ALLIANCE
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SELECT INVESTOR
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SERIES
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PREMIER PORTFOLIO
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Annual Report
October 31, 1998
Alliance Capital [LOGO](R)
<PAGE>
Alliance Select Investor Series
LETTER TO SHAREHOLDERS Premier Portfolio
================================================================================
December 28, 1998
Dear Shareholder:
We are pleased to provide the introductory shareholder report for Alliance
Select Investor Series Premier Portfolio for the period ended October 31, 1998.
The strategy, performance and outlook for the Fund and the financial markets are
discussed.
Your Fund's investment objective is to seek long-term growth of capital through
all market conditions. Premier Portfolio invests a majority of its assets in a
core portfolio of stocks of large, intensively researched, high quality
companies that we believe are likely to achieve superior earnings growth. The
core portfolio typically consists of the 25 companies that are the most highly
regarded at any point in time. The balance of the portfolio may be invested in
equity securities of other U.S. and non-U.S. companies that we believe have
exceptional growth potential.
TOUGH FIRST THREE MONTHS
Premier Portfolio was launched during one of the most violent market corrections
in recent memory. The market retreated approximately 20% during August and
September. During this period we took advantage of the correction to invest into
the market. However, the length of the correction and our investment into some
stocks, caused the Fund to underperform the market. While the Fund's investment
strategies are designed to provide some protection in a down trending market, no
investment product, including the Fund, can fully protect against down markets.
Our underlying investment thesis during this volatile period, given the
potential risks we saw in the market, was to overweight positions in the
technology and financial sectors so as to counterbalance each other in a slowing
economy. However, the quickness in which asset/credit quality became a real
issue for those trading/banking entities effectively negated this strategy.
Several of our financial holdings at the time such as Citigroup, Inc., Merrill
Lynch & Co., Inc. and Morgan Stanley, Dean Witter & Co. declined 30-50% from
their highs in July. We have since sold our position in Merrill Lynch & Co.,
Inc.
As of October 31, 1998 the Fund's main holdings were in the technology, consumer
and finance sectors. Top technology holdings included Dell Computer Corp., Nokia
Corp. and Cisco Systems, Inc. Top consumer holdings included Home Depot, Inc.,
Dayton Hudson Corp. and Air Touch Communications. Top finance holdings included
Washington Mutual, Inc., Freddie Mac and U.S. Bancorp.
INVESTMENT RESULTS
The following table shows how the Fund performed from its inception date on July
29, 1998 to October 31, 1998. For comparison, we have shown returns for the
overall U.S. stock market, represented by the unmanaged S&P 500 Stock Index and
the Russell 1000 Growth Stock Index.
The Fund and its benchmarks experienced negative performance over the period due
to the Asian crisis and subsequent problems in Russia and Latin America. Several
of your Fund's financial holdings declined during this time which negatively
affected performance.
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INVESTMENT RESULTS*
Period Ended October 31, 1998
Total Returns
Since Fund's
Inception Date
--------------
Alliance Select Investor Series
Premier Portfolio
Class A -4.70%
Class B -5.10%
Class C -5.00%
S&P 500 Stock Index -1.95%
Russell 1000 Growth
Stock Index -1.58%
* The Fund's investment results are total returns for the period, and are
based on the net asset value from the Fund's inception date on July 29,
1998 to October 31, 1998. All fees
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Alliance Select Investor Series
Premier Portfolio
================================================================================
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 and its comparative benchmarks
include the reinvestment of any distributions paid during the period. Past
performance is no guarantee of future results.
Returns for the benchmarks are from the Fund's inception date to the end of the
period on October 31, 1998. The S&P 500 Stock Index is an unmanaged index of 500
U.S. companies and is a common measure of the performance of the overall U.S.
stock market. The Russell 1000 Growth Stock Index consists of 1000 of the
largest stocks representing approximately 87% of the U.S. equity market. The
indices reflect no fees or expenses. An investor cannot invest directly in the
indices.
MARKET ENVIRONMENT AND OUTLOOK
The world's financial markets have changed dramatically over the last six
months. Investors are now concerned that the recession/deflation environment
that impacted Asia last year has circuitously spread to both Latin America and
Eastern Europe through Russia. Russia's collapse may be correctly judged as
being economically insignificant, but it proved to be the turning point for the
world's financial markets. Russia's problems impacted not only emerging market
economies, but also rich country commodity producers whose export revenues have
collapsed. Compounding this negative development is the potential
credit/liquidity crisis that firms like Long Term Capital Management (LTCM) have
brought into focus. LTCM, a large, highly leveraged fund, lost a good deal of
its value very quickly as interest rate spreads went against them due to the
liquidity crisis. Some investors feared this could happen to other highly
leveraged funds.
First on the recessionary/deflationary front, we believe that the Latin American
situation is of greatest significance to the U.S. due to the important trade
relationship with our two neighbors, Mexico and Canada. We are focusing
particularly on Brazil, which we believe will adopt the needed fiscal and
monetary policies to orchestrate a managed and gradual devaluation (6% per year)
of Brazil's currency, the real. This should alleviate corresponding pressures on
Argentina.
With regards to the credit/liquidity crisis, investment organizations like LTCM
have stressed the global financial systems through the leverage they employed.
We have certainly experienced the increased volatility associated with the
unwinding, or "focused selling," of these leveraged positions in recent months.
However, we believe that the actual trading, credit and counterparty losses
associated with LTCM will be forthcoming and could impact some company balance
sheets. The likely conclusion we can draw is that credit, in its many forms,
will be more difficult to obtain in the capital markets going forward.
As we approach the millennium, Year 2000 (Y2K) computer and 1999 Euro conversion
issues could quickly create uncertainty regarding our computer readiness and
security. This is particularly true in the government area and the financial
sector, with Europe and Asia a step behind the U.S. in terms of preparedness.
As we step back and analyze these developments, it is important to recognize
that the U.S. and Europe account for $15 trillion of the $25 trillion world
Gross Domestic Product (GDP). The United States' $7 trillion economy is
primarily domestic with the U.S. consumer playing the dominant role. In order to
ensure the health of the U.S. consumer, the Federal Reserve has the flexibility
to cut rates (which happened three times in recent months). Additionally, it is
possible that the U.S. Congress could cut taxes next year which would also help
the U.S. consumer. Fed funds rates are now at 4.75%, and we believe there is
flexibility down to a 3.00% level. (Expected U.S. inflation is less than 2% and
Europe's short-term rates are at 3.00%.) In other words, to get from where we
are today to a recession in the U.S., and a resulting global slump, would
require the current global concerns to worsen (e.g., Japanese banking reforms
continue to stall) and U.S. policy makers to exercise poor judgment in using
their available tools to keep the economy on its current track.
PORTFOLIO STRATEGY
Our cautiously optimistic view of the U.S. equity market has not changed. A
"flight to quality" will likely mean lower U.S. interest rates. As of
mid-December, the long
2
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Alliance Select Investor Series
Premier Portfolio
================================================================================
bond yield was approximately 5.00%. Well chosen large cap growth stocks, with
double-digit earnings growth, should reflect their superior returns over time.
The market has been indiscriminate in its selling of stocks. We are using this
as an opportunity to add to key holdings where our confidence in the underlying
earnings capacity of the companies remains high and where the exposure to
developing countries is either muted or overly discounted.
The issues for the emerging markets, particularly Asia and Russia, are real and
troubling. However, our often stated positives for the U.S. equity market remain
in place. The U.S. continues to enjoy some tremendous strengths in both absolute
and relative terms. These range all the way from our democratic-capitalist base,
through sound legal and accounting structures, excellent corporate health,
technology leadership, ongoing benefits of cost cutting, brand leadership,
centralist fiscal, monetary and political policies, and strong 401(k) type
investment flows. Thus, although we anticipate market volatility to continue, we
also argue that there are very persuasive reasons for "staying the equity
course."
Thank you for your interest in Alliance Select Investor Series Premier
Portfolio. We look forward to reporting to you again on market activity and the
Fund's investment results in the coming periods.
Sincerely,
/s/ John D. Carifa
John D. Carifa
Chairman and President
/s/ Alfred Harrison
Alfred Harrison
Senior Vice President
/s/ Michael J. Reilly
Michael J. Reilly
Vice President
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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.
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3
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Alliance Select Investor Series
INVESTMENT OBJECTIVE AND POLICIES Premier Portfolio
================================================================================
Alliance Select Investor Series Premier Portfolio seeks long-term capital
appreciation by investing in a non-diversified portfolio of equity securities of
large, intensively researched, high quality companies that are judged likely to
achieve superior earnings growth.
INVESTMENT RESULTS
================================================================================
NAV and SEC Average Annual Total Returns as of October 31, 1998
------------------
Class A Shares
------------------
Without With
Sales Charge Sales Charge
--------------------------------
Since Inception* -4.70% -8.72%
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Class B Shares
------------------
Without With
Sales Charge Sales Charge
--------------------------------
Since Inception* -5.10% -8.90%%
------------------
Class C Shares
------------------
Without With
Sales Charge Sales Charge
--------------------------------
Since Inception* -5.00% -5.95%
SEC Average Annual Total Returns as of the most recent quarter-end (September
30, 1998)
Class A Class B Class C
------- ------- -------
Since Inception* -16.57% -16.58% -13.87%
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 or applicable contingent
deferred sales charge for Class B (4% year 1, 3% year 2, 2% year 3, 1% year 4);
and for Class C shares (1% year 1). Returns for Class A shares do not reflect
the imposition of the 1 year 1% contingent deferred sales charge for accounts
over $1,000,000.
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.
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* Inception date: 7/29/98 for all share Classes.
4
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TEN LARGEST HOLDINGS Alliance Select Investor Series
October 31, 1998 Premier Portfolio
================================================================================
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COMPANY VALUE PERCENT OF NET ASSETS
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Nokia Corp. (ADR)(a) $ 6,680,919 7.8%
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Dell Computer Corp. 4,978,000 5.8
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Cisco Systems, Inc. 4,501,350 5.3
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Tyco International, Ltd.(a) 4,264,275 5.0
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AirTouch Communications, Inc.(a) 3,900,100 4.5
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Home Depot, Inc.(a) 3,870,150 4.5
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Pfizer, Inc. 3,841,788 4.5
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Schering-Plough Corp. 3,508,038 4.1
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Dayton Hudson Corp. 3,059,475 3.6
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Freddie Mac 2,760,000 3.2
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$41,364,095 48.3%
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MAJOR PORTFOLIO PURCHASES AND SALES
July 29, 1998* to October 31, 1998
================================================================================
SHARES+
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PURCHASES BOUGHT HOLDINGS 10/31/98
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AirTouch Communications, Inc. 54,000 54,000
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Bristol-Myers Squibb Co. 23,300 23,300
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Cisco Systems, Inc. 52,300 71,450
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Dayton Hudson Corp. 72,200 72,200
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Dell Computer Corp. 46,000 76,000
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Home Depot, Inc. 83,900 83,900
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Nokia Corp. (ADR) 72,300 72,300
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Pfizer, Inc. 35,800 35,800
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Schering-Plough Corp. 34,100 34,100
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Tyco International, Ltd. 50,400 50,400
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SALES SOLD HOLDINGS 10/31/98
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Campbell Soup Co. 6,100 -0-
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Ciena Corp. 8,400 -0-
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Colgate-Palmolive Co. 11,500 -0-
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Compaq Computer Corp. 35,000 -0-
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Gillette Co. 6,100 -0-
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Halliburton Co. 31,900 -0-
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Honeywell, Inc. 8,600 -0-
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Humana, Inc. 50,000 -0-
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Merrill Lynch & Co., Inc. 21,400 -0-
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Walt Disney Co. 24,400 -0-
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(a) Adjusted for market value of call options purchased and written.
* Commencement of operations.
+ Adjusted for stock splits.
5
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PORTFOLIO OF INVESTMENTS Alliance Select Investor Series
October 31, 1998 Premier Portfolio
================================================================================
Company Shares Value
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COMMON STOCKS - 89.8%
TECHNOLOGY - 30.4%
COMMUNICATION
EQUIPMENT - 11.3%
EMC Corp.(a) ............................ 29,300 $ 1,886,188
Lucent Technologies, Inc. ............... 13,200 1,058,475
Nokia Corp. (ADR)(a)(b)(c) .............. 72,300 6,728,419
------------
9,673,082
------------
COMPUTER
HARDWARE - 5.8%
Dell Computer Corp.(a) .................. 76,000 4,978,000
------------
COMPUTER
SOFTWARE - 3.9%
HBO & Co. ............................... 36,000 945,000
Microsoft Corp.(a) ...................... 22,800 2,413,950
------------
3,358,950
------------
NETWORKING
SOFTWARE - 6.9%
America Online, Inc.(a) ................. 11,000 1,397,687
Cisco Systems, Inc.(a) .................. 71,450 4,501,350
------------
5,899,037
------------
SEMICONDUCTOR
COMPONENTS - 2.5%
Intel Corp. ............................. 23,300 2,078,069
------------
25,987,138
------------
CONSUMER SERVICES - 21.8%
AIRLINES - 2.2%
Northwest Airlines
Corp.(a) .............................. 28,100 736,747
UAL Corp.(a) ............................ 17,200 1,116,925
------------
1,853,672
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BROADCASTING &
CABLE - 5.4%
AirTouch Communications,
Inc.(a) ............................... 54,000 3,024,000
Tele-Communications
Liberty Media Group
Cl. A(a) .............................. 42,500 1,617,656
------------
4,641,656
------------
ENTERTAINMENT &
LEISURE - 1.1%
Time Warner, Inc.(d) .................... 10,300 $ 955,969
------------
PRINTING &
PUBLISHING - 0.4%
Gannett Co., Inc. ....................... 6,300 389,812
------------
RETAIL - GENERAL
MERCHANDISE - 12.7%
Dayton Hudson Corp. ..................... 72,200 3,059,475
Home Depot, Inc. ........................ 83,900 3,649,650
Kohl's Corp.(a) ......................... 29,100 1,391,344
Lowe's Cos., Inc. ....................... 20,000 673,750
Wal-Mart Stores, Inc. ................... 30,200 2,083,800
------------
10,858,019
------------
18,699,128
------------
FINANCE - 15.9%
BANKING - REGIONAL - 3.1%
BankAmerica Corp. ....................... 23,400 1,344,037
U.S. Bancorp ............................ 35,300 1,288,450
------------
2,632,487
------------
BROKERAGE & MONEY
MANAGEMENT - 1.3%
Morgan Stanley, Dean
Witter & Co. .......................... 17,000 1,100,750
------------
INSURANCE - 2.6%
American International
Group, Inc. ........................... 7,800 664,950
Citigroup, Inc. ......................... 20,250 953,016
Progressive Corp. ....................... 3,000 441,750
SunAmerica, Inc. ........................ 3,000 211,500
------------
2,271,216
------------
MORTGAGE
BANKING - 5.8%
Freddie Mac ............................. 48,000 2,760,000
Washington Mutual, Inc. ................. 59,636 2,232,623
------------
4,992,623
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Alliance Select Investor Series
Premier Portfolio
================================================================================
Company Shares Value
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MISCELLANEOUS - 3.1%
Associates First Capital
Corp. Cl. A ......................... 23,800 $ 1,677,900
Household International,
Inc ................................. 23,600 862,875
MBNA Corp. ............................ 4,320 98,550
------------
2,639,325
------------
13,636,401
------------
HEALTHCARE - 13.9%
DRUGS - 12.4%
Bristol-Myers Squibb Co. .............. 23,300 2,576,106
Merck & Co., Inc. ..................... 4,100 554,525
Pfizer, Inc. .......................... 35,800 3,841,788
Schering-Plough Corp. ................. 34,100 3,508,038
Warner-Lambert Co. .................... 2,100 164,587
------------
10,645,044
------------
MEDICAL SERVICES - 1.5%
IMS Health, Inc. ...................... 18,800 1,250,200
------------
11,895,244
------------
MULTI-INDUSTRY - 3.7%
Tyco International, Ltd. .............. 50,400 3,121,650
------------
CONSUMER STAPLES - 1.9%
BEVERAGE - 0.6%
Coca-Cola Co. ......................... 7,600 513,950
------------
RETAIL - FOOD &
DRUGS - 1.3%
Kroger Co.(a) ......................... 10,100 560,550
Rite Aid Corp. ........................ 14,000 555,625
------------
1,116,175
------------
1,630,125
------------
UTILITY - 1.3%
TELEPHONE UTILITY - 1.3%
MCI WorldCom, Inc.(a) ................. 20,000 1,105,000
------------
CAPITAL GOODS - 0.9%
MISCELLANEOUS - 0.9%
United Technologies
Corp ................................ 8,450 804,862
------------
Total Common Stocks
(cost $74,253,972) .................. 76,879,548
------------
Contracts(e)
or Principal
Amount
Company (000) Value
- --------------------------------------------------------------------------------
CALL OPTIONS
PURCHASED - 5.7%(a)
AirTouch
Communications, Inc. ..................
expiring Jan '00 @ $30 ................ 221 $ 629,850
expiring Jan '00 @ $35 ................ 100 246,250
Bristol-Myers Squibb Co. ................
expiring Jan '00 @ $60 ................ 35 185,937
General Electric Co. ....................
expiring Jan '00 @ $50 ................ 203 814,538
Home Depot, Inc. ........................
expiring Jan '00 @ $27.50 ............. 120 220,500
MBNA Corp. ..............................
expiring Jan '00
@ $13.375(f) .......................... 239 376,425
Philip Morris Cos., Inc. ................
expiring Jan '00 @ $30 ................ 410 902,000
Tyco International, Ltd. ................
expiring Jan '00 @ $30 ................ 330 1,142,625
Wal-Mart Stores, Inc. ...................
expiring Jan '00 @ $40 ................ 100 320,000
------------
Total Call Options
Purchased
(cost $4,496,284) ..................... 4,838,125
------------
SHORT TERM
INVESTMENT - 6.4%
COMMERCIAL PAPER - 6.4%
General Electric Capital Corp. ..........
5.70%, 11/02/98
(amortized cost
$5,514,127) ........................... $5,515 5,514,127
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TOTAL INVESTMENTS - 101.9%
(cost $84,264,383) .................... 87,231,800
------------
7
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PORTFOLIO OF INVESTMENTS Alliance Select Investor Series
(continued) Premier Portfolio
================================================================================
Company Contracts(e) Value
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CALL OPTIONS
WRITTEN - (0.1%)(a)
Nokia Corp. (ADR)
expiring Nov '98 @ $8(b)
(premiums received
$26,099) ........................... 50 $ (47,500)
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TOTAL INVESTMENTS,
NET OF OUTSTANDING
CALL OPTIONS
WRITTEN - 101.8%
(cost $84,238,284) ................. $ 87,184,300
Other assets less
liabilities - (1.8%) ............... (1,558,181)
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NET ASSETS - 100% .................... $ 85,626,119
============
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(a) Non-income producing security.
(b) Country of origin -- Finland.
(c) Security, or a portion thereof, which has been segregated to collateralize
written call options has a total market value of approximately $465,313.
(d) Security trades with preferred stock purchase rights expiring January 20,
2004.
(e) One contract relates to 100 shares unless indicated otherwise.
(f) One contract relates to 150 shares.
Glossary:
ADR - American Depositary Receipt.
See notes to financial statements.
8
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES Alliance Select Investor Series
October 31, 1998 Premier Portfolio
================================================================================
ASSETS
Investments in securities, at value (cost $84,264,383) .... $ 87,231,800
Receivable for capital stock sold ......................... 1,587,736
Receivable for investment securities sold ................. 634,652
Receivable from Adviser ................................... 37,190
Dividends receivable ...................................... 28,038
Deferred offering costs ................................... 162,388
------------
Total assets .............................................. 89,681,804
------------
LIABILITIES
Due to custodian .......................................... 624,401
Outstanding call options written, at value (premiums
received $26,099) ....................................... 47,500
Payable for investment securities purchased ............... 2,694,305
Payable for capital stock redeemed ........................ 153,755
Distribution fee payable .................................. 50,022
Advisory fee payable ...................................... 42,698
Accrued expenses .......................................... 443,004
------------
Total liabilities ......................................... 4,055,685
------------
NET ASSETS .................................................. $ 85,626,119
============
COMPOSITION OF NET ASSETS
Capital stock, at par ..................................... $ 9,006
Additional paid-in capital ................................ 87,226,222
Net realized loss on investments and written option
transactions ............................................ (4,555,125)
Net unrealized appreciation of investments and options
written ................................................. 2,946,016
------------
$ 85,626,119
============
CALCULATION OF MAXIMUM OFFERING PRICE Class A Shares
Net asset value and redemption price per share
($25,834,877 / 2,711,063 shares of capital stock
issued and outstanding) ................................. $9.53
Sales charge -- 4.25% of public offering price ............ .42
-----
Maximum offering price .................................... $9.95
=====
Class B Shares
Net asset value and offering price per share
($38,887,038 / 4,095,538 shares of capital stock issued
and outstanding) ........................................ $9.49
=====
Class C Shares
Net asset value and offering price per share
($20,904,204 / 2,199,329 shares of capital stock issued
and outstanding) ........................................ $9.50
=====
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See notes to financial statements.
9
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STATEMENT OF OPERATIONS Alliance Select Investor Series
July 29, 1998* to October 31, 1998 Premier Portfolio
================================================================================
INVESTMENT INCOME
Interest ....................................... $ 147,142
Dividends ...................................... 87,437 $ 234,579
-----------
EXPENSES
Advisory fee ................................... 183,788
Distribution fee - Class A ..................... 14,722
Distribution fee - Class B ..................... 82,068
Distribution fee - Class C ..................... 45,223
Amortization of offering expenses .............. 54,112
Audit and legal ................................ 49,577
Custodian ...................................... 43,999
Administrative fee ............................. 35,000
Printing ....................................... 24,498
Registration ................................... 23,999
Transfer agency ................................ 12,959
Directors' fees ................................ 6,600
Miscellaneous .................................. 3,001
-----------
Total expenses ................................. 579,546
Less: expenses waived and reimbursed by
Adviser (See Note B) ......................... (49,535)
-----------
Net expenses ................................... 530,011
-----------
Net investment loss ............................ (295,432)
-----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
AND OPTIONS WRITTEN
Net realized loss on investment transactions ... (4,741,040)
Net realized gain on written option
transactions ................................. 185,915
Net unrealized appreciation of investments and
options written .............................. 2,946,016
-----------
Net loss on investments ........................ (1,609,109)
-----------
NET DECREASE IN NET ASSETS FROM OPERATIONS ....... $(1,904,541)
===========
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* Commencement of operations.
See notes to financial statements.
10
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STATEMENT OF CHANGES Alliance Select Investor Series
IN NET ASSETS Premier Portfolio
================================================================================
July 29, 1998(a)
to
October 31, 1998
----------------
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS
Net investment loss ........................................ $ (295,432)
Net realized loss on investments and written option
transactions ............................................. (4,555,125)
Net unrealized appreciation of investments and options
written .................................................. 2,946,016
------------
Net decrease in net assets from operations ................. (1,904,541)
COMMON STOCK TRANSACTIONS
Net increase ............................................... 87,430,460
------------
Total increase ............................................. 85,525,919
NET ASSETS
Beginning of period ........................................ 100,200
------------
End of period .............................................. $ 85,626,119
============
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(a) Commencement of operations.
See notes to financial statements.
11
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NOTES TO FINANCIAL STATEMENTS Alliance Select Investor Series
October 31, 1998 Premier Portfolio
================================================================================
NOTE A: Significant Accounting Policies
The Premier Portfolio (the "Fund"), the initial portfolio of Alliance Select
Investor Series, Inc. (the "Company") was incorporated in the state of Maryland
on May 21, 1998 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 and Class C shares. Prior to commencement of operations on July 29,
1998, the Fund had no operations other than the sale to Alliance Capital
Management L.P. (the "Adviser") of 10,000 shares of Class A and 10 shares of
each of Class B and Class C for the aggregate amount of $100,000 on Class A
shares and $100 on each of Class B and Class C shares on June 25, 1998. Class A
shares are sold with a front-end sales charge of up to 4.25% for purchases not
exceeding $1,000,000. With respect to purchases of $1,000,000 or more, Class A
shares redeemed within one year of purchase will be subject to a contingent
deferred sales charge of 1%. Class B shares are currently 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. All three 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. Listed put or 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.
2. Currency Translation
Assets and liabilities denominated in foreign currencies and commitments under
forward exchange currency contracts are translated into U.S. dollars at the mean
of the quoted bid and asked price of such currencies against the U.S. dollar.
Purchases and sales of portfolio securities are translated at the rates of
exchange prevailing when such securities were acquired or sold. Income and
expenses are translated at rates of exchange prevailing when accrued.
Net realized foreign exchange gains or losses represent foreign exchange gains
and losses from sales of investments and forward currency exchange contracts,
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 amounts actually received or
paid. Net currency gains and losses from valuing foreign currency denominated
assets and liabilities at period end exchange rates would be reflected as a
component of net unrealized appreciation (depreciation) of investments and
foreign currency denominated assets and liabilities.
12
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Alliance Select Investor Series
Premier Portfolio
================================================================================
3. 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 provision for federal income or excise taxes is
required.
4. Organization and Offering Expenses
Organization expenses of $62,500 were charged to the Fund as incurred prior to
commencement of operations and reimbursed by the Adviser. Offering expenses of
$216,500 have been deferred and are being amortized on a straight-line basis
over a one year period.
5. 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 as adjustments to interest income.
6. 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.
7. Dividends and Distributions
Dividends and distributions to shareholders are recorded on the ex-dividend
date. Income 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 with the capital accounts based on
their federal tax basis treatment; temporary differences do not require such
reclassification. During the current fiscal period, permanent differences,
primarily due to net investment loss, resulted in a net decrease in net
investment loss and a corresponding decrease in additional paid in capital.
- --------------------------------------------------------------------------------
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 monthly fee at an annualized rate of
1.10% of the Fund's average daily net assets (the "Basic Fee") and an adjustment
to the Basic Fee based upon the investment performance of the Class A shares of
the Fund in relation to the investment record of the Russell 1000 Growth Index.
For the period from August 1, 1998 through July 31, 1999, the Adviser will
receive a minimum fee payable monthly equal to .80% annualized of the average
net assets of the Fund for each day included in such annual period. The fee paid
to the Adviser for this period may be increased to 1.40%, based on the
investment performance of the Class A shares of the Fund in relation to the
investment record of the Russell 1000 Growth Index. During the period ended
October 31, 1998, the effective advisory fee was at the annualized rate of 1.05%
of the Fund's average daily net assets.
The Fund and the Adviser have entered into an Expense Limitation Agreement (the
"Agreement"), dated June 29, 1998, under which the Adviser has agreed to waive
its fees and, if necessary, reimburse expenses for the period from May 21, 1998
(date of organization of the Fund) to July 31, 1999, exceeding the annual rate
of 2.50% of average daily net assets for Class A shares and 3.20% of average
daily net assets for Class B shares and Class C shares, respectively. Under the
Agreement, any waivers or reimbursements made by the Adviser during this period
are subject to repayment by the Fund in subsequent periods, but no later than
July 31, 2001, provided that repayment does not result in the Fund's aggregate
expenses in those subsequent periods exceeding the foregoing expense
limitations. Further, the aggregate repayment to the Adviser will not exceed the
sum of the Fund's organization costs and initial offering expenses. At October
31, 1998, the total amount of expenses waived and reimbursed by the Adviser that
are subject to repayment amounted to $112,035.
Pursuant to the advisory agreement, the Adviser provides certain legal and
accounting services for the Fund. For the period ended October 31, 1998, such
fees amounted to $35,000.
13
<PAGE>
NOTES TO FINANCIAL STATEMENTS Alliance Select Investor Series
(continued) Premier Portfolio
================================================================================
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. Such compensation
amounted to $6,326 for the period ended October 31, 1998.
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 $3,156 from the sale of Class A shares and $45,713
and $7,197 in contingent deferred sales charges imposed upon redemptions by
shareholders of Class B and Class C shares, respectively, for the period ended
October 31, 1998.
Brokerage commissions paid for the period ended October 31, 1998 on investment
transactions amounted to $83,812, none of which was paid to brokers utilizing
the services of the Pershing Division of Donaldson, Lufkin & Jenrette Securities
Corp. ("DLJ") nor to DLJ directly, an affiliate of the Adviser.
- --------------------------------------------------------------------------------
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. Such fee is accrued daily and paid monthly. The Agreement
provides that the Distributor will use such payments in their entirety for
distribution assistance and promotional activities. The Distributor has incurred
expenses in excess of the distribution costs reimbursed by the Fund in the
amount of $771,248 and $110,058, for Class B and C shares, respectively. Such
costs may be recovered from the Fund in future periods so long as the Agreement
is in effect. In accordance with the Agreement there is no provision for
recovery of unreimbursed distribution costs incurred by the Distributor, beyond
the current fiscal year for Class A shares. The Agreement also provides that the
Adviser may use its own resources to finance the distribution of the Fund's
shares.
- --------------------------------------------------------------------------------
NOTE D: Investment Transactions
Purchases and sales of investment securities (excluding short-term investments,
and U.S. government securities) aggregated $96,972,082 and $13,482,730,
respectively, for the period ended October 31, 1998. There were no purchases or
sales of U.S. government or government agency obligations for the period ended
October 31, 1998.
At October 31, 1998, the cost of investments for federal income tax purposes was
$84,355,899. Gross unrealized appreciation of investments was $5,208,098 and
gross unrealized depreciation of investments was $2,332,197 resulting in net
unrealized appreciation of $2,875,901 (excluding written call options).
The Fund had a capital loss carryover of $4,455,022 which expires October 31,
2006. To the extent that any net capital loss carryover is used to offset future
capital gains, it is probable that these gains will not be distributed to
shareholders.
1. Options Transactions
For hedging purposes, the Fund purchases and writes (sells) options on market
indices and covered put and call options on U.S. securities that are traded on
U.S. securities exchanges and over-the-counter markets.
The risk associated with purchasing an option is that the Fund pays a premium
whether or not the option is exercised. Additionally, the Fund bears the risk of
loss of the premium and any change in market value should the counterparty not
perform under the contract. Put and call options purchased are accounted for in
the same manner as portfolio securities. The cost of securities acquired through
the exercise of call options is increased by premiums paid. The proceeds from
securities sold through the exercise of put options are decreased by the
premiums paid.
When the Fund writes an option, the premium received by the Fund is recorded as
a liability and is subsequently adjusted to the current market value of the
option written.
14
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Alliance Select Investor Series
Premier Portfolio
================================================================================
Premiums received from writing options which expire unexercised are recorded by
the Fund on the expiration date as realized gains from option transactions. The
difference between the premium and the amount paid on effecting a closing
purchase transaction, including brokerage commissions, is also treated as a
realized gain, or if the premium is less than the amount paid for the closing
purchase transaction, as a realized loss. If a written call option is exercised,
the premium is added to the proceeds from the sale of the underlying security in
determining whether the Fund has realized a gain or loss. If a written put
option is exercised, the premium reduces the costs basis of the security
purchased by the Fund. In writing covered options, the Fund bears the market
risk of an unfavorable change in the price of the security underlying the
written option. Exercise of an option written by the Fund could result in the
Fund selling or buying a security at a price different from the current market
value.
Transactions in options written for the period ended October 31, 1998 were as
follows:
Number Premiums
of Contracts Received
------------ ----------
Options outstanding at beginning of period....... - 0 - $ - 0 -
Options written.................................. 373 657,316
Options terminated in closing purchase
transactions................................... (323) (631,217)
--- --------
Options outstanding at October 31, 1998.......... 50 $ 26,099
=== ========
- --------------------------------------------------------------------------------
NOTE E: Capital Stock
There are 9,000,000,000 shares of $.001 par value capital stock authorized,
divided into three classes, designated Class A, Class B and Class C. Each
consists of 3,000,000,000 authorized shares. Transactions in capital stock were
as follows:
---------- ----------
SHARES AMOUNT
---------- ----------
July 29, 1998(a) July 29, 1998(a)
to to
October 31, 1998 October 31, 1998
---------------- ----------------
Class A
Shares sold .......................... 3,023,758 $ 28,756,722
Shares redeemed ...................... (322,695) (2,854,007)
---------- ------------
Net increase ......................... 2,701,063 $ 25,902,715
========== ============
Class B
Shares sold .......................... 4,396,418 $ 42,449,402
Shares redeemed ...................... (300,890) (2,503,948)
---------- ------------
Net increase ......................... 4,095,528 $ 39,945,454
========== ============
Class C
Shares sold .......................... 2,447,233 $ 23,765,875
Shares redeemed ...................... (247,914) (2,183,584)
---------- ------------
Net increase ......................... 2,199,319 $ 21,582,291
========== ============
- --------------------------------------------------------------------------------
(a) Commencement of operations.
15
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Alliance Select Investor Series
Premier Portfolio
================================================================================
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
miscellaneous expenses in the statement of operations. The Fund did not utilize
the Facility during the period ended October 31, 1998.
16
<PAGE>
Alliance Select Investor Series
FINANCIAL HIGHLIGHTS Premier Portfolio
================================================================================
Selected Data For A Share Of Capital Stock Outstanding Throughout The Period
<TABLE>
<CAPTION>
----------- ----------- -----------
CLASS A CLASS B CLASS C
----------- ----------- -----------
July 29, 1998(a) July 29, 1998(a) July 29, 1998(a)
to to to
October 31, 1998 October 31, 1998 October 31, 1998
---------------- ---------------- ----------------
<S> <C> <C> <C>
Net asset value, beginning of period ....... $ 10.00 $ 10.00 $ 10.00
------- ------- -------
Income From Investment Operations
Net investment loss (b) .................... (.03) (.04) (.04)
Net realized and unrealized loss on
investment and written option
transactions ............................. (.44) (.47) (.46)
------- ------- -------
Net decrease in net asset value from
operations ............................... (.47) (.51) (.50)
------- ------- -------
Net asset value, end of period ............. $ 9.53 $ 9.49 $ 9.50
======= ======= =======
Total Return
Total investment return based on net asset
value (c) ................................ (4.70)% (5.10)% (5.00)%
Ratios/Supplemental Data
Net assets, end of period (000's omitted) .. $25,835 $38,887 $20,904
Ratio to average net assets of:
Expenses net of waivers/reimbursements (d) 2.50% 3.20% 3.20%
Expenses before waivers/reimbursements (d) 2.70% 3.39% 3.39%
Net investment loss net of waivers/
reimbursements (d) ..................... (1.19)% (1.87)% (1.85)%
Portfolio turnover rate .................... 29% 29% 29%
</TABLE>
- --------------------------------------------------------------------------------
(a) Commencement of operations.
(b) Based on average shares outstanding.
(c) Total investment return is calculated assuming an initial investment made
at the net asset value at the beginning of the period, reinvestment of all
dividends and distributions at net asset value during the period, and
redemption on the last day of the period. Initial sales charge or
contingent deferred sales charge is not reflected in the calculation of
total investment return. Total investment return calculated for a period
of less than one year is not annualized.
(d) Annualized.
17
<PAGE>
REPORT OF INDEPENDENT Alliance Select Investor Series
ACCOUNTANTS Premier Portfolio
================================================================================
To the Board of Directors and Shareholders of Alliance Select Investor Series
Premier Portfolio
In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Alliance Select Investor Series
Premier Portfolio (the "Fund") at October 31, 1998, and the results of its
operations, the changes in its net assets and the financial highlights for the
period July 29, 1998 (commencement of operations) through October 31, 1998, in
conformity with generally accepted accounting principles. These financial
statements and financial highlights (hereafter referred to as "financial
statements") are the responsibility of the Fund's management; our responsibility
is to express an opinion on these financial statements based on our audit. We
conducted our audit of these financial statements in accordance with generally
accepted auditing standards which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audit, which included confirmation of securities at October 31, 1998 by
correspondence with the custodian and brokers, provides a reasonable basis for
the opinion expressed above.
PricewaterhouseCoopers LLP
New York, New York
December 15, 1998
18
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Alliance Select Investor Series
Premier Portfolio
================================================================================
BOARD OF TRUSTEES
John D. Carifa, Chairman and President
Ruth Block (1)
David H. Dievler (1)
John H. Dobkin (1)
William H. Foulk, Jr. (1)
Dr. James M. Hester (1)
Clifford L. Michel (1)
Donald J. Robinson (1)
OFFICERS
Kathleen Corbet, Senior Vice President
Alfred Harrison, Senior Vice President
Thomas J. Bardong, Vice President
John A. Koltes, Vice President
Michael J. Reilly, Vice President
Edmund P. Bergan, Jr., Secretary
Mark D. Gersten, Treasurer & Chief Financial Officer
Vincent S. Noto, Controller
CUSTODIAN
The Bank of New York
One Wall Street
New York, NY 10286
PRINCIPAL UNDERWRITER
Alliance Fund Distributors, Inc.
1345 Avenue of the Americas
New York, NY 10105
LEGAL COUNSEL
Seward & Kissel
One Battery Park Plaza
New York, NY 10004
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, NY 10036-2798
TRANSFER AGENT
Alliance Fund Services, Inc.
P.O. Box 1520
Secaucus, NJ 07096-1520
Toll-free 1-(800) 221-5672
(1) Member of the Audit Committee.
19
<PAGE>
-----------------
BULK RATE
U.S. POSTAGE
PAID
New York, NY
Permit No. 7131
-----------------
Alliance Select Investor Series Premier Portfolio
1345 Avenue of the Americas
New York, NY 10105
(800) 221-5672
Alliance Capital [LOGO](R)
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.
ASIAR
