ALLIANCE GREATER CHINA '97 FUND
ANNUAL REPORT
JULY 31, 1999
ALLIANCE CAPITAL
LETTER TO SHAREHOLDERS ALLIANCE GREATER CHINA '97 FUND
_______________________________________________________________________________
September 28, 1999
Dear Shareholder:
We are pleased to report on our performance, outlook and investment strategy
for Alliance Greater China '97 Fund (the "Fund") for the annual reporting
period ended July 31, 1999.
INVESTMENT RESULTS
The following table provides performance data for the Fund during the six- and
12-month periods ended July 31, 1999. For comparison, we have also included
performance results for the Lipper China Region Funds Average (the "Lipper
Average"). For reference, the table also shows performance data for three
Morgan Stanley Capital International ("MSCI") indices including the China Free,
Hong Kong and Taiwan indices. Since the performance for each MSCI index
represents issues located only in a single country, these indices should not be
used to compare the performance data of your Fund, as your Fund's investments
are diversified into all three countries.
The Fund outperformed the Lipper Average during the 12-month period under
review due to an overweighting in Hong Kong. During the six-month period under
review, the Fund underperformed the Lipper Average slightly due to its
underexposure to Chinese B shares (shares that are listed in Shanghai/Shenzhen
available for foreign investors) that ran up strongly between May and June of
1999. We believe that this run-up is not sustainable on a fundamental basis.
INVESTMENT RESULTS*
As of July 31, 1999
TOTAL RETURNS
6 MONTHS 12 MONTHS
---------- ----------
ALLIANCE GREATER CHINA '97 FUND
Class A 38.28% 69.42%
Class B 37.86% 68.46%
Class C 37.92% 68.26%
MSCI CHINA FREE INDEX 84.31% 52.96%
MSCI HONG KONG INDEX 36.30% 80.64%
MSCI TAIWAN INDEX 28.99% 20.91%
LIPPER CHINA REGION FUNDS AVERAGE 41.15% 54.94%
* THE FUND'S INVESTMENT RESULTS REPRESENT TOTAL RETURNS AND ARE BASED ON THE
NET ASSET VALUE AS OF JULY 31, 1999. ALL FEES AND EXPENSES RELATED TO THE
OPERATION OF THE FUND HAVE BEEN DEDUCTED, BUT NO ADJUSTMENT HAS BEEN MADE FOR
SALES CHARGES THAT MAY APPLY WHEN SHARES ARE PURCHASED OR REDEEMED. RETURNS FOR
THE FUND INCLUDE THE REINVESTMENT OF ANY DISTRIBUTIONS PAID DURING THE PERIOD.
TOTAL RETURNS FOR ADVISOR CLASS SHARES WILL DIFFER DUE TO DIFFERENT EXPENSES
ASSOCIATED WITH THAT CLASS. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.
THE MSCI CHINA FREE INDEX, THE MSCI HONG KONG INDEX, AND THE MSCI TAIWAN
INDEX ARE MARKET CAPITALIZATION-WEIGHTED INDICES OF COMPANIES LOCATED IN THEIR
RESPECTIVE COUNTRIES, AND ARE RESPECTIVELY COMPRISED OF 37, 33, AND 76
COMPANIES AS OF JULY 31, 1999. THE LIPPER CHINA REGION FUNDS AVERAGE REPRESENTS
FUNDS THAT INVEST IN EQUITY SECURITIES WHOSE PRIMARY TRADING MARKETS OR
OPERATIONS ARE CONCENTRATED IN THE CHINA REGION OR IN A SINGLE COUNTRY WITHIN
THIS REGION. THESE FUNDS GENERALLY HAVE SIMILAR INVESTMENT OBJECTIVES TO YOUR
FUND, ALTHOUGH INVESTMENT POLICIES FOR THE VARIOUS FUNDS MAY DIFFER. FOR THE
SIX- AND 12-MONTH PERIODS, THE LIPPER AVERAGE INCLUDED 28 AND 25 FUNDS,
RESPECTIVELY. ALL COMPARATIVE INDICES ARE UNMANAGED AND REFLECT NO FEES OR
EXPENSES. AN INVESTOR CANNOT INVEST DIRECTLY IN AN INDEX OR AVERAGE.
ADDITIONAL INVESTMENT RESULTS APPEAR ON PAGE 3.
MARKET REVIEW
During the period under review, the recovery in Asian stock markets continued
as the region's economies started to bottom out. Global central bank
interventions, including the lowering of interest rates, also prevented a
deflationary bust that could have potentially occurred following the Russian
default and the collapse of Long Term Capital Management. The Hong Kong stock
market rally continued in the first half of 1999 due to lower interest rates
and further improvement in the economy and the property market. The budget
announced by Hong Kong's government was also well received.
The China market rallied sharply from May to June of 1999 primarily due to a
series of government measures to stimulate the domestic A share market (shares
available for domestic investors only) in order to boost consumer
1
ALLIANCE GREATER CHINA '97 FUND
_______________________________________________________________________________
confidence. As a result, the B shares and H shares (Chinese shares listed in
Hong Kong) have also rallied due to the spillover from the A share market. We
believe, however, that this rally may not be sustainable. In our view, the
underlying corporate earnings and quality of management of these companies have
not improved and the sharp jump in prices was more a result of liquidity flows.
In Taiwan, the market rebounded since the first quarter of 1999 due to strong
foreign inflows and positive economic figures. However, the market pulled back
in July of 1999 due to President Lee's comments on Taiwan's political
relationship with China.
ECONOMIC REVIEW AND OUTLOOK
According to the central bank, the Chinese economy is expected to grow by
nearly 8% in the first half of 1999. This figure is in line with the 7% growth
target. In view of the slowdown in exports and flat consumer spending, we
believe that government spending will remain a major engine of growth. Despite
the short-term setback in the Sino-U.S. relationship in the World Trade
Organization ("WTO") negotiation, we believe that there is still a possibility
that a breakthrough will be reached in the second half of 1999.
In our view, Hong Kong's economy should bottom out in the second half of 1999,
and we expect positive growth for the year 2000. The WTO entry of China should
benefit Hong Kong as a major service center as foreign direct investment is
expected to pick up in the medium term. The government push to diversify the
economy into higher value-added industries should also strengthen the economy
in the long run.
The Taiwan economy has shown signs of picking up as exports have recovered.
However, we anticipate that the recent political tension between Taiwan and
China, and the political uncertainty ahead of the presidential election next
year, may hold back investment and consumption in the second half of 1999.
FUND STRATEGY
As U.S. interest rates may potentially trend higher in the next six-month
period, the rally in the Asian stock markets may potentially moderate as
investors may begin to focus on corporate earnings rather than a general
recovery theme. As China starts to reflate, the Fund has selectively increased
weightings to favor some cyclical industries in China. As mentioned earlier, we
remain skeptical about the sustainability of the rally in the domestic market
and would therefore be highly selective in increasing our exposure to China
plays. In Hong Kong, we would focus on telecom and financials, while in Taiwan
semiconductors and technology remain our preferred sectors.
Thank you for your continued interest in Alliance Greater China '97 Fund. We
look forward to reporting to you on market activity and your Fund's investment
results in the coming periods.
Sincerely,
John D. Carifa
Chairman and President
Matthew Lee
Portfolio Manager
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, GUARANTEED OR ENDORSED
BY, ANY BANK; FURTHER, SUCH SHARES ARE NOT FEDERALLY INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY.
SHARES OF THE FUND INVOLVE INVESTMENT RISKS, INCLUDING THE POSSIBLE LOSS OF
PRINCIPAL.
2
INVESTMENT OBJECTIVE AND POLICIES ALLIANCE GREATER CHINA '97 FUND
_______________________________________________________________________________
Alliance Greater China '97 Fund is a non-diversified management investment
company that seeks long-term capital appreciation by investing at least 80% of
its total assets in equity securities issued by Greater China companies.
INVESTMENT RESULTS
_______________________________________________________________________________
NAV AND SEC AVERAGE ANNUAL TOTAL RETURNS AS OF JULY 31, 1999
CLASS A SHARES
WITHOUT WITH
SALES CHARGE SALES CHARGE
------------ ------------
One Year 69.42% 62.38%
Since Inception* -9.48% -11.49%
CLASS B SHARES
WITHOUT WITH
SALES CHARGE SALES CHARGE
------------ ------------
One Year 68.46% 64.46%
Since Inception* -10.07% -11.48%
CLASS C SHARES
WITHOUT WITH
SALES CHARGE SALES CHARGE
------------ ------------
One Year 68.26% 67.26%
Since Inception* -10.13% -10.13%
SEC AVERAGE ANNUAL TOTAL RETURNS AS OF THE MOST RECENT QUARTER-END (JUNE 30,
1999)
CLASS A CLASS B CLASS C
------------ ------------ ------------
1 Year 53.36% 55.26% 58.07%
Since Inception* -9.23% -9.20% -7.73%
The Fund's investment results represent average annual total returns. The NAV
and SEC returns reflect reinvestment of dividends and/or capital gains
distributions in additional shares without (NAV) and with (SEC) the effect of
the 4.25% maximum front-end sales charge for Class A shares or applicable
contingent deferred sales charge for Class B shares (4% year 1, 3% year 2, 2%
year 3, 1% year 4); and for Class C shares (1% year 1). Returns for Class A
shares do not reflect the imposition of the 1 year 1% contingent deferred sales
charge for accounts over $1,000,000. Total return for Advisor Class shares will
differ due to different expenses associated with that class.
Past performance does not guarantee future results. Investment return and
principal value will fluctuate so that an investor's shares, when redeemed, may
be worth more or less than their original cost.
* Since Inception: 9/3/97, all share classes.
3
ALLIANCE GREATER CHINA '97 FUND
_______________________________________________________________________________
ALLIANCE GREATER CHINA '97 FUND
GROWTH OF A $10,000 INVESTMENT
9/30/97* TO 7/31/99
$10,000
$9,000
$8,000
$7,000
$6,000
$5,000
$4,000
9/30/97 1/31/98 7/31/98 1/31/99 7/31/99
ALLIANCE GREATER CHINA '97 FUND CLASS A: $8,012
LIPPER CHINA REGION FUNDS AVERAGE: $7,503
This chart illustrates the total value of an assumed $10,000 investment in
Alliance Greater China '97 Fund Class A shares (from 9/30/97 to 7/31/99) as
compared to the performance of an appropriate average. The chart reflects the
deduction of the maximum 4.25% sales charge from the initial $10,000 investment
in the Fund and assumes the reinvestment of dividends and capital gains.
Performance for Class B, Class C and Advisor Class shares will vary from the
results shown above due to differences in expenses charged to those classes.
Past performance is not indicative of future results, and is not representative
of future gain or loss in capital value or dividend income.
The Lipper China Region Funds Average reflects the performance of 18 funds
(based on the number of funds in the average from 9/30/97 to 7/31/99). These
funds generally have similar investment objectives to Alliance Greater China
'97 Fund, although the investment policies of some funds included in the
average may vary.
When comparing Alliance Greater China '97 Fund to the average shown above, you
should note that Lipper results include fees and expenses.
Alliance Greater China '97 Fund
Lipper China Region Funds Average
* Closest month-end after Fund's Class A share inception date of 9/3/97.
4
TEN LARGEST HOLDINGS
JULY 31, 1999 ALLIANCE GREATER CHINA '97 FUND
_______________________________________________________________________________
PERCENT OF
COMPANY U.S. $ VALUE NET ASSETS
- -------------------------------------------------------------------------------
Cheung Kong Holdings, Ltd.--The company is
involved in property development and
investment, infrastructure and related
businesses. $ 279,324 8.6%
Hutchison Whampoa, Ltd.--The company has
diverse operations including property
investment and development, port services,
retail, manufacturing, finance, investment
and other services. 228,046 7.0
HSBC Holdings Plc.--The company provides
financial services that include
corporate and retail banking, private
and investment banking, and insurance. 212,198 6.6
Cable & Wireless HKT, Ltd.--The company
provides international, local and
mobile telecommunications services and
equipment sales, internet and
interactive multi-media services,
engineering and other services. 207,857 6.4
Pacific Century Regional Developments,
Ltd.--The company is an investment
holding and property development
company. The company's subsidiaries
are involved in life insurance,
property investment and development,
and hotel operations. 164,487 5.1
China Telecom (Hong Kong), Ltd.--The
company provides telecommunication
services in the People's Republic of
China. 161,410 5.0
Dao Heng Bank Group, Ltd.--An investment
holding company whose principle
activities include commercial banking,
trustee, and nominee services. 152,675 4.7
China Resources Enterprise, Ltd.--A holding
company whose subsidiaries develop and
invest in real estate and infrastructural
projects, provide cold storage services,
manufacture beer products, and office
furniture. 124,717 3.9
Wharf Holdings, Ltd.--The company is
involved in property development and
investment, hotel operations, terminal
and warehousing, and cable television. 119,048 3.7
New World Development Co., Ltd.--A holding
company whose subsidiaries are involved
in property development and investment,
as well as hotel operations, construction
and civil engineering activities, and
other investments. 105,648 3.3
$1,755,410 54.3%
5
SECTOR DIVERSIFICATION
JULY 31, 1999 ALLIANCE GREATER CHINA '97 FUND
_______________________________________________________________________________
PERCENT OF
U.S. $ VALUE NET ASSETS
- -------------------------------------------------------------------------------
Basic Industries $ 36,075 1.1%
Capital Goods 92,764 2.9
Consumer Manufacturing 154,285 4.8
Consumer Services 59,395 1.8
Consumer Staples 105,358 3.3
Finance 1,451,073 44.8
Multi Industry 622,686 19.3
Technology 233,076 7.2
Transportation 62,951 1.9
Utilities 401,554 12.4
Energy 38,394 1.2
Total Investments 3,257,611 100.7
Cash and receivables, net of liabilities (22,216) (0.7)
Net Assets $3,235,395 100.0%
6
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
ALLIANCE GREATER CHINA '97 FUND
_______________________________________________________________________________
BOARD OF DIRECTORS
JOHN D. CARIFA, CHAIRMAN AND PRESIDENT
DAVID H. DIEVLER (1)
WILLIAM H. FOULK, JR. (1)
TAK-LUNG TSIM
OFFICERS
MATTHEW W. S. LEE, CHIEF INVESTMENT OFFICER
KATHLEEN A. CORBET, SENIOR VICE PRESIDENT
MAMURO YAMAOKA, VICE PRESIDENT
EDMUND P. BERGAN, JR., SECRETARY
MARK D. GERSTEN, TREASURER AND CHIEF FINANCIAL OFFICER
VINCENT S. NOTO, CONTROLLER
DISTRIBUTOR
ALLIANCE FUND DISTRIBUTORS, INC.
1345 Avenue of the Americas
New York, NY 10105
CUSTODIAN
BROWN BROTHERS HARRIMAN & CO.
40 Water Street
Boston, MA 02109
LEGAL COUNSEL
SEWARD & KISSEL LLP
One Battery Park Plaza
New York, NY10004
TRANSFER AGENT
ALLIANCE FUND SERVICES, INC.
P.O. Box 1520
Secaucus, NJ 07096-1520
Toll-Free 1-(800) 221-5672
INDEPENDENT AUDITORS
ERNST & YOUNG LLP
787 Seventh Avenue
New York, NY10019
(1) Member of the Audit Committee
22
THE ALLIANCE FAMILY OF MUTUAL FUNDS
_______________________________________________________________________________
FIXED INCOME
Alliance Bond Fund
U.S. Government Portfolio
Corporate Bond Portfolio
Quality Bond Portfolio
Alliance Global Dollar Government Fund
Alliance Global Strategic Income Trust
Alliance High Yield Fund
Alliance Mortgage Securities Income Fund
Alliance Limited Maturity Government Fund
Alliance Multi-Market Strategy Trust
Alliance North American Government Income Trust
Alliance Short-Term U.S. Government Fund
TAX-FREE INCOME
Alliance Municipal Income Fund
California Portfolio
Insured California Portfolio
Insured National Portfolio
National Portfolio
New York Portfolio
Alliance Municipal Income Fund II
Arizona Portfolio
Florida Portfolio
Massachusetts Portfolio
Michigan Portfolio
Minnesota Portfolio
New Jersey Portfolio
Ohio Portfolio
Pennsylvania Portfolio
Virginia Portfolio
MONEY MARKET
AFD Exchange Reserves
GROWTH
The Alliance Fund
Alliance Global Environment Fund
Alliance Growth Fund
Alliance Premier Growth Fund
Select Investors Series - Premier Portfolio
GROWTH & INCOME
Alliance Balanced Shares
Alliance Conservative Investors Fund
Alliance Growth & Income Fund
Alliance Growth Investors Fund
Alliance Real Estate Investment Fund
Alliance Utility Income Fund
AGGRESSIVE GROWTH
Alliance Global Small Cap Fund
Alliance Health Care Fund
Alliance Quasar Fund
Alliance Technology Fund
INTERNATIONAL
Alliance All-Asia Investment Fund
Alliance Greater China '97 Fund
Alliance International Fund
Alliance International Premier Growth Fund
Alliance New Europe Fund
Alliance Worldwide Privatization Fund
INSTITUTIONAL
Premier Growth
Quasar
Real Estate Investment
CLOSED-END FUNDS
Alliance All-Market Advantage Fund
ACM Government Income Fund
ACM Government Opportunity Fund
ACM Government Securities Fund
ACM Government Spectrum Fund
ACM Managed Dollar Income Fund
ACM Managed Income Fund
ACM Municipal Securities Income Fund
Alliance World Dollar Government Fund
Alliance World Dollar Government Fund II
The Austria Fund
The Korean Investment Fund
The Spain Fund
The Southern Africa Fund
CASH MANAGEMENT SERVICES
Alliance Capital Reserves
Alliance Government Reserves
Alliance Institutional Reserves
Prime Portfolio
Government Portfolio
Tax-Free Portfolio
Treasury Portfolio
Trust Portfolio
Alliance Insured Account
Alliance Money Reserves
Alliance Municipal Trust
California Portfolio
Connecticut Portfolio
Florida Portfolio
General Portfolio
Massachusetts Portfolio
New Jersey Portfolio
New York Portfolio
Virginia Portfolio
Alliance Treasury Reserves
Alliance Money Market Fund
Prime Portfolio
General Municipal Portfolio
Government Portfolio
23
ALLIANCE GREATER CHINA '97 FUND
1345 Avenue of the Americas
New York, NY 10105
(800) 221-5672
ALLIANCE CAPITAL
THIS REPORT IS INTENDED SOLELY FOR DISTRIBUTION TO CURRENT SHAREHOLDERS
OF THE FUND.
R THESE REGISTERED SERVICE MARKS USED UNDER LICENSE FROM THE OWNER,
ALLIANCE CAPITAL MANAGEMENT L.P.
GCFAR799
