 1998. The Shanghai Stock Exchange's B-share index
closed at 33.2 and 28.71 on October 30, 1998 and December 31,
1998, respectively. The Shenzhen Stock Exchange's B-share closed
at 500.88 and 436.11 on October 30, 1998 and December 31, 1998,
respectively.
China also has an active bond market, as the government
issues Treasury bonds to help fund consistent budget deficits.
During 1997, China issued 241.2 billion RMB in treasury bonds and
repaid all mature treasury bonds. The issuance of Treasury bond
issues increased in 1998 and 1999, including a special 100
billion RMB long-term issue in the second half of 1998, targeted
to pay for infrastructure construction for economic and social
development, and a 60 billion RMB special bond issue in August
1999 to finance the latest stimulus package. It is expected that
the government will undertake additional special bond issues in
2000 to finance increased expenditures. The number of short-term
bonds has also increased to ensure a lively secondary market.
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 stability of
government issued debt, economic growth and manageable inflation,
S&P raised the rating of government issued long-term debt to BBB+
from BBB on May 14, 1997. S&P reaffirmed the BBB+ rating on July
16, 1998, but changed the outlook from stable to negative. The
outlook was revised to reflect smaller economic growth, increased
unemployment resulting from the restructuring of SOEs and
worsening economic conditions throughout Asia. In July 1999, S&P
lowered the BBB+ rating to BBB, citing a projected slowing of
economic growth. The Moody's correspondence rating is A3.
China also allows commodity futures trading although the
government is wary of the speculation futures markets can foster.
The government intends to reduce the number of commodities
exchanges from fourteen to three by early 1999 as part of its
attempt to overhaul the industry and reduce risk and volatility
in the markets. The number of different commodities traded will
also be sharply reduced, from twenty-five to twelve.
HONG KONG
Hong Kong, officially called the Hong Kong Special
Administrative Region of the People's Republic of China, is
located contiguous to China on its southeastern coast and
consists of an area on the mainland and more than 200 surrounding
islands. Hong Kong has an area of approximately 240 square miles
and a population estimated at 6.8 million people, the vast
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majority of whom are ethnic Chinese. The territory is divided
into four regions, Hong Kong Island, the New Territories (less
populated suburbs), Kowloon and the Outlying Islands. 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 and 235 islands under a 99 year lease, which
expired June 30, 1997. In 1984, Britain and China signed 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 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 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
Legislative Council (the Legco), had 60 members, 30 of whom were
indirectly elected by functional constituencies (such as
professionals), 20 of whom were directly elected by the people
and 10 of whom were appointed by the Election Committee. The
Executive Council (the Exco), was appointed by the governor.
They advised the governor concerning legislation to be debated in
the Legco.
Hong Kong is now headed by a chief executive, Tung Chee-
hwa, who reports directly to Beijing. The chief executive is
appointed for a five year term by the central government of China
after being selected by the Election Committee, which is
nominated by corporate bodies. The policy making and executive
powers of the chief executive are checked by both the central
government of China above and the Legco below. The fourteen
member Exco advises the chief executive.
On July 1, 1997, the Legco was dissolved and replaced by
a Provisional Legislative Council (PLC), which had been appointed
by the Election Committee. A new Legco, whose members were
chosen in the same manner as the old Legco, has since replaced
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the PLC. Hong Kong voters overwhelmingly supported pro-democracy
candidates in the May 24, 1998 election for the 20 directly
elected members of the Legco. However, because two-thirds of the
Legco is elected by the Election Committee and the functional
constituencies whose election rules favor pro-business
candidates, pro-democracy candidates failed to win a majority of
the overall seats in the Legco, capturing only 20 of the 60
seats. Nevertheless, the Democratic Party, after having been the
largest party in the pre-turnover Legco but being unrepresented
in the PLC, is once again the largest party in the Legco. The
next Legco election is required by law to occur in 2000.
The Legco is presided over by a president who is elected
by the members. The current president is Rita Fann who
previously presided over the PLC.
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 11,819
foreign companies operating in Hong Kong, approximately 924
multinational corporations doing business in Asia have regional
headquarters in Hong Kong.
Hong Kong's economy had been growing for the last few
years, the growth rate not dropping below 3.9% from 1992 through
1997. In 1998, however, the GDP contracted by 5.1%. The GDP
contracted by 3.4% in the first quarter of 1999, year-on-year,
but was expected to begin growing thereafter for an overall
contraction of 1% for 1999. This shrinking of the economy has
been attributed to substantially lower consumer spending. Retail
sales fell by 14% in volume and 16.9% in value in December 1998,
year-on-year; however, by April 1999, retail sales were down 4%
and 10% in volume and value, respectively, year-on-year.
Consumer price inflation, which averaged 5.7% during 1997,
averaged 2.6% during 1998. In May 1999, the consumer price index
fell by 3.5%, year-on-year. During the first three months of
1999, unemployment averaged 6.2%, a record high, as compared with
an average of 2.2% during the year 1997. Unemployment has since
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stabilized at 6.3%, due in part to a decrease in business
insolvencies.
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 over 150%, 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. Re-exports rose by
5.0% during 1997, but fell by 6.9% during 1998. Domestic exports
fell 0.4% and 11.0% respectively during the same periods. The
fall in domestic exports is attributed to the Asian financial
crisis. Hong Kong's role as a re-exporter is expected to
decrease, while its role in transshipment is expected to
increase, as China continues to modernize its own port facilities
and direct shipping with Taiwan, which has recently been
authorized by both China and Taiwan on a limited basis, expands.
Transshipments do not show up in Hong Kong's trade statistics,
however, in 1996 it was estimated that transshipments were worth
approximately 70% of Hong Kong's re-exports. Hong Kong boasts
the world's largest container port. After several years of
double-digit growth, Hong Kong's container throughput grew by
only 8% in 1997, and is expected to grow by only 3% to 4% in
1998. Growth has been slowed by the Asian financial crisis as
well as by a diversion to Chinese ports. Nonetheless, a new
container terminal was approved to handle the expansion in
throughput that is expected once the financial crisis over. In
line with Hong Kong's strength as an exporter and re-exporter,
its foreign exchange reserves are the fifth largest in the world,
behind Japan, China, Taiwan and Germany, despite a recent drop
caused by the government's intervention in the stock market. At
the end of June 1999, foreign exchange reserves were estimated at
US$88.6 billion.
In contrast to Hong Kong's large seaport, its airport
was considered inadequate, and after two delays, a new airport
opened in July 1998. Chinese authorities pushed to keep the
opening on its delayed schedule and as a result the new airport
was unable to handle 80% of its cargo when it opened. Chaos
resulted and some businesses were forced to close due to
increased costs from very long waits and lost cargo.
Property prices in Hong Kong have dropped precipitously,
falling by approximately 50% between October 1997 and the end of
1998. In an effort to ward off a recession, all public land was
withdrawn from the market on June 22, 1998. The moratorium,
which expired on March 31, 1999, was aimed at preventing further
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drops in property prices which could threaten the stability of
the banking system. Taxes were cut at the same time and as a
result, a HK$23.3 billion deficit was recorded for the 1998-1999
fiscal year. Since the end of the moratorium, there have been
several public land auctions and sales have been above market
expectations.
S&P downgraded Hong Kong's local and foreign sovereign
debt ratings notch on August 31, 1998 to A+/Negative/A-1, and
A/Negative/A-1, respectively. Moody's, which had changed the
outlook on Hong Kong's long-term foreign currency debt and bank
deposits from stable to negative in February 1998, placed Hong
Kong's debt rating on review for a possible downgrade on
September 4, 1998. Since then, however, Hong Kong's debt rating
was removed from review by Moody's, and was not downgraded.
Banking and Finance
Hong Kong has established itself as one of the most
important financial centers in the world. Together with real
estate and insurance, the financial sector accounted for 24.9% of
Hong Kong's GDP in 1996 and 26.5% in 1997, as opposed to 15.6% in
1984. Unlike many Asian economies, Hong Kong does not actively
attract or dissuade foreign investment. Given Hong Kong's low
taxes and quality infrastructure, many businesses looking to set
up regional headquarters or a foothold to do business in China
have set up offices in Hong Kong. Hong Kong followed a policy of
"positive non-interventionism" for approximately twenty years,
but in August 1998 the government broke with this policy and
intervened in the stock market to defend the Hong Kong dollar
("HK$"). (See "Securities Markets")
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 had more than 330 authorized banking institutions
(including 172 licensed banks, 60 restricted-license banks and
101 "deposit-taking companies") at the end of 1998. While
government regulation is not extensive, 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:$1.00. The free market exchange rate of the
Hong Kong dollar against the U.S. dollar for the non-bank public
is determined by supply and demand. The exchange rate had not
deviated significantly from the fixed exchange rate until August
1998, when it reached HK$7.75:$1.00. The HKMA converted banks'
clearing account funds at the 7.75 rate but announced plans to
reduce this rate to 7.8, causing a sharp increase in interest
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rates. Normally Hong Kong interest rates closely follow U.S.
rates because of the tie between the U.S. dollar and the Hong
Kong dollar. 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 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
government consents to raise debt or equity capital. The
currency link appears justifiable only if Hong Kong's citizens
keep their savings in Hong Kong dollars. Currently, 57.4% of
deposits are kept in local currency.
International bank lending in Hong Kong fell from US$463
billion during the first eight months of 1997 to US$400.9 billion
during the first eight months of 1998. New debt will be issued
by the government only when there is an inflow of funds.
Additionally, the government, in a reversal of position, now
discourages the issuance of Hong Kong dollar debt, which
historically has been issued by supranational organizations such
as the World Bank. These government moves, designed to protect
the Hong Kong dollar, have made it increasingly difficult for
banks to find funding. Problems for banks have been further
compounded by the increasing number of mortgage defaults caused
by falling real estate prices.
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 Stock Exchange of Hong Kong (SEHK) is
completely open to foreign investors with minimal regulations.
The regulatory powers of Hong Kong's Securities and Futures
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. The SFC has recently complained that the SEHK
inadequately enforces exchange rules. In June of 1998, the SFC
proposed an amendment to the Disclosure of Interests Ordinance
which would make purchasers disclose their holdings when they
reach 5% of the total issued shares, rather than the current 10%
threshold. Another proposed amendment would require substantial
shareholders to disclose their share purchases and sales.
Currently, only directors must make such disclosure. Meanwhile,
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the chief executive officer of the SEHK also announced in June of
1998 that it will seek greater regulatory power.
In 1986, four Hong Kong stock exchanges ceased trading
and merged into the SEHK. The SEHK expanded from 310 listed
companies with a market capitalization of HK$805 billion in 1991
to 674 listed companies with a market capitalization of HK$3,600
billion as of June 30, 1999. The Hang Seng Index, which tracks
33 blue chip companies listed on the SEHK, rose from 4,297 in
1991 to 15,196 as of June 27, 1997, the last day of the SEHK was
open prior to the transfer of sovereignty to China. After
hitting a low of 6,660 on August 13, 1998, the Hang Seng Index
rebounded to 10,049 on December 31, 1998 after the government
intervened by spending HK$118.1 billion on stock to support
prices. The Hang Seng Index closed at 12,299 on October 15,
1999. Because the government became a significant owner of many
of the companies it regulates, it set up an independent entity,
Exchange Fund Investment Ltd., to manage its shares. In October
1999 the portfolio was valued at about $27 billion, up 66% from
August 1998. On October 25, 1999 the government began selling
off its portfolio to the public via the Tracker Fund of Hong
Kong, a fund that tracks the Hang Seng Index. It is unclear how
successful the offering, which was priced at $1.3 billion, will
be and what effect it will have on Hong Kong's market.
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 concern as to
the effect of the Chinese takeover. These departures have been
replaced in part by Chinese companies listing H-shares on the
SEHK. 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. However, many Chinese companies have been
unable to meet the SEHK's strict listing requirements.
Additionally, many investors have lost confidence in H-shares
because of poor disclosure requirements in China and have turned
instead 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 be better
managed than the H-share listed companies and also provide better
company disclosure. Investor confidence in Red Chips has waned
as well, due in part to the financial difficulties of several
prominent Chinese companies.
Both H-shares and Red Chips have also been affected by
the financial turmoil in Asia. While other shares have shown
signs of sustained recovery, the H-Shares and Red Chips have not
fared as well. The performance of the Hang Seng China
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Enterprises index, comprising the H-shares listed on the SEHK,
rose 22% in the second half of 1996 to close the year at 980. As
of June 27, 1997, this index stood at 1,015, but it fell to 398
by December 31, 1998. On October 1, 1999 this index closed at
543. Companies considered to have strong ties with the mainland
have performed particularly well. The Hang Seng China-Affiliated
Corporations Index, an index which tracks the "Red-Chip"
companies, including companies incorporated in Hong Kong at least
35% of whose assets are owned by Mainland China entities, has
also increased substantially. The index rose 7.28% on June 16,
1997, the first day securities on the index were measured to
close at 2,867. This index fell from 3,469 on June 27, 1997 to
914 on December 31, 1998. On October 1, 1999 this index closed
at 1,042, approximately 75% below its all-time high of 4,111
recorded in August 1997. In contrast, the Hang Seng Index, whose
constituent stocks account for 70% of the total market
capitalization of the SEHK, closed at 12,733 on October 1, 1999,
only 24% below its all-time high of 16,673 recorded in August
1997.
In 1999, the SEHK launched the Growth Enterprise Market
("GEM") a new market to provide capital to emerging companies to
facilitate their development and/or expansion. Due to the
increased investment risks of the GEM, it is open only to
sophisticated investors.
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 1999, the HKMA had
HK$99 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 Hong Kong Futures Exchange ("HKFE") operates both
futures and options markets on the Hang Seng index, interest rate
and foreign exchange products, as well as a limited number of
commodities and a stock futures market. On July 30, 1999 the
SEHK and the HKFE announced the successful conclusion of merger
negotiations; the proposals are subject to shareholder approval.
The SEHK also has a fairly successful stock options market.
TAIWAN
Taiwan, officially called the Republic of China, is an
island located off the southeastern coast of China with a land
mass of approximately 14,000 square miles and a population
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estimated at 21.6 million, of which 98% are ethnic Chinese.
Politically, Taiwan is subdivided into 16 counties and seven
municipalities. 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 Taiwan, then a province of China, and
set up a provisional government which 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 and currently there are 84
political parties. 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 sources
predict the KMT will be unable to hold on to its majority in the
upcoming December 1998 election. On March 23, 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 remains a province of
China, while Taiwan's official position remains the same as in
1949, that its government is the rightful government of Mainland
China. Most countries, including the United States, recognize
the government of China as the only official government
representing China while only 31 nations recognize the government
of Taiwan as the official government of China. China has
recently offered to resume political talks with Taiwan and has
proposed a formula for reunification called One China. According
to Beijing, One China would be neither the PROC or the ROC but a
new China built together. An increasing number of Taiwanese
people support political talks with China, with 70.5% of the
Taiwanese investors in China supporting such talks according to a
New Party survey. A trip by China's chief Cross-Strait
negotiator to Taiwan toward the end of 1999 has been planned,
following a 1998 trip to China by Taiwan's chief negotiator.
However, it is not certain whether the trip will go forward given
the confusion that has resulted from recent remarks by the
President of Taiwan that seemed to endorse the independence of
Taiwan.
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Government
Taiwan continues in the process of moving from a mostly
one party system to a representative democracy. There are three
significant political parties: the KMT, the Democratic
Progressive Party (DDP) and the New Party (NP) which favors
reunification. Taiwan's national level of government consists of
the Presidency, the National Assembly, and five Yuans. The
President and the Vice President are now directly elected by the
people and the offices are currently held by Lee Teng-hui and
Lien Chan of the KMT, respectively. The popularly elected
National Assembly, whose main role is to amend the Constitution
and also has the power to impeach the President or Vice
President, remains under the control of the KMT who hold 54.8% of
the 334 seats. The National Assembly has amended the ROC
Constitution four times in recent years which has contributed to
Taiwan's progress toward democracy. First, the terms for the
President and members of the National Assembly were shortened
from six to four years, and the Legislative Yuan and the National
Assembly switched to a system of proportional representation; a
second amendment provided for direct popular elections of the
President and Vice President; a third amendment transformed the
Control Yuan from a parliamentary body to a semi-judicial body;
and the most recent amendment streamlined the provincial
government. In addition to the Presidency and National Assembly,
there are five governing branches called Yuans: the Executive
Yuan; the Legislative Yuan; the Judicial Yuan; the Examination
Yuan and the Control Yuan. Of the five Yuans, only the 164-
member Legislative Yuan, Taiwan's highest legislative body, is
popularly elected. The next elections (Presidential and National
Assembly) are scheduled to occur in March 2000.
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 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 a reported 6.8% in 1992, 6.3% in 1993,
6.5% in 1994, 6.0% in 1995, 5.7% in 1996 and 6.8% in 1997.
During 1998, the growth rate of Taiwan's GDP slowed to 4.8% due
to a fall-off in exports, investment and government consumption
caused by the Asian financial crisis. The government has
forecast a growth rate of 5.5% during 1999. Taiwan's inflation
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rate dropped from 3.1% in 1996, to 0.9% in 1997, the lowest in a
decade. The consumer price index increased by 1.7% during 1998.
For the first seven months of 1999, the consumer price index rose
0.1% year-on-year; the government forecasts that the consumer
price index will increase by less than 1% during 1999.
In 1998, manufacturing continued as Taiwan's most
important sector, accounting for 27.0% of its GDP, with an
emphasis on electronics and computers. The financial, insurance
and real estate sectors, which continue to grow, represented
20.9% 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.
Taiwan reached a record foreign trade volume of
US$236.51 billion in 1997, up 7.26% from 1996, and making Taiwan
the fourteenth largest trading economy in the world. In 1998,
trade volume decreased 8.9% to US$215.38 billion. In the past,
Taiwan has consistently maintained a trade surplus, reaching a
nine year high of US$14.7 billion in 1996. Due to the Asian
financial crisis, the Asian demand for Taiwan's exports has
fallen. Approximately 40% to 50% of Taiwan's exports are to
other Asian countries. As a result, the trade surplus fell to
US$14.3 billion for 1997, and US$10.6 billion for 1998. During
the first half of 1999, the trade surplus was US$6.6 billion,
five times the trade surplus during the first half of 1998.
Taiwan's foreign exchange reserves have remained relatively
steady and totaled US$90.3 billion on December 31, 1998. 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
60% of all exports to Hong Kong end up in China. Taiwan and
China have come to an agreement allowing Taiwan continued access
to China's markets through Hong Kong.
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. Debt expenditures for the 1998-99 fiscal year represented
16.2% of government expenditures. In 1998, the deficit rose to
6.8% of GDP, although it is expected to fall to 6.3% of GDP in
1999 and 5.9% of GDP in 2000.
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 over
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dependent on China, while at the same time losing its
manufacturing base to the mainland. Inexpensive labor is the
main draw for Taiwanese companies shifting their manufacturing to
China. Taiwan is the second largest source of foreign investment
in China. In the first quarter of 1999, US$1.5 billion had been
approved by the Taiwanese government, down 6% from the first
quarter of 1998. This is a misleading figure, as most of
Taiwanese investment in China avoids the approval process. The
Taiwanese government attempts to restrict investments in Chinaby
capping the value of a single investment in China at $US50
million; in October 1998 the Premier stated that this cap will
stay in place indefinitely. Taiwan has also banned investments
in the property sector as well as certain infrastructure projects
and petrochemical related industries. China is now a
significantly larger export market for Taiwan than is the
Southeast Asian export market. During the first five months of
1999, Taiwan's trade surplus with China grew by 13.5%, compared
to the first five months of 1998, to US$6.5 billion, with exports
totaling US$8.2 billion and imports totaling US$1.7 billion.
The Taiwanese government has continued to encourage
Taiwanese investors to invest in countries other than China. As
a result, Taiwan has become the largest source of direct
investment in Vietnam, and one of the largest sources in
Indonesia and Malaysia. But the governments policy has only been
successful in terms of diversifying the countries in which
Taiwanese firms invest. Investment in China continues and
Taiwan currently accounts for an estimated 8.3% of all foreign
investment in China, second only to Hong Kong, although this
percentage of investment has declined from recent years.
Banking and Finance
Unlike Hong Kong, the Taiwanese financial markets,
including both the banking and securities markets, have
historically been highly regulated by the Taiwanese government.
Monetary policy in Taiwan is controlled by the Central Bank of
China ("CBC"). Beginning in 1989, Taiwanese financial markets
began to be liberalized. Initially, interest rate restrictions
were lifted followed by removal of certain restrictions on bank
branches which has allowed foreign banks to open more than one
branch in Taiwan. However, significant restrictions still limit
foreign capital investments, and reporting rules for non-delivery
forward currency were recently tightened in an effort to reduce
speculation. Restrictions are gradually being lifted and the CBC
has repeatedly stated that all capital controls will be lifted by
the year 2000.
Taiwan's currency is the New Taiwan dollar ("NT$"). The
currency was allowed to float on October 17, 1997. Taiwan's
currency depreciated by 17% in 1997 and continues to drop, but
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this drop was minor when compared to that of other Asian
currencies. The exchange rate averaged NT$28.70:US$1 during
1997, and NT$33.46:US$1 during 1998. On October 15, 1999 the
exchange rate stood at NT$31.74:US$1. Foreign investment
increased dramatically during 1997, hitting a record US$4.3
billion, up 73% from 1996; in 1998, foreign investment amounted
to US$3.3 billion, down 23% from 1997. Many major investment
projects have been launched recently, including the privatization
of the telecommunications network, transportation vehicles and
constructions, the opening of offshore shipping centers, and the
construction of a high-speed rail link between Taiwan's two
largest cities, Taipei and Kaosiung.
In an effort to ensure adequate liquidity in the banking
system, the CBC cut bank reserve ratio requirements by 25 basis
points in August 1998. The requirements were cut again, by 20 to
50 basis points depending on the type of deposit, in September
1998, bringing the average reserve requirement down to 7.7%, and
in the first quarter of 1999, reserve requirements were cut to an
average 6.4%. These cuts have not caused any downward pressure
on the New Taiwan dollar thus far. Additionally, the Ministry of
Finance reduced the banking tax from 5% to 2% and eliminated
several transaction taxes. The increased liquidity has helped
banks to reduce their bad loan ratios, but they still remain
high. The Ministry of Finance further required that all banks
reduce their bad loan ratios by September 1999 or they will be
forced to merge or shut down.
Securities Markets
The Taiwan Stock Exchange ("TSE"), Taiwan's primary
securities exchange, is the sixth largest exchange in the world
in terms of average trading volume and the fourteenth 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 1990. Since this collapse,
the market has been less erratic. The TSE Capitalization
Weighted Stock Index TAIEX, the most widely quoted TSE index,
posted an increase of 18% for all of 1997. The TSE opened the
year at 6,820.35, the low for the year, reached a high of
10,116.84 in August of 1997, and closed for the year at 8,187.27.
In 1998, the TAIEX posted a 21.6% loss from 1997, closing at
6,418.43 at the end of 1998. The loss is attributed to
government efforts to boost the stock market. The TAIEX is based
on 397 components stocks from the TSEs 437 listed companies, and
covers all stocks accept for preferred stocks, full-delivery
stocks, and stocks which have been listed for less than one
month. The ROC Over-the-Counter Securities Exchange, which is
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set up similarly to the NASDAQ system in the U.S., has grown
rapidly since its inception in 1994. At the end of September
1999 there were 233 companies listed on the over-the-counter
market, a significant number of which are technology
companies.
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 10%, there is still a limit
on total foreign investment in an exchange listed security of 50%
of the market capitalization of the security. Along with the 50%
limitation, no single CBC and Securities and Futures Commission
qualified foreign institutional investor ("QFII"), such as
Alliance acting on behalf of the Fund and Alliance's other
clients, can acquire more than 15% of a listed security's market
capitalization. Additionally, there is a 50% cap on aggregate
ownership of shares, which was recently raised from 30%. The
liberalization of foreign investment restrictions sparked a sharp
increase in foreign portfolio investment in the first quarter of
1999 and contributed to significant gains on the TSE. Foreign
naturals are currently subject to a US$5 million each way annual
inward and outward remittance quota and a per person investment
cap of US$50 million, while non QFII foreign corporations are
subject to a US$20 million remittance quota on an investment cap
of US$50 million. Taiwan further restricts purchases by foreign
investors of securities of certain companies to prescribed limits
or forbids foreign investment completely in certain industries.
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 Securities and Futures Commission 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 pre-approved maximum
amount for all of a QFII'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 pre-approved
amount is not remitted in and converted into NT dollars within
one year 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
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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 bureaucratic
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 1998, the Taiwanese government issued bonds
totaling an estimated NT$146 billion. The government's first 20-
year bond issue, which should total at least NT$120 billion, is
expected during the 1998-99 fiscal year. On May 28, 1997, the
Taiwan Rating Corporation, which is half owned by 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 Taiwanese
sovereign government debt at AA+ and Aa3, respectively.
Margin trading in common stocks and beneficiary
certificates of companies that do not have a concentrated
ownership or overly volatile activity and have been listed for
more than six months is permitted for individuals who meet
certain qualifications. Maintenance ratios are regulated by the
CBC and the Competent Authority and margin account customers must
buy and sell securities based on the margin requirements. Both
securities bought on margin and the value received for short
sales are held as collateral which is marked to market everyday.
All accounts must remain above the maintenance ratio and margin
calls are issued for accounts which dip below the ratio.
Taiwan's futures exchange, the Taiwan Futures Exchange
(TAIFEX), originally named the Taiwan International Mercantile
Exchange (TAIMEX), was established on September 9, 1997, and
launched its first product on July 21, 1998. TAIFEX, which
trades financial derivatives and probably will not trade
commodities futures for several years, is currently closed to
foreign investors.
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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
acquire that security without additional cash consideration (or
for additional cash consideration held in a segregated account by
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its custodian) upon conversion or exchange of other securities
held in its portfolio. A call option is also covered if the Fund
holds a call on the same security and in the same principal
amount as the call written where the exercise price of the call
held (i) is equal to or less than the exercise price of the call
written or (ii) is greater than the exercise price of the call
written if the difference is maintained by the Fund in cash and
liquid high-grade debt securities in a segregated account with
its custodian. A put option written by the Fund is "covered" if
the Fund maintains cash or high-grade liquid assets with a value
equal to the exercise price in a segregated account with its
custodian, or else holds a put on the same security and in the
same principal amount as the put written where the exercise price
of the put held is equal to or greater than the exercise price of
the put written. The premium paid by the purchaser of an option
will reflect, among other things, the relationship of the
exercise price to the market price and volatility of the
underlying security, the remaining term of the option, supply and
demand and interest rates.
A call option is for cross-hedging purposes if the Fund
does not own the underlying security but seeks to provide a hedge
against a decline in value in another security which the Fund
owns or has the right to acquire. In such circumstances, the
Fund collateralizes its obligation under the option by
maintaining in a segregated account with the Fund's custodian
cash or liquid securities in an amount not less than the market
value of the underlying security, marked to market daily. The
Fund would write a call option for cross-hedging purposes,
instead of writing a covered call option, when the premium to be
received from the cross-hedge transaction would exceed that which
would be received from writing a covered call option, while at
the same time achieving the desired hedge.
In purchasing a call option, the Fund would be in a
position to realize a gain if, during the option period, the
price of the underlying security increased by an amount in excess
of the premium paid. It would realize a loss if the price of the
underlying security declined or remained the same or did not
increase during the period, by more than the amount of the
premium. In purchasing a put option, the Fund would be in a
position to realize a gain if, during the option period, the
price of the underlying security declined by an amount in excess
of the premium paid. It would realize a loss if the price of the
underlying security increased or remained the same or did not
decrease during that period by more than the amount of the
premium. If a put or call option purchased by the Fund were
permitted to expire without being sold or exercised, its premium
would be lost by the Fund.
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If a put option written by the Fund were exercised, the
Fund would be obligated to purchase the underlying security at
the exercise price. If a call option written by the Fund were
exercised, the Fund would be obligated to sell the underlying
security at the exercise price. The risk involved in writing a
put option is that there could be a decrease in the market value
of the underlying security caused by rising interest rates or
other factors. If this occurred, the option could be exercised
and the underlying security would then be sold by the option
holder to the Fund at a higher price than its current market
value. The risk involved in writing a call option is that there
could be an increase in the market value of the underlying
security caused by declining interest rates or other factors. If
this occurred, the option could be exercised and the underlying
security would then be sold by the Fund at a lower price than its
current market value. These risks could be reduced by entering
into a closing transaction prior to the option expiration dates
if a liquid market is available. The Fund retains the premium
received from writing a put or call option whether or not the
option is exercised.
The Fund may purchase or write options on securities of
the types in which it is permitted to invest in privately
negotiated (i.e., over-the-counter) transactions. The Fund will
effect such transactions only with investment dealers and other
financial institutions (such as commercial banks or savings and
loan institutions) deemed creditworthy by the Adviser, and the
Adviser has adopted procedures for monitoring the
creditworthiness of such entities. Options purchased or written
by the Fund in negotiated transactions are illiquid and it may
not be possible for the Fund to effect a closing transaction at a
time when the Adviser believes it would be advantageous to do so.
An option on a securities index is similar to an option
on a security except that, rather than the right to take or make
delivery of a security at a specified price, an option on a
securities index gives the holder the right to receive, upon
exercises of the option, an amount of cash if the closing level
of the chosen index is greater than (in the case of a call) or
less than (in the case of a put) the exercise price of the
option. There are no specific limitations on the Fund's
purchasing and selling of options on securities indices.
The writer of an option may have no control over when
the underlying securities must be sold, in the case of a call
option, or purchased, in the case of a put option, since with
regard to certain options, the writer may be assigned an exercise
notice at any time prior to the termination of the obligation.
Whether or not an option expires unexercised, the writer retains
the amount of the premium. This amount, of course, may, in the
case of a covered call option, be offset by a decline in the
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market value of the underlying security during the option period.
If a call option is exercised, the writer experiences a profit or
loss from the sale of the underlying security. If a put option
is exercised, the writer must fulfill the obligation to purchase
the underlying security at the exercise price, which will usually
exceed the then market value of the underlying security.
The writer of a listed option that wishes to terminate
its obligation may effect a "closing purchase transaction." This
is accomplished by buying an option of the same series as the
option previously written. The effect of the purchase is that
the writer's position will be cancelled by the clearing
corporation. However, a writer may not effect a closing purchase
transaction after being notified of the exercise of an option.
Likewise, an investor who is the holder of a listed option may
liquidate its position by effecting a "closing sale transaction."
This is accomplished by selling an option of the same series as
the option previously purchased. There is no guarantee that
either a closing purchase or a closing sale transaction can be
effected in any particular situation.
Effecting a closing transaction in the case of a written
call option will permit the Fund to write another call option on
the underlying security with either a different exercise price or
expiration date or both, or in the case of a written put option
will permit the Fund to write another put option to the extent
that the exercise price thereof is secured by deposited cash or
short-term securities. Also, effecting a closing transaction
will permit the cash or proceeds from the concurrent sale of any
securities subject to the option to be used for other Fund
investments. If the Fund desires to sell a particular security
from its portfolio on which it has written a call option, it will
effect a closing transaction prior to or concurrent with the sale
of the security.
The Fund will realize a profit from a closing
transaction if the price of the transaction is less than the
premium received from writing the option or is more than the
premium paid to purchase the option; the Fund will realize a loss
from a closing transaction if the price of the transaction is
more than the premium received from writing the option or is less
than the premium paid to purchase the option. Because increases
in the market price of a call option will generally reflect
increases in the market price of the underlying security, any
loss resulting from the repurchase of a call option is likely to
be offset in whole or in part by appreciation of the underlying
security owned by the Fund.
An option position may be closed out only where there
exists a secondary market for an option of the same series. If a
secondary market does not exist, it might not be possible to
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effect closing transactions in particular options with the result
that the Fund would have to exercise the options in order to
realize any profit. If the Fund is unable to effect a closing
purchase transaction in a secondary market, it will not be able
to sell the underlying security until the option expires or it
delivers the underlying security upon exercise. Reasons for the
absence of a liquid secondary market include the following:
(i) there may be insufficient trading interest in certain
options, (ii) restrictions may be imposed by a national
securities exchange ("National Exchange") on opening transactions
or closing transactions or both, (iii) trading halts, suspensions
or other restrictions may be imposed with respect to particular
classes or series of options or underlying securities,
(iv) unusual or unforeseen circumstances may interrupt normal
operations on a National Exchange, (v) the facilities of a
National Exchange or the Options Clearing Corporation may not at
all times be adequate to handle current trading volume, or
(vi) one or more National Exchanges could, for economic or other
reasons, decide or be compelled at some future date to
discontinue the trading of options (or a particular class or
series of options), in which event the secondary market on that
National Exchange (or in that class or series of options) would
cease to exist, although outstanding options on that National
Exchange that had been issued by the Options Clearing Corporation
as a result of trades on that National Exchange would continue to
be exercisable in accordance with their terms.
The Fund may write options in connection with buy-and-
write transactions; that is, the Fund may purchase a security and
then write a call option against that security. The exercise
price of the call the Fund determines to write will depend upon
the expected price movement of the underlying security. The
exercise price of a call option may be below ("in-the-money"),
equal to ("at-the-money") or above ("out-of-the-money") the
current value of the underlying security at the time the option
is written. Buy-and-write transactions using in-the-money call
options may be used when it is expected that the price of the
underlying security will remain flat or decline moderately during
the option period. Buy-and-write transactions using at-the-money
call options may be used when it is expected that the price of
the underlying security will remain fixed or advance moderately
during the option period. Buy-and-write transactions using out-
of-the-money call options may be used when it is expected that
the premiums received from writing the call option plus the
appreciation in the market price of the underlying security up to
the exercise price will be greater than the appreciation in the
price of the underlying security alone. If the call options are
exercised in such transactions, the Fund's maximum gain will be
the premium received by it for writing the option, adjusted
upwards or downwards by the difference between the Fund's
purchase price of the security and the exercise price. If the
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options are not exercised and the price of the underlying
security declines, the amount of such decline will be offset in
part, or entirely, by the premium received.
The writing of covered put options is similar in terms
of risk/return characteristics to buy-and-write transactions. If
the market price of the underlying security rises or otherwise is
above the exercise price, the put option will expire worthless
and the Fund's gain will be limited to the premium received. If
the market price of the underlying security declines or otherwise
is below the exercise price, the Fund may elect to close the
position or take delivery of the security at the exercise price
and the Fund's return will be the premium received from the put
option minus the amount by which the market price of the security
is below the exercise price. Out-of-the-money, at-the-money, and
in-the-money put options may be used by the Fund in the same
market environments that call options are used in equivalent buy-
and-write transactions.
Futures Contracts
The Fund may enter into contracts for the purchase or
sale for future delivery of fixed-income securities or foreign
currencies, or contracts based on financial indices including any
index of U.S. Government Securities, securities issued by foreign
government entities or common stocks. U.S. futures contracts
have been designed by exchanges which have been designated
"contracts markets" by the Commodity Futures Trading Commission
("CFTC"), and must be executed through a futures commission
merchant, or brokerage firm, which is a member of the relevant
contract market. Futures contracts trade on a number of exchange
markets, and, through their clearing corporations, the exchanges
guarantee performance of the contracts as between the clearing
members of the exchange.
At the same time a futures contract is purchased or
sold, the Fund must allocate cash or securities as a deposit
payment ("initial deposit"). It is expected that the initial
deposit would be approximately 1 1/2% to 5% of a contract's face
value. Daily thereafter, the futures contract is valued and the
payment of "variation margin" may be required, since each day the
Fund would provide or receive cash that reflects any decline or
increase in the contract's value.
At the time of delivery of securities pursuant to such a
contract, adjustments are made to recognize differences in value
arising from the delivery of securities with a different price or
interest rate from that specified in the contract. In some (but
not many) cases, securities called for by a futures contract may
not have been issued when the contract was written.
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Although futures contracts by their terms call for the
actual delivery or acquisition of securities, in most cases the
contractual obligation is fulfilled before the date of the
contract without having to make or take delivery of the
securities. The offsetting of a contractual obligation is
accomplished by buying (or selling, as the case may be) on a
commodities exchange an identical futures contract calling for
delivery in the same month. Such a transaction, which is
effected through a member of an exchange, cancels the obligation
to make or take delivery of the securities. Since all
transactions in the futures market are made, offset or fulfilled
through a clearinghouse associated with the exchange on which the
contracts are traded, the Fund will incur brokerage fees when it
purchases or sells futures contracts.
Stock Index Futures
The Fund may purchase and sell stock index futures as a
hedge against movements in the equity markets. There are several
risks in connection with the use of stock index futures by the
Fund as a hedging device. One risk arises because of the
imperfect correlation between movements in the price of the stock
index futures and movements in the price of the securities which
are the subject of the hedge. The price of the stock index
futures may move more than or less than the price of the
securities being hedged. If the price of the stock index futures
moves less than the price of the securities which are the subject
of the hedge, the hedge will not be fully effective but, if the
price of the securities being hedged has moved in an unfavorable
direction, the Fund would be in a better position than if it had
not hedged at all. If the price of the securities being hedged
has moved in a favorable direction, this advantage will be
partially offset by the loss on the index future. If the price
of the future moves more than the price of the stock, the Fund
will experience either a loss or gain on the future which will
not be completely offset by movements in the price of the
securities which are subject to the hedge. To compensate for the
imperfect correlation of movements in the price of securities
being hedged and movements in the price of the stock index
futures, the Fund may buy or sell stock index futures contracts
in a greater dollar amount than the dollar amount of securities
being hedged if the volatility over a particular time period of
the prices of such securities has been greater than the
volatility over such time period of the index, or if otherwise
deemed to be appropriate by the Adviser. Conversely, the Fund
may buy or sell fewer stock index futures contracts if the
volatility over a particular time period of the prices of the
securities being hedged is less than the volatility over such
time period of the stock index, or it is otherwise deemed to be
appropriate by the Adviser. It is also possible that, when the
Fund has sold futures to hedge its portfolio against a decline in
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the market, the market may advance and the value of securities
held in the Fund may decline. If this occurred, the Fund would
lose money on the futures and also experience a decline in value
in its portfolio securities. However, over time the value of a
diversified portfolio should tend to move in the same direction
as the market indices upon which the futures are based, although
there may be deviations arising from differences between the
composition of the Fund and the stocks comprising the index.
Where futures are purchased to hedge against a possible
increase in the price of stock before the Fund is able to invest
its cash (or cash equivalents) in stocks (or options) in an
orderly fashion, it is possible that the market may decline
instead. If the Fund then concludes not to invest in stock or
options at that time because of concern as to possible further
market decline or for other reasons, the Fund will realize a loss
on the futures contract that is not offset by a reduction in the
price of securities purchased.
In addition to the possibility that there may be an
imperfect correlation, or no correlation at all, between
movements in the stock index futures and the portion of the
portfolio being hedged, the price of stock index futures may not
correlate perfectly with movement in the stock index due to
certain market distortions. Rather than meeting additional
margin deposit requirements, investors may close futures
contracts through offsetting transactions which could distort the
normal relationship between the index and futures markets.
Secondly, from the point of view of speculators, the deposit
requirements in the futures market are less onerous than margin
requirements in the securities market. Therefore, increased
participation by speculators in the futures market may also cause
temporary price distortions. Due to the possibility of price
distortion in the futures market, and because of the imperfect
correlation between the movements in the stock index and
movements in the price of stock index futures, a correct forecast
of general market trends by the investment adviser may still not
result in a successful hedging transaction over a short time
frame.
Positions in stock index futures may be closed out only
on an exchange or board of trade which provides a secondary
market for such futures. Although the Fund intends to purchase
or sell futures only on exchanges or boards of trade where there
appear to be active secondary markets, there is no assurance that
a liquid secondary market on any exchange or board of trade will
exist for any particular contract or at any particular time. In
such event, it may not be possible to close a futures investment
position, and in the event of adverse price movements, the Fund
would continue to be required to make daily cash payments of
variation margin. However, in the event futures contracts have
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been used to hedge portfolio securities, such securities will not
be sold until the futures contract can be terminated. In such
circumstances, an increase in the price of the securities, if
any, may partially or completely offset losses on the futures
contract. However, as described above, there is no guarantee
that the price of the securities will in fact correlate with the
price movements in the futures contract and thus provide an
offset on a futures contract.
Options on Futures Contracts
The Fund intends to purchase and write options on
futures contracts for hedging purposes. The Fund is not a
commodity pool and all transactions in futures contracts and
options on futures contracts engaged in by the Fund must
constitute bona fide hedging or other permissible transactions in
accordance with the rules and regulations promulgated by the
CFTC. The purchase of a call option on a futures contract is
similar in some respects to the purchase of a call option on an
individual security. Depending on the pricing of the option
compared to either the price of the futures contract upon which
it is based or the price of the underlying debt securities, it
may or may not be less risky than ownership of the futures
contract or underlying debt securities. As with the purchase of
futures contracts, when the Fund is not fully invested it may
purchase a call option on a futures contract to hedge against
adverse market conditions.
The writing of a call option on a futures contract
constitutes a partial hedge against declining prices of the
security or foreign currency which is deliverable upon exercise
of the futures contract or securities comprising an index. If
the futures price at expiration of the option is below the
exercise price, the Fund will retain the full amount of the
option premium which provides a partial hedge against any decline
that may have occurred in the Fund's portfolio holdings. The
writing of a put option on a futures contract constitutes a
partial hedge against increasing prices of the security or
foreign currency which is deliverable upon exercise of the
futures contract or securities comprising an index. If the
futures price at expiration of the option is higher than the
exercise price, the Fund will retain the full amount of the
option premium which provides a partial hedge against any
increase in the price of securities which the Fund intends to
purchase. If a put or call option the Fund has written is
exercised, the Fund will incur a loss which will be reduced by
the amount of the premium it receives. Depending on the degree
of correlation between changes in the value of its portfolio
securities and changes in the value of its futures positions, the
Fund's losses from existing options on futures may to some extent
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be reduced or increased by changes in the value of portfolio
securities.
The purchase of a put option on a futures contract is
similar in some respects to the purchase of protective put
options on portfolio securities. For example, the Fund may
purchase a put option on a futures contract to hedge the Fund's
portfolio against the risk of rising interest rates.
The amount of risk the Fund assumes when it purchases an
option on a futures contract is the premium paid for the option
plus related transaction costs. In addition to the correlation
risks discussed above, the purchase of an option also entails the
risk that changes in the value of the underlying futures contract
will not be fully reflected in the value of the option purchased.
Options on Foreign Currencies
The Fund may purchase and write options on foreign
currencies for hedging purposes in a manner similar to that in
which futures contracts on foreign currencies, or forward
contracts, will be utilized. For example, a decline in the
dollar value of a foreign currency in which portfolio securities
are denominated will reduce the dollar value of such securities,
even if their value in the foreign currency remains constant. In
order to protect against such diminutions in the value of
portfolio securities, the Fund may purchase put options on the
foreign currency. If the value of the currency does decline, the
Fund will have the right to sell such currency for a fixed amount
in dollars and will thereby offset, in whole or in part, the
adverse effect on its portfolio which otherwise would have
resulted. The purchase of an option on a foreign currency may
constitute an effective hedge against fluctuations in exchange
rates although, in the event of rate movements adverse to the
Fund's position, it may forfeit the entire amount of the premium
plus related transaction costs. Options on foreign currencies to
be written or purchased by the Fund are traded on U.S. and
foreign exchanges or over-the-counter.
Conversely, where a rise in the dollar value of a
currency in which securities to be acquired are denominated is
projected, thereby increasing the cost of such securities, the
Fund may purchase call options thereon. The purchase of such
options could offset, at least partially, the effects of the
adverse movements in exchange rates. As in the case of other
types of options, however, the benefit to the Fund deriving from
purchases of foreign currency options will be reduced by the
amount of the premium and related transaction costs. In
addition, where currency exchange rates do not move in the
direction or to the extent anticipated, the Fund could sustain
losses on transactions in foreign currency options which would
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require it to forego a portion or all of the benefits of
advantageous changes in such rates.
The Fund may write options on foreign currencies for the
same types of hedging purposes. For example, where the Fund
anticipates a decline in the dollar value of foreign currency
denominated securities due to adverse fluctuations in exchange
rates it could, instead of purchasing a put option, write a call
option on the relevant currency. If the expected decline occurs,
the option will most likely not be exercised, and the diminution
in value of portfolio securities will be offset by the amount of
the premium received.
Similarly, instead of purchasing a call option to hedge
against an anticipated increase in the dollar cost of securities
to be acquired, the Fund could write a put option on the relevant
currency which, if rates move in the manner projected, will
expire unexercised and allow the Fund to hedge such increased
cost up to the amount of the premium. As in the case of other
types of options, however, the writing of a foreign currency
option will constitute only a partial hedge up to the amount of
the premium, and only if rates move in the expected direction. If
this does not occur, the option may be exercised and the Fund
would be required to purchase or sell the underlying currency at
a loss which may not be offset by the amount of the premium.
Through the writing of options on foreign currencies, the Fund
also may be required to forego all or a portion of the benefits
which might otherwise have been obtained from favorable movements
in exchange rates.
The Fund intends to write covered call options on
foreign currencies. A call option written on a foreign currency
by the Fund is "covered" if the Fund owns the underlying foreign
currency covered by the call or has an absolute and immediate
right to acquire that foreign currency without additional cash
consideration (or for additional cash consideration held in a
segregated account by its Custodian) upon conversion or exchange
of other foreign currency held in its portfolio. A call option
is also covered if the Fund has a call on the same foreign
currency and in the same principal amount as the call written
where the exercise price of the call held (a) is equal to or less
than the exercise price of the call written or (b) is greater
than the exercise price of the call written if the difference is
maintained by the Fund in cash, U.S. Government Securities and
other high-grade liquid debt securities in a segregated account
with its Custodian.
The Fund also intends to write call options on foreign
currencies for cross-hedging purposes. An option that is cross-
hedged is not covered, but is designed to provide a hedge against
a decline in the U.S. dollar value of a security which the Fund
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owns or has the right to acquire and which is denominated in the
currency underlying the option due to an adverse change in the
exchange rate. In such circumstances, the Fund collateralizes
the option by maintaining in a segregated account with the Fund's
Custodian, cash or other high-grade liquid debt securities in an
amount not less than the value of the underlying foreign currency
in U.S. dollars marked to market daily.
Additional Risks of Options on Futures Contracts,
Forward Contracts and Options on Foreign Currencies
Unlike transactions entered into by the Fund in futures
contracts, options on foreign currencies and forward contracts
are not traded on contract markets regulated by the CFTC or (with
the exception of certain foreign currency options) by the SEC. To
the contrary, such instruments are traded through financial
institutions acting as market-makers, although foreign currency
options are also traded on certain national securities exchanges,
such as the Philadelphia Stock Exchange and the Chicago Board
Options Exchange, subject to SEC regulation. Similarly, options
on securities may be traded over-the-counter. In an
over-the-counter trading environment, many of the protections
afforded to exchange participants will not be available. Although
the purchaser of an option cannot lose more than the amount of
the premium plus related transaction costs, this entire amount
could be lost. Moreover, the option writer and a trader of
forward contracts could lose amounts substantially in excess of
their initial investments, due to the margin and collateral
requirements associated with such positions.
Options on foreign currencies traded on national
securities exchanges are within the jurisdiction of the SEC, as
are other securities traded on such exchanges. As a result, many
of the protections provided to traders on organized exchanges
will be available with respect to such transactions. In
particular, all foreign currency option positions entered into on
a national securities exchange are cleared and guaranteed by the
Options Clearing Corporation ("OCC"), thereby reducing the risk
of counterparty default. Further, a liquid secondary market in
options traded on a national securities exchange may be more
readily available than in the over-the-counter market,
potentially permitting the Fund to liquidate open positions at a
profit prior to exercise or expiration, or to limit losses in the
event of adverse market movements.
The purchase and sale of exchange-traded foreign
currency options, however, is subject to the risks of the
availability of a liquid secondary market described above, as
well as the risks regarding adverse market movements, margining
of options written, the nature of the foreign currency market,
possible intervention by governmental authorities and the effects
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of other political and economic events. In addition, exchange-
traded options on foreign currencies involve certain risks not
presented by the over-the-counter market. For example, exercise
and settlement of such options must be made exclusively through
the OCC, which has established banking relationships in
applicable foreign countries for this purpose. As a result, the
OCC may, if it determines that foreign governmental restrictions
or taxes would prevent the orderly settlement of foreign currency
option exercise, or would result in undue burdens on the OCC or
its clearing member, impose special procedures on exercise and
settlement, such as technical changes in the mechanics of
delivery of currency, the fixing of dollar settlement prices or
prohibitions on exercise.
In addition, futures contracts, options on futures
contracts, forward contracts and options on foreign currencies
may be traded on foreign exchanges. Such transactions are
subject to the risk of governmental actions affecting trading in
or the prices of foreign currencies or securities. The value of
such positions also could be adversely affected by (i) other
complex foreign political and economic factors, (ii) lesser
availability than in the United States of data on which to make
trading decisions, (iii) delays in the Fund's ability to act upon
economic events occurring in foreign markets during nonbusiness
hours in the United States, (iv) the imposition of different
exercise and settlement terms and procedures and margin
requirements than in the United States, and (v) lesser trading
volume.
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_________________________________________________________________
APPENDIX C:
DEBT SECURITIES RATINGS
_________________________________________________________________
The ratings of securities by S&P, Moody's, Duff & Phelps
and Fitch are a generally accepted barometer of credit risk.
They are, however, subject to certain limitations from an
investor's standpoint. The rating of an issuer is heavily
weighted by past developments and does not necessarily reflect
probable future conditions. There is frequently a lag between
the time a rating is assigned and the time it is updated. In
addition, there may be varying degrees of difference in credit
risk of securities within each rating category.
Securities rated Aaa by Moody's and AAA by S&P, Duff &
Phelps and Fitch are considered to be of the highest quality;
capacity to pay interest and repay principal is extremely strong.
Securities rated Aa by Moody's and AA by S&P, Duff & Phelps and
Fitch are considered to be high quality; capacity to repay
principal is considered very strong, although elements may exist
that make risks appear somewhat larger than exist with securities
rated Aaa or AAA. Securities rated A are considered by Moody's
to possess adequate factors giving security to principal and
interest. S&P, Duff & Phelps and Fitch consider such securities
to have a strong capacity to pay interest and repay principal.
Such securities are more susceptible to adverse changes in
economic conditions and circumstances than higher-rated
securities.
Securities rated Baa by Moody's and BBB by S&P, Duff &
Phelps and Fitch are considered to have an adequate capacity to
pay interest and repay principal. Such securities are considered
to have speculative characteristics and share some of the same
characteristics as lower-rated securities. Sustained periods of
deteriorating economic conditions or of rising interest rates are
more likely to lead to a weakening in the issuer's capacity to
pay interest and repay principal than in the case of higher-rated
securities. Securities rated Ba by Moody's and BB by S&P, Duff &
Phelps and Fitch are considered to have speculative
characteristics with respect to capacity to pay interest and
repay principal over time; their future cannot be considered as
well-assured. Securities rated B by Moody's, S&P, Duff & Phelps
and Fitch are considered to have highly speculative
characteristics with respect to capacity to pay interest and
repay principal. Assurance of interest and principal payments or
of maintenance of other terms of the contract over any long
period of time may be small.
C-1
<PAGE>
Securities rated Caa by Moody's and CCC by S&P, Duff &
Phelps and Fitch are of poor standing and there is a present
danger with respect to payment of principal or interest.
Securities rated Ca by Moody's and CC by S&P and Fitch are
minimally protected, and default in payment of principal or
interest is probable. Securities rated C by Moody's, S&P and
Fitch are in imminent default in payment of principal or interest
and have extremely poor prospects of ever attaining any real
investment standing. Securities rated D by S&P and Fitch are in
default. The issuer of securities rated DD by Duff & Phelps is
under and order of liquidation.
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____________________________________________________________
APPENDIX D:
CERTAIN EMPLOYEE BENEFIT PLANS
____________________________________________________________
Employee benefit plans described below which are
intended to be tax-qualified under section 401(a) of the Internal
Revenue Code of 1986, as amended ("Tax Qualified Plans"), for
which Merrill Lynch, Pierce, Fenner & Smith Incorporated or an
affiliate thereof ("Merrill Lynch") is recordkeeper (or with
respect to which recordkeeping services are provided pursuant to
certain arrangements as described in paragraph (ii) below)
("Merrill Lynch Plans") are subject to specific requirements as
to the Fund shares which they may purchase. Notwithstanding
anything to the contrary contained elsewhere in this Statement of
Additional Information, the following Merrill Lynch Plans are not
eligible to purchase Class A shares and are eligible to purchase
Class B shares of the Fund at net asset value without being
subject to a contingent deferred sales charge:
(i) Plans for which Merrill Lynch is the recordkeeper on a
daily valuation basis, if when the plan is established
as an active plan on Merrill Lynch's recordkeeping
system:
(a) the plan is one which is not already
investing in shares of mutual funds or
interests in other commingled investment
vehicles of which Merrill Lynch Asset
Management, L.P. is investment adviser or
manager ("MLAM Funds"), and either (A) the
aggregate assets of the plan are less than
$3 million or (B) the total of the sum of
(x) the employees eligible to participate in
the plan and (y) those persons, not
including any such employees, for whom a
plan account having a balance therein is
maintained, is less than 500, each of (A)
and (B) to be determined by Merrill Lynch in
the normal course prior to the date the plan
is established as an active plan on Merrill
Lynch's recordkeeping system (an "Active
Plan"); or
(b) the plan is one which is already investing
in shares of or interests in MLAM Funds and
the assets of the plan have an aggregate
value of less than $5 million, as determined
D-1
<PAGE>
by Merrill Lynch as of the date the plan
becomes an Active Plan.
For purposes of applying (a) and (b), there
are to be aggregated all assets of any Tax-
Qualified Plan maintained by the sponsor of
the Merrill Lynch Plan (or any of the
sponsor's affiliates) (determined to be such
by Merrill Lynch) which are being invested
in shares of or interests in MLAM Funds,
Alliance Mutual Funds or other mutual funds
made available pursuant to an agreement
between Merrill Lynch and the principal
underwriter thereof (or one of its
affiliates) and which are being held in a
Merrill Lynch account.
(ii) Plans for which the recordkeeper is not Merrill Lynch,
but which are recordkept on a daily valuation basis by
a recordkeeper with which Merrill Lynch has a
subcontracting or other alliance arrangement for the
performance of recordkeeping services, if the plan is
determined by Merrill Lynch to be so eligible and the
assets of the plan are less than $3 million.
Class B shares of the Fund held by any of the above-
described Merrill Lynch Plans are to be replaced at Merrill
Lynch's direction through conversion, exchange or otherwise by
Class A shares of the Fund on the earlier of the date that the
value of the plan's aggregate assets first equals or exceeds $5
million or the date on which any Class B share of the Fund held
by the plan would convert to a Class A share of the Fund as
described under "Purchase of Shares" and "Redemption and
Repurchase of Shares."
Any Tax Qualified Plan, including any Merrill Lynch
Plan, which does not purchase Class B shares of the Fund without
being subject to a contingent deferred sales charge under the
above criteria is eligible to purchase Class B shares subject to
a contingent deferred sales charge as well as other classes of
shares of the Fund as set forth above under "Purchase of Shares"
and "Redemption and Repurchase of Shares."
D-2
<PAGE>
C. OTHER INFORMATION
Item 23. Exhibits:
(a) Articles of Incorporation of the Registrant -
Incorporated by reference to Exhibit 1 to the
Registrant's Registration Statement on Form N-1A (File
Nos. 333-26229 and 811-08201) filed with the Securities
and Exchange Commission on April 30, 1997.
(b) By-Laws of the Registrant - Incorporated by reference
to Exhibit 2 to the 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.
(c) Not applicable.
(d) Investment Advisory Agreement between the Registrant
and Alliance Capital Management L.P. - Incorporated by
reference to Exhibit 5 to Post-Effective Amendment
No. 1 of the Registrant's Registration Statement on
Form N-1A (File Nos. 333-26229 and 811-08201) filed
with the Securities and Exchange Commission on April 6,
1998.
(e) (1) Distribution Services Agreement between the
Registrant and Alliance Fund Distributors, Inc., -
Incorporated by reference to Exhibit 6(a) to Post-
Effective Amendment No. 1 of the Registrant's
Registration Statement on Form N-1A (File
Nos. 333-26229 and 811-08201) filed with the
Securities and Exchange Commission on April 6,
1998.
(2) Form of Selected Dealers Agreement between
Alliance Fund Distributors, Inc. and selected
dealers offering shares of the Registrant -
Incorporated by reference to Exhibit 6(b) to Pre-
Effective Amendment No. 1 of the Registrant's
Registration Statement on Form N-1A (File
Nos. 333-26229 and 811-08201) filed with the
Securities and Exchange Commission on July 30,
1997.
(3) Form of Selected Agents Agreement between Alliance
Fund Distributors, Inc. and selected agents making
available shares of the Registrant - Incorporated
by reference to Exhibit 6(c) to Pre-Effective
Amendment No. 1 of the Registrant's Registration
Statement on Form N-1A (File Nos. 333-26229 and
C-1
<PAGE>
811-08201) filed with the Securities and Exchange
Commission on July 29, 1997.
(f) Not applicable.
(g) Custodian Agreement between the Registrant and Brown
Brothers Harriman & Company dated July 29, 1997 -
Incorporated by reference to Exhibit 8 to Post-
Effective Amendment No. 1 of the Registrant's
Registration Statement on Form N-1A (File
Nos. 333-26229 and 811-08201) filed with the Securities
and Exchange Commission on April 6, 1998.
(h) (1) Transfer Agent Agreement between the Registrant
and Alliance Fund Services Incorporated by
reference to Exhibit 9 to Post-Effective Amendment
No. 1 of the Registrant's Registration Statement
on Form N-1A (File Nos. 333-26229 and 811-08201)
filed with the Securities and Exchange Commission
on April 6, 1998.
(2) Expense Limitation Undertaking by Alliance Capital
Management L.P. - Filed herewith.
(i) (1) Opinion and Consent of Seward & Kissel LLP - Filed
herewith.
(2) Opinion and Consent of Venable, Baetjer and
Howard, LLP - Incorporated by reference to
Exhibit 10(b) to Pre-Effective Amendment No. 2 of
the Registrant's Registration Statement on Form
N-1A (File Nos. 333-26229 and 811-08201) filed
with the Securities and Exchange Commission on
August 14, 1997.
(j) Consent of Independent Auditors - Filed herewith.
(k) Not applicable.
(l) Not applicable.
(m) Rule 12b-1 Plan - see Exhibit (e)(1) hereto.
(n) Financial Data Schedules - Filed herewith.
(o) Rule 18f-3 Plan - Incorporated by reference to
Exhibit 18 to Pre-Effective Amendment No. 1 of the
Registrant's Registration Statement on Form N-1A (File
Nos. 333-26229 and 811-08201) filed with the Securities
and Exchange Commission on July 29, 1997.
C-2
<PAGE>
Other Exhibits: Powers of Attorney of John D. Carifa,
David H. Dievler, William H. Foulk, Jr. and T.L. Tsim -
Incorporated by reference to Other Exhibits to Post-
Effective Amendment No. 1 of the Registrant's
Registration Statement on Form N-1A (File
Nos. 333-26229 and 811-08201) filed with the Securities
and Exchange Commission on April 6, 1998.
Item 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH
REGISTRANT.
None.
ITEM 25. INDEMNIFICATION.
It is the Registrant's policy to indemnify its
directors and officers, employees and other agents to
the maximum extent permitted by Section 2-418 of the
General Corporation Law of the State of Maryland, which
is incorporated by reference herein, and as set forth
in Article EIGHTH of Registrant's Articles of
Incorporation, filed as Exhibit (a) hereto, Article VII
and Article VIII of Registrant's By-Laws, filed as
Exhibit (b) hereto, and Section 10 of the Distribution
Services Agreement, filed as Exhibit (e)(1) hereto.
The Advisers liability for any loss suffered by the
Registrant or its shareholders is set forth in
Section 4 of the Advisory Agreement, filed as
Exhibit (d) hereto.
Insofar as indemnification for liabilities arising
under the Securities Act may be permitted to directors,
officers and controlling persons of the Registrant
pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that, in the opinion of the
Securities and Exchange Commission, such
indemnification is against public policy as expressed
in the Securities Act and is, therefore, unenforceable.
In the event that a claim for indemnification against
such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director,
officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding)
is asserted by such director, officer or controlling
person in connection with the securities being
registered, the Registrant will, unless in the opinion
of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate
jurisdiction the question of whether such
C-3
<PAGE>
indemnification by it is against public policy as
expressed in the Securities Act and will be governed by
the final adjudication of such issue.
In accordance with Release No. IC-11330 (September 2,
1980), the Registrant will indemnify its directors,
officers, investment manager and principal underwriters
only if (1) a final decision on the merits was issued
by the court or other body before whom the proceeding
was brought that the person to be indemnified (the
"indemnitee") was not liable by reason or willful
misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of his
office ("disabling conduct") or (2) a reasonable
determination is made, based upon a review of the
facts, that the indemnitee was not liable by reason of
disabling conduct, by (a) the vote of a majority of a
quorum of the directors who are neither "interested
persons" of the Registrant as defined in section
2(a)(19) of the Investment Company Act of 1940 nor
parties to the proceeding ("disinterested, non-party
directors"), or (b) an independent legal counsel in a
written opinion. The Registrant will advance attorneys
fees or other expenses incurred by its directors,
officers, investment adviser or principal underwriters
in defending a proceeding, upon the undertaking by or
on behalf of the indemnitee to repay the advance unless
it is ultimately determined that he is entitled to
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
C-4
<PAGE>
for this coverage is charged to each investment company
and to the Adviser.
ITEM 26. BUSINESS AND OTHER CONNECTIONS OF 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 this Registration Statement are incorporated by
reference herein.
The information as to the directors and executive
officers of Alliance Capital Management Corporation,
the general partner of Alliance Capital Management
L.P., set forth in Alliance Capital Management L.P.'s
Form ADV filed with the Securities and Exchange
Commission on April 21, 1988 (File No. 801-32361) and
amended through the date hereof, is incorporated by
reference.
ITEM 27. Principal Underwriters.
(a) Alliance Fund Distributors, Inc., the Registrant's
Principal Underwriter in connection with the sale of
shares of the Registrant. Alliance Fund Distributors,
Inc. also acts as Principal Underwriter or Distributor
for the following investment companies:
AFD Exchange Reserves
Alliance All-Asia Investment Fund, Inc.
Alliance Balanced Shares, Inc.
Alliance Bond Fund, Inc.
Alliance Capital Reserves
Alliance Global Dollar Government Fund, Inc.
Alliance Global Environment Fund, Inc.
Alliance Global Small Cap Fund, Inc.
Alliance Global Strategic Income Trust, Inc.
Alliance Government Reserves
Alliance Greater China '97 Fund, Inc.
Alliance Growth and Income Fund, Inc.
Alliance Health Care Fund, Inc.
Alliance High Yield Fund, Inc.
Alliance Institutional Funds, Inc.
Alliance Institutional Reserves, Inc.
Alliance International Fund
Alliance International Premier Growth Fund, Inc.
Alliance Limited Maturity Government Fund, Inc.
Alliance Money Market Fund
Alliance Mortgage Securities Income Fund, Inc.
C-5
<PAGE>
Alliance Multi-Market Strategy Trust, Inc.
Alliance Municipal Income Fund, Inc.
Alliance Municipal Income Fund II
Alliance Municipal Trust
Alliance New Europe Fund, Inc.
Alliance North American Government Income Trust, Inc.
Alliance Premier Growth Fund, Inc.
Alliance Quasar Fund, Inc.
Alliance Real Estate Investment Fund, Inc.
Alliance Select Investor Series, Inc.
Alliance Technology Fund, Inc.
Alliance Utility Income Fund, Inc.
Alliance Variable Products Series Fund, Inc.
Alliance Worldwide Privatization Fund, Inc.
The Alliance Fund, Inc.
The Alliance Portfolios
(b) The following are the Directors and Officers of
Alliance Fund Distributors, Inc., the principal place
of business of which is 1345 Avenue of the Americas,
New York, New York, 10105.
POSITIONS AND POSITIONS AND
OFFICES WITH OFFICES WITH
NAME UNDERWRITER REGISTRANT
Michael J. Laughlin Director and Chairman
John D. Carifa Director President,
Director
Robert L. Errico Director and President
Geoffrey L. Hyde Director and Senior
Vice President
Dave H. Williams Director
David Conine Executive Vice President
Richard K. Saccullo Executive Vice President
Edmund P. Bergan, Jr. Senior Vice President, Secretary
General Counsel and
Secretary
Richard A. Davies Senior Vice President
and Managing Director
C-6
<PAGE>
Robert H. Joseph, Jr. Senior Vice President
and Chief Financial Officer
Anne S. Drennan Senior Vice President
and Treasurer
Benji A. Baer Senior Vice President
Karen J. Bullot Senior Vice President
John R. Carl Senior Vice President
James S. Comforti Senior Vice President
James L. Cronin Senior Vice President
Daniel J. Dart Senior Vice President
Byron M. Davis Senior Vice President
Mark J. Dunbar Senior Vice President
Donald N. Fritts Senior Vice President
Bradley F. Hanson Senior Vice President
George H. Keith Senior Vice President
Richard E. Khaleel Senior Vice President
Stephen R. Laut Senior Vice President
Susan L. Matteson-King Senior Vice President
Daniel D. McGinley Senior Vice President
Antonios G. Poleondakis Senior Vice President
Robert E. Powers Senior Vice President
Kevin A. Rowell Senior Vice President
Raymond S. Sclafani Senior Vice President
Gregory K. Shannahan Senior Vice President
Joseph F. Sumanski Senior Vice President
Peter J. Szabo Senior Vice President
William C. White Senior Vice President
C-7
<PAGE>
Nicholas K. Willett Senior Vice President
Richard A. Winge Senior Vice President
Gerard J. Friscia Vice President and
Controller
Ricardo Arreola Vice President
Kenneth F. Barkoff Vice President
Charles M. Barrett Vice President
Gregory P. Best Vice President
Casimir F. Bolanowski Vice President
Robert F. Brendli Vice President
Christopher L. Butts Vice President
Timothy W. Call Vice President
Jonathan W. Cangalosi Vice President
Kevin T. Cannon Vice President
William W. Collins, Jr. Vice President
Leo H. Cook Vice President
Russell R. Corby Vice President
John W. Cronin Vice President
William J. Crouch Vice President
Robert J. Cruz Vice President
Richard W. Dabney Vice President
John F. Dolan Vice President
Richard P. Dyson Vice President
John C. Endahl Vice President
John E. English Vice President
C-8
<PAGE>
Sohaila S. Farsheed Vice President
Duff C. Ferguson Vice President
Daniel J. Frank Vice President
Shawn C. Gage Vice President
Andrew L. Gangolf Vice President and Assistant
Assistant General Secretary
Counsel
Alex G. Garcia Vice President
Michael J. Germain Vice President
Mark D. Gersten Vice President Treasurer and
Chief
Financial
Officer
John Grambone Vice President
Charles M. Greenberg Vice President
Alan Halfenger Vice President
William B. Hanigan Vice President
Michael S. Hart Vice President
Timothy A. Hill Vice President
Brian R. Hoegee Vice President
George R. Hrabovsky Vice President
Valerie J. Hugo Vice President
Michael J. Hutten Vice President
Scott Hutton Vice President
Oscar J. Isoba Vice President
Richard D. Keppler Vice President
Richard D. Kozlowski Vice President
Daniel W. Krause Vice President
C-9
<PAGE>
Donna M. Lamback Vice President
P. Dean Lampe Vice President
Nicholas J. Lapi Vice President
Henry Michael Lesmeister Vice President
Eric L. Levinson Vice President
James M. Liptrot Vice President
James P. Luisi Vice President
Jerry W. Lynn Vice President
Michael F. Mahoney Vice President
Shawn P. McClain Vice President
David L. McGuire Vice President
Jeffrey P. Mellas Vice President
Michael V. Miller Vice President
Thomas F. Monnerat Vice President
Timothy S. Mulloy Vice President
Joanna D. Murray Vice President
Michael F. Nash, Jr. Vice President
Nicole Nolan-Koester Vice President
Daniel A. Notto Vice President
Peter J. O'Brien Vice President
John C. O'Connell Vice President
John J. O'Connor Vice President
Christopher W. Olson Vice President
Richard J. Olszewski Vice President
Catherine N. Peterson Vice President
James J. Posch Vice President
C-10
<PAGE>
Domenick Pugliese Vice President and Assistant
Assistant General Secretary
Counsel
Bruce W. Reitz Vice President
Karen C. Satterberg Vice President
John P. Schmidt Vice President
Robert C. Schultz Vice President
Richard J. Sidell Vice President
Clara Sierra Vice President
Teris A. Sinclair Vice President
Scott C. Sipple Vice President
Martine H. Stansbery, Jr. Vice President
Vincent T. Strangio Vice President
Andrew D. Strauss Vice President
Michael J. Tobin Vice President
Joseph T. Tocyloski Vice President
Benjamin H. Travers Vice President
David R. Turnbough Vice President
Martha D. Volcker Vice President
Patrick E. Walsh Vice President
Mark E. Westmoreland Vice President
David E. Willis Vice President
Stephen P. Wood Vice President
Emilie D. Wrapp Vice President and Assistant
Assistant General Secretary
Counsel
C-11
<PAGE>
Michael W. Alexander Assistant Vice
President
Richard J. Appaluccio Assistant Vice
President
Paul G. Bishop Assistant Vice
President
Mark S. Burns Assistant Vice
President
John M. Capeci Assistant Vice
President
Maria L. Carreras Assistant Vice
President
John P. Chase Assistant Vice
President
William P. Condon Assistant Vice
President
Jean A. Coomber Assistant Vice
President
Terri J. Daly Assistant Vice
President
Ralph A. DiMeglio Assistant Vice
President
Faith C. Deutsch Assistant Vice
President
Timothy J. Donegan Assistant Vice
President
Adam E. Engelhardt Assistant Vice
President
Michele Grossman Assistant Vice
President
Theresa Iosca Assistant Vice
President
C-12
<PAGE>
Erik A. Jorgensen Assistant Vice
President
Eric G. Kalender Assistant Vice
President
Edward W. Kelly Assistant Vice
President
Victor Kopelakis Assistant Vice
President
Evamarie C. Lombardo Assistant Vice
President
Kristine J. Luisi Assistant Vice
President
Kathryn Austin Masters Assistant Vice
President
Richard F. Meier Assistant Vice
President
Rizwan A. Raja Assistant Vice
President
Carol H. Rappa Assistant Vice
President
Mark V. Spina Assistant Vice
President
Gayle S. Stamer Assistant Vice
President
Eileen Stauber Assistant Vice
President
Margaret M. Tompkins Assistant Vice
President
Marie R. Vogel Assistant Vice Assistant
President Secretary
Wesley S. Williams Assistant Vice
President
C-13
<PAGE>
Matthew Witschel Assistant Vice
President
David M. Wolf Assistant Vice
President
Mark R. Manley Assistant Secretary
(c) Not applicable.
ITEM 28. LOCATION OF ACCOUNTS AND RECORDS.
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, 40 Water Street,
Boston, Massachusetts 02109. All other records so
required to be maintained are maintained at the offices
of Alliance Capital Management L.P., 1345 Avenue of the
Americas, New York, New York 10105.
ITEM 29. MANAGEMENT SERVICES.
Not applicable.
ITEM 30. UNDERTAKINGS.
The Registrant undertakes to furnish each person to
whom a prospectus is delivered with a copy of the
Registrant's latest annual report to shareholders, upon
request and without charge.
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-14
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of
1933, as amended, and the Investment Company Act of 1940, as
amended, the Registrant certifies that it meets all of the
requirements for effectiveness of this Amendment to its
Registration Statement pursuant to Rule 485(b) under the
Securities Act of 1933 and has duly caused this Amendment to its
Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of New York
and State of New York, on the 28th day of October, 1999.
ALLIANCE GREATER CHINA '97
FUND, INC.
By /s/ John D. Carifa
_________________________
John D. Carifa
Chairman and President
Pursuant to the requirements of the Securities Act of
l933, as amended, this Amendment to the Registration Statement
has been signed below by the following persons in the capacities
and on the dates indicated:
Signature Title Date
1) Principal
Executive Officer
/s/ John D. Carifa
________________________ Chairman October 28, 1999
John D. Carifa and President
2) Principal Financial
and Accounting Officer
/s/ Mark D. Gersten
________________________ Treasurer October 28, 1999
Mark D. Gersten and Chief
Financial
Officer
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<PAGE>
A majority of the Directors
John D. Carifa
David H. Dievler
William H. Foulk, Jr.
Tak-Lung Tsim
By /s/ Edmund P. Bergan, Jr. October 28, 1999
_________________________
(Attorney-in-fact)
Edmund P. Bergan, Jr.
C-16
<PAGE>
EXHIBIT INDEX
Exhibit
No. Description
(h)(2) Expense Limitation Undertaking
(i)(1) Opinion of Seward & Kissel LLP
(j) Consent of Independent Auditors
(n) Financial Data Schedules
C-17
00250235.AQ1
<PAGE>
EXPENSE LIMITATION UNDERTAKING
ALLIANCE CAPITAL MANAGEMENT L.P.
1345 Avenue of the Americas
New York, New York 10105
February 1, 1999
ALLIANCE GREATER CHINA '97 FUND, INC.
1345 Avenue Of The Americas
New York, New York 10105
Dear Sirs:
Alliance Capital Management L.P. herewith undertakes
that for the Expense Limitation Period, as defined below, we
shall cause the aggregate operating expenses of every character
incurred by the Alliance Greater China '97 Fund, Inc. (the
"Fund") to be limited to 2.50%, 3.20%, 3.20% and 2.20% of the
aggregate average daily net assets of the Fund's Class A, Class
B, Class C and Advisor Class shares, respectively (the
"Limitation"). To determine the amount of expenses of each Class
in excess of the Limitation, the amount of allowable fiscal-
year-to-date expenses shall be computed daily by prorating the
Limitation based on the number of days elapsed within the fiscal
year of the Fund (the "Prorated Limitation"). The Prorated
Limitation shall be compared to the expenses of each Class
recorded through the current day in order to produce the
allowable expenses to be recorded and accrued for the current day
(the "Allowable Expenses"). If the expenses of any Class for the
current day exceed the Allowable Expenses, we shall be
<PAGE>
responsible for such excess and will for the current day (i)
reduce our advisory fees and/or (ii) reimburse the Fund
accordingly.
For purposes of this Undertaking, the Expense Limitation
Period shall mean the period commencing on the date hereof and
terminating at the close of the Fund's fiscal year. The Expense
Limitation Period and the Undertaking given hereunder will
automatically be extended for additional one-year terms unless we
provide you with at least 60 days' notice prior to the end of any
Expense Limitation Period, of our determination not to extend
this Undertaking beyond its then current term.
We understand and intend that you will rely on this
Undertaking in preparing and filing a Registration Statement for
the Fund on Form N-1A with the Securities and Exchange
Commission, in accruing the Fund's expenses for purposes of
calculating its net asset value per share and for other purposes
and expressly permit you to do so.
Very truly yours,
ALLIANCE CAPITAL MANAGEMENT L.P.
By: Alliance Capital Management
Corporation, its general
partner
By: /s/ Edmund P. Bergan
2
00250235.AQ7
<PAGE>
Exhibit (i)
SEWARD & KISSEL LLP
ONE BATTERY PARK PLAZA
NEW YORK, NY 10004
Telephone: (212) 574-1200
Facsimile: (212) 480-8421
www.sewkis.com
October 28, 1999
Alliance Premier Growth Fund, Inc.
Alliance Health Care Fund, Inc.
Alliance Technology Fund, Inc.
Alliance Quasar Fund, Inc.
The Alliance Fund, Inc.
Alliance Growth and Income Fund, Inc.
Alliance Balanced Shares, Inc.
Alliance Utility Income Fund, Inc.
Alliance Real Estate Investment Fund, Inc.
Alliance New Europe Fund, Inc.
Alliance Worldwide Privatization Fund, Inc.
Alliance International Premier Growth Fund, Inc.
Alliance Global Small Cap Fund, Inc.
Alliance Greater China 97 Fund, Inc.
Alliance All-Asia Investment Fund, Inc.
Alliance Global Environment Fund, Inc.
1345 Avenue of the Americas
New York, New York 10105
Ladies and Gentlemen:
We have acted as counsel for each of the corporations named
above (each, a "Company," and collectively, the "Companies") in
connection with the registration under the Securities Act of
1933, as amended (the "Securities Act"), of an indefinite number
of shares of each Company's common stock, par value per share as
set forth in that Company's Charter (the "Common Stock"). Each
Company is a Maryland corporation and is registered under the
Investment Company Act of 1940, as amended, as an open-end
management investment company. This opinion is rendered to each
Company severally, and not to the Companies jointly, and relates
to Common Stock of each class and portfolio being registered
pursuant to the Post-Effective Amendment to the Registration
Statement on Form N-1A to be filed with the Securities and
Exchange Commission (the "Commission") to become effective on
November 1, 1999 pursuant to paragraph (b) of Rule 485 under the
<PAGE>
Securities Act (as so amended, the "Registration Statement") in
which this letter is included as Exhibit (i).
As counsel for a Company, we have participated in the
preparation of each Company's Registration Statement. We have
examined the Charter and By-laws of the Company and any
amendments and supplements thereto and have relied upon a
certificate of an Assistant Secretary of the Company certifying
the resolutions of the Board of Directors of the Company
authorizing the sale and issuance of shares of the Common Stock.
We have also examined and relied upon such corporate records of
the Company and such other documents and certificates as to
factual matters as we have deemed to be necessary to render the
opinion expressed herein.
Based on such examination, we are of the opinion that the
shares of Common Stock of the Company to be offered for sale
pursuant to the Registration Statement are, to the extent of the
number of shares of the relevant class, and, if applicable,
portfolio, authorized to be issued by the Company in its Charter,
duly authorized, and, when sold, issued and paid for as
contemplated by the Registration Statement, will have been
validly issued and will be fully paid and nonassessable shares of
Common Stock of the Company under the laws of the State of
Maryland.
We do not express an opinion with respect to any laws other
than the Maryland General Corporation Law. Accordingly, our
opinion does not extend to, among other laws, the federal
securities laws or the securities or "blue sky" laws of Maryland
or any other jurisdiction. Members of this firm are admitted to
the bar in the State of New York and the District of Columbia.
We hereby consent to the filing of this opinion with the
Commission as an exhibit to the Registration Statement and to the
reference to our firm under the caption "General Information-
- -Counsel" in the Part B thereof. In giving this consent, we do
not thereby admit that we are included in the category of persons
whose consent is required under Section 7 of the Securities Act
or the rules and regulations of the Commission.
Very truly yours,
/s/ Seward & Kissel LLP
2
00250157.BX9
<PAGE>
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the captions
"Financial Highlights", "Shareholder Services - Statements and
Reports" and "General Information - Independent Auditors" and to
the use of our report dated September 8, 1999 included in this
Registration Statement (Form N-1A Nos. 333-26229 and 811-08201)
of Alliance Greater China '97 Fund, Inc.
ERNST & YOUNG LLP
New York, New York
October 26, 1999
00250235.AR2
<PAGE>
[ARTICLE] 6
[SERIES]
[NUMBER] 001
[NAME] Class A
[MULTIPLIER] 1
<TABLE>
<S> <C>
[PERIOD-TYPE] 12 Months
[FISCAL-YEAR-END] Jul-31-1999
[PERIOD-START] Aug-1-1998
[PERIOD-END] Jul-31-1999
[INVESTMENTS-AT-COST] 2499183
[INVESTMENTS-AT-VALUE] 3257611
[RECEIVABLES] 94077
[ASSETS-OTHER] 53974
[OTHER-ITEMS-ASSETS] 291396
[TOTAL-ASSETS] 3697058
[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 461663
[TOTAL-LIABILITIES] 461663
[SENIOR-EQUITY] 397
[PAID-IN-CAPITAL-COMMON] 3974342
[SHARES-COMMON-STOCK] 123202
[SHARES-COMMON-PRIOR] 92060
[ACCUMULATED-NII-CURRENT] 6167
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] 0
[OVERDISTRIBUTION-GAINS] 1504185
[ACCUM-APPREC-OR-DEPREC] 758674
[NET-ASSETS] 3235395
[DIVIDEND-INCOME] 76279
[INTEREST-INCOME] 3542
[OTHER-INCOME] 0
[EXPENSES-NET] 81421
[NET-INVESTMENT-INCOME] (1600)
[REALIZED-GAINS-CURRENT] (629637)
[APPREC-INCREASE-CURRENT] 1987402
[NET-CHANGE-FROM-OPS] 1356165
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 0
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 107452
[NUMBER-OF-SHARES-REDEEMED] (76310)
[SHARES-REINVESTED] 0
[NET-CHANGE-IN-ASSETS] 1076925
[ACCUMULATED-NII-PRIOR] 0
[ACCUMULATED-GAINS-PRIOR] 0
[OVERDISTRIB-NII-PRIOR] 1554
[OVERDIST-NET-GAINS-PRIOR] 873006
<PAGE>
[GROSS-ADVISORY-FEES] 27234
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 546542
[AVERAGE-NET-ASSETS] 654369
[PER-SHARE-NAV-BEGIN] 4.84
[PER-SHARE-NII] 0.02
[PER-SHARE-GAIN-APPREC] 3.34
[PER-SHARE-DIVIDEND] 0.00
[PER-SHARE-DISTRIBUTIONS] 0.00
[RETURNS-OF-CAPITAL] 0.00
[PER-SHARE-NAV-END] 8.20
[EXPENSE-RATIO] 2.52
[AVG-DEBT-OUTSTANDING] 0.00
[AVG-DEBT-PER-SHARE] 0.00
00250235.AQ8
</TABLE>
<PAGE>
[ARTICLE] 6
[SERIES]
[NUMBER] 001
[NAME] Class B
[MULTIPLIER] 1
<TABLE>
<S> <C>
[PERIOD-TYPE] 12 Months
[FISCAL-YEAR-END] Jul-31-1999
[PERIOD-START] Aug-1-1998
[PERIOD-END] Jul-31-1999
[INVESTMENTS-AT-COST] 2499183
[INVESTMENTS-AT-VALUE] 3257611
[RECEIVABLES] 94077
[ASSETS-OTHER] 53974
[OTHER-ITEMS-ASSETS] 291396
[TOTAL-ASSETS] 3697058
[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 461663
[TOTAL-LIABILITIES] 461663
[SENIOR-EQUITY] 397
[PAID-IN-CAPITAL-COMMON] 3974342
[SHARES-COMMON-STOCK] 234257
[SHARES-COMMON-PRIOR] 321641
[ACCUMULATED-NII-CURRENT] 6167
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] 0
[OVERDISTRIBUTION-GAINS] 1504185
[ACCUM-APPREC-OR-DEPREC] 758674
[NET-ASSETS] 3235395
[DIVIDEND-INCOME] 76279
[INTEREST-INCOME] 3542
[OTHER-INCOME] 0
[EXPENSES-NET] 81421
[NET-INVESTMENT-INCOME] (1600)
[REALIZED-GAINS-CURRENT] (629637)
[APPREC-INCREASE-CURRENT] 1987402
[NET-CHANGE-FROM-OPS] 1356165
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 0
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 327834
[NUMBER-OF-SHARES-REDEEMED] (415218)
[SHARES-REINVESTED] 0
[NET-CHANGE-IN-ASSETS] 1076925
[ACCUMULATED-NII-PRIOR] 0
[ACCUMULATED-GAINS-PRIOR] 0
[OVERDISTRIB-NII-PRIOR] 1554
[OVERDIST-NET-GAINS-PRIOR] 873006
<PAGE>
[GROSS-ADVISORY-FEES] 27234
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 546542
[AVERAGE-NET-ASSETS] 1836846
[PER-SHARE-NAV-BEGIN] 4.82
[PER-SHARE-NII] (0.01)
[PER-SHARE-GAIN-APPREC] 3.31
[PER-SHARE-DIVIDEND] 0.00
[PER-SHARE-DISTRIBUTIONS] 0.00
[RETURNS-OF-CAPITAL] 0.00
[PER-SHARE-NAV-END] 8.12
[EXPENSE-RATIO] 3.22
[AVG-DEBT-OUTSTANDING] 0.00
[AVG-DEBT-PER-SHARE] 0.00
00250235.AQ9
</TABLE>
<PAGE>
[ARTICLE] 6
[SERIES]
[NUMBER] 001
[NAME] Class C
[MULTIPLIER] 1
<TABLE>
<S> <C>
[PERIOD-TYPE] 12 Months
[FISCAL-YEAR-END] Jul-31-1999
[PERIOD-START] Aug-1-1998
[PERIOD-END] Jul-31-1999
[INVESTMENTS-AT-COST] 2499183
[INVESTMENTS-AT-VALUE] 3257611
[RECEIVABLES] 94077
[ASSETS-OTHER] 53974
[OTHER-ITEMS-ASSETS] 291396
[TOTAL-ASSETS] 3697058
[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 461663
[TOTAL-LIABILITIES] 461663
[SENIOR-EQUITY] 397
[PAID-IN-CAPITAL-COMMON] 3974342
[SHARES-COMMON-STOCK] 19951
[SHARES-COMMON-PRIOR] 21109
[ACCUMULATED-NII-CURRENT] 6167
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] 0
[OVERDISTRIBUTION-GAINS] 1504185
[ACCUM-APPREC-OR-DEPREC] 758674
[NET-ASSETS] 3235395
[DIVIDEND-INCOME] 76279
[INTEREST-INCOME] 3542
[OTHER-INCOME] 0
[EXPENSES-NET] 81421
[NET-INVESTMENT-INCOME] (1600)
[REALIZED-GAINS-CURRENT] (629637)
[APPREC-INCREASE-CURRENT] 1987402
[NET-CHANGE-FROM-OPS] 1356165
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 0
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 13684
[NUMBER-OF-SHARES-REDEEMED] (14842)
[SHARES-REINVESTED] 0
[NET-CHANGE-IN-ASSETS] 1076925
[ACCUMULATED-NII-PRIOR] 0
[ACCUMULATED-GAINS-PRIOR] 0
[OVERDISTRIB-NII-PRIOR] 1554
[OVERDIST-NET-GAINS-PRIOR] 873006
<PAGE>
[GROSS-ADVISORY-FEES] 27234
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 546542
[AVERAGE-NET-ASSETS] 117398
[PER-SHARE-NAV-BEGIN] 4.82
[PER-SHARE-NII] (0.03)
[PER-SHARE-GAIN-APPREC] 3.32
[PER-SHARE-DIVIDEND] 0.00
[PER-SHARE-DISTRIBUTIONS] 0.00
[RETURNS-OF-CAPITAL] 0.00
[PER-SHARE-NAV-END] 8.11
[EXPENSE-RATIO] 3.22
[AVG-DEBT-OUTSTANDING] 0.00
[AVG-DEBT-PER-SHARE] 0.00
00250235.AR0
</TABLE>
<PAGE>
[ARTICLE] 6
[SERIES]
[NUMBER] 001
[NAME] Advisor Class
[MULTIPLIER] 1
<TABLE>
<S> <C>
[PERIOD-TYPE] 12 Months
[FISCAL-YEAR-END] Jul-31-1999
[PERIOD-START] Aug-1-1998
[PERIOD-END] Jul-31-1999
[INVESTMENTS-AT-COST] 2499183
[INVESTMENTS-AT-VALUE] 3257611
[RECEIVABLES] 94077
[ASSETS-OTHER] 53974
[OTHER-ITEMS-ASSETS] 291396
[TOTAL-ASSETS] 3697058
[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 461663
[TOTAL-LIABILITIES] 461663
[SENIOR-EQUITY] 397
[PAID-IN-CAPITAL-COMMON] 3974342
[SHARES-COMMON-STOCK] 19554
[SHARES-COMMON-PRIOR] 12352
[ACCUMULATED-NII-CURRENT] 6167
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] 0
[OVERDISTRIBUTION-GAINS] 1504185
[ACCUM-APPREC-OR-DEPREC] 758674
[NET-ASSETS] 3235395
[DIVIDEND-INCOME] 76279
[INTEREST-INCOME] 3542
[OTHER-INCOME] 0
[EXPENSES-NET] 81421
[NET-INVESTMENT-INCOME] (1600)
[REALIZED-GAINS-CURRENT] (629637)
[APPREC-INCREASE-CURRENT] 1987402
[NET-CHANGE-FROM-OPS] 1356165
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 0
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 30587
[NUMBER-OF-SHARES-REDEEMED] (23385)
[SHARES-REINVESTED] 0
[NET-CHANGE-IN-ASSETS] 1076925
[ACCUMULATED-NII-PRIOR] 0
[ACCUMULATED-GAINS-PRIOR] 0
[OVERDISTRIB-NII-PRIOR] 1554
[OVERDIST-NET-GAINS-PRIOR] 873006
<PAGE>
[GROSS-ADVISORY-FEES] 27234
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 546542
[AVERAGE-NET-ASSETS] 114796
[PER-SHARE-NAV-BEGIN] 4.85
[PER-SHARE-NII] 0.04
[PER-SHARE-GAIN-APPREC] 3.35
[PER-SHARE-DIVIDEND] 0.00
[PER-SHARE-DISTRIBUTIONS] 0.00
[RETURNS-OF-CAPITAL] 0.00
[PER-SHARE-NAV-END] 8.24
[EXPENSE-RATIO] 2.22
[AVG-DEBT-OUTSTANDING] 0.00
[AVG-DEBT-PER-SHARE] 0.00
00250235.AR1
<EF=1>
</TABLE>
