<PAGE>
This is filed pursuant to Rule 497(c).
File Nos. 333-77953 and 811-09329.
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ALLIANCE HEALTH CARE FUND
Alliance Health Care Fund, Inc. is an open-end management investment company
that offers investors the opportunity to seek capital appreciation through
investment in health care and health care-related industries.
Prospectus and Application
July 26, 1999
The Securities and Exchange Commission has not approved or disapproved these
securities or passed upon the adequacy or accuracy of this Prospectus. Any
representation to the contrary is a criminal offense.
AllianceCapital [logo]
TABLE OF CONTENTS
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Page
RISK/RETURN SUMMARY 3
FEES AND EXPENSES OF THE FUND 5
GLOSSARY 6
DESCRIPTION OF THE FUND 6
Investment Objective, Policies and Risk
Considerations 6
Description of Investment Practices 8
Additional Risk Considerations 10
MANAGEMENT OF THE FUND 12
PURCHASE AND SALE OF SHARES 13
How The Fund Values Its Shares 13
How To Buy Shares 13
How To Exchange Shares 13
How To Sell Shares 13
DIVIDENDS, DISTRIBUTIONS AND TAXES 14
DISTRIBUTION ARRANGEMENTS 15
GENERAL INFORMATION 16
The Fund's investment adviser is Alliance Capital Management L.P., a global
investment manager providing diversified services to institutions and
individuals through a broad line of investments including more than 100 mutual
funds.
RISK/RETURN SUMMARY
The following is a summary of certain key information about Alliance Health
Care Fund, Inc. This Summary describes the Fund's objective, principal
investment strategies, principal risks and fees. This Summary includes a short
discussion of some of the principal risks of investing in the Fund.
A more detailed description of the Fund, including the risks associated with
investing in the Fund, can be found further back in this Prospectus. Please be
sure to read this additional information BEFORE you invest.
Other important things for you to note:
. You may lose money by investing in the Fund.
. An investment in the Fund is not a deposit in a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.
3
OBJECTIVE:
THE FUND'S INVESTMENT OBJECTIVE IS CAPITAL APPRECIATION AND, SECONDARILY,
CURRENT INCOME.
PRINCIPAL INVESTMENT STRATEGIES:
Under normal circumstances the Fund invests at least 65%, and normally
substantially all, of the value of its total assets in securities issued
by companies principally engaged in health care and health care-related
industries ("Health Care Industries") (companies principally engaged in
the discovery, development, provision, production or distribution of
products and services that relate to the diagnosis, treatment and prevention
of diseases or other medical disorders). Although the payment of dividends
will be a factor considered in the selection of investments for the Fund, the
Fund seeks primarily to take advantage of capital appreciation opportunities
identified by Alliance in emerging technologies and services in Health Care
Industries by investing in companies which are expected to profit from the
development of new products and services for these industries. The Fund
expects under normal circumstances to invest primarily in the equity securities
of U.S. companies. The Fund may invest up to 40% of its total assets in
securities of non-U.S. companies and other foreign securities. The Fund may
invest in new, smaller or less-seasoned companies as well as in larger,
established companies in Health Care Industries.
PRINCIPAL RISKS:
Among the principal risks of investing in the Fund are market risk and sector
risk. Unlike many other equity funds, the Fund invests in the securities of
companies principally engaged in Health Care Industries. As a result, certain
economic conditions and market changes that affect those industries may have
a more significant effect on the Fund's net asset value than on the value of a
more broadly diversified fund. For example, the Fund's share price could be
affected by changes in competition, legislation or government regulation,
government funding, product liability and other litigation, the obsolescence
or development of products, or other factors specific to the health care and
health sciences industries. The Fund's investments in foreign securities have
foreign risk, which is the risk of investing in issuers located in foreign
countries, and currency risk, which is the risk of losses from adverse
changes in currency exchange rates. The Fund may invest in small- to
mid-capitalization companies and such investments have capitalization risk.
These investments may be more volatile than investments in large-cap
companies. The Fund may at times use certain types of investment derivatives
such as forwards. The use of these techniques involves special risks that are
discussed in this Prospectus. The Fund is not a complete investment program
and investors should invest only a portion of their assets in the Fund.
BAR CHART AND PERFORMANCE TABLE:
There is no bar chart or performance table for the Fund because it has not
completed a full calendar year of operations.
4
FEES AND EXPENSES OF THE FUND
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.
SHAREHOLDER FEES (fees paid directly from your investment)
Class A Shares Class B Shares Class C Shares
-------------- -------------- --------------
Maximum Sales Charge (Load)
imposed on Purchases
(as a percentage of
offering price) 4.25% None None
Maximum Deferred Sales
Charge (Load) (as a
percentage of original
purchase price or
redemption proceeds,
whichever is lower) None 4.0%* 1.0%*
Exchange Fee None None None
* Class B shares automatically convert to Class A shares after 8 years. The
CDSC decreases over time. For Class B shares the CDSC DECREASES 1.00% ANNUALLY
TO 0% AFTER THE 4TH YEAR. For Class C shares the CDSC IS 0% after the 1st year.
ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from Fund assets)
OPERATING EXPENSES
---------------------------------
CLASS A CLASS B CLASS C
------- ------- -------
Management fees .95% .95% .95%
Distribution (12b-1) fees .30% 1.00% 1.00%
Other expenses 1.40% 1.40% 1.40%
----- ----- -----
Total Fund operating
expenses 2.65% 3.35% 3.35%
----- ----- -----
----- ----- -----
Fee waiver and/or expense
reimbursement (a) (.15)% (.15)% (.15)%
----- ----- -----
Net expenses 2.50% 3.20% 3.20%
----- ----- -----
----- ----- -----
EXAMPLES
The Examples are to help you compare the cost of investing in the Fund with the
cost of investing in other funds. They assume that you invest $10,000 in the
Fund for the time periods indicated and then redeem all of your shares at the
end of those periods. They also assume that your investment has a 5% return
each year, that the Fund's operating expenses stay the same, and that all
dividends and distributions are reinvested. Your actual costs may be higher or
lower.
EXAMPLES (b)
------------------------------------------------------------
CLASS A CLASS B+ CLASS B++ CLASS C+ CLASS C++
------- -------- --------- ------- --------
After 1 Yr. $ 667 $ 723 $ 323 $ 423 $ 323
After 3 Yr $1,200 $1,216 $1,016 $1,016 $1,016
(A) ALLIANCE HAS AGREED TO WAIVE ITS MANAGEMENT FEES AND/OR TO BEAR EXPENSES
OF THE FUND THROUGH AUGUST 31, 2000 TO THE EXTENT NECESSARY TO PREVENT TOTAL
FUND OPERATING EXPENSES, ON AN ANNUALIZED BASIS, FROM EXCEEDING THE NET
EXPENSES REFLECTED IN THIS TABLE. FROM THAT DATE THROUGH AUGUST 31, 2002, THE
FEES WAIVED AND EXPENSES BORNE BY ALLIANCE DURING THIS PERIOD MAY BE REIMBURSED
BY THE FUND. NO REIMBURSEMENT PAYMENT WILL BE MADE THAT WOULD CAUSE THE FUND'S
TOTAL ANNUALIZED OPERATING EXPENSES TO EXCEED THE NET EXPENSES REFLECTED IN THE
TABLE OR CAUSE THE TOTAL OF THE PAYMENTS TO EXCEED THE FUND'S TOTAL INITIAL
ORGANIZATIONAL AND OFFERING EXPENSES.
(B) THESE EXAMPLES ASSUME THAT ALLIANCE'S AGREEMENT TO WAIVE MANAGEMENT FEES
AND/OR TO BEAR OPERATING EXPENSES IS NOT EXTENDED BEYOND ITS INITIAL PERIOD.
+ ASSUMES REDEMPTION AT THE END OF PERIOD.
++ ASSUMES NO REDEMPTION AT END OF PERIOD.
5
GLOSSARY
This Prospectus uses the following terms.
TYPES OF SECURITIES
CONVERTIBLE SECURITIES are fixed-income securities that are convertible into
common stock.
DEBT SECURITIES are bonds, debentures, notes, bills, loans, other direct debt
instruments, and other fixed, floating and variable rate debt obligations, but
do not include convertible securities.
EQUITY SECURITIES are (i) common stocks, partnership interests, business trust
shares, and other equity ownership interests in business enterprises, and (ii)
securities convertible into, and rights and warrants to subscribe for the
purchase of, such stocks, shares and interests.
FIXED-INCOME SECURITIES are debt securities and dividend-paying preferred
stocks, including floating rate and variable rate instruments.
HEALTH CARE INDUSTRIES include the health care and health care-related
(including health sciences) industries. These industries are principally
engaged in the discovery, development, provision, production or distribution
of products and services that relate to the diagnosis, treatment and prevention
of diseases or other medical disorders. Companies in these fields include, but
are not limited to, pharmaceutical firms; companies that design, manufacture or
sell medical supplies, equipment and support services; companies that operate
hospitals and other health care facilities; and companies engaged in medical,
diagnostic, biochemical, biotechnological or other health sciences research and
development.
NON-U.S. COMPANIES are entities (i) that are organized under the laws of a
country other than the United States and have their principal office in a
country other than the United States, or (ii) the equity securities of which
are traded principally in securities markets outside the United States.
RULE 144A SECURITIES are securities that may be resold pursuant to Rule 144A
under the Securities Act.
U.S. GOVERNMENT SECURITIES are securities issued or guaranteed by the United
States Government, its agencies or instrumentalities.
RATING AGENCIES
MOODY'S is Moody's Investors Service, Inc.
S&P is Standard & Poor's Rating Services.
OTHER
1940 ACT is the Investment Company Act of 1940, as amended.
CODE is the Internal Revenue Code of 1986, as amended.
COMMISSION is the Securities and Exchange Commission.
EXCHANGE is the New York Stock Exchange.
SECURITIES ACT is the Securities Act of 1933, as amended.
DESCRIPTION OF THE FUND
This section of the Prospectus provides a more complete description of the
Fund's investment objective, principal strategies and principal risks. Of
course, there can be no assurance that the Fund will achieve its investment
objective.
Please note:
. Additional discussion of the Fund's investments, including the risks of the
investments that appear in bold type can be found in the discussion under
DESCRIPTION OF INVESTMENT PRACTICES following this section.
. The description of the Fund's risks may include risks discussed in the
RISK/RETURN SUMMARY above. Additional information about the risks of investing
in the Fund can be found in the discussions under ADDITIONAL RISK
CONSIDERATIONS.
. Additional descriptions of the Fund's strategies and investments, as well
as other strategies and investments not described below, may be found in the
Fund's Statement of Additional Information or SAI.
. The Fund's investment objective is "fundamental" and cannot be changed
without a shareholder vote and, except as noted, the Fund's investment policies
are not fundamental and thus can be changed without a shareholder vote.
INVESTMENT OBJECTIVE, POLICIES AND RISK CONSIDERATIONS
INVESTMENT OBJECTIVE
The Fund's investment objective is capital appreciation and, secondarily,
current income.
HOW THE FUND PURSUES ITS OBJECTIVE
In seeking to achieve its investment objective, under normal circumstances the
Fund invests at least 65%, and normally substantially all, of the value of its
total assets in securities issued by companies principally engaged in Health
Care Industries.
The Fund seeks investments in both new, smaller and less seasoned companies and
well-known, larger and established companies. Whenever possible, investments in
new, smaller or less seasoned companies will be made with a view to benefiting
from the development and growth of new products and markets in Health Care
Industries. Investments in these companies may offer more reward but may also
entail more risk than is generally true of larger, established companies.
While the Fund anticipates that a substantial portion of its portfolio will be
invested in the securities of U.S. companies, the Fund is not limited to
investing in such securities. Many companies in the forefront of world medical
technology are located outside the United States, primarily in Japan and
Europe. Accordingly, the Fund may invest up to 40% of the value of its total
assets in foreign securities, including up to 25% in issuers located in any one
foreign country. However, no more than 5% of the value of the Fund's total net
assets may be invested in securities of issuers located in emerging market
6
countries. All percentage limitations are applied at the time of investment.
Although the payment of dividends will be a factor considered in the selection
of investments for the Fund, the Fund seeks primarily to take advantage of
capital appreciation opportunities identified by Alliance in emerging
technologies and services in Health Care Industries by investing in companies
which are expected to profit from the development of new products and services
for these industries. Examples of such emerging technologies and services
include:
. New methods for administering drugs to a patient, such as surgical implants
and skin patches which enhance the effectiveness of the drugs and may reduce
patient side effects by delivering the drugs in precise quantities over a
prolonged time period or by evading natural body defense mechanisms which delay
the effect of the drugs;
. Developments in medical imaging such as the application of computer
technology to the output of conventional x-ray systems which allow for
cross-sectional images of soft tissue and organs (CT scanning) and continuous
imaging (digital radiography) as well as more advanced nuclear medicine,
ultrasound and magnetic resonance imaging (MRI);
. Advances in minimally invasive surgical techniques, such as angioplasty and
related technologies for diseased blood vessels and laser beams for the eye,
general and cardiovascular surgery, which provide greater effectiveness, lower
cost and improved patient safety than more traditional surgical techniques;
. New therapeutic pharmaceutical compounds that control or alleviate disease,
including prescription and non-prescription drugs and treatment regimes for
conditions not controlled, alleviated or treatable by existing medications or
treatments and chemical or biological pharmaceuticals for use in diagnostic
testing;
. Advances in molecular biology such as signal transduction, cell adhesion
and cell to cell communication which have facilitated a rapid increase in new
classes of drugs. These have included monoclonal antibodies, bio-engineered
proteins and small molecules from novel synthesis and screening techniques;
. Genomics, which allows scientists to better understand the causes of human
diseases, and in some cases has led to the manufacture of proteins for use as
therapeutic drugs;
. Gene chips and other equipment that provides for the screening, diagnosis
and treatment of diseases;
. The introduction of large scale business efficiencies to the management of
nursing homes, acute and specialty hospitals as well as free-standing
outpatient facilities, surgical centers and rehabilitation centers;
. Adaptations of microprocessors for use by pharmaceutical manufacturers,
hospitals, doctors and others in Health Care Industries to increase
distribution efficiency;
. Health care delivery organizations which combine cost effectiveness with
high quality medical care and help address the rising cost of health care; and
. The sale of prescription drugs and other pharmaceuticals to consumers via
the Internet.
The Fund's portfolio may also include companies that provide traditional
products and services currently in use in Health Care Industries and that are
likely to benefit from any increases in the general demand for such products
and services. The following are examples of the products and services that may
be offered by companies in Health Care Industries:
. DRUGS OR PHARMACEUTICALS, including both ethical and proprietary drugs,
drug administration products and pharmaceutical components used in diagnostic
testing;
. MEDICAL EQUIPMENT AND SUPPLIES, including equipment and supplies used by
health service companies and individual practitioners, such as electronic
equipment used for diagnosis and treatment, surgical and medical instruments
and other products designed especially for Health Care Industries;
. HEALTH CARE SERVICES, including the services of clinical testing
laboratories, hospitals, nursing homes, clinics, centers for convalescence and
rehabilitation, and products and services for home health care; and
. MEDICAL RESEARCH, including scientific research to develop drugs, processes
or technologies with possible commercial application in Health Care Industries.
The Fund also may:
. make SECURED LOANS OF SECURITIES of up to 20% of its total assets;
. enter into REPURCHASE AGREEMENTS;
. purchase or sell FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS; and
. enter into FORWARD COMMITMENTS for the purchase or sale of securities.
RISK CONSIDERATIONS
The value of an investment in the Fund changes with the values of the Fund's
investments. Many factors can affect those values. In the following summary, we
describe the principal risks that may affect the Fund's portfolio as a whole.
The Fund could be subject to additional principal risks because the types of
investments made by the Fund can change over time. This Prospectus has
additional descriptions of investments and risks that appear in bold type below
under DESCRIPTION OF INVESTMENT PRACTICES or ADDITIONAL RISK CONSIDERATIONS.
This section also includes more information about the Fund, its investments,
and related risks. Among the principal risks of investing in the Fund are:
. MARKET RISK This is the risk that the value of the Fund's investments will
fluctuate as the stock or bond markets
7
fluctuate and that prices overall will decline over short or longer-term
periods.
. SECTOR RISK This is the risk of investments in a particular industry
sector. Market or economic factors affecting the Health Care Industries
sector could have a major effect on the value of the Fund's investments.
Certain of the companies in which the Fund invests may allocate substantial
financial resources to research and product development. The securities of
such companies may experience above-average price movements associated with
the perceived prospects of success of the research and development programs.
. FOREIGN RISK This is the risk of investments in issuers located in foreign
countries. Investments in foreign securities may experience more rapid and
extreme changes in value than investments in securities of U.S. companies. This
is because the securities markets of many foreign countries are relatively
small, with a limited number of companies representing a small number of
industries. Additionally, foreign securities issuers are usually not subject to
the same degree of regulation as U.S. issuers. Reporting, accounting, and
auditing standards of foreign countries differ, in some cases significantly,
from U.S. standards. Also, nationalization, expropriation or confiscatory
taxation, currency blockage, or political changes or diplomatic developments
could adversely affect the Fund's investments in a foreign country. In the
event of nationalization, expropriation, or other confiscation, the Fund could
lose its entire investment in that country. To the extent the Fund invests a
substantial amount of its assets in a particular country, your investment has
the risk that market changes or other events affecting that country, including
political instability and unpredictable economic conditions, may have a
particularly significant effect on the Fund's net asset value.
. CURRENCY RISK This is the risk that fluctuations in the exchange rates
between the U.S. dollar and foreign currencies may negatively affect the value
of the Fund's investments.
. CAPITALIZATION RISK This is the risk of investments in small- to
mid-capitalization companies. Investments in small- to mid-cap companies may be
more volatile than large-cap companies. In addition, the Fund's investments in
smaller capitalization stocks may have additional risks because these companies
often have limited product lines, markets, or financial resources.
. MANAGEMENT RISK The Fund is subject to management risk because it is an
actively managed investment Fund. Alliance will apply its investment techniques
and risk analyses in making investment decisions for the Fund, but there is no
guarantee that its techniques will produce the intended result.
DESCRIPTION OF INVESTMENT PRACTICES
This section describes the investment practices of the Fund and risks
associated with these practices. Unless otherwise noted, the Fund's use of any
of these practices was specified in the previous section.
FORWARD COMMITMENTS. Forward commitments for the purchase or sale of securities
may include purchases on a "when-issued" basis or purchases or sales on a
"delayed delivery" basis. In some cases, a forward commitment may be
conditioned upon the occurrence of a subsequent event, such as approval and
consummation of a merger, corporate reorganization or debt restructuring (i.e.,
a "when, as and if issued" trade).
When forward commitment transactions are negotiated, the price is fixed at the
time the commitment is made, but delivery and payment for the securities take
place at a later date. Normally, the settlement date occurs within two months
after the transaction, but the Fund may negotiate settlements beyond two
months. Securities purchased or sold under a forward commitment are subject to
market fluctuation, and no interest or dividends accrue to the purchaser prior
to the settlement date.
When-issued securities and forward commitments may be sold prior to the
settlement date, but the Fund enters into when-issued and forward commitments
only with the intention of actually receiving securities or delivering them, as
the case may be. If the Fund chose to dispose of the right to acquire a
when-issued security prior to its acquisition or dispose of its right to
deliver or receive against a forward commitment, it may realize a gain or incur
a loss. Any significant commitment of Fund assets to the purchase of securities
on a "when, as and if issued" basis may increase the volatility of the Fund's
net asset value. No forward commitments will be entered into if, as a result,
the Fund's aggregate commitments under the transactions would be more than 30%
of its total assets. In the event the other party to a forward commitment
transaction were to default, the Fund might lose the opportunity to invest
money at favorable rates or to dispose of securities at favorable prices.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS. The Fund may purchase or sell
forward foreign currency exchange contracts to minimize the risk of adverse
changes in the relationship between the U.S. Dollar and other currencies. A
forward contract is an obligation to purchase or sell a specific currency for
an agreed price at a future date, and is individually negotiated and privately
traded.
The Fund may enter into a forward contract, for example, when it enters into a
contract for the purchase or sale of a security denominated in a foreign
currency in order to "lock in" the U.S. Dollar price of the security
("transaction hedge"). The Fund may not engage in transaction hedges with
respect to the currency of a particular country to an extent greater than the
aggregate amount of the Fund's transactions in that currency. When the Fund
believes that a foreign currency may suffer a substantial decline against the
U.S. Dollar, it may enter into a forward sale contract to sell an amount of
that foreign currency approximating the value of some or all of the Fund's
portfolio securities denominated in such foreign currency; or when the Fund
believes that the U.S. Dollar may suffer a substantial decline against a
foreign currency, it may enter into a forward
8
purchase contract to buy that foreign currency for a fixed dollar amount
("position hedge"). The Fund will not position hedge with respect to a
particular currency to an extent greater than the aggregate market value (at
the time of making such sale) of the securities held in its portfolio
denominated or quoted in that currency. Instead of entering into a position
hedge, the Fund may, in the alternative, enter into a forward contract to sell
a different foreign currency for a fixed U.S. Dollar amount where the Fund
believes that the U.S. Dollar value of the currency to be sold pursuant to the
forward contract will fall whenever there is a decline in the U.S. Dollar
value of the currency in which portfolio securities of the Fund are denominated
("cross-hedge"). Unanticipated changes in currency prices may result in poorer
overall performance for the Fund than if it does not enter into forward
contracts.
Hedging against a decline in the value of a currency does not eliminate
fluctuations in the prices of portfolio securities or prevent losses if the
prices of securities decline. These transactions also preclude the opportunity
for gain if the value of the hedge currency should rise. Moreover, it may not
be possible for the Fund to hedge against a devaluation that is so generally
anticipated that the Fund is not able to contract to sell the currency at a
price above the anticipated devaluation level.
ILLIQUID SECURITIES. The Fund will limit its investment in illiquid securities
to no more than 10% of its net assets. Illiquid securities generally include
(i) direct placements or other securities that are subject to legal or
contractual restrictions on resale or for which there is no readily available
market (e.g., when trading in the security is suspended or, in the case of
unlisted securities, when market makers do not exist or will not entertain bids
or offers), including many individually negotiated currency swaps and any
assets used to cover currency swaps, (ii) over-the-counter options and assets
used to cover over-the-counter options, and (iii) repurchase agreements not
terminable within seven days.
Because of the absence of a trading market for illiquid securities, the Fund
may not be able to realize the price at which they are carried on the Fund's
books upon sale. Alliance will monitor the illiquidity of the Fund's
investments in such securities. Rule 144A securities generally will not be
treated as "illiquid" for purposes of this limit on investments.
The Fund may not be able to readily sell securities for which there is no ready
market. To the extent that these securities are foreign securities, there is no
law in many of the countries in which the Fund may invest similar to the
Securities Act requiring an issuer to register the sale of securities with a
governmental agency or imposing legal restrictions on resales of securities,
either as to length of time the securities may be held or manner of resale.
There may, however, be contractual restrictions on resale of securities.
LOANS OF PORTFOLIO SECURITIES. The Fund may make secured loans of its portfolio
securities to entities with which it can enter into repurchase agreements,
provided that cash and/or liquid high grade debt securities equal to at least
100% of the market value of the securities loaned are deposited and maintained
by the borrower with the Fund. The Fund may lend not more than half of the
securities representing each holding of the portfolio and will not permit a
loan to remain outstanding for more than 30 days. The value of the securities
loaned will not exceed 20% of the value of the Fund's total net assets at the
time a loan is made. The risk in lending portfolio securities, as with other
extensions of credit, consists of the possible failure of the borrower to
return the loaned securities, the possible inadequacy of the collateral given
increases in the market value of the loaned securities, and the possible loss
of rights in the collateral should the borrower fail financially. In
determining whether to lend securities to a particular borrower, Alliance will
consider all relevant facts and circumstances, including the creditworthiness
of the borrower. While securities are on loan, the borrower will pay the Fund
any income from the securities. The Fund may invest any cash collateral in
portfolio securities and earn additional income, or receive an agreed-upon
amount of income from a borrower who has delivered equivalent collateral. The
Fund will have the right to regain record ownership of loaned securities to
exercise beneficial rights such as voting rights, subscription rights, and
rights to dividends, interest or distributions. The Fund may pay reasonable
finders', administrative, and custodial fees in connection with a loan.
REPURCHASE AGREEMENTS. A repurchase agreement arises when a buyer purchases a
security and simultaneously agrees to resell it to the vendor at an agreed-upon
future date, normally a day or a few days later. The resale price is greater
than the purchase price, reflecting an agreed-upon interest rate for the period
the buyer's money is invested in the security. Such agreements permit the Fund
to keep all of its assets at work while retaining "overnight" flexibility in
pursuit of investments of a longer-term nature. If a vendor defaults on its
repurchase obligation, the Fund would suffer a loss to the extent that the
proceeds from the sale of the collateral were less than the repurchase price.
If a vendor goes bankrupt, the Fund might be delayed in, or be prevented from,
selling the collateral for its benefit.
FUTURE DEVELOPMENTS. The Fund may, following written notice to its
shareholders, take advantage of other investment practices that are not
currently contemplated for use by the Fund or are not available but may yet be
developed, to the extent such investment practices are consistent with the
Fund's investment objective and legally permissible for the Fund. Such
investment practices, if they arise, may involve risks that exceed those
involved in the activities described above.
GENERAL. The successful use of the investment practices described above draws
upon Alliance's special skills and experience and usually depends on Alliance's
ability to forecast price movements or currency exchange rate movements
correctly. Should prices or exchange rates move unexpectedly, the Fund may not
achieve the anticipated benefits of the transactions or may realize losses and
thus be in a worse position than if such strategies had not been used.
The Fund's ability to dispose of its positions in forward contracts depends on
the availability of liquid markets in such instruments. There is no public
market for forward contracts. It
9
is impossible to predict the amount of trading interest that may exist in
various types of forward contracts. The lack of a secondary market may reduce
the Fund's ability to obtain the maximum value from the use of forward
contracts. Therefore, no assurance can be given that the Fund will be able to
utilize these instruments effectively.
PORTFOLIO TURNOVER. The Fund is actively managed and, in some cases in response
to market conditions, the Fund's portfolio turnover may exceed 100%. A higher
rate of portfolio turnover increases brokerage and other expenses, which must
be borne by the Fund and its shareholders. High portfolio turnover also may
result in the realization of substantial net short-term capital gains, which,
when distributed, are taxable to shareholders.
TEMPORARY DEFENSIVE POSITION. For temporary defensive purposes, the Fund may
invest in certain types of short-term, liquid, high-grade or high-quality debt
securities. These securities may include U.S. Government securities, qualifying
bank deposits, money market instruments, prime commercial paper and other types
of short-term debt securities, including notes and bonds. Such securities may
also include short-term, foreign-currency denominated securities of the type
mentioned above issued by foreign governmental entities, companies and
supranational organizations. While the Fund is investing for temporary
defensive purposes, it may not meet its investment objective.
ADDITIONAL RISK CONSIDERATIONS
EFFECTS OF BORROWING. The Fund may, when Alliance believes that market
conditions are appropriate, borrow in order to take full advantage of available
investment opportunities. The Fund may, although it has no present intention of
doing so, borrow money from a bank in a privately arranged transaction to
increase the money available to the Fund to invest in securities when the Fund
believes that the return from the securities financed will be greater than the
interest expense paid on the borrowing. Borrowings may involve additional risk
to the Fund because the interest expense may be greater than the income from or
appreciation of the securities carried by the borrowings and the value of the
securities carried may decline below the amount borrowed.
Any investment gains made with the proceeds obtained from borrowings in excess
of interest paid on the borrowings will cause the net income per share and the
net asset value per share of the Fund's common stock to be greater than would
otherwise be the case. On the other hand, if the investment performance of the
additional securities purchased fails to cover their cost (including any
interest paid on the money borrowed) to the Fund, then the net income per share
and net asset value per share of the Fund's common stock will be less than
would otherwise be the case. This is the speculative factor known as "leverage".
Borrowings by the Fund result in leveraging of the Fund's shares of common
stock. Utilization of leverage, which is usually considered speculative,
involves certain risks to the Fund's shareholders. These include a higher
volatility of the net asset value of the Fund's shares of common stock and the
relatively greater effect on the net asset value of the shares. So long as the
Fund is able to realize a net return on its investment portfolio that is higher
than the interest expense paid on borrowings, the effect of leverage will be to
cause the Fund's shareholders to realize a higher current net investment income
than if the Fund were not leveraged. On the other hand, interest rates on U.S.
Dollar-denominated and foreign currency-denominated obligations change from
time to time as does their relationship to each other, depending upon such
factors as supply and demand forces, monetary and tax policies within each
country and investor expectations. Changes in such factors could cause the
relationship between such rates to change so that rates on U.S.
Dollar-denominated obligations may substantially increase relative to the
foreign currency-denominated obligations in which the Fund may be invested. To
the extent that the interest expense on borrowings approaches the net return on
the Fund's investment portfolio, the benefit of leverage to the Fund's
shareholders will be reduced, and if the interest expense on borrowings were to
exceed the net return to shareholders, the Fund's use of leverage would result
in a lower rate of return than if the Fund were not leveraged. Similarly, the
effect of leverage in a declining market could be a greater decrease in net
asset value per share than if the Fund were not leveraged. In an extreme case,
if the Fund's current investment income were not sufficient to meet the
interest expense on borrowings, it could be necessary for the Fund to liquidate
certain of its investments, thereby reducing the net asset value of the Fund's
shares.
FOREIGN SECURITIES. The securities markets of many foreign countries are
relatively small, with the majority of market capitalization and trading volume
concentrated in a limited number of companies representing a small number of
industries. Consequently, the Fund, whose investment portfolio includes foreign
securities, may experience greater price volatility and significantly lower
liquidity than a portfolio invested solely in equity securities of U.S.
companies. These markets may be subject to greater influence by adverse events
generally affecting the market, and by large investors trading significant
blocks of securities, than is usual in the United States. Securities
registration, custody and settlements may in some instances be subject to
delays and legal and administrative uncertainties.
Certain foreign countries require governmental approval prior to investments by
foreign persons or limit investment by foreign persons to only a specified
percentage of an issuer's outstanding securities or a specific class of
securities which may have less advantageous terms (including price) than
securities of the company available for purchase by nationals. These
restrictions or controls may at times limit or preclude investment in certain
securities and may increase the costs and expenses of the Fund. In addition,
the repatriation of investment income, capital or the proceeds of sales of
securities from certain countries is controlled under regulations, including in
some cases the need for certain advance government notification or authority,
and if a deterioration occurs in a
10
country's balance of payments, the country could impose temporary restrictions
on foreign capital remittances.
The Fund also could be adversely affected by delays in, or a refusal to grant,
any required governmental approval for repatriation of profits as well as by
the application of other restrictions on investment. Investing in local markets
may require the Fund to adopt special procedures that may involve additional
costs to the Fund. These factors may affect the liquidity of the Fund's
investments in any country and Alliance will monitor the effect of any such
factor or factors on the Fund's investments. Furthermore, transaction costs
including brokerage commissions for transactions both on and off the securities
exchanges in many foreign countries are generally higher than in the United
States.
Issuers of securities in foreign jurisdictions are generally not subject to the
same degree of regulation as are U.S. issuers with respect to such matters as
insider trading rules, restrictions on market manipulation, shareholder proxy
requirements, and timely disclosure of information. The reporting, accounting,
and auditing standards of foreign countries may differ, in some cases
significantly, from U.S. standards in important respects and less information
may be available to investors in foreign securities than to investors in U.S.
securities. Substantially less information is publicly available about certain
non-U.S. issuers than is available about U.S. issuers.
The economies of individual foreign countries may differ favorably or
unfavorably from the U.S. economy in such respects as growth of gross domestic
product or gross national product, rate of inflation, capital reinvestment,
resource self-sufficiency, and balance of payments position. Nationalization,
expropriation or confiscatory taxation, currency blockage, political changes,
government regulation, political or social instability, or diplomatic
developments could affect adversely the economy of a foreign country and the
Fund's investments. In the event of expropriation, nationalization or other
confiscation, the Fund could lose its entire investment in the country
involved. In addition, laws in foreign countries governing business
organizations, bankruptcy and insolvency may provide less protection to
security holders, such as the Fund, than that provided by U.S. laws.
YEAR 2000. Many computer systems and applications in use today process
transactions using two-digit date fields for the year of the transaction,
rather than the full four digits. If these systems are not modified or
replaced, transactions occurring after 1999 could be processed as year "1900,"
which could result in processing inaccuracies and computer system failures at
or after the year 2000. This is commonly known as the Year 2000 problem. The
Fund and its major service providers, including Alliance, utilize a number of
computer systems and applications that have been either developed internally or
licensed from third-party suppliers. In addition, the Fund and its major
service providers, including Alliance, are dependent on third-party suppliers
for certain systems applications and for electronic receipt of information
critical to their business. Should any of the computer systems employed by the
Fund or its major service providers, including Alliance, fail to process Year
2000 related information properly, that could have a significant negative
impact on the Fund's operations and the services that are provided to the
Fund's shareholders. To the extent that the operations of issuers of securities
held by the Fund are impaired by the Year 2000 problem, the value of the Fund's
shares may be materially affected. In addition, for the Fund's investments in
foreign markets, it is possible that foreign companies and markets will not be
as prepared for Year 2000 as domestic companies and markets.
The Year 2000 issue is a high priority for the Fund and Alliance. The Fund has
been advised that, during 1997, Alliance began a formal Year 2000 initiative
which established a structured and coordinated process to deal with the Year
2000 issue. As part of its initiative, Alliance established a Year 2000 project
office to manage the Year 2000 initiative, focusing on both information
technology and non-information technology systems. Alliance has also retained
the services of a number of consulting firms which have expertise in advising
and assisting with regard to Year 2000 issues. Alliance reports that by June
30, 1998 it had completed its inventory and assessment of its domestic and
international computer systems and applications, identified mission critical
systems and non-mission critical systems and determined which of these systems
were not Year 2000 compliant. All third-party suppliers of mission critical
computer systems and applications have been contacted to verify whether their
systems and applications will be Year 2000 compliant and their responses are
being evaluated. Substantially all of those contacted have responded and
approximately 90% have informed Alliance that their systems and applications
are or will be Year 2000 compliant. Alliance will seek alternative solutions or
third-party suppliers for all suppliers who do not furnish a satisfactory
response by July 31, 1999. The same process is being performed for non-mission
critical systems and is estimated to be completed by July 31, 1999. Alliance
had remediated, replaced or retired all of its non-compliant mission critical
systems and applications that can affect the Fund. After each system has been
remediated, it is tested with 19XX dates to determine if it still performs its
intended business function correctly. Next, each system undergoes a simulation
test using dates occurring after December 31, 1999. Inclusive of the
replacement and retirement of some of its systems, Alliance has completed these
testing phases for approximately 89% of non-mission critical systems.
Integrated systems tests will then be conducted to verify that the systems will
continue to work together. Full integration testing of all mission critical and
non-mission critical systems is estimated to be completed by July 31, 1999.
Testing of interfaces with third-party suppliers has begun and will continue
throughout 1999. The same process is being performed for non-mission critical
systems and is estimated to be completed by July 31, 1999. Alliance reports
that it has completed an inventory of its facilities and related technology
applications and has begun to evaluate and test these systems. Alliance reports
that it anticipates that these systems will be fully operable in the year 2000.
Alliance, with the assistance of a consulting firm, is developing Year 2000
specific contingency plans with emphasis on mission critical
11
functions. These plans seek to provide alternative methods of processing in
the event of a failure that is outside Alliance's control. The estimated date
for the completion of these plans is July 31, 1999.
There are many risks associated with Year 2000 issues, including the risks that
the computer systems and applications used by the Fund and its major service
providers, will not operate as intended and that the systems and applications
of third-party providers to the Fund and its service providers will not be
Year 2000 compliant. Likewise there can be no assurance the compliance
schedules outlined above will be met or that the actual cost incurred will not
exceed current cost estimates. Should the significant computer systems and
applications used by the Fund or its major service providers, or the systems
of their important third-party suppliers, be unable to process date sensitive
information accurately after 1999, the Fund and its service providers may be
unable to conduct their normal business operations and to provide shareholders
with required services. In addition, the Fund and its service providers may
incur unanticipated expenses, regulatory actions and legal liabilities. The
Fund and Alliance cannot determine which risks, if any, are most reasonably
likely to occur or the effects of any particular failure to be Year 2000
compliant. Certain statements provided by Alliance in this section entitled
"Year 2000," as such statements relate to Alliance, are "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995. To the fullest extent permitted by law, the foregoing Year 2000
discussion is a "Year 2000 Readiness Disclosure" within the meaning of the
Year 2000 Information and Readiness Disclosure Act, 15 U.S.C. Sec. 1 (1998).
MANAGEMENT OF THE FUND
INVESTMENT ADVISER AND FUND MANAGER
The Fund's investment adviser is Alliance Capital Management L.P., 1345 Avenue
of the Americas, New York, New York 10105. Alliance is a leading international
investment adviser managing client accounts with assets as of March 31, 1999
totaling more than $301 billion (of which approximately $127 billion
represented assets of investment companies). As of March 31, 1999, Alliance
managed retirement assets for many of the largest public and private employee
benefit plans (including 30 of the nation's FORTUNE 100 companies), for public
employee retirement funds in 32 out of the 50 states, for investment companies,
and for foundations, endowments, banks and insurance companies worldwide. The
54 registered investment companies managed by Alliance, comprising 120 separate
investment portfolios, currently have more than four million shareholder
accounts.
The person primarily responsible for the day-to-day management of the Fund is
Norman Fidel. Mr. Fidel is a Senior Vice President of Alliance Capital
Management Corporation with which he has been associated since prior to 1994.
Under the Advisory Agreement, Alliance receives a fee at an annualized rate of
.95% of the Fund's average daily net assets. The fee will be accrued daily and
paid monthly.
PERFORMANCE OF A SIMILARLY MANAGED FUND. Alliance is the investment adviser of
an investment company organized and operated under the laws of the Grand Duchy
of Luxembourg, ACM International Health Care Fund (the "ACM Fund"), that has
substantially the same investment objective and policies as those of the Fund.
The ACM Fund has been managed in accordance with substantially the same
investment strategies and techniques as are intended to be employed with
respect to the Fund.
Norman Fidel, the portfolio manager of the Fund, is also the person who has
been primarily responsible for the day-to-day management of the ACM Fund since
1988. Mr. Fidel manages approximately $950 million of Health Care Industries
assets, including approximately $330 million of assets in the ACM Fund as of
June 30, 1999.
The ACM Fund is not subject to certain limitations, diversification
requirements and other restrictions imposed under the 1940 Act and the Code to
which the Fund, as a registered investment company, is subject and which, if
applicable to the ACM Fund, may have adversely affected the performance results
of the ACM Fund.
Set forth below are performance data provided by Alliance relating to the Class
AX shares of the ACM Fund since 1988, when Mr. Fidel began managing that
fund. Performance data are shown annually and cumulatively through June 30,
1999.
The performance data are net of all fees imposed by the ACM Fund. The
performance data have not been adjusted to reflect the fees that will be
payable by the Fund, which, at comparable asset levels, may be lower than the
fees imposed on the ACM Fund and may result in a lower expense ratio for the
Fund. Expenses associated with the distribution of Class A, Class B and Class
C shares of the Fund in accordance with the plan adopted by the Fund's Board
of Directors pursuant to Rule 12b-1 under the 1940 Act also are not reflected
in the data below relating to the ACM Fund. See "Fees and Expenses of the
Fund." The performance data have also not been adjusted for corporate or
individual taxes, if any, payable by the ACM Fund shareholders.
The following performance data are provided solely to illustrate Mr. Fidel's
performance in managing the ACM Fund. Investors should not rely on the
following performance data of the ACM Fund as an indication of future
performance of the Fund. The investment performance for the periods presented
may not be indicative of future rates of return.
12
ACM INTERNATIONAL HEALTH CARE FUND
- ----------------------------------
TOTAL RETURNS
-------------
1988 21.82%
1989 46.75%
1990 25.96%
1991 83.07%
1992 -10.46%
1993 -1.38%
1994 13.84%
1995 46.49%
1996 2.18%
1997 23.07%
1998 24.29%
1999* -6.24%
AVERAGE ANNUAL TOTAL RETURN
(FOR PERIODS ENDED 6/30/99)
One year -1.17%
Five years 20.19%
Ten years 19.27%
Cumulative Total Return of the ACM Fund from 12/31/87
to 6/30/99: 789.68%
* THROUGH JUNE 30, 1999 (UNANNUALIZED)
PURCHASE AND SALE OF SHARES
HOW THE FUND VALUES ITS SHARES
The Fund's net asset value or NAV is calculated at 4:00 p.m. Eastern time each
day the Exchange is open for business. To calculate NAV, the Fund's assets are
valued and totaled, liabilities are subtracted, and the balance, called net
assets, is divided by the number of shares outstanding. The Fund values its
securities at their current market value determined on the basis of market
quotations, or, if such quotations are not readily available, such other
methods as the Fund's directors believe accurately reflect fair market value.
Your order for purchase, sale, or exchange of shares is priced at the next NAV
calculated after your order is received in proper form by the Fund. Your
purchase of Fund shares may be subject to an initial sales charge. Sales of
Fund shares may be subject to a contingent deferred sales charge or CDSC. See
the Distribution Arrangements section of this Prospectus for details.
HOW TO BUY SHARES
You may purchase the Fund's shares through broker-dealers, banks, or other
financial intermediaries. You also may purchase shares directly from the Fund's
principal underwriter, Alliance Fund Distributors, Inc., or AFD.
Minimum investment amounts are:
Initial: $250
Subsequent: $50
Automatic Investment Program: $25
If you are an existing Fund shareholder, you may purchase shares by electronic
funds transfer in amounts not exceeding $500,000 if you have completed the
appropriate section of the Shareholder Application. Call 800-221-5672 to
arrange a transfer from your bank account.
The Fund is required to withhold 31% of taxable dividends, capital gains
distributions, and redemptions paid to shareholders who have not provided the
Fund with their certified taxpayer identification number. To avoid this, you
must provide your correct Tax Identification Number (Social Security Number for
most investors) on your account application.
The Fund may refuse any order to purchase shares. In this regard, the Fund
reserves the right to restrict purchases of shares (including through
exchanges) when they appear to evidence a pattern of frequent purchases and
sales made in response to short-term considerations.
INITIAL OFFERING
It is expected that shares of the Fund will be offered during an initial
offering period which is currently scheduled to end on August 24, 1999. The
Fund will begin its continuous offering of shares on August 27, 1999. During
the Fund's initial offering period, Class A shares will be offered to the
public at their net asset value of $10.00 per share plus a sales charge.
The maximum offering price of the Class A shares during the initial offering
period is $10.44 per share. During the initial offering, AFD will "reallow"
to dealers the entire amount of the initial sales charge on Class A shares.
Class B and Class C shares will be offered to the public during the initial
offering period at their net asset value of $10.00 per share.
During the initial offering period, the Fund will not accept subscriptions for
Fund shares other than through authorized dealers and agent, and any
subscription monies sent directly to the Fund will be promptly returned. In
addition, under Commission regulations (e.g., Rule 15c-4 under the Securities
Exchange Act of 1934), authorized dealers and agents will not be permitted to
accept subscription monies from their customers in advance of the purchase date
unless appropriate arrangements are made for the temporary investment or
deposit of such monies. Shares subscribed for during the Fund's initial
offering period will be sold to subscribers on the purchase date, which is
expected to occur not later than August 27, 1999.
HOW TO EXCHANGE SHARES
You may exchange your Fund shares for shares of the same class of other
Alliance Mutual Funds (including AFD Exchange Reserves, a money market fund
managed by Alliance). Exchanges of shares are made at the next-determined NAV,
without sales or service charges. You may request an exchange by mail or
telephone. You must call by 4:00 p.m. Eastern time to receive that day's NAV.
The Fund may change, suspend, or terminate the exchange service on 60 days'
written notice.
HOW TO SELL SHARES
You may "redeem" your shares (i.e., sell your shares to the Fund) on any day
the NYSE is open, either directly or through your financial intermediary. Your
sales price will be the next-determined NAV, less any applicable CDSC, after
the Fund
13
receives your sales request in proper form. Normally, proceeds will be
sent to you within 7 days. If you recently purchased your shares by check or
electronic funds transfer, you cannot redeem any portion of it until the Fund
is reasonably satisfied that the check or electronic funds transfer has been
collected (which may take up to 15 days).
. SELLING SHARES THROUGH YOUR BROKER
Your broker must receive your sales request by 4:00 p.m., Eastern time, and
submit it to the Fund by 5:00 p.m., Eastern time, for you to receive that day's
NAV, less any applicable CDSC. Your broker is responsible for submitting all
necessary documentation to the Fund and may charge you for this service.
. SELLING SHARES DIRECTLY TO THE FUND
BY MAIL:
- --Send a signed letter of instruction or stock power, along with certificates,
to:
Alliance Fund Services
P.O. Box 1520
Secaucus, N.J. 07906-1520
800-221-5672
- --For your protection, a bank, a member firm of a national stock exchange, or
other eligible guarantor institution, must guarantee signatures. Stock power
forms are available from your financial intermediary, AFS, and many commercial
banks. Additional documentation is required for the sale of shares by
corporations, intermediaries, fiduciaries, and surviving joint owners.
If you have any questions about these procedures, contact AFS.
BY TELEPHONE:
- --You may redeem your shares for which no stock certificates have been issued
by telephone request. Call AFS at 800-221-5672 with instructions on how you
wish to receive your sale proceeds.
- --A telephone redemption request must be received by 4:00 p.m. Eastern time for
you to receive that day's NAV, less any applicable CDSC.
- --If you have selected electronic funds transfer in your Shareholder
Application, the redemption proceeds may be sent directly to your bank.
Otherwise, the proceeds will be mailed to you.
- --Redemption requests by electronic funds transfer may not exceed $100,000 per
day and redemption requests by check cannot exceed $50,000 per day.
- --Telephone redemption is not available for shares held in nominee or "street
name" accounts, retirement plan accounts, or shares held by a shareholder who
has changed his or her address of record within the previous 30 calendar days.
DIVIDENDS, DISTRIBUTIONS AND TAXES
The income dividends and capital gains distribution, if any, declared by the
Fund on its outstanding shares will, at the election of each shareholder, be
paid in cash or in additional shares of the same class of shares of the Fund.
If paid in additional shares, the shares will have an aggregate net asset value
as of the close of business on the day following the declaration date of the
dividend or distribution equal to the cash amount of the dividend or
distribution. You may make an election to receive dividends and distributions
in cash or in shares at the time you purchase shares. Your election can be
changed at any time prior to a record date for a dividend. There is no sales or
other charge in connection with the reinvestment of dividends or capital gains
distributions. Cash dividends may be paid in check, or at your election,
electronically via the ACH network. There is no sales or other charge on the
reinvestment of Fund distributions.
If you receive an income dividend or capital gains distribution in cash you
may, within 120 days following the date of its payment, reinvest the dividend
or distribution in additional shares of the Fund without charge by returning to
Alliance, with appropriate instructions, the check representing the dividend or
distribution. Thereafter, unless you otherwise specify, you will be deemed to
have elected to reinvest all subsequent dividends and distributions in shares
of the Fund.
The Fund expects that distributions will consist either of net income or
long-term capital gains. For federal income tax purposes, the Fund's dividend
distributions of net income (or short-term taxable gains) will be taxable to
you as ordinary income. Any capital gains distributions may be taxable to you
as capital gains. The Fund's distributions also may be subject to certain state
and local taxes.
While it is the intention of the Fund to distribute to its shareholders
substantially all of each fiscal year's net income and net realized capital
gains, if any, the amount and time of any dividend or distribution will depend
on the realization by the Fund of income and capital gains from investments.
There is no fixed dividend rate and there can be no assurance that the Fund
will pay any dividends or realize any capital gains. The final determination of
the amount of the Fund's return of capital distributions for the period will be
made after the end of each calendar year.
Investment income received by the Fund from sources within foreign countries
may be subject to foreign income taxes withheld at the source. To the extent
that the Fund is liable for foreign income taxes withheld at the source, the
Fund intends, if possible, to operate so as to meet the requirements of the
Code to "pass through" to the Fund's shareholders credits for foreign income
taxes paid (or to permit shareholders to claim a deduction for such foreign
taxes), but there can be no assurance that the Fund will be able to do so.
Furthermore, a shareholder's ability to claim a foreign tax credit or deduction
in
14
respect of foreign taxes paid by the Fund may be subject to certain limitations
imposed by the Code, as a result of which a shareholder may not be permitted to
claim a full credit or deduction for the amount of such taxes.
Under certain circumstances, if the Fund realizes losses (e.g., from
fluctuations in currency exchange rates) after paying a dividend, all or a
portion of the dividend may subsequently be characterized as a return of
capital. Returns of capital are generally nontaxable, but will reduce a
shareholder's basis in shares of the Fund. If that basis is reduced to zero
(which could happen if the shareholder does not reinvest distributions and
returns of capital are significant), any further returns of capital will be
taxable as capital gain. See the Fund's SAI for a further explanation of these
tax issues.
If you buy shares just before the Fund deducts a distribution from its net
asset value, you will pay the full price for the shares and then receive a
portion of the price back as a taxable distribution.
The sale or exchange of Fund shares is a taxable transaction for federal income
tax purposes.
Each year shortly after December 31, the Fund will send you tax information
stating the amount and type of all its distributions for the year. Consult your
tax adviser about the federal, state, and local tax consequences in your
particular circumstances.
DISTRIBUTION ARRANGEMENTS
SHARE CLASSES. The Fund offers three classes of shares.
CLASS A SHARES--INITIAL SALES CHARGE ALTERNATIVE
You can purchase Class A shares at NAV with an initial sales charge as follows.
INITIAL SALES CHARGE
COMMISSION
TO DEALER/
AGENT AS
AS % OF AS % OF % OF
NET AMOUNT OFFERING OFFERING
AMOUNT PURCHASED INVESTED PRICE PRICE
- -------------------------------------------------------------------------------
Up to $100,000 4.44% 4.25% 4.00%
$100,000 up to $250,000 3.36 3.25 3.00
$250,000 up to $500,000 2.30 2.25 2.00
$500,000 up to $1,000,000 1.78 1.75 1.50
You pay no initial sales charge on purchases of Class A Shares in the amount of
$1,000,000 or more, but may pay a 1% CDSC if you redeem your shares within
1 year. Alliance may pay the dealer or agent a fee of up to 1% of the dollar
amount purchased. Certain purchases of Class A shares may qualify for reduced
or eliminated sales charges under the Fund's Combined Purchase Privilege,
Cumulative Quantity Discount, Statement of Intention, Privilege for Certain
Retirement Plans, Reinstatement Privilege, and Sales at Net Asset Value
Programs. Consult the Subscription Application and the Fund's SAI for
additional information about these options.
CLASS B SHARES--DEFERRED SALES CHARGE ALTERNATIVE
You can purchase Class B Shares at NAV without an initial sales charge. The
Fund will thus receive the full amount of your purchase. Your investment,
however, will be subject to a CDSC if you redeem shares within 4 years of
purchase. The CDSC varies depending on the number of years you hold the shares.
The CDSC amounts are:
YEAR SINCE PURCHASE CDSC
- ------------------- ----
First 4.0%
Second 3.0%
Third 2.0%
Fourth 1.0%
Fifth None
If you exchange your shares for the Class B shares of another Alliance Mutual
Fund, the CDSC also will apply to those Class B shares. The CDSC period begins
with the date of your original purchase, not the date of exchange for the other
Class B shares.
The Fund's Class B shares purchased for cash automatically convert to Class A
shares eight years after the end of the month of your purchase. If you purchase
shares by exchange for the Class B shares of another Alliance Mutual Fund, the
conversion period runs from the date of your original purchase.
CLASS C SHARES--ASSET-BASED SALES CHARGE ALTERNATIVE
You can purchase shares at NAV without an initial sales charge. The Fund will
thus receive the full amount of your purchase. Your investment, however, will
be subject to a 1% CDSC if you redeem your shares within 1 year. If you
exchange your shares for the Class C shares of another Alliance Mutual Fund,
the 1% CDSC also will apply to those Class C shares. The 1-year period for the
CDSC begins with the date of your original purchase, not the date of the
exchange for the other Class C shares.
Class C shares do not convert to any other class of shares of the Fund.
ASSET-BASED SALES CHARGE OR RULE 12B-1 FEES. The Fund has adopted a plan under
Commission Rule 12b-1 that allows the Fund to pay asset-based sales charges or
distribution and service fees for the distribution and sale of its shares. The
amount of these fees for each class of the Fund's shares is:
RULE 12B-1 FEE (AS A PERCENTAGE OF
AGGREGATE AVERAGE DAILY NET ASSETS)
------------------------------------
Class A .30%
Class B 1.00%
Class C 1.00%
Because these fees are paid out of the Fund's assets on an on-going basis, over
time these fees will increase the cost of your investment and may cost you more
than paying other types of sales fees. Class B and Class C shares are subject
to higher distribution fees than Class A shares (Class B shares are subject to
these higher fees for a period of eight years, after which they convert to
Class A shares). The higher fees mean a higher expense ratio, so Class B and
Class C shares pay correspondingly lower dividends and may have a lower net
asset value than Class A shares.
CHOOSING A CLASS OF SHARES. The decision as to which class of shares is more
beneficial to you depends on the amount and intended length of your investment.
If you are making a large investment, thus qualifying for a reduced sales
charge, you
15
might consider purchasing Class A shares. If you are making a smaller
investment, you might consider purchasing Class B shares because 100% of your
purchase is invested immediately. If you are unsure of the length of your
investment, you might consider Class C shares because there is no initial
sales charge and no CDSC as long as the shares are held for one year or more.
Dealers and agents may receive differing compensation for selling Class A,
Class B, or Class C shares. There is no size limit on purchases of Class A
shares. The maximum purchase of Class B shares is $250,000. The maximum
purchase of Class C shares is $1,000,000.
You should consult your financial agent to assist in choosing a class of Fund
shares.
APPLICATION OF THE CDSC. The CDSC is applied to the lesser of the original cost
of shares being redeemed or NAV at the time of redemption (or, as to Fund
shares acquired through an exchange, the cost of the Alliance Mutual Fund
shares originally purchased for cash). Shares obtained from dividend or
distribution reinvestment are not subject to the CDSC. The Fund may waive the
CDSC on redemptions of shares following the death or disability of a
shareholder, to meet the requirements of certain qualified retirement plans, or
under a monthly, bimonthly, or quarterly systematic withdrawal plan. See the
Fund's SAI for further information about CDSC waivers.
OTHER. A transaction, service, administrative or other similar fee may be
charged by your broker-dealer, agent, financial intermediary or other financial
representative with respect to the purchase, sale or exchange of Class A, Class
B or Class C shares made through such financial representative. Such financial
intermediaries may also impose requirements with respect to the purchase, sale,
or exchange of shares that are different from, or in addition to, those imposed
by the Fund, including requirements as to the minimum initial and subsequent
investment amounts.
GENERAL INFORMATION
Under unusual circumstances, the Fund may suspend redemptions or postpone
payment for up to seven days or longer, as permitted by federal securities law.
The Fund reserves the right to close an account that through redemption has
remained below $200 for 90 days. Shareholders will receive 60 days' written
notice to increase the account value before the account is closed.
During drastic economic or market developments, you might have difficulty in
reaching AFS by telephone, in which event you should issue written instructions
to AFS. AFS is not responsible for the authenticity of telephone requests to
purchase, sell, or exchange shares. AFS will employ reasonable procedures to
verify that telephone requests are genuine, and could be liable for losses
resulting from unauthorized transactions if it failed to do so. Dealers and
agents may charge a commission for handling telephone requests. The telephone
service may be suspended or terminated at any time without notice.
SHAREHOLDER SERVICES. AFS offers a variety of shareholder services. For more
information about these services or your account, call AFS's toll-free number,
800-221-5672. Some services are described in the attached Subscription
Application. You also may request a shareholder's manual explaining all
available services by calling 800-227-4618.
EMPLOYEE BENEFIT PLANS. Certain employee benefit plans, including
employer-sponsored tax-qualified 401(k) plans and other defined contribution
retirement plans ("Employee Benefit Plans"), may establish requirements as to
the purchase, sale or exchange of shares, including maximum and minimum initial
investment requirements, that are different from those described in this
Prospectus. Employee Benefit Plans also may not offer all classes of shares of
the Fund. In order to enable participants investing through Employee Benefit
Plans to purchase shares of the Fund, the maximum and minimum investment
amounts may be different for shares purchased through Employee Benefit Plans
from those described in this Prospectus. In addition, the Class A, Class B, and
Class C CDSC may be waived for investments made through Employee Benefit Plans.
For more information about the Fund, the following documents are available upon
request:
. STATEMENT OF ADDITIONAL INFORMATION (SAI)
The Fund has an SAI, which contains more detailed information about the Fund,
including its operations and investment policies. The Fund's SAI is
incorporated by reference into (and is legally part of) this Prospectus.
You may request a free copy of the SAI or make shareholder inquiries of the
Fund by contacting your broker or other financial intermediary, or by
contacting Alliance:
BY MAIL: C/O ALLIANCE FUND SERVICES, INC.
P.O. BOX 1520
SECAUCUS, NJ 07096-1520
BY PHONE: For Information: (800) 221-5672
For Literature: (800) 227-4618
Or you may view or obtain these documents from the Commission:
IN PERSON: at the Commission's Public Reference Room
in Washington, D.C.
BY PHONE: 1-800-SEC-0330
BY MAIL: Public Reference Section
Securities and Exchange Commission
Washington, DC 20549-6009
(duplicating fee required)
ON THE INTERNET: www.sec.gov
You also may find more information about Alliance and the Fund on the Internet
at: www.Alliancecapital.com.
SEC File No. 811-09329
16
Alliance Health Care Fund Subscription Application
TO OPEN YOUR NEW ALLIANCE ACCOUNT...
Please complete the application and mail it to:
ALLIANCE FUND SERVICES, INC.
P.O. BOX 1520
SECAUCUS, NEW JERSEY 07096-1520
For certified or overnight deliveries, send to:
ALLIANCE FUND SERVICES, INC.
500 PLAZA DRIVE
SECAUCUS, NEW JERSEY 07094
SECTION 1 YOUR ACCOUNT REGISTRATION (REQUIRED)
Complete one of the available choices. To ensure proper tax reporting to the
IRS:
x Individuals, Joint Tenants, Transfer on Death and Gift/Transfer to a Minor:
. Indicate your name(s) exactly as it appears on your social security card.
X Transfer on Death:
. Ensure that your state participates
x Trust/Other:
. Indicate the name of the entity exactly as it appeared on the notice you
received from the IRS when your Employer Identification number was assigned.
SECTION 2 YOUR ADDRESS (REQUIRED)
Complete in full.
X Non-Resident Alien:
. Indicate your permanent country of residence.
SECTION 3 YOUR INITIAL INVESTMENT (REQUIRED)
For each fund in which you are investing: 1 Write the three digit fund number
in the column titled 'INDICATE THREE DIGIT FUND NUMBER LOCATED BELOW'. 2 Write
the dollar amount of your initial purchase in the column titled 'INDICATE
DOLLAR AMOUNT'. (If you are eligible for a reduced sales charge, you must also
complete Section 4F). 3 Check off a distribution option for your dividends. 4
Check off a distribution option for your capital gains. All distributions
(dividends and capital gains) will be reinvested into your fund account unless
you direct otherwise. If you want distributions sent directly to your bank
account, then you must complete Section 4D and attach a preprinted, voided
check for that account. If you want your distributions sent to a third party
you must complete Section 4E.
SECTION 4 YOUR SHAREHOLDER OPTIONS (COMPLETE ONLY THOSE OPTIONS YOU WANT)
A. AUTOMATIC INVESTMENT PLANS (AIP) - You can make periodic investments into
any of your Alliance Funds in one of three ways. First, by a periodic
withdrawal ($25 minimum) directly from your bank account and invested into an
Alliance Fund. Second, you can direct your distributions (dividends and capital
gains) from one Alliance Fund into another Fund. Or third, you can
automatically exchange monthly ($25 minimum) shares of one Alliance Fund for
shares of another Fund. To elect one of these options, complete the appropriate
portion of Section 4A & 4D.
If more than one dividend direction or monthly exchange is desired, please call
our Literature Center to obtain a Shareholder Account Services Options Form for
completion.
B. TELEPHONE TRANSACTIONS VIA EFT - Complete this option if you would like to
be able to transact via telephone between your fund account and your bank
account.
C. SYSTEMATIC WITHDRAWAL PLANS (SWP) - Complete this option if you wish to
periodically redeem dollars from one of your fund accounts. Payments can be
made via Electronic Funds Transfer (EFT) to your bank account or by check.
D. BANK INFORMATION - If you have elected any options that involve
transactions between your bank account and your fund account or have elected
cash distribution options and would like the payments sent to your bank
account, please tape a preprinted, voided check of the account you wish to use
to this section of the application.
E. THIRD PARTY PAYMENT DETAILS - If you have chosen cash distributions and/or
a Systematic Withdrawal Plan and would like the payments sent to a person
and/or address other than those provided in section 1 or 2, complete this
option. Medallion Signature Guarantee is required if your account is not
maintained by a broker dealer.
F. REDUCED CHARGES (CLASS A ONLY) - Complete if you would like to link fund
accounts that have combined balances that might exceed $100,000 so that future
purchases will receive discounts. Complete if you intend to purchase over
$100,000 within 13 months.
SECTION 5 SHAREHOLDER AUTHORIZATION (REQUIRED) All owners must sign. If it is a
custodial, corporate, or trust account, the custodian, an authorized officer,
or the trustee respectively must sign.
IF WE CAN ASSIST YOU IN ANY WAY, PLEASE DO NOT HESITATE TO CALL US AT: (800)
221-5672
OR VISIT OUR WEBSITE AT: WWW.ALLIANCECAPITAL.COM
FOR LITERATURE CALL: (800) 227-4618
Alliance Health Care Fund Subscription Application
- --------------------------------------------------------------------------------
1. Your Account Registration (Please Print in Capital Letters and Mark Check
Boxes Where Applicable)
- --------------------------------------------------------------------------------
|_| Individual Account [ |_| Male |_| Female ] - or - |_| Joint Account - or -
|_| Transfer On Death [ |_| Male |_| Female ] - or - Gift/Transfer to a Minor
|_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_|
Owner or Custodian (First Name) (MI) (Last Name)
|_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_|
(First Name) Joint Owner*, (MI) (Last Name)
Transfer On Death Beneficiary
or Minor
|_| |_| |_| - |_| |_| - |_| |_| |_| |_|
Social Security Number of Owner or Minor
(required to open account)
If Uniform Gift/Transfer
to Minor Account:
|_| |_| Minor's State of Residence
If Joint Tenants Account: * The Account will be registered "Joint Tenants with
right of Survivorship" unless you indicate otherwise below:
|_| In Common |_| By Entirety |_| Community Property
|_| Trust - or - |_| Corporation - or - |_| Other
-------------------------------
|_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_|
Name of Trustee if applicable (First Name) (MI) (Last Name)
|_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_|
Name of Trust or Corporation or Other Entity
|_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_|
Name of Trust or Corporation or Other Entity continued
|_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_|
Trust Dated (MM, DD, YYYY) Tax ID Number (required to open account)
|_| Employer ID Number - OR - |_| Social Security
Number
- --------------------------------------------------------------------------------
2. Your Address
- --------------------------------------------------------------------------------
|_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_|
Street Number Street Name
|_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_|
City State Zip code
|_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| - |_| |_| |_| - |_| |_| |_| |_|
If Non-U.S., Specify Country Daytime Phone Number
|_| U.S. Citizen |_| Resident Alien |_| Non-Resident Alien
-------------------
-------------------
90663GEN-HCFApp-P1 e-mail address
1
- --------------------------------------------------------------------------------
3. Your Initial Investment The minimum investment is $250 per fund.
The maximum investment in Class B is $250,000; Class C is $1,000,000.
- --------------------------------------------------------------------------------
I hereby subscribe for shares of the following the Alliance Health Care Fund
and elect distribution options as indicated.
- ---------------------------------------
Broker/Dealer Use Only: Wire Confirm #
|_| |_| |_| |_| |_| |_| |_| |_|
- ---------------------------------------
Dividend and Capital Gain Distribution Options:
R Reinvest distributions into my fund account.
C Send my distributions in cash to the address I have provided in Section 2.
(Complete Section 4D for direct deposit to your bank account. Complete
Section 4E for payment to a third party).
D Direct my distributions to another Alliance fund. Complete the appropriate
portion of Section 4A to direct your distributions (dividends and capital
gains) to another Alliance Fund.
- ----------- ------------- ---------------------- ---------------------------
Make all Distributions Options
checks* Indicate three *Check One*
payable to: digit Fund Indicate Dollar Amount ---------------------------
Alliance number Dividends Capital Gains
Funds located below R C D R C D
- ----------- ------------- ---------------------- ----------- -------------
|_| |_| |_| $ |__________________| |R| |C| |D| |R| |C| |D|
|_| |_| |_| $ |__________________| |R| |C| |D| |R| |C| |D|
|_| |_| |_| $ |__________________| |R| |C| |D| |R| |C| |D|
- ----------------------
Total Investment $ |__________________|
- ----------------------
* Cash and money orders are not accepted
- --------------------------------------------------------------------------------
Alliance Health Care Fund Numbers
- --------------------------------------------------------------------------------
------------- -------------- ------------
Contingent
Initial Sales Deferred Sales Asset-Based
Charge Charge Sales Charge
A B C
------------- -------------- ------------
Alliance Health Care Fund 108 208 308
----------------------------------------------------------------------
90663GEN-HCFApp-P2 Alliance Capital [LOGO](R)
The Investment Professional's Choice
2
- --------------------------------------------------------------------------------
4. Your Shareholder Options
- --------------------------------------------------------------------------------
A. Automatic Investment Plans (AIP)
|_| Withdraw From My Bank Account Via EFT*
I authorize Alliance to draw on my bank account for investment in my
fund account(s) as indicated below (Complete Section 4D also for the
bank account you wish to use).
1 - |_| |_| |_| |_| |_| |_| |_| |_| |_| , |_| |_| |_|.00 |_|
Fund Number Beginning Date Amount ($25 minimum) Frequency
(MM,DD)
2 - |_| |_| |_| |_| |_| |_| |_| |_| |_| , |_| |_| |_|.00 |_|
Fund Number Beginning Date Amount ($25 minimum) Frequency
(MM,DD)
3 - |_| |_| |_| |_| |_| |_| |_| |_| |_| , |_| |_| |_|.00 |_|
Fund Number Beginning Date Amount ($25 minimum) Frequency
(MM,DD)
Frequency: M = monthly Q = quarterly A = annually
* Electronic Funds Transfer. Your bank must be a member of the
National Automated Clearing House Association (NACHA)
|_| Direct My Distributions As indicated in Section 3, I would like my
dividends and/or capital gains directed to the same class of shares of
another Alliance Fund.
FROM: |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| - |_|
Fund Number Account Number (If existing)
TO: |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| - |_|
Fund Number Account Number (If existing)
|_| Exchange My Shares Monthly I authorize Alliance to transact monthly
exchanges, within the same class of shares, between my fund accounts as
listed below.
FROM: |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| - |_|
Fund Number Account Number (If existing)
|_| |_| , |_| |_| |_|.00 |_| |_|
Amount ($25 minimum) Day of Exchange**
TO: |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| - |_|
Fund Number Account Number (If existing)
** Shares exchanged will be redeemed at the net asset value on the "Day of
Exchange" (If the "Day of Exchange" is not a fund business day, the
exchange transaction will be processed on the next fund business day). The
exchange privilege is not available if stock certificates have been
issued.
B. Purchases and Redemptions Via EFT
You can call our toll-free number 1-800-221-5672 and instruct Alliance
Fund Services, Inc. in a recorded conversation to purchase, redeem or
exchange shares for your account. Purchase and redemption requests will be
processed via electronic funds transfer (EFT) to and from your bank
account.
Instructions: o Review the information in the Prospectus about
telephone transaction services.
o If you select the telephone purchase or redemption
privilege, you must write "VOID" across the face
of a check from the bank account you wish to use
and attach it to Section 4D of this application.
|_| Purchases and Redemptions via EFT
I hereby authorize Alliance Fund Services, Inc. to effect the purchase
and/or redemption of Fund shares for my account according to my telephone
instructions or telephone instructions from my Broker/Agent, and to
withdraw money or credit money for such shares via EFT from the bank
account I have selected.
- --------------------------------------------------------------------------------
For shares recently purchased by check or electronic funds transfer
redemption proceeds will not be made available until the Fund is
reasonably assured the check or electronic funds transfer has been
collected, normally 15 calendar days after the purchase date.
- --------------------------------------------------------------------------------
90663GEN-HCFApp-P3
3
- --------------------------------------------------------------------------------
4. Your Shareholder Options (CONTINUED)
- --------------------------------------------------------------------------------
C. Systematic Withdrawal Plans (SWP)
In order to establish a SWP, you must reinvest all dividends and capital
gains.
|_| I authorize Alliance to transact periodic redemptions from my fund
account and send the proceeds to me as indicated below.
1 - |_| |_| |_| |_| |_| |_| |_| |_| |_| , |_| |_| |_|.00 |_|
Fund Number Beginning Date Amount ($25 minimum) Frequency
(MM,DD)
2 - |_| |_| |_| |_| |_| |_| |_| |_| |_| , |_| |_| |_|.00 |_|
Fund Number Beginning Date Amount ($25 minimum) Frequency
(MM,DD)
3 - |_| |_| |_| |_| |_| |_| |_| |_| |_| , |_| |_| |_|.00 |_|
Fund Number Beginning Date Amount ($25 minimum) Frequency
(MM,DD)
Frequency: M = monthly Q = quarterly A = annually
Please send my SWP proceeds to:
|_| My Address of Record (via check)
|_| The Payee and address specified in section 4E (via check) (Medallion
Signature Guarantee required)
|_| My checking account-via EFT (complete section 4D) Your bank must be
a member of the National Automated Clearing House Association
(NACHA) in order for you to receive SWP proceeds directly into your
bank account. Otherwise payment will be made by check
D. Bank Information This bank account information will be used for:
|_| Distributions (Section 3)
|_| Automatic Investments (Section 4A)
|_| Telephone Transactions (Section 4B)
|_| Withdrawals (Section 4C)
- --------------------------------------------------------------------------------
Please Tape a Pre-printed Voided Check Here*
- --------------------------------------------------------------------------------
[GRAPHIC OMITTED]
* The above services cannot be established without a pre-printed voided
check.
For EFT transactions, the fund requires signatures of bank account owners
exactly as they appear on bank records. If the registration at the bank
differs from that on the Alliance mutual fund, all parties must sign in
Section 5.
|_| |_| |_| |_| |_| |_| |_| |_| |_|
Your Bank's ABA Routing Number
|_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_|
Your Bank Account Number
|_| Checking Account |_| Savings Account
90663GEN-HCFApp-P4
4
- --------------------------------------------------------------------------------
4. Your Shareholder Options (CONTINUED)
- --------------------------------------------------------------------------------
E. Third Party Payment Details Your signature(s) in Section 5 must be
Medallion Signature Guaranteed if your account is not maintained by a
broker/dealer. This third party payee information will be used for:
|_| Distributions (section 3) |_| Systematic Withdrawals (section 4C)
|_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_|
Name (First Name) (MI) (Last Name)
|_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_|
Street Number Street Name
|_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_|
City State Zip code
F. Reduced Charges (Class A only) If you, your spouse or minor children own
shares in other Alliance funds, you may be eligible for a reduced sales
charge. Please complete the Right of Accumulation section or the Statement
of Intent section.
|_| A. Right of Accumulation
Please link the tax identification numbers or account numbers
listed below for Right of Accumulation privileges, so that this and
future purchases will receive any discount for which they are
eligible.
________________________ ________________________
________________________ ________________________
Tax ID or Account Number Tax ID or Account Number
________________________
________________________
Tax ID or Account Number
|_| B. Statement of Intent
I want to reduce my sales charge by agreeing to invest the
following amount over a 13-month period:
|_| $100,000 |_| $250,000 |_| $500,000 |_| $1,000,000
If the full amount indicated is not purchased within 13 months, I
understand that an additional sales charge must be paid from my
account.
- --------------------------------------------------------------------------------
Dealer/Agent Authorization - For selected Dealers or Agents ONLY.
- --------------------------------------------------------------------------------
We hereby authorize Alliance Fund Services, Inc. to act as our agent in
connection with transactions under this authorization form; and we guarantee the
signature(s) set forth in Section 5, as well as the legal capacity of the
shareholder.
____________________________________ ______________________________________
Dealer/Agent Firm Authorized Signature
___________________________ |_| ______________________________________
Representative First Name MI Last Name
____________________________________ ______________________________________
Dealer/Agent Firm Number Representative Number
____________________________________ ______________________________________
Branch Number Branch Telephone Number
______________________________________________________________________________
Branch Office Address
____________________________________ |_| |_| ____________________________
City State Zip Code
90663GEN-HCFApp-P5
5
- --------------------------------------------------------------------------------
5. Shareholder Authorization -- This section MUST be completed
- --------------------------------------------------------------------------------
Telephone Exchanges and Redemptions by Check
Unless I have checked one or both boxes below, these privileges will
automatically apply, and by signing this application, I hereby authorize
Alliance Fund Services, Inc. to act on my telephone instructions, or on
telephone instructions from any person representing himself to be an
authorized employee of an investment dealer or agent requesting a
redemption or exchange on my behalf. (NOTE: Telephone exchanges may only
be processed between accounts that have identical registrations.)
Telephone redemption checks will only be mailed to the name and address of
record; and the address must not have changed within the last 30 days. The
maximum telephone redemption amount is $50,000 for redemptions by check.
|_| I do not elect the telephone exchange service
|_| I do not elect the telephone redemption by check service
By selecting any of the above telephone privileges, I agree that neither
the Fund nor Alliance, Alliance Fund Distributors, Inc., Alliance Fund
Services, Inc. or other Fund Agent will be liable for any loss, injury,
damage or expense as a result of acting upon telephone instructions
purporting to be on my behalf, that the Fund reasonably believes to be
genuine, and that neither the Fund nor any such party will be responsible
for the authenticity of such telephone instructions. I understand that any
or all of these privileges may be discontinued by me or the Fund at any
time. I understand and agree that the Fund reserves the right to refuse
any telephone instructions and that my investment dealer or agent reserves
the right to refuse to issue any telephone instructions I may request.
For non-residents only: Under penalties of perjury, I certify that to the
best of my knowledge and belief, I qualify as a foreign person as
indicated in Section 2.
I am of legal age and capacity and have received and read the Prospectus
and agree to its terms.
I certify under penalty of perjury that the number shown in Section 1 of
this form is my correct tax identification number or I am waiting for a
number to be issued to me and that I have not been notified that this
account is subject to backup withholding.
The Internal Revenue Service does not require your consent to any
provision of this document other than the certification required to avoid
backup withholding.
- ----------------------------------------------------------- -------------
Signature Date
- ----------------------------------------------------------- -------------
Signature Date
- --------------------------------------------
Medallion Signature Guarantee required if
completing Section 4E and your mutual
fund is not maintained by a broker dealer
90663GEN-HCFApp-P6 Alliance Capital [LOGO](R)
The Investment Professional's Choice
6
<PAGE>
This is filed pursuant to Rule 497(c).
File Nos. 333-77953 and 811-09329.
<PAGE>
ALLIANCE HEALTH CARE FUND
Alliance Health Care Fund, Inc. is an open-end management investment company
that offers investors the opportunity to seek capital appreciation through
investment in health care and health care-related industries.
The Securities and Exchange Commission has not approved or disapproved these
securities or passed upon the adequacy or accuracy of this Prospectus. Any
representation to the contrary is a criminal offense.
Advisor Class Prospectus and Application
July 26, 1999
ALLIANCE CAPITAL [logo]
TABLE OF CONTENTS
- -------------------------------------------------------------------------------
Page
RISK/RETURN SUMMARY 3
FEES AND EXPENSES OF THE FUND 5
GLOSSARY 6
DESCRIPTION OF THE FUND 6
Investment Objective, Policies and Risk
Considerations 6
Description of Investment Practices 8
Additional Risk Considerations 10
MANAGEMENT OF THE FUND 12
PURCHASE AND SALE OF SHARES 13
How The Fund Values Its Shares 13
How To Buy Shares 13
How To Exchange Shares 13
How To Sell Shares 13
DIVIDENDS, DISTRIBUTIONS AND TAXES 14
CONVERSION FEATURE 15
GENERAL INFORMATION 15
The Fund's investment adviser is Alliance Capital Management L.P., a global
investment manager providing diversified services to institutions and
individuals through a broad line of investments including more than 100 mutual
funds.
RISK/RETURN SUMMARY
The following is a summary of certain key information about Alliance Health
Care Fund, Inc. This Summary describes the Fund's objective, principal
investment strategies, principal risks and fees. This Summary includes a short
discussion of some of the principal risks of investing in the Fund.
A more detailed description of the Fund, including the risks associated with
investing in the Fund, can be found further back in this Prospectus. Please be
sure to read this additional information BEFORE you invest.
Other important things for you to note:
. You may lose money by investing in the Fund.
. An investment in the Fund is not a deposit in a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.
3
OBJECTIVE:
THE FUND'S INVESTMENT OBJECTIVE IS CAPITAL APPRECIATION AND, SECONDARILY,
CURRENT INCOME.
PRINCIPAL INVESTMENT STRATEGIES:
Under normal circumstances the Fund invests at least 65%, and normally
substantially all, of the value of its total assets in securities issued by
companies principally engaged in health care and health care-related
industries ("Health Care Industries") (companies principally engaged in the
discovery, development, provision, production or distribution of products and
services that relate to the diagnosis, treatment and prevention of diseases or
other medical disorders). Although the payment of dividends will be a factor
considered in the selection of investments for the Fund, the Fund seeks
primarily to take advantage of capital appreciation opportunities identified by
Alliance in emerging technologies and services in Health Care Industries by
investing in companies which are expected to profit from the development of new
products and services for these industries. The Fund expects under normal
circumstances to invest primarily in the equity securities of U.S. companies.
The Fund may invest up to 40% of its total assets in securities of non-U.S.
companies and other foreign securities. The Fund may invest in new, smaller or
less-seasoned companies as well as in larger, established companies in the
Health Care Industries.
PRINCIPAL RISKS:
Among the principal risks of investing in the Fund are market risk and sector
risk. Unlike many other equity funds, the Fund invests in the securities of
companies principally engaged in Health Care Industries. As a result,
certain economic conditions and market changes that affect those industries may
have a more significant effect on the Fund's net asset value than on the value
of a more broadly diversified fund. For example, the Fund's share price could
be affected by changes in competition, legislation or government regulation,
government funding, product liability and other litigation, the obsolescence
or development of products, or other factors specific to the health care and
health sciences industries. The Fund's investments in foreign securities have
foreign risk, which is the risk of investing in issuers located in foreign
countries, and currency risk, which is the risk of losses from adverse changes
in currency exchange rates. The Fund may invest in small- to mid-capitalization
companies and such investments have capitalization risk. These investments may
be more volatile than investments in large-cap companies. The Fund may at times
use certain types of investment derivatives such as forwards. The use of these
techniques involves special risks that are discussed in this Prospectus. The
Fund is not a complete investment program and investors should invest only a
portion of their assets in the Fund.
BAR CHART AND PERFORMANCE TABLE:
There is no bar chart or performance table for the Fund because it has not
completed a full calendar year of operations.
4
FEES AND EXPENSES OF THE FUND
- -------------------------------------------------------------------------------
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.
SHAREHOLDER FEES (fees paid directly from your investment)
ADVISOR CLASS SHARES
--------------------
Maximum Front-End or Deferred Sales Charge (Load)
(as a percentage of original purchase price or
redemption proceeds, whichever is lower) None
ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from Fund assets)
OPERATING EXPENSES
- ----------------------------------------------------------
Management fees .95%
Distribution (12b-1) fees None
Other expenses 1.40%
Total Fund operating
expenses 2.35%
Fee waiver and/or expense
reimbursement (a) (.15)%
Net expenses 2.20%
EXAMPLE
The Example is to help you compare the cost of investing in the Fund with the
cost of investing in other funds. It assumes that you invest $10,000 in the
Fund for the time periods indicated and then redeem all of your shares at the
end of those periods. It also assumes that your investment has a 5% return each
year, that the Fund's operating expenses stay the same and that all dividends
and distributions are reinvested. Your actual costs may be higher or lower.
EXAMPLE(b)
- --------------------------------
After 1 year $223
After 3 years $719
(A) ALLIANCE HAS AGREED TO WAIVE ITS MANAGEMENT FEES AND/OR TO BEAR EXPENSES
OF THE FUND THROUGH AUGUST 31, 2000 TO THE EXTENT NECESSARY TO PREVENT TOTAL
FUND OPERATING EXPENSES, ON AN ANNUALIZED BASIS, FROM EXCEEDING THE NET
EXPENSES REFLECTED IN THIS TABLE. FROM THAT DATE THROUGH AUGUST 31, 2002, THE
FEES WAIVED AND EXPENSES BORNE BY ALLIANCE DURING THIS PERIOD MAY BE REIMBURSED
BY THE FUND. NO REIMBURSEMENT PAYMENT WILL BE MADE THAT WOULD CAUSE THE
FUND'S TOTAL ANNUALIZED OPERATING EXPENSES TO EXCEED THE NET EXPENSES REFLECTED
IN THE TABLE OR CAUSE THE TOTAL OF THE PAYMENTS TO EXCEED THE FUND'S TOTAL
INITIAL ORGANIZATIONAL AND OFFERING EXPENSES.
(B) THIS EXAMPLE ASSUMES THAT ALLIANCE'S AGREEMENT TO WAIVE MANAGEMENT FEES
AND/OR TO BEAR OPERATING EXPENSES IS NOT EXTENDED BEYOND ITS INITIAL PERIOD.
5
GLOSSARY
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This Prospectus uses the following terms.
TYPES OF SECURITIES
CONVERTIBLE SECURITIES are fixed-income securities that are convertible into
common stock.
DEBT SECURITIES are bonds, debentures, notes, bills, loans, other direct debt
instruments, and other fixed, floating and variable rate debt obligations, but
do not include convertible securities.
EQUITY SECURITIES are (i) common stocks, partnership interests, business trust
shares, and other equity ownership interests in business enterprises, and (ii)
securities convertible into, and rights and warrants to subscribe for the
purchase of, such stocks, shares and interests.
FIXED-INCOME SECURITIES are debt securities and dividend-paying preferred
stocks, including floating rate and variable rate instruments.
HEALTH CARE INDUSTRIES include the health care and health care-related
(including health sciences) industries. These industries are principally
engaged in the discovery, development, provision, production or distribution
of products and services that relate to the diagnosis, treatment and
prevention of diseases or other medical disorders. Companies in these fields
include, but are not limited to, pharmaceutical firms; companies that design,
manufacture or sell medical supplies, equipment and support services;
companies that operate hospitals and other health care facilities; and
companies engaged in medical, diagnostic, biochemical, biotechnological or
other health sciences research and development.
NON-U.S. COMPANIES are entities (i) that are organized under the laws of a
country other than the United States and have their principal office in a
country other than the United States, or (ii) the equity securities of which
are traded principally in securities markets outside the United States.
RULE 144A SECURITIES are securities that may be resold pursuant to Rule 144A
under the Securities Act.
U.S. GOVERNMENT SECURITIES are securities issued or guaranteed by the United
States Government, its agencies or instrumentalities.
RATING AGENCIES
MOODY'S is Moody's Investors Service, Inc.
S&P is Standard & Poor's Rating Services.
OTHER
1940 ACT is the Investment Company Act of 1940, as amended.
CODE is the Internal Revenue Code of 1986, as amended.
COMMISSION is the Securities and Exchange Commission.
EXCHANGE is the New York Stock Exchange.
SECURITIES ACT is the Securities Act of 1933, as amended.
DESCRIPTION OF THE FUND
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This section of the Prospectus provides a more complete description of the
Fund's investment objective, principal strategies and principal risks. Of
course, there can be no assurance that the Fund will achieve its investment
objective.
Please note:
. Additional discussion of the Fund's investments, including the risks of the
investments that appear in bold type can be found in the discussion under
DESCRIPTION OF INVESTMENT PRACTICES following this section.
. The description of the Fund's risks may include risks discussed in the
RISK/RETURN SUMMARY above. Additional information about the risks of investing
in the Fund can be found in the discussions under ADDITIONAL RISK
CONSIDERATIONS.
. Additional descriptions of the Fund's strategies and investments, as well
as other strategies and investments not described below, may be found in the
Fund's Statement of Additional Information or SAI.
. The Fund's investment objective is "fundamental" and cannot be changed
without a shareholder vote and, except as noted, the Fund's investment policies
are not fundamental and thus can be changed without a shareholder vote.
INVESTMENT OBJECTIVE, POLICIES AND RISK CONSIDERATIONS
INVESTMENT OBJECTIVE
The Fund's investment objective is capital appreciation and, secondarily,
current income.
HOW THE FUND PURSUES ITS OBJECTIVE
In seeking to achieve its investment objective, under normal circumstances the
Fund invests at least 65%, and normally substantially all, of the value of its
total assets in securities issued by companies principally engaged in
Health Care Industries.
The Fund seeks investments in both new, smaller and less seasoned companies and
well-known, larger and established companies. Whenever possible, investments in
new, smaller or less seasoned companies will be made with a view to benefiting
from the development and growth of new products and markets in Health Care
Industries. Investments in these companies may offer more reward but may also
entail more risk than is generally true of larger, established companies.
While the Fund anticipates that a substantial portion of its portfolio will be
invested in the securities of U.S. companies, the Fund is not limited to
investing in such securities. Many companies in the forefront of world medical
technology are located outside the United States, primarily in Japan and
Europe. Accordingly, the Fund may invest up to 40% of the value of its total
assets in foreign securities, including up to 25% in issuers located in any one
foreign country. However, no more than 5% of the value of the Fund's total net
assets may be invested in securities of issuers located in emerging market
6
countries. All percentage limitations are applied at the time of investment.
Although the payment of dividends will be a factor considered in the selection
of investments for the Fund, the Fund seeks primarily to take advantage of
capital appreciation opportunities identified by Alliance in emerging
technologies and services in Health Care Industries by investing in companies
which are expected to profit from the development of new products and services
for these industries. Examples of such emerging technologies and services
include:
. New methods for administering drugs to a patient, such as surgical implants
and skin patches which enhance the effectiveness of the drugs and may reduce
patient side effects by delivering the drugs in precise quantities over a
prolonged time period or by evading natural body defense mechanisms which delay
the effect of the drugs;
. Developments in medical imaging such as the application of computer
technology to the output of conventional x-ray systems which allow for
cross-sectional images of soft tissue and organs (CT scanning) and continuous
imaging (digital radiography) as well as more advanced nuclear medicine,
ultrasound and magnetic resonance imaging (MRI);
. Advances in minimally invasive surgical techniques, such as angioplasty and
related technologies for diseased blood vessels and laser beams for the eye,
general and cardiovascular surgery, which provide greater effectiveness, lower
cost and improved patient safety than more traditional surgical techniques;
. New therapeutic pharmaceutical compounds that control or alleviate disease,
including prescription and non-prescription drugs and treatment regimes for
conditions not controlled, alleviated or treatable by existing medications or
treatments and chemical or biological pharmaceuticals for use in diagnostic
testing;
. Advances in molecular biology such as signal transduction, cell adhesion
and cell to cell communication which have facilitated a rapid increase in new
classes of drugs. These have included monoclonal antibodies, bio-engineered
proteins and small molecules from novel synthesis and screening techniques;
. Genomics, which allows scientists to better understand the causes of human
diseases, and in some cases has led to the manufacture of proteins for use as
therapeutic drugs;
. Gene chips and other equipment that provides for the screening, diagnosis
and treatment of diseases;
. The introduction of large scale business efficiencies to the management of
nursing homes, acute and specialty hospitals as well as free-standing
outpatient facilities, surgical centers and rehabilitation centers;
. Adaptations of microprocessors for use by pharmaceutical manufacturers,
hospitals, doctors and others in the Health Care Industries to increase
distribution efficiency;
. Health care delivery organizations which combine cost effectiveness with
high quality medical care and help address the rising cost of health care; and
. The sale of prescription drugs and pharmaceuticals to consumers via the
Internet.
The Fund's portfolio may also include companies that provide traditional
products and services currently in use in Health Care Industries and that are
likely to benefit from any increases in the general demand for such products
and services. The following are examples of the products and services that may
be offered by companies in Health Care Industries:
. DRUGS OR PHARMACEUTICALS, including both ethical and proprietary drugs,
drug administration products and pharmaceutical components used in diagnostic
testing;
. MEDICAL EQUIPMENT AND SUPPLIES, including equipment and supplies used by
health service companies and individual practitioners, such as electronic
equipment used for diagnosis and treatment, surgical and medical instruments
and other products designed especially for Health Care Industries;
. HEALTH CARE SERVICES, including the services of clinical testing
laboratories, hospitals, nursing homes, clinics, centers for convalescence and
rehabilitation, and products and services for home health care; and
. MEDICAL RESEARCH, including scientific research to develop drugs, processes
or technologies with possible commercial application in Health Care Industries.
The Fund also may:
. make SECURED LOANS OF SECURITIES of up to 20% of its total assets;
. enter into REPURCHASE AGREEMENTS;
. purchase or sell FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS; and
. enter into FORWARD COMMITMENTS for the purchase or sale of securities.
RISK CONSIDERATIONS
The value of an investment in the Fund changes with the values of the Fund's
investments. Many factors can affect those values. In the following summary, we
describe the principal risks that may affect the Fund's portfolio as a whole.
The Fund could be subject to additional principal risks because the types of
investments made by the Fund can change over time. This Prospectus has
additional descriptions of investments and risks that appear in bold type below
under DESCRIPTION OF INVESTMENT PRACTICES or ADDITIONAL RISK CONSIDERATIONS.
This section also includes more information about the Fund, its investments,
and related risks. Among the principal risks of investing in the Fund are:
. MARKET RISK This is the risk that the value of the Fund's investments will
fluctuate as the stock or bond markets
7
fluctuate and that prices overall will decline over short or longer-term
periods.
. SECTOR RISK This is the risk of investments in a particular industry
sector. Market or economic factors affecting the Health Care Industries
sector could have a major effect on the value of the Fund's investments.
Certain of the comapnies in which the Fund invests may allocate substantial
financial resources to research and product development. The securities of
such companies may experience above-average price movements associated with
the perceived prospects of success of the research and development programs.
. FOREIGN RISK This is the risk of investments in issuers located in foreign
countries. Investments in foreign securities may experience more rapid and
extreme changes in value than investments in securities of U.S. companies. This
is because the securities markets of many foreign countries are relatively
small, with a limited number of companies representing a small number of
industries. Additionally, foreign securities issuers are usually not subject to
the same degree of regulation as U.S. issuers. Reporting, accounting, and
auditing standards of foreign countries differ, in some cases significantly,
from U.S. standards. Also, nationalization, expropriation or confiscatory
taxation, currency blockage, or political changes or diplomatic developments
could adversely affect the Fund's investments in a foreign country. In the
event of nationalization, expropriation, or other confiscation, the Fund could
lose its entire investment in that country. To the extent the Fund invests a
substantial amount of its assets in a particular country, your investment has
the risk that market changes or other events affecting that country, including
political instability and unpredictable economic conditions, may have a
particularly significant effect on the Fund's net asset value.
. CURRENCY RISK This is the risk that fluctuations in the exchange rates
between the U.S. dollar and foreign currencies may negatively affect the value
of the Fund's investments.
. CAPITALIZATION RISK This is the risk of investments in small- to
mid-capitalization companies. Investments in small- to mid-cap companies may be
more volatile than large-cap companies. In addition, the Fund's investments in
smaller capitalization stocks may have additional risks because these companies
often have limited product lines, markets, or financial resources.
. MANAGEMENT RISK The Fund is subject to management risk because it is an
actively managed investment Fund. Alliance will apply its investment techniques
and risk analyses in making investment decisions for the Fund, but there is no
guarantee that its techniques will produce the intended result.
DESCRIPTION OF INVESTMENT PRACTICES
This section describes the investment practices of the Fund and risks
associated with these practices. Unless otherwise noted, the Fund's use of any
of these practices was specified in the previous section.
FORWARD COMMITMENTS. Forward commitments for the purchase or sale of securities
may include purchases on a "when-issued" basis or purchases or sales on a
"delayed delivery" basis. In some cases, a forward commitment may be
conditioned upon the occurrence of a subsequent event, such as approval and
consummation of a merger, corporate reorganization or debt restructuring (i.e.,
a "when, as and if issued" trade).
When forward commitment transactions are negotiated, the price is fixed at the
time the commitment is made, but delivery and payment for the securities take
place at a later date. Normally, the settlement date occurs within two months
after the transaction, but the Fund may negotiate settlements beyond two
months. Securities purchased or sold under a forward commitment are subject to
market fluctuation, and no interest or dividends accrue to the purchaser prior
to the settlement date.
When-issued securities and forward commitments may be sold prior to the
settlement date, but the Fund enters into when-issued and forward commitments
only with the intention of actually receiving securities or delivering them, as
the case may be. If the Fund chose to dispose of the right to acquire a
when-issued security prior to its acquisition or dispose of its right to
deliver or receive against a forward commitment, it may realize a gain or incur
a loss. Any significant commitment of Fund assets to the purchase of securities
on a "when, as and if issued" basis may increase the volatility of the Fund's
net asset value. No forward commitments will be entered into if, as a result,
the Fund's aggregate commitments under the transactions would be more than 30%
of its total assets. In the event the other party to a forward commitment
transaction were to default, the Fund might lose the opportunity to invest
money at favorable rates or to dispose of securities at favorable prices.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS. The Fund may purchase or sell
forward foreign currency exchange contracts to minimize the risk of adverse
changes in the relationship between the U.S. Dollar and other currencies. A
forward contract is an obligation to purchase or sell a specific currency for
an agreed price at a future date, and is individually negotiated and privately
traded.
The Fund may enter into a forward contract, for example, when it enters into a
contract for the purchase or sale of a security denominated in a foreign
currency in order to "lock in" the U.S. Dollar price of the security
("transaction hedge"). The Fund may not engage in transaction hedges with
respect to the currency of a particular country to an extent greater than the
aggregate amount of the Fund's transactions in that currency. When the Fund
believes that a foreign currency may suffer a substantial decline against the
U.S. Dollar, it may enter into a forward sale contract to sell an amount of
that foreign currency approximating the value of some or all of the Fund's
portfolio securities denominated in such foreign currency; or when the Fund
believes that the U.S. Dollar may suffer a substantial decline against a
foreign currency, it may enter into a forward
8
purchase contract to buy that foreign currency for a fixed dollar amount
("position hedge"). The Fund will not position hedge with respect to a
particular currency to an extent greater than the aggregate market value (at
the time of making such sale) of the securities held in its portfolio
denominated or quoted in that currency. Instead of entering into a position
hedge, the Fund may, in the alternative, enter into a forward contract to sell
a different foreign currency for a fixed U.S. Dollar amount where the Fund
believes that the U.S. Dollar value of the currency to be sold pursuant to the
forward contract will fall whenever there is a decline in the U.S. Dollar value
of the currency in which portfolio securities of the Fund are denominated
("cross-hedge"). Unanticipated changes in currency prices may result in
poorer overall performance for the Fund than if it does not enter into
forward contracts.
Hedging against a decline in the value of a currency does not eliminate
fluctuations in the prices of portfolio securities or prevent losses if the
prices of securities decline. These transactions also preclude the opportunity
for gain if the value of the hedge currency should rise. Moreover, it may not
be possible for the Fund to hedge against a devaluation that is so generally
anticipated that the Fund is not able to contract to sell the currency at a
price above the anticipated devaluation level.
ILLIQUID SECURITIES. The Fund will limit its investment in illiquid securities
to no more than 10% of its net assets. Illiquid securities generally include
(i) direct placements or other securities that are subject to legal or
contractual restrictions on resale or for which there is no readily available
market (e.g., when trading in the security is suspended or, in the case of
unlisted securities, when market makers do not exist or will not entertain bids
or offers), including many individually negotiated currency swaps and any
assets used to cover currency swaps, (ii) over-the-counter options and assets
used to cover over-the-counter options, and (iii) repurchase agreements not
terminable within seven days.
Because of the absence of a trading market for illiquid securities, the Fund
may not be able to realize the price at which they are carried on the Fund's
books upon sale. Alliance will monitor the illiquidity of the Fund's
investments in such securities. Rule 144A securities generally will not be
treated as "illiquid" for purposes of this limit on investments.
The Fund may not be able to readily sell securities for which there is no ready
market. To the extent that these securities are foreign securities, there is no
law in many of the countries in which the Fund may invest similar to the
Securities Act requiring an issuer to register the sale of securities with a
governmental agency or imposing legal restrictions on resales of securities,
either as to length of time the securities may be held or manner of resale.
There may, however, be contractual restrictions on resale of securities.
LOANS OF PORTFOLIO SECURITIES. The Fund may make secured loans of its portfolio
securities to entities with which it can enter into repurchase agreements,
provided that cash and/or liquid high grade debt securities equal to at least
100% of the market value of the securities loaned are deposited and maintained
by the borrower with the Fund. The Fund may lend not more than half of the
securities representing each holding of the portfolio and will not permit a
loan to remain outstanding for more than 30 days. The value of the securities
loaned will not exceed 20% of the value of the Fund's total net assets at the
time a loan is made. The risk in lending portfolio securities, as with other
extensions of credit, consists of the possible failure of the borrower to
return the loaned securities, the possible inadequacy of the collateral given
increases in the market value of the loaned securities, and the possible loss
of rights in the collateral should the borrower fail financially. In
determining whether to lend securities to a particular borrower, Alliance will
consider all relevant facts and circumstances, including the creditworthiness
of the borrower. While securities are on loan, the borrower will pay the Fund
any income from the securities. The Fund may invest any cash collateral in
portfolio securities and earn additional income, or receive an agreed-upon
amount of income from a borrower who has delivered equivalent collateral. The
Fund will have the right to regain record ownership of loaned securities to
exercise beneficial rights such as voting rights, subscription rights, and
rights to dividends, interest or distributions. The Fund may pay reasonable
finders', administrative, and custodial fees in connection with a loan.
REPURCHASE AGREEMENTS. A repurchase agreement arises when a buyer purchases a
security and simultaneously agrees to resell it to the vendor at an agreed-upon
future date, normally a day or a few days later. The resale price is greater
than the purchase price, reflecting an agreed-upon interest rate for the period
the buyer's money is invested in the security. Such agreements permit the Fund
to keep all of its assets at work while retaining "overnight" flexibility in
pursuit of investments of a longer-term nature. If a vendor defaults on its
repurchase obligation, the Fund would suffer a loss to the extent that the
proceeds from the sale of the collateral were less than the repurchase price.
If a vendor goes bankrupt, the Fund might be delayed in, or be prevented from,
selling the collateral for its benefit.
FUTURE DEVELOPMENTS. The Fund may, following written notice to its
shareholders, take advantage of other investment practices that are not
currently contemplated for use by the Fund or are not available but may yet be
developed, to the extent such investment practices are consistent with the
Fund's investment objective and legally permissible for the Fund. Such
investment practices, if they arise, may involve risks that exceed those
involved in the activities described above.
GENERAL. The successful use of the investment practices described above draws
upon Alliance's special skills and experience and usually depends on Alliance's
ability to forecast price movements or currency exchange rate movements
correctly. Should prices or exchange rates move unexpectedly, the Fund may not
achieve the anticipated benefits of the transactions or may realize losses and
thus be in a worse position than if such strategies had not been used.
The Fund's ability to dispose of its positions in forward contracts depends on
the availability of liquid markets in such instruments. There is no public
market for forward contracts.
9
It is impossible to predict the amount of trading interest that may exist in
various types of forward contracts. The lack of a secondary market may reduce
the Fund's ability to obtain the maximum value from the use of forward
contracts. Therefore, no assurance can be given that the Fund will be able to
utilize these instruments effectively.
PORTFOLIO TURNOVER. The Fund is actively managed and, in some cases in response
to market conditions, the Fund's portfolio turnover may exceed 100%. A higher
rate of portfolio turnover increases brokerage and other expenses, which must
be borne by the Fund and its shareholders. High portfolio turnover also may
result in the realization of substantial net short-term capital gains, which,
when distributed, are taxable to shareholders.
TEMPORARY DEFENSIVE POSITION. For temporary defensive purposes, the Fund may
invest in certain types of short-term, liquid, high-grade or high-quality debt
securities. These securities may include U.S. Government securities, qualifying
bank deposits, money market instruments, prime commercial paper and other types
of short-term debt securities, including notes and bonds. Such securities may
also include short-term, foreign-currency denominated securities of the type
mentioned above issued by foreign governmental entities, companies and
supranational organizations. While the Fund is investing for temporary
defensive purposes, it may not meet its investment objective.
ADDITIONAL RISK CONSIDERATIONS
EFFECTS OF BORROWING. The Fund may, when Alliance believes that market
conditions are appropriate, borrow in order to take full advantage of available
investment opportunities. The Fund may, although it has no present intention of
doing so, borrow money from a bank in a privately arranged transaction to
increase the money available to the Fund to invest in securities when the Fund
believes that the return from the securities financed will be greater than the
interest expense paid on the borrowing. Borrowings may involve additional risk
to the Fund because the interest expense may be greater than the income from or
appreciation of the securities carried by the borrowings and the value of the
securities carried may decline below the amount borrowed.
Any investment gains made with the proceeds obtained from borrowings in excess
of interest paid on the borrowings will cause the net income per share and the
net asset value per share of the Fund's common stock to be greater than would
otherwise be the case. On the other hand, if the investment performance of the
additional securities purchased fails to cover their cost (including any
interest paid on the money borrowed) to the Fund, then the net income per share
and net asset value per share of the Fund's common stock will be less than
would otherwise be the case. This is the speculative factor known as "leverage".
Borrowings by the Fund result in leveraging of the Fund's shares of common
stock. Utilization of leverage, which is usually considered speculative,
involves certain risks to the Fund's shareholders. These include a higher
volatility of the net asset value of the Fund's shares of common stock and the
relatively greater effect on the net asset value of the shares. So long as the
Fund is able to realize a net return on its investment portfolio that is higher
than the interest expense paid on borrowings, the effect of leverage will be to
cause the Fund's shareholders to realize a higher current net investment income
than if the Fund were not leveraged. On the other hand, interest rates on U.S.
Dollar-denominated and foreign currency-denominated obligations change from
time to time as does their relationship to each other, depending upon such
factors as supply and demand forces, monetary and tax policies within each
country and investor expectations. Changes in such factors could cause the
relationship between such rates to change so that rates on U.S.
Dollar-denominated obligations may substantially increase relative to the
foreign currency-denominated obligations in which the Fund may be invested. To
the extent that the interest expense on borrowings approaches the net return on
the Fund's investment portfolio, the benefit of leverage to the Fund's
shareholders will be reduced, and if the interest expense on borrowings were to
exceed the net return to shareholders, the Fund's use of leverage would result
in a lower rate of return than if the Fund were not leveraged. Similarly, the
effect of leverage in a declining market could be a greater decrease in net
asset value per share than if the Fund were not leveraged. In an extreme case,
if the Fund's current investment income were not sufficient to meet the
interest expense on borrowings, it could be necessary for the Fund to liquidate
certain of its investments, thereby reducing the net asset value of the Fund's
shares.
FOREIGN SECURITIES. The securities markets of many foreign countries are
relatively small, with the majority of market capitalization and trading volume
concentrated in a limited number of companies representing a small number of
industries. Consequently, the Fund, whose investment portfolio includes foreign
securities, may experience greater price volatility and significantly lower
liquidity than a portfolio invested solely in equity securities of U.S.
companies. These markets may be subject to greater influence by adverse events
generally affecting the market, and by large investors trading significant
blocks of securities, than is usual in the United States. Securities
registration, custody and settlements may in some instances be subject to
delays and legal and administrative uncertainties.
Certain foreign countries require governmental approval prior to investments by
foreign persons or limit investment by foreign persons to only a specified
percentage of an issuer's outstanding securities or a specific class of
securities which may have less advantageous terms (including price) than
securities of the company available for purchase by nationals. These
restrictions or controls may at times limit or preclude investment in certain
securities and may increase the costs and expenses of the Fund. In addition,
the repatriation of investment income, capital or the proceeds of sales of
securities from certain countries is controlled under regulations, including in
some cases the need for certain advance government notification or authority,
and if a deterioration occurs in a
10
country's balance of payments, the country could impose temporary restrictions
on foreign capital remittances.
The Fund also could be adversely affected by delays in, or a refusal to grant,
any required governmental approval for repatriation of profits, as well as by
the application of other restrictions on investment. Investing in local
markets may require the Fund to adopt special procedures that may involve
additional costs to the Fund. These factors may affect the liquidity of the
Fund's investments in any country and Alliance will monitor the effect of any
such factor or factors on the Fund's investments.
Furthermore, transaction costs including brokerage commissions for transactions
both on and off the securities exchanges in many foreign countries are
generally higher than in the United States.
Issuers of securities in foreign jurisdictions are generally not subject to the
same degree of regulation as are U.S. issuers with respect to such matters as
insider trading rules, restrictions on market manipulation, shareholder proxy
requirements, and timely disclosure of information. The reporting, accounting,
and auditing standards of foreign countries may differ, in some cases
significantly, from U.S. standards in important respects and less information
may be available to investors in foreign securities than to investors in U.S.
securities. Substantially less information is publicly available about certain
non-U.S. issuers than is available about U.S. issuers.
The economies of individual foreign countries may differ favorably or
unfavorably from the U.S. economy in such respects as growth of gross domestic
product or gross national product, rate of inflation, capital reinvestment,
resource self-sufficiency, and balance of payments position. Nationalization,
expropriation or confiscatory taxation, currency blockage, political changes,
government regulation, political or social instability, or diplomatic
developments could affect adversely the economy of a foreign country and the
Fund's investments. In the event of expropriation, nationalization or other
confiscation, the Fund could lose its entire investment in the country
involved. In addition, laws in foreign countries governing business
organizations, bankruptcy and insolvency may provide less protection to
security holders, such as the Fund, than that provided by U.S. laws.
YEAR 2000. Many computer systems and applications in use today process
transactions using two-digit date fields for the year of the transaction,
rather than the full four digits. If these systems are not modified or
replaced, transactions occurring after 1999 could be processed as year "1900,"
which could result in processing inaccuracies and computer system failures at
or after the year 2000. This is commonly known as the Year 2000 problem. The
Fund and its major service providers, including Alliance, utilize a number of
computer systems and applications that have been either developed internally or
licensed from third-party suppliers. In addition, the Fund and its major
service providers, including Alliance, are dependent on third-party suppliers
for certain systems applications and for electronic receipt of information
critical to their business. Should any of the computer systems employed by the
Fund or its major service providers, including Alliance, fail to process Year
2000 related information properly, that could have a significant negative
impact on the Fund's operations and the services that are provided to the
Fund's shareholders. To the extent that the operations of issuers of securities
held by the Fund are impaired by the Year 2000 problem, the value of the Fund's
shares may be materially affected. In addition, for the Fund's investments in
foreign markets, it is possible that foreign companies and markets will not be
as prepared for Year 2000 as domestic companies and markets.
The Year 2000 issue is a high priority for the Fund and Alliance. The Fund has
been advised that, during 1997, Alliance began a formal Year 2000 initiative
which established a structured and coordinated process to deal with the Year
2000 issue. As part of its initiative, Alliance established a Year 2000 project
office to manage the Year 2000 initiative, focusing on both information
technology and non-information technology systems. Alliance has also retained
the services of a number of consulting firms which have expertise in advising
and assisting with regard to Year 2000 issues. Alliance reports that by June
30, 1998 it had completed its inventory and assessment of its domestic and
international computer systems and applications, identified mission critical
systems and non-mission critical systems and determined which of these systems
were not Year 2000 compliant. All third-party suppliers of mission critical
computer systems and applications have been contacted to verify whether their
systems and applications will be Year 2000 compliant and their responses are
being evaluated. Substantially all of those contacted have responded and
approximately 90% have informed Alliance that their systems and applications
are or will be Year 2000 compliant. Alliance will seek alternative solutions or
third-party suppliers for all suppliers who do not furnish a satisfactory
response by July 31, 1999. The same process is being performed for non-mission
critical systems and is estimated to be completed by July 31, 1999. Alliance
had remediated, replaced or retired all of its non-compliant mission critical
systems and applications that can affect the Fund. After each system has been
remediated, it is tested with 19XX dates to determine if it still performs its
intended business function correctly. Next, each system undergoes a simulation
test using dates occurring after December 31, 1999. Inclusive of the
replacement and retirement of some of its systems, Alliance has completed these
testing phases for approximately 89% of non-mission critical systems.
Integrated systems tests will then be conducted to verify that the systems will
continue to work together. Full integration testing of all mission critical and
non-mission critical systems is estimated to be completed by July 31, 1999.
Testing of interfaces with third-party suppliers has begun and will continue
throughout 1999. The same process is being performed for non-mission critical
systems and is estimated to be completed by July 31, 1999. Alliance reports
that it has completed an inventory of its facilities and related technology
applications and has begun to evaluate and test these systems. Alliance reports
that it anticipates that these systems will be fully operable in the year 2000.
Alliance, with the assistance of a consulting firm, is developing Year 2000
specific contingency plans with emphasis on mission critical
11
functions. These plans seek to provide alternative methods of processing in
the event of a failure that is outside Alliance's control. The estimated date
for the completion of these plans is July 31, 1999.
There are many risks associated with Year 2000 issues, including the risks that
the computer systems and applications used by the Fund and its major service
providers, will not
operate as intended and that the systems and applications of third-party
providers to the Fund and its service providers will not be Year 2000
compliant. Likewise there can be no assurance the compliance schedules
outlined above will be met or that the actual cost incurred will not exceed
current cost estimates. Should the significant computer systems and
applications used by the Fund or its major service providers, or the systems
of their important third-party suppliers, be unable to process date sensitive
information accurately after 1999, the Fund and its service providers may be
unable to conduct their normal business operations and to provide shareholders
with required services. In addition, the Fund and its service providers may
incur unanticipated expenses, regulatory actions and legal liabilities. The
Fund and Alliance cannot determine which risks, if any, are most reasonably
likely to occur or the effects of any particular failure to be Year 2000
compliant. Certain statements provided by Alliance in this section entitled
"Year 2000," as such statements relate to Alliance, are "forward-looking
statements" within the meaning of the Private Securities Litigation Reform
Act of 1995. To the fullest extent permitted by law, the foregoing Year 2000
discussion is a "Year 2000 Readiness Disclosure" within the meaning of the
Year 2000 Information and Readiness Disclosure Act, 15 U.S.C. Sec. 1 (1998).
MANAGEMENT OF THE FUND
- -------------------------------------------------------------------------------
INVESTMENT ADVISER AND FUND MANAGER
The Fund's investment adviser is Alliance Capital Management L.P., 1345 Avenue
of the Americas, New York, New York 10105. Alliance is a leading international
investment adviser managing client accounts with assets as of March 31, 1999
totaling more than $301 billion (of which approximately $127 billion
represented assets of investment companies). As of March 31, 1999, Alliance
managed retirement assets for many of the largest public and private employee
benefit plans (including 30 of the nation's FORTUNE 100 companies), for public
employee retirement funds in 32 out of the 50 states, for investment companies,
and for foundations, endowments, banks and insurance companies worldwide. The
54 registered investment companies managed by Alliance, comprising 120 separate
investment portfolios, currently have more than four million shareholder
accounts.
The person primarily responsible for the day-to-day management of the Fund is
Norman Fidel. Mr. Fidel is a Senior Vice President of Alliance Capital
Management Corporation with which he has been associated since prior to 1994.
Under the Advisory Agreement, Alliance receives a fee at an annualized rate of
.95% of the Fund's average daily net assets. The fee will be accrued daily and
paid monthly.
PERFORMANCE OF A SIMILARLY MANAGED FUND. Alliance is the investment adviser of
an investment company organized and operated under the laws of the Grand Duchy
of Luxembourg, ACM International Health Care Fund (the "ACM Fund"), that has
substantially the same investment objective and policies as those of the Fund.
The ACM Fund has been managed in accordance with substantially the same
investment strategies and techniques as are intended to be employed with
respect to the Fund.
Norman Fidel, the portfolio manager of the Fund, is also the person who has
been primarily responsible for the day-to-day management of the ACM Fund since
1988. Mr. Fidel manages approximately $950 million of Health Care Industries
assets, including approximately $330 million of assets in the ACM Fund as of
June 30, 1999.
The ACM Fund is not subject to certain limitations, diversification
requirements and other restrictions imposed under the 1940 Act and the Code to
which the Fund, as a registered investment company, is subject and which, if
applicable to the ACM Fund, may have adversely affected the performance results
of the ACM Fund.
Set forth below are performance data provided by Alliance relating to the Class
AX shares of the ACM Fund since 1998, when Mr. Fidel began managing that
fund. Performance data are shown annually and cumulatively through June 30,
1999.
The performance data are net of all fees imposed by the ACM Fund. The
performance data have not been adjusted to reflect the fees that will be
payable by the Fund, which, at comparable asset levels, may be lower than the
fees imposed on the ACM Fund and may result in a lower expense ratio for the
Fund. Expenses associated with the distribution of Class A, Class B and
Class C shares of the Fund in accordance with the plan adopted by the Fund's
Board of Directors pursuant to Rule 12b-1 under the 1940 Act also are not
reflected in the data below relating to the ACM Fund. See "Fees and Expenses
of the Fund." The performance data have also not been adjusted for corporate
or individual taxes, if any, payable by the ACM Fund shareholders.
The following performance data are provided solely to illustrate Mr. Fidel's
performance in managing the ACM Fund. Investors should not rely on the
following performance data of the ACM Fund as an indication of future
performance of the Fund. The investment performance for the periods
presented may not be indicative of future rates of return.
12
ACM INTERNATIONAL HEALTH CARE FUND
- ----------------------------------
TOTAL RETURNS
-------------
1988 21.82%
1989 46.75%
1990 25.96%
1991 83.07%
1992 -10.46%
1993 -1.38%
1994 13.84%
1995 46.49%
1996 2.18%
1997 23.07%
1998 24.29%
1999* -6.24%
AVERAGE ANNUAL TOTAL RETURN
(FOR PERIODS ENDED 6/30/99)
One year -1.17%
Five years 20.19%
Ten years 19.27%
Cumulative Total Return of the ACM Fund from
12/31/87 to 6/30/99: 789.68%
* THROUGH JUNE 30, 1999 (UNANNUALIZED)
PURCHASE AND SALE OF SHARES
- -------------------------------------------------------------------------------
HOW THE FUND VALUES ITS SHARES
The Fund's net asset value or NAV is calculated at 4:00 p.m. Eastern time each
day the Exchange is open for business. To calculate NAV, the Fund's assets are
valued and totaled, liabilities are subtracted, and the balance, called net
assets, is divided by the number of shares outstanding. The Fund values its
securities at their current market value determined on the basis of market
quotations, or, if such quotations are not readily available, such other
methods as the Fund's directors believe accurately reflect fair market value.
Your order for purchase, sale, or exchange of shares is priced at the next NAV
calculated after your order is received in proper form by the Fund.
HOW TO BUY SHARES
You may purchase Advisor Class shares through your financial representative at
NAV. Advisor Class shares are not subject to any initial or contingent sales
charges or distribution expenses. You may purchase and hold Advisor Class
shares solely:
. through accounts established under a fee-based program, sponsored and
maintained by a registered broker-dealer or other financial intermediary and
approved by the Fund's principal underwriter, AFD;
. through a self-directed defined contribution employee benefit plan (e.g., a
401(k) plan) that has at least 1,000 participants or $25 million in assets;
. by investment advisory clients of, and certain other persons associated
with, Alliance and its affiliates or the Fund; and
. through registered investment advisers or other financial intermediaries
who charge a management, consulting or other fee for their services and who
purchase shares through a broker or agent approved by AFD and clients of such
registered investment advisers or financial intermediaries whose accounts are
linked to the master account of such investment adviser or financial
intermediary on the books of such approved broker or agent.
Generally, a fee-based program must charge an asset-based or other similar fee
and must invest at least $250,000 in Advisor Class shares to be approved by AFD
for investment in Advisor Class shares. The Fund's Statement of Additional
Information has more detailed information about who may purchase and hold
Advisor Class shares.
The Fund may refuse any order to purchase Advisor Class shares. In this regard,
the Fund reserves the right to restrict purchases of Advisor Class shares
(including through exchanges) when there appears to be evidence a pattern of
frequent purchases and sales made in response to short-term considerations.
INITIAL OFFERING
It is expected that shares of the Fund will be offered during an initial
offering period which is currently scheduled to end on August 24, 1999. The
Fund will begin its continuous offering of shares on August 27, 1999. During
the Fund's initial offering period, Advisor Class shares will be offered to
the public at their net asset value of $10.00 per share.
During the initial offering period, the Fund will not accept subscriptions for
Fund shares other than through authorized dealers and agent, and any
subscription monies sent directly to the Fund will be promptly returned. In
addition, under Commission regulations (e.g., Rule 15c-4 under the Securities
Exchange Act of 1934), authorized dealers and agents will not be permitted to
accept subscription monies from their customers in advance of the purchase
date unless appropriate arrangements are made for the temporary investment or
deposit of such monies. Shares subscribed for during the Fund's initial
offering period will be sold to subscribers on the purchase date, which is
expected to occur not later than August 27, 1999.
HOW TO EXCHANGE SHARES
You may exchange your Advisor Class shares for Advisor Class shares of other
Alliance Mutual Funds. Exchanges of Advisor Class shares are made at the
next-determined NAV without any sales or service charge. You may request an
exchange by mail or telephone. You must call by 4:00 p.m. Eastern time to
receive that day's NAV. The Fund may change, suspend, or terminate the exchange
service on 60 days' written notice.
HOW TO SELL SHARES
You may "redeem" your shares (i.e., sell your shares to the Fund) on any day
the Exchange is open, either directly or through your financial intermediary.
Your sales price will be the next-determined NAV after the Fund receives your
sales request in proper form. Normally, proceeds will be sent to you within 7
days. If you recently purchased your shares by check or electronic funds
transfer, you cannot redeem any portion of
13
it until the Fund is reasonably satisfied that the check or electronic funds
transfer has been collected (which may take up to 15 days). If you are in doubt
about what procedures or documents are required by your fee-based program or
employee benefit plan to sell your shares, you should contact your financial
representative.
. SELLING SHARES THROUGH YOUR FINANCIAL REPRESENTATIVE
Your financial representative must receive your sales request by 4:00 p.m.,
Eastern time, and submit it to the Fund by 5:00 p.m., Eastern time, for you to
receive that day's NAV. Your financial representative is responsible for
submitting all necessary documentation to the Fund and may charge you for this
service.
. SELLING SHARES DIRECTLY TO THE FUND
BY MAIL:
--Send a signed letter of instruction or stock power, along with
certificates, to:
Alliance Fund Services
P.O. Box 1520
Secaucus, N.J. 07906-1520
800-221-5672
--For your protection, a bank, a member firm of a national stock exchange,
or other eligible guarantor institution, must guarantee signatures. Stock
power forms are available from your financial intermediary, AFS, and many
commercial banks. Additional documentation is required for the sale of shares
by corporations, intermediaries, fiduciaries, and surviving joint owners. If
you have any questions about these procedures, contact AFS.
BY TELEPHONE:
--You may redeem your shares for which no stock certificates have been
issued by telephone request. Call AFS at 800-221-5672 with instructions on how
you wish to receive your sale proceeds.
--A telephone redemption request must be received by 4:00 p.m. Eastern time
for you to receive that day's NAV.
--If you have selected electronic funds transfer in your Shareholder
Application, the redemption proceeds may be sent directly to your bank.
Otherwise, the proceeds will be mailed to you.
--Redemption requests by electronic funds transfer may not exceed $100,000
per day and redemption requests by check cannot exceed $50,000 per day.
--Telephone redemption is not available for shares held in nominee or
"street name" accounts, retirement plan accounts, or shares held by a
shareholder who has changed his or her address of record within the previous 30
calendar days.
OTHER
If you are a Fund shareholder through an account established under a fee-based
program, your fee-based program may impose requirements with respect to the
purchase, sale, or exchange of Advisor Class shares of the Fund that are
different from those described in this Prospectus. A transaction, service,
administrative or other similar fee may be charged by your broker-dealer,
agent, financial intermediary or other financial representative with respect to
the purchase, sale or exchange of Advisor Class shares made through such
financial representative. Such financial intermediaries may also impose
requirements with respect to the purchase, sale or exchange of shares that are
different from, or in addition to, those imposed by the Fund, including
requirements as to the minimum initial and subsequent investment amounts.
DIVIDENDS, DISTRIBUTIONS AND TAXES
- -------------------------------------------------------------------------------
The income dividends and capital gains distribution, if any, declared by the
Fund on its outstanding shares will, at the election of each shareholder, be
paid in cash or in additional shares of the same class of shares of the Fund.
If paid in additional shares, the shares will have an aggregate net asset value
as of the close of business on the day following the declaration date of the
dividend or distribution equal to the cash amount of the dividend or
distribution. You may make an election to receive dividends and distributions
in cash or in shares at the time you purchase shares. Your election can be
changed at any time prior to a record date for a dividend. There is no sales or
other charge in connection with the reinvestment of dividends or capital gains
distributions. Cash dividends may be paid in check, or at your election,
electronically via the ACH network. There is no sales or other charge on the
reinvestment of Fund distributions.
If you receive an income dividend or capital gains distribution in cash you
may, within 120 days following the date of its payment, reinvest the dividend
or distribution in additional shares of the Fund without charge by returning to
Alliance, with appropriate instructions, the check representing the dividend or
distribution. Thereafter, unless you otherwise specify, you will be deemed to
have elected to reinvest all subsequent dividends and distributions in shares
of the Fund.
The Fund expects that distributions will consist either of net income or
long-term capital gains. For federal income tax purposes, the Fund's dividend
distributions of net income (or short-term taxable gains) will be taxable to
you as ordinary income. Any capital gains distributions may be taxable to you
as capital gains. The Fund's distributions also may be subject to certain state
and local taxes.
While it is the intention of the Fund to distribute to its shareholders
substantially all of each fiscal year's net income and net realized capital
gains, if any, the amount and time of any dividend or distribution will depend
on the realization by the Fund of income and capital gains from investments.
There is
14
no fixed dividend rate and there can be no assurance that the Fund
will pay any dividends or realize any capital gains. The final determination
of the amount of the Fund's return of capital distributions for the period
will be made after the end of each calendar year.
Investment income received by the Fund from sources within foreign countries
may be subject to foreign income taxes withheld at the source. To the extent
that the Fund is liable for foreign income taxes withheld at the source, the
Fund intends, if possible, to operate so as to meet the requirements of the
Code to "pass through" to the Fund's shareholders credits for foreign income
taxes paid (or to permit shareholders to claim a deduction for such foreign
taxes), but there can be no assurance that the Fund will be able to do so.
Furthermore, a shareholder's ability to claim a foreign tax credit or deduction
in respect of foreign taxes paid by the Fund may be subject to certain
limitations imposed by the Code, as a result of which a shareholder may not be
permitted to claim a full credit or deduction for the amount of such taxes.
Under certain circumstances, if the Fund realizes losses (e.g., from
fluctuations in currency exchange rates) after paying a dividend, all or a
portion of the dividend may subsequently be characterized as a return of
capital. Returns of capital are generally nontaxable, but will reduce a
shareholder's basis in
shares of the Fund. If that basis is reduced to zero (which could happen if
the shareholder does not reinvest distributions and returns of capital are
significant), any further returns of capital will be taxable as capital gain.
See the Fund's SAI for a further explanation of these tax issues.
If you buy shares just before the Fund deducts a distribution from its net
asset value, you will pay the full price for the shares and then receive a
portion of the price back as a taxable distribution.
The sale or exchange of Fund shares is a taxable transaction for federal income
tax purposes.
Each year shortly after December 31, the Fund will send you tax information
stating the amount and type of all its distributions for the year. Consult your
tax adviser about the federal, state, and local tax consequences in your
particular circumstances.
CONVERSION FEATURE
- -------------------------------------------------------------------------------
CONVERSION
As described above, Advisor Class shares may be held solely through certain
fee-based program accounts, employee benefit plans and registered investment
advisory or other financial intermediary relationships, and by investment
advisory clients of, and certain persons associated with, Alliance and its
affiliates or the Fund. If a holder of Advisor Class shares (i) ceases to
participate in the fee-based program or plan, or to be associated with an
eligible investment advisor or financial intermediary or (ii) is otherwise no
longer eligible to purchase Advisor Class shares (each a "Conversion Event"),
then all Advisor Class shares held by the shareholder will convert
automatically to Class A shares of the Fund. The Fund will provide the
shareholder with at least 30 days advance notice of such conversion. The
failure of a shareholder or a fee-based program to satisfy the minimum
investment requirements to purchase Advisor Class shares will not constitute
a Conversion Event. The conversion would occur on the basis of the relative
NAV of the two classes and without the imposition of any sales load, fee or
other charge.
DESCRIPTION OF CLASS A SHARES
The Class A shares of the Fund have a distribution fee of .30% under the Fund's
Rule 12b-1 plan that allows the Fund to pay distribution and service fees for
the distribution and sale of its shares. Advisor Class shares do not have any
Rule 12b-1 fee. Because this fee is paid out of the Fund's assets, Class A
shares have a higher expense ratio and may pay lower dividends and may have a
lower NAV than Advisor Class shares.
GENERAL INFORMATION
- -------------------------------------------------------------------------------
Under unusual circumstances, the Fund may suspend redemptions or postpone
payment for up to seven days or longer, as permitted by federal securities law.
The Fund reserves the right to close an account that through redemption has
remained below $200 for 90 days. Shareholders will receive 60 days' written
notice to increase the account value before the account is closed.
During drastic economic or market developments, you might have difficulty in
reaching AFS by telephone, in which event you should issue written instructions
to AFS. AFS is not responsible for the authenticity of telephone requests to
purchase, sell, or exchange shares. AFS will employ reasonable procedures to
verify that telephone requests are genuine, and could be liable for losses
resulting from unauthorized transactions if it failed to do so. Dealers and
agents may charge a commission for handling telephone requests. The telephone
service may be suspended or terminated at any time without notice.
15
For more information about the Fund, the following documents are available upon
request:
. STATEMENT OF ADDITIONAL INFORMATION (SAI)
The Fund has an SAI, which contains more detailed information about the Fund,
including its operations and investment policies. The Fund's SAI is
incorporated by reference into (and is legally part of) this Prospectus.
You may request a free copy of the SAI or make shareholder inquiries of the
Fund by contacting your broker or other financial intermediary, or by
contacting Alliance:
BY MAIL: C/O ALLIANCE FUND SERVICES, INC.
P.O. BOX 1520
SECAUCUS, NJ 07096-1520
BY PHONE: For Information: (800) 221-5672
For Literature: (800) 227-4618
Or you may view or obtain these documents from the Commission:
IN PERSON: at the Commission's Public Reference Room
in Washington, D.C.
BY PHONE: 1-800-SEC-0330
BY MAIL: Public Reference Section
Securities and Exchange Commission
Washington, DC 20549-6009
(duplicating fee required)
ON THE INTERNET: www.sec.gov
You also may find more information about Alliance and the Fund on the Internet
at: www.Alliancecapital.com.
SEC File No. 811-09329
16
ALLIANCE HEALTH CARE FUND SUBSCRIPTION APPLICATION
- - ADVISOR CLASS
TO OPEN YOUR NEW ALLIANCE ACCOUNT...
Please complete the application and mail it to:
ALLIANCE FUND SERVICES, INC.
P.O. BOX 1520
SECAUCUS, NEW JERSEY 07096-1520
For certified or overnight deliveries, send to:
ALLIANCE FUND SERVICES, INC.
500 PLAZA DRIVE
SECAUCUS, NEW JERSEY 07094
SECTION 1 YOUR ACCOUNT REGISTRATION (REQUIRED)
Complete one of the available choices. To ensure proper tax reporting to the
IRS:
x Individuals, Joint Tenants, Transfer on Death and Gift/Transfer to a Minor:
. Indicate your name(s) exactly as it appears on your social security
card.
X Transfer on Death:
. Ensure that your state participates
x Trust/Other:
. Indicate the name of the entity exactly as it appeared on the notice
you received from the IRS when your Employer Identification number was assigned.
SECTION 2 YOUR ADDRESS (REQUIRED) Complete in full.
X Non-Resident Alien:
. Indicate your permanent country of residence.
SECTION 3 YOUR INITIAL INVESTMENT (REQUIRED)
For each fund in which you are investing: 1 Write the three digit fund number
in the column titled 'INDICATE THREE DIGIT FUND NUMBER LOCATED BELOW'.
2 Write the dollar amount of your initial purchase in the column titled
'INDICATE DOLLAR AMOUNT'.
3 Check off a distribution option for your dividends.
4 Check off a distribution option for your capital gains. All distributions
(dividends and capital gains) will be reinvested into your fund account unless
you direct otherwise. If you want distributions sent directly to your bank
account, then you must complete Section 4D and attach a preprinted, voided
check for that account. If you want your distributions sent to a third party
you must complete Section 4E.
SECTION 4 YOUR SHAREHOLDER OPTIONS (COMPLETE ONLY THOSE OPTIONS YOU WANT)
A. AUTOMATIC INVESTMENT PLANS (AIP) - You can make periodic investments into
any of your Alliance Funds in one of three ways. First, by a periodic
withdrawal ($25 minimum) directly from your bank account and invested into an
Alliance Fund. Second, you can direct your distributions (dividends and capital
gains) from one Alliance Fund into another Fund. Or third, you can
automatically exchange monthly ($25 minimum) shares of one Alliance Fund for
shares of another Fund. To elect one of these options, complete the appropriate
portion of Section 4A & 4D. If more than one dividend direction or monthly
exchange is desired, please call our Literature Center to obtain a Shareholder
Account Services Options Form for completion.
B. TELEPHONE TRANSACTIONS VIA EFT - Complete this option if you would like to
be able to transact via telephone between your fund account and your bank
account.
C. SYSTEMATIC WITHDRAWAL PLANS (SWP) - Complete this option if you wish to
periodically redeem dollars from one of your fund accounts. Payments can be
made via Electronic Funds Transfer (EFT) to your bank account or by check.
D. BANK INFORMATION - If you have elected any options that involve
transactions between your bank account and your fund account or have elected
cash distribution options and would like the payments sent to your bank
account, please tape a preprinted, voided check of the account you wish to use
to this section of the application.
E. THIRD PARTY PAYMENT DETAILS - If you have chosen cash distributions and/or
a Systematic Withdrawal Plan and would like the payments sent to a person
and/or address other than those provided in section 1 or 2, complete this
option. Medallion Signature Guarantee is required if your account is not
maintained by a broker dealer.
SECTION 5 SHAREHOLDER AUTHORIZATION (REQUIRED) All owners must sign. If it is a
custodial, corporate, or trust account, the custodian, an authorized officer,
or the trustee respectively must sign.
IF WE CAN ASSIST YOU IN ANY WAY, PLEASE DO NOT HESITATE TO CALL US AT: (800)
221-5672.
OR VISIT OUR WEBSITE AT: WWW.ALLIANCECAPITAL.COM
FOR LITERATURE CALL: (800) 227-4618
ALLIANCE HEALTH CARE SUBSCRIPTION APPLICATION
- - ADVISOR CLASS
- --------------------------------------------------------------------------------
1. Your Account Registration (Please Print in Capital Letters and Mark Check
Boxes Where Applicable)
- --------------------------------------------------------------------------------
|_| Individual Account [ |_| Male |_| Female ] - or - |_| Joint Account - or -
|_| Transfer On Death [ |_| Male |_| Female ] - or - Gift/Transfer to a Minor
|_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_|
Owner or Custodian (First Name) (MI) (Last Name)
|_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_|
(First Name) Joint Owner*, (MI) (Last Name)
Transfer On Death Beneficiary
or Minor
|_| |_| |_| - |_| |_| - |_| |_| |_| |_|
Social Security Number of Owner or Minor
(required to open account)
If Uniform Gift/Transfer
to Minor Account:
|_| |_| Minor's State of Residence
If Joint Tenants Account: * The Account will be registered "Joint Tenants with
right of Survivorship" unless you indicate otherwise below:
|_| In Common |_| By Entirety |_| Community Property
|_| Trust - or - |_| Corporation - or - |_| Other
-------------------------------
|_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_|
Name of Trustee if applicable (MI) (Last Name)
(First Name)
|_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_|
Name of Trust or Corporation or Other Entity
|_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_|
Name of Trust or Corporation or Other Entity continued
|_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_|
Trust Dated (MM, DD, YYYY) Tax ID Number (required to open account)
|_| Employer ID Number - OR - |_| Social Security
Number
- --------------------------------------------------------------------------------
2. Your Address
- --------------------------------------------------------------------------------
|_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_|
Street Number Street Name
|_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_|
City State Zip code
|_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| - |_| |_| |_| - |_| |_| |_| |_|
If Non-U.S., Specify Country Daytime Phone Number
|_| U.S. Citizen |_| Resident Alien |_| Non-Resident Alien
90663-HCFApp-Advisor-P1
- --------------------------------------------------------------------------------
3. Your Initial Investment
- --------------------------------------------------------------------------------
I hereby subscribe for shares of the Alliance Health Care Fund Advisor Class
and elect distribution options as indicated.
- ---------------------------------------
Broker/Dealer Use Only: Wire Confirm #
|_| |_| |_| |_| |_| |_| |_| |_|
- ---------------------------------------
Dividend and Capital Gain Distribution Options:
R Reinvest distributions into my fund account.
C Send my distributions in cash to the address I have provided in Section 2.
(Complete Section 4D for direct deposit to your bank account. Complete
Section 4E for payment to a third party).
D Direct my distributions to another Alliance fund. Complete the appropriate
portion of Section 4A to direct your distributions (dividends and capital
gains) to another Alliance Fund.
- ----------- ------------- ---------------------- ---------------------------
Make all Distributions Options
checks* Indicate three *Check One*
payable to: digit Fund Indicate Dollar Amount ---------------------------
Alliance number Dividends Capital Gains
Funds located below R C D R C D
- ----------- ------------- ---------------------- ----------- -------------
4 0 8 $ |__________________| |R| |C| |D| |R| |C| |D|
* Cash and money orders are not accepted
90663-HCFApp-Advisor-P2 Alliance Capital [LOGO](R)
The Investment Professional's Choice
- --------------------------------------------------------------------------------
4. Your Shareholder Options
- --------------------------------------------------------------------------------
A. Automatic Investment Plans (AIP)
|_| Withdraw From My Bank Account Via EFT* I authorize Alliance to draw on my
bank account for investment in my fund account(s) as indicated below
(Complete Section 4D also for the bank account you wish to use).
1 - |_| |_| |_| |_| |_| |_| |_| |_| |_| , |_| |_| |_|.00 |_|
Fund Number Beginning Date Amount ($25 minimum) Frequency
(MM,DD)
2 - |_| |_| |_| |_| |_| |_| |_| |_| |_| , |_| |_| |_|.00 |_|
Fund Number Beginning Date Amount ($25 minimum) Frequency
(MM,DD)
3 - |_| |_| |_| |_| |_| |_| |_| |_| |_| , |_| |_| |_|.00 |_|
Fund Number Beginning Date Amount ($25 minimum) Frequency
(MM,DD)
Frequency: M = monthly Q = quarterly A = annually
* Electronic Funds Transfer. Your bank must be a member of the
National Automated Clearing House Association (NACHA)
|_| Direct My Distributions As indicated in Section 3, I would like my
dividends and/or capital gains directed to the same class of shares of
another Alliance Fund.
FROM: |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| - |_|
Fund Number Account Number (If existing)
TO: |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| - |_|
Fund Number Account Number (If existing)
|_| Exchange My Shares Monthly I authorize Alliance to transact monthly
exchanges, within the same class of shares, between my fund accounts as
listed below.
FROM: |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| - |_|
Fund Number Account Number (If existing)
|_| |_| , |_| |_| |_|.00 |_| |_|
Amount ($25 minimum) Day of Exchange**
TO: |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| - |_|
Fund Number Account Number (If existing)
** Shares exchanged will be redeemed at the net asset value on the "Day of
Exchange" (If the "Day of Exchange" is not a fund business day, the
exchange transaction will be processed on the next fund business day). The
exchange privilege is not available if stock certificates have been
issued.
B. Purchases and Redemptions Via EFT
You can call our toll-free number 1-800-221-5672 and instruct Alliance
Fund Services, Inc. in a recorded conversation to purchase, redeem or
exchange shares for your account. Purchase and redemption requests will be
processed via electronic funds transfer (EFT) to and from your bank
account.
Instructions: o Review the information in the Prospectus about
telephone transaction services.
o If you select the telephone purchase or redemption
privilege, you must write "VOID" across the face
of a check from the bank account you wish to use
and attach it to Section 4D of this application.
|_| Purchases and Redemptions via EFT
I hereby authorize Alliance Fund Services, Inc. to effect the purchase
and/or redemption of Fund shares for my account according to my telephone
instructions or telephone instructions from my Broker/Agent, and to
withdraw money or credit money for such shares via EFT from the bank
account I have selected.
- --------------------------------------------------------------------------------
For shares recently purchased by check or electronic funds transfer
redemption proceeds will not be made available until the Fund is
reasonably assured the check or electronic funds transfer has been
collected, normally 15 calendar days after the purchase date.
- --------------------------------------------------------------------------------
90663-HCFApp-Advisor-P3
- --------------------------------------------------------------------------------
4. Your Shareholder Options (CONTINUED)
- --------------------------------------------------------------------------------
C. Systematic Withdrawal Plans (SWP)
In order to establish a SWP, you must reinvest all dividends and capital
gains.
|_| I authorize Alliance to transact periodic redemptions from my fund
account and send the proceeds to me as indicated below.
1 - |_| |_| |_| |_| |_| |_| |_| |_| |_| , |_| |_| |_|.00 |_|
Fund Number Beginning Date Amount ($25 minimum) Frequency
(MM,DD)
2 - |_| |_| |_| |_| |_| |_| |_| |_| |_| , |_| |_| |_|.00 |_|
Fund Number Beginning Date Amount ($25 minimum) Frequency
(MM,DD)
3 - |_| |_| |_| |_| |_| |_| |_| |_| |_| , |_| |_| |_|.00 |_|
Fund Number Beginning Date Amount ($25 minimum) Frequency
(MM,DD)
Frequency: M = monthly Q = quarterly A = annually
Please send my SWP proceeds to:
|_| My Address of Record (via check)
|_| The Payee and address specified in section 4E (via check) (Medallion
Signature Guarantee required)
|_| My checking account-via EFT (complete section 4D) Your bank must be
a member of the National Automated Clearing House Association
(NACHA) in order for you to receive SWP proceeds directly into your
bank account. Otherwise payment will be made by check
D. Bank Information This bank account information will be used for:
|_| Distributions (Section 3)
|_| Automatic Investments (Section 4A)
|_| Telephone Transactions (Section 4B)
|_| Withdrawals (Section 4C)
- --------------------------------------------------------------------------------
Please Tape a Pre-printed Voided Check Here*
- --------------------------------------------------------------------------------
[GRAPHIC OMITTED]
* The above services cannot be established without a pre-printed voided
check.
For EFT transactions, the fund requires signatures of bank account owners
exactly as they appear on bank records. If the registration at the bank
differs from that on the Alliance mutual fund, all parties must sign in
Section 5.
|_| |_| |_| |_| |_| |_| |_| |_| |_|
Your Bank's ABA Routing Number
|_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_|
Your Bank Account Number
|_| Checking Account |_| Savings Account
90663-HCFApp-Advisor-P4
- --------------------------------------------------------------------------------
4. Your Shareholder Options (CONTINUED)
- --------------------------------------------------------------------------------
E. Third Party Payment Details Your signature(s) in Section 5 must be
Medallion Signature Guaranteed if your account is not maintained by a
broker/dealer. This third party payee information will be used for:
|_| Distributions (section 3) |_| Systematic Withdrawals (section 4C)
|_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_|
Name (First Name) (MI) (Last Name)
|_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_|
Street Number Street Name
|_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_| |_|
City State Zip code
- --------------------------------------------------------------------------------
Dealer/Agent Authorization - For selected Dealers or Agents ONLY.
- --------------------------------------------------------------------------------
We hereby authorize Alliance Fund Services, Inc. to act as our agent in
connection with transactions under this authorization form; and we guarantee the
signature(s) set forth in Section 5, as well as the legal capacity of the
shareholder.
____________________________________ ______________________________________
Dealer/Agent Firm Authorized Signature
___________________________ |_| ______________________________________
Representative First Name MI Last Name
____________________________________ ______________________________________
Dealer/Agent Firm Number Representative Number
____________________________________ ______________________________________
Branch Number Branch Telephone Number
______________________________________________________________________________
Branch Office Address
____________________________________ |_| |_| ____________________________
City State Zip Code
90663-HCFApp-Advisor-P5 Alliance Capital [LOGO](R)
The Investment Professional's Choice
- --------------------------------------------------------------------------------
5. Shareholder Authorization -- This section MUST be completed
- --------------------------------------------------------------------------------
Telephone Exchanges and Redemptions by Check
Unless I have checked one or both boxes below, these privileges will
automatically apply, and by signing this application, I hereby authorize
Alliance Fund Services, Inc. to act on my telephone instructions, or on
telephone instructions from any person representing himself to be an
authorized employee of an investment dealer or agent requesting a
redemption or exchange on my behalf. (NOTE: Telephone exchanges may only
be processed between accounts that have identical registrations.)
Telephone redemption checks will only be mailed to the name and address of
record; and the address must not have changed within the last 30 days. The
maximum telephone redemption amount is $50,000 for redemptions by check.
|_| I do not elect the telephone exchange service
|_| I do not elect the telephone redemption by check service
By selecting any of the above telephone privileges, I agree that neither
the Fund nor Alliance, Alliance Fund Distributors, Inc., Alliance Fund
Services, Inc. or other Fund Agent will be liable for any loss, injury,
damage or expense as a result of acting upon telephone instructions
purporting to be on my behalf, that the Fund reasonably believes to be
genuine, and that neither the Fund nor any such party will be responsible
for the authenticity of such telephone instructions. I understand that any
or all of these privileges may be discontinued by me or the Fund at any
time. I understand and agree that the Fund reserves the right to refuse
any telephone instructions and that my investment dealer or agent reserves
the right to refuse to issue any telephone instructions I may request.
For non-residents only: Under penalties of perjury, I certify that to the
best of my knowledge and belief, I qualify as a foreign person as
indicated in Section 2.
I am of legal age and capacity and have received and read the Prospectus
and agree to its terms.
I certify under penalty of perjury that the number shown in Section 1 of
this form is my correct tax identification number or I am waiting for a
number to be issued to me and that I have not been notified that this
account is subject to backup withholding.
The Internal Revenue Service does not require your consent to any
provision of this document other than the certification required to avoid
backup withholding.
- ----------------------------------------------------------- -------------
Signature Date
- ----------------------------------------------------------- -------------
Signature Date
- --------------------------------------------
Medallion Signature Guarantee required if
completing Section 4E and your mutual
fund is not maintained by a broker dealer
90663-HCFApp-Advisor-P6 Alliance Capital [LOGO](R)
The Investment Professional's Choice
<PAGE>
This is filed pursuant to Rule 497(c).
File Nos. 333-77953 and 811-09329.
<PAGE>
(LOGO) ALLIANCE HEALTH CARE FUND, INC.
c/o Alliance Fund Services, Inc.
P.O. Box 1520, Secaucus, New Jersey 07096-1520
Toll Free (800) 221-5672
For Literature: Toll Free (800) 227-4618
_________________________________________________________________
STATEMENT OF ADDITIONAL INFORMATION
July 26, 1999
_________________________________________________________________
This Statement of Additional Information is not a
prospectus but supplements and should be read in conjunction with
the Prospectus dated July 26, 1999 for Alliance Health Care Fund,
Inc. (the "Fund") that offers the Class A, Class B and Class C
shares of the Fund and the Prospectus dated July 26, 1999 that
offers the Advisor Class shares of the Fund (the "Advisor Class
Prospectus" and, together with the Prospectus for the Fund that
offers the Class A, Class B, and Class C shares of the Fund, the
"Prospectus"). Copies of the Prospectus may be obtained by
contacting Alliance Fund Services, Inc. at the address or the
"For Literature" telephone number shown above.
TABLE OF CONTENTS
Page
Description of the Fund................................
Management of the Fund.................................
Expenses of the Fund...................................
Purchase of Shares.....................................
Redemption and Repurchase of Shares....................
Shareholder Services...................................
Net Asset Value........................................
Dividends, Distributions and Taxes.....................
Portfolio Transactions.................................
General Information....................................
Financial Statements and Report of Independent
Accountants .........................................
Appendix A: Certain Employee Benefit Plans
(R): This registered service mark used under license from the
owner, Alliance Capital Management L.P.
<PAGE>
_________________________________________________________________
DESCRIPTION OF THE FUND
_________________________________________________________________
Alliance Health Care Fund, Inc. (the "Fund") is a
diversified open-end management investment company. The Fund was
incorporated under the laws of the State of Maryland on April 30,
1999. The Fund's investment objective is "fundamental" and
cannot be changed without a shareholder vote. Except as noted,
the Fund's investment policies are not fundamental and thus can
be changed without a shareholder vote. The Fund will not change
these policies without notifying its shareholders. There is no
guarantee that the Fund will achieve its investment objective.
Investment Policies and Practices
The Fund's principal investment policies, practices and
risks are set forth in the Prospectus. The information set forth
below concerning the Fund's investment practices and policies
supplements the information in the Prospectus. Except as
otherwise noted, the Fund's investment policies described below
are not designated "fundamental policies" within the meaning of
the Investment Company Act of 1940, as amended (the "1940 Act"),
and may be changed by the Directors of the Fund without
shareholder approval. However, the Fund will not change its
investment policies without contemporaneous written notice to
shareholders.
ADDITIONAL INVESTMENT POLICIES AND PRACTICES
The following information about the Fund's investment
policies and practices supplements the information set forth in
the Prospectus.
FORWARD COMMITMENTS. The Fund may enter into forward
commitments for the purchase or sale of securities. Such
transactions may include purchases on a "when-issued" basis or
purchases or sales on a "delayed delivery" basis. In some cases,
a forward commitment may be conditioned upon the occurrence of a
subsequent event, such as approval and consummation of a merger,
corporate reorganization or debt restructuring (i.e., a "when, as
and if issued" trade).
When forward commitment transactions are negotiated, the
price, which is generally expressed in yield terms, is fixed at
the time the commitment is made, but delivery and payment for the
securities take place at a later date, normally within four
months after the transaction, although delayed settlements beyond
four months may be negotiated. Securities purchased or sold
under a forward commitment are subject to market fluctuation, and
2
<PAGE>
no interest accrues to the purchaser prior to the settlement
date. At the time the Fund enters into a forward commitment, it
will record the transaction and thereafter reflect the value of
the security purchased or, if a sale, the proceeds to be
received, in determining its net asset value. Any unrealized
appreciation or depreciation reflected in such valuation of a
"when, as and if issued" security would be cancelled in the event
that the required conditions did not occur and the trade was
cancelled.
The use of forward commitments enables the Fund to
protect against anticipated changes in interest rates and prices.
For instance, in periods of rising interest rates and falling
bond prices, the Fund might sell securities in its portfolio on a
forward commitment basis to limit its exposure to falling bond
prices. In periods of falling interest rates and rising bond
prices, the Fund might sell a security in its portfolio and
purchase the same or a similar security on a when-issued or
forward commitment basis, thereby obtaining the benefit of
currently higher cash yields. However, if Alliance Capital
Management L.P., the Fund's investment adviser (the "Adviser"),
were to forecast incorrectly the direction of interest rate
movements, the Fund might be required to complete such when-
issued or forward transactions at prices less favorable than
current market values.
The Fund's right to receive or deliver a security under
a forward commitment may be sold prior to the settlement date,
but the Fund will enter into forward commitments only with the
intention of actually receiving or delivering the securities, as
the case may be. To facilitate such transactions, the Fund's
custodian will maintain, in the separate account of the Fund,
liquid assets having value equal to, or greater than, any
commitments to purchase securities on a forward commitment basis.
If the Fund, however, chooses to dispose of the right to receive
or deliver a security subject to a forward commitment prior to
the settlement date of the transaction, it can incur a gain or
loss. In the event the other party to a forward commitment
transaction were to default, the Fund might lose the opportunity
to invest money at favorable rates or to dispose of securities at
favorable prices.
Although the Fund intends to make such purchases for
speculative purposes, purchases of securities on such bases may
involve more risk than other types of purchases. For example, by
committing to purchase securities in the future, the Fund
subjects itself to a risk of loss on such commitments as well as
on its portfolio securities. Also, the Fund may have to sell
assets that have been set aside in order to meet redemptions. In
addition, if the Fund determines it is advisable as a matter of
investment strategy to sell the forward commitment or when-issued
3
<PAGE>
or delayed delivery securities before delivery, the Fund may
incur a gain or loss because of market fluctuations since the
time the commitment to purchase such securities was made. Any
such gain or loss would be treated as a capital gain or loss and
would be treated for tax purposes as such. When the time comes
to pay for the securities to be purchased under a forward
commitment or on a when-issued or delayed delivery basis, the
Fund will meet its obligations from the then available cash flow
or the sale of securities, or, although it would not normally
expect to do so, from the sale of the forward commitment or when-
issued or delayed delivery securities themselves (which may have
a value greater or less than the Fund's payment obligation).
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS. The Fund
may purchase or sell forward foreign currency exchange contracts
("forward contracts") to attempt to minimize the risk to the Fund
of adverse changes in the relationship between the U.S. Dollar
and foreign currencies. A forward contract is an obligation to
purchase or sell a specific currency for an agreed price at a
future date which is individually negotiated and privately traded
by currency traders and their customers.
The Fund may enter into a forward contract, for example,
when it enters into a contract for the purchase or sale of a
security denominated in a foreign currency in order to "lock in"
the U.S. Dollar price of the security ("transaction hedge"). The
Fund may not engage in transaction hedges with respect to the
currency of a particular country to an extent greater than the
aggregate amount of the Fund's transactions in that currency.
Additionally, for example, when the Fund believes that a foreign
currency may suffer a substantial decline against the U.S.
Dollar, it may enter into a forward sale contract to sell an
amount of that foreign currency approximating the value of some
or all of the Fund's securities denominated in such foreign
currency, or when the Fund believes that the U.S. Dollar may
suffer a substantial decline against a foreign currency, it may
enter into a forward purchase contract to buy that foreign
currency for a fixed dollar amount ("position hedge"). The Fund
will not position hedge with respect to a particular currency to
an extent greater than the aggregate market value (at the time of
making such sale) of the securities held in its portfolio
denominated or quoted in that currency. In this situation the
Fund may, in the alternative, enter into a forward contract to
sell a different foreign currency for a fixed U.S. Dollar amount
where the Fund believes that the U.S. Dollar value of the
currency to be sold pursuant to the forward contract will fall
whenever there is a decline in the U.S. Dollar value of the
currency in which portfolio securities of the Fund are
denominated ("cross-hedge").
4
<PAGE>
To the extent required by applicable law, the Fund's
Custodian will place liquid assets in a separate account of the
Fund having a value equal to the aggregate amount of the Fund's
commitments under forward contracts entered into with respect to
position hedges and cross-hedges. If the value of the assets
placed in a separate account declines, additional liquid assets
will be placed in the account on a daily basis so that the value
of the account will equal the amount of the Fund's commitments
with respect to such contracts. As an alternative to maintaining
all or part of the separate account, the Fund may purchase a call
option permitting the Fund to purchase the amount of foreign
currency being hedged by a forward sale contract at a price no
higher than the forward contract price or the Fund may purchase a
put option permitting the Fund to sell the amount of foreign
currency subject to a forward purchase contract at a price as
high or higher than the forward contract price. In addition, the
Fund may use such other methods of "cover" as are permitted by
applicable law.
While these contracts are not presently regulated by the
Commodity Futures Trading Commission (the "CFTC"), the CFTC may
in the future assert authority to regulate forward contracts. In
such event the Fund's ability to utilize forward contracts in the
manner set forth in the Prospectus may be restricted.
The Fund will not speculate in forward currency
contracts. The Fund will only enter forward foreign currency
exchange contracts with counterparties that, in the opinion of
the Adviser, do not present undue credit risk. Generally, such
forward contracts will be for a period of less than three months.
Hedging against a decline in the value of a currency
does not eliminate fluctuations in the prices of portfolio
securities or prevent losses if the prices of securities decline.
These transactions also preclude the opportunity for gain if the
value of the hedge currency should rise. Moreover, it may not be
possible for the Fund to hedge against a devaluation that is so
generally anticipated that the Fund is not able to contract to
sell the currency at a price above the anticipated devaluation
level. Unanticipated changes in currency prices may result in
poorer overall performance for the Fund than if it had not
entered into such contracts. The matching of the increase in
value of a forward contract and the decline in the U.S. Dollar
equivalent value of the foreign currency-denominated asset that
is the subject of the hedge generally will not be precise. In
addition, the Fund may not always be able to enter into foreign
currency forward contracts at attractive prices and this will
limit the Fund's ability to use such contract to hedge or cross-
hedge its assets. Also, with regard to the Fund's use of cross-
hedges, there can be no assurance that historical correlations
between the movement of certain foreign currencies relative to
5
<PAGE>
the U.S. Dollar will continue. Thus, at any time poor
correlation may exist between movements in the exchange rates of
the foreign currencies underlying the Fund's cross-hedges and the
movements in the exchange rates of the foreign currencies in
which the Fund's assets that are the subject of such cross-hedges
are denominated.
LENDING OF PORTFOLIO SECURITIES. Consistent with
applicable regulatory requirements, the Fund may lend its
portfolio securities provided the loan is continuously secured by
cash, marketable securities issued or guaranteed by the U.S.
Government or its agencies, or a standby letter of credit issued
by qualified banks equal to no less than the market value,
determined daily, of the securities loaned. In lending its
portfolio securities, the Fund will require that interest or
dividends on securities loaned be paid to the Fund. Where voting
or consent rights with respect to loaned securities pass to the
borrower, the Fund will follow the policy of calling the loan, in
whole or in part as may be appropriate, to permit it to exercise
such voting or consent rights if the exercise of such rights
involves issues having a material effect on the Fund's investment
in the securities loaned. Loans will be made only to firms
deemed by the Adviser to be of good standing and will not be made
unless, in the judgment of the Adviser, the consideration to be
earned from such loans would justify the risk. The Fund may
invest any cash collateral in portfolio securities and earn
additional income, or receive an agreed-upon amount of income
from a borrower who has delivered equivalent collateral. The Fund
will have the right to regain record ownership of loaned
securities to exercise beneficial rights such as voting rights,
subscription rights, and rights to dividends, interest or
distributions. The Fund may pay reasonable finders',
administrative, and custodial fees in connection with a loan.
REPURCHASE AGREEMENTS. The Fund may enter into
repurchase agreements pertaining to U.S. Government Securities
with member banks of the Federal Reserve System or "primary
dealers" (as designated by the Federal Reserve Bank of New York)
in such securities. There is no percentage restriction on the
Fund's ability to enter into repurchase agreements. Currently,
the Fund intends to enter into repurchase agreements only with
its custodian and such primary dealers. A repurchase agreement
arises when a buyer purchases a security and simultaneously
agrees to resell it to the vendor at an agreed-upon future date,
normally one day or a few days later. The resale price is
greater than the purchase price, reflecting an agreed-upon
interest rate which is effective for the period of time the
buyer's money is invested in the security and which is related to
the current market rate rather than the coupon rate on the
purchased security. Such agreements permit the Fund to keep all
of its assets at work while retaining "overnight" flexibility in
6
<PAGE>
pursuit of investments of a longer-term nature. The Fund
requires continual maintenance by its custodian for its account
in the Federal Reserve/Treasury Book Entry System of collateral
in an amount equal to, or in excess of, the resale price. In the
event a vendor defaulted on its repurchase obligation, the Fund
might suffer a loss to the extent that the proceeds from the sale
of the collateral were less than the repurchase price. In the
event of a vendor's bankruptcy, the Fund might be delayed in, or
prevented from, selling the collateral for its benefit. The
Fund's Board of Directors has established procedures, which are
periodically reviewed by the Board, pursuant to which the Fund's
Adviser monitors the creditworthiness of the dealers with which
the Fund enters into repurchase agreement transactions.
Repurchase agreements may exhibit the characteristics of
loans by the Fund. During the term of the repurchase agreement,
the Fund retains the security subject to the repurchase agreement
as collateral securing the seller's repurchase obligation,
continually monitors on a daily basis the market value of the
security subject to the agreement and requires the seller to
deposit with the Fund collateral equal to any amount by which the
market value of the security subject to the repurchase agreement
falls below the resale amount provided under the repurchase
agreement.
ILLIQUID SECURITIES. The Fund will not invest more than
10% of its net assets in illiquid securities. For this purpose,
illiquid securities are securities restricted as to disposition
under Federal securities laws and include, among others,
(a) direct placements or other securities which are subject to
legal or contractual restrictions on resale or for which there is
no readily available market (e.g., trading in the security is
suspended or, in the case of unlisted securities, market makers
do not exist or will not entertain bids or offers), and
(b) repurchase agreements not terminable within seven days.
Securities that have legal or contractual restrictions on resale
but have a readily available market are not deemed illiquid for
purposes of this limitation.
Historically, illiquid securities have included
securities subject to contractual or legal restrictions on resale
because they have not been registered under the Securities Act of
1933, as amended (the "Securities Act"), securities which are
otherwise not readily marketable and repurchase agreements having
a maturity of longer than seven days. Securities which have not
been registered under the Securities Act are referred to as
private placements or restricted securities and are purchased
directly from the issuer or in the secondary market. Mutual
funds do not typically hold a significant amount of these
restricted or other illiquid securities because of the potential
for delays on resale and uncertainty in valuation. Limitations
7
<PAGE>
on resale may have an adverse effect on the marketability of
portfolio securities and a mutual fund might be unable to dispose
of restricted or other illiquid securities promptly or at
reasonable prices and might thereby experience difficulty
satisfying redemptions within seven days. A mutual fund might
also have to register such restricted securities in order to
dispose of them resulting in additional expense and delay.
Adverse market conditions could impede such a public offering of
securities.
In recent years, however, a large institutional market
has developed for certain securities that are not registered
under the Securities Act including repurchase agreements,
commercial paper, foreign securities, municipal securities and
corporate bonds and notes. Institutional investors depend on an
efficient institutional market in which the unregistered security
can be readily resold or on an issuer's ability to honor a demand
for repayment. The fact that there are contractual or legal
restrictions on resale to the general public or to certain
institutions may not be indicative of the liquidity of such
investments.
Rule 144A under the Securities Act allows a broader
institutional trading market for securities otherwise subject to
restriction on resale to the general public. Rule 144A
establishes a "safe harbor" from the registration requirements of
the Securities Act for resales of certain securities to qualified
institutional buyers. An insufficient number of qualified
institutional buyers interested in purchasing certain restricted
securities held by the Fund, however, could affect adversely the
marketability of such portfolio securities and the Fund might be
unable to dispose of such securities promptly or at reasonable
prices. Rule 144A has already produced enhanced liquidity for
many restricted securities, and market liquidity for such
securities may continue to expand as a result of this regulation
and the consequent inception of the PORTAL System, which is an
automated system for the trading, clearance and settlement of
unregistered securities of domestic and foreign issuers sponsored
by the National Association of Securities Dealers, Inc. (the
"NASD").
The Adviser, acting under the supervision of the Board
of Directors, will monitor the liquidity of restricted securities
in the Fund that are eligible for resale pursuant to Rule 144A.
In reaching liquidity decisions, the Adviser will consider, among
others, the following factors: (1) the frequency of trades and
quotes for the security; (2) the number of dealers issuing
quotations to purchase or sell the security; (3) the number of
other potential purchasers of the security; (4) the number of
dealers undertaking to make a market in the security; (5) the
nature of the security (including its unregistered nature) and
8
<PAGE>
the nature of the marketplace for the security (e.g., the time
needed to dispose of the security, the method of soliciting
offers and the mechanics of the transfer); and (6) any applicable
Commission interpretation or position with respect to such type
of securities.
The Fund may not be able to readily sell securities for
which there is no ready market. To the extent that these
securities are foreign securities, there is no law in many of the
countries in which the Fund may invest similar to the Securities
Act requiring an issuer to register the sale of securities with a
governmental agency or imposing legal restrictions on resales of
securities, either as to length of time the securities may be
held or manner of resale. There may, however, be contractual
restrictions on resale of securities.
PORTFOLIO TURNOVER. Because the Fund will actively use
trading to achieve its investment objective and policies, the
Fund may be subject to a greater degree of turnover and, thus, a
higher incidence of short-term capital gains taxable as ordinary
income than might be expected from investment companies which
invest substantially all of their funds on a long-term basis, and
correspondingly larger mark-up charges can be expected to be
borne by the Fund. Management anticipates that the annual
turnover in the Fund may be in excess of 100%. An annual
turnover rate of 100% occurs, for example, when all of the
securities in the Fund are replaced one time in a period of one
year.
The value of the Fund's shares will be influenced by the
factors which generally affect securities, such as the economic
and political outlook, earnings, dividends and the supply and
demand for various classes of securities. There can be, of
course, no assurance that the Fund's investment objective will be
achieved.
CERTAIN RISK CONSIDERATIONS
RISKS OF INVESTMENTS IN FOREIGN SECURITIES. Foreign
issuers are subject to accounting and financial standards and
requirements that differ, in some cases significantly, from those
applicable to U.S. issuers. In particular, the assets and
profits appearing on the financial statements of a foreign issuer
may not reflect its financial position or results of operations
in the way they would be reflected had the financial statement
been prepared in accordance with U.S. generally accepted
accounting principles. In addition, for an issuer that keeps
accounting records in local currency, inflation accounting rules
in some of the countries in which the Fund will invest require,
for both tax and accounting purposes, that certain assets and
liabilities be restated on the issuer's balance sheet in order to
9
<PAGE>
express items in terms of currency of constant purchasing power.
Inflation accounting may indirectly generate losses or profits.
Consequently, financial data may be materially affected by
restatements for inflation and may not accurately reflect the
real condition of those issuers and securities markets.
Substantially less information is publicly available about
certain non-U.S. issuers than is available about U.S. issuers.
Expropriation, confiscatory taxation, nationalization,
political, economic or social instability or other similar
developments, such as military coups, have occurred in the past
in countries in which the Fund will invest and could adversely
affect the Fund's assets should these conditions or events recur.
Foreign investment in certain foreign securities is
restricted or controlled to varying degrees. These restrictions
or controls may at times limit or preclude foreign investment in
certain foreign securities and increase the costs and expenses of
the Fund. Certain countries in which the Fund will invest
require governmental approval prior to investments by foreign
persons, limit the amount of investment by foreign persons in a
particular issuer, limit the investment by foreign persons only
to a specific class of securities of an issuer that may have less
advantageous rights than the classes available for purchase by
domiciliaries of the countries and/or impose additional taxes on
foreign investors.
Certain countries other than those on which the Fund
will focus it investments may require governmental approval for
the repatriation of investment income, capital or the proceeds of
sales of securities by foreign investors. In addition, if a
deterioration occurs in a country's balance of payments, the
country could impose temporary restrictions on foreign capital
remittances.
Income from certain investments held by the Fund could
be reduced by foreign income taxes, including withholding taxes.
It is impossible to determine the effective rate of foreign tax
in advance. The Fund's net asset value may also be affected by
changes in the rates or methods of taxation applicable to the
Fund or to entities in which the Fund has invested. The Adviser
generally will consider the cost of any taxes in determining
whether to acquire any particular investments, but can provide no
assurance that the tax treatment of investments held by the Fund
will not be subject to change.
For many foreign securities, there are U.S. dollar-
denominated American Depository Receipts (ADRs) which are traded
in the United States on exchanges or over-the-counter, are issued
by domestic banks or trust companies and which market quotations
are readily available. ADRs do not lessen the foreign exchange
10
<PAGE>
risk inherent in investing in the securities of foreign issuers.
However, by investing in ADRs rather than directly in stock of
foreign issuers, the Fund can avoid currency risks which might
occur during the settlement period for either purchases or sales.
The Fund may purchase foreign securities directly, as well as
through ADRs.
SECURITIES RATINGS. The ratings of fixed-income
securities by Moody's Investors Service, Inc. and Standard &
Poor's Ratings Services are a generally accepted barometer of
credit risk. They are, however, subject to certain limitations
from an investor's standpoint. The rating of an issuer is
heavily weighted by past developments and does not necessarily
reflect probable future conditions. There is frequently a lag
between the time a rating is assigned and the time it is updated.
In addition, there may be varying degrees of difference in credit
risk of securities within each rating category.
The Adviser will try to reduce the risk inherent in the
Fund's investment approach through credit analysis,
diversification and attention to current developments and trends
in interest rates and economic conditions. However, there can be
no assurance that losses will not occur. In considering
investments for the Fund, the Adviser will attempt to identify
those high-yielding securities whose financial condition is
adequate to meet future obligations, has improved, or is expected
to improve in the future. The Adviser's analysis focuses on
relative values based on such factors as interest or dividend
coverage, asset coverage, earnings prospects, and the experience
and managerial strength of the issuer.
Non-rated securities will also be considered for
investment by the Fund when the Adviser believes that the
financial condition of the issuers of such securities, or the
protection afforded by the terms of the securities themselves,
limits the risk to the Fund to a degree comparable to that of
rated securities which are consistent with the Fund's objectives
and policies.
1940 ACT RESTRICTIONS. Under the 1940 Act, the Fund is
not permitted to borrow unless immediately after such borrowing
there is "asset coverage," as that term is defined and used in
the 1940 Act, of at least 300% for all borrowings of the Fund.
In addition, under the 1940 Act, in the event asset coverage
falls below 300%, the Fund must within three days reduce the
amount of its borrowing to such an extent that the asset coverage
of its borrowings is at least 300%. Assuming, for example,
outstanding borrowings representing not more than one-third of
the Fund's total assets less liabilities (other than such
borrowings), the asset coverage of the Fund's portfolio would be
300%; while outstanding borrowings representing 25% of the total
11
<PAGE>
assets less liabilities (other than such borrowings), the asset
coverage of the Fund's portfolio would be 400%. The Fund will
maintain asset coverage of outstanding borrowings of at least
300% and if necessary will, to the extent possible, reduce the
amounts borrowed by making repayments from time to time in order
to do so. Such repayments could require the Fund to sell
portfolio securities at times considered disadvantageous by the
Adviser and such sales could cause the Fund to incur related
transaction costs and to realize taxable gains.
Under the 1940 Act, the Fund may invest not more than
10% of its total assets in securities of other investment
companies. In addition, under the 1940 Act the Fund may not own
more than 3% of the total outstanding voting stock of any
investment company and not more than 5% of the value of the
Fund's total assets may be invested in the securities of any
investment company.
Certain Fundamental Investment Policies
The Fund has adopted the following investment
restrictions, which may not be changed without the approval of
the holders of a majority of the Fund's outstanding voting
securities. The approval of a majority of the Fund's outstanding
voting securities means the affirmative vote of (i) 67% or more
of the shares represented at a meeting at which more than 50% of
the outstanding shares are present in person or by proxy, or (ii)
more than 50% of the outstanding shares, whichever is less.
As a matter of fundamental policy, the Fund may
not:
1. Invest 25% or more of its total assets in
securities of a single issuer, or in securities of
issuers in any single industry (except the Fund
will concentrate in Health Care Industries, as
defined in the Prospectus), except that these
restrictions do not apply to securities issued or
guaranteed by the U.S. Government, its agencies or
instrumentalities or other U.S. Government
securities;
2. Make loans except through (a) the
purchase of debt obligations in accordance with its
investment objective and policies; (b) the lending
of portfolio securities; or (c) the use of
repurchase agreements;
3. Borrow money or issue senior securities
except to the extent permitted by the 1940 Act;
12
<PAGE>
4. Pledge, hypothecate, mortgage or
otherwise encumber its assets, except to secure
permitted borrowings;
5. Invest in companies for the purpose of
exercising control; or
6. (a) Purchase or sell real estate, except
that it may purchase and sell securities of
companies which deal in real estate or interests
therein and securities that are secured by real
estate, provided such securities are securities of
the type in which the Fund may invest; (b) purchase
or sell commodities or commodity contracts,
including futures contracts (except foreign
currencies, futures on securities, currencies and
securities indices and forward contracts or
contracts for the future acquisition or delivery of
securities and foreign currencies and other similar
contracts and options on the foregoing); and
(c) act as an underwriter of securities, except
that the Fund may acquire restricted securities
under circumstances in which, if such securities
were sold, the Fund might be deemed to be an
underwriter for purposes of the Securities Act.
Whenever any investment restriction states a maximum
percentage of the Fund's assets which may be invested in any
security or other asset, it is intended that such maximum
percentage limitation be determined immediately after and as a
result of the Fund's acquisition of such securities or other
assets. Accordingly, any later increase or decrease in
percentage beyond the specified limitation resulting from a
change in values or net assets will not be considered a violation
of any such maximum.
Certain Non-Fundamental Investment Policies
The following investment restrictions are not
fundamental. They may be changed without a vote of the Fund's
shareholders.
The Fund may not:
1. Borrow money except from banks on a temporary basis
in order to meet redemption requests and only if the aggregate of
the amount borrowed would not exceed 10% of the value of its
total net assets (not including the aggregate amount borrowed);
2. Make short sales of securities or maintain a short
position for the account of the Fund; or
13
<PAGE>
3. Invest in the securities of any single issuer if
immediately after and as a result of such investment more than
10% of the total net assets of the fund would consist of the
securities of such issuer, provided that:
a. the above limit of 10% shall be 25% in respect
of the securities issued or guaranteed by any
Member State of the European Union ("EU") or
any local authority thereof, or public
international bodies of which one or more
Member States of the EU are members or any
other national government; and
b. the above limit of 10% shall be 25% for debt
securities issued by a credit institution
whose registered office is situated in a
Member State of the EU.
________________________________________________________________
MANAGEMENT OF THE FUND
________________________________________________________________
Directors and Officers
The business and affairs of the Fund are managed under
the direction of the Board of Directors. The Directors and
officers of the Fund, their ages and their principal occupations
during the past five years are set forth below. Each such
Director and officer is also a trustee, director or officer of
other registered investment companies sponsored by the Adviser.
Unless otherwise specified, the address of each such person is
1345 Avenue of the Americas, New York, New York 10105.
DIRECTORS
JOHN D. CARIFA,1 54, Chairman of the Board, is the
President, Chief Operating Officer and a Director of Alliance
Capital Management Corporation, the general partner of the
Adviser ("ACMC"), with which he has been associated since prior
to 1994.
RUTH BLOCK, 68, was formerly an Executive Vice President
and the Chief Insurance Officer of Equitable. She is a Director
of Ecolab Incorporated (specialty chemicals) and Amoco
Corporation (oil and gas). Her address is P.O. Box 4623,
Stamford, Connecticut 06903.
____________________
1. An "interested person" of the Fund as defined in the 1940
Act.
14
<PAGE>
DAVID H. DIEVLER, 69, is an independent consultant. He
was formerly a Senior Vice President of ACMC until December 1994.
His address is P.O. Box 167, Spring Lake, New Jersey 07762.
JOHN H. DOBKIN, 57, has been the President of Historic
Hudson Valley (historic preservation) since prior to 1994.
Previously, he was Director of the National Academy of Design.
His address is 150 White Plains Road, Tarrytown, New York 10591.
WILLIAM H. FOULK, JR., 66, is an Investment Adviser and
an independent consultant. He was formerly Senior Manager of
Barrett Associates, Inc., a registered investment adviser, with
which he had been associated since 1986. His address is Room
100, 2 Greenwich Plaza, Greenwich, Connecticut 06830.
DR. JAMES M. HESTER, 75, is President of the Harry Frank
Guggenheim Foundation, with which he has been associated since
prior to 1994. He was formerly President of New York University,
the New York Botanical Garden and Rector of the United Nations
University. His address is 25 Cleveland Lane, Princeton, New
Jersey 08540.
CLIFFORD L. MICHEL, 59, is a member of the law firm of
Cahill Gordon & Reindel, with which he has been associated since
prior to 1994. He is President and Chief Executive Officer of
Wenonah Development Company (investments) and a Director of
Placer Dome, Inc. (mining). His address is St. Bernard's Road,
Gladstone, New Jersey 07934.
DONALD J. ROBINSON, 64, is Senior Counsel to the law
firm of Orrick, Herrington & Sutcliffe and was formerly a senior
partner and a member of the Executive Committee of that firm. He
was also a Trustee of the Museum of the City of New York from
1977 to 1995. His address is 98 Hell's Peak Road, Weston,
Vermont 05161.
OFFICERS
JOHN D. CARIFA, CHAIRMAN AND PRESIDENT (see biography,
above).
EDMUND P. BERGAN, JR., SECRETARY, 49, is a Senior Vice
President and the General Counsel of Alliance Fund Distributors,
Inc. ("AFD") and Alliance Fund Services, Inc. ("AFS") with which
he has been associated since prior to 1994.
MARK D. GERSTEN, TREASURER AND CHIEF FINANCIAL OFFICER,
48, is a Senior Vice President of AFS, with which he has been
associated since prior to 1994.
15
<PAGE>
DOMENICK PUGLIESE, ASSISTANT SECRETARY, 38, is a Vice
President and Assistant General Counsel of AFD, with which he has
been associated since May 1995. Prior thereto, he was a Vice
President and Counsel of Concord Financial Holding Corporation
since 1994, Vice President and Associate General Counsel of
Prudential Securities since prior to 1993.
ANDREW L. GANGOLF, ASSISTANT SECRETARY, 45, is a Vice
President and Assistant General Counsel of AFD, with which he has
been associated since December 1994. Prior thereto, he was Vice
President and Assistant Secretary of Delaware Management Co.,
Inc.
EMILIE D. WRAPP, ASSISTANT SECRETARY, 43, is a Vice
President and Assistant General Counsel of AFD, with which she
has been associated since prior to 1994.
The Fund does not pay any fees to, or reimburse
expenses of, its Directors who are considered "interested
persons" of the Fund. The aggregate compensation to be paid
by the Fund to each of the Directors during the Fund's
fiscal period ending June 30, 2000 (estimating future
payments based upon existing arrangements), and the
aggregate compensation paid to each of the Directors during
calendar year 1998 by all of the registered investment
companies to which the Adviser provides investment advisory
services (collectively, the "Alliance Fund Complex"), and
the total number of registered investment companies (and
separate investment portfolios within those companies) in
the Alliance Fund Complex with respect to which each of the
Directors serves as a director or trustee, are set forth
below. Neither the Fund nor any other registered investment
company in the Alliance Fund Complex provides compensation
in the form of pension or retirement benefits to any of its
directors or trustees.
16
<PAGE>
Total Number Total Number
of Investment of Investment
Total Companies in Portfolios Within
Compensation the Alliance the Alliance
From the Fund Complex, Fund Complex,
Alliance Fund Including the Including the
Complex, Fund, for which Fund, as to which
Aggregate Including the the Director the Director
Name of Compensation Fund, During is a Director is a Director or
Director From the Fund 1998 or Trustee Trustee
___________ _____________ ______________ _____________ _______________
John D. Carifa $-0- $-0- 50 116
Ruth Block $3,750 $180,762.50 37 79
David H. Dievler $3,750 $216,287.50 43 82
John H. Dobkin $3,750 $185,362.50 41 93
William H. Foulk, Jr. $3,750 $241,002.50 45 111
Dr. James M. Hester $3,750 $172,912.50 37 76
Clifford L. Michel $3,750 $187,762.50 38 92
Donald J. Robinson $3,750 $193,708.50 41 105
As of July 26, 1999, the Directors and officers of the
Fund as a group owned less than 1% of the shares of the Fund.
Adviser
The Fund's investment adviser, Alliance Capital
Management L.P., 1345 Avenue of the Americas, New York, New York
10105, is a leading international investment adviser managing
client accounts with assets as of March 31, 1999 totaling more
than $301 billion (of which approximately $127 billion
represented the assets of investment companies). As of March 31,
1999, the Adviser managed retirement assets for many of the
largest public and private employee benefit plans (including 30
of the nation's FORTUNE 100 companies), for public employee
retirement funds in 32 out of the 50 states, for investment
companies, and for foundations, endowments, banks and insurance
companies worldwide. The 54 registered investment companies
managed by the Adviser, comprising 120 separate investment
portfolios, currently have more than four million shareholder
accounts.
Alliance Capital Management Corporation ("ACMC"), the
sole general partner of, and the owner of a 1% general
partnership interest in, the Adviser, is an indirect wholly-owned
subsidiary of The Equitable Life Assurance Society of the United
States ("Equitable"), one of the largest life insurance companies
in the United States and a wholly-owned subsidiary of The
Equitable Companies Incorporated ("ECI"). ECI is a holding
company controlled by AXA, a French insurance holding company.
As of March 1, 1999 AXA and certain of its subsidiaries
17
<PAGE>
beneficially owned approximately 58.4% of ECI's outstanding
common stock. ECI is a public company with shares traded on the
New York Stock Exchange.
AXA, a French company, is the holding company for an
international group of insurance and related financial services
companies. AXA's insurance operations include activities in life
insurance, property and casualty insurance and reinsurance. The
insurance operations are diverse geographically with activities
principally in Western Europe, North America, the Asia/Pacific
area and, to a lesser extent, in Africa and South America. AXA
is also engaged in asset management, investment banking,
securities trading, brokerage, real estate and other financial
services activities principally in the United States, as well as
in Western Europe and the Asia/Pacific area.
For insurance regulatory purposes the shares of capital
stock of ECI beneficially owned by AXA and its subsidiaries have
been deposited into a voting trust which has an initial term of
10 years commencing in 1992. The trustees of the voting trust
(the "Voting Trustees") have agreed to protect the legitimate
economic interests of AXA, but with a view of ensuring that
certain minority shareholders of AXA do not exercise control over
ECI or certain of its insurance subsidiaries. As of March 1,
1999, AXA, ECI, Equitable and certain subsidiaries of Equitable
were the beneficial owners of approximately 56.6% of the issued
and outstanding units representing assignments of beneficial
ownership of limited partnership interests ("Units") in the
Adviser.
Based on information provided by AXA, on March 1, 1999,
approximately 20.7% of the issued ordinary shares (representing
32.7% of the voting power) of AXA were owned directly and
indirectly by Finaxa, a French holding company. As of March 1,
1999, 61.7% of the shares (representing 72.3% of the voting
power) of Finaxa were owned by four French mutual insurance
companies (the "Mutuelles AXA") (one of which, AXA Assurances
I.A.R.D. Mutuelle, owned 35.4% of the shares, representing 41.5%
of the voting power of Finaxa), and 22.7% of the shares of Finaxa
(representing 13.7% of the voting power) were owned by Paribas, a
French bank. Including the ordinary shares owned by Finaxa, on
March 1, 1999, the Mutuelles AXA directly and indirectly owned
approximately 23.9% of the issued ordinary shares (representing
37.6% of the voting power) of AXA. The Voting Trustees may be
deemed to be beneficial owners of all Units beneficially owned by
AXA and its subsidiaries. By virtue of the provisions of the
voting trust agreement, AXA may be deemed to have shared voting
power with respect to the Units. In addition, the Mutuelles AXA,
as a group, and Finaxa may be deemed to be beneficial owners of
all Units beneficially owned by AXA and its subsidiaries. AXA
and its subsidiaries have the power to dispose or direct the
18
<PAGE>
disposition of all shares of the capital stock of ECI deposited
in the voting trust. The Mutuelles AXA, as a group, and Finaxa
may be deemed to share the power to vote or to direct the vote
and to dispose or to direct the disposition of all the Units
beneficially owned by AXA and its subsidiaries. By reason of
their relationship, AXA, the Voting Trustees, the Mutuelles AXA,
Finaxa, ECI, Equitable, Equitable Holdings, L.L.C., Equitable
Investment Corporation, ACMC and Equitable Capital Management
Corporation may be deemed to share the power to vote or to direct
the vote and to dispose or direct the disposition of all or a
portion of the Units beneficially owned by AXA and its
subsidiaries.
Under the Advisory Agreement, the Adviser provides
investment advisory services and order placement facilities for
the Fund and pays all compensation of Directors and officers of
the Fund who are affiliated persons of the Adviser. The Adviser
or its affiliates also furnishes the Fund, without charge,
management supervision and assistance and office facilities and
provides persons satisfactory to the Fund's Board of Directors to
serve as the Fund's officers.
The Adviser is, under the Advisory Agreement,
responsible for certain expenses incurred by the Fund, including,
for example, office facilities and certain administrative
services, and any expenses incurred in promoting the sale of Fund
shares (other than the portion of the promotional expenses borne
by the Fund in accordance with an effective plan pursuant to Rule
12b-1 under the 1940 Act, and the costs of printing Fund
prospectuses and other reports to shareholders and fees related
to registration with the Securities and Exchange Commission (the
"Commission") and with state regulatory authorities.)
The Fund has, under the Advisory Agreement, assumed the
obligation for payment of all of its other expenses. As to the
obtaining of services other than those specifically provided to
the Fund by the Adviser, the Fund may employ its own personnel.
For such services, it also may utilize personnel employed by the
Adviser or by other subsidiaries of Equitable. In such event,
the services will be provided to the Fund at cost and the
payments specifically approved by the Fund's Board of Directors.
For the services rendered by the Adviser under the
Advisory Agreement, the Fund pays the Adviser at an annualized
rate of .95% of the average daily value of the Fund's net assets.
The fee is accrued daily and paid monthly.
The Advisory Agreement became effective on July 13,
1999. The Advisory Agreement was approved by the unanimous vote,
cast in person, of the Fund's Directors including the Directors
who are not parties to the Advisory Agreement or interested
19
<PAGE>
persons as defined in the Act, of any such party, at a meeting
called for the purpose and held on July 13, 1999.
The Advisory Agreement is terminable without penalty on
60 days' written notice by a vote of a majority of the
outstanding voting securities of the Fund or by a vote of a
majority of the Fund's Directors, or by the Adviser on 60 days'
written notice, and will automatically terminate in the event of
its assignment. The Advisory Agreement provides that in the
absence of willful misfeasance, bad faith or gross negligence on
the part of the Adviser, or of reckless disregard of its
obligations thereunder, the Adviser shall not be liable for any
action or failure to act in accordance with its duties
thereunder.
The Advisory Agreement continues in effect until
July 31, 2001, and shall continue in effect thereafter only so
long as its continuance is specifically approved at least
annually by a vote of a majority of the Fund's outstanding voting
securities or by the Fund's Board of Directors, including in
either case approval by a majority of the Directors who are not
parties to the Advisory Agreement or interested persons of such
parties as defined by the 1940 Act.
Certain other clients of the Adviser may have investment
objectives and policies similar to those of the Fund. The
Adviser may, from time to time, make recommendations which result
in the purchase or sale of the particular security by its other
clients simultaneously with the Fund. If transactions on behalf
of more than one client during the same period increase the
demand for securities being purchased or the supply of securities
being sold, there may be an adverse effect on price. It is the
policy of the Adviser to allocate advisory recommendations and
the placing of orders in a manner which is deemed equitable by
the Adviser to the accounts involved, including the Fund. When
two or more of the clients of the Adviser (including the Fund)
are purchasing or selling the same security on a given day from
the same broker or dealer, such transactions may be averaged as
to price.
The Adviser may act as an investment adviser to other
persons, firms or corporations, including investment companies,
and is investment adviser to AFD Exchange Reserves, Alliance All-
Asia Investment Fund, Inc., Alliance Balanced Shares, Inc.,
Alliance Bond Fund, Inc., Alliance Capital Reserves, Alliance
Global Dollar Government Fund, Inc., Alliance Global Environment
Fund, Inc., Alliance Global Small Cap Fund, Inc., Alliance Global
Strategic Income Trust, Inc., Alliance Government Reserves,
Alliance Greater China '97 Fund, Inc., Alliance Growth and Income
Fund, Inc., Alliance High Yield Fund, Inc., Alliance
Institutional Funds, Inc., Alliance Institutional Reserves, Inc.,
20
<PAGE>
Alliance International Fund, Alliance International Premier
Growth Fund, Inc., Alliance Limited Maturity Government Fund,
Inc., Alliance Money Market Fund, Alliance Mortgage Securities
Income Fund, Inc., Alliance Multi-Market Strategy Trust, Inc.,
Alliance Municipal Income Fund, Inc., Alliance Municipal Income
Fund II, Alliance Municipal Trust, Alliance New Europe Fund,
Inc., Alliance North American Government Income Trust, Inc.,
Alliance Premier Growth Fund, Inc., Alliance Quasar Fund, Inc.,
Alliance Real Estate Investment Fund, Inc., Alliance Select
Investor Series, Inc., Alliance Technology Fund, Inc., Alliance
Utility Income Fund, Inc., Alliance Variable Products Series
Fund, Inc., Alliance Worldwide Privatization Fund, The Alliance
Fund, Inc., The Alliance Portfolios, and The Hudson River Trust,
all registered open-end investment companies; ACM Government
Income Fund, Inc., ACM Government Securities Fund, Inc., ACM
Government Spectrum Fund, Inc., ACM Government Opportunity Fund,
Inc., ACM Managed Dollar Income Fund, Inc., ACM Managed Income
Fund, Inc., ACM Municipal Securities Income Fund, Inc., Alliance
All-Market Advantage Fund, Inc., Alliance World Dollar Government
Fund, Inc., Alliance World Dollar Government Fund II, Inc., The
Austria Fund, Inc., The Korean Investment Fund, Inc., The
Southern Africa Fund, Inc. and The Spain Fund, Inc., all
registered closed-end investment companies.
_________________________________________________________________
EXPENSES OF THE FUND
_________________________________________________________________
Distribution Services Agreement
The Fund has entered into a Distribution Services
Agreement (the "Agreement") with Alliance Fund Distributors,
Inc., the Fund's principal underwriter (the "Principal
Underwriter"), to permit the Principal Underwriter to distribute
the Fund's shares and to permit the Fund to pay distribution
services fees to defray expenses associated with distribution of
its Class A shares, Class B shares and Class C shares in
accordance with a plan of distribution which is included in the
Agreement and which has been duly adopted and approved in
accordance with Rule 12b-1 adopted by the Commission under the
1940 Act (the "Rule 12b-1 Plan").
Distribution services fees are accrued daily and paid
monthly and charged as expenses of the Fund as accrued. The
distribution services fees attributable to the Class B shares and
Class C shares are designed to permit an investor to purchase
such shares through broker-dealers without the assessment of an
initial sales charge and at the same time to permit the Principal
Underwriter to compensate broker-dealers in connection with the
sale of such shares. In this regard the purpose and function of
21
<PAGE>
the combined contingent deferred sales charge and respective
distribution services fee on the Class B shares and Class C
shares are the same as those of the initial sales charge and
distribution services fee with respect to the Class A shares in
that in each case the sales charge and distribution services fee
provides for the financing of the distribution of the relevant
class of the Fund's shares.
With respect to Class A shares of the Fund, distribution
expenses accrued by AFD in one fiscal year may not be paid from
distribution services fees received from the Fund in subsequent
fiscal years. AFD's compensation with respect to Class B and
Class C shares under the Rule 12b-1 Plan of the Fund is directly
tied to the expenses incurred by AFD. Actual distribution
expenses for Class B and Class C shares for any given year,
however, will probably exceed the distribution services fees
payable under the Rule 12b-1 Plan with respect to the class
involved and, in the case of Class B and Class C shares, payments
received from contingent deferred sales charges ("CDSCs"). The
excess will be carried forward by AFD and reimbursed from
distribution services fees payable under the Rule 12b-1 Plan with
respect to the class involved and, in the case of Class B and
Class C shares, payments subsequently received through CDSCs, so
long as the Rule 12b-1 Plan is in effect.
The Rule 12b-1 Plan is in compliance with rules of the
National Association of Securities Dealers, Inc. which
effectively limit the annual asset-based sales charges and
service fees that a mutual fund may pay on a class of shares to
.75% and .25%, respectively, of the average annual net assets
attributable to that class. The rules also limit the aggregate
of all front-end, deferred and asset-based sales charges imposed
with respect to a class of shares by a mutual fund that also
charges a service fee to 6.25% of cumulative gross sales of
shares of that class, plus interest at the prime rate plus 1% per
annum.
In approving the Rule 12b-1 Plan, the Directors of the
Fund determined that there was a reasonable likelihood that the
Rule 12b-1 Plan would benefit the Fund and its shareholders. The
distribution services fee of a particular class will not be used
to subsidize the provision of distribution services with respect
to any other class.
The Adviser may from time to time and from its own funds
or such other resources as may be permitted by rules of the
Commission make payments for distribution services to the
Principal Underwriter; the latter may in turn pay part or all of
such compensation to brokers or other persons for their
distribution assistance.
22
<PAGE>
The Agreement was initially approved by the Directors of
the Fund at a meeting held on July 13, 1999. The Agreement will
continue in effect until July 31, 2000 and continue in effect
thereafter so long as its continuance is specifically approved at
least annually by the Directors of the Fund or by vote of the
holders of a majority of the outstanding voting securities (as
defined in the 1940 Act) of that class, and, in either case, by a
majority of the Directors of the Fund who are not parties to the
Agreement or interested persons, as defined in the 1940 Act, of
any such party (other than as directors of the Fund) and who have
no direct or indirect financial interest in the operation of the
Rule 12b-1 Plan or any agreement related thereto.
In the event that the Rule 12b-1 Plan is terminated or
not continued with respect to the Class A shares, Class B shares
or Class C shares, (i) no distribution services fees (other than
current amounts accrued but not yet paid) would be owed by the
Fund to the Principal Underwriter with respect to that class and
(ii) the Fund would not be obligated to pay the Principal
Underwriter for any amounts expended under the Agreement not
previously recovered by the Principal Underwriter from
distribution services fees in respect of shares of such class or
through deferred sales charges.
The Glass-Steagall Act and other applicable laws may
limit the ability of a bank or other depository institution to
become an underwriter or distributor of securities. However, in
the opinion of the Funds' management, based on the advice of
counsel, these laws do not prohibit such depository institutions
from providing services for investment companies such as the
administrative, accounting and other services referred to in the
Agreement. In the event that a change in these laws prevented a
bank from providing such services, it is expected that other
service arrangements would be made and that shareholders would
not be adversely affected.
Transfer Agency Agreement
Alliance Fund Services, Inc., an indirect wholly-owned
subsidiary of the Adviser, receives a transfer agency fee per
account holder of each of the Class A shares, Class B shares,
Class C shares and Advisor Class shares of the Fund, plus
reimbursement for out-of-pocket expenses. The transfer agency
fee with respect to the Class B shares and Class C shares is
higher than the transfer agency fee with respect to the Class A
shares and Advisor Class shares, reflecting the additional costs
associated with the Class B and Class C contingent deferred sales
charge.
23
<PAGE>
_________________________________________________________________
PURCHASE OF SHARES
_________________________________________________________________
The following information supplements that set forth in
the Fund's Prospectus under the heading "Purchase and Sale of
Shares--How to Buy Shares."
General
Shares of the Fund are offered on a continuous basis at
a price equal to their net asset value plus an initial sales
charge at the time of purchase ("Class A shares"), with a
contingent deferred sales charge ("Class B shares"), or without
any initial sales charge and, as long as the shares are held for
one year or more, without any contingent deferred sales charge
("Class C shares"). Shares of the Fund that are offered subject
to a sales charge are offered through (i) investment dealers that
are members of the National Association of Securities Dealers,
Inc. and have entered into selected dealer agreements with the
Principal Underwriter ("selected dealers"), (ii) depository
institutions and other financial intermediaries or their
affiliates, that have entered into selected agent agreements with
the Principal Underwriter ("selected agents") and (iii) the
Principal Underwriter.
Advisor Class shares of the Fund may be purchased and
held solely (i) through accounts established under fee-based
programs, sponsored and maintained by registered broker-dealers
or other financial intermediaries and approved by the Principal
Underwriter, (ii) through self-directed defined contribution
employee benefit plans (e.g., 401(k) plans) that have at least
1,000 participants or $25 million in assets, (iii) by the
categories of investors described in clauses (i) through (iv)
under "--Sales at Net Asset Value" (other than officers,
directors and present and full-time employees of selected dealers
or agents, or relatives of such person, or any trust, individual
retirement account or retirement plan account for the benefit of
such relative, none of whom is eligible on the basis solely of
such status to purchase and hold Advisor Class shares), or
(iv) by directors and present or retired full-time employees of
CB Richard Ellis, Inc. Generally, a fee-based program must
charge an asset-based or other similar fee and must invest at
least $250,000 in Advisor Class shares of the Fund in order to be
approved by the Principal Underwriter for investment in Advisor
Class shares.
Investors may purchase shares of the Fund either through
selected broker-dealers, agents, financial intermediaries or
other financial representatives or directly through the Principal
24
<PAGE>
Underwriter. A transaction, service, administrative or other
similar fee may be charged by your broker-dealer, agent,
financial intermediary or other financial representative with
respect to the purchase, sale or exchange of Class A, Class B,
Class C or Advisor Class shares made through such financial
representative. Such financial representative may also impose
requirements with respect to the purchase, sale or exchange of
shares that are different from, or in addition to, those imposed
by the Fund, including requirements as to the minimum initial and
subsequent investment amounts. Sales personnel of selected
dealers and agents distributing the Fund's shares may receive
differing compensation for selling Class A, Class B, Class C or
Advisor Class shares. The Fund may refuse any order for the
purchase of shares. The Fund reserves the right to suspend the
sale of its shares to the public in response to conditions in the
securities markets or for other reasons.
The public offering price of shares of the Fund is their
net asset value, plus, in the case of Class A shares, a sales
charge which will vary depending on the purchase alternative
chosen by the investor, as shown in the table below under
"--Class A Shares". On each Fund business day on which a
purchase or redemption order is received by the Fund and trading
in the types of securities in which the Fund invests might
materially affect the value of Fund shares, the per share net
asset value is computed in accordance with the Fund's Articles of
Incorporation and By-Laws as of the next close of regular trading
on the New York Stock Exchange (the "Exchange") (currently
4:00 p.m. Eastern time) by dividing the value of the Fund's total
assets, less its liabilities, by the total number of its shares
then outstanding. A Fund business day is any day on which the
Exchange is open for trading.
The respective per share net asset values of the
Class A, Class B, Class C and Advisor Class shares are expected
to be substantially the same. Under certain circumstances,
however, the per share net asset values of the Class B and
Class C shares may be lower than the per share net asset values
of the Class A and Advisor Class shares, as a result of the
differential daily expense accruals of the distribution and
transfer agency fees applicable with respect to those classes of
shares. Even under those circumstances, the per share net asset
values of the three classes eventually will tend to converge
immediately after the payment of dividends, which will differ by
approximately the amount of the expense accrual differential
among the classes.
The Fund will accept unconditional orders for its shares
to be executed at the public offering price equal to their net
asset value next determined (plus applicable Class A sales
charges), as described below. Orders received by the Principal
25
<PAGE>
Underwriter prior to the close of regular trading on the Exchange
on each day the Exchange is open for trading are priced at the
net asset value computed as of the close of regular trading on
the Exchange on that day (plus applicable Class A sales charges).
In the case of orders for purchase of shares placed through
selected dealers, agents or financial representatives, as
applicable, the applicable public offering price will be the net
asset value as so determined, but only if the selected dealer,
agent or financial representative receives the order prior to the
close of regular trading on the Exchange and transmits it to the
Principal Underwriter prior to 5:00 p.m. Eastern time. The
selected dealer, agent or financial representative, as
applicable, is responsible for transmitting such orders by
5:00 p.m. If the selected dealer, agent or financial
representative fails to do so, the investor's right to that day's
closing price must be settled between the investor and the
selected dealer, agent or financial representative, as
applicable. If the selected dealer, agent or financial
representative, as applicable, receives the order after the close
of regular trading on the Exchange, the price will be based on
the net asset value determined as of the close of regular trading
on the Exchange on the next day it is open for trading.
Following the initial purchase of Fund shares, a
shareholder may place orders to purchase additional shares by
telephone if the shareholder has completed the appropriate
portion of the Subscription Application or an "Autobuy"
application obtained by calling the "For Literature" telephone
number shown on the cover of this Statement of Additional
Information. Except with respect to certain omnibus accounts,
telephone purchase orders may not exceed $500,000. Payment for
shares purchased by telephone can be made only by Electronic
Funds Transfer from a bank account maintained by the shareholder
at a bank that is a member of the National Automated Clearing
House Association ("NACHA"). If a shareholder's telephone
purchase request is received before 3:00 p.m. Eastern time on a
Fund business day, the order to purchase shares is automatically
placed the following Fund business day, and the applicable public
offering price will be the public offering price determined as of
the close of business on such following business day.
Full and fractional shares are credited to a
subscriber's account in the amount of his or her subscription.
As a convenience to the subscriber, and to avoid unnecessary
expense to the Fund, stock certificates representing shares of
the Fund are not issued except upon written request to the Fund
by the shareholder or his or her authorized selected dealer or
agent. This facilitates later redemption and relieves the
shareholder of the responsibility for and inconvenience of lost
or stolen certificates. No certificates are issued for
26
<PAGE>
fractional shares, although such shares remain in the
shareholder's account on the books of the Fund.
In addition to the discount or commission paid to
dealers or agents, the Principal Underwriter from time to time
pays additional cash or other incentives to dealers or agents, in
connection with the sale of shares of the Fund. Such additional
amounts may be utilized, in whole or in part, to provide
additional compensation to registered representatives who sell
shares of the Fund. On some occasions, cash or other incentives
will be conditioned upon the sale of a specified minimum dollar
amount of the shares of the Fund and/or other Alliance Mutual
Funds, as defined below, during a specific period of time. On
some occasions, such cash or other incentives may take the form
of payment for attendance at seminars, meals, sporting events or
theater performances, or payment for travel, lodging and
entertainment incurred in connection with travel taken by persons
associated with a dealer or agent to urban or resort locations
within or outside the United States. Such dealer or agent may
elect to receive cash incentives of equivalent amount in lieu of
such payments.
Class A, Class B, Class C and Advisor Class shares each
represent an interest in the same portfolio of investments of the
Fund, have the same rights and are identical in all respects,
except that (i) Class A shares bear the expense of the initial
sales charge (or contingent deferred sales charge when
applicable) and Class B and Class C shares bear the expense of
the deferred sales charge, (ii) Class B shares and Class C shares
each bear the expense of a higher distribution services fee than
that borne by Class A shares, and Advisor Class shares do not
bear such a fee, (iii) Class B shares and Class C shares bear
higher transfer agency costs than those borne by Class A and
Advisor Class shares, (iv) each of Class A, Class B and Class C
shares has exclusive voting rights with respect to provisions of
the Rule 12b-1 Plan pursuant to which its distribution services
fee is paid and other matters for which separate class voting is
appropriate under applicable law, provided that, if the Fund
submits to a vote of the Class A shareholders, an amendment to
the Rule 12b-1 Plan that would materially increase the amount to
be paid thereunder with respect to the Class A shares, then such
amendment will also be submitted to the Class B and Advisor Class
shareholders and the Class A and Class B and Advisor Class
shareholders will vote separately by class, and (v) Class B and
Advisor Class shares are each subject to a conversion feature.
Each class has different exchange privileges and certain
different shareholder service options available.
The Directors of the Fund have determined that currently
no conflict of interest exists between or among the Class A,
Class B, Class C and Advisor Class shares. On an ongoing basis,
27
<PAGE>
the Directors of the Fund, pursuant to their fiduciary duties
under the 1940 Act and state law, will seek to ensure that no
such conflict arises.
Alternative Purchase Arrangements -- Class A, Class B
and Class C Shares2
The alternative purchase arrangements available with
respect to Class A shares, Class B shares and Class C shares
permit an investor to choose the method of purchasing shares that
is most beneficial given the amount of the purchase, the length
of time the investor expects to hold the shares, and other
circumstances. Investors should consider whether, during the
anticipated life of their investment in the Fund, the accumulated
distribution services fee and contingent deferred sales charge on
Class B shares prior to conversion, or the accumulated
distribution services fee and contingent deferred sales charge on
Class C shares, would be less than the initial sales charge and
accumulated distribution services fee on Class A shares purchased
at the same time, and to what extent such differential would be
offset by the higher return of Class A shares. Class A shares
will normally be more beneficial than Class B shares to the
investor who qualifies for reduced initial sales charges on
Class A shares, as described below. In this regard, the
Principal Underwriter will reject any order (except orders from
certain retirement plans and certain employee benefit plans) for
more than $250,000 for Class B shares. (See Appendix A for
information concerning the eligibility of certain employee
benefit plans to purchase Class B shares at net asset value
without being subject to a contingent deferred sales charge and
the ineligibility of certain such plans to purchase Class A
shares.) Class C shares will normally not be suitable for the
investor who qualifies to purchase Class A shares at net asset
value. For this reason, the Principal Underwriter will reject
any order for more than $1,000,000 for Class C shares.
Class A shares are subject to a lower distribution
services fee and, accordingly, pay correspondingly higher
dividends per share than Class B shares or Class C shares.
However, because initial sales charges are deducted at the time
of purchase, investors purchasing Class A shares would not have
all their funds invested initially and, therefore, would
initially own fewer shares. Investors not qualifying for reduced
initial sales charges who expect to maintain their investment for
an extended period of time might consider purchasing Class A
shares because the accumulated continuing distribution charges on
Class B shares or Class C shares may exceed the initial sales
____________________
2. Advisor Class shares are sold only to investors described
above in this section "--General."
28
<PAGE>
charge on Class A shares during the life of the investment.
Again, however, such investors must weigh this consideration
against the fact that, because of such initial sales charges, not
all their funds will be invested initially.
Other investors might determine, however, that it would
be more advantageous to purchase Class B shares or Class C shares
in order to have all their funds invested initially, although
remaining subject to higher continuing distribution charges and
being subject to a contingent deferred sales charge for a four-
year and one-year period, respectively. For example, based on
current fees and expenses, an investor subject to the 4.25%
initial sales charge on Class A shares would have to hold his or
her investment approximately seven years for the Class C
distribution services fee to exceed the initial sales charge plus
the accumulated distribution services fee of Class A shares. In
this example, an investor intending to maintain his or her
investment for a longer period might consider purchasing Class A
shares. This example does not take into account the time value
of money, which further reduces the impact of the Class C
distribution services fees on the investment, fluctuations in net
asset value or the effect of different performance assumptions.
Those investors who prefer to have all of their funds
invested initially but may not wish to retain Fund shares for the
four-year period during which Class B shares are subject to a
contingent deferred sales charge may find it more advantageous to
purchase Class C shares.
Class A Shares
The public offering price of Class A shares is the net
asset value plus a sales charge, as set forth below.
29
<PAGE>
Sales Charge
Discount or
Commission
As % of to Dealers
As % of the or Agents
Net Public As % of
Amount of Amount Offering Offering
Purchase Invested Price Price
________ ________ ________ ____________
Less than
$100,000 . . . 4.44% 4.25% 4.00%
$100,000 but
less than
$250,000. . . . 3.36 3.25 3.00
$250,000 but
less than
$500,000. . . . 2.30 2.25 2.00
$500,000 but
less than
$1,000,000*. . . 1.78 1.75 1.50
_____________
* There is no initial sales charge on transactions of $1,000,000
or more.
With respect to purchases of $1,000,000 or more, Class A
shares redeemed within one year of purchase will be subject to a
contingent deferred sales charge equal to 1% of the lesser of the
cost of the shares being redeemed or their net asset value at the
time of redemption. Accordingly, no sales charge will be imposed
on increases in net asset value above the initial purchase price.
In addition, no charge will be assessed on shares derived from
reinvestment of dividends or capital gains distributions. The
contingent deferred sales charge on Class A shares will be waived
on certain redemptions, as described below under "--Class B
Shares." In determining the contingent deferred sales charge
applicable to a redemption of Class A shares, it will be assumed
that the redemption is, first, of any shares that are not subject
to a contingent deferred sales charge (for example, because an
initial sales charge was paid with respect to the shares, or they
have been held beyond the period during which the charge applies
or were acquired upon the reinvestment of dividends or
distributions) and, second, of shares held longest during the
time they are subject to the sales charge. Proceeds from the
contingent deferred sales charge on Class A shares are paid to
the Principal Underwriter and are used by the Principal
Underwriter to defray the expenses of the Principal Underwriter
related to providing distribution-related services to the Fund in
connection with the sales of Class A shares, such as the payment
of compensation to selected dealers and agents for selling
30
<PAGE>
Class A shares. With respect to purchases of $1,000,000 or more
made through selected dealers or agents, the Adviser may,
pursuant to the Distribution Services Agreement described above,
pay such dealers or agents from its own resources a fee of up to
1% of the amount invested to compensate such dealers or agents
for their distribution assistance in connection with such
purchases.
No initial sales charge is imposed on Class A shares
issued (i) pursuant to the automatic reinvestment of income
dividends or capital gains distributions, (ii) in exchange for
Class A shares of other "Alliance Mutual Funds" (as that term is
defined under "Combined Purchase Privilege" below), except that
an initial sales charge will be imposed on Class A shares issued
in exchange for Class A shares of AFD Exchange Reserves ("AFDER")
that were purchased for cash without the payment of an initial
sales charge and without being subject to a contingent deferred
sales charge or (iii) upon the automatic conversion of Class B
shares as described below under "Class B Shares-Conversion
Feature." The Fund receives the entire net asset value of its
Class A shares sold to investors. The Principal Underwriter's
commission is the sales charge shown above less any applicable
discount or commission "reallowed" to selected dealers and
agents. The Principal Underwriter will reallow discounts to
selected dealers and agents in the amounts indicated in the table
above. In this regard, the Principal Underwriter may elect to
reallow the entire sales charge to selected dealers and agents
for all sales with respect to which orders are placed with the
Principal Underwriter. A selected dealer who receives
reallowance in excess of 90% of such a sales charge may be deemed
to be an "underwriter" under the Securities Act.
Set forth below is an example of the method of computing
the offering price of the Class A shares. The example assumes a
purchase of Class A shares of the Fund aggregating less than
$100,000 subject to the schedule of sales charges set forth above
at a price based upon the net asset value of Class A shares of
the Fund on July 14, 1999.
Net Asset Value per Class A Share at
July 14, 1999 $10.00
Class A Per Share Sales Charge 4.25%
of offering price (4.44% of net asset
value per share) $ .44
-----
Class A Per Share Offering Price to
the Public $10.44
=====
31
<PAGE>
Investors choosing the initial sales charge alternative
may under certain circumstances be entitled to pay (i) no initial
sales charge (but may be subject in most such cases to a
contingent deferred sales charge) or (ii) a reduced initial sales
charge. The circumstances under which such investors may pay a
reduced initial sales charge are described below.
Combined Purchase Privilege. Certain persons may
qualify for the sales charge reductions indicated in the schedule
of such charges above by combining purchases of shares of the
Fund into a single "purchase," if the resulting "purchase" totals
at least $100,000. The term "purchase" refers to: (i) a single
purchase by an individual, or to concurrent purchases, which in
the aggregate are at least equal to the prescribed amounts, by an
individual, his or her spouse and their children under the age of
21 years purchasing shares of the Fund for his, her or their own
account(s); (ii) a single purchase by a trustee or other
fiduciary purchasing shares for a single trust, estate or single
fiduciary account although more than one beneficiary is involved;
or (iii) a single purchase for the employee benefit plans of a
single employer. The term "purchase" also includes purchases by
any "company," as the term is defined in the 1940 Act, but does
not include purchases by any such company which has not been in
existence for at least six months or which has no purpose other
than the purchase of shares of the Fund or shares of other
registered investment companies at a discount. The term
"purchase" does not include purchases by any group of individuals
whose sole organizational nexus is that the participants therein
are credit card holders of a company, policy holders of an
insurance company, customers of either a bank or broker-dealer or
clients of an investment adviser. A "purchase" may also include
shares, purchased at the same time through a single selected
dealer or agent, of any other "Alliance Mutual Fund." Currently,
the Alliance Mutual Funds include:
AFD Exchange Reserves
Alliance All-Asia Investment Fund, Inc.
Alliance Balanced Shares, Inc.
Alliance Bond Fund, Inc.
-Corporate Bond Portfolio
-Quality Bond Portfolio
-U.S. Government Portfolio
Alliance Global Dollar Government Fund, Inc.
Alliance Global Environment Fund, Inc.
Alliance Global Small Cap Fund, Inc.
Alliance Global Strategic Income Trust, Inc.
Alliance Greater China '97 Fund, Inc.
Alliance Growth and Income Fund, Inc.
Alliance High Yield Fund, Inc.
Alliance International Fund
Alliance International Premier Growth Fund, Inc.
32
<PAGE>
Alliance Limited Maturity Government Fund, Inc.
Alliance Mortgage Securities Income Fund, Inc.
Alliance Multi-Market Strategy Trust, Inc.
Alliance Municipal Income Fund, Inc.
-California Portfolio
-Insured California Portfolio
-Insured National Portfolio
-National Portfolio
-New York Portfolio
Alliance Municipal Income Fund II
-Arizona Portfolio
-Florida Portfolio
-Massachusetts Portfolio
-Michigan Portfolio
-Minnesota Portfolio
-New Jersey Portfolio
-Ohio Portfolio
-Pennsylvania Portfolio
-Virginia Portfolio
Alliance New Europe Fund, Inc.
Alliance North American Government Income Trust, Inc.
Alliance Premier Growth Fund, Inc.
Alliance Quasar Fund, Inc.
Alliance Real Estate Investment Fund, Inc.
Alliance Technology Fund, Inc.
Alliance Utility Income Fund, Inc.
Alliance Worldwide Privatization Fund, Inc.
The Alliance Fund, Inc.
The Alliance Portfolios
-Alliance Growth Fund
-Alliance Conservative Investors Fund
-Alliance Growth Investors Fund
-Alliance Short-Term U.S. Government Fund
Prospectuses for the Alliance Mutual Funds may be
obtained without charge by contacting Alliance Fund Services,
Inc. at the address or the "For Literature" telephone number
shown on the front cover of this Statement of Additional
Information.
Cumulative Quantity Discount (Right of Accumulation). An
investor's purchase of additional Class A shares of the Fund may
qualify for a Cumulative Quantity Discount. The applicable sales
charge will be based on the total of:
(i) the investor's current purchase;
(ii) the net asset value (at the close of business
on the previous day) of (a) all shares of the
Fund held by the investor and (b) all shares
33
<PAGE>
of any other Alliance Mutual Fund held by the
investor; and
(iii) the net asset value of all shares described in
paragraph (ii) owned by another shareholder
eligible to combine his or her purchase with
that of the investor into a single "purchase"
(see above).
For example, if an investor owned shares of an Alliance
Mutual Fund worth $200,000 at their then current net asset value
and, subsequently, purchased Class A shares of the Fund worth an
additional $100,000, the sales charge for the $100,000 purchase
would be at the 2.25% rate applicable to a single $300,000
purchase of shares of the Fund, rather than the 3.25% rate.
To qualify for the Combined Purchase Privilege or to
obtain the Cumulative Quantity Discount on a purchase through a
selected dealer or agent, the investor or selected dealer or
agent must provide the Principal Underwriter with sufficient
information to verify that each purchase qualifies for the
privilege or discount.
Statement of Intention. Class A investors may also
obtain the reduced sales charges shown in the table above by
means of a written Statement of Intention, which expresses the
investor's intention to invest not less than $250,000 within a
period of 13 months in Class A shares (or Class A, Class B,
Class C and/or Advisor Class shares) of the Fund or any other
Alliance Mutual Fund. Class A investors investing pursuant to
the Statement of Intention must invest at least $50,000 with
their initial purchase of shares of the Fund. Each purchase of
shares under a Statement of Intention will be made at the public
offering price or prices applicable at the time of such purchase
to a single transaction of the dollar amount indicated in the
Statement of Intention. At the investor's option, a Statement of
Intention may include purchases of shares of the Fund or any
other Alliance Mutual Fund made not more than 90 days prior to
the date that the investor signs the Statement of Intention;
however, the 13-month period during which the Statement of
Intention is in effect will begin on the date of the earliest
purchase to be included.
Investors qualifying for the Combined Purchase Privilege
described above may purchase shares of the Alliance Mutual Funds
under a single Statement of Intention. For example, if at the
time an investor signs a Statement of Intention to invest at
least $100,000 in Class A shares of the Fund, the investor and
the investor's spouse each purchase shares of the Fund worth
$20,000 (for a total of $40,000), it will only be necessary to
invest a total of $60,000 during the following 13 months in
34
<PAGE>
shares of the Fund or any other Alliance Mutual Fund, to qualify
for the 3.25% sales charge on the total amount being invested
(the sales charge applicable to an investment of $100,000).
The Statement of Intention is not a binding obligation
upon the investor to purchase the full amount indicated. The
minimum initial investment under a Statement of Intention is 5%
of such amount. Shares purchased with the first 5% of such
amount will be held in escrow (while remaining registered in the
name of the investor) to secure payment of the higher sales
charge applicable to the shares actually purchased if the full
amount indicated is not purchased, and such escrowed shares will
be involuntarily redeemed to pay the additional sales charge, if
necessary. Dividends on escrowed shares, whether paid in cash or
reinvested in additional Fund shares, are not subject to escrow.
When the full amount indicated has been purchased, the escrow
will be released. To the extent that an investor purchases more
than the dollar amount indicated on the Statement of Intention
and qualifies for a further reduced sales charge, the sales
charge will be adjusted for the entire amount purchased at the
end of the 13-month period. The difference in the sales charge
will be used to purchase additional shares of the Fund subject to
the rate of the sales charge applicable to the actual amount of
the aggregate purchases.
Investors wishing to enter into a Statement of Intention
in conjunction with their initial investment in Class A shares of
the Fund should complete the appropriate portion of the
Subscription Application found in the Prospectus while current
Class A shareholders desiring to do so can obtain a form of
Statement of Intention by contacting Alliance Fund Services, Inc.
at the address or telephone numbers shown on the cover of this
Statement of Additional Information.
Certain Retirement Plans. Multiple participant payroll
deduction retirement plans may also purchase shares of the Fund
or any other Alliance Mutual Fund at a reduced sales charge on a
monthly basis during the 13-month period following such a plan's
initial purchase. The sales charge applicable to such initial
purchase of shares of the Fund will be that normally applicable,
under the schedule of the sales charges set forth in this
Statement of Additional Information, to an investment 13 times
larger than such initial purchase. The sales charge applicable
to each succeeding monthly purchase will be that normally
applicable, under such schedule, to an investment equal to the
sum of (i) the total purchase previously made during the 13-month
period and (ii) the current month's purchase multiplied by the
number of months (including the current month) remaining in the
13-month period. Sales charges previously paid during such
period will not be retroactively adjusted on the basis of later
purchases.
35
<PAGE>
Reinstatement Privilege. A shareholder who has caused
any or all of his or her Class A or Class B shares of the Fund to
be redeemed or repurchased may reinvest all or any portion of the
redemption or repurchase proceeds in Class A shares of the Fund
at net asset value without any sales charge, provided that
(i) such reinvestment is made within 120 calendar days after the
redemption or repurchase date, and (ii) for Class B shares, a
contingent deferred sales charge has been paid and the Principal
Underwriter has approved, at its discretion, the reinvestment of
such shares. Shares are sold to a reinvesting shareholder at the
net asset value next determined as described above. A
reinstatement pursuant to this privilege will not cancel the
redemption or repurchase transaction; therefore, any gain or loss
so realized will be recognized for federal income tax purposes,
except that no loss will be recognized to the extent that the
proceeds are reinvested in shares of the Fund within 30 calendar
days after the redemption or repurchase transaction. Investors
may exercise the reinstatement privilege by written request sent
to the Fund at the address shown on the cover of this Statement
of Additional Information.
Sales at Net Asset Value. The Fund may sell its Class A
shares at net asset value (i.e., without an initial sales charge)
and without a contingent deferred sales charge to certain
categories of investors including:
(i) investment management clients of the
Adviser or its affiliates;
(ii) officers and present or former Directors
of the Fund; present or former directors
and trustees of other investment
companies managed by the Adviser; present
or retired full-time employees of the
Adviser, the Principal Underwriter,
Alliance Fund Services, Inc. and their
affiliates; officers and directors of
ACMC, the Principal Underwriter, Alliance
Fund Services, Inc. and their affiliates;
officers, directors and present full-time
employees of selected dealers or agents;
or the spouse, sibling, direct ancestor
or direct descendant (collectively,
"relatives") of any such person; or any
trust, individual retirement account or
retirement plan account for the benefit
of any such person or relative; or the
estate of any such person or relative, if
such shares are purchased for investment
purposes (such shares may not be resold
except to the Fund);
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(iii) the Adviser, the Principal Underwriter,
Alliance Fund Services, Inc. and their
affiliates; certain employee benefit
plans for employees of the Adviser, the
Principal Underwriter, Alliance Fund
Services, Inc. and their affiliates;
(iv) registered investment advisers or other
financial intermediaries who charge a
management, consulting or other fee for
their services and who purchase shares
through a broker or agent approved by the
Principal Underwriter and clients of such
registered investment advisers or
financial intermediaries whose accounts
are linked to the master account of such
investment adviser or financial
intermediary on the books of such
approved broker or agent;
(v) persons participating in a fee-based
program, sponsored and maintained by a
registered broker-dealer or other
financial intermediary and approved by
the Principal Underwriter, pursuant to
which such persons pay an asset-based fee
to such broker-dealer or financial
intermediary, or its affiliate or agent,
for services in the nature of investment
advisory or administrative services;
(vi) persons who establish to the Principal
Underwriter's satisfaction that they are
investing, within such time period as may
be designated by the Principal
Underwriter, proceeds of redemption of
shares of such other registered
investment companies as may be designated
from time to time by the Principal
Underwriter; and
(vii) employer-sponsored qualified pension or
profit-sharing plans (including Section
401(k) plans), custodial accounts
maintained pursuant to Section 403(b)(7),
retirement plans and individual
retirement accounts (including individual
retirement accounts to which simplified
employee pension ("SEP") contributions
are made), if such plans or accounts are
established or administered under
37
<PAGE>
programs sponsored by administrators or
other persons that have been approved by
the Principal Underwriter.
Class B Shares
Investors may purchase Class B shares at the public
offering price equal to the net asset value per share of the
Class B shares on the date of purchase without the imposition of
a sales charge at the time of purchase. The Class B shares are
sold without an initial sales charge so that the Fund will
receive the full amount of the investor's purchase payment.
Proceeds from the contingent deferred sales charge on
the Class B shares are paid to the Principal Underwriter and are
used by the Principal Underwriter to defray the expenses of the
Principal Underwriter related to providing distribution-related
services to the Fund in connection with the sale of the Class B
shares, such as the payment of compensation to selected dealers
and agents for selling Class B shares. The combination of the
contingent deferred sales charge and the distribution services
fee enables the Fund to sell the Class B shares without a sales
charge being deducted at the time of purchase. The higher
distribution services fee incurred by Class B shares will cause
such shares to have a higher expense ratio and to pay lower
dividends than those related to Class A shares.
Contingent Deferred Sales Charge. Class B shares that
are redeemed within four years of purchase will be subject to a
contingent deferred sales charge at the rates set forth below
charged as a percentage of the dollar amount subject thereto.
The charge will be assessed on an amount equal to the lesser of
the cost of the shares being redeemed or their net asset value at
the time of redemption. Accordingly, no sales charge will be
imposed on increases in net asset value above the initial
purchase price. In addition, no charge will be assessed on
shares derived from reinvestment of dividends or capital gains
distributions.
To illustrate, assume that an investor purchased 10,000
Class B shares at $10 per share (at a cost of $100,000) and in
the second year after purchase, the net asset value per share is
$12 and, during such time, the investor has acquired 1,000
additional Class B shares upon dividend reinvestment. If at such
time the investor makes his or her first redemption of 5,000
Class B shares (proceeds of $60,000), 1,000 Class B shares will
not be subject to the charge because of dividend reinvestment.
With respect to the remaining 4,000 Class B shares, the charge is
applied only to the original cost of $10 per share and not to the
increase in net asset value of $2 per share. Therefore, $40,000
of the $60,000 redemption proceeds will be charged at a rate of
38
<PAGE>
3.0% (the applicable rate in the second year after purchase, as
set forth below).
The amount of the contingent deferred sales charge, if
any, will vary depending on the number of years from the time of
payment for the purchase of Class B shares until the time of
redemption of such shares.
Contingent Deferred Sales Charge as a
Year Since Purchase % of Dollar Amount Subject to Charge
____________________ ____________________________________
First 4.0%
Second 3.0%
Third 2.0%
Fourth 1.0%
Fifth and thereafter None
In determining the contingent deferred sales charge
applicable to a redemption of Class B shares, it will be assumed
that the redemption is, first, of any shares that were acquired
upon the reinvestment of dividends or distributions and, second,
of shares held longest during the time they are subject to the
sales charge. When shares acquired in an exchange are redeemed,
the applicable contingent deferred sales charge and conversion
schedules will be the schedules that applied at the time of the
purchase of shares of the corresponding class of the Alliance
Mutual Fund originally purchased by the shareholder.
The contingent deferred sales charge is waived on
redemptions of shares (i) following the death or disability, as
defined in the Internal Revenue Code of 1986, as amended (the
"Code"), of a shareholder, (ii) to the extent that the redemption
represents a minimum required distribution from an individual
retirement account or other retirement plan to a shareholder who
has attained the age of 70-1/2, (iii) that had been purchased by
present or former Directors of the Fund, by the relative of any
such person, by any trust, individual retirement account or
retirement plan account for the benefit of any such person or
relative, or by the estate of any such person or relative, or
(iv) pursuant to a systematic withdrawal plan (see "Shareholder
Services -- Systematic Withdrawal Plan" below).
Conversion Feature. Eight years after the end of the
calendar month in which the shareholder's purchase order was
accepted, Class B shares will automatically convert to Class A
shares and will no longer be subject to a higher distribution
services fee. Such conversion will occur on the basis of the
relative net asset values of the two classes, without the
imposition of any sales load, fee or other charge. The purpose
39
<PAGE>
of the conversion feature is to reduce the distribution services
fee paid by holders of Class B shares that have been outstanding
long enough for the Principal Underwriter to have been
compensated for distribution expenses incurred in the sale of
such shares.
For purposes of conversion to Class A, Class B shares
purchased through the reinvestment of dividends and distributions
paid in respect of Class B shares in a shareholder's account will
be considered to be held in a separate sub-account. Each time
any Class B shares in the shareholder's account (other than those
in the sub-account) convert to Class A, an equal pro-rata portion
of the Class B shares in the sub-account will also convert to
Class A.
The conversion of Class B shares to Class A shares is
subject to the continuing availability of an opinion of counsel
to the effect that the conversion of Class B shares to Class A
shares does not constitute a taxable event under federal income
tax law. The conversion of Class B shares to Class A shares may
be suspended if such an opinion is no longer available at the
time such conversion is to occur. In that event, no further
conversions of Class B shares would occur, and shares might
continue to be subject to the higher distribution services fee
for an indefinite period which may extend beyond the period
ending eight years after the end of the calendar month in which
the shareholder's purchase order was accepted.
Class C Shares
Investors may purchase Class C shares at the public
offering price equal to the net asset value per share of the
Class C shares on the date of purchase without the imposition of
a sales charge either at the time of purchase or, as long as the
shares are held for one year or more, upon redemption. Class C
shares are sold without an initial sales charge so that the Fund
will receive the full amount of the investor's purchase payment
and, as long as the shares are held for one year or more, without
a contingent deferred sales charge so that the investor will
receive as proceeds upon redemption the entire net asset value of
his or her Class C shares. The Class C distribution services fee
enables the Fund to sell Class C shares without either an initial
or contingent deferred sales charge, as long as the shares are
held for one year or more. Class C shares do not convert to any
other class of shares of the Fund and incur higher distribution
services fees and transfer agency costs than Class A shares, and
will thus have a higher expense ratio and pay correspondingly
lower dividends than Class A shares.
Class C shares that are redeemed within one year of
purchase will be subject to a contingent deferred sales charge of
40
<PAGE>
1%, charged as a percentage of the dollar amount subject thereto.
The charge will be assessed on an amount equal to the lesser of
the cost of the shares being redeemed or their net asset value at
the time of redemption. Accordingly, no sales charge will be
imposed on increases in net asset value above the initial
purchase price. In addition, no charge will be assessed on
shares derived from reinvestment of dividends or capital gains
distributions. The contingent deferred sales charge on Class C
shares will be waived on certain redemptions, as described above
under "--Class B Shares." In determining the contingent deferred
sales charge applicable to a redemption of Class C shares, it
will be assumed that the redemption is, first, of any shares that
are not subject to a contingent deferred sales charge (for
example, because the shares have been held beyond the period
during which the charge applies or were acquired upon the
reinvestment of dividends or distributions) and, second, of
shares held longest during the time they are subject to the sales
charge.
Proceeds from the contingent deferred sales charge are
paid to the Principal Underwriter and are used by the Principal
Underwriter to defray the expenses of the Principal Underwriter
related to providing distribution-related services to the Fund in
connection with the sale of the Class C shares, such as the
payment of compensation to selected dealers and agents for
selling Class C shares. The combination of the contingent
deferred sales charge and the distribution services fee enables
the Fund to sell the Class C shares without a sales charge being
deducted at the time of purchase. The higher distribution
services fee incurred by Class C shares will cause such shares to
have a higher expense ratio and to pay lower dividends than those
related to Class A shares.
Conversion of Advisor Class Shares to Class A Shares
Advisor Class shares may be held solely through the fee-
based program accounts, employee benefit plans and registered
investment advisory or other financial intermediary relationships
described above under "Purchase of Shares--General" and by
investment advisory clients of, and by certain other persons
associated with, the Adviser and its affiliates or the Fund. If
(i) a holder of Advisor Class shares ceases to participate in the
fee-based program or plan or, to be associated with the
investment adviser or financial intermediary, in each case that
satisfies the requirements to purchase shares set forth under
"Purchase of Shares--General" or (ii) the holder is otherwise no
longer eligible to purchase Advisor Class shares as described in
the Advisor Class Prospectus and this Statement of Additional
Information (each, a "Conversion Event"), then all Advisor Class
shares held by the shareholder will convert automatically to
Class A shares of the Fund during the calendar month following
41
<PAGE>
the month in which the Fund is informed of the occurrence of the
Conversion Event. The Fund will provide the shareholder with at
least 30 days' notice of the conversion. The failure of a
shareholder of a fee-based program to satisfy the minimum
investment requirements to purchase Advisor Class shares will not
constitute a Conversion Event. The conversion would occur on the
basis of the relative net asset values of the two classes and
without the imposition of any sales load, fee or other charge.
Class A shares currently bear a .30% distribution services fee.
Advisor Class shares do not have any distribution services fee.
As a result, Class A shares have a higher expense ratio and may
pay correspondingly lower dividends and have a lower net asset
value than Advisor Class shares.
The conversion of Advisor Class shares to Class A shares
is subject to the continuing availability of an opinion of
counsel to the effect that the conversion of Advisor Class shares
to Class A shares does not constitute a taxable event under
federal income tax law. The conversion of Advisor Class shares
to Class A shares may be suspended if such an opinion is no
longer available at the time such conversion is to occur. In
that event, the Advisor Class shareholder would be required to
redeem his Advisor Class shares, which would constitute a taxable
event under federal income tax law.
_________________________________________________________________
REDEMPTION AND REPURCHASE OF SHARES
_________________________________________________________________
The following information supplements that set forth in
the Fund's Prospectus under the heading "Purchase and Sale of
Shares -- How to Sell Shares." If you are an Advisor Class
shareholder through an account established under a fee-based
program your fee-based program may impose requirements with
respect to the purchase, sale or exchange of Advisor Class shares
of the Fund that are different from those described herein. A
transaction fee may be charged by your financial representative
with respect to the purchase, sale or exchange of Advisor Class
shares made through such financial representative.
Redemption
Subject only to the limitations described below, the
Fund's Articles of Incorporation require that the Fund redeem the
shares tendered to it, as described below, at a redemption price
equal to their net asset value as next computed following the
receipt of shares tendered for redemption in proper form. Except
for any contingent deferred sales charge which may be applicable
to Class A, Class B or Class C shares, there is no redemption
charge. Payment of the redemption price will be made within
42
<PAGE>
seven days after the Fund's receipt of such tender for
redemption. If a shareholder is in doubt about what documents
are required by his or her fee-based program or employee benefit
plan, the shareholder should contact his or her financial
representative.
The right of redemption may not be suspended or the date
of payment upon redemption postponed for more than seven days
after shares are tendered for redemption, except for any period
during which the Exchange is closed (other than customary weekend
and holiday closings) or during which the Commission determines
that trading thereon is restricted, or for any period during
which an emergency (as determined by the Commission) exists as a
result of which disposal by the Fund of securities owned by it is
not reasonably practicable or as a result of which it is not
reasonably practicable for the Fund fairly to determine the value
of its net assets, or for such other periods as the Commission
may by order permit for the protection of security holders of the
Fund.
Payment of the redemption price will be made in cash.
The value of a shareholder's shares on redemption or repurchase
may be more or less than the cost of such shares to the
shareholder, depending upon the market value of the Fund's
portfolio securities at the time of such redemption or
repurchase. Redemption proceeds on Class A, Class B and Class C
shares will reflect the deduction of the contingent deferred
sales charge, if any. Payment received by a shareholder upon
redemption or repurchase of his shares, assuming the shares
constitute capital assets in his hands, will result in long-term
or short-term capital gains (or loss) depending upon the
shareholder's holding period and basis in respect of the shares
redeemed.
To redeem shares of the Fund for which no stock
certificates have been issued, the registered owner or owners
should forward a letter to the Fund containing a request for
redemption. The signature or signatures on the letter must be
guaranteed by an "eligible guarantor institution" as defined in
Rule 17Ad-15 under the Securities Exchange Act of 1934, as
amended.
To redeem shares of the Fund represented by stock
certificates, the investor should forward the appropriate stock
certificate or certificates, endorsed in blank or with blank
stock powers attached, to the Fund with the request that the
shares represented thereby, or a specified portion thereof, be
redeemed. The stock assignment form on the reverse side of each
stock certificate surrendered to the Fund for redemption must be
signed by the registered owner or owners exactly as the
registered name appears on the face of the certificate or,
43
<PAGE>
alternatively, a stock power signed in the same manner may be
attached to the stock certificate or certificates or, where
tender is made by mail, separately mailed to the Fund. The
signature or signatures on the assignment form must be guaranteed
in the manner described above.
Telephone Redemption By Electronic Funds Transfer. Each
Fund shareholder is entitled to request redemption by electronic
funds transfer of shares for which no stock certificates have
been issued by telephone at (800) 221-5672 by a shareholder who
has completed the appropriate portion of the Subscription
Application or, in the case of an existing shareholder, an
"Autosell" application obtained from Alliance Fund Services, Inc.
A telephone redemption request by electronic funds transfer may
not exceed $100,000 (except for certain omnibus accounts), and
must be made by 4:00 p.m. Eastern time on a Fund business day as
defined above. Proceeds of telephone redemptions will be sent by
electronic funds transfer to a shareholder's designated bank
account at a bank selected by the shareholder that is a member of
the NACHA.
Telephone Redemption By Check. Each Fund shareholder is
eligible to request redemption by check of Fund shares for which
no stock certificates have been issued by telephone at (800)
221-5672 before 4:00 p.m. Eastern time on a Fund business day in
an amount not exceeding $50,000. Proceeds of such redemptions
are remitted by check to the shareholder's address of record. A
shareholder otherwise eligible for telephone redemption by check
may cancel the privilege by written instruction to Alliance Fund
Services, Inc., or by checking the appropriate box on the
Subscription Application found in the Prospectus.
Telephone Redemptions - General. During periods of
drastic economic or market developments, such as the market break
of October 1987, it is possible that shareholders would have
difficulty in reaching Alliance Fund Services, Inc. by telephone
(although no such difficulty was apparent at any time in
connection with the 1987 market break). If a shareholder were to
experience such difficulty, the shareholder should issue written
instructions to Alliance Fund Services, Inc. at the address shown
on the cover of this Statement of Additional Information. The
Fund reserves the right to suspend or terminate its telephone
redemption service at any time without notice. Telephone
redemption is not available with respect to shares (i) for which
certificates have been issued, (ii) held in nominee or "street
name" accounts, (iii) held by a shareholder who has changed his
or her address of record within the preceding 30 calendar days or
(iv) held in any retirement plan account. Neither the Fund nor
the Adviser, the Principal Underwriter or Alliance Fund Services,
Inc. will be responsible for the authenticity of telephone
requests for redemptions that the Fund reasonably believes to be
44
<PAGE>
genuine. The Fund will employ reasonable procedures in order to
verify that telephone requests for redemptions are genuine,
including, among others, recording such telephone instructions
and causing written confirmations of the resulting transactions
to be sent to shareholders. If the Fund did not employ such
procedures, it could be liable for losses arising from
unauthorized or fraudulent telephone instructions. Selected
dealers or agents may charge a commission for handling telephone
requests for redemptions.
Repurchase
The Fund may repurchase shares through the Principal
Underwriter, selected financial intermediaries or selected
dealers or agents. The repurchase price will be the net asset
value next determined after the Principal Underwriter receives
the request (less the contingent deferred sales charge, if any,
with respect to the Class A, Class B and Class C shares), except
that requests placed through selected dealers or agents before
the close of regular trading on the Exchange on any day will be
executed at the net asset value determined as of such close of
regular trading on that day if received by the Principal
Underwriter prior to its close of business on that day (normally
5:00 p.m. Eastern time). The financial intermediary or selected
dealer or agent is responsible for transmitting the request to
the Principal Underwriter by 5:00 p.m. If the financial
intermediary or selected dealer or agent fails to do so, the
shareholder's right to receive that day's closing price must be
settled between the shareholder and the dealer or agent. A
shareholder may offer shares of the Fund to the Principal
Underwriter either directly or through a selected dealer or
agent. Neither the Fund nor the Principal Underwriter charges a
fee or commission in connection with the repurchase of shares
(except for the contingent deferred sales charge, if any, with
respect to Class A, Class B and Class C shares). Normally, if
shares of the Fund are offered through a financial intermediary
or selected dealer or agent, the repurchase is settled by the
shareholder as an ordinary transaction with or through the
selected dealer or agent, who may charge the shareholder for this
service. The repurchase of shares of the Fund as described above
is a voluntary service of the Fund and the Fund may suspend or
terminate this practice at any time.
General
The Fund reserves the right to close out an account that
through redemption has remained below $200 for 90 days.
Shareholders will receive 60 days' written notice to increase the
account value before the account is closed. No contingent
deferred sales charge will be deducted from the proceeds of this
redemption. In the case of a redemption or repurchase of shares
45
<PAGE>
of the Fund recently purchased by check, redemption proceeds will
not be made available until the Fund is reasonably assured that
the check has cleared, normally up to 15 calendar days following
the purchase date.
_________________________________________________________________
SHAREHOLDER SERVICES
_________________________________________________________________
The following information supplements that set forth in
the Fund's Prospectus under the heading "Purchase and Sale of
Shares--Shareholder Services." The shareholder services set
forth below are applicable to Class A, Class B, Class C and
Advisor Class shares unless otherwise indicated. If you are an
Advisor Class shareholder through an account established under a
fee-based program your fee-based program may impose requirements
with respect to the purchase, sale or exchange of Advisor Class
shares of the Fund that are different from those described
herein. A transaction fee may be charged by your financial
representative with respect to the purchase, sale or exchange of
Advisor Class shares made through such financial representative.
Automatic Investment Program
Investors may purchase shares of the Fund through an
automatic investment program utilizing electronic funds transfer
drawn on the investor's own bank account. Under such a program,
pre-authorized monthly drafts for a fixed amount (at least
$50,000 for the initial purchase) are used to purchase shares
through the selected dealer or selected agent designated by the
investor at the public offering price next determined after the
Principal Underwriter receives the proceeds from the investor's
bank. In electronic form, drafts can be made on or about a date
each month selected by the shareholder. Investors wishing to
establish an automatic investment program in connection with
their initial investment should complete the appropriate portion
of the Subscription Application found in the Prospectus. Current
shareholders should contact Alliance Fund Services, Inc. at the
address or telephone numbers shown on the cover of this Statement
of Additional Information to establish an automatic investment
program.
Exchange Privilege
You may exchange your investment in the Fund for shares
of the same class of other Alliance Mutual Funds (including AFD
Exchange Reserves, a money market fund managed by the Adviser).
In addition, (i) present officers and full-time employees of the
Adviser, (ii) present Directors or Trustees of any Alliance
Mutual Fund and (iii) certain employee benefit plans for
46
<PAGE>
employees of the Adviser, the Principal Underwriter, Alliance
Fund Services, Inc. and their affiliates may exchange Class A
shares of the Fund for Advisor Class shares of the Fund.
Exchanges of shares are made at the net asset value next
determined and without sales or service charges. Exchanges may
be made by telephone or written request. Telephone exchange
requests must be received by Alliance Fund Services, Inc. by
4:00 p.m. Eastern time on a Fund business day in order to receive
that day's net asset value.
Shares will continue to age without regard to exchanges
for purpose of determining the CDSC, if any, upon redemption and,
in the case of Class B shares, for the purpose of conversion to
Class A shares. After an exchange, your Class B shares will
automatically convert to Class A shares in accordance with the
conversion schedule applicable to the Class B shares of the
Alliance Mutual Fund you originally purchased for cash ("original
shares"). When redemption occurs, the CDSC applicable to the
original shares is applied.
Please read carefully the prospectus of the mutual fund
into which you are exchanging before submitting the request.
Call Alliance Fund Services, Inc. at (800) 221-5672 to exchange
uncertificated shares. Exchanges of shares as described above in
this section are taxable transactions for federal income tax
purposes. The exchange service may be changed, suspended, or
terminated on 60 days' written notice.
All exchanges are subject to the minimum investment
requirements and any other applicable terms set forth in the
Prospectus for the Alliance Mutual Fund whose shares are being
acquired. An exchange is effected through the redemption of the
shares tendered for exchange and the purchase of shares being
acquired at their respective net asset values as next determined
following receipt by the Alliance Mutual Fund whose shares are
being exchanged of (i) proper instructions and all necessary
supporting documents as described in such fund's Prospectus, or
(ii) a telephone request for such exchange in accordance with the
procedures set forth in the following paragraph. Exchanges
involving the redemption of shares recently purchased by check
will be permitted only after the Alliance Mutual Fund whose
shares have been tendered for exchange is reasonably assured that
the check has cleared, normally up to 15 calendar days following
the purchase date.
Each Fund shareholder, and the shareholder's selected
dealer, agent or financial representative, as applicable, are
authorized to make telephone requests for exchanges unless
Alliance Fund Services, Inc., receives written instruction to the
contrary from the shareholder, or the shareholder declines the
privilege by checking the appropriate box on the Subscription
47
<PAGE>
Application found in the Prospectus. Such telephone requests
cannot be accepted with respect to shares then represented by
stock certificates. Shares acquired pursuant to a telephone
request for exchange will be held under the same account
registration as the shares redeemed through such exchange.
Eligible shareholders desiring to make an exchange
should telephone Alliance Fund Services, Inc. with their account
number and other details of the exchange, at (800) 221-5672
before 4:00 p.m., Eastern time, on a Fund business day as defined
above. Telephone requests for exchange received before 4:00 p.m.
Eastern time on a Fund business day will be processed as of the
close of business on that day. During periods of drastic
economic or market developments, such as the market break of
October 1987, it is possible that shareholders would have
difficulty in reaching Alliance Fund Services, Inc. by telephone
(although no such difficulty was apparent at any time in
connection with the 1987 market break). If a shareholder were to
experience such difficulty, the shareholder should issue written
instructions to Alliance Fund Services, Inc. at the address shown
on the cover of this Statement of Additional Information.
A shareholder may elect to initiate a monthly "Auto
Exchange" whereby a specified dollar amount's worth of his or her
Fund shares (minimum $25) is automatically exchanged for shares
of another Alliance Mutual Fund. Auto Exchange transactions
normally occur on the 12th day of each month, or the Fund
business day prior thereto.
None of the Alliance Mutual Funds, the Adviser, the
Principal Underwriter or Alliance Fund Services, Inc. will be
responsible for the authenticity of telephone requests for
exchanges that the Fund reasonably believes to be genuine. The
Fund will employ reasonable procedures in order to verify that
telephone requests for exchanges are genuine, including, among
others, recording such telephone instructions and causing written
confirmations of the resulting transactions to be sent to
shareholders. If the Fund did not employ such procedures, it
could be liable for losses arising from unauthorized or
fraudulent telephone instructions. Selected dealers, agents or
financial representatives, as applicable, may charge a commission
for handling telephone requests for exchanges.
The exchange privilege is available only in states where
shares of the Alliance Mutual Fund being acquired may be legally
sold. Each Alliance Mutual Fund reserves the right, at any time
on 60 days' notice to its shareholders, to reject any order to
acquire its shares through exchange or otherwise to modify,
restrict or terminate the exchange privilege.
48
<PAGE>
Retirement Plans
The Fund may be a suitable investment vehicle for part
or all of the assets held in various types of retirement plans,
such as those listed below. The Fund has available forms of such
plans pursuant to which investments can be made in the Fund and
other Alliance Mutual Funds. Persons desiring information
concerning these plans should contact Alliance Fund Services,
Inc. at the "For Literature" telephone number on the cover of
this Statement of Additional Information, or write to:
Alliance Fund Services, Inc.
Retirement Plans
P.O. Box 1520
Secaucus, New Jersey 07096-1520
Individual Retirement Account ("IRA"). Individuals who
receive compensation, including earnings from self-employment,
are entitled to establish and make contributions to an IRA.
Taxation of the income and gains paid to an IRA by the Fund is
deferred until distribution from the IRA. An individual's
eligible contribution to an IRA will be deductible if neither the
individual nor his or her spouse is an active participant in an
employer-sponsored retirement plan. If the individual or his or
her spouse is an active participant in an employer-sponsored
retirement plan, the individual's contributions to an IRA may be
deductible, in whole or in part, depending on the amount of the
adjusted gross income of the individual and his or her spouse.
Employer-Sponsored Qualified Retirement Plans. Sole
proprietors, partnerships and corporations may sponsor qualified
money purchase pension and profit-sharing plans, including
Section 401(k) plans ("qualified plans"), under which annual tax-
deductible contributions are made within prescribed limits based
on compensation paid to participating individuals. The minimum
initial investment requirement may be waived with respect to
certain of these qualified plans.
If the aggregate net asset value of shares of the
Alliance Mutual Funds held by a qualified plan reaches $1 million
on or before December 15 in any year, all Class B or Class C
shares of the Fund held by the plan can be exchanged at the
plan's request without any sales charge, for Class A shares of
the Fund.
Simplified Employee Pension Plan ("SEP"). Sole
proprietors, partnerships and corporations may sponsor a SEP
under which they make annual tax-deductible contributions to an
IRA established by each eligible employee within prescribed
limits based on employee compensation.
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<PAGE>
403(b)(7) Retirement Plan. Certain tax-exempt
organizations and public educational institutions may sponsor
retirement plans under which an employee may agree that monies
deducted from his or her compensation (minimum $25 per pay
period) may be contributed by the employer to a custodial account
established for the employee under the plan.
The Alliance Plans Division of Frontier Trust Company, a
subsidiary of Equitable, which serves as custodian or trustee
under the retirement plan prototype forms available from the
Fund, charges certain nominal fees for establishing an account
and for annual maintenance. A portion of these fees is remitted
to Alliance Fund Services, Inc. as compensation for its services
to the retirement plan accounts maintained with the Fund.
Distributions from retirement plans are subject to
certain Code requirements in addition to normal redemption
procedures. For additional information please contact Alliance
Fund Services, Inc.
Dividend Direction Plan
A shareholder who already maintains, in addition to his
or her Class A, Class B, Class C or Advisor Class Fund account, a
Class A, Class B, Class C or Advisor Class account with one or
more other Alliance Mutual Funds may direct that income dividends
and/or capital gains paid on the shareholder's Class A, Class B,
Class C or Advisor Class Fund shares be automatically reinvested,
in any amount, without the payment of any sales or service
charges, in shares of the same class of such other Alliance
Mutual Fund(s). Further information can be obtained by
contacting Alliance Fund Services, Inc. at the address or the
"For Literature" telephone number shown on the cover of this
Statement of Additional Information. Investors wishing to
establish a dividend direction plan in connection with their
initial investment should complete the appropriate section of the
Subscription Application found in the Prospectus. Current
shareholders should contact Alliance Fund Services, Inc. to
establish a dividend direction plan.
Systematic Withdrawal Plan
General. Any shareholder who owns or purchases shares
of the Fund having a current net asset value of at least $4,000
(for quarterly or less frequent payments), $5,000 (for bi-monthly
payments) or $10,000 (for monthly payments) may establish a
systematic withdrawal plan under which the shareholder will
periodically receive a payment in a stated amount of not less
than $50 on a selected date. Systematic withdrawal plan
participants must elect to have their dividends and distributions
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from the Fund automatically reinvested in additional shares of
the Fund.
Shares of the Fund owned by a participant in the Fund's
systematic withdrawal plan will be redeemed as necessary to meet
withdrawal payments and such payments will be subject to any
taxes applicable to redemptions and, except as discussed below,
any applicable contingent deferred sales charge. Shares acquired
with reinvested dividends and distributions will be liquidated
first to provide such withdrawal payments and thereafter other
shares will be liquidated to the extent necessary, and depending
upon the amount withdrawn, the investor's principal may be
depleted. A systematic withdrawal plan may be terminated at any
time by the shareholder or the Fund.
Withdrawal payments will not automatically end when a
shareholder's account reaches a certain minimum level.
Therefore, redemptions of shares under the plan may reduce or
even liquidate a shareholder's account and may subject the
shareholder to the Fund's involuntary redemption provisions. See
"Redemption and Repurchase of Shares--General." Purchases of
additional shares concurrently with withdrawals are undesirable
because of sales charges when purchases are made. While an
occasional lump-sum investment may be made by a holder of Class A
shares who is maintaining a systematic withdrawal plan, such
investment should normally be an amount equivalent to three times
the annual withdrawal or $5,000, whichever is less.
Payments under a systematic withdrawal plan may be made
by check or electronically via the Automated Clearing House
("ACH") network. Investors wishing to establish a systematic
withdrawal plan in conjunction with their initial investment in
shares of the Fund should complete the appropriate portion of the
Subscription Application found in the Prospectus, while current
Fund shareholders desiring to do so can obtain an application
form by contacting Alliance Fund Services, Inc. at the address or
the "For Literature" telephone number shown on the cover of this
Statement of Additional Information.
CDSC Waiver for Class B Shares and Class C Shares.
Under a systematic withdrawal plan, up to 1% monthly, 2%
bi-monthly or 3% quarterly of the value at the time of redemption
of the Class B or Class C shares in a shareholder's account may
be redeemed free of any contingent deferred sales charge.
With respect to Class B shares, the waiver applies only
with respect to shares acquired after July 1, 1995. Class B
shares that are not subject to a contingent deferred sales charge
(such as shares acquired with reinvested dividends or
distributions) will be redeemed first and will count toward the
foregoing limitations. Remaining Class B shares that are held
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the longest will be redeemed next. Redemptions of Class B shares
in excess of the foregoing limitations will be subject to any
otherwise applicable contingent deferred sales charge.
With respect to Class C shares, shares held the longest
will be redeemed first and will count toward the foregoing
limitations. Redemptions in excess of those limitations will be
subject to any otherwise applicable contingent deferred sales
charge.
Statements and Reports
Each shareholder of the Fund receives semi-annual and
annual reports which include a portfolio of investments,
financial statements and, in the case of the annual report, the
report of the Fund's independent accountants,
PricewaterhouseCoopers LLP, as well as a confirmation of each
purchase and redemption. By contacting his or her broker or
Alliance Fund Services, Inc., a shareholder can arrange for
copies of his or her account statements to be sent to another
person.
_________________________________________________________________
NET ASSET VALUE
_________________________________________________________________
The per share net asset value is computed in accordance
with the Fund's Articles of Incorporation and By-Laws at the next
close of regular trading on the Exchange (ordinarily 4:00 p.m.
Eastern time) following receipt of a purchase or redemption order
by the Fund on each Fund business day on which such an order is
received and on such other days as the Board of Directors deems
appropriate or necessary in order to comply with Rule 22c-1 under
the 1940 Act. The Fund's per share net asset value is calculated
by dividing the value of the Fund's total assets, less its
liabilities, by the total number of its shares then outstanding.
A Fund business day is any weekday on which the Exchange is open
for trading.
In accordance with applicable rules under the 1940 Act,
portfolio securities are valued at current market value or at
fair value as determined in good faith by the Board of Directors.
The Board of Directors has delegated to the Adviser certain of
the Board's duties with respect to the following procedures.
Readily marketable securities listed on the Exchange or on a
foreign securities exchange (other than foreign securities
exchanges whose operations are similar to those of the United
States over-the-counter market) are valued, except as indicted
below, at the last sale price reflected on the consolidated tape
at the close of the Exchange or, in the case of a foreign
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securities exchange, at the last quoted sale price, in each case
on the business day as of which such value is being determined.
If there has been no sale on such day, the securities are valued
at the quoted bid prices on such day. If no bid prices are
quoted on such day, then the security is valued at the mean of
the bid and asked prices at the close of the Exchange on such day
as obtained from one or more dealers regularly making a market in
such security. Where a bid and asked price can be obtained from
only one such dealer, such security is valued at the mean of the
bid and asked price obtained from such dealer unless it is
determined that such price does not represent current market
value, in which case the security shall be value in good faith at
fair value by, or pursuant to procedures established by, the
Board of Directors. Securities for which no bid and asked price
quotations are readily available are valued in good faith at fair
value by, or in accordance with procedures established by, the
Board of Directors. Readily marketable securities not listed on
the Exchange or on a foreign securities exchange are valued in
like manner. Portfolio securities traded on the Exchange and on
one or more foreign or other national securities exchanges, and
portfolio securities not traded on the Exchange but traded on one
or more foreign or other national securities exchanges are valued
in accordance with these procedures by reference to the principal
exchange on which the securities are traded.
Readily marketable securities traded only in the over-
the-counter market, securities listed on a foreign securities
exchange whose operations are similar to those of the United
States over-the-counter market, and debt securities listed on a
U.S. national securities exchange whose primary market is
believed to be over-the-counter, are valued at the mean of the
bid and asked prices at the close of the Exchange on such day as
obtained from two or more dealers regularly making a market in
such security. Where a bid and asked price can be obtained from
only one such dealer, such security is valued at the mean of the
bid and asked price obtained from such dealer unless it is
determined that such price does not represent current market
value, in which case the security shall be value in good faith at
fair value by, or pursuant to procedures established by, the
Board of Directors.
Open futures contracts will be valued using the closing
settlement price or, in the absence of such a price, the most
recent quoted bid price, If there are no quotations available for
the day of valuations, the last available closing settlement
price will be used.
U.S. Government securities and other debt instruments
having 60 days or less remaining until maturity are valued at
amortized cost if their original maturity was 60 days or less, or
by amortizing their fair value as of the 61st day prior to
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maturity if their original term to maturity exceeded 60 days
(unless in either case the Board of Directors determines that
this method does not represent fair value).
Fixed-income securities may be valued on the basis of
prices provided by a pricing service when such prices are
believed to reflect the fair market value of such securities.
The prices provided by pricing service take into account many
factors, including institutional size trading in similar groups
of securities and any developments related to specific
securities.
All other assets of the Fund are valued in good faith at
fair value by, or in accordance with procedures established by,
the Board of Directors.
Trading in securities on Far Eastern and European
securities exchanges and over-the-counter markets is normally
completed well before the close of business of each Fund business
day. In addition, trading in foreign markets may not take place
on all Fund business days. Furthermore, trading may take place
in various foreign markets on days that are not Fund business
days. The Fund's calculation of the net asset value per share,
therefore, does not always take place contemporaneously with the
most recent determination of the prices of portfolio securities
in these markets. Events affecting the values of these portfolio
securities that occur between the time their prices are
determined in accordance with the above procedures and the close
of the Exchange will not be reflected in the Fund's calculation
of net asset value unless these prices do not reflect current
market value, in which case the securities will be valued in good
faith at fair value by, or in accordance with procedures
established by, the Board of Directors.
The Board of Directors may suspend the determination of
the Fund's, net asset value (and the offering and sales of
shares), subject to the rules of the Commission and other
governmental rules and regulations, at a time when: (1) the
Exchange is closed, other than customary weekend and holiday
closings, (2) an emergency exists as a result of which it is not
reasonably practicable for the Fund to dispose of securities
owned by it or to determine fairly the value of its net assets,
or (3) for the protection of shareholders, the Commission by
order permits a suspension of the right of redemption or a
postponement of the date of payment on redemption.
For purposes of determining the Fund's net asset value
per share, all assets and liabilities initially expressed in a
foreign currency will be converted into U.S. dollars at the mean
of the current bid and asked prices of such currency against the
U.S. dollar last quoted by a major bank that is a regular
54
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participant in the relevant foreign exchange market or on the
basis of a pricing service that takes into account the quotes
provided by a number of such major banks. If such quotations are
not available as of the close of the Exchange, the rate of
exchange will be determined in good faith by, or under the
direction of, the Board of Directors.
The assets attributable to the Class A shares, Class B
shares, Class C shares and Advisor Class shares will be invested
together in a single portfolio. The net asset value of each
class will be determined separately by subtracting the
liabilities allocated to that class from the assets belonging to
that class in conformance with the provisions of a plan adopted
by the Fund in accordance with Rule 18f-3 under the 1940 Act.
_________________________________________________________________
DIVIDENDS, DISTRIBUTIONS AND TAXES
_________________________________________________________________
Dividends paid by the Fund, if any, with respect to
Class A, Class B, Class C and Advisor Class shares will be
calculated in the same manner at the same time on the same day
and will be in the same amount, except that the higher
distribution services applicable to Class B and C shares, and any
incremental transfer agency costs relating to Class B and Class C
shares, will be borne exclusively by the class to which they
relate.
United States Federal Income Taxation
Of Dividends and Distributions
General. The Fund intends for each taxable year to
qualify to be taxed as a "regulated investment company" under the
Internal Revenue Code of 1986, as amended (the "Code"). To so
qualify, the Fund must, among other things, (i) derive at least
90% of its gross income in each taxable year from dividends,
interest, payments with respect to securities loans, gains from
the sale or other disposition of stock or securities or foreign
currency, or certain other income (including, but not limited to,
gains from options, futures and forward contracts) derived with
respect to its business of investing in stock, securities or
currency; and (ii) diversify its holdings so that, at the end of
each quarter of its taxable year, the following two conditions
are met: (a) at least 50% of the value of the Fund's assets is
represented by cash, U.S. Government Securities, securities of
other regulated investment companies and other securities with
respect to which the Fund's investment is limited, in respect of
any one issuer, to an amount not greater than 5% of the Fund's
assets and 10% of the outstanding voting securities of such
issuer, and (b) not more than 25% of the value of the Fund's
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assets is invested in securities of any one issuer (other than
U.S. Government Securities or securities of other regulated
investment companies).
If the Fund qualifies as a regulated investment company
for any taxable year and makes timely distributions to its
shareholders of 90% or more of its investment company taxable
income for that year (calculated without regard to its net
capital gain, i.e., the excess of its net long-term capital gain
over its net short-term capital loss), it will not be subject to
federal income tax on the portion of its taxable income for the
year (including any net capital gain) that it distributes to
shareholders.
The Fund will also avoid the 4% federal excise tax that
would otherwise apply to certain undistributed income for a given
calendar year if it makes timely distributions to the
shareholders equal to at least the sum of (i) 98% of its ordinary
income for that year; (ii) 98% of its capital gain net income and
foreign currency gains for the twelve-month period ending on
October 31 of that year; and (iii) any ordinary income or capital
gain net income from the preceding calendar year that was not
distributed during that year. For this purpose, income or gain
retained by the Fund that is subject to corporate income tax will
be considered to have been distributed by the Fund by year-end.
For federal income and excise tax purposes, dividends declared
and payable to shareholders of record as of a date in October,
November or December of a given year but actually paid during the
immediately following January will be treated as if paid by the
Fund on December 31 of that calendar year, and will be taxable to
these shareholders for the year declared, and not for the year in
which the shareholders actually receive the dividend.
The Fund intends to make timely distributions of the
Fund's taxable income (including any net capital gain) so that
the Fund will not be subject to federal income or excise taxes.
However, exchange control or other regulations on the
repatriation of investment income, capital or the proceeds of
securities sales, if any exist or are enacted in the future, may
limit the Fund's ability to make distributions sufficient in
amount to avoid being subject to one or both of such federal
taxes.
Dividends and Distributions. Dividends of the Fund's
net ordinary income and distributions of any net realized short-
term capital gain will be taxable to shareholders as ordinary
income. In the case of corporate shareholders, such dividends
may be eligible for the dividends-received deduction, except that
the amount eligible for the deduction is limited to the amount of
qualifying dividends received by the Fund. A corporation's
dividends-received deduction will be disallowed unless the
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corporation holds shares in the Fund at least 46 days during the
90-day period beginning 45 days before the ex-dividend date. In
determining the holding period of such shares for this purpose,
any period during which the corporation's risk of loss is offset
by means of options, short sales or similar transactions is not
counted. Furthermore, the dividends-received deduction will be
disallowed to the extent a corporation's investment in shares of
the Fund is financed with indebtedness.
Distributions of net capital gain will be taxable to
shareholders as long-term capital gain regardless of how long a
shareholder has held shares in the Fund. Distributions of net
capital gain are not eligible for the dividends-received
deduction referred to above.
Any dividend or distribution received by a shareholder
on shares of the Fund will have the effect of reducing the net
asset value of such shares by the amount of such dividend or
distribution. Furthermore, a dividend or distribution made
shortly after the purchase of such shares by a shareholder,
although in effect a return of capital to that particular
shareholder, would be taxable to him as described above.
Dividends are taxable in the manner discussed regardless of
whether they are paid to the shareholder in cash or are
reinvested in additional shares of the Fund.
After the end of the taxable year, the Fund will notify
shareholders of the federal income tax status of any
distributions made by the Fund to shareholders during such year.
A dividend or capital gains distribution with respect to
shares of he Fund held by a tax-deferred or qualified plan, such
as an individual retirement account, 403(b)(7) retirement plan or
corporate pension or profit-sharing plan, generally will not be
taxable to the plan. Distributions from such plans will be
taxable to individual participants under applicable tax rules
without regard to the character of the income by the qualified
plan.
It is the present policy of the Fund to distribute to
shareholders all net investment income and to distribute realized
capital gains, if any, annually. There is no fixed dividend rate
and there can be no assurance that the Fund will pay any
dividends. The amount of any dividend or distribution paid on
shares of the Fund must necessarily depend upon the realization
of income and capital gains from the Fund's investments.
Sales and Redemptions. Any gain or loss arising from a
sale or redemption of Fund shares generally will be capital gain
or loss except in the case of dealers or certain financial
institutions. Such gain or loss will be long-term capital gain
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<PAGE>
or loss if such shareholder has held such shares for more than
one year at the time of the sale or redemption; and otherwise
short-term capital gain or loss. If a shareholder has held
shares in the Fund for six months or less and during that period
has received a distribution of net capital gain, any loss
recognized by the shareholder on the sale of those shares during
the six-month period will be treated as a long-term capital loss
to the extent of the distribution. In determining the holding
period of such shares for this purpose, any period during which a
shareholder's risk of loss is offset by means of options, short
sales or similar transactions is not counted.
Any loss realized by a shareholder on a sale or exchange
of shares of the Fund will be disallowed to the extent the shares
disposed of are replaced within a period of 61 days beginning 30
days before and ending 30 days after the shares are sold or
exchanged. For this purpose, acquisitions pursuant to the
Dividend Reinvestment Plan would constitute a replacement if made
within the period. If disallowed, the loss will be reflected in
an upward adjustment to the basis of the shares acquired.
Foreign Taxes. Income received by the Fund may also be
subject to foreign income taxes, including withholding taxes. The
United States has entered into tax treaties with many foreign
countries which entitle the Fund to a reduced rate of such taxes
or exemption from taxes on such income. It is impossible to
determine the effective rate of foreign tax in advance since the
amount of the Fund's assets to be invested within various
countries is not known. If more than 50% of the value of the
Fund's total assets at the close of its taxable year consists of
stocks or securities of foreign corporations, the Fund will be
eligible and intends to file an election with the Internal
Revenue Service to pass through to its shareholders the amount of
foreign taxes paid by the Fund. However, there can be no
assurance that the Fund will be able to do so. Pursuant to this
election a shareholder will be required to (i) include in gross
income (in addition to taxable dividends actually received) his
pro rata share of foreign taxes paid by the Fund, (ii) treat his
pro rata share of such foreign taxes as having been paid by him,
and (iii) either deduct such pro rata share of foreign taxes in
computing his taxable income or treat such foreign taxes as a
credit against United States federal income taxes. Shareholders
who are not liable for federal income taxes, such as retirement
plans qualified under section 401 of the Code, will not be
affected by any such pass through of taxes by the Fund. No
deduction for foreign taxes may be claimed by an individual
shareholder who does not itemize deductions. In addition,
certain shareholders may be subject to rules which limit or
reduce their ability to fully deduct, or claim a credit for,
their pro rata share of the foreign taxes paid by the Fund. A
shareholder's foreign tax credit with respect to a dividend
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received from the Fund will be disallowed unless the shareholder
holds shares in the Fund on the ex-dividend date and for at least
15 other days during the 30-day period beginning 15 days prior to
the ex- dividend date. Each shareholder will be notified within
60 days after the close of the Fund's taxable year whether the
foreign taxes paid by the Fund will pass through for that year
and, if so, such notification will designate (i) the
shareholder's portion of the foreign taxes paid to each such
country and (ii) the portion of dividends that represents income
derived from sources within each such country.
Backup Withholding. The Fund may be required to
withhold federal income tax at the rate of 31% of all taxable
distributions payable to shareholders who fail to provide the
Fund with their correct taxpayer identification numbers or to
make required certifications, or who have been notified by the
Internal Revenue Service that they are subject to backup
withholding. Corporate shareholders and certain other
shareholders specified in the Code are exempt from such backup
withholding. Backup withholding is not an additional tax; any
amounts so withheld may be credited against a shareholder's
federal income tax liability or refunded.
United States Federal Income Taxation of the Fund
The following discussion relates to certain significant
United States federal income tax consequences to the Fund with
respect to the determination of its "investment company taxable
income" each year. This discussion assumes that the Fund will be
taxed as a regulated investment company for each of its taxable
years.
Currency Fluctuations-"Section 988" Gains or Losses.
Under the Code, gains or losses attributable to fluctuations in
exchange rates which occur between the time the Fund accrues
interest or other receivables or accrues expenses or other
liabilities denominated in a foreign currency and the time the
Fund actually collects such receivables or pays such liabilities
are treated as ordinary income or ordinary loss. Similarly,
gains or losses from the disposition of foreign currencies, from
the disposition of debt securities denominated in a foreign
currency, or from the disposition of a forward contract
denominated in a foreign currency, which are attributable to
fluctuations in the value of the foreign currency between the
date of acquisition of the asset and the date of disposition also
are treated as ordinary gain or loss. These gains or losses,
referred to under the Code as "section 988" gains or losses,
increase or decrease the amount of the Fund's investment company
taxable income available to be distributed to its shareholders as
ordinary income, rather than increasing or decreasing the amount
of the Fund's net capital gain. Because section 988 losses
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reduce the amount of ordinary dividends the Fund will be allowed
to distribute for a taxable year, such section 988 losses may
result in all or a portion of prior dividend distributions for
such year being recharacterized as a non-taxable return of
capital to shareholders, rather than as an ordinary dividend,
reducing each shareholder's basis in his Fund shares. If such
distributions exceed such shareholder's basis, such excess will
be treated as a gain from the sale of shares.
Futures and Forward Contracts. Certain options,
regulated futures contracts, and forward foreign currency
contracts are considered "section 1256 contracts" for federal
income tax purposes. Section 1256 contracts held by the Fund at
the end of each taxable year will be "marked to market" and
treated for federal income tax purposes as though sold for fair
market value on the last business day of such taxable year. Gain
or loss realized by the Fund on section 1256 contracts other than
forward foreign currency contracts will be considered 60% long-
term and 40% short-term capital gain or loss. Gain or loss
realized by the Fund on forward foreign currency contracts
generally will be treated as section 988 gain or loss and will
therefore be characterized as ordinary income or loss and will
increase or decrease the amount of the Fund's investment company
taxable income available to be distributed to shareholders as
ordinary income, as described above. The Fund can elect to
exempt its section 1256 contracts which are part of a "mixed
straddle" (as described below) from the application of section
1256.
The Treasury Department has the authority to issue
regulations that would permit or require the Fund either to
integrate a foreign currency hedging transaction with the
investment that is hedged and treat the two as a single
transaction, or otherwise to treat the hedging transaction in a
manner that is consistent with the hedged investment. The
regulations issued under this authority generally should not
apply to the type of hedging transactions in which the Fund
intends to engage.
Tax Straddles. Any futures contract, forward foreign
currency contract, or other position entered into or held by the
Fund in conjunction with any other position held by the Fund may
constitute a "straddle" for federal income tax purposes. A
straddle of which at least one, but not all, the positions are
section 1256 contracts may constitute a "mixed straddle". In
general, straddles are subject to certain rules that may affect
the character and timing of the Fund's gains and losses with
respect to straddle positions by requiring, among other things,
that (i) loss realized on disposition of one position of a
straddle not be recognized to the extent that the Fund has
unrealized gains with respect to the other position in such
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straddle; (ii) the Fund's holding period in straddle positions be
suspended while the straddle exists (possibly resulting in gain
being treated as short-term capital gain rather than long-term
capital gain); (iii) losses recognized with respect to certain
straddle positions which are part of a mixed straddle and which
are non-section 1256 positions be treated as 60% long-term and
40% short-term capital loss; (iv) losses recognized with respect
to certain straddle positions which would otherwise constitute
short-term capital losses be treated as long-term capital losses;
and (v) the deduction of interest and carrying charges
attributable to certain straddle positions may be deferred. The
Treasury Department is authorized to issue regulations providing
for the proper treatment of a mixed straddle where at least one
position is ordinary and at least one position is capital. No
such regulations have yet been issued. Various elections are
available to the Fund which may mitigate the effects of the
straddle rules, particularly with respect to mixed straddles. In
general, the straddle rules described above do not apply to any
straddles held by the Fund all of the offsetting positions of
which consist of section 1256 contracts.
Taxation of Foreign Stockholders
The foregoing discussion relates only to United States
federal income tax law as it affects shareholders who are United
States citizens or residents or United States corporations. The
effects of federal income tax law on shareholders who are non-
resident alien individuals or foreign corporations may be
substantially different. Foreign investors should therefore
consult their counsel for further information as to the United
States tax consequences of receipt of income from the Fund.
Other Taxation
The Fund may be subject to other state and local
taxes.
_________________________________________________________________
PORTFOLIO TRANSACTIONS
_________________________________________________________________
The management of the Fund has the responsibility for
allocating its brokerage orders and may direct orders to any
broker. It is the Fund's general policy to seek favorable net
prices and prompt reliable execution in connection with the
purchase or sale of all portfolio securities. In the purchase
and sale of over-the-counter securities, it is the Fund's policy
to use the primary market makers except when a better price can
be obtained by using a broker. The Board of Directors has
approved, as in the best interests of the Fund and the
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shareholders, a policy of considering, among other factors, sales
of the Fund's shares as a factor in the selection of
broker-dealers to execute portfolio transactions, subject to best
execution. The Adviser is authorized under the Advisory
Agreement to place brokerage business with such brokers and
dealers. The use of brokers who supply supplemental research and
analysis and other services may result in the payment of higher
commissions than those available from other brokers and dealers
who provide only the execution of portfolio transactions. In
addition, the supplemental research and analysis and other
services that may be obtained from brokers and dealers through
which brokerage transactions are effected may be useful to the
Adviser in connection with advisory clients other than the Fund.
Investment decisions for the Fund are made independently
from those for other investment companies and other advisory
accounts managed by the Adviser. It may happen, on occasion,
that the same security is held in the portfolio of the Fund and
one or more of such other companies or accounts. Simultaneous
transactions are likely when several funds or accounts are
managed by the same adviser, particularly when a security is
suitable for the investment objectives of more than one of such
companies or accounts. When two or more companies or accounts
managed by the Adviser are simultaneously engaged in the purchase
or sale of the same security, the transactions are allocated to
the respective companies or accounts both as to amount and price,
in accordance with a method deemed equitable to each company or
account. In some cases this system may adversely affect the
price paid or received by the Fund or the size of the position
obtainable for the Fund.
Allocations are made by the officers of the Fund or of
the Adviser. Purchases and sales of portfolio securities are
determined by the Adviser and are placed with broker-dealers by
the order department of the Adviser.
The extent to which commissions that will be charged by
broker-dealers selected by the Fund may reflect an element of
value for research cannot presently be determined. To the extent
that research services of value are provided by broker-dealers
with or through whom the Fund places portfolio transactions, the
Adviser may be relieved of expenses which it might otherwise
bear. Research services furnished by broker-dealers could be
useful and of value to the Adviser in servicing its other clients
as well as the Fund; but, on the other hand, certain research
services obtained by the Adviser as a result of the placement of
portfolio brokerage of other clients could be useful and of value
to it in serving the Fund. Consistent with the Conduct Rules of
the National Association of Securities Dealers, Inc., and subject
to seeking best execution, the Fund may consider sales of shares
of the Fund or other investment companies managed by the Adviser
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as a factor in the selection of brokers to execute portfolio
transactions for the Fund.
The Fund may from time to time place orders for the
purchase or sale of securities (including listed call options)
with Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ"),
an affiliate of the Adviser, and with brokers which may have
their transactions cleared or settled, or both, by the Pershing
Division of DLJ, for which DLJ may receive a portion of the
brokerage commissions. In such instances, the placement of
orders with such brokers would be consistent with the Fund's
objective of obtaining best execution and would not be dependent
upon the fact that DLJ is an affiliate of the Adviser.
Some of the Fund's portfolio transactions in equity
securities may occur on foreign stock exchanges. Transactions on
stock exchanges involve the payment of brokerage commissions. On
many foreign stock exchanges these commissions are fixed.
Securities traded in foreign over-the-counter markets (including
most fixed-income securities) are purchased from and sold to
dealers acting as principal. Over-the-counter transactions
generally do not involve the payment of a stated commission, but
the price usually includes an undisclosed commission or markup.
The prices of underwritten offerings, however, generally include
a stated underwriter's discount. The Adviser expects to effect
the bulk of its transactions in securities of companies based in
foreign countries through brokers, dealers or underwriters
located in such countries. U.S. Government or other U.S.
securities constituting permissible investments will be purchased
and sold through U.S. brokers, dealers or underwriters.
_________________________________________________________________
GENERAL INFORMATION
_________________________________________________________________
Capitalization
The authorized capital stock of the Fund currently
consists of 3,000,000,000 shares of Class A Common Stock,
3,000,000,000 shares of Class B Common Stock, 3,000,000,000
shares of Class C Common Stock and 3,000,000,000 shares of
Advisor Class Common Stock, each having a par value of $.001 per
share. All shares of the Fund, when issued, are fully paid and
non-assessable. The Directors are authorized to reclassify any
unissued shares to any number of additional series and classes
without shareholder approval. Accordingly, the Directors in the
future, for reasons such as the desire to establish one or more
additional portfolios with different investment objectives,
policies or restrictions, may create additional classes or series
of shares. Any issuance of shares of another class or series
63
<PAGE>
would be governed by the 1940 Act and the law of the State of
Maryland. If shares of another series were issued in connection
with the creation of a second portfolio, each share of either
portfolio would normally be entitled to one vote for all
purposes. Generally, shares of both portfolios would vote as a
single series on matters, such as the election of Directors, that
affected both portfolios in substantially the same manner. As to
matters affecting each portfolio differently, such as approval of
the Investment Advisory Contract and changes in investment
policy, shares of each portfolio would vote as a separate series.
Procedures for calling a shareholders' meeting for the removal of
Directors of the Fund, similar to those set forth in Section
16(c) of the 1940 Act will be available to shareholders of the
Fund. The rights of the holders of shares of a series may not be
modified except by the vote of a majority of the outstanding
shares of such series.
It is anticipated that annual shareholder meetings will
not be held; shareholder meetings will be held only when required
by federal or state law. Shareholders have available certain
procedures for the removal of Directors.
A shareholder will be entitled to share pro rata with
other holders of the same class of shares all dividends and
distributions arising from the Fund's assets and, upon redeeming
shares, will receive the then current net asset value of the Fund
represented by the redeemed shares less any applicable CDSC. The
Fund is empowered to establish, without shareholder approval,
additional portfolios, which may have different investment
objectives and policies than those of the Fund, and additional
classes of shares within the Fund. If an additional portfolio or
class were established in the Fund, each share of the portfolio
or class would normally be entitled to one vote for all purposes.
Generally, shares of each portfolio and class would vote together
as a single class on matters, such as the election of Directors,
that affect each portfolio and class in substantially the same
manner. Class A, B, C and Advisor Class shares have identical
voting, dividend, liquidation and other rights, except that each
class bears its own transfer agency expenses, each of Class A,
Class B and Class C shares of the Fund bears its own distribution
expenses and Class B shares and Advisor Class shares convert to
Class A shares under certain circumstances. Each class of shares
of the Fund votes separately with respect to the Fund's Rule 12b-
1 distribution plan and other matters for which separate class
voting is appropriate under applicable law. Shares are freely
transferable, are entitled to dividends as determined by the
Directors and, in liquidation of the Fund, are entitled to
receive the net assets of the Fund.
64
<PAGE>
Custodian
Brown Brothers Harriman & Co. will act as the Fund's
custodian for the assets of the Fund but plays no part in
deciding the purchase or sale of portfolio securities. Subject
to the supervision of the Fund's Directors, Brown Brothers
Harriman & Co. may enter into sub-custodial agreements for the
holding of the Fund's foreign securities.
Principal Underwriter
Alliance Fund Distributors, Inc., 1345 Avenue of the
Americas, New York, New York 10105, serves as the Fund's
Principal Underwriter, and as such may solicit orders from the
public to purchase shares of the Fund. Under the Agreement, the
Fund has agreed to indemnify the Principal Underwriter, in the
absence of its willful misfeasance, bad faith, gross negligence
or reckless disregard of its obligations thereunder, against
certain civil liabilities, including liabilities under the
Securities Act.
Counsel
Legal matters in connection with the issuance of the
common stock offered hereby are passed upon by Seward & Kissel
LLP, New York, New York. Seward & Kissel LLP has relied upon the
opinion of Venable, Baetjer and Howard, LLP, Baltimore, Maryland,
for matters relating to Maryland law.
Independent Accountants
PricewaterhouseCoopers LLP, New York, New York, has been
appointed as independent accountants for the Fund.
Performance Information
From time to time the Fund advertises its "total
return." Computed separately for each class, the Fund's "total
return" is its average annual compounded total return for its
most recently completed one, five, and ten-year periods (or the
period since the Fund's inception). The Fund's total return for
such a period is computed by finding, through the use of a
formula prescribed by the Commission, the average annual
compounded rate of return over the period that would equate an
assumed initial amount invested to the value of such investment
at the end of the period. For purposes of computing total
return, income dividends and capital gains distributions paid on
shares of the Fund are assumed to have been reinvested when paid
and the maximum sales charge applicable to purchases of Fund
shares is assumed to have been paid.
65
<PAGE>
The Fund's total return is computed separately for
Class A, Class B, Class C and Advisor Class shares. The Fund's
total return is not fixed and will fluctuate in response to
prevailing market conditions or as a function of the type and
quality of the securities in the Fund's portfolio and its
expenses. Total return information is useful in reviewing the
Fund's performance but such information may not provide a basis
for comparison with bank deposits or other investments which pay
a fixed yield for a stated period of time. An investor's
principal invested in the Fund is not fixed and will fluctuate in
response to prevailing market conditions.
Advertisements quoting performance rankings of the Fund
as measured by financial publications or by independent
organizations such as Lipper Inc. and Morningstar, Inc. and
advertisements presenting the historical record of payments of
income dividends by the Fund may also from time to time be sent
to investors or placed in newspapers, magazines such as Barron's,
Business Week, Changing Times, Forbes, Investor's Daily, Money
Magazine, The New York Times and The Wall Street Journal or other
media on behalf of the Fund.
Additional Information
Any shareholder inquiries may be directed to the
shareholder's broker or to Alliance Fund Services, Inc. at the
address or telephone numbers shown on the front cover of this
Statement of Additional Information. This Statement of
Additional Information does not contain all the information set
forth in the Registration Statement filed by the Fund with the
Commission under the Securities Act. Copies of the Registration
Statement may be obtained at a reasonable charge from the
Commission or may be examined, without charge, at the offices of
the Commission in Washington, D.C.
66
<PAGE>
_________________________________________________________________
FINANCIAL STATEMENTS AND
REPORT OF INDEPENDENT ACCOUNTANTS
_________________________________________________________________
ALLIANCE HEALTH CARE FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
JULY 14, 1999
ASSETS
Cash $100,300
Receivable from Adviser (Note B) 42,000
Deferred Offering Expenses (Note A) 169,000
--------
Total Assets 311,300
--------
LIABILITIES
Organization Costs Payable (Note A) 42,000
offering Expenses Payable (Note A) 169,000
--------
Total Liabilities 211,000
--------
NET ASSETS
Paid in Capital (Applicable to 10
Class A shares issued and
outstanding, 10 Class B shares
issued and outstanding, 10 Class C
shares issued and outstanding and
10,000 Advisor Class shares issued
and outstanding; each with $.001
par value; 3,000,000,000 shares of
each class authorized) $100,300
========
CALCULATION OF MAXIMUM OFFERING
PRICE.
CLASS A SHARES
Net asset value and redemption
price per share
($100/10 shares issued and
outstanding) $10.00
1
<PAGE>
Sales charge - 4.25% of public
offering price .44
--------
Maximum offering price $10.44
========
CLASS B SHARES
Net asset value and offering
price per share
($100/10 shares issued and
outstanding) $10.00
========
CLASS C SHARES
Net asset value and offering
price per share
($100/10 shares issued and
outstanding) $10.00
========
ADVISOR CLASS SHARES
Net asset value, offering and
redemption price per share
($100,000/10,000 shares issued
and outstanding) $10.00
========
See notes to financial statements.
2
<PAGE>
ALLIANCE HEALTH CARE FUND, INC.
STATEMENT OF OPERATIONS
For the Period April 30, 1999 (date
of organization) to July 14,1999
Organization Expenses $42,000
Expenses reimbursed by the Adviser (42,000)
--------
Net Income/Loss 0
========
3
<PAGE>
ALLIANCE HEALTH CARE FUND, INC.
NOTES TO FINANCIAL STATEMENTS
JULY 14,1999
NOTE A - ORGANIZATION:
Alliance Health Care Fund, Inc. (the "Fund") was organized as a
Maryland corporation on April 30,1999. The Fund is registered
under the Investment Company Act of 1940 as an open-end,
diversified management investment company. The Fund has had no
operations to date, other than the sale to Alliance Capital
Management L.P. (the "Adviser") of 10 shares of Class A common
shares for the amount of $100, 10 shares of Class B common shares
for the amount of $100, and 10 shares of Class C common shares
for the amount of $100 and 10,000 shares of Advisor Class common
stock for the amount of $100,000, in each case on July 14, 1999.
The Fund currently offers four classes of shares. Class A shares
are sold with an initial sales charge imposed at the time of
purchase. Class B share's are sold with a contingent deferred
sales charge imposed on most redemptions made within four years
of purchase and higher distribution fees. Class C shares are sold
with a contingent deferred sales charge imposed on redemptions
made within one year of purchase and higher distribution fees.
Advisor Class shams are sold without any initial or contingent
deferred sales charge and without ongoing distribution expenses.
Costs incurred and to be incurred in connection with the
organization of the Fund, estimated at $42,000, will be borne by
the Fund, subject to the expense limitation agreement described
in Note, R below. Certain costs incurred and to be incurred in
connection with the initial offering of shares of the Fund,
estimated at $169,000, will be paid initially by the Advisor. The
Fund will reimburse the Advisor for such costs, which will be
deferred and amortized by the Fund over the period of benefit,
not to exceed 12 months from the date the Fund commences
operations.
NOTE B - INVESTMENT ADVISORY, DISTRIBUTION SERVICES AND TRANSFER
AGENCY AGREEMENTS:
Under the terms of an Investment Advisory Agreement, the Fund
pays the Adviser a monthly fee at an annualized rate of .95% of
the Fund's average daily net assets.
The Fund and the Adviser have entered into an Expense Limitation
Agreement (the "Agreement"), dated July 13, 1999, under which the
Adviser has agreed to waive its fees and, if necessary, reimburse
expenses for the period from April 30, 1999 (date of organization
of the Fund) to August 31, 2000, exceeding the annual rate of
2.50% of average daily net assets for Class A shares, 3.20% of
4
<PAGE>
average daily net assets for Class B shares and Class C shares
and 2.20% of average daily net assets for Advisor class shares,
respectively. Under the Agreement, any waivers or reimbursements
made by the Adviser during this period are subject to repayment
by the Fund by August 31, 2002, provided that repayment does not
result in the Fund's aggregate expenses 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.
The Fund recorded its initial organization costs of $42,000 as an
expense as of July 13, 1999 and recognized an offsetting expense
reduction as a result of the Adviser's commitment to reimburse
these costs under the Agreement. The Fund may be obliged to repay
some or all of these costs to the Adviser if the Agreements
conditions are met.
The Fund has adopted a Distribution Services Agreement (the
"Distribution Agreement) pursuant to Rule 12b-1 under the
Investment Company Act of 1940. Under the Distribution Agreement,
the Fund pays a distribution fee to the Distributor at an annual
rate of up to .30% of the Fund's average daily net assets
attributable to Class A shares and 1% of the average daily not
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 Distribution Agreement
provides that the Distributor will use such payments in their
entirety for distribution assistance and promotional activities.
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.
5
<PAGE>
Report of Independent Accountants
To the Shareholder and Board of Directors of
Alliance Health Care Fund, Inc.
In our opinion, the accompanying statement of assets and
liabilities and the related statement of operations present
fairly, in all material respects, the financial position of
Alliance Health Care Fund, Inc. (the "Fund") at July 14, 1999,
and the results of its operations for the period from April 30,
1999 (date of organization) to July 14, 1999, in conformity with
generally accepted accounting principles. These 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 provides a reasonable basis for the
opinion expressed above.
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York
July 15, 1999
<PAGE>
_________________________________________________________________
APPENDIX A:
CERTAIN EMPLOYEE BENEFIT PLANS
_________________________________________________________________
Employee benefit plans described below which are
intended to be tax-qualified under section 401(a) of the Internal
Revenue Code of 1986, as amended ("Tax Qualified Plans"), for
which Merrill Lynch, Pierce, Fenner & Smith Incorporated or an
affiliate thereof ("Merrill Lynch") is recordkeeper (or with
respect to which recordkeeping services are provided pursuant to
certain arrangements as described in paragraph (ii) below)
("Merrill Lynch Plans") are subject to specific requirements as
to the Fund shares which they may purchase. Notwithstanding
anything to the contrary contained elsewhere in this Statement of
Additional Information, the following Merrill Lynch Plans are not
eligible to purchase Class A shares and are eligible to purchase
Class B shares of the Fund at net asset value without being
subject to a contingent deferred sales charge:
(i) Plans for which Merrill Lynch is the recordkeeper on a
daily valuation basis, if when the plan is established
as an active plan on Merrill Lynch's recordkeeping
system:
(a) the plan is one which is not already
investing in shares of mutual funds or
interests in other commingled investment
vehicles of which Merrill Lynch Asset
Management, L.P. is investment adviser or
manager ("MLAM Funds"), and either (A) the
aggregate assets of the plan are less than
$3 million or (B) the total of the sum of
(x) the employees eligible to participate in
the plan and (y) those persons, not
including any such employees, for whom a
plan account having a balance therein is
maintained, is less than 500, each of (A)
and (B) to be determined by Merrill Lynch in
the normal course prior to the date the plan
is established as an active plan on Merrill
Lynch's recordkeeping system (an "Active
Plan"); or
(b) the plan is one which is already investing
in shares of or interests in MLAM Funds and
the assets of the plan have an aggregate
value of less than $5 million, as determined
A-1
<PAGE>
by Merrill Lynch as of the date the plan
becomes an Active Plan.
For purposes of applying (a) and (b), there
are to be aggregated all assets of any Tax-
Qualified Plan maintained by the sponsor of
the Merrill Lynch Plan (or any of the
sponsor's affiliates) (determined to be such
by Merrill Lynch) which are being invested
in shares of or interests in MLAM Funds,
Alliance Mutual Funds or other mutual funds
made available pursuant to an agreement
between Merrill Lynch and the principal
underwriter thereof (or one of its
affiliates) and which are being held in a
Merrill Lynch account.
(ii) Plans for which the recordkeeper is not Merrill Lynch,
but which are recordkept on a daily valuation basis by
a recordkeeper with which Merrill Lynch has a
subcontracting or other alliance arrangement for the
performance of recordkeeping services, if the plan is
determined by Merrill Lynch to be so eligible and the
assets of the plan are less than $3 million.
Class B shares of the Fund held by any of the above-described
Merrill Lynch Plans are to be replaced at Merrill Lynch's
direction through conversion, exchange or otherwise by Class A
shares of the Fund on the earlier of the date that the value of
the plan's aggregate assets first equals or exceeds $5 million or
the date on which any Class B share of the Fund held by the plan
would convert to a Class A share of the Fund as described under
"Purchase of Shares" and "Redemption and Repurchase of Shares."
Any Tax Qualified Plan, including any Merrill Lynch Plan,
which does not purchase Class B shares of the Fund without being
subject to a contingent deferred sales charge under the above
criteria is eligible to purchase Class B shares subject to a
contingent deferred sales charge as well as other classes of
shares of the Fund as set forth above under "Purchase of Shares"
and "Redemption and Repurchase of Shares."
A-2
00250248.AG0
