AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION
DECEMBER 15, 2000
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SECURITIES ACT OF 1933 REGISTRATION NO.
INVESTMENT COMPANY ACT OF 1940 FILE NO.
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 |X|
Pre-Effective Amendment No.
Post-Effective Amendment No.
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 |X|
Amendment No.
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ALLIANCEBERNSTEIN TRUST
(Exact Name Of Registrant As Specified In Charter)
1345 Avenue of the Americas, New York, New York 10105
(Address of Principal Executive Office) (Zip Code)
Registrant's Telephone Number, including Area Code: (212) 969-1000
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Edmund P. Bergan, Jr.
Alliance Capital Management L.P.
1345 Avenue of the Americas
New York, New York 10105
(Name and address of agent for service)
Copies of communications to:
Joseph B. Kittredge, Jr.
Ropes & Gray
One International Place
Boston, Massachusetts 02110
Approximate date of commencement of proposed sale to the public: As soon
as practicable after the effective date of this Registration Statement.
Title of Securities Being Registered: Shares of Beneficial Interest of
AllianceBernstein Trust.
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The registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a)
may determine.
AllianceBernstein Global Value Fund
The AllianceBernstein Global Value Fund is an open-end management investment
company structured as a series fund that invests primarily in a diversified
portfolio of equity securities issued by U.S. and non-U.S. companies.
Prospectus and Application
[____________], 2001
The Securities and Exchange Commission has not approved or disapproved these
securities or passed upon the adequacy of this Prospectus. Any representation
to the contrary is a criminal offense.
AllianceCapital T
Investment Products Offered
* Are Not FDIC Insured
* May Lose Value
* Are Not Bank Guaranteed
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TABLE OF CONTENTS
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Page
RISK/RETURN SUMMARY......................................................
FEES AND EXPENSES OF THE FUND............................................
GLOSSARY.................................................................
DESCRIPTION OF THE FUND..................................................
Investment Objective and Principal Policies and Risks....................
Description of Additional Investment Practices...........................
Additional Risk Considerations...........................................
MANAGEMENT OF THE FUND...................................................
PURCHASE AND SALE OF SHARES..............................................
How The Fund Values Its Shares...........................................
How To Buy Shares........................................................
Initial Offering.........................................................
How To Exchange Shares...................................................
How To Sell Shares.......................................................
DIVIDENDS, DISTRIBUTIONS AND TAXES.......................................
DISTRIBUTION ARRANGEMENTS................................................
GENERAL INFORMATION......................................................
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 the
AllianceBernstein Global Value Fund. This Risk/Return 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:
* As with all investments, 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.
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Global Value Fund
_______________________________________________________________________________
OBJECTIVE:
The Fund's investment objective is long-term growth of capital.
PRINCIPAL INVESTMENT STRATEGIES:
The Fund will invest primarily in a diversified portfolio of equity securities
from around the world, including the U.S. The Fund's investment policies
emphasize investment in companies that are determined by Alliance to be
undervalued, using the fundamental value approach of Alliance's Bernstein unit
("Bernstein"). In selecting securities for the Fund's portfolio, Bernstein
uses its fundamental research to identify companies whose long term earnings
power is not reflected in the current market price of their securities.
In order to hedge a portion of currency risk, the Fund may from time to time
invest in currency futures contracts or currency forward contracts.
PRINCIPAL RISKS:
Among the principal risks of investing in the Fund are market risk, non-U.S.
investment risk and currency risk. Market risk is the risk of losses from
adverse changes in the stock market. Investments in countries other than the
United States may have more risk because they tend to be more volatile than the
U.S. stock market. To the extent that the Fund invests a substantial amount of
its assets in a particular country, an investment in the Fund has the risk that
market changes or other events affecting that country may have a more
significant effect on the Fund's net asset value. Because the Fund may invest
in emerging markets and in developing countries, an investment also has the
risk that market changes or other factors affecting emerging markets and
developing countries, including political instability and unpredictable
economic conditions, may have a significant effect on the Fund's net asset
value. Depending on the Fund's investments at a particular time, the Fund may
also have industry/sector risk. The Fund may at times use certain types of
investment derivatives such as options, futures, forwards and swaps. The use
of these techniques involves special risks that are discussed in this
Prospectus.
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.
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FEES AND EXPENSES OF THE FUND
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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 first year.
ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from Fund assets)
Operating Expenses
------------------------------------------------
Class A Class B Class C
-------------- -------------- --------------
Management fees [____]% [____]% [____]%
Distribution (12b-1) fees [____]% [____]% [____]%
Other expenses [____]% [____]% [____]%
Total Fund
operating expenses (a) [____]% [____]% [____]%
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
-----------------------------------------------------
Class A Class B+ Class B++ Class C+ Class C++
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After 1 Yr. $[______] $[______] $[______] $[______] $[______]
After 3 Yrs. $[______] $[______] $[______] $[______] $[______]
(a) Alliance has contractually agreed to waive its management fees and/or to
bear expenses of the Fund through [ ] to the extent
necessary to prevent total fund operating expenses, on an annualized
basis, from exceeding [ ]% for Class A shares and [ ]% for
Classes B & C shares. The fees waived and expenses borne by Alliance
during this period may be reimbursed by the Fund during the three years
after commencement of operations. No reimbursement payment will be made
that would cause the Fund's total annualized operating expenses to exceed
these percentages or cause the total of the payments to exceed the Fund's
total initial organizational and offering expenses.
+ Assumes redemption at the end of period.
++ Assumes no redemption at end of period.
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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.
Depositary receipts include American Depositary Receipts ("ADRs"), Global
Depositary Receipts ("GDRs") and other types of depositary receipts.
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.
Lower-rated securities are fixed-income securities rated Ba or below by Moody's
or BB or below by S&P, Duff & Phelps or Fitch, or determined by Alliance to be
of equivalent quality, and are commonly referred to as "junk bonds."
Non-U.S. Company is an entity that (i) is organized under the laws of a country
other than the United States, (ii) has its principal place of business in a
country other than the United States, and (iii) issues equity or debt
securities that are traded principally in a country other than the United
States.
Prime commercial paper is commercial paper rated Prime 1 by Moody's or A-1 or
higher by S&P or, if not rated, issued by companies that have an outstanding
debt issue rated Aa or higher by Moody's or AA or higher by S&P.
Qualifying bank deposits are certificates of deposit, bankers' acceptances and
interest-bearing savings deposits of banks that have total assets of more than
$1 billion and are members of the Federal Deposit Insurance Corporation.
Rule 144A securities are securities that may be resold pursuant to Rule 144A of
the Securities Act.
U.S. Government securities are securities issued or guaranteed by the United
States Government, its agencies or instrumentalities.
RATING AGENCIES
Duff & Phelps is Duff & Phelps Credit Rating Co.
Fitch is Fitch IBCA, Inc.
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.
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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 investment policies and risks. Of
course, there can be no assurance that the Fund will achieve its investment
objective.
Please note that:
* Additional discussion of the Fund's investments, including the risks of the
investments, can be found in the discussion under Description of Additional
Investment Practices following this section.
* The description of the principal risks for the Fund includes risks described
in the RISK/RETURN SUMMARY above. Additional information about the risks of
investing in the Fund can be found in the discussion 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. Except as noted, the Fund's investment policies
are not fundamental and thus can be changed without a shareholder vote.
INVESTMENT OBJECTIVE AND PRINCIPAL POLICIES AND RISKS
INVESTMENT OBJECTIVE
The Fund's investment objective is long-term growth of capital.
PRINCIPAL POLICIES
The Fund will invest primarily in a diversified portfolio of equity securities
of 150 to 250 established companies selected from more than 40 industries and
from more than 40 developed and emerging market countries, including the United
States. Countries are generally weighted in proportion to the size of their
stock markets, although the Fund may over- or under-weight a country depending
on an assessment of the relative attractiveness of investments in that country
by Alliance's Bernstein unit ("Bernstein"). The Fund normally invests in
companies in at least three countries, generally including the United States.
Other such countries currently include the developed nations in Europe and the
Far East, Canada, Australia, and emerging market countries worldwide. The
Fund's investment policies emphasize investment in companies that are
determined by Bernstein to be undervalued, using a fundamental value approach.
Investment decisions are the result of the multi-step process described below.
Bernstein's fundamental value approach to equity investing generally defines
value by reference to the relationship between a security's current price and
its intrinsic economic value as measured by long-term earnings prospects. In
each market, this approach seeks to identify, in the first instance, a universe
of securities that are considered to be undervalued because they are
attractively priced relative to their future earnings power. Accordingly,
forecasting corporate earnings and dividend-paying capability is the heart of
the fundamental value approach.
Bernstein's fundamental analysis depends heavily upon its large internal
research staff. The research staff begins with a global research universe of
approximately 5,000 companies worldwide. Teams within the research staff cover
a given industry worldwide, to better understand each company's competitive
position in a global context.
Bernstein's staff of approximately 100 company and industry analysts prepares
its own earnings estimates and financial models for each company analyzed.
Bernstein identifies and quantifies the critical variables that control a
business's performance and analyzes the results in order to forecast each
company's long-term prospects and expected returns. As one of the largest
multi-national investment firms, Alliance and its Bernstein unit have global
access to considerable information concerning all of the companies followed, an
in-depth understanding of the products, services, markets and competition of
these companies and a good knowledge of the management of most of the companies
in its research universe. A company's financial performance is typically
projected over a full economic cycle, including a trough and a peak, within the
context of forecasts for real economic growth, inflation and interest rate
changes. As a result, forecasts of near term economic events are generally not
of major consequence.
A group of senior investment professionals, including the Fund's portfolio
managers, carefully reviews the research process to be sure that the analysts
have appropriately considered key issues facing each company, that forecasts
of a
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company's future are compatible with its history, and that all forecasts use
consistent analytic frameworks and economic assumptions.
Once Bernstein has applied its fundamental analysis to determine the intrinsic
economic values of each of the companies in its research universe, each company
is then ranked in the order of disparity between its intrinsic economic value
and its stock price, with companies having the greatest disparities receiving
the highest rankings (i.e., being considered the most undervalued). A similar
relative evaluation is performed for the markets in each country.
The Fund does not simply purchase the top-ranked securities. Rather, Bernstein
considers aggregate portfolio characteristics when deciding how much of each
security to purchase for the Fund. Bernstein's team of approximately 40
quantitative analysts build valuation and risk models to ensure that the Fund's
portfolio is constructed to obtain an effective balance of risk and return. By
evaluating overall regional, country and currency exposures, sector
concentration, degree of undervaluation and other subtle similarities among
investments, Bernstein seeks to minimize overall Fund volatility by favoring
those top ranked securities that also tend to diversify the Fund's risk.
A disparity between a company's current stock price and the assessment of
intrinsic value can arise, at least in part, as a result of adverse, short-term
market reactions to recent events or trends. In order to reduce the risk that
an undervalued security will be purchased before such an adverse market
reaction has run its course, Bernstein also monitors analysts'
earnings-estimate revisions and relative return trends (also called "price
momentum") so as to better time new purchases and sales of securities.
Currencies can have a dramatic impact on equity returns, significantly adding
to returns in some years and greatly diminishing them in others. Investment
decisions concerning currencies are made independently of equity investments
and may be used to hedge the currency exposure resulting from securities
positions.
A security generally will be sold when it no longer meets appropriate valuation
criteria. Sale of a stock that has reached its target may be delayed, however,
when earnings expectations and/or price momentum is favorable.
The Fund may also
* Invest in depositary receipts, instruments of supranational entities
denominated in the currency of any country, securities of multinational
companies and "semi-governmental securities";
* Invest up to 20% of its total assets in convertible securities;
* Write covered put and call options and purchase put and call options on
securities issued by U.S. and non-U.S. companies, security exchanges and over
the counter, including options on market indices and currencies;
* Invest up to 15% of its net assets in illiquid securities;
* Invest up to 10% of its total assets in rights and warrants;
* Enter into forward commitments, futures contracts and options on futures
contracts with respect to securities, indices and currencies;
* Enter into contracts for the purchase and sale for the future delivery of
contracts based on financial indices;
* Enter into currency swaps and forward currency exchange contracts for hedging
purposes;
* Make secured loans of portfolio securities of up to 30% of its total assets;
and
* Enter into repurchase agreements.
PRINCIPAL 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 markets fluctuate and that prices overall will decline
over short- or long-term periods.
* Sector Risk This is the risk of investments in a particular industry sector.
If the Fund invests a substantial amount of its assets in companies engaged in
a particular industry sector, market or economic factors affecting that
industry could have a major effect on the value of the Fund's investments.
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* Capitalization Risk This is the risk of investments in small capitalization
companies. Investments in small- and mid-cap companies may be more volatile
than investments in large-cap companies. Investments in small-cap companies
tend to be more volatile than investments in mid- or large-cap companies. The
Fund's investments in smaller capitalization companies may have additional
risks because these companies often have limited product lines, markets or
financial resources.
* Derivative and Leverage Risk The Fund may make substantial use of derivatives
and employ specialized trading techniques such as short sales, options,
futures, forwards, and other leveraging techniques to increase its exposure to
certain selected securities. Alliance employs these techniques speculatively to
enhance returns and not merely as hedging tools. These techniques are riskier
than many investment strategies and will result in greater volatility for the
Fund, particularly in periods of market declines.
* Non-U.S. Investment Risk This is the risk of investments in issuers located
in countries other than the United States. Investments in securities issued by
non-U.S. companies 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 countries are relatively small, with a limited number of
companies representing a small number of industries. Additionally, non-U.S.
issuers are usually not subject to the same degree of regulation as U.S.
issuers. Reporting, accounting and auditing standards of 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
country other than the United States. In the event of nationalization,
expropriation or other confiscation, the Fund could lose its entire investment.
* Currency Risk This is the risk that fluctuations in the exchange rates
between the U.S. Dollar and other currencies may negatively affect the value of
the Fund's investments.
* 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[, including its fundamental value approach,] in
making investment decisions for the Fund, but there is no guarantee that its
techniques will produce the intended result.
Portfolio Turnover. The Fund's portfolio turnover is not expected to exceed
100%.
Temporary Defensive Position. For temporary defensive purposes, the Fund may
reduce its position in equity securities and increase without limit its
position in short-term, liquid, high-grade debt securities, which may include
U.S. Government securities, bank deposits, money market instruments, short-term
debt securities, including notes and bonds, or hold its assets in cash. While
the Fund is investing for temporary defensive purposes, it may not meet its
investment objective.
DESCRIPTION OF ADDITIONAL INVESTMENT PRACTICES
This section describes the investment practices of the Fund and risks
associated with these practices.
Convertible Securities. Prior to conversion, convertible securities have the
same general characteristics as nonconvertible debt securities, which generally
provide a stable stream of income with generally higher yields than those of
equity securities of the same or similar issuers. The price of a convertible
security will normally vary with changes in the price of the underlying equity
security, although the higher yield tends to make the price of the convertible
security less volatile than that of the underlying equity security. As with
debt securities, the market values of convertible securities tend to decrease
as interest rates rise and increase as interest rates fall. While convertible
securities generally offer lower interest yields than non-convertible debt
securities of similar quality, they offer investors the potential to benefit
from increases in the market prices of the underlying common stocks.
Convertible securities that are rated Baa or lower by Moody's and BBB or lower
by S&P or, if unrated, determined by Alliance to be of equivalent quality, may
share some or all of the risks of non-convertible debt securities with those
ratings. The Fund may invest up to 20% of its total assets in convertible
securities.
Currency Swaps. Currency swaps involve the individually negotiated exchange by
the Fund with another party of a series of payments in specified currencies. A
currency swap may involve the delivery at the end of the exchange period of a
substantial amount of one designated currency in exchange for the other
designated currency. Therefore, the entire principal value of a currency swap
is subject to the risk that the swap counterparty will default on its
contractual delivery obligations. The Fund will enter into currency swaps for
hedging purposes only. The Fund will not enter into any currency swap unless
the credit quality of the unsecured senior debt or the claims-paying ability of
the counterparty is rated in the highest rating category of at least one
nationally recognized rating organization at the time of entering into the
transaction. If there is a default by the other party to such a transaction,
the Fund will have contractual remedies under the transaction agreements.
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Depositary Receipts. Depositary receipts may not necessarily be denominated in
the same currency as the underlying securities into which they may be
converted. In addition, the issuers of the stock of unsponsored depositary
receipts are not obligated to disclose material information in the United
States, and therefore, there may not be a correlation between such information
and the market value of the depositary receipts. ADRs are depositary receipts
typically issued by a U.S. bank or trust company that evidence ownership of
underlying securities issued by a non-U.S. corporation. GDRs and other types of
depositary receipts are typically issued by non-U.S. banks or trust companies
and evidence ownership of underlying securities issued by either a U.S. or a
non-U.S. company. Generally, depositary receipts in registered form are
designed for use in the U.S. securities markets, and depositary receipts in
bearer form are designed for use in securities markets outside of the United
States.
Forward Currency Exchange Contracts. The Fund may purchase or sell forward
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 currency in
order to "lock in" the U.S. Dollar price of the security ("transaction hedge").
The Fund will not engage in transaction hedges with respect to the currency of
a particular country to an extent greater than the aggregate amount of the
Fund's transactions in that currency. When the Fund believes that a 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 currency approximating the
value of some or all of the Fund's portfolio securities denominated in such
currency, or when the Fund believes that the U.S. Dollar may suffer a
substantial decline against another currency, it may enter into a forward
purchase contract to buy that 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 currency for a
fixed U.S. dollar amount where the Fund believes that the U.S. Dollar value of
the currency to be sold pursuant to the forward contract will fall whenever
there is a decline in the U.S. Dollar value of the currency in which portfolio
securities of the Fund are denominated ("cross-hedge"). Unanticipated changes
in currency prices may result in poorer overall performance for the Fund than
if it had not entered into such forward contracts. Hedging against a decline
in the value of a currency does not eliminate fluctuations in the prices of
portfolio securities or prevent losses if the prices of such securities
decline. Such transactions also preclude the opportunity for gain if the value
of the hedged currency should rise. Moreover, it may not be possible for 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
devaluation level it anticipates.
Illiquid Securities. The Fund will limit its investment in illiquid securities
to no more than 15% 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 will not be treated as
"illiquid" for purposes of this limit on investments if they meet certain
liquidity guidelines established by the Fund or Alliance.
The Fund may not be able to readily sell securities for which there is no ready
market. Such securities are unlike securities that are traded in the open
market and can be expected to be sold immediately if the market is adequate.
The sale price of illiquid securities may be lower or higher than Alliance's
most recent estimate of their fair value. Generally, less public information is
available about the issuers of such securities than about companies whose
securities are traded on an exchange. To the extent that these securities are
securities issued by non-U.S. companies, 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 of up to 30% of its total assets 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 risk in lending
portfolio securities, as with other extensions of credit, consists of the
possible loss of rights in the collateral
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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.
Options on Securities. An option gives the purchaser of the option, upon
payment of a premium, the right to deliver to (in the case of a put) or receive
from (in the case of a call) the writer of the option a specified amount of a
security on or before a fixed date at a predetermined price. A call option
written by the Fund is "covered" if the Fund owns the underlying security, has
an absolute and immediate right to acquire that security upon conversion or
exchange of another security it holds, or holds a call option on the underlying
security with an exercise price equal to or less than that of the call option
it has written. A put option written by the Fund is "covered" if the Fund holds
a put on the underlying securities with an exercise price equal to or greater
than that of the put option it has written.
A call option is for cross-hedging purposes if the Fund does not own the
underlying security and is designed to provide a hedge against a decline in
value in another security which the Fund owns or has the right to acquire. The
Fund may write call options for cross-hedging purposes. The Fund would write a
call option for cross-hedging purposes, instead of writing a covered call
option, when the premium to be received from the cross-hedge transaction would
exceed that which would be received from writing a covered call option, while
at the same time achieving the desired hedge.
In purchasing an option, the Fund would be in a position to realize a gain if,
during the option period, the price of the underlying security increased (in
the case of a call) or decreased (in the case of a put) by an amount in excess
of the premium paid; otherwise the Fund would experience a loss equal to the
premium paid for the option.
If an option written by the Fund were exercised, the Fund would be obligated to
purchase (in the case of a put) or sell (in the case of a call) the underlying
security at the exercise price. The risk involved in writing an option is that,
if the option is exercised, the underlying security would then be purchased or
sold by the Fund at a disadvantageous price. Entering into a closing
transaction (i.e., by disposing of the option prior to its exercise) could
reduce these risks. The Fund retains the premium received from writing a put or
call option whether or not the option is exercised. The writing of call options
could result in increases in the Fund's portfolio turnover rate, especially
during periods when market prices of the underlying securities appreciate.
The Fund will purchase or write options on securities of the types in which it
is permitted to invest in privately negotiated (i.e., over-the-counter)
transactions only with investment dealers and other financial institutions
(such as commercial banks or savings and loan institutions) deemed creditworthy
by Alliance. Alliance has adopted procedures for monitoring the
creditworthiness of such entities. Options purchased or written by the Fund in
negotiated transactions are illiquid and it may not be possible for the Fund to
effect a closing transaction at an advantageous time.
Options on Securities Indices. An option on a securities index is similar to
an option on a security except that, rather than the right to take or make
delivery of a security at a specified price, an option on a securities index
gives the holder the right to receive, upon exercise of the option, an amount
of cash if the closing level of the chosen index is greater than (in the case
of a call) or less than (in the case of a put) the exercise price of the option.
Options on Currencies. As in the case of other kinds of options, the writing
of an option on a currency constitutes only a partial hedge, up to the amount
of the premium received, and the Fund could be required to purchase or sell
currencies at disadvantageous exchange rates, thereby incurring losses. The
purchase of an option on a currency may constitute an effective hedge against
fluctuations in exchange rates although, in the event of rate movements adverse
to the Fund's position, the Fund may forfeit the entire amount of the premium
plus related transaction costs.
Futures Contracts and Options on Futures Contracts. A "sale" of a futures
contract means the acquisition of a contractual obligation to deliver the
securities or currency or other commodity called for by the contract at a
specified price on a specified date. A "purchase" of a futures contract means
the incurring of an obligation to acquire the securities or currency or other
commodity called for by the contract at a specified price on a specified date.
The purchaser of a futures contract on an index agrees to take or make delivery
of an amount of cash equal to the difference between a specified dollar
multiple of the value of the index on the expiration date of the contract
("current contract value") and the price at which the contract was originally
struck. No physical delivery of the securities underlying the index is made.
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<PAGE>
Options on Futures contracts are options that, upon exercise, call for the
delivery of futures contracts (or cash payments based on the value of futures
contracts). Options on futures contracts written or purchased by the Fund will
be traded on exchanges worldwide or over-the-counter. These investment
techniques will be used only to hedge against anticipated future changes in
market conditions and interest or exchange rates which otherwise might either
adversely affect the value of the Fund's portfolio securities or adversely
affect the prices of securities which the Fund intends to purchase at a later
date.
The Fund will not enter into any futures contracts or options on futures
contracts if immediately thereafter the market values of the outstanding
futures contracts of the Fund and the currencies and futures contracts subject
to outstanding options written by the Fund would exceed [___]% of its total
assets.
Repurchase Agreements. A repurchase agreement arises when a buyer purchases a
security and simultaneously agrees to resell it to the vendor at an agreed-upon
future date, normally a day or a few days later. The resale price is greater
than the purchase price, reflecting an agreed-upon interest rate for the period
the buyer's money is invested in the security. Such agreements permit 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 prevented from,
selling the collateral for its benefit. Alliance monitors the creditworthiness
of the vendors with which the Fund enters into repurchase agreements.
Rights and Warrants. The Fund will invest in rights or warrants only if the
underlying equity securities themselves are deemed appropriate by Alliance for
inclusion in the Fund's portfolio. Rights and warrants entitle the holder to
buy equity securities at a specific price for a specific period of time. Rights
are similar to warrants except that they have a substantially shorter duration.
Rights and warrants may be considered more speculative than certain other types
of investments in that they do not entitle a holder to dividends or voting
rights with respect to the underlying securities nor do they represent any
rights in the assets of the issuing company. The value of a right or warrant
does not necessarily change with the value of the underlying security, although
the value of a right or warrant may decline because of a decrease in the value
of the underlying security, the passage of time or a change in perception as to
the potential of the underlying security, or any combination of these factors.
If the market price of the underlying security is below the exercise price of
the warrant on the expiration date, the warrant will expire worthless.
Moreover, a right or warrant ceases to have value if it is not exercised prior
to the expiration date. The Fund may invest up to 10% of its total assets in
rights and warrants.
Short Sales. The Fund may utilize short selling in order to attempt both to
protect its portfolio against the effects of potential downtrends in the
securities markets and as a means of enhancing its overall performance. A short
sale is a transaction in which the Fund sells a security it does not own but
has borrowed in anticipation that the market price of that security will
decline. The Fund may be required to pay a fee to borrow the security and to
pay over to the lender any payments received on the security.
If the price of the security sold short increases between the time of the short
sale and the time the Fund replaces the borrowed security, the Fund will incur
a loss; conversely, if the price declines, the Fund will realize a capital
gain. Although the Fund's gain is limited by the price at which it sold the
security short, its potential loss is unlimited. The Fund may engage in short
sales for up to 33% of its total assets.
Stock Index Futures. The Fund may purchase and sell stock index futures as a
hedge against movements in the equity markets. There are several risks in
connection with the use of stock index futures by the Fund as a hedging device.
One risk arises because of the imperfect correlation between movements in the
price of a stock index future and movements in the price of the securities
which are the subject of the hedge. The price of a stock index future may move
more than or less than the price of the securities being hedged. If the price
of a stock index future moves less than the price of the securities which are
the subject of the hedge, the hedge will not be fully effective but, if the
price of the securities being hedged has moved in an unfavorable direction, the
Fund would be in a better position than if it had not hedged at all. If the
price of the securities being hedged has moved in a favorable direction, this
advantage will be partially offset by the loss on the index futures contract.
If the price of the index future moves more than the price of the stock, the
Fund will experience either a loss or gain on the futures contract which will
not be completely offset by movements in the price of the securities which are
subject to the hedge.
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<PAGE>
To compensate for the imperfect correlation of movements in the price of
securities being hedged and movements in the price of a stock index future, the
Fund may buy or sell stock index futures contracts in greater dollar amount
than the dollar amount of securities being hedged if the volatility over a
particular time period of the prices of such securities has been greater than
the volatility over such time period of the stock index, or if otherwise deemed
to be appropriate by Alliance. Conversely, the Fund may buy or sell fewer stock
index futures contracts if the volatility over a particular time period of the
prices of the securities being hedged is less than the volatility over such
time period of the stock index, or it is otherwise deemed to be appropriate by
Alliance. It is also possible that, where the Fund has sold futures to hedge
its portfolio against a decline in the market, the market may advance and the
value of securities held in the Fund may decline. If this occurred, the Fund
would lose money on the futures and also experience a decline in value in its
portfolio securities. However, over time the value of a diversified portfolio
should tend to move in the same direction as the market indices upon which the
index futures are based, although there may be deviations arising from
differences between the composition of the Fund and the stock comprising the
index.
Where a stock index futures contract is purchased to hedge against a possible
increase in the price of stock before the Fund is able to invest its cash (or
cash equivalents) in stocks (or options) in an orderly fashion, it is possible
that the market may decline instead. If the Fund then concludes not to invest
in stock or options at that time because of concern as to possible further
market decline or for other reasons, the Fund will realize a loss on the
futures contract that is not offset by a reduction in the price of securities
purchased.
In addition to the possibility that there may be an imperfect correlation, or
no correlation at all, between movements in stock index futures and the portion
of the portfolio being hedged, the price of stock index futures may not
correlate perfectly with movement in the stock index due to certain market
distortions. Rather than meeting additional margin deposit requirements,
investors may close futures contracts through offsetting transactions which
could distort the normal relationship between the index and futures markets.
From the point of view of speculators, the deposit requirements in the futures
market are less onerous than margin requirements in the securities market.
Therefore, increased participation by speculators in the futures market may
also cause temporary price distortions. Due to the possibility of price
distortion in the futures market, and because of the imperfect correlation
between the movements in a stock index and movements in the price of stock
index futures, a correct forecast of general market trends by Alliance may
still not result in a successful hedging transaction over a short time frame.
Positions in stock index futures may be closed out only on an exchange or board
of trade which provides a secondary market for such futures. Although the Fund
intends to purchase or sell futures only on exchanges or boards of trade where
there appear to be active secondary markets, there is no assurance that a
liquid secondary market on any exchange or board of trade will exist for any
particular futures contract or at any particular time. In such event, it may
not be possible to close a futures investment position, and in the event of
adverse price movements, the Fund would continue to be required to make daily
cash payments of variation margin. However, in the event that futures contracts
have been used to hedge portfolio securities, such securities will not be sold
until the futures contract can be terminated. In such circumstances, an
increase in the price of the securities, if any, may partially or completely
offset losses on the futures contract. As described above, however, there is no
guarantee that the price of the securities will in fact correlate with the
price movements in the futures contract and thus provide an offset on a futures
contract.
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. Unlike
many exchange-traded futures contracts and options on futures contracts, there
are no daily price fluctuation limits for certain options on currencies and
forward contracts, and adverse market movements could therefore continue to an
unlimited extent over a period of time. In addition, the correlation between
movements in the prices of such instruments and movements in the prices of the
securities and currencies hedged or used for cover will not be perfect and
could produce unanticipated losses.
The Fund's ability to dispose of its positions in futures contracts, options
and forward contracts depends on the availability of liquid markets in such
instruments. Markets in options and futures with respect to a number of types
of securities and currencies are relatively new and still developing, and there
is no public market for forward contracts. It is impossible to predict the
amount of trading interest that may exist in various types of futures
contracts, options, and forward contracts. If a
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<PAGE>
secondary market does not exist for an option purchased or written by the Fund,
it might not be possible to effect a closing transaction in the option (i.e.,
dispose of the option) with the result that (i) an option purchased by the Fund
would have to be exercised in order for the Fund to realize any profit and (ii)
the Fund may not be able to sell portfolio securities or currencies covering an
option written by the Fund until the option expires or it delivers the
underlying securities, currency or futures contract upon exercise. Therefore,
no assurance can be given that the Fund will be able to utilize these
instruments effectively. In addition, the Fund's ability to engage in options
and futures transactions may be limited by tax considerations and the use of
certain hedging techniques may adversely impact the characterization of income
to the Fund for U.S. federal income tax purposes.
ADDITIONAL RISK CONSIDERATIONS
Investment in the Fund involves the special risk considerations described
below. These risks may be heightened when investing in emerging markets.
Currency Considerations. The Fund may receive a portion of its revenues in
currencies other than the U.S. Dollar. Therefore, the dollar equivalent of its
net assets, distributions, and income will be adversely affected by reductions
in the value of certain currencies relative to the U.S. Dollar. If the value of
the currencies in which the Fund receives its income falls relative to the U.S.
Dollar between receipt of the income and the making of Fund distributions, the
Fund may be required to liquidate securities in order to make distributions if
it has insufficient cash in U.S. Dollars to meet distribution requirements that
the Fund must satisfy to qualify as a regulated investment company for federal
income tax purposes. Similarly, if an exchange rate declines between the time
the Fund incurs expenses in U.S. Dollars and the time cash expenses are paid,
the amount of the currency required to be converted into U.S. Dollars in order
to pay expenses in U.S. Dollars could be greater than the equivalent amount of
such expenses in the currency at the time they were incurred. In light of these
risks, the Fund may engage in currency hedging transactions, as described
above, which involve certain special risks.
Securities Issued by Non-U.S. Companies. The securities markets of many
countries outside of the United States 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 will include securities issued by non-U.S.
companies, 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 countries require governmental approval prior to investments by foreign
persons or limit investment by foreign persons to only a specified percentage
of an issuer's outstanding securities or a specific class of securities that
may have less advantageous terms (including price) than securities of the
company available for purchase by nationals. These restrictions or controls
may at times limit or preclude investment in certain securities and may
increase the costs and expenses of 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. If a deterioration
occurs in a 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, 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 countries are generally higher than in the United States.
Issuers of securities in jurisdictions other than the United States 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 countries may
differ, in some cases significantly, from U.S. standards in important respects
and less information may be available to investors in securities issued by
non-U.S. companies 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 countries other than the United States 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
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<PAGE>
taxation, currency blockage, political changes, government regulation,
political or social instability, or diplomatic developments could affect
adversely the economy of a 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 countries other
than the United States governing business organizations, bankruptcy and
insolvency may provide less protection to security holders such as the Fund than
that provided by U.S. laws.
Extreme Governmental Action; Less Protective Laws. In contrast to investing in
the United States, investment in other countries may involve in certain
situations greater risk of nationalization, expropriation, confiscatory
taxation, currency blockage or other extreme governmental action that could
adversely impact the Fund's investments. In the event of certain such actions,
the Fund could lose its entire investment in the country involved. In addition,
laws in various countries other than the United States governing, among other
subjects, business organization and practices, securities and securities
trading, bankruptcy and insolvency may provide less protection to investors
such as the Fund than provided under United States laws.
Non-U.S. Taxes. The Fund's investment in securities issued by non-U.S.
companies may be subject to taxes withheld at the source on dividend or
interest payments.
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MANAGEMENT OF THE FUND
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INVESTMENT ADVISER AND FUND MANAGER
The Fund's Adviser is Alliance Capital Management L.P., 1345 Avenue of the
Americas, New York, New York 10105. Alliance is a leading international
investment adviser supervising client accounts with assets as of [________],
2001 totaling more than $[___] billion (of which more than $[___] billion
represented the assets of investment companies). As of [_____], 2001, Alliance
managed retirement assets for many of the largest public and private employee
benefit plans (including [__] of the nation's FORTUNE 100 companies), for
public employee retirement funds in [___] states, for investment companies, and
for foundations, endowments, banks and insurance companies worldwide. The [___]
registered investment companies managed by Alliance, comprising [___] separate
portfolios, currently have more than [___] million shareholder accounts.
The persons primarily responsible for the day-to-day management of the Fund are
[_____] and [_____]. [Biography to be inserted here.]
Alliance provides investment advisory services and order placement facilities
for the Fund. For these advisory services, the Fund pays Alliance a fee at an
annualized rate of [___]% of the Fund's average daily net assets. The fee will
be accrued daily and paid monthly.
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PURCHASE AND SALE OF SHARES
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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. The minimum
initial investment amount is $10,000, except that the minimum initial
investment amount applicable to individual retirement accounts (IRAs) is $2,000.
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<PAGE>
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 particular, 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.
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 Exchange is open, either directly or through your financial intermediary.
Your sales price will be the next-determined NAV, less any applicable CDSC,
after the Fund receives your sales request in proper form. Normally, proceeds
will be sent to you within 7 days. If you recently purchased your shares by
check or electronic funds transfer, your redemption payment may be delayed
until the Fund is reasonably satisfied that the check or electronic funds
transfer has been collected (which may take up to 15 days).
o 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.
o Selling Shares Directly to the Fund
By Mail:
--Send a signed letter of instruction or stock power, along with certificates,
to:
Alliance Fund Services, Inc.
P.O. Box 1520
Secaucus, N.J. 07906-1520
800-221-5672
--For your protection, a bank, a member firm of a national stock exchange, or
other eligible guarantor institution, must guarantee signatures. Stock power
forms are available from your financial intermediary, AFS, and many commercial
banks. Additional documentation is required for the sale of shares by
corporations, intermediaries, fiduciaries, and surviving joint owners. If you
have any questions about these procedures, contact AFS.
By Telephone:
--You may redeem your shares for which no stock certificates have been issued
by telephone request. Call AFS at 800-221-5672 with instructions on how you
wish to receive your sale proceeds.
--A telephone redemption request must be received by 4:00 p.m., Eastern time,
for you to receive that day's NAV, less any applicable CDSC.
--If you have selected electronic funds transfer in your Shareholder
Application, the redemption proceeds will be sent directly to your bank.
Otherwise, the proceeds will be mailed to you.
--Redemption requests by electronic funds transfer may not exceed $100,000 per
day and redemption requests by check cannot exceed $50,000 per day.
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<PAGE>
--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.
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DIVIDENDS, DISTRIBUTIONS AND TAXES
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Dividends and Distributions
The income dividend and capital gains distributions, 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 NAV as of the
close of business on the day following the declaration date of the dividend or
distribution equal to the cash amount of the dividend or distribution. You may
make an election to receive dividends and distributions in cash or in shares at
the time you purchase shares. Your election can be changed at any time prior to
a record date for a dividend. There is no sales or other charge on the
reinvestment of dividends or capital gains distributions. Cash dividends may be
paid in check, or at your election, electronically via the ACH network.
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.
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 distributions of long-term capital gains generally will be taxable to you
as long-term 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.
Investment income received by the Fund from sources within countries outside of
the United States may be subject to non-U.S. income taxes withheld at the
source. To the extent that the Fund is liable for non-U.S. 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 non-U.S. income taxes paid (or to permit shareholders to claim a
deduction for such taxes), but there can be no assurance that the Fund will be
able to do so. Furthermore, a shareholder's ability to claim a tax credit or
deduction for non-U.S. 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 credit or deduction for all or a portion of 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.
If you buy shares just before the Fund deducts a distribution from its NAV, you
will pay the full price for the shares and then receive a portion of the price
back as a taxable distribution.
The sale or exchange of Fund shares is a taxable transaction for federal income
tax purposes.
Each year shortly after December 31, the 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.
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DISTRIBUTION ARRANGEMENTS
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Share Classes. The Fund offers three classes of shares.
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<PAGE>
Class A Shares--Initial Sales Charge Alternative
You can purchase Class A shares at NAV plus an initial sales charge, as follows:
Initial Sales Charge
Commission to
As % of As % of Dealer/Agent
Net Amount Offering as % of
Amount Purchased Invested Price Offering Price
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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 of the number of years you hold the shares.
The CDSC amounts are:
Years Since Purchase CDSC
-------------------- ----
First 4.0%
Second 3.0%
Third 2.0%
Fourth 1.0%
Fifth None
If you exchange your shares for the Class B shares of another Alliance Mutual
Fund, the CDSC also will apply to those Class B shares. The CDSC period begins
with the date of your original purchase, not the date of exchange for the other
Class B shares.
The Fund's Class B shares purchased for cash automatically convert to Class A
shares eight years after the end of the month of your purchase. If you purchase
shares by exchange for the Class B shares of another Alliance Mutual Fund, the
conversion period runs from the date of your original purchase.
Class C Shares--Asset-Based Sales Charge Alternative
You can purchase shares at NAV without an initial sales charge. 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 Charges 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
17
<PAGE>
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 might consider purchasing Class A shares. If you are making a
smaller investment, you might consider purchasing Class B shares because 100%
of your purchase is invested immediately. If you are unsure of the length of
your investment, you might consider Class C shares because there is no initial
sales charge and no CDSC as long as the shares are held for one year or more.
Dealers and agents may receive differing compensation for selling Class A,
Class B, or Class C shares. There is no size limit on purchases of Class A
shares. The maximum purchase of Class B shares is $250,000. The maximum
purchase of Class C shares is $1,000,000.
You should consult your financial agent to assist in choosing a Class of Fund
shares.
Application of the CDSC. The CDSC is applied to the lesser of the original cost
of shares being redeemed or NAV at the time of redemption (or, as to Fund
shares acquired through an exchange, the cost of the Alliance Mutual Fund
shares originally purchased for cash). Shares obtained from dividend or
distribution reinvestment are not subject to the CDSC. The Fund may waive the
CDSC on redemptions of shares following the death or disability of a
shareholder, to meet the requirements of certain qualified retirement plans, or
under a monthly, bimonthly, or quarterly systematic withdrawal plan. See the
Fund's SAI for further information about CDSC waivers.
Other. A transaction, service, administrative or other similar fee may be
charged by your broker-dealer, agent, financial intermediary, or other
financial representative with respect to the purchase, sale, or exchange of
Class A, Class B, or Class C shares made through your financial representative.
The financial intermediaries also may impose requirements on the purchase,
sale, or exchange of shares that are different from, or in addition to, those
imposed by a Fund, including requirements as to the minimum initial and
subsequent investment amounts.
-------------------------------------------------------------------------------
GENERAL INFORMATION
-------------------------------------------------------------------------------
Under unusual circumstances, 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.
18
<PAGE>
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:
o 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:
o Call the Commission at 1-202-942-8090 for information on the operation of
the Public Reference Room.
o Reports and other information about the Fund are available on the EDGAR
Database on the Commission's Internet site at http://www.sec.gov.
o Copies of the information may be obtained, after paying a fee, by electronic
request at [email protected], or by writing the Commission's Public Reference
Section, Washington, DC 20549-0102.
You also may find more information about Alliance and the Fund on the Internet
at: www.Alliancecapital.com.
SEC File No. [_____________________]
19
<PAGE>
Advisor Class Prospectus
AllianceBernstein Global Value Fund
The AllianceBernstein Global Value Fund is an open-end management investment
company structured as a series fund that invests primarily in a diversified
portfolio of equity securities issued by U.S. and non-U.S. companies.
Prospectus and Application
[____________], 2001
The Securities and Exchange Commission has not approved or disapproved these
securities or passed upon the adequacy of this Prospectus. Any representation
to the contrary is a criminal offense.
AllianceCapital T
Investment Products Offered
* Are Not FDIC Insured
* May Lose Value
* Are Not Bank Guaranteed
<PAGE>
TABLE OF CONTENTS
_______________________________________________________________________________
Page
RISK/RETURN SUMMARY......................................................
FEES AND EXPENSES OF THE FUND............................................
GLOSSARY.................................................................
DESCRIPTION OF THE FUND..................................................
Investment Objective and Principal Policies and Risks....................
Description of Additional Investment Practices...........................
Additional Risk Considerations...........................................
MANAGEMENT OF THE FUND...................................................
PURCHASE AND SALE OF SHARES..............................................
How The Fund Values Its Shares...........................................
How To Buy Shares........................................................
Initial Offering.........................................................
How To Exchange Shares...................................................
How To Sell Shares.......................................................
DIVIDENDS, DISTRIBUTIONS AND TAXES.......................................
DISTRIBUTION ARRANGEMENTS................................................
GENERAL INFORMATION......................................................
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 the
AllianceBernstein Global Value Fund. This Risk/Return 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:
* As with all investments, 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.
2
<PAGE>
Global Value Fund
_______________________________________________________________________________
OBJECTIVE:
The Fund's investment objective is long-term growth of capital.
PRINCIPAL INVESTMENT STRATEGIES:
The Fund will invest primarily in a diversified portfolio of equity securities
from around the world, including the U.S. The Fund's investment policies
emphasize investment in companies that are determined by Alliance to be
undervalued, using the fundamental value approach of Alliance's Bernstein unit
("Bernstein"). In selecting securities for the Fund's portfolio, Bernstein
uses its fundamental research to identify companies whose long term earnings
power is not reflected in the current market price of their securities.
In order to hedge a portion of currency risk, the Fund may from time to time
invest in currency futures contracts or currency forward contracts.
PRINCIPAL RISKS:
Among the principal risks of investing in the Fund are market risk, non-U.S.
investment risk and currency risk. Market risk is the risk of losses from
adverse changes in the stock market. Investments in countries other than the
United States may have more risk because they tend to be more volatile than the
U.S. stock market. To the extent that the Fund invests a substantial amount of
its assets in a particular country, an investment in the Fund has the risk that
market changes or other events affecting that country may have a more
significant effect on the Fund's net asset value. Because the Fund may invest
in emerging markets and in developing countries, an investment also has the
risk that market changes or other factors affecting emerging markets and
developing countries, including political instability and unpredictable
economic conditions, may have a significant effect on the Fund's net asset
value. Depending on the Fund's investments at a particular time, the Fund may
also have industry/sector risk. The Fund may at times use certain types of
investment derivatives such as options, futures, forwards and swaps. The use
of these techniques involves special risks that are discussed in this
Prospectus.
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.
3
<PAGE>
-------------------------------------------------------------------------------
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
--------------------
Advisor Class Shares
--------------------
Management fees [____]%
Distribution (12b-1) fees [____]%
Other expenses [____]%
_______
Total Fund
operating expenses (a) [____]%
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
--------------------
Advisor Class Shares
--------------------
After 1 Yr. $[______]
After 3 Yrs. $[______]
(a) These examples assume that Alliance's agreement to waive its management
fees and/or reimburse Fund expenses is not extended beyond its initial
period.
-------------------------------------------------------------------------------
GLOSSARY
-------------------------------------------------------------------------------
This Prospectus uses the following terms.
TYPES OF SECURITIES
Convertible securities are fixed-income securities that are convertible into
common stock.
Debt securities are bonds, debentures, notes, bills, loans, other direct debt
instruments, and other fixed, floating and variable rate debt obligations, but
do not include convertible securities.
Depositary receipts include American Depositary Receipts ("ADRs"), Global
Depositary Receipts ("GDRs") and other types of depositary receipts.
4
<PAGE>
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.
Lower-rated securities are fixed-income securities rated Ba or below by Moody's
or BB or below by S&P, Duff & Phelps or Fitch, or determined by Alliance to be
of equivalent quality, and are commonly referred to as "junk bonds."
Non-U.S. Company is an entity that (i) is organized under the laws of a country
other than the United States, (ii) has its principal place of business in a
country other than the United States, and (iii) issues equity or debt
securities that are traded principally in a country other than the United
States.
Prime commercial paper is commercial paper rated Prime 1 by Moody's or A-1 or
higher by S&P or, if not rated, issued by companies that have an outstanding
debt issue rated Aa or higher by Moody's or AA or higher by S&P.
Qualifying bank deposits are certificates of deposit, bankers' acceptances and
interest-bearing savings deposits of banks that have total assets of more than
$1 billion and are members of the Federal Deposit Insurance Corporation.
Rule 144A securities are securities that may be resold pursuant to Rule 144A of
the Securities Act.
U.S. Government securities are securities issued or guaranteed by the United
States Government, its agencies or instrumentalities.
RATING AGENCIES
Duff & Phelps is Duff & Phelps Credit Rating Co.
Fitch is Fitch IBCA, Inc.
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 investment policies and risks. Of
course, there can be no assurance that the Fund will achieve its investment
objective.
Please note that:
* Additional discussion of the Fund's investments, including the risks of the
investments, can be found in the discussion under Description of Additional
Investment Practices following this section.
* The description of the principal risks for the Fund includes risks described
in the RISK/RETURN SUMMARY above. Additional information about the risks of
investing in the Fund can be found in the discussion 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.
5
<PAGE>
* 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.
INVESTMENT OBJECTIVE AND PRINCIPAL POLICIES AND RISKS
INVESTMENT OBJECTIVE
The Fund's investment objective is long-term growth of capital.
PRINCIPAL POLICIES
The Fund will invest primarily in a diversified portfolio of equity securities
of 150 to 250 established companies selected from more than 40 industries and
from more than 40 developed and emerging market countries, including the United
States. Countries are generally weighted in proportion to the size of their
stock markets, although the Fund may over- or under-weight a country depending
on an assessment of the relative attractiveness of investments in that country
by Alliance's Bernstein unit ("Bernstein"). The Fund normally invests in
companies in at least three countries, generally including the United States.
Other such countries currently include the developed nations in Europe and the
Far East, Canada, Australia, and emerging market countries worldwide. The
Fund's investment policies emphasize investment in companies that are
determined by Bernstein to be undervalued, using a fundamental value approach.
Investment decisions are the result of the multi-step process described below.
Bernstein's fundamental value approach to equity investing generally defines
value by reference to the relationship between a security's current price and
its intrinsic economic value as measured by long-term earnings prospects. In
each market, this approach seeks to identify, in the first instance, a universe
of securities that are considered to be undervalued because they are
attractively priced relative to their future earnings power. Accordingly,
forecasting corporate earnings and dividend-paying capability is the heart of
the fundamental value approach.
Bernstein's fundamental analysis depends heavily upon its large internal
research staff. The research staff begins with a global research universe of
approximately 5,000 companies worldwide. Teams within the research staff cover
a given industry worldwide, to better understand each company's competitive
position in a global context.
Bernstein's staff of approximately 100 company and industry analysts prepares
its own earnings estimates and financial models for each company analyzed.
Bernstein identifies and quantifies the critical variables that control a
business's performance and analyzes the results in order to forecast each
company's long-term prospects and expected returns. As one of the largest
multi-national investment firms, Alliance and its Bernstein unit have global
access to considerable information concerning all of the companies followed, an
in-depth understanding of the products, services, markets and competition of
these companies and a good knowledge of the management of most of the companies
in its research universe. A company's financial performance is typically
projected over a full economic cycle, including a trough and a peak, within the
context of forecasts for real economic growth, inflation and interest rate
changes. As a result, forecasts of near term economic events are generally not
of major consequence.
A group of senior investment professionals, including the Fund's portfolio
managers, carefully reviews the research process to be sure that the analysts
have appropriately considered key issues facing each company, that forecasts of
a company's future are compatible with its history, and that all forecasts use
consistent analytic frameworks and economic assumptions.
Once Bernstein has applied its fundamental analysis to determine the intrinsic
economic values of each of the companies in its research universe, each company
is then ranked in the order of disparity between its intrinsic economic value
and its stock price, with companies having the greatest disparities receiving
the highest rankings (i.e., being considered the most undervalued). A similar
relative evaluation is performed for the markets in each country.
The Fund does not simply purchase the top-ranked securities. Rather, Bernstein
considers aggregate portfolio characteristics when deciding how much of each
security to purchase for the Fund. Bernstein's team of approximately 40
quantitative analysts build valuation and risk models to ensure that the Fund's
portfolio is constructed to obtain an effective balance of risk and return. By
evaluating overall regional, country and currency exposures, sector
concentration, degree of undervaluation and other subtle similarities among
investments, Bernstein seeks to minimize overall Fund volatility by favoring
those top ranked securities that also tend to diversify the Fund's risk.
6
<PAGE>
A disparity between a company's current stock price and the assessment of
intrinsic value can arise, at least in part, as a result of adverse, short-term
market reactions to recent events or trends. In order to reduce the risk that
an undervalued security will be purchased before such an adverse market
reaction has run its course, Bernstein also monitors analysts'
earnings-estimate revisions and relative return trends (also called "price
momentum") so as to better time new purchases and sales of securities.
Currencies can have a dramatic impact on equity returns, significantly adding
to returns in some years and greatly diminishing them in others. Investment
decisions concerning currencies are made independently of equity investments
and may be used to hedge the currency exposure resulting from securities
positions.
A security generally will be sold when it no longer meets appropriate valuation
criteria. Sale of a stock that has reached its target may be delayed, however,
when earnings expectations and/or price momentum is favorable.
The Fund may also
* Invest in depositary receipts, instruments of supranational entities
denominated in the currency of any country, securities of multinational
companies and "semi-governmental securities";
* Invest up to 20% of its total assets in convertible securities;
* Write covered put and call options and purchase put and call options on
securities issued by U.S. and non-U.S. companies, security exchanges and over
the counter, including options on market indices and currencies;
* Invest up to 15% of its net assets in illiquid securities;
* Invest up to 10% of its total assets in rights and warrants;
* Enter into forward commitments, futures contracts and options on futures
contracts with respect to securities, indices and currencies;
* Enter into contracts for the purchase and sale for the future delivery of
contracts based on financial indices;
* Enter into currency swaps and forward currency exchange contracts for hedging
purposes;
* Make secured loans of portfolio securities of up to 30% of its total assets;
and
* Enter into repurchase agreements.
PRINCIPAL 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 markets fluctuate and that prices overall will decline
over short- or long-term periods.
* Sector Risk This is the risk of investments in a particular industry sector.
If the Fund invests a substantial amount of its assets in companies engaged in
a particular industry sector, market or economic factors affecting that
industry could have a major effect on the value of the Fund's investments.
* Capitalization Risk This is the risk of investments in small capitalization
companies. Investments in small- and mid-cap companies may be more volatile
than investments in large-cap companies. Investments in small-cap companies
tend to be more volatile than investments in mid- or large-cap companies. The
Fund's investments in smaller capitalization companies may have additional
risks because these companies often have limited product lines, markets or
financial resources.
* Derivative and Leverage Risk The Fund may make substantial use of derivatives
and employ specialized trading techniques such as short sales, options,
futures, forwards, and other leveraging techniques to increase its exposure to
certain selected securities. Alliance employs these techniques speculatively to
enhance returns and not merely as hedging tools. These techniques are riskier
than many investment strategies and will result in greater volatility for the
Fund, particularly in periods of market declines.
* Non-U.S. Investment Risk This is the risk of investments in issuers located
in countries other than the United States. Investments in securities issued by
non-U.S. companies 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 countries
7
<PAGE>
are relatively small, with a limited number of companies representing a small
number of industries. Additionally, non-U.S. issuers are usually not subject
to the same degree of regulation as U.S. issuers. Reporting, accounting and
auditing standards of 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 country other than the United
States. In the event of nationalization, expropriation or other confiscation,
the Fund could lose its entire investment.
* Currency Risk This is the risk that fluctuations in the exchange rates
between the U.S. Dollar and other currencies may negatively affect the value of
the Fund's investments.
* 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[, including its fundamental value approach,] in
making investment decisions for the Fund, but there is no guarantee that its
techniques will produce the intended result.
Portfolio Turnover. The Fund's portfolio turnover is not expected to exceed
100%.
Temporary Defensive Position. For temporary defensive purposes, the Fund may
reduce its position in equity securities and increase without limit its
position in short-term, liquid, high-grade debt securities, which may include
U.S. Government securities, bank deposits, money market instruments, short-term
debt securities, including notes and bonds, or hold its assets in cash. While
the Fund is investing for temporary defensive purposes, it may not meet its
investment objective.
DESCRIPTION OF ADDITIONAL INVESTMENT PRACTICES
This section describes the investment practices of the Fund and risks
associated with these practices.
Convertible Securities. Prior to conversion, convertible securities have the
same general characteristics as nonconvertible debt securities, which generally
provide a stable stream of income with generally higher yields than those of
equity securities of the same or similar issuers. The price of a convertible
security will normally vary with changes in the price of the underlying equity
security, although the higher yield tends to make the price of the convertible
security less volatile than that of the underlying equity security. As with
debt securities, the market values of convertible securities tend to decrease
as interest rates rise and increase as interest rates fall. While convertible
securities generally offer lower interest yields than non-convertible debt
securities of similar quality, they offer investors the potential to benefit
from increases in the market prices of the underlying common stocks.
Convertible securities that are rated Baa or lower by Moody's and BBB or lower
by S&P or, if unrated, determined by Alliance to be of equivalent quality, may
share some or all of the risks of non-convertible debt securities with those
ratings. The Fund may invest up to 20% of its total assets in convertible
securities.
Currency Swaps. Currency swaps involve the individually negotiated exchange by
the Fund with another party of a series of payments in specified currencies. A
currency swap may involve the delivery at the end of the exchange period of a
substantial amount of one designated currency in exchange for the other
designated currency. Therefore, the entire principal value of a currency swap
is subject to the risk that the swap counterparty will default on its
contractual delivery obligations. The Fund will enter into currency swaps for
hedging purposes only. The Fund will not enter into any currency swap unless
the credit quality of the unsecured senior debt or the claims-paying ability of
the counterparty is rated in the highest rating category of at least one
nationally recognized rating organization at the time of entering into the
transaction. If there is a default by the other party to such a transaction,
the Fund will have contractual remedies under the transaction agreements.
Depositary Receipts. Depositary receipts may not necessarily be denominated in
the same currency as the underlying securities into which they may be
converted. In addition, the issuers of the stock of unsponsored depositary
receipts are not obligated to disclose material information in the United
States, and therefore, there may not be a correlation between such information
and the market value of the depositary receipts. ADRs are depositary receipts
typically issued by a U.S. bank or trust company that evidence ownership of
underlying securities issued by a non-U.S. corporation. GDRs and other types of
depositary receipts are typically issued by non-U.S. banks or trust companies
and evidence ownership of underlying securities issued by either a U.S. or a
non-U.S. company. Generally, depositary receipts in registered form are
designed for use in the U.S. securities markets, and depositary receipts in
bearer form are designed for use in securities markets outside of the United
States.
Forward Currency Exchange Contracts. The Fund may purchase or sell forward
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.
8
<PAGE>
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 currency in
order to "lock in" the U.S. Dollar price of the security ("transaction hedge").
The Fund will not engage in transaction hedges with respect to the currency of
a particular country to an extent greater than the aggregate amount of the
Fund's transactions in that currency. When the Fund believes that a 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 currency approximating the
value of some or all of the Fund's portfolio securities denominated in such
currency, or when the Fund believes that the U.S. Dollar may suffer a
substantial decline against another currency, it may enter into a forward
purchase contract to buy that 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 currency for a
fixed U.S. dollar amount where the Fund believes that the U.S. Dollar value of
the currency to be sold pursuant to the forward contract will fall whenever
there is a decline in the U.S. Dollar value of the currency in which portfolio
securities of the Fund are denominated ("cross-hedge"). Unanticipated changes
in currency prices may result in poorer overall performance for the Fund than
if it had not entered into such forward contracts. Hedging against a decline
in the value of a currency does not eliminate fluctuations in the prices of
portfolio securities or prevent losses if the prices of such securities
decline. Such transactions also preclude the opportunity for gain if the value
of the hedged currency should rise. Moreover, it may not be possible for 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
devaluation level it anticipates.
Illiquid Securities. The Fund will limit its investment in illiquid securities
to no more than 15% 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 will not be treated as
"illiquid" for purposes of this limit on investments if they meet certain
liquidity guidelines established by the Fund or Alliance.
The Fund may not be able to readily sell securities for which there is no ready
market. Such securities are unlike securities that are traded in the open
market and can be expected to be sold immediately if the market is adequate.
The sale price of illiquid securities may be lower or higher than Alliance's
most recent estimate of their fair value. Generally, less public information is
available about the issuers of such securities than about companies whose
securities are traded on an exchange. To the extent that these securities are
securities issued by non-U.S. companies, 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 of up to 30% of its total assets 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 risk in lending
portfolio securities, as with other extensions of credit, consists of the
possible loss of rights in the collateral should the borrower fail financially.
In determining whether to lend securities to a particular borrower, Alliance
will consider all relevant facts and circumstances, including the
creditworthiness of the borrower. While securities are on loan, the borrower
will pay the Fund any income from the securities. The Fund may invest any cash
collateral in portfolio securities and earn additional income, or receive an
agreed-upon amount of income from a borrower who has delivered equivalent
collateral. 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.
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Options on Securities. An option gives the purchaser of the option, upon
payment of a premium, the right to deliver to (in the case of a put) or receive
from (in the case of a call) the writer of the option a specified amount of a
security on or before a fixed date at a predetermined price. A call option
written by the Fund is "covered" if the Fund owns the underlying security, has
an absolute and immediate right to acquire that security upon conversion or
exchange of another security it holds, or holds a call option on the underlying
security with an exercise price equal to or less than that of the call option
it has written. A put option written by the Fund is "covered" if the Fund holds
a put on the underlying securities with an exercise price equal to or greater
than that of the put option it has written.
A call option is for cross-hedging purposes if the Fund does not own the
underlying security and is designed to provide a hedge against a decline in
value in another security which the Fund owns or has the right to acquire. The
Fund may write call options for cross-hedging purposes. The Fund would write a
call option for cross-hedging purposes, instead of writing a covered call
option, when the premium to be received from the cross-hedge transaction would
exceed that which would be received from writing a covered call option, while
at the same time achieving the desired hedge.
In purchasing an option, the Fund would be in a position to realize a gain if,
during the option period, the price of the underlying security increased (in
the case of a call) or decreased (in the case of a put) by an amount in excess
of the premium paid; otherwise the Fund would experience a loss equal to the
premium paid for the option.
If an option written by the Fund were exercised, the Fund would be obligated to
purchase (in the case of a put) or sell (in the case of a call) the underlying
security at the exercise price. The risk involved in writing an option is that,
if the option is exercised, the underlying security would then be purchased or
sold by the Fund at a disadvantageous price. Entering into a closing
transaction (i.e., by disposing of the option prior to its exercise) could
reduce these risks. The Fund retains the premium received from writing a put or
call option whether or not the option is exercised. The writing of call options
could result in increases in the Fund's portfolio turnover rate, especially
during periods when market prices of the underlying securities appreciate.
The Fund will purchase or write options on securities of the types in which it
is permitted to invest in privately negotiated (i.e., over-the-counter)
transactions only with investment dealers and other financial institutions
(such as commercial banks or savings and loan institutions) deemed creditworthy
by Alliance. Alliance has adopted procedures for monitoring the
creditworthiness of such entities. Options purchased or written by the Fund in
negotiated transactions are illiquid and it may not be possible for the Fund to
effect a closing transaction at an advantageous time.
Options on Securities Indices. An option on a securities index is similar to
an option on a security except that, rather than the right to take or make
delivery of a security at a specified price, an option on a securities index
gives the holder the right to receive, upon exercise of the option, an amount
of cash if the closing level of the chosen index is greater than (in the case
of a call) or less than (in the case of a put) the exercise price of the option.
Options on Currencies. As in the case of other kinds of options, the writing
of an option on a currency constitutes only a partial hedge, up to the amount
of the premium received, and the Fund could be required to purchase or sell
currencies at disadvantageous exchange rates, thereby incurring losses. The
purchase of an option on a currency may constitute an effective hedge against
fluctuations in exchange rates although, in the event of rate movements adverse
to the Fund's position, the Fund may forfeit the entire amount of the premium
plus related transaction costs.
Futures Contracts and Options on Futures Contracts. A "sale" of a futures
contract means the acquisition of a contractual obligation to deliver the
securities or currency or other commodity called for by the contract at a
specified price on a specified date. A "purchase" of a futures contract means
the incurring of an obligation to acquire the securities or currency or other
commodity called for by the contract at a specified price on a specified date.
The purchaser of a futures contract on an index agrees to take or make delivery
of an amount of cash equal to the difference between a specified dollar
multiple of the value of the index on the expiration date of the contract
("current contract value") and the price at which the contract was originally
struck. No physical delivery of the securities underlying the index is made.
Options on Futures contracts are options that, upon exercise, call for the
delivery of futures contracts (or cash payments based on the value of futures
contracts). Options on futures contracts written or purchased by the Fund will
be traded on exchanges worldwide or over-the-counter. These investment
techniques will be used only to hedge against anticipated future changes in
market conditions and interest or exchange rates which otherwise might either
adversely affect the value of the Fund's portfolio securities or adversely
affect the prices of securities which the Fund intends to purchase at a later
date.
The Fund will not enter into any futures contracts or options on futures
contracts if immediately thereafter the market values of the outstanding
futures contracts of the Fund and the currencies and futures contracts subject
to outstanding options written by the Fund would exceed [___]% of its total
assets.
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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 prevented from,
selling the collateral for its benefit. Alliance monitors the creditworthiness
of the vendors with which the Fund enters into repurchase agreements.
Rights and Warrants. The Fund will invest in rights or warrants only if the
underlying equity securities themselves are deemed appropriate by Alliance for
inclusion in the Fund's portfolio. Rights and warrants entitle the holder to
buy equity securities at a specific price for a specific period of time. Rights
are similar to warrants except that they have a substantially shorter duration.
Rights and warrants may be considered more speculative than certain other types
of investments in that they do not entitle a holder to dividends or voting
rights with respect to the underlying securities nor do they represent any
rights in the assets of the issuing company. The value of a right or warrant
does not necessarily change with the value of the underlying security, although
the value of a right or warrant may decline because of a decrease in the value
of the underlying security, the passage of time or a change in perception as to
the potential of the underlying security, or any combination of these factors.
If the market price of the underlying security is below the exercise price of
the warrant on the expiration date, the warrant will expire worthless.
Moreover, a right or warrant ceases to have value if it is not exercised prior
to the expiration date. The Fund may invest up to 10% of its total assets in
rights and warrants.
Short Sales. The Fund may utilize short selling in order to attempt both to
protect its portfolio against the effects of potential downtrends in the
securities markets and as a means of enhancing its overall performance. A short
sale is a transaction in which the Fund sells a security it does not own but
has borrowed in anticipation that the market price of that security will
decline. The Fund may be required to pay a fee to borrow the security and to
pay over to the lender any payments received on the security.
If the price of the security sold short increases between the time of the short
sale and the time the Fund replaces the borrowed security, the Fund will incur
a loss; conversely, if the price declines, the Fund will realize a capital
gain. Although the Fund's gain is limited by the price at which it sold the
security short, its potential loss is unlimited. The Fund may engage in short
sales for up to 33% of its total assets.
Stock Index Futures. The Fund may purchase and sell stock index futures as a
hedge against movements in the equity markets. There are several risks in
connection with the use of stock index futures by the Fund as a hedging device.
One risk arises because of the imperfect correlation between movements in the
price of a stock index future and movements in the price of the securities
which are the subject of the hedge. The price of a stock index future may move
more than or less than the price of the securities being hedged. If the price
of a stock index future moves less than the price of the securities which are
the subject of the hedge, the hedge will not be fully effective but, if the
price of the securities being hedged has moved in an unfavorable direction, the
Fund would be in a better position than if it had not hedged at all. If the
price of the securities being hedged has moved in a favorable direction, this
advantage will be partially offset by the loss on the index futures contract.
If the price of the index future moves more than the price of the stock, the
Fund will experience either a loss or gain on the futures contract which will
not be completely offset by movements in the price of the securities which are
subject to the hedge.
To compensate for the imperfect correlation of movements in the price of
securities being hedged and movements in the price of a stock index future, the
Fund may buy or sell stock index futures contracts in greater dollar amount
than the dollar amount of securities being hedged if the volatility over a
particular time period of the prices of such securities has been greater than
the volatility over such time period of the stock index, or if otherwise deemed
to be appropriate by Alliance. Conversely, the Fund may buy or sell fewer stock
index futures contracts if the volatility over a particular time period of the
prices of the securities being hedged is less than the volatility over such
time period of the stock index, or it is otherwise deemed to be appropriate by
Alliance. It is also possible that, where the Fund has sold futures to hedge
its portfolio against a decline in the market, the market may advance and the
value of securities held in the Fund may decline. If this occurred, the Fund
would lose money on the futures and also experience a decline in value in its
portfolio securities. However, over time the value of a diversified portfolio
should tend to move in the same direction as the market indices upon which the
index futures are based, although there may be deviations arising from
differences between the composition of the Fund and the stock comprising the
index.
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Where a stock index futures contract is purchased to hedge against a possible
increase in the price of stock before the Fund is able to invest its cash (or
cash equivalents) in stocks (or options) in an orderly fashion, it is possible
that the market may decline instead. If the Fund then concludes not to invest
in stock or options at that time because of concern as to possible further
market decline or for other reasons, the Fund will realize a loss on the
futures contract that is not offset by a reduction in the price of securities
purchased.
In addition to the possibility that there may be an imperfect correlation, or
no correlation at all, between movements in stock index futures and the portion
of the portfolio being hedged, the price of stock index futures may not
correlate perfectly with movement in the stock index due to certain market
distortions. Rather than meeting additional margin deposit requirements,
investors may close futures contracts through offsetting transactions which
could distort the normal relationship between the index and futures markets.
From the point of view of speculators, the deposit requirements in the futures
market are less onerous than margin requirements in the securities market.
Therefore, increased participation by speculators in the futures market may
also cause temporary price distortions. Due to the possibility of price
distortion in the futures market, and because of the imperfect correlation
between the movements in a stock index and movements in the price of stock
index futures, a correct forecast of general market trends by Alliance may
still not result in a successful hedging transaction over a short time frame.
Positions in stock index futures may be closed out only on an exchange or board
of trade which provides a secondary market for such futures. Although the Fund
intends to purchase or sell futures only on exchanges or boards of trade where
there appear to be active secondary markets, there is no assurance that a
liquid secondary market on any exchange or board of trade will exist for any
particular futures contract or at any particular time. In such event, it may
not be possible to close a futures investment position, and in the event of
adverse price movements, the Fund would continue to be required to make daily
cash payments of variation margin. However, in the event that futures contracts
have been used to hedge portfolio securities, such securities will not be sold
until the futures contract can be terminated. In such circumstances, an
increase in the price of the securities, if any, may partially or completely
offset losses on the futures contract. As described above, however, there is no
guarantee that the price of the securities will in fact correlate with the
price movements in the futures contract and thus provide an offset on a futures
contract.
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. Unlike
many exchange-traded futures contracts and options on futures contracts, there
are no daily price fluctuation limits for certain options on currencies and
forward contracts, and adverse market movements could therefore continue to an
unlimited extent over a period of time. In addition, the correlation between
movements in the prices of such instruments and movements in the prices of the
securities and currencies hedged or used for cover will not be perfect and
could produce unanticipated losses.
The Fund's ability to dispose of its positions in futures contracts, options
and forward contracts depends on the availability of liquid markets in such
instruments. Markets in options and futures with respect to a number of types
of securities and currencies are relatively new and still developing, and there
is no public market for forward contracts. It is impossible to predict the
amount of trading interest that may exist in various types of futures
contracts, options, and forward contracts. If a secondary market does not exist
for an option purchased or written by the Fund, it might not be possible to
effect a closing transaction in the option (i.e., dispose of the option) with
the result that (i) an option purchased by the Fund would have to be exercised
in order for the Fund to realize any profit and (ii) the Fund may not be able
to sell portfolio securities or currencies covering an option written by the
Fund until the option expires or it delivers the underlying securities,
currency or futures contract upon exercise. Therefore, no assurance can be
given that the Fund will be able to utilize these instruments effectively. In
addition, the Fund's ability to engage in options and futures transactions may
be limited by tax considerations and the use of certain hedging techniques may
adversely impact the characterization of income to the Fund for U.S. federal
income tax purposes.
ADDITIONAL RISK CONSIDERATIONS
Investment in the Fund involves the special risk considerations described
below. These risks may be heightened when investing in emerging markets.
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<PAGE>
Currency Considerations. The Fund may receive a portion of its revenues in
currencies other than the U.S. Dollar. Therefore, the dollar equivalent of its
net assets, distributions, and income will be adversely affected by reductions
in the value of certain currencies relative to the U.S. Dollar. If the value of
the currencies in which the Fund receives its income falls relative to the U.S.
Dollar between receipt of the income and the making of Fund distributions, the
Fund may be required to liquidate securities in order to make distributions if
it has insufficient cash in U.S. Dollars to meet distribution requirements that
the Fund must satisfy to qualify as a regulated investment company for federal
income tax purposes. Similarly, if an exchange rate declines between the time
the Fund incurs expenses in U.S. Dollars and the time cash expenses are paid,
the amount of the currency required to be converted into U.S. Dollars in order
to pay expenses in U.S. Dollars could be greater than the equivalent amount of
such expenses in the currency at the time they were incurred. In light of these
risks, the Fund may engage in currency hedging transactions, as described
above, which involve certain special risks.
Securities Issued by Non-U.S. Companies. The securities markets of many
countries outside of the United States 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 will include securities issued by non-U.S.
companies, 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 countries require governmental approval prior to investments by foreign
persons or limit investment by foreign persons to only a specified percentage
of an issuer's outstanding securities or a specific class of securities that
may have less advantageous terms (including price) than securities of the
company available for purchase by nationals. These restrictions or controls
may at times limit or preclude investment in certain securities and may
increase the costs and expenses of 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. If a deterioration
occurs in a 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, 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 countries are generally higher than in the United States.
Issuers of securities in jurisdictions other than the United States 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 countries may
differ, in some cases significantly, from U.S. standards in important respects
and less information may be available to investors in securities issued by
non-U.S. companies 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 countries other than the United States 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 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 countries other than the United States governing
business organizations, bankruptcy and insolvency may provide less protection
to security holders such as the Fund than that provided by U.S. laws.
Extreme Governmental Action; Less Protective Laws. In contrast to investing in
the United States, investment in other countries may involve in certain
situations greater risk of nationalization, expropriation, confiscatory
taxation, currency blockage or other extreme governmental action that could
adversely impact the Fund's investments. In the event of certain such actions,
the Fund could lose its entire investment in the country involved. In addition,
laws in various countries other than the United States governing, among other
subjects, business organization and practices, securities and securities
trading, bankruptcy and insolvency may provide less protection to investors
such as the Fund than provided under United States laws.
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Non-U.S. Taxes. The Fund's investment in securities issued by non-U.S.
companies may be subject to taxes withheld at the source on dividend or
interest payments.
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MANAGEMENT OF THE FUND
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INVESTMENT ADVISER AND FUND MANAGER
The Fund's Adviser is Alliance Capital Management L.P., 1345 Avenue of the
Americas, New York, New York 10105. Alliance is a leading international
investment adviser supervising client accounts with assets as of [________],
2001 totaling more than $[___] billion (of which more than $[___] billion
represented the assets of investment companies). As of [_____], 2001, Alliance
managed retirement assets for many of the largest public and private employee
benefit plans (including [__] of the nation's FORTUNE 100 companies), for
public employee retirement funds in [___] states, for investment companies, and
for foundations, endowments, banks and insurance companies worldwide. The [___]
registered investment companies managed by Alliance, comprising [___] separate
portfolios, currently have more than [___] million shareholder accounts.
The persons primarily responsible for the day-to-day management of the Fund are
[_____] and [_____]. [Biography to be inserted here.]
Alliance provides investment advisory services and order placement facilities
for the Fund. For these advisory services, the Fund pays Alliance a fee at an
annualized rate of [___]% of the Fund's average daily net assets. The fee will
be accrued daily and paid monthly.
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 shares solely:
* through accounts established under a fee-based program, sponsored and
maintained by a registered broker-dealer or other financial intermediary and
approved by the Fund's principal underwriter, Alliance Fund Distributors, Inc.
or AFD;
* through a self-directed defined contribution employee benefit plan (e.g., a
401(k) plan) that has at least 1,000 participants or $25 million in assets;
* by investment advisory clients of, and certain other persons associated with,
Alliance and its affiliates or the Funds; and
* through registered investment advisers or other financial intermediaries who
charge a management, consulting or other fee for their services and who
purchase shares through a broker or agent approved by AFD and clients of such
registered investment advisers or financial intermediaries whose accounts are
linked to the master account of such investment adviser or financial
intermediary on the books of such approved broker or agent.
Generally, a fee-based program must charge an asset-based or other similar fee
and must invest at least $250,000 in Advisor Class shares to be approved by AFD
for investment in Advisor Class shares. The Fund's Statement of Additional
Information has more detailed information about who may purchase and hold
Advisor Class shares.
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The Fund may refuse any order to purchase Advisor Class shares. In particular,
the Fund reserves the right to restrict purchases of Advisor Class shares
(including through exchanges) when there appears to be evidence of a pattern of
frequent purchases and sales made in response to short-term considerations.
How To Exchange Shares
You may exchange your Advisor Class shares for Advisor Class shares of other
Alliance Mutual Funds (including AFD Exchange Reserves, a money market fund
managed by Alliance). Exchanges of Advisor Class 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 Exchange is open, either directly or through your financial intermediary.
Your sales price will be the next-determined NAV, less any applicable CDSC,
after the Fund receives your sales request in proper form. Normally, proceeds
will be sent to you within 7 days. If you recently purchased your shares by
check or electronic funds transfer, your redemption payment may be delayed
until the Fund is reasonably satisfied that the check or electronic funds
transfer has been collected (which may take up to 15 days). 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.
o 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, less any applicable CDSC. Your financial representative
is responsible for submitting all necessary documentation to the Fund and may
charge you for this service.
o Selling Shares Directly to the Fund
By Mail:
--Send a signed letter of instruction or stock power, along with certificates,
to:
Alliance Fund Services, Inc.
P.O. Box 1520
Secaucus, N.J. 07906-1520
800-221-5672
--For your protection, a bank, a member firm of a national stock exchange, or
other eligible guarantor institution, must guarantee signatures. Stock power
forms are available from your financial intermediary, AFS, and many commercial
banks. Additional documentation is required for the sale of shares by
corporations, intermediaries, fiduciaries, and surviving joint owners. If you
have any questions about these procedures, contact AFS.
By Telephone:
--You may redeem your shares for which no stock certificates have been issued
by telephone request. Call AFS at 800-221-5672 with instructions on how you
wish to receive your sale proceeds.
--A telephone redemption request must be received by 4:00 p.m., Eastern time,
for you to receive that day's NAV, less any applicable CDSC.
--If you have selected electronic funds transfer in your Shareholder
Application, the redemption proceeds will be sent directly to your bank.
Otherwise, the proceeds will be mailed to you.
--Redemption requests by electronic funds transfer may not exceed $100,000 per
day and redemption requests by check cannot exceed $50,000 per day.
--Telephone redemption is not available for shares held in nominee or "street
name" accounts, retirement plan accounts, or shares held by a shareholder who
has changed his or her address of record within the previous 30 calendar days.
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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 a Fund that are
different from those described in this prospectus. A transaction, service,
administrative or other similar fee may be charged by your broker-dealer,
agent, financial intermediary or other financial representative with respect to
the purchase, sale or exchange of Advisor Class shares made through such
financial representative. Such financial intermediaries may also impose
requirements with respect to the purchase, sale or exchange of shares that are
different from, or in addition to, those imposed by a Fund, including
requirements as to the minimum initial and subsequent investment amounts.
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DIVIDENDS, DISTRIBUTIONS AND TAXES
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Dividends and Distributions
The income dividend and capital gains distributions, 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 NAV as of the
close of business on the day following the declaration date of the dividend or
distribution equal to the cash amount of the dividend or distribution. You may
make an election to receive dividends and distributions in cash or in shares at
the time you purchase shares. Your election can be changed at any time prior to
a record date for a dividend. There is no sales or other charge on the
reinvestment of dividends or capital gains distributions. Cash dividends may be
paid in check, or at your election, electronically via the ACH network.
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.
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 distributions of long-term capital gains generally will be taxable to you
as long-term 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.
Investment income received by the Fund from sources within countries outside of
the United States may be subject to non-U.S. income taxes withheld at the
source. To the extent that the Fund is liable for non-U.S. 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 non-U.S. income taxes paid (or to permit shareholders to claim a
deduction for such taxes), but there can be no assurance that the Fund will be
able to do so. Furthermore, a shareholder's ability to claim a tax credit or
deduction for non-U.S. 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 credit or deduction for all or a portion of 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.
If you buy shares just before the Fund deducts a distribution from its NAV, you
will pay the full price for the shares and then receive a portion of the price
back as a taxable distribution.
The sale or exchange of Fund shares is a taxable transaction for federal income
tax purposes.
Each year shortly after December 31, the 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.
16
<PAGE>
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CONVERSION FEATURE
-------------------------------------------------------------------------------
Conversion
As described above, Advisor Class shares may be held solely through certain
fee-based program accounts, employee benefit plans and registered investment
advisory or other financial intermediary relationships, and by investment
advisory clients of, and certain persons associated with, Alliance and its
affiliates or the Funds. If a holder of Advisor Class shares (i) ceases to
participate in the fee-based program or plan, or to be associated with an
eligible investment advisor or financial intermediary or (ii) is otherwise no
longer eligible to purchase Advisor Class shares (each a "Conversion Event"),
then all Advisor Class shares held by the shareholder will convert
automatically to Class A shares of the same Fund. The Fund will provide the
shareholder with at least 30 days advance notice of such conversion. The
failure of a shareholder or a fee-based program to satisfy the minimum
investment requirements to purchase Advisor Class shares will not constitute a
Conversion Event. The conversion would occur on the basis of the relative NAV
of the two classes and without the imposition of any sales load, fee or other
charge.
Description of Class A Shares
The Class A shares of each Fund have a distribution fee of .30% under the
Fund's Rule 12b-1 plan that allows the Fund to pay distribution and service
fees for the distribution and sale of its shares. Because this fee is paid out
of the Fund's assets, Class A shares have a higher expense ratio and may pay
lower dividends and may have a lower NAV than Advisor Class shares.
-------------------------------------------------------------------------------
GENERAL INFORMATION
-------------------------------------------------------------------------------
Under unusual circumstances, 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.
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:
o 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
17
<PAGE>
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:
o Call the Commission at 1-202-942-8090 for information on the operation of
the Public Reference Room.
o Reports and other information about the Fund are available on the EDGAR
Database on the Commission's Internet site at http://www.sec.gov.
o pies of the information may be obtained, after paying a fee, by electronic
request at [email protected], or by writing the Commission's Public Reference
Section, Washington, DC 20549-0102.
You also may find more information about Alliance and the Fund on the Internet
at: www.Alliancecapital.com.
SEC File No. [_____________________]
18
<PAGE>
AllianceBernstein International Value Fund
The AllianceBernstein International Value Fund is an open-end management
investment company structured as a series fund that invests primarily in a
diversified portfolio of equity securities issued by non-U.S. companies.
Prospectus and Application
[____________], 2001
The Securities and Exchange Commission has not approved or disapproved these
securities or passed upon the adequacy of this Prospectus. Any representation
to the contrary is a criminal offense.
AllianceCapital [LOGO]
Investment Products Offered
* Are Not FDIC Insured
* May Lose Value
* Are Not Bank Guaranteed
<PAGE>
TABLE OF CONTENTS
Page
RISK/RETURN SUMMARY.....................................................
FEES AND EXPENSES OF THE FUND...........................................
GLOSSARY................................................................
DESCRIPTION OF THE FUND.................................................
Investment Objective and Principal Policies and Risks...................
Description of Additional Investment Practices..........................
Additional Risk Considerations..........................................
MANAGEMENT OF THE FUND..................................................
PURCHASE AND SALE OF SHARES.............................................
How The Fund Values Its Shares..........................................
How To Buy Shares.......................................................
Initial Offering........................................................
How To Exchange Shares..................................................
How To Sell Shares......................................................
DIVIDENDS, DISTRIBUTIONS AND TAXES......................................
DISTRIBUTION ARRANGEMENTS...............................................
GENERAL INFORMATION.....................................................
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 the
AllianceBernstein International Value Fund. This Risk/Return 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:
* As with all investments, 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.
2
<PAGE>
International Value Fund
-------------------------------------------------------------------------------
OBJECTIVE:
The Fund's investment objective is long-term growth of capital.
PRINCIPAL INVESTMENT STRATEGIES:
The Fund will invest primarily in a diversified portfolio of non-U.S. equity
securities. The Fund's investment policies emphasize investment in companies
that are determined by Alliance to be undervalued, using the fundamental value
approach of Alliance's Bernstein unit ("Bernstein"). In selecting securities
for the Fund's portfolio, Bernstein uses its fundamental research to identify
companies whose long term earnings power is not reflected in the current market
price of their securities.
In order to hedge a portion of currency risk, the Fund may from time to time
invest in currency futures contracts or currency forward contracts.
PRINCIPAL RISKS:
Among the principal risks of investing in the Fund are market risk, non-U.S.
investment risk and currency risk. Market risk is the risk of losses from
adverse changes in the stock market. Investments in countries other than the
United States may have more risk because they tend to be more volatile than the
U.S. stock market. To the extent that the Fund invests a substantial amount of
its assets in a particular country, an investment in the Fund has the risk that
market changes or other events affecting that country may have a more
significant effect on the Fund's net asset value. Because the Fund may invest
in emerging markets and in developing countries, an investment also has the
risk that market changes or other factors affecting emerging markets and
developing countries, including political instability and unpredictable
economic conditions, may have a significant effect on the Fund's net asset
value. Depending on the Fund's investments at a particular time, the Fund may
also have industry/sector risk. The Fund may at times use certain types of
investment derivatives such as options, futures, forwards and swaps. The use
of these techniques involves special risks that are discussed in this
Prospectus.
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.
3
<PAGE>
-------------------------------------------------------------------------------
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 Class B Class C
Shares Shares 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 first year.
ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from Fund assets)
Operating Expenses
Class A Class B Class C
------- ------- -------
Management fees [____]% [____]% [____]%
Distribution (12b-1) fees [____]% [____]% [____]%
Other expenses [____]% [____]% [____]%
------- ------- -------
Total Fund
operating expenses (a) [____]% [____]% [____]%
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
Class A Class B+ Class B++ Class C+ Class C++
After 1 Yr. $[______] $[______] $[______] $[______] $[______]
After 3 Yrs. $[______] $[______] $[______] $[______] $[______]
(a) Alliance has contractually agreed to waive its management fees and/or to
bear expenses of the Fund through [ ] to the extent necessary
to prevent total fund operating expenses, on an annualized basis, from
exceeding [ ]% for Class A shares and [ ]% for Classes B & C shares.
The fees waived and expenses borne by Alliance during this period may be
reimbursed by the Fund during the three years after commencement of operations.
No reimbursement payment will be made that would cause the Fund's total
annualized operating expenses to exceed these percentages or cause the total of
the payments to exceed the Fund's total initial organizational and offering
expenses.
+ Assumes redemption at the end of period.
++ Assumes no redemption at end of period.
4
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GLOSSARY
-------------------------------------------------------------------------------
This Prospectus uses the following terms.
TYPES OF SECURITIES
Convertible securities are fixed-income securities that are convertible into
common stock.
Debt securities are bonds, debentures, notes, bills, loans, other direct debt
instruments, and other fixed, floating and variable rate debt obligations, but
do not include convertible securities.
Depositary receipts include American Depositary Receipts ("ADRs"), Global
Depositary Receipts ("GDRs") and other types of depositary receipts.
Equity securities 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.
Lower-rated securities are fixed-income securities rated Ba or below by Moody's
or BB or below by S&P, Duff & Phelps or Fitch, or determined by Alliance to be
of equivalent quality, and are commonly referred to as "junk bonds."
Non-U.S. Company is an entity that (i) is organized under the laws of a country
other than the United States, (ii) has its principal place of business in a
country other than the United States, and (iii) issues equity or debt
securities that are traded principally in a country other than the United
States.
Prime commercial paper is commercial paper rated Prime 1 by Moody's or A-1 or
higher by S&P or, if not rated, issued by companies that have an outstanding
debt issue rated Aa or higher by Moody's or AA or higher by S&P.
Qualifying bank deposits are certificates of deposit, bankers' acceptances and
interest-bearing savings deposits of banks that have total assets of more than
$1 billion and are members of the Federal Deposit Insurance Corporation.
Rule 144A securities are securities that may be resold pursuant to Rule 144A of
the Securities Act.
U.S. Government securities are securities issued or guaranteed by the United
States Government, its agencies or instrumentalities. [Presumably should be
included for purposes of Temporary Defensive Position.]
RATING AGENCIES
Duff & Phelps is Duff & Phelps Credit Rating Co.
Fitch is Fitch IBCA, Inc.
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.
5
<PAGE>
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DESCRIPTION OF THE FUND
-------------------------------------------------------------------------------
This section of the Prospectus provides a more complete description of the
Fund's investment objective, principal investment policies and risks. Of
course, there can be no assurance that the Fund will achieve its investment
objective.
Please note that:
* Additional discussion of the Fund's investments, including the risks of the
investments, can be found in the discussion under Description of Additional
Investment Practices following this section.
* The description of the principal risks for the Fund includes risks described
in the RISK/RETURN SUMMARY above. Additional information about the risks of
investing in the Fund can be found in the discussion 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. Except as noted, the Fund's investment policies
are not fundamental and thus can be changed without a shareholder vote.
INVESTMENT OBJECTIVE AND PRINCIPAL POLICIES AND RISKS
INVESTMENT OBJECTIVE
The Fund's investment objective is long-term growth of capital.
PRINCIPAL POLICIES
The Fund will invest primarily in a diversified portfolio of equity securities
of 50 to 75 established companies selected from more than 40 industries and
from more than 40 developed and emerging market countries. Countries are
generally weighted in proportion to the size of their stock markets, although
the Fund may over- or under-weight a country depending on an assessment of the
relative attractiveness of investments in that country by Alliance's Bernstein
unit ("Bernstein"). The Fund normally invests in companies in at least three
countries other than United States. These countries currently include the
developed nations in Europe and the Far East, Canada, Australia and emerging
market countries worldwide. The Fund's investment policies emphasize
investment in companies that are determined by Bernstein to be undervalued,
using a fundamental value approach. Investment decisions are the result of the
multi-step process described below.
Bernstein's fundamental value approach to equity investing generally defines
value by reference to the relationship between a security's current price and
its intrinsic economic value, as measured by long-term earnings prospects. In
each market, this approach seeks to identify, in the first instance, a universe
of securities that are considered to be undervalued because they are
attractively priced relative to their future earnings power. Accordingly,
forecasting corporate earnings and dividend-paying capability is the heart of
the fundamental value approach.
Bernstein's fundamental analysis depends heavily upon its large internal
research staff. The research staff begins with a global research universe of
approximately 4,000 international and emerging market companies. Teams within
the research staff cover a given industry worldwide, to better understand each
company's competitive position in a global context.
Bernstein's staff of approximately 100 company and industry analysts prepares
its own earnings estimates and financial models for each company analyzed.
Bernstein identifies and quantifies the critical variables that control a
business's performance and analyzes the results in order to forecast each
company's long-term prospects and expected returns. As one of the largest
multi-national investment firms, Alliance and its Bernstein unit have global
access to considerable information concerning all of the companies followed, an
in-depth understanding of the products, services, markets and competition of
these companies and a good knowledge of the management of most of the companies
in its research universe. A company's financial performance is typically
projected over a full economic cycle, including a trough and a peak, within the
context of forecasts for real economic growth, inflation and interest rate
changes. As a result, forecasts of near term economic events are generally not
of major consequence.
6
<PAGE>
A group of senior investment professionals, including the Fund's portfolio
managers, carefully reviews the research process to be sure that the analysts
have appropriately considered key issues facing each company, that forecasts of
a company's future are compatible with its history, and that all forecasts use
consistent analytic frameworks and economic assumptions.
Once Bernstein has applied its fundamental analysis to determine the intrinsic
economic values of each of the companies in its research universe, each company
is then ranked in the order of disparity between its intrinsic economic value
and its stock price, with companies having the greatest disparities receiving
the highest rankings (i.e., being considered the most undervalued). A similar
relative evaluation is performed for the markets in each country.
The Fund does not simply purchase the top-ranked securities. Rather, Bernstein
considers aggregate portfolio characteristics when deciding how much of each
security to purchase for the Fund. Bernstein's team of approximately 40
quantitative analysts build valuation and risk models to ensure that the Fund's
portfolio is constructed to obtain an effective balance of risk and return. By
evaluating overall regional, country and currency exposures, sector
concentration, degree of undervaluation and other subtle similarities among
investments, Bernstein seeks to minimize overall Fund volatility by favoring
those top ranked securities that also tend to diversify the Fund's risk.
A disparity between a company's current stock price and the assessment of
intrinsic value can arise, at least in part, as a result of adverse, short-term
market reactions to recent events or trends. In order to reduce the risk that
an undervalued security will be purchased before such an adverse market
reaction has run its course, Bernstein also monitors analysts'
earnings-estimate revisions and relative return trends (also called "price
momentum") so as to better time new purchases and sales of securities.
Currencies can have a dramatic impact on equity returns, significantly adding
to returns in some years and greatly diminishing them in others. Investment
decisions concerning currencies are made independently of equity investments,
and may be used to hedge the currency exposure resulting from securities
positions.
A security generally will be sold when it no longer meets appropriate valuation
criteria. Sale of a stock that has reached its target may be delayed, however,
when earnings expectations and/or price momentum is favorable.
The Fund may also
* Invest in depositary receipts, instruments of supranational entities
denominated in the currency of any country, securities of multinational
companies and "semi-governmental securities";
* Invest up to 20% of its total assets in convertible securities;
* Write covered put and call options and purchase put and call options on
securities issued by U.S. and non-U.S. companies, security exchanges and over
the counter, including options on market indices and currencies;
* Invest up to 15% of its net assets in illiquid securities;
* Invest up to 10% of its total assets in rights and warrants;
* Enter into forward commitments, futures contracts and options on futures
contracts with respect to securities, indices and currencies;
* Enter into contracts for the purchase and sale for the future delivery of
contracts based on financial indices;
* Enter into currency swaps and forward currency exchange contracts for hedging
purposes;
* Make secured loans of portfolio securities of up to 30% of its total assets;
and
* Enter into repurchase agreements.
PRINCIPAL 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 markets fluctuate and that prices overall will decline
over short- or long-term periods.
* Sector Risk This is the risk of investments in a particular industry sector.
If the Fund invests a substantial amount of its assets in companies engaged in
a particular industry sector, market or economic factors affecting that
industry could have a major effect on the value of the Fund's investments.
7
<PAGE>
* Capitalization Risk This is the risk of investments in small capitalization
companies. Investments in small- and mid-cap companies may be more volatile
than investments in large-cap companies. Investments in small-cap companies
tend to be more volatile than investments in mid- or large-cap companies. The
Fund's investments in smaller capitalization companies may have additional
risks because these companies often have limited product lines, markets or
financial resources.
* Derivative and Leverage Risk The Fund may make substantial use of derivatives
and employ specialized trading techniques such as short sales, options,
futures, forwards, and other leveraging techniques to increase its exposure to
certain selected securities. Alliance employs these techniques speculatively to
enhance returns and not merely as hedging tools. These techniques are riskier
than many investment strategies and will result in greater volatility for the
Fund, particularly in periods of market declines.
* Non-U.S. Investment Risk This is the risk of investments in issuers located
in countries other than the United States. Investments in securities issued by
non-U.S. companies 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 countries are relatively small, with a limited number of
companies representing a small number of industries. Additionally, non-U.S.
issuers are usually not subject to the same degree of regulation as U.S.
issuers. Reporting, accounting and auditing standards of 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
country other than the United States. In the event of nationalization,
expropriation or other confiscation, the Fund could lose its entire investment.
* Currency Risk This is the risk that fluctuations in the exchange rates
between the U.S. Dollar and other currencies may negatively affect the value of
the Fund's investments.
* 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[, including its fundamental value approach,] in
making investment decisions for the Fund, but there is no guarantee that its
techniques will produce the intended result.
Portfolio Turnover. The Fund's portfolio turnover is not expected to exceed
100%.
Temporary Defensive Position. For temporary defensive purposes, the Fund may
reduce its position in equity securities and increase without limit its
position in short-term, liquid, high-grade debt securities, which may include
U.S. Government securities, bank deposits, money market instruments, short-term
debt securities, including notes and bonds, or hold its assets in cash. While
the Fund is investing for temporary defensive purposes, it may not meet its
investment objective.
DESCRIPTION OF ADDITIONAL INVESTMENT PRACTICES
This section describes the investment practices of the Fund and risks
associated with these practices.
Convertible Securities. Prior to conversion, convertible securities have the
same general characteristics as nonconvertible debt securities, which generally
provide a stable stream of income with generally higher yields than those of
equity securities of the same or similar issuers. The price of a convertible
security will normally vary with changes in the price of the underlying equity
security, although the higher yield tends to make the price of the convertible
security less volatile than that of the underlying equity security. As with
debt securities, the market values of convertible securities tend to decrease
as interest rates rise and increase as interest rates fall. While convertible
securities generally offer lower interest yields than non-convertible debt
securities of similar quality, they offer investors the potential to benefit
from increases in the market prices of the underlying common stocks.
Convertible securities that are rated Baa or lower by Moody's and BBB or lower
by S&P or, if unrated, determined by Alliance to be of equivalent quality, may
share some or all of the risks of non-convertible debt securities with those
ratings. The Fund may invest up to 20% of its total assets in convertible
securities.
Currency Swaps. Currency swaps involve the individually negotiated exchange by
the Fund with another party of a series of payments in specified currencies. A
currency swap may involve the delivery at the end of the exchange period of a
substantial amount of one designated currency in exchange for the other
designated currency. Therefore, the entire principal value of a currency swap
is subject to the risk that the swap counterparty will default on its
contractual delivery obligations. The Fund will enter into currency swaps for
hedging purposes only. The Fund will not enter into any currency swap unless
the credit quality of the unsecured senior debt or the claims-paying ability of
the counterparty is rated in the highest rating category of at least one
nationally recognized rating organization at the time of entering into the
transaction. If there is a default by the other party to such a transaction,
the Fund will have contractual remedies under the transaction agreements.
Depositary Receipts. Depositary receipts may not necessarily be denominated in
the same currency as the underlying securities into which they may be
converted. In addition, the issuers of the stock of unsponsored depositary
receipts are not
8
<PAGE>
obligated to disclose material information in the United States, and therefore,
there may not be a correlation between such information and the market value of
the depositary receipts. ADRs are depositary receipts typically issued by a
U.S. bank or trust company that evidence ownership of underlying securities
issued by a non-U.S. corporation. GDRs and other types of depositary receipts
are typically issued by non-U.S. banks or trust companies and evidence
ownership of underlying securities issued by either a U.S. or a non-U.S.
company. Generally, depositary receipts in registered form are designed for use
in the U.S. securities markets, and depositary receipts in bearer form are
designed for use in securities markets outside of the United States.
Forward Currency Exchange Contracts. The Fund may purchase or sell forward
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 currency in
order to "lock in" the U.S. Dollar price of the security ("transaction hedge").
The Fund will not engage in transaction hedges with respect to the currency of
a particular country to an extent greater than the aggregate amount of the
Fund's transactions in that currency. When the Fund believes that a 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 currency approximating the
value of some or all of the Fund's portfolio securities denominated in such
currency, or when the Fund believes that the U.S. Dollar may suffer a
substantial decline against another currency, it may enter into a forward
purchase contract to buy that 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 currency for a
fixed U.S. dollar amount where the Fund believes that the U.S. Dollar value of
the currency to be sold pursuant to the forward contract will fall whenever
there is a decline in the U.S. Dollar value of the currency in which portfolio
securities of the Fund are denominated ("cross-hedge"). Unanticipated changes
in currency prices may result in poorer overall performance for the Fund than
if it had not entered into such forward contracts. Hedging against a decline
in the value of a currency does not eliminate fluctuations in the prices of
portfolio securities or prevent losses if the prices of such securities
decline. Such transactions also preclude the opportunity for gain if the value
of the hedged currency should rise. Moreover, it may not be possible for 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
devaluation level it anticipates..
Illiquid Securities. The Fund will limit its investment in illiquid securities
to no more than 15% 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 will not be treated as
"illiquid" for purposes of this limit on investments if they meet certain
liquidity guidelines established by the Fund or Alliance.
The Fund may not be able to readily sell securities for which there is no ready
market. Such securities are unlike securities that are traded in the open
market and can be expected to be sold immediately if the market is adequate.
The sale price of illiquid securities may be lower or higher than Alliance's
most recent estimate of their fair value. Generally, less public information is
available about the issuers of such securities than about companies whose
securities are traded on an exchange. To the extent that these securities are
securities issued by non-U.S. companies, 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 of up to 30% of its total assets 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 risk in lending
portfolio securities, as with other extensions of credit, consists of the
possible loss of rights in the collateral should the borrower fail financially.
In determining whether to lend securities to a particular borrower, Alliance
will consider all relevant facts and circumstances, including the
creditworthiness of the borrower. While securities are on loan, the
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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.
Options on Securities. An option gives the purchaser of the option, upon
payment of a premium, the right to deliver to (in the case of a put) or receive
from (in the case of a call) the writer of the option a specified amount of a
security on or before a fixed date at a predetermined price. A call option
written by the Fund is "covered" if the Fund owns the underlying security, has
an absolute and immediate right to acquire that security upon conversion or
exchange of another security it holds, or holds a call option on the underlying
security with an exercise price equal to or less than that of the call option
it has written. A put option written by the Fund is "covered" if the Fund holds
a put on the underlying securities with an exercise price equal to or greater
than that of the put option it has written.
A call option is for cross-hedging purposes if the Fund does not own the
underlying security and is designed to provide a hedge against a decline in
value in another security which the Fund owns or has the right to acquire. The
Fund may write call options for cross-hedging purposes. The Fund would write a
call option for cross-hedging purposes, instead of writing a covered call
option, when the premium to be received from the cross-hedge transaction would
exceed that which would be received from writing a covered call option, while
at the same time achieving the desired hedge.
In purchasing an option, the Fund would be in a position to realize a gain if,
during the option period, the price of the underlying security increased (in
the case of a call) or decreased (in the case of a put) by an amount in excess
of the premium paid; otherwise the Fund would experience a loss equal to the
premium paid for the option.
If an option written by the Fund were exercised, the Fund would be obligated to
purchase (in the case of a put) or sell (in the case of a call) the underlying
security at the exercise price. The risk involved in writing an option is that,
if the option is exercised, the underlying security would then be purchased or
sold by the Fund at a disadvantageous price. Entering into a closing
transaction (i.e., by disposing of the option prior to its exercise) could
reduce these risks. The Fund retains the premium received from writing a put or
call option whether or not the option is exercised. The writing of call options
could result in increases in the Fund's portfolio turnover rate, especially
during periods when market prices of the underlying securities appreciate.
The Fund will purchase or write options on securities of the types in which it
is permitted to invest in privately negotiated (i.e., over-the-counter)
transactions only with investment dealers and other financial institutions
(such as commercial banks or savings and loan institutions) deemed creditworthy
by Alliance. Alliance has adopted procedures for monitoring the
creditworthiness of such entities. Options purchased or written by the Fund in
negotiated transactions are illiquid and it may not be possible for the Fund to
effect a closing transaction at an advantageous time.
Options on Securities Indices. An option on a securities index is similar to
an option on a security except that, rather than the right to take or make
delivery of a security at a specified price, an option on a securities index
gives the holder the right to receive, upon exercise of the option, an amount
of cash if the closing level of the chosen index is greater than (in the case
of a call) or less than (in the case of a put) the exercise price of the option.
Options on Currencies. As in the case of other kinds of options, the writing
of an option on a currency constitutes only a partial hedge, up to the amount
of the premium received, and the Fund could be required to purchase or sell
currencies at disadvantageous exchange rates, thereby incurring losses. The
purchase of an option on a currency may constitute an effective hedge against
fluctuations in exchange rates although, in the event of rate movements adverse
to the Fund's position, the Fund may forfeit the entire amount of the premium
plus related transaction costs.
Futures Contracts and Options on Futures Contracts. A "sale" of a futures
contract means the acquisition of a contractual obligation to deliver the
securities or currency or other commodity called for by the contract at a
specified price on a specified date. A "purchase" of a futures contract means
the incurring of an obligation to acquire the securities or currency or other
commodity called for by the contract at a specified price on a specified date.
The purchaser of a futures contract on an index agrees to take or make delivery
of an amount of cash equal to the difference between a specified dollar
multiple of the value of the index on the expiration date of the contract
("current contract value") and the price at which the contract was originally
struck. No physical delivery of the securities underlying the index is made.
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Options on Futures contracts are options that, upon exercise, call for the
delivery of futures contracts (or cash payments based on the value of futures
contracts). Options on futures contracts written or purchased by the Fund will
be traded on exchanges worldwide or over-the-counter. These investment
techniques will be used only to hedge against anticipated future changes in
market conditions and interest or exchange rates which otherwise might either
adversely affect the value of the Fund's portfolio securities or adversely
affect the prices of securities which the Fund intends to purchase at a later
date.
The Fund will not enter into any futures contracts or options on futures
contracts if immediately thereafter the market values of the outstanding
futures contracts of the Fund and the currencies and futures contracts subject
to outstanding options written by the Fund would exceed [___]% of its total
assets.
Repurchase Agreements. A repurchase agreement arises when a buyer purchases a
security and simultaneously agrees to resell it to the vendor at an agreed-upon
future date, normally a day or a few days later. The resale price is greater
than the purchase price, reflecting an agreed-upon interest rate for the period
the buyer's money is invested in the security. Such agreements permit 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 prevented from,
selling the collateral for its benefit. Alliance monitors the creditworthiness
of the vendors with which the Fund enters into repurchase agreements.
Rights and Warrants. The Fund will invest in rights or warrants only if the
underlying equity securities themselves are deemed appropriate by Alliance for
inclusion in the Fund's portfolio. Rights and warrants entitle the holder to
buy equity securities at a specific price for a specific period of time. Rights
are similar to warrants except that they have a substantially shorter duration.
Rights and warrants may be considered more speculative than certain other types
of investments in that they do not entitle a holder to dividends or voting
rights with respect to the underlying securities nor do they represent any
rights in the assets of the issuing company. The value of a right or warrant
does not necessarily change with the value of the underlying security, although
the value of a right or warrant may decline because of a decrease in the value
of the underlying security, the passage of time or a change in perception as to
the potential of the underlying security, or any combination of these factors.
If the market price of the underlying security is below the exercise price of
the warrant on the expiration date, the warrant will expire worthless.
Moreover, a right or warrant ceases to have value if it is not exercised prior
to the expiration date. The Fund may invest up to 10% of its total assets in
rights and warrants.
Short Sales. The Fund may utilize short selling in order to attempt both to
protect its portfolio against the effects of potential downtrends in the
securities markets and as a means of enhancing its overall performance. A short
sale is a transaction in which the Fund sells a security it does not own but
has borrowed in anticipation that the market price of that security will
decline. The Fund may be required to pay a fee to borrow the security and to
pay over to the lender any payments received on the security.
If the price of the security sold short increases between the time of the short
sale and the time the Fund replaces the borrowed security, the Fund will incur
a loss; conversely, if the price declines, the Fund will realize a capital
gain. Although the Fund's gain is limited by the price at which it sold the
security short, its potential loss is unlimited. The Fund may engage in short
sales for up to 33% of its total assets.
Stock Index Futures. The Fund may purchase and sell stock index futures as a
hedge against movements in the equity markets. There are several risks in
connection with the use of stock index futures by the Fund as a hedging device.
One risk arises because of the imperfect correlation between movements in the
price of a stock index future and movements in the price of the securities
which are the subject of the hedge. The price of a stock index future may move
more than or less than the price of the securities being hedged. If the price
of a stock index future moves less than the price of the securities which are
the subject of the hedge, the hedge will not be fully effective but, if the
price of the securities being hedged has moved in an unfavorable direction, the
Fund would be in a better position than if it had not hedged at all. If the
price of the securities being hedged has moved in a favorable direction, this
advantage will be partially offset by the loss on the index futures contract.
If the price of the index future moves more than the price of the stock, the
Fund will experience either a loss or gain on the futures contract which will
not be completely offset by movements in the price of the securities which are
subject to the hedge.
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To compensate for the imperfect correlation of movements in the price of
securities being hedged and movements in the price of a stock index future, the
Fund may buy or sell stock index futures contracts in greater dollar amount
than the dollar amount of securities being hedged if the volatility over a
particular time period of the prices of such securities has been greater than
the volatility over such time period of the stock index, or if otherwise deemed
to be appropriate by Alliance. Conversely, the Fund may buy or sell fewer stock
index futures contracts if the volatility over a particular time period of the
prices of the securities being hedged is less than the volatility over such
time period of the stock index, or it is otherwise deemed to be appropriate by
Alliance. It is also possible that, where the Fund has sold futures to hedge
its portfolio against a decline in the market, the market may advance and the
value of securities held in the Fund may decline. If this occurred, the Fund
would lose money on the futures and also experience a decline in value in its
portfolio securities. However, over time the value of a diversified portfolio
should tend to move in the same direction as the market indices upon which the
index futures are based, although there may be deviations arising from
differences between the composition of the Fund and the stock comprising the
index.
Where a stock index futures contract is purchased to hedge against a possible
increase in the price of stock before the Fund is able to invest its cash (or
cash equivalents) in stocks (or options) in an orderly fashion, it is possible
that the market may decline instead. If the Fund then concludes not to invest
in stock or options at that time because of concern as to possible further
market decline or for other reasons, the Fund will realize a loss on the
futures contract that is not offset by a reduction in the price of securities
purchased.
In addition to the possibility that there may be an imperfect correlation, or
no correlation at all, between movements in stock index futures and the portion
of the portfolio being hedged, the price of stock index futures may not
correlate perfectly with movement in the stock index due to certain market
distortions. Rather than meeting additional margin deposit requirements,
investors may close futures contracts through offsetting transactions which
could distort the normal relationship between the index and futures markets.
From the point of view of speculators, the deposit requirements in the futures
market are less onerous than margin requirements in the securities market.
Therefore, increased participation by speculators in the futures market may
also cause temporary price distortions. Due to the possibility of price
distortion in the futures market, and because of the imperfect correlation
between the movements in a stock index and movements in the price of stock
index futures, a correct forecast of general market trends by Alliance may
still not result in a successful hedging transaction over a short time frame.
Positions in stock index futures may be closed out only on an exchange or board
of trade which provides a secondary market for such futures. Although the Fund
intends to purchase or sell futures only on exchanges or boards of trade where
there appear to be active secondary markets, there is no assurance that a
liquid secondary market on any exchange or board of trade will exist for any
particular futures contract or at any particular time. In such event, it may
not be possible to close a futures investment position, and in the event of
adverse price movements, the Fund would continue to be required to make daily
cash payments of variation margin. However, in the event that futures contracts
have been used to hedge portfolio securities, such securities will not be sold
until the futures contract can be terminated. In such circumstances, an
increase in the price of the securities, if any, may partially or completely
offset losses on the futures contract. As described above, however, there is no
guarantee that the price of the securities will in fact correlate with the
price movements in the futures contract and thus provide an offset on a futures
contract.
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. Unlike
many exchange-traded futures contracts and options on futures contracts, there
are no daily price fluctuation limits for certain options on currencies and
forward contracts, and adverse market movements could therefore continue to an
unlimited extent over a period of time. In addition, the correlation between
movements in the prices of such instruments and movements in the prices of the
securities and currencies hedged or used for cover will not be perfect and
could produce unanticipated losses.
The Fund's ability to dispose of its positions in futures contracts, options
and forward contracts depends on the availability of liquid markets in such
instruments. Markets in options and futures with respect to a number of types
of securities and currencies are relatively new and still developing, and there
is no public market for forward contracts. It is impossible to predict the
amount of trading interest that may exist in various types of futures
contracts, options, and forward contracts. If a
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<PAGE>
secondary market does not exist for an option purchased or written by the Fund,
it might not be possible to effect a closing transaction in the option (i.e.,
dispose of the option) with the result that (i) an option purchased by the Fund
would have to be exercised in order for the Fund to realize any profit and (ii)
the Fund may not be able to sell portfolio securities or currencies covering an
option written by the Fund until the option expires or it delivers the
underlying securities, currency or futures contract upon exercise. Therefore,
no assurance can be given that the Fund will be able to utilize these
instruments effectively. In addition, the Fund's ability to engage in options
and futures transactions may be limited by tax considerations and the use of
certain hedging techniques may adversely impact the characterization of income
to the Fund for U.S. federal income tax purposes.
ADDITIONAL RISK CONSIDERATIONS
Investment in the Fund involves the special risk considerations described
below. These risks may be heightened when investing in emerging markets.
Currency Considerations. The Fund may receive a portion of its revenues in
currencies other than the U.S. Dollar. Therefore, the dollar equivalent of its
net assets, distributions, and income will be adversely affected by reductions
in the value of certain currencies relative to the U.S. Dollar. If the value of
the currencies in which the Fund receives its income falls relative to the U.S.
Dollar between receipt of the income and the making of Fund distributions, the
Fund may be required to liquidate securities in order to make distributions if
it has insufficient cash in U.S. Dollars to meet distribution requirements that
the Fund must satisfy to qualify as a regulated investment company for federal
income tax purposes. Similarly, if an exchange rate declines between the time
the Fund incurs expenses in U.S. Dollars and the time cash expenses are paid,
the amount of the currency required to be converted into U.S. Dollars in order
to pay expenses in U.S. Dollars could be greater than the equivalent amount of
such expenses in the currency at the time they were incurred. In light of these
risks, the Fund may engage in currency hedging transactions, as described
above, which involve certain special risks.
Securities Issued by Non-U.S. Companies. The securities markets of many
countries outside of the United States 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 will include securities issued by non-U.S.
companies, 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 countries require governmental approval prior to investments by foreign
persons or limit investment by foreign persons to only a specified percentage
of an issuer's outstanding securities or a specific class of securities that
may have less advantageous terms (including price) than securities of the
company available for purchase by nationals. These restrictions or controls
may at times limit or preclude investment in certain securities and may
increase the costs and expenses of 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. If a deterioration
occurs in a 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, 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 countries are generally higher than in the United States.
Issuers of securities in jurisdictions other than the United States 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 countries may
differ, in some cases significantly, from U.S. standards in important respects
and less information may be available to investors in securities issued by
non-U.S. companies 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 countries other than the United States 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
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<PAGE>
taxation, currency blockage, political changes, government regulation,
political or social instability, or diplomatic developments could affect
adversely the economy of a 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 countries other
than the United States governing business organizations, bankruptcy and
insolvency may provide less protection to security holders such as the Fund
than that provided by U.S. laws.
Extreme Governmental Action; Less Protective Laws. In contrast to investing in
the United States, investment in other countries may involve in certain
situations greater risk of nationalization, expropriation, confiscatory
taxation, currency blockage or other extreme governmental action that could
adversely impact the Fund's investments. In the event of certain such actions,
the Fund could lose its entire investment in the country involved. In addition,
laws in various countries other than the United States governing, among other
subjects, business organization and practices, securities and securities
trading, bankruptcy and insolvency may provide less protection to investors
such as the Fund than provided under United States laws.
Non-U.S. Taxes. The Fund's investment in securities issued by non-U.S.
companies may be subject to taxes withheld at the source on dividend or
interest payments.
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MANAGEMENT OF THE FUND
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INVESTMENT ADVISER AND FUND MANAGER
The Fund's Adviser is Alliance Capital Management L.P., 1345 Avenue of the
Americas, New York, New York 10105. Alliance is a leading international
investment adviser supervising client accounts with assets as of [________],
2001 totaling more than $[___] billion (of which more than $[___] billion
represented the assets of investment companies). As of [_____], 2001, Alliance
managed retirement assets for many of the largest public and private employee
benefit plans (including [__] of the nation's FORTUNE 100 companies), for
public employee retirement funds in [___] states, for investment companies, and
for foundations, endowments, banks and insurance companies worldwide. The [___]
registered investment companies managed by Alliance, comprising [___] separate
portfolios, currently have more than [___] million shareholder accounts.
The persons primarily responsible for the day-to-day management of the Fund are
[_____] and [_____]. [Biography to be inserted here.]
Alliance provides investment advisory services and order placement facilities
for the Fund. For these advisory services, the Fund pays Alliance a fee at an
annualized rate of [___]% of the Fund's average daily net assets. The fee will
be accrued daily and paid monthly.
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PURCHASE AND SALE OF SHARES
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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. The minimum
initial investment amount is $10,000, except that the minimum initial
investment amount applicable to individual retirement accounts (IRAs) is $2,000.
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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 particular, 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.
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 Exchange is open, either directly or through your financial intermediary.
Your sales price will be the next-determined NAV, less any applicable CDSC,
after the Fund receives your sales request in proper form. Normally, proceeds
will be sent to you within 7 days. If you recently purchased your shares by
check or electronic funds transfer, your redemption payment may be delayed
until the Fund is reasonably satisfied that the check or electronic funds
transfer has been collected (which may take up to 15 days).
o 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.
o Selling Shares Directly to the Fund
By Mail:
--Send a signed letter of instruction or stock power, along with
certificates, to:
Alliance Fund Services, Inc.
P.O. Box 1520
Secaucus, N.J. 07906-1520
800-221-5672
--For your protection, a bank, a member firm of a national stock exchange,
or other eligible guarantor institution, must guarantee signatures. Stock power
forms are available from your financial intermediary, AFS, and many commercial
banks. Additional documentation is required for the sale of shares by
corporations, intermediaries, fiduciaries, and surviving joint owners. If you
have any questions about these procedures, contact AFS.
By Telephone:
--You may redeem your shares for which no stock certificates have been
issued by telephone request. Call AFS at 800-221-5672 with instructions on how
you wish to receive your sale proceeds.
--A telephone redemption request must be received by 4:00 p.m., Eastern
time, for you to receive that day's NAV, less any applicable CDSC.
--If you have selected electronic funds transfer in your Shareholder
Application, the redemption proceeds will be sent directly to your bank.
Otherwise, the proceeds will be mailed to you.
--Redemption requests by electronic funds transfer may not exceed $100,000
per day and redemption requests by check cannot exceed $50,000 per day.
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--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.
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DIVIDENDS, DISTRIBUTIONS AND TAXES
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Dividends and Distributions
The income dividend and capital gains distributions, 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 NAV as of the
close of business on the day following the declaration date of the dividend or
distribution equal to the cash amount of the dividend or distribution. You may
make an election to receive dividends and distributions in cash or in shares at
the time you purchase shares. Your election can be changed at any time prior to
a record date for a dividend. There is no sales or other charge on the
reinvestment of dividends or capital gains distributions. Cash dividends may be
paid in check, or at your election, electronically via the ACH network.
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.
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 distributions of long-term capital gains generally will be taxable to you
as long-term 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.
Investment income received by the Fund from sources within countries outside of
the United States may be subject to non-U.S. income taxes withheld at the
source. To the extent that the Fund is liable for non-U.S. 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 non-U.S. income taxes paid (or to permit shareholders to claim a
deduction for such taxes), but there can be no assurance that the Fund will be
able to do so. Furthermore, a shareholder's ability to claim a tax credit or
deduction for non-U.S. 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 credit or deduction for all or a portion of 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.
If you buy shares just before the Fund deducts a distribution from its NAV, you
will pay the full price for the shares and then receive a portion of the price
back as a taxable distribution.
The sale or exchange of Fund shares is a taxable transaction for federal income
tax purposes.
Each year shortly after December 31, the 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.
16
<PAGE>
Class A Shares--Initial Sales Charge Alternative
You can purchase Class A shares at NAV plus an initial sales charge, as follows:
Initial Sales Charge
Commission to
As % of As % of Dealer/Agent
Net Amount Offering as % of
Amount Purchased Invested Price Offering 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 of the number of years you hold the shares.
The CDSC amounts are:
Years Since Purchase CDSC
-------------------- ----
First 4.0%
Second 3.0%
Third 2.0%
Fourth 1.0%
Fifth None
If you exchange your shares for the Class B shares of another Alliance Mutual
Fund, the CDSC also will apply to those Class B shares. The CDSC period begins
with the date of your original purchase, not the date of exchange for the other
Class B shares.
The Fund's Class B shares purchased for cash automatically convert to Class A
shares eight years after the end of the month of your purchase. If you purchase
shares by exchange for the Class B shares of another Alliance Mutual Fund, the
conversion period runs from the date of your original purchase.
Class C Shares--Asset-Based Sales Charge Alternative
You can purchase shares at NAV without an initial sales charge. 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 Charges 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:
17
<PAGE>
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 might consider purchasing Class A shares. If you are making a
smaller investment, you might consider purchasing Class B shares because 100%
of your purchase is invested immediately. If you are unsure of the length of
your investment, you might consider Class C shares because there is no initial
sales charge and no CDSC as long as the shares are held for one year or more.
Dealers and agents may receive differing compensation for selling Class A,
Class B, or Class C shares. There is no size limit on purchases of Class A
shares. The maximum purchase of Class B shares is $250,000. The maximum
purchase of Class C shares is $1,000,000.
You should consult your financial agent to assist in choosing a Class of Fund
shares.
Application of the CDSC. The CDSC is applied to the lesser of the original cost
of shares being redeemed or NAV at the time of redemption (or, as to Fund
shares acquired through an exchange, the cost of the Alliance Mutual Fund
shares originally purchased for cash). Shares obtained from dividend or
distribution reinvestment are not subject to the CDSC. The Fund may waive the
CDSC on redemptions of shares following the death or disability of a
shareholder, to meet the requirements of certain qualified retirement plans, or
under a monthly, bimonthly, or quarterly systematic withdrawal plan. See the
Fund's SAI for further information about CDSC waivers.
Other. A transaction, service, administrative or other similar fee may be
charged by your broker-dealer, agent, financial intermediary, or other
financial representative with respect to the purchase, sale, or exchange of
Class A, Class B, or Class C shares made through your financial representative.
The financial intermediaries also may impose requirements on the purchase,
sale, or exchange of shares that are different from, or in addition to, those
imposed by a Fund, including requirements as to the minimum initial and
subsequent investment amounts.
-------------------------------------------------------------------------------
GENERAL INFORMATION
-------------------------------------------------------------------------------
Under unusual circumstances, 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.
18
<PAGE>
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:
o 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:
o Call the Commission at 1-202-942-8090 for information on the operation of
the Public Reference Room.
o Reports and other information about the Fund are available on the EDGAR
Database on the Commission's Internet site at http://www.sec.gov.
o Copies of the information may be obtained, after paying a fee, by electronic
request at [email protected], or by writing the Commission's Public Reference
Section, Washington, DC 20549-0102.
You also may find more information about Alliance and the Fund on the Internet
at: www.Alliancecapital.com.
SEC File No. [_____________________]
19
<PAGE>
Advisor Class Prospectus
AllianceBernstein International Value Fund
The AllianceBernstein International Value Fund is an open-end management
investment company structured as a series fund that invests primarily in a
diversified portfolio of equity securities issued by non-U.S. companies.
Prospectus and Application
[____________], 2001
The Securities and Exchange Commission has not approved or disapproved these
securities or passed upon the adequacy of this Prospectus. Any representation
to the contrary is a criminal offense.
AllianceCapital T
Investment Products Offered
* Are Not FDIC Insured
* May Lose Value
* Are Not Bank Guaranteed
<PAGE>
TABLE OF CONTENTS
_______________________________________________________________________________
Page
RISK/RETURN SUMMARY......................................................
FEES AND EXPENSES OF THE FUND............................................
GLOSSARY.................................................................
DESCRIPTION OF THE FUND..................................................
Investment Objective and Principal Policies and Risks....................
Description of Additional Investment Practices...........................
Additional Risk Considerations...........................................
MANAGEMENT OF THE FUND...................................................
PURCHASE AND SALE OF SHARES..............................................
How The Fund Values Its Shares...........................................
How To Buy Shares........................................................
Initial Offering.........................................................
How To Exchange Shares...................................................
How To Sell Shares.......................................................
DIVIDENDS, DISTRIBUTIONS AND TAXES.......................................
DISTRIBUTION ARRANGEMENTS................................................
GENERAL INFORMATION......................................................
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 the
AllianceBernstein International Value Fund. This Risk/Return 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:
* As with all investments, 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.
2
<PAGE>
International Value Fund
_______________________________________________________________________________
OBJECTIVE:
The Fund's investment objective is long-term growth of capital.
PRINCIPAL INVESTMENT STRATEGIES:
The Fund will invest primarily in a diversified portfolio of non-U.S. equity
securities. The Fund's investment policies emphasize investment in companies
that are determined by Alliance to be undervalued, using the fundamental value
approach of Alliance's Bernstein unit ("Bernstein"). In selecting securities
for the Fund's portfolio, Bernstein uses its fundamental research to identify
companies whose long term earnings power is not reflected in the current market
price of their securities.
In order to hedge a portion of currency risk, the Fund may from time to time
invest in currency futures contracts or currency forward contracts.
PRINCIPAL RISKS:
Among the principal risks of investing in the Fund are market risk, non-U.S.
investment risk and currency risk. Market risk is the risk of losses from
adverse changes in the stock market. Investments in countries other than the
United States may have more risk because they tend to be more volatile than the
U.S. stock market. To the extent that the Fund invests a substantial amount of
its assets in a particular country, an investment in the Fund has the risk that
market changes or other events affecting that country may have a more
significant effect on the Fund's net asset value. Because the Fund may invest
in emerging markets and in developing countries, an investment also has the
risk that market changes or other factors affecting emerging markets and
developing countries, including political instability and unpredictable
economic conditions, may have a significant effect on the Fund's net asset
value. Depending on the Fund's investments at a particular time, the Fund may
also have industry/sector risk. The Fund may at times use certain types of
investment derivatives such as options, futures, forwards and swaps. The use
of these techniques involves special risks that are discussed in this
Prospectus.
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.
3
<PAGE>
-------------------------------------------------------------------------------
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
--------------------
Advisor Class Shares
--------------------
Management fees [____]%
Distribution (12b-1) fees [____]%
Other expenses [____]%
_______
Total Fund
operating expenses (a) [____]%
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
--------------------
Advisor Class Shares
--------------------
After 1 Yr. $[______]
After 3 Yrs. $[______]
(a) These examples assume that Alliance's agreement to waive its management
fees and/or reimburse Fund expenses is not extended beyond its initial
period.
-------------------------------------------------------------------------------
GLOSSARY
-------------------------------------------------------------------------------
This Prospectus uses the following terms.
TYPES OF SECURITIES
Convertible securities are fixed-income securities that are convertible into
common stock.
Debt securities are bonds, debentures, notes, bills, loans, other direct debt
instruments, and other fixed, floating and variable rate debt obligations, but
do not include convertible securities.
Depositary receipts include American Depositary Receipts ("ADRs"), Global
Depositary Receipts ("GDRs") and other types of depositary receipts.
4
<PAGE>
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.
Lower-rated securities are fixed-income securities rated Ba or below by Moody's
or BB or below by S&P, Duff & Phelps or Fitch, or determined by Alliance to be
of equivalent quality, and are commonly referred to as "junk bonds."
Non-U.S. Company is an entity that (i) is organized under the laws of a country
other than the United States, (ii) has its principal place of business in a
country other than the United States, and (iii) issues equity or debt
securities that are traded principally in a country other than the United
States.
Prime commercial paper is commercial paper rated Prime 1 by Moody's or A-1 or
higher by S&P or, if not rated, issued by companies that have an outstanding
debt issue rated Aa or higher by Moody's or AA or higher by S&P.
Qualifying bank deposits are certificates of deposit, bankers' acceptances and
interest-bearing savings deposits of banks that have total assets of more than
$1 billion and are members of the Federal Deposit Insurance Corporation.
Rule 144A securities are securities that may be resold pursuant to Rule 144A of
the Securities Act.
U.S. Government securities are securities issued or guaranteed by the United
States Government, its agencies or instrumentalities. [Presumably should be
included for purposes of Temporary Defensive Position.]
RATING AGENCIES
Duff & Phelps is Duff & Phelps Credit Rating Co.
Fitch is Fitch IBCA, Inc.
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.
5
<PAGE>
-------------------------------------------------------------------------------
DESCRIPTION OF THE FUND
-------------------------------------------------------------------------------
This section of the Prospectus provides a more complete description of the
Fund's investment objective, principal investment policies and risks. Of
course, there can be no assurance that the Fund will achieve its investment
objective.
Please note that:
* Additional discussion of the Fund's investments, including the risks of the
investments, can be found in the discussion under Description of Additional
Investment Practices following this section.
* The description of the principal risks for the Fund includes risks described
in the RISK/RETURN SUMMARY above. Additional information about the risks of
investing in the Fund can be found in the discussion 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. Except as noted, the Fund's investment policies
are not fundamental and thus can be changed without a shareholder vote.
INVESTMENT OBJECTIVE AND PRINCIPAL POLICIES AND RISKS
INVESTMENT OBJECTIVE
The Fund's investment objective is long-term growth of capital.
PRINCIPAL POLICIES
The Fund will invest primarily in a diversified portfolio of equity securities
of 50 to 75 established companies selected from more than 40 industries and
from more than 40 developed and emerging market countries. Countries are
generally weighted in proportion to the size of their stock markets, although
the Fund may over- or under-weight a country depending on an assessment of the
relative attractiveness of investments in that country by Alliance's Bernstein
unit ("Bernstein"). The Fund normally invests in companies in at least three
countries other than United States. These countries currently include the
developed nations in Europe and the Far East, Canada, Australia and emerging
market countries worldwide. The Fund's investment policies emphasize
investment in companies that are determined by Bernstein to be undervalued,
using a fundamental value approach. Investment decisions are the result of the
multi-step process described below.
Bernstein's fundamental value approach to equity investing generally defines
value by reference to the relationship between a security's current price and
its intrinsic economic value, as measured by long-term earnings prospects. In
each market, this approach seeks to identify, in the first instance, a universe
of securities that are considered to be undervalued because they are
attractively priced relative to their future earnings power. Accordingly,
forecasting corporate earnings and dividend-paying capability is the heart of
the fundamental value approach.
Bernstein's fundamental analysis depends heavily upon its large internal
research staff. The research staff begins with a global research universe of
approximately 4,000 international and emerging market companies. Teams within
the research staff cover a given industry worldwide, to better understand each
company's competitive position in a global context.
Bernstein's staff of approximately 100 company and industry analysts prepares
its own earnings estimates and financial models for each company analyzed.
Bernstein identifies and quantifies the critical variables that control a
business's performance and analyzes the results in order to forecast each
company's long-term prospects and expected returns. As one of the largest
multi-national investment firms, Alliance and its Bernstein unit have global
access to considerable information concerning all of the companies followed, an
in-depth understanding of the products, services, markets and competition of
these companies and a good knowledge of the management of most of the companies
in its research universe. A company's financial performance is typically
projected over a full economic cycle, including a trough and a peak, within the
context of forecasts for real economic growth, inflation and interest rate
changes. As a result, forecasts of near term economic events are generally not
of major consequence.
6
<PAGE>
A group of senior investment professionals, including the Fund's portfolio
managers, carefully reviews the research process to be sure that the analysts
have appropriately considered key issues facing each company, that forecasts of
a company's future are compatible with its history, and that all forecasts use
consistent analytic frameworks and economic assumptions.
Once Bernstein has applied its fundamental analysis to determine the intrinsic
economic values of each of the companies in its research universe, each company
is then ranked in the order of disparity between its intrinsic economic value
and its stock price, with companies having the greatest disparities receiving
the highest rankings (i.e., being considered the most undervalued). A similar
relative evaluation is performed for the markets in each country.
The Fund does not simply purchase the top-ranked securities. Rather, Bernstein
considers aggregate portfolio characteristics when deciding how much of each
security to purchase for the Fund. Bernstein's team of approximately 40
quantitative analysts build valuation and risk models to ensure that the Fund's
portfolio is constructed to obtain an effective balance of risk and return. By
evaluating overall regional, country and currency exposures, sector
concentration, degree of undervaluation and other subtle similarities among
investments, Bernstein seeks to minimize overall Fund volatility by favoring
those top ranked securities that also tend to diversify the Fund's risk.
A disparity between a company's current stock price and the assessment of
intrinsic value can arise, at least in part, as a result of adverse, short-term
market reactions to recent events or trends. In order to reduce the risk that
an undervalued security will be purchased before such an adverse market
reaction has run its course, Bernstein also monitors analysts'
earnings-estimate revisions and relative return trends (also called "price
momentum") so as to better time new purchases and sales of securities.
Currencies can have a dramatic impact on equity returns, significantly adding
to returns in some years and greatly diminishing them in others. Investment
decisions concerning currencies are made independently of equity investments,
and may be used to hedge the currency exposure resulting from securities
positions.
A security generally will be sold when it no longer meets appropriate valuation
criteria. Sale of a stock that has reached its target may be delayed, however,
when earnings expectations and/or price momentum is favorable.
The Fund may also
* Invest in depositary receipts, instruments of supranational entities
denominated in the currency of any country, securities of multinational
companies and "semi-governmental securities";
* Invest up to 20% of its total assets in convertible securities;
* Write covered put and call options and purchase put and call options on
securities issued by U.S. and non-U.S. companies, security exchanges and over
the counter, including options on market indices and currencies;
* Invest up to 15% of its net assets in illiquid securities;
* Invest up to 10% of its total assets in rights and warrants;
* Enter into forward commitments, futures contracts and options on futures
contracts with respect to securities, indices and currencies;
* Enter into contracts for the purchase and sale for the future delivery of
contracts based on financial indices;
* Enter into currency swaps and forward currency exchange contracts for hedging
purposes;
* Make secured loans of portfolio securities of up to 30% of its total assets;
and
* Enter into repurchase agreements.
PRINCIPAL 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 markets fluctuate and that prices overall will decline
over short- or long-term periods.
* Sector Risk This is the risk of investments in a particular industry sector.
If the Fund invests a substantial amount of its assets in companies engaged in
a particular industry sector, market or economic factors affecting that
industry could have a major effect on the value of the Fund's investments.
7
<PAGE>
* Capitalization Risk This is the risk of investments in small capitalization
companies. Investments in small- and mid-cap companies may be more volatile
than investments in large-cap companies. Investments in small-cap companies
tend to be more volatile than investments in mid- or large-cap companies. The
Fund's investments in smaller capitalization companies may have additional
risks because these companies often have limited product lines, markets or
financial resources.
* Derivative and Leverage Risk The Fund may make substantial use of derivatives
and employ specialized trading techniques such as short sales, options,
futures, forwards, and other leveraging techniques to increase its exposure to
certain selected securities. Alliance employs these techniques speculatively to
enhance returns and not merely as hedging tools. These techniques are riskier
than many investment strategies and will result in greater volatility for the
Fund, particularly in periods of market declines.
* Non-U.S. Investment Risk This is the risk of investments in issuers located
in countries other than the United States. Investments in securities issued by
non-U.S. companies 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 countries are relatively small, with a limited number of
companies representing a small number of industries. Additionally, non-U.S.
issuers are usually not subject to the same degree of regulation as U.S.
issuers. Reporting, accounting and auditing standards of 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
country other than the United States. In the event of nationalization,
expropriation or other confiscation, the Fund could lose its entire investment.
* Currency Risk This is the risk that fluctuations in the exchange rates
between the U.S. Dollar and other currencies may negatively affect the value of
the Fund's investments.
* 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[, including its fundamental value approach,] in
making investment decisions for the Fund, but there is no guarantee that its
techniques will produce the intended result.
Portfolio Turnover. The Fund's portfolio turnover is not expected to exceed
100%.
Temporary Defensive Position. For temporary defensive purposes, the Fund may
reduce its position in equity securities and increase without limit its
position in short-term, liquid, high-grade debt securities, which may include
U.S. Government securities, bank deposits, money market instruments, short-term
debt securities, including notes and bonds, or hold its assets in cash. While
the Fund is investing for temporary defensive purposes, it may not meet its
investment objective.
DESCRIPTION OF ADDITIONAL INVESTMENT PRACTICES
This section describes the investment practices of the Fund and risks
associated with these practices.
Convertible Securities. Prior to conversion, convertible securities have the
same general characteristics as nonconvertible debt securities, which generally
provide a stable stream of income with generally higher yields than those of
equity securities of the same or similar issuers. The price of a convertible
security will normally vary with changes in the price of the underlying equity
security, although the higher yield tends to make the price of the convertible
security less volatile than that of the underlying equity security. As with
debt securities, the market values of convertible securities tend to decrease
as interest rates rise and increase as interest rates fall. While convertible
securities generally offer lower interest yields than non-convertible debt
securities of similar quality, they offer investors the potential to benefit
from increases in the market prices of the underlying common stocks.
Convertible securities that are rated Baa or lower by Moody's and BBB or lower
by S&P or, if unrated, determined by Alliance to be of equivalent quality, may
share some or all of the risks of non-convertible debt securities with those
ratings. The Fund may invest up to 20% of its total assets in convertible
securities.
Currency Swaps. Currency swaps involve the individually negotiated exchange by
the Fund with another party of a series of payments in specified currencies. A
currency swap may involve the delivery at the end of the exchange period of a
substantial amount of one designated currency in exchange for the other
designated currency. Therefore, the entire principal value of a currency swap
is subject to the risk that the swap counterparty will default on its
contractual delivery obligations. The Fund will enter into currency swaps for
hedging purposes only. The Fund will not enter into any currency swap unless
the credit quality of the unsecured senior debt or the claims-paying ability of
the counterparty is rated in the highest rating category of at least one
nationally recognized rating organization at the time of entering into the
transaction. If there is a default by the other party to such a transaction,
the Fund will have contractual remedies under the transaction agreements.
Depositary Receipts. Depositary receipts may not necessarily be denominated in
the same currency as the underlying securities into which they may be
converted. In addition, the issuers of the stock of unsponsored depositary
receipts are not
8
<PAGE>
obligated to disclose material information in the United States, and therefore,
there may not be a correlation between such information and the market value of
the depositary receipts. ADRs are depositary receipts typically issued by a
U.S. bank or trust company that evidence ownership of underlying securities
issued by a non-U.S. corporation. GDRs and other types of depositary receipts
are typically issued by non-U.S. banks or trust companies and evidence
ownership of underlying securities issued by either a U.S. or a non-U.S.
company. Generally, depositary receipts in registered form are designed for use
in the U.S. securities markets, and depositary receipts in bearer form are
designed for use in securities markets outside of the United States.
Forward Currency Exchange Contracts. The Fund may purchase or sell forward
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 currency in
order to "lock in" the U.S. Dollar price of the security ("transaction hedge").
The Fund will not engage in transaction hedges with respect to the currency of
a particular country to an extent greater than the aggregate amount of the
Fund's transactions in that currency. When the Fund believes that a 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 currency approximating the
value of some or all of the Fund's portfolio securities denominated in such
currency, or when the Fund believes that the U.S. Dollar may suffer a
substantial decline against another currency, it may enter into a forward
purchase contract to buy that 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 currency for a
fixed U.S. dollar amount where the Fund believes that the U.S. Dollar value of
the currency to be sold pursuant to the forward contract will fall whenever
there is a decline in the U.S. Dollar value of the currency in which portfolio
securities of the Fund are denominated ("cross-hedge"). Unanticipated changes
in currency prices may result in poorer overall performance for the Fund than
if it had not entered into such forward contracts. Hedging against a decline
in the value of a currency does not eliminate fluctuations in the prices of
portfolio securities or prevent losses if the prices of such securities
decline. Such transactions also preclude the opportunity for gain if the value
of the hedged currency should rise. Moreover, it may not be possible for 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
devaluation level it anticipates..
Illiquid Securities. The Fund will limit its investment in illiquid securities
to no more than 15% 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 will not be treated as
"illiquid" for purposes of this limit on investments if they meet certain
liquidity guidelines established by the Fund or Alliance.
The Fund may not be able to readily sell securities for which there is no ready
market. Such securities are unlike securities that are traded in the open
market and can be expected to be sold immediately if the market is adequate.
The sale price of illiquid securities may be lower or higher than Alliance's
most recent estimate of their fair value. Generally, less public information is
available about the issuers of such securities than about companies whose
securities are traded on an exchange. To the extent that these securities are
securities issued by non-U.S. companies, 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 of up to 30% of its total assets 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 risk in lending
portfolio securities, as with other extensions of credit, consists of the
possible loss of rights in the collateral should the borrower fail financially.
In determining whether to lend securities to a particular borrower, Alliance
will consider all relevant facts and circumstances, including the
creditworthiness of the borrower. While securities are on loan, the
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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.
Options on Securities. An option gives the purchaser of the option, upon
payment of a premium, the right to deliver to (in the case of a put) or receive
from (in the case of a call) the writer of the option a specified amount of a
security on or before a fixed date at a predetermined price. A call option
written by the Fund is "covered" if the Fund owns the underlying security, has
an absolute and immediate right to acquire that security upon conversion or
exchange of another security it holds, or holds a call option on the underlying
security with an exercise price equal to or less than that of the call option
it has written. A put option written by the Fund is "covered" if the Fund holds
a put on the underlying securities with an exercise price equal to or greater
than that of the put option it has written.
A call option is for cross-hedging purposes if the Fund does not own the
underlying security and is designed to provide a hedge against a decline in
value in another security which the Fund owns or has the right to acquire. The
Fund may write call options for cross-hedging purposes. The Fund would write a
call option for cross-hedging purposes, instead of writing a covered call
option, when the premium to be received from the cross-hedge transaction would
exceed that which would be received from writing a covered call option, while
at the same time achieving the desired hedge.
In purchasing an option, the Fund would be in a position to realize a gain if,
during the option period, the price of the underlying security increased (in
the case of a call) or decreased (in the case of a put) by an amount in excess
of the premium paid; otherwise the Fund would experience a loss equal to the
premium paid for the option.
If an option written by the Fund were exercised, the Fund would be obligated to
purchase (in the case of a put) or sell (in the case of a call) the underlying
security at the exercise price. The risk involved in writing an option is that,
if the option is exercised, the underlying security would then be purchased or
sold by the Fund at a disadvantageous price. Entering into a closing
transaction (i.e., by disposing of the option prior to its exercise) could
reduce these risks. The Fund retains the premium received from writing a put or
call option whether or not the option is exercised. The writing of call options
could result in increases in the Fund's portfolio turnover rate, especially
during periods when market prices of the underlying securities appreciate.
The Fund will purchase or write options on securities of the types in which it
is permitted to invest in privately negotiated (i.e., over-the-counter)
transactions only with investment dealers and other financial institutions
(such as commercial banks or savings and loan institutions) deemed creditworthy
by Alliance. Alliance has adopted procedures for monitoring the
creditworthiness of such entities. Options purchased or written by the Fund in
negotiated transactions are illiquid and it may not be possible for the Fund to
effect a closing transaction at an advantageous time.
Options on Securities Indices. An option on a securities index is similar to
an option on a security except that, rather than the right to take or make
delivery of a security at a specified price, an option on a securities index
gives the holder the right to receive, upon exercise of the option, an amount
of cash if the closing level of the chosen index is greater than (in the case
of a call) or less than (in the case of a put) the exercise price of the option.
Options on Currencies. As in the case of other kinds of options, the writing
of an option on a currency constitutes only a partial hedge, up to the amount
of the premium received, and the Fund could be required to purchase or sell
currencies at disadvantageous exchange rates, thereby incurring losses. The
purchase of an option on a currency may constitute an effective hedge against
fluctuations in exchange rates although, in the event of rate movements adverse
to the Fund's position, the Fund may forfeit the entire amount of the premium
plus related transaction costs.
Futures Contracts and Options on Futures Contracts. A "sale" of a futures
contract means the acquisition of a contractual obligation to deliver the
securities or currency or other commodity called for by the contract at a
specified price on a specified date. A "purchase" of a futures contract means
the incurring of an obligation to acquire the securities or currency or other
commodity called for by the contract at a specified price on a specified date.
The purchaser of a futures contract on an index agrees to take or make delivery
of an amount of cash equal to the difference between a specified dollar
multiple of the value of the index on the expiration date of the contract
("current contract value") and the price at which the contract was originally
struck. No physical delivery of the securities underlying the index is made.
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Options on Futures contracts are options that, upon exercise, call for the
delivery of futures contracts (or cash payments based on the value of futures
contracts). Options on futures contracts written or purchased by the Fund will
be traded on exchanges worldwide or over-the-counter. These investment
techniques will be used only to hedge against anticipated future changes in
market conditions and interest or exchange rates which otherwise might either
adversely affect the value of the Fund's portfolio securities or adversely
affect the prices of securities which the Fund intends to purchase at a later
date.
The Fund will not enter into any futures contracts or options on futures
contracts if immediately thereafter the market values of the outstanding
futures contracts of the Fund and the currencies and futures contracts subject
to outstanding options written by the Fund would exceed [___]% of its total
assets.
Repurchase Agreements. A repurchase agreement arises when a buyer purchases a
security and simultaneously agrees to resell it to the vendor at an agreed-upon
future date, normally a day or a few days later. The resale price is greater
than the purchase price, reflecting an agreed-upon interest rate for the period
the buyer's money is invested in the security. Such agreements permit 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 prevented from,
selling the collateral for its benefit. Alliance monitors the creditworthiness
of the vendors with which the Fund enters into repurchase agreements.
Rights and Warrants. The Fund will invest in rights or warrants only if the
underlying equity securities themselves are deemed appropriate by Alliance for
inclusion in the Fund's portfolio. Rights and warrants entitle the holder to
buy equity securities at a specific price for a specific period of time. Rights
are similar to warrants except that they have a substantially shorter duration.
Rights and warrants may be considered more speculative than certain other types
of investments in that they do not entitle a holder to dividends or voting
rights with respect to the underlying securities nor do they represent any
rights in the assets of the issuing company. The value of a right or warrant
does not necessarily change with the value of the underlying security, although
the value of a right or warrant may decline because of a decrease in the value
of the underlying security, the passage of time or a change in perception as to
the potential of the underlying security, or any combination of these factors.
If the market price of the underlying security is below the exercise price of
the warrant on the expiration date, the warrant will expire worthless.
Moreover, a right or warrant ceases to have value if it is not exercised prior
to the expiration date. The Fund may invest up to 10% of its total assets in
rights and warrants.
Short Sales. The Fund may utilize short selling in order to attempt both to
protect its portfolio against the effects of potential downtrends in the
securities markets and as a means of enhancing its overall performance. A short
sale is a transaction in which the Fund sells a security it does not own but
has borrowed in anticipation that the market price of that security will
decline. The Fund may be required to pay a fee to borrow the security and to
pay over to the lender any payments received on the security.
If the price of the security sold short increases between the time of the short
sale and the time the Fund replaces the borrowed security, the Fund will incur
a loss; conversely, if the price declines, the Fund will realize a capital
gain. Although the Fund's gain is limited by the price at which it sold the
security short, its potential loss is unlimited. The Fund may engage in short
sales for up to 33% of its total assets.
Stock Index Futures. The Fund may purchase and sell stock index futures as a
hedge against movements in the equity markets. There are several risks in
connection with the use of stock index futures by the Fund as a hedging device.
One risk arises because of the imperfect correlation between movements in the
price of a stock index future and movements in the price of the securities
which are the subject of the hedge. The price of a stock index future may move
more than or less than the price of the securities being hedged. If the price
of a stock index future moves less than the price of the securities which are
the subject of the hedge, the hedge will not be fully effective but, if the
price of the securities being hedged has moved in an unfavorable direction, the
Fund would be in a better position than if it had not hedged at all. If the
price of the securities being hedged has moved in a favorable direction, this
advantage will be partially offset by the loss on the index futures contract.
If the price of the index future moves more than the price of the stock, the
Fund will experience either a loss or gain on the futures contract which will
not be completely offset by movements in the price of the securities which are
subject to the hedge.
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To compensate for the imperfect correlation of movements in the price of
securities being hedged and movements in the price of a stock index future, the
Fund may buy or sell stock index futures contracts in greater dollar amount
than the dollar amount of securities being hedged if the volatility over a
particular time period of the prices of such securities has been greater than
the volatility over such time period of the stock index, or if otherwise deemed
to be appropriate by Alliance. Conversely, the Fund may buy or sell fewer stock
index futures contracts if the volatility over a particular time period of the
prices of the securities being hedged is less than the volatility over such
time period of the stock index, or it is otherwise deemed to be appropriate by
Alliance. It is also possible that, where the Fund has sold futures to hedge
its portfolio against a decline in the market, the market may advance and the
value of securities held in the Fund may decline. If this occurred, the Fund
would lose money on the futures and also experience a decline in value in its
portfolio securities. However, over time the value of a diversified portfolio
should tend to move in the same direction as the market indices upon which the
index futures are based, although there may be deviations arising from
differences between the composition of the Fund and the stock comprising the
index.
Where a stock index futures contract is purchased to hedge against a possible
increase in the price of stock before the Fund is able to invest its cash (or
cash equivalents) in stocks (or options) in an orderly fashion, it is possible
that the market may decline instead. If the Fund then concludes not to invest
in stock or options at that time because of concern as to possible further
market decline or for other reasons, the Fund will realize a loss on the
futures contract that is not offset by a reduction in the price of securities
purchased.
In addition to the possibility that there may be an imperfect correlation, or
no correlation at all, between movements in stock index futures and the portion
of the portfolio being hedged, the price of stock index futures may not
correlate perfectly with movement in the stock index due to certain market
distortions. Rather than meeting additional margin deposit requirements,
investors may close futures contracts through offsetting transactions which
could distort the normal relationship between the index and futures markets.
From the point of view of speculators, the deposit requirements in the futures
market are less onerous than margin requirements in the securities market.
Therefore, increased participation by speculators in the futures market may
also cause temporary price distortions. Due to the possibility of price
distortion in the futures market, and because of the imperfect correlation
between the movements in a stock index and movements in the price of stock
index futures, a correct forecast of general market trends by Alliance may
still not result in a successful hedging transaction over a short time frame.
Positions in stock index futures may be closed out only on an exchange or board
of trade which provides a secondary market for such futures. Although the Fund
intends to purchase or sell futures only on exchanges or boards of trade where
there appear to be active secondary markets, there is no assurance that a
liquid secondary market on any exchange or board of trade will exist for any
particular futures contract or at any particular time. In such event, it may
not be possible to close a futures investment position, and in the event of
adverse price movements, the Fund would continue to be required to make daily
cash payments of variation margin. However, in the event that futures contracts
have been used to hedge portfolio securities, such securities will not be sold
until the futures contract can be terminated. In such circumstances, an
increase in the price of the securities, if any, may partially or completely
offset losses on the futures contract. As described above, however, there is no
guarantee that the price of the securities will in fact correlate with the
price movements in the futures contract and thus provide an offset on a futures
contract.
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. Unlike
many exchange-traded futures contracts and options on futures contracts, there
are no daily price fluctuation limits for certain options on currencies and
forward contracts, and adverse market movements could therefore continue to an
unlimited extent over a period of time. In addition, the correlation between
movements in the prices of such instruments and movements in the prices of the
securities and currencies hedged or used for cover will not be perfect and
could produce unanticipated losses.
The Fund's ability to dispose of its positions in futures contracts, options
and forward contracts depends on the availability of liquid markets in such
instruments. Markets in options and futures with respect to a number of types
of securities and currencies are relatively new and still developing, and there
is no public market for forward contracts. It is impossible to predict the
amount of trading interest that may exist in various types of futures
contracts, options, and forward contracts. If a
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secondary market does not exist for an option purchased or written by the Fund,
it might not be possible to effect a closing transaction in the option (i.e.,
dispose of the option) with the result that (i) an option purchased by the Fund
would have to be exercised in order for the Fund to realize any profit and (ii)
the Fund may not be able to sell portfolio securities or currencies covering an
option written by the Fund until the option expires or it delivers the
underlying securities, currency or futures contract upon exercise. Therefore,
no assurance can be given that the Fund will be able to utilize these
instruments effectively. In addition, the Fund's ability to engage in options
and futures transactions may be limited by tax considerations and the use of
certain hedging techniques may adversely impact the characterization of income
to the Fund for U.S. federal income tax purposes.
ADDITIONAL RISK CONSIDERATIONS
Investment in the Fund involves the special risk considerations described
below. These risks may be heightened when investing in emerging markets.
Currency Considerations. The Fund may receive a portion of its revenues in
currencies other than the U.S. Dollar. Therefore, the dollar equivalent of its
net assets, distributions, and income will be adversely affected by reductions
in the value of certain currencies relative to the U.S. Dollar. If the value of
the currencies in which the Fund receives its income falls relative to the U.S.
Dollar between receipt of the income and the making of Fund distributions, the
Fund may be required to liquidate securities in order to make distributions if
it has insufficient cash in U.S. Dollars to meet distribution requirements that
the Fund must satisfy to qualify as a regulated investment company for federal
income tax purposes. Similarly, if an exchange rate declines between the time
the Fund incurs expenses in U.S. Dollars and the time cash expenses are paid,
the amount of the currency required to be converted into U.S. Dollars in order
to pay expenses in U.S. Dollars could be greater than the equivalent amount of
such expenses in the currency at the time they were incurred. In light of these
risks, the Fund may engage in currency hedging transactions, as described
above, which involve certain special risks.
Securities Issued by Non-U.S. Companies. The securities markets of many
countries outside of the United States 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 will include securities issued by non-U.S.
companies, 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 countries require governmental approval prior to investments by foreign
persons or limit investment by foreign persons to only a specified percentage
of an issuer's outstanding securities or a specific class of securities that
may have less advantageous terms (including price) than securities of the
company available for purchase by nationals. These restrictions or controls
may at times limit or preclude investment in certain securities and may
increase the costs and expenses of 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. If a deterioration
occurs in a 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, 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 countries are generally higher than in the United States.
Issuers of securities in jurisdictions other than the United States 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 countries may
differ, in some cases significantly, from U.S. standards in important respects
and less information may be available to investors in securities issued by
non-U.S. companies 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 countries other than the United States 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
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taxation, currency blockage, political changes, government regulation,
political or social instability, or diplomatic developments could affect
adversely the economy of a 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 countries other
than the United States governing business organizations, bankruptcy and
insolvency may provide less protection to security holders such as the Fund
than that provided by U.S. laws.
Extreme Governmental Action; Less Protective Laws. In contrast to investing in
the United States, investment in other countries may involve in certain
situations greater risk of nationalization, expropriation, confiscatory
taxation, currency blockage or other extreme governmental action that could
adversely impact the Fund's investments. In the event of certain such actions,
the Fund could lose its entire investment in the country involved. In addition,
laws in various countries other than the United States governing, among other
subjects, business organization and practices, securities and securities
trading, bankruptcy and insolvency may provide less protection to investors
such as the Fund than provided under United States laws.
Non-U.S. Taxes. The Fund's investment in securities issued by non-U.S.
companies may be subject to taxes withheld at the source on dividend or
interest payments.
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MANAGEMENT OF THE FUND
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INVESTMENT ADVISER AND FUND MANAGER
The Fund's Adviser is Alliance Capital Management L.P., 1345 Avenue of the
Americas, New York, New York 10105. Alliance is a leading international
investment adviser supervising client accounts with assets as of [________],
2001 totaling more than $[___] billion (of which more than $[___] billion
represented the assets of investment companies). As of [_____], 2001, Alliance
managed retirement assets for many of the largest public and private employee
benefit plans (including [__] of the nation's FORTUNE 100 companies), for
public employee retirement funds in [___] states, for investment companies, and
for foundations, endowments, banks and insurance companies worldwide. The [___]
registered investment companies managed by Alliance, comprising [___] separate
portfolios, currently have more than [___] million shareholder accounts.
The persons primarily responsible for the day-to-day management of the Fund are
[_____] and [_____]. [Biography to be inserted here.]
Alliance provides investment advisory services and order placement facilities
for the Fund. For these advisory services, the Fund pays Alliance a fee at an
annualized rate of [___]% of the Fund's average daily net assets. The fee will
be accrued daily and paid monthly.
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PURCHASE AND SALE OF SHARES
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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 shares solely:
* through accounts established under a fee-based program, sponsored and
maintained by a registered broker-dealer or other financial intermediary and
approved by the Fund's principal underwriter, Alliance Fund Distributors, Inc.
or AFD;
* through a self-directed defined contribution employee benefit plan (e.g., a
401(k) plan) that has at least 1,000 participants
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or $25 million in assets;
* by investment advisory clients of, and certain other persons associated with,
Alliance and its affiliates or the Funds; and
* through registered investment advisers or other financial intermediaries who
charge a management, consulting or other fee for their services and who
purchase shares through a broker or agent approved by AFD and clients of such
registered investment advisers or financial intermediaries whose accounts are
linked to the master account of such investment adviser or financial
intermediary on the books of such approved broker or agent.
Generally, a fee-based program must charge an asset-based or other similar fee
and must invest at least $250,000 in Advisor Class shares to be approved by AFD
for investment in Advisor Class shares. The Fund's Statement of Additional
Information has more detailed information about who may purchase and hold
Advisor Class shares.
The Fund may refuse any order to purchase Advisor Class shares. In particular,
the Fund reserves the right to restrict purchases of Advisor Class shares
(including through exchanges) when there appears to be evidence of a pattern of
frequent purchases and sales made in response to short-term considerations.
How To Exchange Shares
You may exchange your Advisor Class shares for Advisor Class shares of other
Alliance Mutual Funds (including AFD Exchange Reserves, a money market fund
managed by Alliance). Exchanges of Advisor Class 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 Exchange is open, either directly or through your financial intermediary.
Your sales price will be the next-determined NAV, less any applicable CDSC,
after the Fund receives your sales request in proper form. Normally, proceeds
will be sent to you within 7 days. If you recently purchased your shares by
check or electronic funds transfer, your redemption payment may be delayed
until the Fund is reasonably satisfied that the check or electronic funds
transfer has been collected (which may take up to 15 days). 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.
o 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, less any applicable CDSC. Your financial representative
is responsible for submitting all necessary documentation to the Fund and may
charge you for this service.
o Selling Shares Directly to the Fund
By Mail:
--Send a signed letter of instruction or stock power, along with certificates,
to:
Alliance Fund Services, Inc.
P.O. Box 1520
Secaucus, N.J. 07906-1520
800-221-5672
--For your protection, a bank, a member firm of a national stock exchange, or
other eligible guarantor institution, must guarantee signatures. Stock power
forms are available from your financial intermediary, AFS, and many commercial
banks. Additional documentation is required for the sale of shares by
corporations, intermediaries, fiduciaries, and surviving joint owners. If you
have any questions about these procedures, contact AFS.
By Telephone:
--You may redeem your shares for which no stock certificates have been issued
by telephone request. Call AFS at 800-221-5672 with instructions on how you
wish to receive your sale proceeds.
15
<PAGE>
--A telephone redemption request must be received by 4:00 p.m., Eastern time,
for you to receive that day's NAV, less any applicable CDSC.
--If you have selected electronic funds transfer in your Shareholder
Application, the redemption proceeds will be sent directly to your bank.
Otherwise, the proceeds will be mailed to you.
--Redemption requests by electronic funds transfer may not exceed $100,000 per
day and redemption requests by check cannot exceed $50,000 per day.
--Telephone redemption is not available for shares held in nominee or "street
name" accounts, retirement plan accounts, or shares held by a shareholder who
has changed his or her address of record within the previous 30 calendar days.
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 a Fund that are
different from those described in this prospectus. A transaction, service,
administrative or other similar fee may be charged by your broker-dealer,
agent, financial intermediary or other financial representative with respect to
the purchase, sale or exchange of Advisor Class shares made through such
financial representative. Such financial intermediaries may also impose
requirements with respect to the purchase, sale or exchange of shares that are
different from, or in addition to, those imposed by a Fund, including
requirements as to the minimum initial and subsequent investment amounts.
-------------------------------------------------------------------------------
DIVIDENDS, DISTRIBUTIONS AND TAXES
-------------------------------------------------------------------------------
Dividends and Distributions
The income dividend and capital gains distributions, 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 NAV as of the
close of business on the day following the declaration date of the dividend or
distribution equal to the cash amount of the dividend or distribution. You may
make an election to receive dividends and distributions in cash or in shares at
the time you purchase shares. Your election can be changed at any time prior to
a record date for a dividend. There is no sales or other charge on the
reinvestment of dividends or capital gains distributions. Cash dividends may be
paid in check, or at your election, electronically via the ACH network.
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.
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 distributions of long-term capital gains generally will be taxable to you
as long-term 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.
Investment income received by the Fund from sources within countries outside of
the United States may be subject to non-U.S. income taxes withheld at the
source. To the extent that the Fund is liable for non-U.S. 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 non-U.S. income taxes paid (or to permit shareholders to claim a
deduction for such taxes), but there can be no assurance that the Fund will be
able to do so. Furthermore, a shareholder's ability to claim a tax credit or
deduction for non-U.S. 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 credit or deduction for all or a portion of the amount of
such taxes.
16
<PAGE>
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.
If you buy shares just before the Fund deducts a distribution from its NAV, you
will pay the full price for the shares and then receive a portion of the price
back as a taxable distribution.
The sale or exchange of Fund shares is a taxable transaction for federal income
tax purposes.
Each year shortly after December 31, the 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 Funds. If a holder of Advisor Class shares (i) ceases to
participate in the fee-based program or plan, or to be associated with an
eligible investment advisor or financial intermediary or (ii) is otherwise no
longer eligible to purchase Advisor Class shares (each a "Conversion Event"),
then all Advisor Class shares held by the shareholder will convert
automatically to Class A shares of the same Fund. The Fund will provide the
shareholder with at least 30 days advance notice of such conversion. The
failure of a shareholder or a fee-based program to satisfy the minimum
investment requirements to purchase Advisor Class shares will not constitute a
Conversion Event. The conversion would occur on the basis of the relative NAV
of the two classes and without the imposition of any sales load, fee or other
charge.
Description of Class A Shares
The Class A shares of each Fund have a distribution fee of .30% under the
Fund's Rule 12b-1 plan that allows the Fund to pay distribution and service
fees for the distribution and sale of its shares. Because this fee is paid out
of the Fund's assets, Class A shares have a higher expense ratio and may pay
lower dividends and may have a lower NAV than Advisor Class shares.
-------------------------------------------------------------------------------
GENERAL INFORMATION
-------------------------------------------------------------------------------
Under unusual circumstances, 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.
17
<PAGE>
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:
o 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:
o Call the Commission at 1-202-942-8090 for information on the operation of
the Public Reference Room.
o Reports and other information about the Fund are available on the EDGAR
Database on the Commission's Internet site at http://www.sec.gov.
o Copies of the information may be obtained, after paying a fee, by electronic
request at [email protected], or by writing the Commission's Public Reference
Section, Washington, DC 20549-0102.
You also may find more information about Alliance and the Fund on the Internet
at: www.Alliancecapital.com.
SEC File No. [_____________________]
18
<PAGE>
AllianceBernstein Value Fund
The AllianceBernstein Value Fund is an open-end management investment
company structured as a series fund that invests in a diversified portfolio of
equity securities of companies with relatively large market capitalizations.
Prospectus and Application
[____________], 2001
The Securities and Exchange Commission has not approved or disapproved these
securities or passed upon the adequacy of this Prospectus. Any representation
to the contrary is a criminal offense.
AllianceCapital T
Investment Products Offered
* Are Not FDIC Insured
* May Lose Value
* Are Not Bank Guaranteed
<PAGE>
TABLE OF CONTENTS
_______________________________________________________________________________
Page
RISK/RETURN SUMMARY......................................................
FEES AND EXPENSES OF THE FUND............................................
GLOSSARY.................................................................
DESCRIPTION OF THE FUND..................................................
Investment Objective and Principal Policies and Risks....................
Description of Additional Investment Practices...........................
Additional Risk Considerations...........................................
MANAGEMENT OF THE FUND...................................................
PURCHASE AND SALE OF SHARES..............................................
How The Fund Values Its Shares...........................................
How To Buy Shares........................................................
Initial Offering.........................................................
How To Exchange Shares...................................................
How To Sell Shares.......................................................
DIVIDENDS, DISTRIBUTIONS AND TAXES.......................................
DISTRIBUTION ARRANGEMENTS................................................
GENERAL INFORMATION......................................................
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 the
AllianceBernstein Value Fund. This Risk/Return 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:
* As with all investments, 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.
2
<PAGE>
Value Fund
_______________________________________________________________________________
OBJECTIVE:
The Fund's investment objective is long-term growth of capital.
PRINCIPAL INVESTMENT STRATEGIES:
The Fund invests primarily in a diversified portfolio of equity securities of
companies with relatively large market capitalizations that Alliance believes
are undervalued. The Fund's investment policies emphasize investment in
companies that are determined by Alliance to be undervalued, using the
fundamental value approach of Alliance's Bernstein unit ("Bernstein"). In
selecting securities for the Fund's portfolio, Alliance uses its fundamental
research to identify companies whose long-term earnings power and dividend
paying capability are not reflected in the current market price of their
securities.
The Fund may also invest 15% of its total assets in securities issued by
non-U.S. companies.
PRINCIPAL RISKS:
Among the principal risks of investing in the Fund is market risk, which is the
risk of losses from adverse changes in the stock market. Depending on the
Fund's investments at a particular time, the Fund may also have industry/sector
risk. To the extent the Fund invests in non-U.S. equity securities, it may
have non-U.S. investment risk and currency risk. The Fund may at times use
certain types of investment derivatives such as options, futures, forwards and
swaps. The use of these techniques involves special risks that are discussed
in this Prospectus.
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.
3
<PAGE>
-------------------------------------------------------------------------------
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 first year.
ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from Fund assets)
Operating Expenses
------------------------------------------------
Class A Class B Class C
-------------- -------------- --------------
Management fees [____]% [____]% [____]%
Distribution (12b-1) fees [_ [____]% [____]%
Other expenses [____]% [____]% [____]%
Total Fund
operating expenses (a) [____]% [____]% [____]%
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
-----------------------------------------------------
Class A Class B+ Class B++ Class C+ Class C++
-----------------------------------------------------
After 1 Yr. $[______] $[______] $[______] $[______] $[______]
After 3 Yrs. $[______] $[______] $[______] $[______] $[______]
(a) Alliance has contractually agreed to waive its management fees and/or to
bear expenses of the Fund through [ ] to the extent
necessary to prevent total fund operating expenses, on an annualized
basis, from exceeding [ ]% for Class A shares and [ ]% for
Classes B & C shares. The fees waived and expenses borne by Alliance
during this period may be reimbursed by the Fund during the three years
after commencement of operations. No reimbursement payment will be made
that would cause the Fund's total annualized operating expenses to exceed
these percentages or cause the total of the payments to exceed the Fund's
total initial organizational and offering expenses.
+ Assumes redemption at the end of period.
++ Assumes no redemption at end of period.
4
<PAGE>
-------------------------------------------------------------------------------
GLOSSARY
-------------------------------------------------------------------------------
This Prospectus uses the following terms.
TYPES OF SECURITIES
Convertible securities are fixed-income securities that are convertible into
common stock.
Debt securities are bonds, debentures, notes, bills, loans, other direct debt
instruments, and other fixed, floating and variable rate debt obligations, but
do not include convertible securities.
Depositary receipts include American Depositary Receipts ("ADRs"), Global
Depositary Receipts ("GDRs") and other types of depositary receipts.
Equity securities 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.
Lower-rated securities are fixed-income securities rated Ba or below by Moody's
or BB or below by S&P, Duff & Phelps or Fitch, or determined by Alliance to be
of equivalent quality, and are commonly referred to as "junk bonds."
Non-U.S. Company is an entity that (i) is organized under the laws of a country
other than the United States, (ii) has its principal place of business in a
country other than the United States, and (iii) issues equity or debt
securities that are traded principally in a country other than the United
States.
Prime commercial paper is commercial paper rated Prime 1 by Moody's or A-1 or
higher by S&P or, if not rated, issued by companies that have an outstanding
debt issue rated Aa or higher by Moody's or AA or higher by S&P.
Qualifying bank deposits are certificates of deposit, bankers' acceptances and
interest-bearing savings deposits of banks that have total assets of more than
$1 billion and are members of the Federal Deposit Insurance Corporation.
Rule 144A securities are securities that may be resold pursuant to Rule 144A of
the Securities Act.
U.S. Government securities are securities issued or guaranteed by the United
States Government, its agencies or instrumentalities.
RATING AGENCIES
Duff & Phelps is Duff & Phelps Credit Rating Co.
Fitch is Fitch IBCA, Inc.
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.
Russell 1000(tm) Value Index measures the performance of those Russell 1000
companies with lower price-to-book ratios and lower forecasted growth values.
The Russell 1000(tm) universe of securities is compiled by Frank Russell
Company and is segmented into two style indices, the Russell 1000(tm) Growth
Index and the Russell 1000(tm) Value Index.
5
<PAGE>
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 investment policies and risks. Of
course, there can be no assurance that the Fund will achieve its investment
objective.
Please note that:
* Additional discussion of the Fund's investments, including the risks of the
investments, can be found in the discussion under Description of Additional
Investment Practices following this section.
* The description of the principal risks for the Fund includes risks described
in the RISK/RETURN SUMMARY above. Additional information about the risks of
investing in the Fund can be found in the discussion 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. Except as noted, the Fund's investment policies
are not fundamental and thus can be changed without a shareholder vote.
INVESTMENT OBJECTIVE AND PRINCIPAL POLICIES AND RISKS
INVESTMENT OBJECTIVE
The Fund's investment objective is long-term growth of capital.
PRINCIPAL POLICIES
The Fund invests primarily in a diversified portfolio of equity securities
generally representing at least 125 companies. The Fund's investment strategy
emphasizes investment in companies that are determined by Alliance's Bernstein
unit ("Bernstein") to be undervalued, using a fundamental value approach. This
approach to equity investing generally defines value by reference to the
relationship between a security's current price and its intrinsic economic
value, as measured by earnings power and dividend paying capability. Alliance
relies heavily on the fundamental research and analysis of Bernstein's large
internal research staff in making investment decisions for the Fund. These
investment decisions are the result of the multi-step process described below.
The fundamental value approach seeks to identify, in the first instance, a
universe of securities that are considered to be undervalued because they are
attractively priced relative to their future earnings power and dividend paying
capability. Bernstein's research staff of company and industry analysts
follows a research universe of approximately 700 companies with large
capitalizations. This universe covers approximately 90% of the capitalization
of the Russell 1000(tm) Value Index.
The research staff identifies and quantifies the critical variables that
influence a business's performance and analyzes the results in order to
forecast each company's long-term prospects. As one of the largest
multi-national investment firms, Alliance has access to considerable
information concerning all of the companies followed and meets regularly with
the management, suppliers, clients and competitors of companies in the Fund.
As a result, analysts have an in-depth understanding of the products, services,
markets and competition of these companies and a good knowledge of the
management of most of the companies in the research universe. A company's
financial performance is typically projected over a full economic cycle,
including a trough and a peak, within the context of forecasts for real
economic growth, inflation and interest rate changes.
A committee composed of senior investment professionals (the "Research Review
Committee") reviews all analyst research performed for the Fund. The Research
Review Committee makes sure that the analysts have appropriately considered the
key issues facing each company. In addition, it checks to see that forecasts
of a company's future are compatible with its
6
<PAGE>
history. Finally, the Research Review Committee ensures that all forecasts
use consistent analytic frameworks and economic assumptions.
For each company in the Fund's universe, Bernstein relates the present value of
the company's future cash flow, as forecast by Bernstein's analysts, to the
current price of the company's stock. Using a dividend discount model and
solving for the internal rate of return, Bernstein thus derives an expected
rate of return. The senior investment professionals involved in the fundamental
value approach, then factor into this analysis the risk attributes of each
company for purposes of re-ranking the companies. By evaluating overall
sector concentration, capitalization distribution, leverage, degree of
undervaluation and other factors, Bernstein ranks each security on a risk
adjusted basis, in an effort to minimize overall Fund volatility.
The Fund does not simply purchase the highest-ranked securities. Rather,
Bernstein considers aggregate portfolio characteristics and risk
diversification when deciding how much of each security to purchase for the
Fund. The Fund will tend to overweight stocks selected in the top third of the
final ranking, will tend to make market weight commitments to stocks selected
from the middle third and will tend to minimize stocks in the lowest third,
subject to overall risk diversification.
The degree to which a security is attractive can change as a result of adverse,
short-term market reactions to recent events or trends. Negative analysts'
earnings-estimate revisions and relative return trends (also called "momentum")
tend to reflect deterioration in a company's operating results and often signal
poor performance to come; positive revisions and return trends tend to reflect
fundamental improvements and positive performance ahead. Bernstein monitors
these factors so as to better time purchases and sales of securities.
A security generally will be sold when it no longer meets appropriate valuation
criteria. Sale of a stock that has reached its target may be delayed, however,
when earnings expectations are rising or relative return trends are improving.
The Fund may also
* Invest up to 20% of its total assets in convertible securities;
* Write covered put and call options and purchase put and call options on
securities issued by U.S. and non-U.S. companies, security exchanges and over
the counter, including options on market indices and currencies;
* Invest up to 15% of its net assets in illiquid securities;
* Invest up to 15% of its total assets in securities issued by non-U.S.
companies;
* Invest up to 10% of its total assets in rights and warrants;
* Enter into forward commitments, futures contracts and options on futures
contracts with respect to securities, indices and currencies;
* Enter into contracts for the purchase and sale for the future delivery of
contracts based on financial indices, including any index of U.S. Government
securities issued by non-U.S. government entities;
* Enter into currency swaps and forward currency exchange contracts for hedging
purposes;
* Make secured loans of portfolio securities of up to 30% of its total assets;
and
* Enter into repurchase agreements.
PRINCIPAL 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 markets fluctuate and that prices overall will decline
over short- or long-term periods.
* Sector Risk This is the risk of investments in a particular industry sector.
If the Fund invests a substantial amount of its assets in companies engaged in
a particular industry sector, market or economic factors affecting that
industry could have a major effect on the value of the Fund's investments.
* Derivative and Leverage Risk The Fund may make substantial use of derivatives
and employ specialized trading techniques such as short sales, options,
futures, forwards, and other leveraging techniques to increase its exposure to
certain selected securities. Alliance employs these techniques speculatively to
enhance returns and not merely as hedging tools.
7
<PAGE>
These techniques are riskier than many investment strategies and will result
in greater volatility for the Fund, particularly in periods of market declines.
* Non-U.S. Investment Risk This is the risk of investments in issuers located
in countries other than the United States. Investments in securities issued by
non-U.S. companies 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 countries are relatively small, with a limited number of
companies representing a small number of industries. Additionally, non-U.S.
issuers are usually not subject to the same degree of regulation as U.S.
issuers. Reporting, accounting and auditing standards of 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
country other than the United States. In the event of nationalization,
expropriation or other confiscation, the Fund could lose its entire investment.
* Currency Risk This is the risk that fluctuations in the exchange rates
between the U.S. Dollar and other currencies may negatively affect the value of
the Fund's investments.
* 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[, including its fundamental value approach,] in
making investment decisions for the Fund, but there is no guarantee that its
techniques will produce the intended result.
Portfolio Turnover. The Fund's portfolio turnover is not expected to exceed
100%.
Temporary Defensive Position. For temporary defensive purposes, the Fund may
reduce its position in equity securities and increase without limit its
position in short-term, liquid, high-grade debt securities, which may include
U.S. Government securities, bank deposits, money market instruments, short-term
debt securities, including notes and bonds, or hold its assets in cash. While
the Fund is investing for temporary defensive purposes, it may not meet its
investment objective.
DESCRIPTION OF ADDITIONAL INVESTMENT PRACTICES
This section describes the investment practices of the Fund and risks
associated with these practices.
Convertible Securities. Prior to conversion, convertible securities have the
same general characteristics as nonconvertible debt securities, which generally
provide a stable stream of income with generally higher yields than those of
equity securities of the same or similar issuers. The price of a convertible
security will normally vary with changes in the price of the underlying equity
security, although the higher yield tends to make the price of the convertible
security less volatile than that of the underlying equity security. As with
debt securities, the market values of convertible securities tend to decrease
as interest rates rise and increase as interest rates fall. While convertible
securities generally offer lower interest yields than non-convertible debt
securities of similar quality, they offer investors the potential to benefit
from increases in the market prices of the underlying common stocks.
Convertible securities that are rated Baa or lower by Moody's and BBB or lower
by S&P or, if unrated, determined by Alliance to be of equivalent quality, may
share some or all of the risks of non-convertible debt securities with those
ratings. The Fund may invest up to 20% of its total assets in convertible
securities.
Currency Swaps. Currency swaps involve the individually negotiated exchange by
the Fund with another party of a series of payments in specified currencies. A
currency swap may involve the delivery at the end of the exchange period of a
substantial amount of one designated currency in exchange for the other
designated currency. Therefore, the entire principal value of a currency swap
is subject to the risk that the swap counterparty will default on its
contractual delivery obligations. The Fund will enter into currency swaps for
hedging purposes only. The Fund will not enter into any currency swap unless
the credit quality of the unsecured senior debt or the claims-paying ability of
the counterparty is rated in the highest rating category of at least one
nationally recognized rating organization at the time of entering into the
transaction. If there is a default by the other party to such a transaction,
the Fund will have contractual remedies under the transaction agreements.
Depositary Receipts. Depositary receipts may not necessarily be denominated in
the same currency as the underlying securities into which they may be
converted. In addition, the issuers of the stock of unsponsored depositary
receipts are not obligated to disclose material information in the United
States, and therefore, there may not be a correlation between such information
and the market value of the depositary receipts. ADRs are depositary receipts
typically issued by a U.S. bank or trust company that evidence ownership of
underlying securities issued by a non-U.S. corporation. GDRs and other types of
depositary receipts are typically issued by non-U.S. banks or trust companies
and evidence ownership of underlying securities issued by either a U.S. or a
non-U.S. company. Generally, depositary receipts in registered form are
designed for use in the U.S. securities markets, and depositary receipts in
bearer form are designed for use in securities markets outside of the United
States.
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Forward Currency Exchange Contracts. The Fund may purchase or sell forward
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 currency in
order to "lock in" the U.S. Dollar price of the security ("transaction hedge").
The Fund will not engage in transaction hedges with respect to the currency of
a particular country to an extent greater than the aggregate amount of the
Fund's transactions in that currency. When the Fund believes that a 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 currency approximating the
value of some or all of the Fund's portfolio securities denominated in such
currency, or when the Fund believes that the U.S. Dollar may suffer a
substantial decline against another currency, it may enter into a forward
purchase contract to buy that 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 currency for a
fixed U.S. dollar amount where the Fund believes that the U.S. Dollar value of
the currency to be sold pursuant to the forward contract will fall whenever
there is a decline in the U.S. Dollar value of the currency in which portfolio
securities of the Fund are denominated ("cross-hedge"). Unanticipated changes
in currency prices may result in poorer overall performance for the Fund than
if it had not entered into such forward contracts. Hedging against a decline
in the value of a currency does not eliminate fluctuations in the prices of
portfolio securities or prevent losses if the prices of such securities
decline. Such transactions also preclude the opportunity for gain if the value
of the hedged currency should rise. Moreover, it may not be possible for 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
devaluation level it anticipates.
Illiquid Securities. The Fund will limit its investment in illiquid securities
to no more than 15% 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 will not be treated as
"illiquid" for purposes of this limit on investments if they meet certain
liquidity guidelines established by the Fund or Alliance.
The Fund may not be able to readily sell securities for which there is no ready
market. Such securities are unlike securities that are traded in the open
market and can be expected to be sold immediately if the market is adequate.
The sale price of illiquid securities may be lower or higher than Alliance's
most recent estimate of their fair value. Generally, less public information is
available about the issuers of such securities than about companies whose
securities are traded on an exchange. To the extent that these securities are
securities issued by non-U.S. companies, 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 of up to 30% of its total assets 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 risk in lending
portfolio securities, as with other extensions of credit, consists of the
possible loss of rights in the collateral should the borrower fail financially.
In determining whether to lend securities to a particular borrower, Alliance
will consider all relevant facts and circumstances, including the
creditworthiness of the borrower. While securities are on loan, the borrower
will pay the Fund any income from the securities. The Fund may invest any cash
collateral in portfolio securities and earn additional income, or receive an
agreed-upon amount of income from a borrower who has delivered equivalent
collateral. 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.
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<PAGE>
Options on Securities. An option gives the purchaser of the option, upon
payment of a premium, the right to deliver to (in the case of a put) or receive
from (in the case of a call) the writer of the option a specified amount of a
security on or before a fixed date at a predetermined price. A call option
written by the Fund is "covered" if the Fund owns the underlying security, has
an absolute and immediate right to acquire that security upon conversion or
exchange of another security it holds, or holds a call option on the underlying
security with an exercise price equal to or less than that of the call option
it has written. A put option written by the Fund is "covered" if the Fund holds
a put on the underlying securities with an exercise price equal to or greater
than that of the put option it has written.
A call option is for cross-hedging purposes if the Fund does not own the
underlying security and is designed to provide a hedge against a decline in
value in another security which the Fund owns or has the right to acquire. The
Fund may write call options for cross-hedging purposes. The Fund would write a
call option for cross-hedging purposes, instead of writing a covered call
option, when the premium to be received from the cross-hedge transaction would
exceed that which would be received from writing a covered call option, while
at the same time achieving the desired hedge.
In purchasing an option, the Fund would be in a position to realize a gain if,
during the option period, the price of the underlying security increased (in
the case of a call) or decreased (in the case of a put) by an amount in excess
of the premium paid; otherwise the Fund would experience a loss equal to the
premium paid for the option.
If an option written by the Fund were exercised, the Fund would be obligated to
purchase (in the case of a put) or sell (in the case of a call) the underlying
security at the exercise price. The risk involved in writing an option is that,
if the option is exercised, the underlying security would then be purchased or
sold by the Fund at a disadvantageous price. Entering into a closing
transaction (i.e., by disposing of the option prior to its exercise) could
reduce these risks. The Fund retains the premium received from writing a put or
call option whether or not the option is exercised. The writing of call options
could result in increases in the Fund's portfolio turnover rate, especially
during periods when market prices of the underlying securities appreciate.
The Fund will purchase or write options on securities of the types in which it
is permitted to invest in privately negotiated (i.e., over-the-counter)
transactions only with investment dealers and other financial institutions
(such as commercial banks or savings and loan institutions) deemed creditworthy
by Alliance. Alliance has adopted procedures for monitoring the
creditworthiness of such entities. Options purchased or written by the Fund in
negotiated transactions are illiquid and it may not be possible for the Fund to
effect a closing transaction at an advantageous time.
Options on Securities Indices. An option on a securities index is similar to
an option on a security except that, rather than the right to take or make
delivery of a security at a specified price, an option on a securities index
gives the holder the right to receive, upon exercise of the option, an amount
of cash if the closing level of the chosen index is greater than (in the case
of a call) or less than (in the case of a put) the exercise price of the option.
Options on Currencies. As in the case of other kinds of options, the writing
of an option on a currency constitutes only a partial hedge, up to the amount
of the premium received, and the Fund could be required to purchase or sell
currencies at disadvantageous exchange rates, thereby incurring losses. The
purchase of an option on a currency may constitute an effective hedge against
fluctuations in exchange rates although, in the event of rate movements adverse
to the Fund's position, the Fund may forfeit the entire amount of the premium
plus related transaction costs.
Futures Contracts and Options on Futures Contracts. A "sale" of a futures
contract means the acquisition of a contractual obligation to deliver the
securities or currency or other commodity called for by the contract at a
specified price on a specified date. A "purchase" of a futures contract means
the incurring of an obligation to acquire the securities or currency or other
commodity called for by the contract at a specified price on a specified date.
The purchaser of a futures contract on an index agrees to take or make delivery
of an amount of cash equal to the difference between a specified dollar
multiple of the value of the index on the expiration date of the contract
("current contract value") and the price at which the contract was originally
struck. No physical delivery of the securities underlying the index is made.
Options on Futures contracts are options that, upon exercise, call for the
delivery of futures contracts (or cash payments based on the value of futures
contracts). Options on futures contracts written or purchased by the Fund will
be traded on exchanges worldwide or over-the-counter. These investment
techniques will be used only to hedge against anticipated future changes in
market conditions and interest or exchange rates which otherwise might either
adversely affect the value of the Fund's portfolio securities or adversely
affect the prices of securities which the Fund intends to purchase at a later
date.
The Fund will not enter into any futures contracts or options on futures
contracts if immediately thereafter the market values of the outstanding
futures contracts of the Fund and the currencies and futures contracts subject
to outstanding options written by the Fund would exceed [___]% of its total
assets.
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<PAGE>
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 prevented from,
selling the collateral for its benefit. Alliance monitors the creditworthiness
of the vendors with which the Fund enters into repurchase agreements.
Rights and Warrants. The Fund will invest in rights or warrants only if the
underlying equity securities themselves are deemed appropriate by Alliance for
inclusion in the Fund's portfolio. Rights and warrants entitle the holder to
buy equity securities at a specific price for a specific period of time. Rights
are similar to warrants except that they have a substantially shorter duration.
Rights and warrants may be considered more speculative than certain other types
of investments in that they do not entitle a holder to dividends or voting
rights with respect to the underlying securities nor do they represent any
rights in the assets of the issuing company. The value of a right or warrant
does not necessarily change with the value of the underlying security, although
the value of a right or warrant may decline because of a decrease in the value
of the underlying security, the passage of time or a change in perception as to
the potential of the underlying security, or any combination of these factors.
If the market price of the underlying security is below the exercise price of
the warrant on the expiration date, the warrant will expire worthless.
Moreover, a right or warrant ceases to have value if it is not exercised prior
to the expiration date. The Fund may invest up to 10% of its total assets in
rights and warrants.
Short Sales. The Fund may utilize short selling in order to attempt both to
protect its portfolio against the effects of potential downtrends in the
securities markets and as a means of enhancing its overall performance. A short
sale is a transaction in which the Fund sells a security it does not own but
has borrowed in anticipation that the market price of that security will
decline. The Fund may be required to pay a fee to borrow the security and to
pay over to the lender any payments received on the security.
If the price of the security sold short increases between the time of the short
sale and the time the Fund replaces the borrowed security, the Fund will incur
a loss; conversely, if the price declines, the Fund will realize a capital
gain. Although the Fund's gain is limited by the price at which it sold the
security short, its potential loss is unlimited. The Fund may engage in short
sales for up to 33% of its total assets.
Stock Index Futures. The Fund may purchase and sell stock index futures as a
hedge against movements in the equity markets. There are several risks in
connection with the use of stock index futures by the Fund as a hedging device.
One risk arises because of the imperfect correlation between movements in the
price of a stock index future and movements in the price of the securities
which are the subject of the hedge. The price of a stock index future may move
more than or less than the price of the securities being hedged. If the price
of a stock index future moves less than the price of the securities which are
the subject of the hedge, the hedge will not be fully effective but, if the
price of the securities being hedged has moved in an unfavorable direction, the
Fund would be in a better position than if it had not hedged at all. If the
price of the securities being hedged has moved in a favorable direction, this
advantage will be partially offset by the loss on the index futures contract.
If the price of the index future moves more than the price of the stock, the
Fund will experience either a loss or gain on the futures contract which will
not be completely offset by movements in the price of the securities which are
subject to the hedge.
To compensate for the imperfect correlation of movements in the price of
securities being hedged and movements in the price of a stock index future, the
Fund may buy or sell stock index futures contracts in greater dollar amount
than the dollar amount of securities being hedged if the volatility over a
particular time period of the prices of such securities has been greater than
the volatility over such time period of the stock index, or if otherwise deemed
to be appropriate by Alliance. Conversely, the Fund may buy or sell fewer stock
index futures contracts if the volatility over a particular time period of the
prices of the securities being hedged is less than the volatility over such
time period of the stock index, or it is otherwise deemed to be appropriate by
Alliance. It is also possible that, where the Fund has sold futures to hedge
its portfolio against a decline in the market, the market may advance and the
value of securities held in the Fund may decline. If this occurred, the Fund
would lose money on the futures and also experience a decline in value in its
portfolio securities. However, over time the value of a diversified portfolio
should tend to move in the same direction as the market indices upon which the
index futures are based, although there may be deviations arising from
differences between the composition of the Fund and the stock comprising the
index.
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<PAGE>
Where a stock index futures contract is purchased to hedge against a possible
increase in the price of stock before the Fund is able to invest its cash (or
cash equivalents) in stocks (or options) in an orderly fashion, it is possible
that the market may decline instead. If the Fund then concludes not to invest
in stock or options at that time because of concern as to possible further
market decline or for other reasons, the Fund will realize a loss on the
futures contract that is not offset by a reduction in the price of securities
purchased.
In addition to the possibility that there may be an imperfect correlation, or
no correlation at all, between movements in stock index futures and the portion
of the portfolio being hedged, the price of stock index futures may not
correlate perfectly with movement in the stock index due to certain market
distortions. Rather than meeting additional margin deposit requirements,
investors may close futures contracts through offsetting transactions which
could distort the normal relationship between the index and futures markets.
From the point of view of speculators, the deposit requirements in the futures
market are less onerous than margin requirements in the securities market.
Therefore, increased participation by speculators in the futures market may
also cause temporary price distortions. Due to the possibility of price
distortion in the futures market, and because of the imperfect correlation
between the movements in a stock index and movements in the price of stock
index futures, a correct forecast of general market trends by Alliance may
still not result in a successful hedging transaction over a short time frame.
Positions in stock index futures may be closed out only on an exchange or board
of trade which provides a secondary market for such futures. Although the Fund
intends to purchase or sell futures only on exchanges or boards of trade where
there appear to be active secondary markets, there is no assurance that a
liquid secondary market on any exchange or board of trade will exist for any
particular futures contract or at any particular time. In such event, it may
not be possible to close a futures investment position, and in the event of
adverse price movements, the Fund would continue to be required to make daily
cash payments of variation margin. However, in the event that futures contracts
have been used to hedge portfolio securities, such securities will not be sold
until the futures contract can be terminated. In such circumstances, an
increase in the price of the securities, if any, may partially or completely
offset losses on the futures contract. As described above, however, there is no
guarantee that the price of the securities will in fact correlate with the
price movements in the futures contract and thus provide an offset on a futures
contract.
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. Unlike
many exchange-traded futures contracts and options on futures contracts, there
are no daily price fluctuation limits for certain options on currencies and
forward contracts, and adverse market movements could therefore continue to an
unlimited extent over a period of time. In addition, the correlation between
movements in the prices of such instruments and movements in the prices of the
securities and currencies hedged or used for cover will not be perfect and
could produce unanticipated losses.
The Fund's ability to dispose of its positions in futures contracts, options
and forward contracts depends on the availability of liquid markets in such
instruments. Markets in options and futures with respect to a number of types
of securities and currencies are relatively new and still developing, and there
is no public market for forward contracts. It is impossible to predict the
amount of trading interest that may exist in various types of futures
contracts, options, and forward contracts. If a secondary market does not exist
for an option purchased or written by the Fund, it might not be possible to
effect a closing transaction in the option (i.e., dispose of the option) with
the result that (i) an option purchased by the Fund would have to be exercised
in order for the Fund to realize any profit and (ii) the Fund may not be able
to sell portfolio securities or currencies covering an option written by the
Fund until the option expires or it delivers the underlying securities,
currency or futures contract upon exercise. Therefore, no assurance can be
given that the Fund will be able to utilize these instruments effectively. In
addition, the Fund's ability to engage in options and futures transactions may
be limited by tax considerations and the use of certain hedging techniques may
adversely impact the characterization of income to the Fund for U.S. federal
income tax purposes.
ADDITIONAL RISK CONSIDERATIONS
Investment in the Fund involves the special risk considerations described
below. These risks may be heightened when investing in emerging markets.
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<PAGE>
Currency Considerations. The Fund may receive a portion of its revenues in
currencies other than the U.S. Dollar. Therefore, the dollar equivalent of its
net assets, distributions, and income will be adversely affected by reductions
in the value of certain currencies relative to the U.S. Dollar. If the value of
the currencies in which the Fund receives its income falls relative to the U.S.
Dollar between receipt of the income and the making of Fund distributions, the
Fund may be required to liquidate securities in order to make distributions if
it has insufficient cash in U.S. Dollars to meet distribution requirements that
the Fund must satisfy to qualify as a regulated investment company for federal
income tax purposes. Similarly, if an exchange rate declines between the time
the Fund incurs expenses in U.S. Dollars and the time cash expenses are paid,
the amount of the currency required to be converted into U.S. Dollars in order
to pay expenses in U.S. Dollars could be greater than the equivalent amount of
such expenses in the currency at the time they were incurred. In light of these
risks, the Fund may engage in currency hedging transactions, as described
above, which involve certain special risks.
Securities Issued by Non-U.S. Companies. The securities markets of many
countries outside of the United States 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 may include securities issued by non-U.S. companies
in an amount up to 15% of its total assets, 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 countries require governmental approval prior to investments by foreign
persons or limit investment by foreign persons to only a specified percentage
of an issuer's outstanding securities or a specific class of securities that
may have less advantageous terms (including price) than securities of the
company available for purchase by nationals. These restrictions or controls
may at times limit or preclude investment in certain securities and may
increase the costs and expenses of 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. If a deterioration
occurs in a 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, 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 countries are generally higher than in the United States.
Issuers of securities in jurisdictions other than the United States 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 countries may
differ, in some cases significantly, from U.S. standards in important respects
and less information may be available to investors in securities issued by
non-U.S. companies 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 countries other than the United States 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 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 countries other than the United States governing
business organizations, bankruptcy and insolvency may provide less protection
to security holders such as the Fund than that provided by U.S. laws.
Extreme Governmental Action; Less Protective Laws. In contrast to investing in
the United States, investment in other countries may involve in certain
situations greater risk of nationalization, expropriation, confiscatory
taxation, currency blockage or other extreme governmental action that could
adversely impact the Fund's investments. In the event of certain such actions,
the Fund could lose its entire investment in the country involved. In addition,
laws in various countries other than the United States governing, among other
subjects, business organization and practices, securities and securities
trading, bankruptcy and insolvency may provide less protection to investors
such as the Fund than provided under United States laws.
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Non-U.S. Taxes. The Fund's investment in securities issued by non-U.S.
companies may be subject to taxes withheld at the source on dividend or
interest payments.
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MANAGEMENT OF THE FUND
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INVESTMENT ADVISER AND FUND MANAGER
The Fund's Adviser is Alliance Capital Management L.P., 1345 Avenue of the
Americas, New York, New York 10105. Alliance is a leading international
investment adviser supervising client accounts with assets as of [________],
2001 totaling more than $[___] billion (of which more than $[___] billion
represented the assets of investment companies). As of [_____], 2001, Alliance
managed retirement assets for many of the largest public and private employee
benefit plans (including [__] of the nation's FORTUNE 100 companies), for
public employee retirement funds in [___] states, for investment companies, and
for foundations, endowments, banks and insurance companies worldwide. The [___]
registered investment companies managed by Alliance, comprising [___] separate
portfolios, currently have more than [___] million shareholder accounts.
The persons primarily responsible for the day-to-day management of the Fund are
[_____] and [_____]. [Biography to be inserted here.]
Alliance provides investment advisory services and order placement facilities
for the Fund. For these advisory services, the Fund pays Alliance a fee at an
annualized rate of [___]% of the Fund's average daily net assets. The fee will
be accrued daily and paid monthly.
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PURCHASE AND SALE OF SHARES
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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. The minimum
initial investment amount is $10,000, except that the minimum initial
investment amount applicable to individual retirement accounts (IRAs) is $2,000.
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 particular, 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.
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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 Exchange is open, either directly or through your financial intermediary.
Your sales price will be the next-determined NAV, less any applicable CDSC,
after the Fund receives your sales request in proper form. Normally, proceeds
will be sent to you within 7 days. If you recently purchased your shares by
check or electronic funds transfer, your redemption payment may be delayed
until the Fund is reasonably satisfied that the check or electronic funds
transfer has been collected (which may take up to 15 days).
o 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.
o Selling Shares Directly to the Fund
By Mail:
--Send a signed letter of instruction or stock power, along with certificates,
to:
Alliance Fund Services, Inc.
P.O. Box 1520
Secaucus, N.J. 07906-1520
800-221-5672
--For your protection, a bank, a member firm of a national stock exchange, or
other eligible guarantor institution, must guarantee signatures. Stock power
forms are available from your financial intermediary, AFS, and many commercial
banks. Additional documentation is required for the sale of shares by
corporations, intermediaries, fiduciaries, and surviving joint owners. If you
have any questions about these procedures, contact AFS.
By Telephone:
--You may redeem your shares for which no stock certificates have been issued
by telephone request. Call AFS at 800-221-5672 with instructions on how you
wish to receive your sale proceeds.
--A telephone redemption request must be received by 4:00 p.m., Eastern time,
for you to receive that day's NAV, less any applicable CDSC.
--If you have selected electronic funds transfer in your Shareholder
Application, the redemption proceeds will be sent directly to your bank.
Otherwise, the proceeds will be mailed to you.
--Redemption requests by electronic funds transfer may not exceed $100,000 per
day and redemption requests by check cannot exceed $50,000 per day.
--Telephone redemption is not available for shares held in nominee or "street
name" accounts, retirement plan accounts, or shares held by a shareholder who
has changed his or her address of record within the previous 30 calendar days.
-------------------------------------------------------------------------------
DIVIDENDS, DISTRIBUTIONS AND TAXES
-------------------------------------------------------------------------------
15
<PAGE>
Dividends and Distributions
The income dividend and capital gains distributions, 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 NAV as of the
close of business on the day following the declaration date of the dividend or
distribution equal to the cash amount of the dividend or distribution. You may
make an election to receive dividends and distributions in cash or in shares at
the time you purchase shares. Your election can be changed at any time prior to
a record date for a dividend. There is no sales or other charge on the
reinvestment of dividends or capital gains distributions. Cash dividends may be
paid in check, or at your election, electronically via the ACH network.
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.
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 distributions of long-term capital gains generally will be taxable to you
as long-term 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.
Investment income received by the Fund from sources within countries outside of
the United States may be subject to non-U.S. income taxes withheld at the
source.
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.
If you buy shares just before the Fund deducts a distribution from its NAV, you
will pay the full price for the shares and then receive a portion of the price
back as a taxable distribution.
The sale or exchange of Fund shares is a taxable transaction for federal income
tax purposes.
Each year shortly after December 31, the 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 plus an initial sales charge, as follows:
Initial Sales Charge
Commission to
As % of As % of Dealer/Agent
Net Amount Offering as % of
Amount Purchased Invested Price Offering 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
16
<PAGE>
$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 of the number of years you hold the shares.
The CDSC amounts are:
Years Since Purchase CDSC
-------------------- ----
First 4.0%
Second 3.0%
Third 2.0%
Fourth 1.0%
Fifth None
If you exchange your shares for the Class B shares of another Alliance Mutual
Fund, the CDSC also will apply to those Class B shares. The CDSC period begins
with the date of your original purchase, not the date of exchange for the other
Class B shares.
The Fund's Class B shares purchased for cash automatically convert to Class A
shares eight years after the end of the month of your purchase. If you purchase
shares by exchange for the Class B shares of another Alliance Mutual Fund, the
conversion period runs from the date of your original purchase.
Class C Shares--Asset-Based Sales Charge Alternative
You can purchase shares at NAV without an initial sales charge. 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 Charges 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.
17
<PAGE>
Choosing a Class of Shares. The decision as to which Class of shares is more
beneficial to you depends on the amount and intended length of your investment.
If you are making a large investment, thus qualifying for a reduced sales
charge, you might consider purchasing Class A shares. If you are making a
smaller investment, you might consider purchasing Class B shares because 100%
of your purchase is invested immediately. If you are unsure of the length of
your investment, you might consider Class C shares because there is no initial
sales charge and no CDSC as long as the shares are held for one year or more.
Dealers and agents may receive differing compensation for selling Class A,
Class B, or Class C shares. There is no size limit on purchases of Class A
shares. The maximum purchase of Class B shares is $250,000. The maximum
purchase of Class C shares is $1,000,000.
You should consult your financial agent to assist in choosing a Class of Fund
shares.
Application of the CDSC. The CDSC is applied to the lesser of the original cost
of shares being redeemed or NAV at the time of redemption (or, as to Fund
shares acquired through an exchange, the cost of the Alliance Mutual Fund
shares originally purchased for cash). Shares obtained from dividend or
distribution reinvestment are not subject to the CDSC. The Fund may waive the
CDSC on redemptions of shares following the death or disability of a
shareholder, to meet the requirements of certain qualified retirement plans, or
under a monthly, bimonthly, or quarterly systematic withdrawal plan. See the
Fund's SAI for further information about CDSC waivers.
Other. A transaction, service, administrative or other similar fee may be
charged by your broker-dealer, agent, financial intermediary, or other
financial representative with respect to the purchase, sale, or exchange of
Class A, Class B, or Class C shares made through your financial representative.
The financial intermediaries also may impose requirements on the purchase,
sale, or exchange of shares that are different from, or in addition to, those
imposed by a Fund, including requirements as to the minimum initial and
subsequent investment amounts.
-------------------------------------------------------------------------------
GENERAL INFORMATION
-------------------------------------------------------------------------------
Under unusual circumstances, 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:
o 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.
18
<PAGE>
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:
o Call the Commission at 1-202-942-8090 for information on the operation of
the Public Reference Room.
o Reports and other information about the Fund are available on the EDGAR
Database on the Commission's Internet site at http://www.sec.gov.
o Copies of the information may be obtained, after paying a fee, by electronic
request at [email protected], or by writing the Commission's Public Reference
Section, Washington, DC 20549-0102.
You also may find more information about Alliance and the Fund on the Internet
at: www.Alliancecapital.com.
SEC File No. [_____________________]
19
<PAGE>
Advisor Class Prospectus
AllianceBernstein Value Fund
The AllianceBernstein Value Fund is an open-end management investment
company structured as a series fund that invests in a diversified portfolio of
equity securities of companies with relatively large market capitalizations.
Prospectus and Application
[____________], 2001
The Securities and Exchange Commission has not approved or disapproved these
securities or passed upon the adequacy of this Prospectus. Any representation
to the contrary is a criminal offense.
AllianceCapital T
Investment Products Offered
* Are Not FDIC Insured
* May Lose Value
* Are Not Bank Guaranteed
<PAGE>
TABLE OF CONTENTS
_______________________________________________________________________________
Page
RISK/RETURN SUMMARY......................................................
FEES AND EXPENSES OF THE FUND............................................
GLOSSARY.................................................................
DESCRIPTION OF THE FUND..................................................
Investment Objective and Principal Policies and Risks....................
Description of Additional Investment Practices...........................
Additional Risk Considerations...........................................
MANAGEMENT OF THE FUND...................................................
PURCHASE AND SALE OF SHARES..............................................
How The Fund Values Its Shares...........................................
How To Buy Shares........................................................
Initial Offering.........................................................
How To Exchange Shares...................................................
How To Sell Shares.......................................................
DIVIDENDS, DISTRIBUTIONS AND TAXES.......................................
DISTRIBUTION ARRANGEMENTS................................................
GENERAL INFORMATION......................................................
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 the
AllianceBernstein Value Fund. This Risk/Return 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:
* As with all investments, 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.
2
<PAGE>
Value Fund
_______________________________________________________________________________
OBJECTIVE:
The Fund's investment objective is long-term growth of capital.
PRINCIPAL INVESTMENT STRATEGIES:
The Fund invests primarily in a diversified portfolio of equity securities of
companies with relatively large market capitalizations that Alliance believes
are undervalued. The Fund's investment policies emphasize investment in
companies that are determined by Alliance to be undervalued, using the
fundamental value approach of Alliance's Bernstein unit ("Bernstein"). In
selecting securities for the Fund's portfolio, Alliance uses its fundamental
research to identify companies whose long-term earnings power and dividend
paying capability are not reflected in the current market price of their
securities.
The Fund may also invest 15% of its total assets in securities issued by
non-U.S. companies.
PRINCIPAL RISKS:
Among the principal risks of investing in the Fund is market risk, which is the
risk of losses from adverse changes in the stock market. Depending on the
Fund's investments at a particular time, the Fund may also have industry/sector
risk. To the extent the Fund invests in non-U.S. equity securities, it may
have non-U.S. investment risk and currency risk. The Fund may at times use
certain types of investment derivatives such as options, futures, forwards and
swaps. The use of these techniques involves special risks that are discussed
in this Prospectus.
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.
3
<PAGE>
-------------------------------------------------------------------------------
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
--------------------
Advisor Class Shares
--------------------
Management fees [____]%
Distribution (12b-1) fees [____]%
Other expenses [____]%
_______
Total Fund
operating expenses (a) [____]%
_______
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
--------------------
Advisor Class Shares
--------------------
After 1 Yr. $[______]
After 3 Yrs. $[______]
(a) These examples assume that Alliance's agreement to waive its management
fees and/or reimburse Fund expenses is not extended beyond its initial
period.
-------------------------------------------------------------------------------
GLOSSARY
-------------------------------------------------------------------------------
This Prospectus uses the following terms.
TYPES OF SECURITIES
Convertible securities are fixed-income securities that are convertible into
common stock.
Debt securities are bonds, debentures, notes, bills, loans, other direct debt
instruments, and other fixed, floating and variable rate debt obligations, but
do not include convertible securities.
Depositary receipts include American Depositary Receipts ("ADRs"), Global
Depositary Receipts ("GDRs") and other types of depositary receipts.
4
<PAGE>
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.
Lower-rated securities are fixed-income securities rated Ba or below by Moody's
or BB or below by S&P, Duff & Phelps or Fitch, or determined by Alliance to be
of equivalent quality, and are commonly referred to as "junk bonds."
Non-U.S. Company is an entity that (i) is organized under the laws of a country
other than the United States, (ii) has its principal place of business in a
country other than the United States, and (iii) issues equity or debt
securities that are traded principally in a country other than the United
States.
Prime commercial paper is commercial paper rated Prime 1 by Moody's or A-1 or
higher by S&P or, if not rated, issued by companies that have an outstanding
debt issue rated Aa or higher by Moody's or AA or higher by S&P.
Qualifying bank deposits are certificates of deposit, bankers' acceptances and
interest-bearing savings deposits of banks that have total assets of more than
$1 billion and are members of the Federal Deposit Insurance Corporation.
Rule 144A securities are securities that may be resold pursuant to Rule 144A of
the Securities Act.
U.S. Government securities are securities issued or guaranteed by the United
States Government, its agencies or instrumentalities.
RATING AGENCIES
Duff & Phelps is Duff & Phelps Credit Rating Co.
Fitch is Fitch IBCA, Inc.
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.
Russell 1000(tm) Value Index measures the performance of those Russell 1000
companies with lower price-to-book ratios and lower forecasted growth values.
The Russell 1000(tm) universe of securities is compiled by Frank Russell
Company and is segmented into two style indices, the Russell 1000(tm) Growth
Index and the Russell 1000(tm) Value Index.
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 investment policies and risks. Of
course, there can be no assurance that the Fund will achieve its investment
objective.
Please note that:
* Additional discussion of the Fund's investments, including the risks of the
investments, can be found in the discussion under Description of Additional
Investment Practices following this section.
5
<PAGE>
* The description of the principal risks for the Fund includes risks described
in the RISK/RETURN SUMMARY above. Additional information about the risks of
investing in the Fund can be found in the discussion 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. Except as noted, the Fund's investment policies
are not fundamental and thus can be changed without a shareholder vote.
INVESTMENT OBJECTIVE AND PRINCIPAL POLICIES AND RISKS
INVESTMENT OBJECTIVE
The Fund's investment objective is long-term growth of capital.
PRINCIPAL POLICIES
The Fund invests primarily in a diversified portfolio of equity securities
generally representing at least 125 companies. The Fund's investment strategy
emphasizes investment in companies that are determined by Alliance's Bernstein
unit ("Bernstein") to be undervalued, using a fundamental value approach. This
approach to equity investing generally defines value by reference to the
relationship between a security's current price and its intrinsic economic
value, as measured by earnings power and dividend paying capability. Alliance
relies heavily on the fundamental research and analysis of Bernstein's large
internal research staff in making investment decisions for the Fund. These
investment decisions are the result of the multi-step process described below.
The fundamental value approach seeks to identify, in the first instance, a
universe of securities that are considered to be undervalued because they are
attractively priced relative to their future earnings power and dividend paying
capability. Bernstein's research staff of company and industry analysts
follows a research universe of approximately 700 companies with large
capitalizations. This universe covers approximately 90% of the capitalization
of the Russell 1000(tm) Value Index.
The research staff identifies and quantifies the critical variables that
influence a business's performance and analyzes the results in order to
forecast each company's long-term prospects. As one of the largest
multi-national investment firms, Alliance has access to considerable
information concerning all of the companies followed and meets regularly with
the management, suppliers, clients and competitors of companies in the Fund.
As a result, analysts have an in-depth understanding of the products, services,
markets and competition of these companies and a good knowledge of the
management of most of the companies in the research universe. A company's
financial performance is typically projected over a full economic cycle,
including a trough and a peak, within the context of forecasts for real
economic growth, inflation and interest rate changes.
A committee composed of senior investment professionals (the "Research Review
Committee") reviews all analyst research performed for the Fund. The Research
Review Committee makes sure that the analysts have appropriately considered the
key issues facing each company. In addition, it checks to see that forecasts
of a company's future are compatible with its history. Finally, the Research
Review Committee ensures that all forecasts use consistent analytic frameworks
and economic assumptions.
For each company in the Fund's universe, Bernstein relates the present value of
the company's future cash flow, as forecast by Bernstein's analysts, to the
current price of the company's stock. Using a dividend discount model and
solving for the internal rate of return, Bernstein thus derives an expected
rate of return. The senior investment professionals involved in the
fundamental value approach, then factor into this analysis the risk attributes
of each company for purposes of re-ranking the companies. By evaluating
overall sector concentration, capitalization distribution, leverage, degree of
undervaluation and other factors, Bernstein ranks each security on a risk
adjusted basis, in an effort to minimize overall Fund volatility.
The Fund does not simply purchase the highest-ranked securities. Rather,
Bernstein considers aggregate portfolio characteristics and risk
diversification when deciding how much of each security to purchase for the
Fund. The Fund will
6
<PAGE>
tend to overweight stocks selected in the top third of the final ranking, will
tend to make market weight commitments to stocks selected from the middle third
and will tend to minimize stocks in the lowest third, subject to overall risk
diversification.
The degree to which a security is attractive can change as a result of adverse,
short-term market reactions to recent events or trends. Negative analysts'
earnings-estimate revisions and relative return trends (also called "momentum")
tend to reflect deterioration in a company's operating results and often signal
poor performance to come; positive revisions and return trends tend to reflect
fundamental improvements and positive performance ahead. Bernstein monitors
these factors so as to better time purchases and sales of securities.
A security generally will be sold when it no longer meets appropriate valuation
criteria. Sale of a stock that has reached its target may be delayed, however,
when earnings expectations are rising or relative return trends are improving.
The Fund may also
* Invest up to 20% of its total assets in convertible securities;
* Write covered put and call options and purchase put and call options on
securities issued by U.S. and non-U.S. companies, security exchanges and over
the counter, including options on market indices and currencies;
* Invest up to 15% of its net assets in illiquid securities;
* Invest up to 15% of its total assets in securities issued by non-U.S.
companies;
* Invest up to 10% of its total assets in rights and warrants;
* Enter into forward commitments, futures contracts and options on futures
contracts with respect to securities, indices and currencies;
* Enter into contracts for the purchase and sale for the future delivery of
contracts based on financial indices, including any index of U.S. Government
securities issued by non-U.S. government entities;
* Enter into currency swaps and forward currency exchange contracts for hedging
purposes;
* Make secured loans of portfolio securities of up to 30% of its total assets;
and
* Enter into repurchase agreements.
PRINCIPAL 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 markets fluctuate and that prices overall will decline
over short- or long-term periods.
* Sector Risk This is the risk of investments in a particular industry sector.
If the Fund invests a substantial amount of its assets in companies engaged in
a particular industry sector, market or economic factors affecting that
industry could have a major effect on the value of the Fund's investments.
* Derivative and Leverage Risk The Fund may make substantial use of derivatives
and employ specialized trading techniques such as short sales, options,
futures, forwards, and other leveraging techniques to increase its exposure to
certain selected securities. Alliance employs these techniques speculatively to
enhance returns and not merely as hedging tools. These techniques are riskier
than many investment strategies and will result in greater volatility for the
Fund, particularly in periods of market declines.
* Non-U.S. Investment Risk This is the risk of investments in issuers located
in countries other than the United States. Investments in securities issued by
non-U.S. companies 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 countries are relatively small, with a limited number of
companies representing a small number of industries. Additionally, non-U.S.
issuers are usually not subject to the same degree of regulation as U.S.
issuers. Reporting, accounting and auditing standards of 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
country other than the United States. In the event of nationalization,
expropriation or other confiscation, the Fund could lose its entire investment.
7
<PAGE>
* Currency Risk This is the risk that fluctuations in the exchange rates
between the U.S. Dollar and other currencies may negatively affect the value of
the Fund's investments.
* 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[, including its fundamental value approach,] in
making investment decisions for the Fund, but there is no guarantee that its
techniques will produce the intended result.
Portfolio Turnover. The Fund's portfolio turnover is not expected to exceed
100%.
Temporary Defensive Position. For temporary defensive purposes, the Fund may
reduce its position in equity securities and increase without limit its
position in short-term, liquid, high-grade debt securities, which may include
U.S. Government securities, bank deposits, money market instruments, short-term
debt securities, including notes and bonds, or hold its assets in cash. While
the Fund is investing for temporary defensive purposes, it may not meet its
investment objective.
DESCRIPTION OF ADDITIONAL INVESTMENT PRACTICES
This section describes the investment practices of the Fund and risks
associated with these practices.
Convertible Securities. Prior to conversion, convertible securities have the
same general characteristics as nonconvertible debt securities, which generally
provide a stable stream of income with generally higher yields than those of
equity securities of the same or similar issuers. The price of a convertible
security will normally vary with changes in the price of the underlying equity
security, although the higher yield tends to make the price of the convertible
security less volatile than that of the underlying equity security. As with
debt securities, the market values of convertible securities tend to decrease
as interest rates rise and increase as interest rates fall. While convertible
securities generally offer lower interest yields than non-convertible debt
securities of similar quality, they offer investors the potential to benefit
from increases in the market prices of the underlying common stocks.
Convertible securities that are rated Baa or lower by Moody's and BBB or lower
by S&P or, if unrated, determined by Alliance to be of equivalent quality, may
share some or all of the risks of non-convertible debt securities with those
ratings. The Fund may invest up to 20% of its total assets in convertible
securities.
Currency Swaps. Currency swaps involve the individually negotiated exchange by
the Fund with another party of a series of payments in specified currencies. A
currency swap may involve the delivery at the end of the exchange period of a
substantial amount of one designated currency in exchange for the other
designated currency. Therefore, the entire principal value of a currency swap
is subject to the risk that the swap counterparty will default on its
contractual delivery obligations. The Fund will enter into currency swaps for
hedging purposes only. The Fund will not enter into any currency swap unless
the credit quality of the unsecured senior debt or the claims-paying ability of
the counterparty is rated in the highest rating category of at least one
nationally recognized rating organization at the time of entering into the
transaction. If there is a default by the other party to such a transaction,
the Fund will have contractual remedies under the transaction agreements.
Depositary Receipts. Depositary receipts may not necessarily be denominated in
the same currency as the underlying securities into which they may be
converted. In addition, the issuers of the stock of unsponsored depositary
receipts are not obligated to disclose material information in the United
States, and therefore, there may not be a correlation between such information
and the market value of the depositary receipts. ADRs are depositary receipts
typically issued by a U.S. bank or trust company that evidence ownership of
underlying securities issued by a non-U.S. corporation. GDRs and other types of
depositary receipts are typically issued by non-U.S. banks or trust companies
and evidence ownership of underlying securities issued by either a U.S. or a
non-U.S. company. Generally, depositary receipts in registered form are
designed for use in the U.S. securities markets, and depositary receipts in
bearer form are designed for use in securities markets outside of the United
States.
Forward Currency Exchange Contracts. The Fund may purchase or sell forward
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 currency in
order to "lock in" the U.S. Dollar price of the security ("transaction hedge").
The Fund will not engage in transaction hedges with respect to the currency of
a particular country to an extent greater than the aggregate amount of the
Fund's transactions in that currency. When the Fund believes that a 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 currency approximating the
value of some or all of the Fund's portfolio securities denominated in such
currency, or when the Fund believes that the U.S. Dollar may suffer a
substantial decline against another currency, it may enter into a forward
purchase contract to buy that currency for a fixed dollar amount ("position
hedge"). The Fund will not position hedge with respect to a particular currency
to an
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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 currency for a
fixed U.S. dollar amount where the Fund believes that the U.S. Dollar value of
the currency to be sold pursuant to the forward contract will fall whenever
there is a decline in the U.S. Dollar value of the currency in which portfolio
securities of the Fund are denominated ("cross-hedge"). Unanticipated changes
in currency prices may result in poorer overall performance for the Fund than
if it had not entered into such forward contracts. Hedging against a decline
in the value of a currency does not eliminate fluctuations in the prices of
portfolio securities or prevent losses if the prices of such securities
decline. Such transactions also preclude the opportunity for gain if the value
of the hedged currency should rise. Moreover, it may not be possible for 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
devaluation level it anticipates.
Illiquid Securities. The Fund will limit its investment in illiquid securities
to no more than 15% 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 will not be treated as
"illiquid" for purposes of this limit on investments if they meet certain
liquidity guidelines established by the Fund or Alliance.
The Fund may not be able to readily sell securities for which there is no ready
market. Such securities are unlike securities that are traded in the open
market and can be expected to be sold immediately if the market is adequate.
The sale price of illiquid securities may be lower or higher than Alliance's
most recent estimate of their fair value. Generally, less public information is
available about the issuers of such securities than about companies whose
securities are traded on an exchange. To the extent that these securities are
securities issued by non-U.S. companies, 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 of up to 30% of its total assets 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 risk in lending
portfolio securities, as with other extensions of credit, consists of the
possible loss of rights in the collateral should the borrower fail financially.
In determining whether to lend securities to a particular borrower, Alliance
will consider all relevant facts and circumstances, including the
creditworthiness of the borrower. While securities are on loan, the borrower
will pay the Fund any income from the securities. The Fund may invest any cash
collateral in portfolio securities and earn additional income, or receive an
agreed-upon amount of income from a borrower who has delivered equivalent
collateral. 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.
Options on Securities. An option gives the purchaser of the option, upon
payment of a premium, the right to deliver to (in the case of a put) or receive
from (in the case of a call) the writer of the option a specified amount of a
security on or before a fixed date at a predetermined price. A call option
written by the Fund is "covered" if the Fund owns the underlying security, has
an absolute and immediate right to acquire that security upon conversion or
exchange of another security it holds, or holds a call option on the underlying
security with an exercise price equal to or less than that of the call option
it has written. A put option written by the Fund is "covered" if the Fund holds
a put on the underlying securities with an exercise price equal to or greater
than that of the put option it has written.
A call option is for cross-hedging purposes if the Fund does not own the
underlying security and is designed to provide a hedge against a decline in
value in another security which the Fund owns or has the right to acquire. The
Fund may write call options for cross-hedging purposes. The Fund would write a
call option for cross-hedging purposes, instead of writing a covered call
option, when the premium to be received from the cross-hedge transaction would
exceed that which would be received from writing a covered call option, while
at the same time achieving the desired hedge.
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In purchasing an option, the Fund would be in a position to realize a gain if,
during the option period, the price of the underlying security increased (in
the case of a call) or decreased (in the case of a put) by an amount in excess
of the premium paid; otherwise the Fund would experience a loss equal to the
premium paid for the option.
If an option written by the Fund were exercised, the Fund would be obligated to
purchase (in the case of a put) or sell (in the case of a call) the underlying
security at the exercise price. The risk involved in writing an option is that,
if the option is exercised, the underlying security would then be purchased or
sold by the Fund at a disadvantageous price. Entering into a closing
transaction (i.e., by disposing of the option prior to its exercise) could
reduce these risks. The Fund retains the premium received from writing a put or
call option whether or not the option is exercised. The writing of call options
could result in increases in the Fund's portfolio turnover rate, especially
during periods when market prices of the underlying securities appreciate.
The Fund will purchase or write options on securities of the types in which it
is permitted to invest in privately negotiated (i.e., over-the-counter)
transactions only with investment dealers and other financial institutions
(such as commercial banks or savings and loan institutions) deemed creditworthy
by Alliance. Alliance has adopted procedures for monitoring the
creditworthiness of such entities. Options purchased or written by the Fund in
negotiated transactions are illiquid and it may not be possible for the Fund to
effect a closing transaction at an advantageous time.
Options on Securities Indices. An option on a securities index is similar to
an option on a security except that, rather than the right to take or make
delivery of a security at a specified price, an option on a securities index
gives the holder the right to receive, upon exercise of the option, an amount
of cash if the closing level of the chosen index is greater than (in the case
of a call) or less than (in the case of a put) the exercise price of the option.
Options on Currencies. As in the case of other kinds of options, the writing
of an option on a currency constitutes only a partial hedge, up to the amount
of the premium received, and the Fund could be required to purchase or sell
currencies at disadvantageous exchange rates, thereby incurring losses. The
purchase of an option on a currency may constitute an effective hedge against
fluctuations in exchange rates although, in the event of rate movements adverse
to the Fund's position, the Fund may forfeit the entire amount of the premium
plus related transaction costs.
Futures Contracts and Options on Futures Contracts. A "sale" of a futures
contract means the acquisition of a contractual obligation to deliver the
securities or currency or other commodity called for by the contract at a
specified price on a specified date. A "purchase" of a futures contract means
the incurring of an obligation to acquire the securities or currency or other
commodity called for by the contract at a specified price on a specified date.
The purchaser of a futures contract on an index agrees to take or make delivery
of an amount of cash equal to the difference between a specified dollar
multiple of the value of the index on the expiration date of the contract
("current contract value") and the price at which the contract was originally
struck. No physical delivery of the securities underlying the index is made.
Options on Futures contracts are options that, upon exercise, call for the
delivery of futures contracts (or cash payments based on the value of futures
contracts). Options on futures contracts written or purchased by the Fund will
be traded on exchanges worldwide or over-the-counter. These investment
techniques will be used only to hedge against anticipated future changes in
market conditions and interest or exchange rates which otherwise might either
adversely affect the value of the Fund's portfolio securities or adversely
affect the prices of securities which the Fund intends to purchase at a later
date.
The Fund will not enter into any futures contracts or options on futures
contracts if immediately thereafter the market values of the outstanding
futures contracts of the Fund and the currencies and futures contracts subject
to outstanding options written by the Fund would exceed [___]% of its total
assets.
Repurchase Agreements. A repurchase agreement arises when a buyer purchases a
security and simultaneously agrees to resell it to the vendor at an agreed-upon
future date, normally a day or a few days later. The resale price is greater
than the purchase price, reflecting an agreed-upon interest rate for the period
the buyer's money is invested in the security. Such agreements permit 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 prevented from,
selling the collateral for its benefit. Alliance monitors the creditworthiness
of the vendors with which the Fund enters into repurchase agreements.
Rights and Warrants. The Fund will invest in rights or warrants only if the
underlying equity securities themselves are deemed appropriate by Alliance for
inclusion in the Fund's portfolio. Rights and warrants entitle the holder to
buy equity securities at a specific price for a specific period of time. Rights
are similar to warrants except that they have a substantially shorter duration.
Rights and warrants may be considered more speculative than certain other types
of investments in that they
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do not entitle a holder to dividends or voting rights with respect to the
underlying securities nor do they represent any rights in the assets of the
issuing company. The value of a right or warrant does not necessarily change
with the value of the underlying security, although the value of a right or
warrant may decline because of a decrease in the value of the underlying
security, the passage of time or a change in perception as to the potential of
the underlying security, or any combination of these factors. If the market
price of the underlying security is below the exercise price of the warrant on
the expiration date, the warrant will expire worthless. Moreover, a right or
warrant ceases to have value if it is not exercised prior to the expiration
date. The Fund may invest up to 10% of its total assets in rights and warrants.
Short Sales. The Fund may utilize short selling in order to attempt both to
protect its portfolio against the effects of potential downtrends in the
securities markets and as a means of enhancing its overall performance. A short
sale is a transaction in which the Fund sells a security it does not own but
has borrowed in anticipation that the market price of that security will
decline. The Fund may be required to pay a fee to borrow the security and to
pay over to the lender any payments received on the security.
If the price of the security sold short increases between the time of the short
sale and the time the Fund replaces the borrowed security, the Fund will incur
a loss; conversely, if the price declines, the Fund will realize a capital
gain. Although the Fund's gain is limited by the price at which it sold the
security short, its potential loss is unlimited. The Fund may engage in short
sales for up to 33% of its total assets.
Stock Index Futures. The Fund may purchase and sell stock index futures as a
hedge against movements in the equity markets. There are several risks in
connection with the use of stock index futures by the Fund as a hedging device.
One risk arises because of the imperfect correlation between movements in the
price of a stock index future and movements in the price of the securities
which are the subject of the hedge. The price of a stock index future may move
more than or less than the price of the securities being hedged. If the price
of a stock index future moves less than the price of the securities which are
the subject of the hedge, the hedge will not be fully effective but, if the
price of the securities being hedged has moved in an unfavorable direction, the
Fund would be in a better position than if it had not hedged at all. If the
price of the securities being hedged has moved in a favorable direction, this
advantage will be partially offset by the loss on the index futures contract.
If the price of the index future moves more than the price of the stock, the
Fund will experience either a loss or gain on the futures contract which will
not be completely offset by movements in the price of the securities which are
subject to the hedge.
To compensate for the imperfect correlation of movements in the price of
securities being hedged and movements in the price of a stock index future, the
Fund may buy or sell stock index futures contracts in greater dollar amount
than the dollar amount of securities being hedged if the volatility over a
particular time period of the prices of such securities has been greater than
the volatility over such time period of the stock index, or if otherwise deemed
to be appropriate by Alliance. Conversely, the Fund may buy or sell fewer stock
index futures contracts if the volatility over a particular time period of the
prices of the securities being hedged is less than the volatility over such
time period of the stock index, or it is otherwise deemed to be appropriate by
Alliance. It is also possible that, where the Fund has sold futures to hedge
its portfolio against a decline in the market, the market may advance and the
value of securities held in the Fund may decline. If this occurred, the Fund
would lose money on the futures and also experience a decline in value in its
portfolio securities. However, over time the value of a diversified portfolio
should tend to move in the same direction as the market indices upon which the
index futures are based, although there may be deviations arising from
differences between the composition of the Fund and the stock comprising the
index.
Where a stock index futures contract is purchased to hedge against a possible
increase in the price of stock before the Fund is able to invest its cash (or
cash equivalents) in stocks (or options) in an orderly fashion, it is possible
that the market may decline instead. If the Fund then concludes not to invest
in stock or options at that time because of concern as to possible further
market decline or for other reasons, the Fund will realize a loss on the
futures contract that is not offset by a reduction in the price of securities
purchased.
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In addition to the possibility that there may be an imperfect correlation, or
no correlation at all, between movements in stock index futures and the portion
of the portfolio being hedged, the price of stock index futures may not
correlate perfectly with movement in the stock index due to certain market
distortions. Rather than meeting additional margin deposit requirements,
investors may close futures contracts through offsetting transactions which
could distort the normal relationship between the index and futures markets.
From the point of view of speculators, the deposit requirements in the futures
market are less onerous than margin requirements in the securities market.
Therefore, increased participation by speculators in the futures market may
also cause temporary price distortions. Due to the possibility of price
distortion in the futures market, and because of the imperfect correlation
between the movements in a stock index and movements in the price of stock
index futures, a correct forecast of general market trends by Alliance may
still not result in a successful hedging transaction over a short time frame.
Positions in stock index futures may be closed out only on an exchange or board
of trade which provides a secondary market for such futures. Although the Fund
intends to purchase or sell futures only on exchanges or boards of trade where
there appear to be active secondary markets, there is no assurance that a
liquid secondary market on any exchange or board of trade will exist for any
particular futures contract or at any particular time. In such event, it may
not be possible to close a futures investment position, and in the event of
adverse price movements, the Fund would continue to be required to make daily
cash payments of variation margin. However, in the event that futures contracts
have been used to hedge portfolio securities, such securities will not be sold
until the futures contract can be terminated. In such circumstances, an
increase in the price of the securities, if any, may partially or completely
offset losses on the futures contract. As described above, however, there is no
guarantee that the price of the securities will in fact correlate with the
price movements in the futures contract and thus provide an offset on a futures
contract.
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. Unlike
many exchange-traded futures contracts and options on futures contracts, there
are no daily price fluctuation limits for certain options on currencies and
forward contracts, and adverse market movements could therefore continue to an
unlimited extent over a period of time. In addition, the correlation between
movements in the prices of such instruments and movements in the prices of the
securities and currencies hedged or used for cover will not be perfect and
could produce unanticipated losses.
The Fund's ability to dispose of its positions in futures contracts, options
and forward contracts depends on the availability of liquid markets in such
instruments. Markets in options and futures with respect to a number of types
of securities and currencies are relatively new and still developing, and there
is no public market for forward contracts. It is impossible to predict the
amount of trading interest that may exist in various types of futures
contracts, options, and forward contracts. If a secondary market does not exist
for an option purchased or written by the Fund, it might not be possible to
effect a closing transaction in the option (i.e., dispose of the option) with
the result that (i) an option purchased by the Fund would have to be exercised
in order for the Fund to realize any profit and (ii) the Fund may not be able
to sell portfolio securities or currencies covering an option written by the
Fund until the option expires or it delivers the underlying securities,
currency or futures contract upon exercise. Therefore, no assurance can be
given that the Fund will be able to utilize these instruments effectively. In
addition, the Fund's ability to engage in options and futures transactions may
be limited by tax considerations and the use of certain hedging techniques may
adversely impact the characterization of income to the Fund for U.S. federal
income tax purposes.
ADDITIONAL RISK CONSIDERATIONS
Investment in the Fund involves the special risk considerations described
below. These risks may be heightened when investing in emerging markets.
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Currency Considerations. The Fund may receive a portion of its revenues in
currencies other than the U.S. Dollar. Therefore, the dollar equivalent of its
net assets, distributions, and income will be adversely affected by reductions
in the value of certain currencies relative to the U.S. Dollar. If the value of
the currencies in which the Fund receives its income falls relative to the U.S.
Dollar between receipt of the income and the making of Fund distributions, the
Fund may be required to liquidate securities in order to make distributions if
it has insufficient cash in U.S. Dollars to meet distribution requirements that
the Fund must satisfy to qualify as a regulated investment company for federal
income tax purposes. Similarly, if an exchange rate declines between the time
the Fund incurs expenses in U.S. Dollars and the time cash expenses are paid,
the amount of the currency required to be converted into U.S. Dollars in order
to pay expenses in U.S. Dollars could be greater than the equivalent amount of
such expenses in the currency at the time they were incurred. In light of these
risks, the Fund may engage in currency hedging transactions, as described
above, which involve certain special risks.
Securities Issued by Non-U.S. Companies. The securities markets of many
countries outside of the United States 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 may include securities issued by non-U.S. companies
in an amount up to 15% of its total assets, 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 countries require governmental approval prior to investments by foreign
persons or limit investment by foreign persons to only a specified percentage
of an issuer's outstanding securities or a specific class of securities that
may have less advantageous terms (including price) than securities of the
company available for purchase by nationals. These restrictions or controls
may at times limit or preclude investment in certain securities and may
increase the costs and expenses of 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. If a deterioration
occurs in a 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, 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 countries are generally higher than in the United States.
Issuers of securities in jurisdictions other than the United States 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 countries may
differ, in some cases significantly, from U.S. standards in important respects
and less information may be available to investors in securities issued by
non-U.S. companies 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 countries other than the United States 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 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 countries other than the United States governing
business organizations, bankruptcy and insolvency may provide less protection
to security holders such as the Fund than that provided by U.S. laws.
Extreme Governmental Action; Less Protective Laws. In contrast to investing in
the United States, investment in other countries may involve in certain
situations greater risk of nationalization, expropriation, confiscatory
taxation, currency blockage or other extreme governmental action that could
adversely impact the Fund's investments. In the event of certain such actions,
the Fund could lose its entire investment in the country involved. In addition,
laws in various countries other than the United States governing, among other
subjects, business organization and practices, securities and securities
trading, bankruptcy and insolvency may provide less protection to investors
such as the Fund than provided under United States laws.
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Non-U.S. Taxes. The Fund's investment in securities issued by non-U.S.
companies may be subject to taxes withheld at the source on dividend or
interest payments.
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MANAGEMENT OF THE FUND
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INVESTMENT ADVISER AND FUND MANAGER
The Fund's Adviser is Alliance Capital Management L.P., 1345 Avenue of the
Americas, New York, New York 10105. Alliance is a leading international
investment adviser supervising client accounts with assets as of [________],
2001 totaling more than $[___] billion (of which more than $[___] billion
represented the assets of investment companies). As of [_____], 2001, Alliance
managed retirement assets for many of the largest public and private employee
benefit plans (including [__] of the nation's FORTUNE 100 companies), for
public employee retirement funds in [___] states, for investment companies, and
for foundations, endowments, banks and insurance companies worldwide. The [___]
registered investment companies managed by Alliance, comprising [___] separate
portfolios, currently have more than [___] million shareholder accounts.
The persons primarily responsible for the day-to-day management of the Fund are
[_____] and [_____]. [Biography to be inserted here.]
Alliance provides investment advisory services and order placement facilities
for the Fund. For these advisory services, the Fund pays Alliance a fee at an
annualized rate of [___]% of the Fund's average daily net assets. The fee will
be accrued daily and paid monthly.
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PURCHASE AND SALE OF SHARES
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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 shares solely:
* through accounts established under a fee-based program, sponsored and
maintained by a registered broker-dealer or other financial intermediary and
approved by the Fund's principal underwriter, Alliance Fund Distributors, Inc.
or AFD;
* through a self-directed defined contribution employee benefit plan (e.g., a
401(k) plan) that has at least 1,000 participants or $25 million in assets;
* by investment advisory clients of, and certain other persons associated with,
Alliance and its affiliates or the Funds; and
* through registered investment advisers or other financial intermediaries who
charge a management, consulting or other fee for their services and who
purchase shares through a broker or agent approved by AFD and clients of such
registered investment advisers or financial intermediaries whose accounts are
linked to the master account of such investment adviser or financial
intermediary on the books of such approved broker or agent.
Generally, a fee-based program must charge an asset-based or other similar fee
and must invest at least $250,000 in Advisor Class shares to be approved by AFD
for investment in Advisor Class shares. The Fund's Statement of Additional
Information has more detailed information about who may purchase and hold
Advisor Class shares.
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The Fund may refuse any order to purchase Advisor Class shares. In particular,
the Fund reserves the right to restrict purchases of Advisor Class shares
(including through exchanges) when there appears to be evidence of a pattern of
frequent purchases and sales made in response to short-term considerations.
How To Exchange Shares
You may exchange your Advisor Class shares for Advisor Class shares of other
Alliance Mutual Funds (including AFD Exchange Reserves, a money market fund
managed by Alliance). Exchanges of Advisor Class 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 Exchange is open, either directly or through your financial intermediary.
Your sales price will be the next-determined NAV, less any applicable CDSC,
after the Fund receives your sales request in proper form. Normally, proceeds
will be sent to you within 7 days. If you recently purchased your shares by
check or electronic funds transfer, your redemption payment may be delayed
until the Fund is reasonably satisfied that the check or electronic funds
transfer has been collected (which may take up to 15 days). 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.
o 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, less any applicable CDSC. Your financial representative
is responsible for submitting all necessary documentation to the Fund and may
charge you for this service.
o Selling Shares Directly to the Fund
By Mail:
--Send a signed letter of instruction or stock power, along with certificates,
to:
Alliance Fund Services, Inc.
P.O. Box 1520
Secaucus, N.J. 07906-1520
800-221-5672
--For your protection, a bank, a member firm of a national stock exchange, or
other eligible guarantor institution, must guarantee signatures. Stock power
forms are available from your financial intermediary, AFS, and many commercial
banks. Additional documentation is required for the sale of shares by
corporations, intermediaries, fiduciaries, and surviving joint owners. If you
have any questions about these procedures, contact AFS.
By Telephone:
--You may redeem your shares for which no stock certificates have been issued
by telephone request. Call AFS at 800-221-5672 with instructions on how you
wish to receive your sale proceeds.
--A telephone redemption request must be received by 4:00 p.m., Eastern time,
for you to receive that day's NAV, less any applicable CDSC.
--If you have selected electronic funds transfer in your Shareholder
Application, the redemption proceeds will be sent directly to your bank.
Otherwise, the proceeds will be mailed to you.
--Redemption requests by electronic funds transfer may not exceed $100,000 per
day and redemption requests by check cannot exceed $50,000 per day.
--Telephone redemption is not available for shares held in nominee or "street
name" accounts, retirement plan accounts, or shares held by a shareholder who
has changed his or her address of record within the previous 30 calendar days.
15
<PAGE>
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 a Fund that are
different from those described in this prospectus. A transaction, service,
administrative or other similar fee may be charged by your broker-dealer,
agent, financial intermediary or other financial representative with respect to
the purchase, sale or exchange of Advisor Class shares made through such
financial representative. Such financial intermediaries may also impose
requirements with respect to the purchase, sale or exchange of shares that are
different from, or in addition to, those imposed by a Fund, including
requirements as to the minimum initial and subsequent investment amounts.
-------------------------------------------------------------------------------
DIVIDENDS, DISTRIBUTIONS AND TAXES
-------------------------------------------------------------------------------
Dividends and Distributions
The income dividend and capital gains distributions, 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 NAV as of the
close of business on the day following the declaration date of the dividend or
distribution equal to the cash amount of the dividend or distribution. You may
make an election to receive dividends and distributions in cash or in shares at
the time you purchase shares. Your election can be changed at any time prior to
a record date for a dividend. There is no sales or other charge on the
reinvestment of dividends or capital gains distributions. Cash dividends may be
paid in check, or at your election, electronically via the ACH network.
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.
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 distributions of long-term capital gains generally will be taxable to you
as long-term 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.
Investment income received by the Fund from sources within countries outside of
the United States may be subject to non-U.S. income taxes withheld at the
source.
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.
If you buy shares just before the Fund deducts a distribution from its NAV, you
will pay the full price for the shares and then receive a portion of the price
back as a taxable distribution.
The sale or exchange of Fund shares is a taxable transaction for federal income
tax purposes.
Each year shortly after December 31, the 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.
16
<PAGE>
-------------------------------------------------------------------------------
CONVERSION FEATURE
-------------------------------------------------------------------------------
Conversion
As described above, Advisor Class shares may be held solely through certain
fee-based program accounts, employee benefit plans and registered investment
advisory or other financial intermediary relationships, and by investment
advisory clients of, and certain persons associated with, Alliance and its
affiliates or the Funds. If a holder of Advisor Class shares (i) ceases to
participate in the fee-based program or plan, or to be associated with an
eligible investment advisor or financial intermediary or (ii) is otherwise no
longer eligible to purchase Advisor Class shares (each a "Conversion Event"),
then all Advisor Class shares held by the shareholder will convert
automatically to Class A shares of the same Fund. The Fund will provide the
shareholder with at least 30 days advance notice of such conversion. The
failure of a shareholder or a fee-based program to satisfy the minimum
investment requirements to purchase Advisor Class shares will not constitute a
Conversion Event. The conversion would occur on the basis of the relative NAV
of the two classes and without the imposition of any sales load, fee or other
charge.
Description of Class A Shares
The Class A shares of each Fund have a distribution fee of .30% under the
Fund's Rule 12b-1 plan that allows the Fund to pay distribution and service
fees for the distribution and sale of its shares. Because this fee is paid out
of the Fund's assets, Class A shares have a higher expense ratio and may pay
lower dividends and may have a lower NAV than Advisor Class shares.
-------------------------------------------------------------------------------
GENERAL INFORMATION
-------------------------------------------------------------------------------
Under unusual circumstances, 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.
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:
o 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
17
<PAGE>
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:
o Call the Commission at 1-202-942-8090 for information on the operation of
the Public Reference Room.
o Reports and other information about the Fund are available on the EDGAR
Database on the Commission's Internet site at http://www.sec.gov.
o Copies of the information may be obtained, after paying a fee, by electronic
request at [email protected], or by writing the Commission's Public Reference
Section, Washington, DC 20549-0102.
You also may find more information about Alliance and the Fund on the Internet
at: www.Alliancecapital.com.
SEC File No. [_____________________]
18
<PAGE>
AllianceBernstein Small Cap Value Fund
The AllianceBernstein Small Cap Value Fund is an open-end management investment
company structured as a series fund that invests in a diversified portfolio of
equity securities of companies with relatively small market capitalizations.
Prospectus and Application
[____________], 2001
The Securities and Exchange Commission has not approved or disapproved these
securities or passed upon the adequacy of this Prospectus. Any representation
to the contrary is a criminal offense.
AllianceCapital T
Investment Products Offered
* Are Not FDIC Insured
* May Lose Value
* Are Not Bank Guaranteed
<PAGE>
TABLE OF CONTENTS
_______________________________________________________________________________
Page
RISK/RETURN SUMMARY......................................................
FEES AND EXPENSES OF THE FUND............................................
GLOSSARY.................................................................
DESCRIPTION OF THE FUND..................................................
Investment Objective and Principal Policies and Risks....................
Description of Additional Investment Practices...........................
Additional Risk Considerations...........................................
MANAGEMENT OF THE FUND...................................................
PURCHASE AND SALE OF SHARES..............................................
How The Fund Values Its Shares...........................................
How To Buy Shares........................................................
Initial Offering.........................................................
How To Exchange Shares...................................................
How To Sell Shares.......................................................
DIVIDENDS, DISTRIBUTIONS AND TAXES.......................................
DISTRIBUTION ARRANGEMENTS................................................
GENERAL INFORMATION......................................................
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 the
AllianceBernstein Small Cap Value Fund. This Risk/Return 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:
* As with all investments, 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.
2
<PAGE>
Small Cap Value Fund
_______________________________________________________________________________
OBJECTIVE:
The Fund's investment objective is long-term growth of capital.
PRINCIPAL INVESTMENT STRATEGIES:
The Fund invests primarily in a diversified portfolio of equity securities of
companies with relatively small market capitalizations. Under normal
circumstances, the Fund will invest at least 65%, and normally substantially
more, of its total assets in these types of securities. The Fund's investment
policies emphasize investment in companies that are determined by Alliance to
be undervalued, using the fundamental value approach of Alliance's Bernstein
unit ("Bernstein"). In selecting securities for the Fund's portfolio,
Bernstein uses its fundamental research to identify companies whose long term
earnings power is not reflected in the current market price of their securities.
The Fund may also invest 15% of its total assets in securities issued by
non-U.S. companies.
PRINCIPAL RISKS:
Among the principal risks of investing in the Fund is market risk, which is the
risk of losses from adverse changes in the stock market. The Fund's
investments in smaller capitalization companies tend to be more volatile than
investments in companies with larger capitalizations. The Fund's investments
in small capitalization stocks may have additional risks because these
companies tend to have limited product lines, markets, or financial resources.
Depending on the Fund's investments at a particular time, the Fund may also
have industry/sector risk. To the extent the Fund invests in non-U.S. equity
securities, it may have non-U.S. investment risk and currency risk. The Fund
may at times use certain types of investment derivatives such as options,
futures, forwards and swaps. The use of these techniques involves special
risks that are discussed in this Prospectus.
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.
3
<PAGE>
-------------------------------------------------------------------------------
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 first year.
ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from Fund assets)
Operating Expenses
------------------------------------------------
Class A Class B Class C
-------------- -------------- --------------
Management fees [____]% [____]% [____]%
Distribution (12b-1) fees [____]% [____]% [____]%
Other expenses [____]% [____]% [____]%
Total Fund
operating expenses (a) [____]% [____]% [____]%
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
-----------------------------------------------------
Class A Class B+ Class B++ Class C+ Class C++
-----------------------------------------------------
After 1 Yr. $[______] $[______] $[______] $[______] $[______]
After 3 Yrs. $[______] $[______] $[______] $[______] $[______]
(a) Alliance has contractually agreed to waive its management fees and/or to
bear expenses of the Fund through [ ] to the extent
necessary to prevent total fund operating expenses, on an annualized
basis, from exceeding [ ]% for Class A shares and [ ]% for
Classes B & C shares. The fees waived and expenses borne by Alliance
during this period may be reimbursed by the Fund during the three years
after commencement of operations. No reimbursement payment will be made
that would cause the Fund's total annualized operating expenses to exceed
these percentages or cause the total of the payments to exceed the Fund's
total initial organizational and offering expenses.
+ Assumes redemption at the end of period.
++ Assumes no redemption at end of period.
4
<PAGE>
-------------------------------------------------------------------------------
GLOSSARY
-------------------------------------------------------------------------------
This Prospectus uses the following terms.
TYPES OF SECURITIES
Convertible securities are fixed-income securities that are convertible into
common stock.
Debt securities are bonds, debentures, notes, bills, loans, other direct debt
instruments, and other fixed, floating and variable rate debt obligations, but
do not include convertible securities.
Depositary receipts include American Depositary Receipts ("ADRs"), Global
Depositary Receipts ("GDRs") and other types of depositary receipts.
Equity securities 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.
Lower-rated securities are fixed-income securities rated Ba or below by Moody's
or BB or below by S&P, Duff & Phelps or Fitch, or determined by Alliance to be
of equivalent quality, and are commonly referred to as "junk bonds."
Non-U.S. Company is an entity that (i) is organized under the laws of a country
other than the United States, (ii) has its principal place of business in a
country other than the United States, and (iii) issues equity or debt
securities that are traded principally in a country other than the United
States.
Prime commercial paper is commercial paper rated Prime 1 by Moody's or A-1 or
higher by S&P or, if not rated, issued by companies that have an outstanding
debt issue rated Aa or higher by Moody's or AA or higher by S&P.
Qualifying bank deposits are certificates of deposit, bankers' acceptances and
interest-bearing savings deposits of banks that have total assets of more than
$1 billion and are members of the Federal Deposit Insurance Corporation.
Rule 144A securities are securities that may be resold pursuant to Rule 144A of
the Securities Act.
U.S. Government securities are securities issued or guaranteed by the United
States Government, its agencies or instrumentalities.
RATING AGENCIES
Duff & Phelps is Duff & Phelps Credit Rating Co.
Fitch is Fitch IBCA, Inc.
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.
Russell 2500(tm) Value Index measures the performance of those Russell 2500(tm)
companies with lower price-to-book ratios and lower forecasted growth values.
The Russell 2500(tm) universe of securities is compiled by Frank Russell
Company and is segmented into two style indices, the Russell 2500(tm) Growth
Index and the Russell 2500(tm) Value Index.
Securities Act is the Securities Act of 1933, as amended.
5
<PAGE>
-------------------------------------------------------------------------------
DESCRIPTION OF THE FUND
-------------------------------------------------------------------------------
This section of the Prospectus provides a more complete description of the
Fund's investment objective, principal investment policies and risks. Of
course, there can be no assurance that the Fund will achieve its investment
objective.
Please note that:
* Additional discussion of the Fund's investments, including the risks of the
investments, can be found in the discussion under Description of Additional
Investment Practices following this section.
* The description of the principal risks for the Fund includes risks described
in the RISK/RETURN SUMMARY above. Additional information about the risks of
investing in the Fund can be found in the discussion 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. Except as noted, the Fund's investment policies
are not fundamental and thus can be changed without a shareholder vote.
INVESTMENT OBJECTIVE AND PRINCIPAL POLICIES AND RISKS
INVESTMENT OBJECTIVE
The Fund's investment objective is long-term growth of capital.
PRINCIPAL POLICIES
In seeking to achieve its objective, the Fund invests primarily in a
diversified portfolio of equity securities generally representing 60 to 90
companies. Under normal circumstances, the Fund will invest at least 65%, and
normally substantially more, of the value of its total assets in companies
having market capitalizations ranging from $100 million to $10 billion. The
Fund's investment policies emphasize investment in companies that are
determined by Alliance's Bernstein unit ("Bernstein") to be undervalued, using
a fundamental value approach.
Bernstein's fundamental value approach to equity investing generally defines
value by reference to the relationship between a security's current price and
its intrinsic economic value, as measured by long-term earnings prospects. In
making investment decisions for the Fund, Alliance depends heavily on
Bernstein's fundamental analysis and the research of its large internal
research staff. These investment decisions are the result of the multi-step
process described below.
The fundamental value approach seeks to identify, in the first instance, a
universe of securities that are considered to be undervalued because they are
attractively priced relative to their future earnings power. Bernstein's
research staff of analysts follows a primary research universe of approximately
800 largely domestic companies with small capitalizations, most of which are
included in the Russell 2500(tm) Value Index. From this universe, Bernstein,
on a daily basis, applies a quantitative screening process that examines a
number of factors, such as the price to earnings ratio, price to book ratio and
earnings changes to target approximately 300 companies for further analysis by
the research staff and the Fund's portfolio managers. Bernstein then prepares
its own earnings estimates and financial models for companies within this
targeted group.
Forecasting corporate earnings and dividend-paying capability is the heart of
the fundamental value approach. The research staff identifies and quantifies
the critical variables that control a business's performance and analyzes the
results in order to forecast the company's long-term prospects and expected
returns. As one of the largest multi-national investment firms, Alliance and
its Bernstein unit have access to considerable information concerning all of
the companies followed. Bernstein's research analysts develop an in-depth
understanding of the products, services, markets and competition of those
companies considered for purchase. Analysts also develop a good knowledge of
the management of those companies. A company's future earnings are typically
projected over a full economic cycle, including a trough and a peak, within the
context of forecasts for real economic growth, inflation and interest rate
changes. As a result, forecasts of near term economic events are generally not
of major consequence.
6
<PAGE>
The Fund's portfolio managers carefully review the research process to be sure
that the analysts have appropriately considered key issues facing each company,
that forecasts of a company's future are compatible with its history, and that
all forecasts use consistent analytic frameworks and economic assumptions.
The Fund's portfolio managers, in consultation with the research analysts, also
consider aggregate portfolio characteristics when deciding whether to purchase
a particular security for the Fund. By evaluating overall sector concentration,
capitalization distribution, leverage and degree of undervaluation, Bernstein
seeks to manage overall Fund volatility relative to the companies in the
Russell 2500TM Value Index by favoring promising securities that offer the best
balance between return and targeted risk. At times, the Fund may favor or
disfavor a particular sector compared to the Russell 2500TM Value Index.
To the extent that companies involved in certain sectors may from time to time
constitute a material portion of the Russell 2500(tm) Value Index, such as
financial services and consumer services, the Fund may also invest
significantly in these companies.
A disparity between a company's current stock price and Bernstein's assessment
of intrinsic value can arise, at least in part, as a result of adverse,
short-term market reactions to recent events or trends. In order to reduce the
risk that an undervalued security will be purchased before such an adverse
market reaction has run its course, Bernstein also monitors analysts'
earnings-estimate revisions and relative return trends (also called
"momentum") so as to better time new purchases and sales of securities.
A security generally will be sold when it no longer meets appropriate valuation
criteria. Sale of a stock that has reached its target may be delayed, however,
when earnings expectations are rising or relative return trends are improving.
Typically, the growth of a company's market capitalization above $10 billion,
alone, will not cause the Fund to dispose of the security.
The Fund may also
* Invest up to 20% of its total assets in convertible securities;
* Write covered put and call options and purchase put and call options on U.S.
and foreign securities, security exchanges and over the counter, including
options on market indices and currencies;
* Invest up to 15% of its net assets in illiquid securities;
* Invest up to 15% of its total assets in securities issued by non-U.S.
companies;
* Invest up to 10% of its total assets in rights and warrants;
* Enter into forward commitments, futures contracts and options on futures
contracts with respect to securities, indices and currencies;
* Enter into contracts for the purchase and sale for the future delivery of
contracts based on financial indices, including any index of U.S. Government
securities issued by non-U.S. government entities;
* Enter into currency swaps and forward currency exchange contracts for hedging
purposes;
* Make secured loans of portfolio securities of up to 30% of its total assets;
and
* Enter into repurchase agreements.
7
<PAGE>
PRINCIPAL 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 markets fluctuate and that prices overall will decline
over short- or long-term periods.
* Sector Risk This is the risk of investments in a particular industry sector.
If the Fund invests a substantial amount of its assets in companies engaged in
a particular industry sector, market or economic factors affecting that
industry could have a major effect on the value of the Fund's investments.
* Capitalization Risk This is the risk of investments in small capitalization
companies. Investments in small- and mid-cap companies may be more volatile
than investments in large-cap companies. Investments in small-cap companies
tend to be more volatile than investments in mid- or large-cap companies. The
Fund's investments in smaller capitalization companies may have additional
risks because these companies often have limited product lines, markets or
financial resources.
* Derivative and Leverage Risk The Fund may make substantial use of derivatives
and employ specialized trading techniques such as short sales, options,
futures, forwards, and other leveraging techniques to increase its exposure to
certain selected securities. Alliance employs these techniques speculatively to
enhance returns and not merely as hedging tools. These techniques are riskier
than many investment strategies and will result in greater volatility for the
Fund, particularly in periods of market declines.
* Non-U.S. Investment Risk This is the risk of investments in issuers located
in countries other than the United States. Investments in securities issued by
non-U.S. companies 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 countries are relatively small, with a limited number of
companies representing a small number of industries. Additionally, non-U.S.
issuers are usually not subject to the same degree of regulation as U.S.
issuers. Reporting, accounting and auditing standards of 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
country other than the United States. In the event of nationalization,
expropriation or other confiscation, the Fund could lose its entire investment.
* Currency Risk This is the risk that fluctuations in the exchange rates
between the U.S. Dollar and other currencies may negatively affect the value of
the Fund's investments.
* 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[, including its fundamental value approach,] in
making investment decisions for the Fund, but there is no guarantee that its
techniques will produce the intended result.
Portfolio Turnover. The Fund's portfolio turnover is not expected to exceed
100%.
Temporary Defensive Position. For temporary defensive purposes, the Fund may
reduce its position in equity securities and increase without limit its
position in short-term, liquid, high-grade debt securities, which may include
U.S. Government securities, bank deposits, money market instruments, short-term
debt securities, including notes and bonds, or hold its assets in cash. While
the Fund is investing for temporary defensive purposes, it may not meet its
investment objective.
DESCRIPTION OF ADDITIONAL INVESTMENT PRACTICES
This section describes the investment practices of the Fund and risks
associated with these practices.
Convertible Securities. Prior to conversion, convertible securities have the
same general characteristics as nonconvertible debt securities, which generally
provide a stable stream of income with generally higher yields than those of
equity securities of the same or similar issuers. The price of a convertible
security will normally vary with changes in the price of the underlying equity
security, although the higher yield tends to make the price of the convertible
security less volatile than that of the underlying equity security. As with
debt securities, the market values of convertible securities tend to decrease
as interest rates rise and increase as interest rates fall. While convertible
securities generally offer lower interest yields than non-convertible debt
securities of similar quality, they offer investors the potential to benefit
from increases in the market prices of the underlying common stocks.
Convertible securities that are rated Baa or lower by Moody's and BBB or lower
by S&P or, if unrated, determined by Alliance to be of equivalent quality, may
share some or all of the risks of non-convertible debt securities with those
ratings. The Fund may invest up to 20% of its total assets in convertible
securities.
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Currency Swaps. Currency swaps involve the individually negotiated exchange by
the Fund with another party of a series of payments in specified currencies. A
currency swap may involve the delivery at the end of the exchange period of a
substantial amount of one designated currency in exchange for the other
designated currency. Therefore, the entire principal value of a currency swap
is subject to the risk that the swap counterparty will default on its
contractual delivery obligations. The Fund will enter into currency swaps for
hedging purposes only. The Fund will not enter into any currency swap unless
the credit quality of the unsecured senior debt or the claims-paying ability of
the counterparty is rated in the highest rating category of at least one
nationally recognized rating organization at the time of entering into the
transaction. If there is a default by the other party to such a transaction,
the Fund will have contractual remedies under the transaction agreements.
Depositary Receipts. Depositary receipts may not necessarily be denominated in
the same currency as the underlying securities into which they may be
converted. In addition, the issuers of the stock of unsponsored depositary
receipts are not obligated to disclose material information in the United
States, and therefore, there may not be a correlation between such information
and the market value of the depositary receipts. ADRs are depositary receipts
typically issued by a U.S. bank or trust company that evidence ownership of
underlying securities issued by a non-U.S. corporation. GDRs and other types of
depositary receipts are typically issued by non-U.S. banks or trust companies
and evidence ownership of underlying securities issued by either a U.S. or a
non-U.S. company. Generally, depositary receipts in registered form are
designed for use in the U.S. securities markets, and depositary receipts in
bearer form are designed for use in securities markets outside of the United
States.
Forward Currency Exchange Contracts. The Fund may purchase or sell forward
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 currency in
order to "lock in" the U.S. Dollar price of the security ("transaction hedge").
The Fund will not engage in transaction hedges with respect to the currency of
a particular country to an extent greater than the aggregate amount of the
Fund's transactions in that currency. When the Fund believes that a 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 currency approximating the
value of some or all of the Fund's portfolio securities denominated in such
currency, or when the Fund believes that the U.S. Dollar may suffer a
substantial decline against another currency, it may enter into a forward
purchase contract to buy that 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 currency for a
fixed U.S. dollar amount where the Fund believes that the U.S. Dollar value of
the currency to be sold pursuant to the forward contract will fall whenever
there is a decline in the U.S. Dollar value of the currency in which portfolio
securities of the Fund are denominated ("cross-hedge"). Unanticipated changes
in currency prices may result in poorer overall performance for the Fund than
if it had not entered into such forward contracts. Hedging against a decline
in the value of a currency does not eliminate fluctuations in the prices of
portfolio securities or prevent losses if the prices of such securities
decline. Such transactions also preclude the opportunity for gain if the value
of the hedged currency should rise. Moreover, it may not be possible for 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
devaluation level it anticipates.
Illiquid Securities. The Fund will limit its investment in illiquid securities
to no more than 15% 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 will not be treated as
"illiquid" for purposes of this limit on investments if they meet certain
liquidity guidelines established by the Fund or Alliance.
The Fund may not be able to readily sell securities for which there is no ready
market. Such securities are unlike securities that are traded in the open
market and can be expected to be sold immediately if the market is adequate.
The sale price of illiquid securities may be lower or higher than Alliance's
most recent estimate of their fair value. Generally, less public information is
available about the issuers of such securities than about companies whose
securities are traded on an exchange.
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To the extent that these securities are securities issued by non-U.S.
companies, 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 of up to 30% of its total assets 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 risk in lending
portfolio securities, as with other extensions of credit, consists of the
possible loss of rights in the collateral should the borrower fail financially.
In determining whether to lend securities to a particular borrower, Alliance
will consider all relevant facts and circumstances, including the
creditworthiness of the borrower. While securities are on loan, the borrower
will pay the Fund any income from the securities. The Fund may invest any cash
collateral in portfolio securities and earn additional income, or receive an
agreed-upon amount of income from a borrower who has delivered equivalent
collateral. 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.
Options on Securities. An option gives the purchaser of the option, upon
payment of a premium, the right to deliver to (in the case of a put) or receive
from (in the case of a call) the writer of the option a specified amount of a
security on or before a fixed date at a predetermined price. A call option
written by the Fund is "covered" if the Fund owns the underlying security, has
an absolute and immediate right to acquire that security upon conversion or
exchange of another security it holds, or holds a call option on the underlying
security with an exercise price equal to or less than that of the call option
it has written. A put option written by the Fund is "covered" if the Fund holds
a put on the underlying securities with an exercise price equal to or greater
than that of the put option it has written.
A call option is for cross-hedging purposes if the Fund does not own the
underlying security and is designed to provide a hedge against a decline in
value in another security which the Fund owns or has the right to acquire. The
Fund may write call options for cross-hedging purposes. The Fund would write a
call option for cross-hedging purposes, instead of writing a covered call
option, when the premium to be received from the cross-hedge transaction would
exceed that which would be received from writing a covered call option, while
at the same time achieving the desired hedge.
In purchasing an option, the Fund would be in a position to realize a gain if,
during the option period, the price of the underlying security increased (in
the case of a call) or decreased (in the case of a put) by an amount in excess
of the premium paid; otherwise the Fund would experience a loss equal to the
premium paid for the option.
If an option written by the Fund were exercised, the Fund would be obligated to
purchase (in the case of a put) or sell (in the case of a call) the underlying
security at the exercise price. The risk involved in writing an option is that,
if the option is exercised, the underlying security would then be purchased or
sold by the Fund at a disadvantageous price. Entering into a closing
transaction (i.e., by disposing of the option prior to its exercise) could
reduce these risks. The Fund retains the premium received from writing a put or
call option whether or not the option is exercised. The writing of call options
could result in increases in the Fund's portfolio turnover rate, especially
during periods when market prices of the underlying securities appreciate.
The Fund will purchase or write options on securities of the types in which it
is permitted to invest in privately negotiated (i.e., over-the-counter)
transactions only with investment dealers and other financial institutions
(such as commercial banks or savings and loan institutions) deemed creditworthy
by Alliance. Alliance has adopted procedures for monitoring the
creditworthiness of such entities. Options purchased or written by the Fund in
negotiated transactions are illiquid and it may not be possible for the Fund to
effect a closing transaction at an advantageous time.
Options on Securities Indices. An option on a securities index is similar to
an option on a security except that, rather than the right to take or make
delivery of a security at a specified price, an option on a securities index
gives the holder the right to receive, upon exercise of the option, an amount
of cash if the closing level of the chosen index is greater than (in the case
of a call) or less than (in the case of a put) the exercise price of the option.
Options on Currencies. As in the case of other kinds of options, the writing
of an option on a currency constitutes only a partial hedge, up to the amount
of the premium received, and the Fund could be required to purchase or sell
currencies at disadvantageous exchange rates, thereby incurring losses. The
purchase of an option on a currency may constitute an effective hedge against
fluctuations in exchange rates although, in the event of rate movements adverse
to the Fund's position, the Fund may forfeit the entire amount of the premium
plus related transaction costs.
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Futures Contracts and Options on Futures Contracts. A "sale" of a futures
contract means the acquisition of a contractual obligation to deliver the
securities or currency or other commodity called for by the contract at a
specified price on a specified date. A "purchase" of a futures contract means
the incurring of an obligation to acquire the securities or currency or other
commodity called for by the contract at a specified price on a specified date.
The purchaser of a futures contract on an index agrees to take or make delivery
of an amount of cash equal to the difference between a specified dollar
multiple of the value of the index on the expiration date of the contract
("current contract value") and the price at which the contract was originally
struck. No physical delivery of the securities underlying the index is made.
Options on Futures contracts are options that, upon exercise, call for the
delivery of futures contracts (or cash payments based on the value of futures
contracts). Options on futures contracts written or purchased by the Fund will
be traded on exchanges worldwide or over-the-counter. These investment
techniques will be used only to hedge against anticipated future changes in
market conditions and interest or exchange rates which otherwise might either
adversely affect the value of the Fund's portfolio securities or adversely
affect the prices of securities which the Fund intends to purchase at a later
date.
The Fund will not enter into any futures contracts or options on futures
contracts if immediately thereafter the market values of the outstanding
futures contracts of the Fund and the currencies and futures contracts subject
to outstanding options written by the Fund would exceed [___]% of its total
assets.
Repurchase Agreements. A repurchase agreement arises when a buyer purchases a
security and simultaneously agrees to resell it to the vendor at an agreed-upon
future date, normally a day or a few days later. The resale price is greater
than the purchase price, reflecting an agreed-upon interest rate for the period
the buyer's money is invested in the security. Such agreements permit 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 prevented from,
selling the collateral for its benefit. Alliance monitors the creditworthiness
of the vendors with which the Fund enters into repurchase agreements.
Rights and Warrants. The Fund will invest in rights or warrants only if the
underlying equity securities themselves are deemed appropriate by Alliance for
inclusion in the Fund's portfolio. Rights and warrants entitle the holder to
buy equity securities at a specific price for a specific period of time. Rights
are similar to warrants except that they have a substantially shorter duration.
Rights and warrants may be considered more speculative than certain other types
of investments in that they do not entitle a holder to dividends or voting
rights with respect to the underlying securities nor do they represent any
rights in the assets of the issuing company. The value of a right or warrant
does not necessarily change with the value of the underlying security, although
the value of a right or warrant may decline because of a decrease in the value
of the underlying security, the passage of time or a change in perception as to
the potential of the underlying security, or any combination of these factors.
If the market price of the underlying security is below the exercise price of
the warrant on the expiration date, the warrant will expire worthless.
Moreover, a right or warrant ceases to have value if it is not exercised prior
to the expiration date. The Fund may invest up to 10% of its total assets in
rights and warrants.
Short Sales. The Fund may utilize short selling in order to attempt both to
protect its portfolio against the effects of potential downtrends in the
securities markets and as a means of enhancing its overall performance. A short
sale is a transaction in which the Fund sells a security it does not own but
has borrowed in anticipation that the market price of that security will
decline. The Fund may be required to pay a fee to borrow the security and to
pay over to the lender any payments received on the security.
If the price of the security sold short increases between the time of the short
sale and the time the Fund replaces the borrowed security, the Fund will incur
a loss; conversely, if the price declines, the Fund will realize a capital
gain. Although the Fund's gain is limited by the price at which it sold the
security short, its potential loss is unlimited. The Fund may engage in short
sales for up to 33% of its total assets.
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Stock Index Futures. The Fund may purchase and sell stock index futures as a
hedge against movements in the equity markets. There are several risks in
connection with the use of stock index futures by the Fund as a hedging device.
One risk arises because of the imperfect correlation between movements in the
price of a stock index future and movements in the price of the securities
which are the subject of the hedge. The price of a stock index future may move
more than or less than the price of the securities being hedged. If the price
of a stock index future moves less than the price of the securities which are
the subject of the hedge, the hedge will not be fully effective but, if the
price of the securities being hedged has moved in an unfavorable direction, the
Fund would be in a better position than if it had not hedged at all. If the
price of the securities being hedged has moved in a favorable direction, this
advantage will be partially offset by the loss on the index futures contract.
If the price of the index future moves more than the price of the stock, the
Fund will experience either a loss or gain on the futures contract which will
not be completely offset by movements in the price of the securities which are
subject to the hedge.
To compensate for the imperfect correlation of movements in the price of
securities being hedged and movements in the price of a stock index future, the
Fund may buy or sell stock index futures contracts in greater dollar amount
than the dollar amount of securities being hedged if the volatility over a
particular time period of the prices of such securities has been greater than
the volatility over such time period of the stock index, or if otherwise deemed
to be appropriate by Alliance. Conversely, the Fund may buy or sell fewer stock
index futures contracts if the volatility over a particular time period of the
prices of the securities being hedged is less than the volatility over such
time period of the stock index, or it is otherwise deemed to be appropriate by
Alliance. It is also possible that, where the Fund has sold futures to hedge
its portfolio against a decline in the market, the market may advance and the
value of securities held in the Fund may decline. If this occurred, the Fund
would lose money on the futures and also experience a decline in value in its
portfolio securities. However, over time the value of a diversified portfolio
should tend to move in the same direction as the market indices upon which the
index futures are based, although there may be deviations arising from
differences between the composition of the Fund and the stock comprising the
index.
Where a stock index futures contract is purchased to hedge against a possible
increase in the price of stock before the Fund is able to invest its cash (or
cash equivalents) in stocks (or options) in an orderly fashion, it is possible
that the market may decline instead. If the Fund then concludes not to invest
in stock or options at that time because of concern as to possible further
market decline or for other reasons, the Fund will realize a loss on the
futures contract that is not offset by a reduction in the price of securities
purchased.
In addition to the possibility that there may be an imperfect correlation, or
no correlation at all, between movements in stock index futures and the portion
of the portfolio being hedged, the price of stock index futures may not
correlate perfectly with movement in the stock index due to certain market
distortions. Rather than meeting additional margin deposit requirements,
investors may close futures contracts through offsetting transactions which
could distort the normal relationship between the index and futures markets.
From the point of view of speculators, the deposit requirements in the futures
market are less onerous than margin requirements in the securities market.
Therefore, increased participation by speculators in the futures market may
also cause temporary price distortions. Due to the possibility of price
distortion in the futures market, and because of the imperfect correlation
between the movements in a stock index and movements in the price of stock
index futures, a correct forecast of general market trends by Alliance may
still not result in a successful hedging transaction over a short time frame.
Positions in stock index futures may be closed out only on an exchange or board
of trade which provides a secondary market for such futures. Although the Fund
intends to purchase or sell futures only on exchanges or boards of trade where
there appear to be active secondary markets, there is no assurance that a
liquid secondary market on any exchange or board of trade will exist for any
particular futures contract or at any particular time. In such event, it may
not be possible to close a futures investment position, and in the event of
adverse price movements, the Fund would continue to be required to make daily
cash payments of variation margin. However, in the event that futures contracts
have been used to hedge portfolio securities, such securities will not be sold
until the futures contract can be terminated. In such circumstances, an
increase in the price of the securities, if any, may partially or completely
offset losses on the futures contract. As described above, however, there is no
guarantee that the price of the securities will in fact correlate with the
price movements in the futures contract and thus provide an offset on a futures
contract.
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.
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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. Unlike
many exchange-traded futures contracts and options on futures contracts, there
are no daily price fluctuation limits for certain options on currencies and
forward contracts, and adverse market movements could therefore continue to an
unlimited extent over a period of time. In addition, the correlation between
movements in the prices of such instruments and movements in the prices of the
securities and currencies hedged or used for cover will not be perfect and
could produce unanticipated losses.
The Fund's ability to dispose of its positions in futures contracts, options
and forward contracts depends on the availability of liquid markets in such
instruments. Markets in options and futures with respect to a number of types
of securities and currencies are relatively new and still developing, and there
is no public market for forward contracts. It is impossible to predict the
amount of trading interest that may exist in various types of futures
contracts, options, and forward contracts. If a secondary market does not exist
for an option purchased or written by the Fund, it might not be possible to
effect a closing transaction in the option (i.e., dispose of the option) with
the result that (i) an option purchased by the Fund would have to be exercised
in order for the Fund to realize any profit and (ii) the Fund may not be able
to sell portfolio securities or currencies covering an option written by the
Fund until the option expires or it delivers the underlying securities,
currency or futures contract upon exercise. Therefore, no assurance can be
given that the Fund will be able to utilize these instruments effectively. In
addition, the Fund's ability to engage in options and futures transactions may
be limited by tax considerations and the use of certain hedging techniques may
adversely impact the characterization of income to the Fund for U.S. federal
income tax purposes.
ADDITIONAL RISK CONSIDERATIONS
Investment in the Fund involves the special risk considerations described
below. These risks may be heightened when investing in emerging markets.
Currency Considerations. The Fund may receive a portion of its revenues in
currencies other than the U.S. Dollar. Therefore, the dollar equivalent of its
net assets, distributions, and income will be adversely affected by reductions
in the value of certain currencies relative to the U.S. Dollar. If the value of
the currencies in which the Fund receives its income falls relative to the U.S.
Dollar between receipt of the income and the making of Fund distributions, the
Fund may be required to liquidate securities in order to make distributions if
it has insufficient cash in U.S. Dollars to meet distribution requirements that
the Fund must satisfy to qualify as a regulated investment company for federal
income tax purposes. Similarly, if an exchange rate declines between the time
the Fund incurs expenses in U.S. Dollars and the time cash expenses are paid,
the amount of the currency required to be converted into U.S. Dollars in order
to pay expenses in U.S. Dollars could be greater than the equivalent amount of
such expenses in the currency at the time they were incurred. In light of these
risks, the Fund may engage in currency hedging transactions, as described
above, which involve certain special risks.
Securities Issued by Non-U.S. Companies. The securities markets of many
countries outside of the United States 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 may include securities issued by non-U.S. companies
in an amount up to 15% of its total assets, 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 countries require governmental approval prior to investments by foreign
persons or limit investment by foreign persons to only a specified percentage
of an issuer's outstanding securities or a specific class of securities that
may have less advantageous terms (including price) than securities of the
company available for purchase by nationals. These restrictions or controls
may at times limit or preclude investment in certain securities and may
increase the costs and expenses of 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. If a deterioration
occurs in a 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, 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
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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 countries are generally higher than in the United States.
Issuers of securities in jurisdictions other than the United States 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 countries may
differ, in some cases significantly, from U.S. standards in important respects
and less information may be available to investors in securities issued by
non-U.S. companies 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 countries other than the United States 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 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 countries other than the United States governing
business organizations, bankruptcy and insolvency may provide less protection
to security holders such as the Fund than that provided by U.S. laws.
Extreme Governmental Action; Less Protective Laws. In contrast to investing in
the United States., investment in other countries may involve in certain
situations greater risk of nationalization, expropriation, confiscatory
taxation, currency blockage or other extreme governmental action that could
adversely impact the Fund's investments. In the event of certain such actions,
the Fund could lose its entire investment in the country involved. In addition,
laws in various countries other than the United States governing, among other
subjects, business organization and practices, securities and securities
trading, bankruptcy and insolvency may provide less protection to investors
such as the Fund than provided under United States laws.
Non-U.S. Taxes. The Fund's investment in securities issued by non-U.S.
companies may be subject to taxes withheld at the source on dividend or
interest payments.
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MANAGEMENT OF THE FUND
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INVESTMENT ADVISER AND FUND MANAGER
The Fund's Adviser is Alliance Capital Management L.P., 1345 Avenue of the
Americas, New York, New York 10105. Alliance is a leading international
investment adviser supervising client accounts with assets as of [________],
2001 totaling more than $[___] billion (of which more than $[___] billion
represented the assets of investment companies). As of [_____], 2001, Alliance
managed retirement assets for many of the largest public and private employee
benefit plans (including [__] of the nation's FORTUNE 100 companies), for
public employee retirement funds in [___] states, for investment companies, and
for foundations, endowments, banks and insurance companies worldwide. The [___]
registered investment companies managed by Alliance, comprising [___] separate
portfolios, currently have more than [___] million shareholder accounts.
The persons primarily responsible for the day-to-day management of the Fund are
[_____] and [_____]. [Biography to be inserted here.]
Alliance provides investment advisory services and order placement facilities
for the Fund. For these advisory services, the Fund pays Alliance a fee at an
annualized rate of [___]% of the Fund's average daily net assets. The fee will
be accrued daily and paid monthly.
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PURCHASE AND SALE OF SHARES
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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. The minimum
initial investment amount is $10,000, except that the minimum initial
investment amount applicable to individual retirement accounts (IRAs) is $2,000.
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 particular, 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.
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 Exchange is open, either directly or through your financial intermediary.
Your sales price will be the next-determined NAV, less any applicable CDSC,
after the Fund receives your sales request in proper form. Normally, proceeds
will be sent to you within 7 days. If you recently purchased your shares by
check or electronic funds transfer, your redemption payment may be delayed
until the Fund is reasonably satisfied that the check or electronic funds
transfer has been collected (which may take up to 15 days).
o 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.
o Selling Shares Directly to the Fund
By Mail:
--Send a signed letter of instruction or stock power, along with certificates,
to:
Alliance Fund Services, Inc.
15
<PAGE>
P.O. Box 1520
Secaucus, N.J. 07906-1520
800-221-5672
--For your protection, a bank, a member firm of a national stock exchange, or
other eligible guarantor institution, must guarantee signatures. Stock power
forms are available from your financial intermediary, AFS, and many commercial
banks. Additional documentation is required for the sale of shares by
corporations, intermediaries, fiduciaries, and surviving joint owners. If you
have any questions about these procedures, contact AFS.
By Telephone:
--You may redeem your shares for which no stock certificates have been issued
by telephone request. Call AFS at 800-221-5672 with instructions on how you
wish to receive your sale proceeds.
--A telephone redemption request must be received by 4:00 p.m., Eastern time,
for you to receive that day's NAV, less any applicable CDSC.
--If you have selected electronic funds transfer in your Shareholder
Application, the redemption proceeds will be sent directly to your bank.
Otherwise, the proceeds will be mailed to you.
--Redemption requests by electronic funds transfer may not exceed $100,000 per
day and redemption requests by check cannot exceed $50,000 per day.
--Telephone redemption is not available for shares held in nominee or "street
name" accounts, retirement plan accounts, or shares held by a shareholder who
has changed his or her address of record within the previous 30 calendar days.
-------------------------------------------------------------------------------
DIVIDENDS, DISTRIBUTIONS AND TAXES
-------------------------------------------------------------------------------
Dividends and Distributions
The income dividend and capital gains distributions, 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 NAV as of the
close of business on the day following the declaration date of the dividend or
distribution equal to the cash amount of the dividend or distribution. You may
make an election to receive dividends and distributions in cash or in shares at
the time you purchase shares. Your election can be changed at any time prior to
a record date for a dividend. There is no sales or other charge on the
reinvestment of dividends or capital gains distributions. Cash dividends may be
paid in check, or at your election, electronically via the ACH network.
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.
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 distributions of long-term capital gains generally will be taxable to you
as long-term 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.
Investment income received by the Fund from sources within countries outside of
the United States may be subject to non-U.S. income taxes withheld at the
source.
16
<PAGE>
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.
If you buy shares just before the Fund deducts a distribution from its NAV, you
will pay the full price for the shares and then receive a portion of the price
back as a taxable distribution.
The sale or exchange of Fund shares is a taxable transaction for federal income
tax purposes.
Each year shortly after December 31, the 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 plus an initial sales charge, as follows:
Initial Sales Charge
Commission to
As % of As % of Dealer/Agent
Net Amount Offering as % of
Amount Purchased Invested Price Offering 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 of the number of years you hold the shares.
The CDSC amounts are:
Years Since Purchase CDSC
-------------------- ----
First 4.0%
Second 3.0%
Third 2.0%
Fourth 1.0%
Fifth None
If you exchange your shares for the Class B shares of another Alliance Mutual
Fund, the CDSC also will apply to those Class B shares. The CDSC period begins
with the date of your original purchase, not the date of exchange for the other
Class B shares.
17
<PAGE>
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 Charges 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:
18
<PAGE>
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 might consider purchasing Class A shares. If you are making a
smaller investment, you might consider purchasing Class B shares because 100%
of your purchase is invested immediately. If you are unsure of the length of
your investment, you might consider Class C shares because there is no initial
sales charge and no CDSC as long as the shares are held for one year or more.
Dealers and agents may receive differing compensation for selling Class A,
Class B, or Class C shares. There is no size limit on purchases of Class A
shares. The maximum purchase of Class B shares is $250,000. The maximum
purchase of Class C shares is $1,000,000.
You should consult your financial agent to assist in choosing a Class of Fund
shares.
Application of the CDSC. The CDSC is applied to the lesser of the original cost
of shares being redeemed or NAV at the time of redemption (or, as to Fund
shares acquired through an exchange, the cost of the Alliance Mutual Fund
shares originally purchased for cash). Shares obtained from dividend or
distribution reinvestment are not subject to the CDSC. The Fund may waive the
CDSC on redemptions of shares following the death or disability of a
shareholder, to meet the requirements of certain qualified retirement plans, or
under a monthly, bimonthly, or quarterly systematic withdrawal plan. See the
Fund's SAI for further information about CDSC waivers.
Other. A transaction, service, administrative or other similar fee may be
charged by your broker-dealer, agent, financial intermediary, or other
financial representative with respect to the purchase, sale, or exchange of
Class A, Class B, or Class C shares made through your financial representative.
The financial intermediaries also may impose requirements on the purchase,
sale, or exchange of shares that are different from, or in addition to, those
imposed by a Fund, including requirements as to the minimum initial and
subsequent investment amounts.
-------------------------------------------------------------------------------
GENERAL INFORMATION
-------------------------------------------------------------------------------
Under unusual circumstances, 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.
19
<PAGE>
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:
o 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:
o Call the Commission at 1-202-942-8090 for information on the operation of
the Public Reference Room.
o Reports and other information about the Fund are available on the EDGAR
Database on the Commission's Internet site at http://www.sec.gov.
o Copies of the information may be obtained, after paying a fee, by electronic
request at [email protected], or by writing the Commission's Public Reference
Section, Washington, DC 20549-0102.
You also may find more information about Alliance and the Fund on the Internet
at: www.Alliancecapital.com.
SEC File No. [_____________________]
20
<PAGE>
Advisor Class Prospectus
AllianceBernstein Small Cap Value Fund
The AllianceBernstein Small Cap Value Fund is an open-end management investment
company structured as a series fund that invests in a diversified portfolio of
equity securities of companies with relatively small market capitalizations.
Prospectus and Application
[____________], 2001
The Securities and Exchange Commission has not approved or disapproved these
securities or passed upon the adequacy of this Prospectus. Any representation
to the contrary is a criminal offense.
AllianceCapital T
Investment Products Offered
* Are Not FDIC Insured
* May Lose Value
* Are Not Bank Guaranteed
<PAGE>
TABLE OF CONTENTS
_______________________________________________________________________________
Page
RISK/RETURN SUMMARY......................................................
FEES AND EXPENSES OF THE FUND............................................
GLOSSARY.................................................................
DESCRIPTION OF THE FUND..................................................
Investment Objective and Principal Policies and Risks....................
Description of Additional Investment Practices...........................
Additional Risk Considerations...........................................
MANAGEMENT OF THE FUND...................................................
PURCHASE AND SALE OF SHARES..............................................
How The Fund Values Its Shares...........................................
How To Buy Shares........................................................
Initial Offering.........................................................
How To Exchange Shares...................................................
How To Sell Shares.......................................................
DIVIDENDS, DISTRIBUTIONS AND TAXES.......................................
DISTRIBUTION ARRANGEMENTS................................................
GENERAL INFORMATION......................................................
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 the
AllianceBernstein Small Cap Value Fund. This Risk/Return 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:
* As with all investments, 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.
2
<PAGE>
Small Cap Value Fund
_______________________________________________________________________________
OBJECTIVE:
The Fund's investment objective is long-term growth of capital.
PRINCIPAL INVESTMENT STRATEGIES:
The Fund invests primarily in a diversified portfolio of equity securities of
companies with relatively small market capitalizations. Under normal
circumstances, the Fund will invest at least 65%, and normally substantially
more, of its total assets in these types of securities. The Fund's investment
policies emphasize investment in companies that are determined by Alliance to
be undervalued, using the fundamental value approach of Alliance's Bernstein
unit ("Bernstein"). In selecting securities for the Fund's portfolio,
Bernstein uses its fundamental research to identify companies whose long term
earnings power is not reflected in the current market price of their securities.
The Fund may also invest 15% of its total assets in securities issued by
non-U.S. companies.
PRINCIPAL RISKS:
Among the principal risks of investing in the Fund is market risk, which is the
risk of losses from adverse changes in the stock market. The Fund's
investments in smaller capitalization companies tend to be more volatile than
investments in companies with larger capitalizations. The Fund's investments
in small capitalization stocks may have additional risks because these
companies tend to have limited product lines, markets, or financial resources.
Depending on the Fund's investments at a particular time, the Fund may also
have industry/sector risk. To the extent the Fund invests in non-U.S. equity
securities, it may have non-U.S. investment risk and currency risk. The Fund
may at times use certain types of investment derivatives such as options,
futures, forwards and swaps. The use of these techniques involves special
risks that are discussed in this Prospectus.
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.
3
<PAGE>
-------------------------------------------------------------------------------
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
--------------------
Advisor Class Shares
--------------------
Management fees [____]%
Distribution (12b-1) fees [____]%
Other expenses [____]%
_______
Total Fund
operating expenses (a) [____]%
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
--------------------
Advisor Class Shares
--------------------
After 1 Yr. $[______]
After 3 Yrs. $[______]
(a) These examples assume that Alliance's agreement to waive its management
fees and/or reimburse Fund expenses is not extended beyond its initial
period.
-------------------------------------------------------------------------------
GLOSSARY
-------------------------------------------------------------------------------
This Prospectus uses the following terms.
TYPES OF SECURITIES
Convertible securities are fixed-income securities that are convertible into
common stock.
Debt securities are bonds, debentures, notes, bills, loans, other direct debt
instruments, and other fixed, floating and variable rate debt obligations, but
do not include convertible securities.
Depositary receipts include American Depositary Receipts ("ADRs"), Global
Depositary Receipts ("GDRs") and other types of depositary receipts.
4
<PAGE>
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.
Lower-rated securities are fixed-income securities rated Ba or below by Moody's
or BB or below by S&P, Duff & Phelps or Fitch, or determined by Alliance to be
of equivalent quality, and are commonly referred to as "junk bonds."
Non-U.S. Company is an entity that (i) is organized under the laws of a country
other than the United States, (ii) has its principal place of business in a
country other than the United States, and (iii) issues equity or debt
securities that are traded principally in a country other than the United
States.
Prime commercial paper is commercial paper rated Prime 1 by Moody's or A-1 or
higher by S&P or, if not rated, issued by companies that have an outstanding
debt issue rated Aa or higher by Moody's or AA or higher by S&P.
Qualifying bank deposits are certificates of deposit, bankers' acceptances and
interest-bearing savings deposits of banks that have total assets of more than
$1 billion and are members of the Federal Deposit Insurance Corporation.
Rule 144A securities are securities that may be resold pursuant to Rule 144A of
the Securities Act.
U.S. Government securities are securities issued or guaranteed by the United
States Government, its agencies or instrumentalities.
RATING AGENCIES
Duff & Phelps is Duff & Phelps Credit Rating Co.
Fitch is Fitch IBCA, Inc.
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.
Russell 2500(tm) Value Index measures the performance of those Russell 2500(tm)
companies with lower price-to-book ratios and lower forecasted growth values.
The Russell 2500(tm) universe of securities is compiled by Frank Russell
Company and is segmented into two style indices, the Russell 2500(tm) Growth
Index and the Russell 2500(tm) Value Index.
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 investment policies and risks. Of
course, there can be no assurance that the Fund will achieve its investment
objective.
Please note that:
* Additional discussion of the Fund's investments, including the risks of the
investments, can be found in the discussion under Description of Additional
Investment Actions following this section.
* The description of the principal risks for the Fund includes risks described
in the RISK/RETURN SUMMARY above. Additional information about the risks of
investing in the Fund can be found in the discussion under Additional Risk
Considerations.
5
<PAGE>
* 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. Except as noted, the Fund's investment policies
are not fundamental and thus can be changed without a shareholder vote.
INVESTMENT OBJECTIVE AND PRINCIPAL POLICIES AND RISKS
INVESTMENT OBJECTIVE
The Fund's investment objective is long-term growth of capital.
PRINCIPAL POLICIES
In seeking to achieve its objective, the Fund invests primarily in a
diversified portfolio of equity securities generally representing 60 to 90
companies. Under normal circumstances, the Fund will invest at least 65%, and
normally substantially more, of the value of its total assets in companies
having market capitalizations ranging from $100 million to $10 billion. The
Fund's investment policies emphasize investment in companies that are
determined by Alliance's Bernstein unit ("Bernstein") to be undervalued, using
a fundamental value approach.
Bernstein's fundamental value approach to equity investing generally defines
value by reference to the relationship between a security's current price and
its intrinsic economic value, as measured by long-term earnings prospects. In
making investment decisions for the Fund, Alliance depends heavily on
Bernstein's fundamental analysis and the research of its large internal
research staff. These investment decisions are the result of the multi-step
process described below.
The fundamental value approach seeks to identify, in the first instance, a
universe of securities that are considered to be undervalued because they are
attractively priced relative to their future earnings power. Bernstein's
research staff of analysts follows a primary research universe of approximately
800 largely domestic companies with small capitalizations, most of which are
included in the Russell 2500(tm) Value Index. From this universe, Bernstein,
on a daily basis, applies a quantitative screening process that examines a
number of factors, such as the price to earnings ratio, price to book ratio and
earnings changes to target approximately 300 companies for further analysis by
the research staff and the Fund's portfolio managers. Bernstein then prepares
its own earnings estimates and financial models for companies within this
targeted group.
Forecasting corporate earnings and dividend-paying capability is the heart of
the fundamental value approach. The research staff identifies and quantifies
the critical variables that control a business's performance and analyzes the
results in order to forecast the company's long-term prospects and expected
returns. As one of the largest multi-national investment firms, Alliance and
its Bernstein unit have access to considerable information concerning all of
the companies followed. Bernstein's research analysts develop an in-depth
understanding of the products, services, markets and competition of those
companies considered for purchase. Analysts also develop a good knowledge of
the management of those companies. A company's future earnings are typically
projected over a full economic cycle, including a trough and a peak, within the
context of forecasts for real economic growth, inflation and interest rate
changes. As a result, forecasts of near term economic events are generally not
of major consequence.
The Fund's portfolio managers carefully review the research process to be sure
that the analysts have appropriately considered key issues facing each company,
that forecasts of a company's future are compatible with its history, and that
all forecasts use consistent analytic frameworks and economic assumptions.
The Fund's portfolio managers, in consultation with the research analysts, also
consider aggregate portfolio characteristics when deciding whether to purchase
a particular security for the Fund. By evaluating overall sector concentration,
capitalization distribution, leverage and degree of undervaluation, Bernstein
seeks to manage overall Fund volatility relative to the companies in the
Russell 2500TM Value Index by favoring promising securities that offer the best
balance between return and targeted risk. At times, the Fund may favor or
disfavor a particular sector compared to the Russell 2500TM Value Index.
To the extent that companies involved in certain sectors may from time to time
constitute a material portion of the Russell 2500(tm) Value Index, such as
financial services and consumer services, the Fund may also invest
significantly in these companies.
A disparity between a company's current stock price and Bernstein's assessment
of intrinsic value can arise, at least in part, as a result of adverse,
short-term market reactions to recent events or trends. In order to reduce the
risk that an undervalued security will be purchased before such an adverse
market reaction has run its course, Bernstein also monitors analysts'
6
<PAGE>
earnings-estimate revisions and relative return trends (also called
"momentum") so as to better time new purchases and sales of securities.
A security generally will be sold when it no longer meets appropriate valuation
criteria. Sale of a stock that has reached its target may be delayed, however,
when earnings expectations are rising or relative return trends are improving.
Typically, the growth of a company's market capitalization above $10 billion,
alone, will not cause the Fund to dispose of the security.
The Fund may also
* Invest up to 20% of its total assets in convertible securities;
* Write covered put and call options and purchase put and call options on U.S.
and foreign securities, security exchanges and over the counter, including
options on market indices and currencies;
* Invest up to 15% of its net assets in illiquid securities;
* Invest up to 15% of its total assets in securities issued by non-U.S.
companies;
* Invest up to 10% of its total assets in rights and warrants;
* Enter into forward commitments, futures contracts and options on futures
contracts with respect to securities, indices and currencies;
* Enter into contracts for the purchase and sale for the future delivery of
contracts based on financial indices;
* Enter into currency swaps and forward currency exchange contracts for hedging
purposes;
* Make secured loans of portfolio securities of up to 30% of its total assets;
and
* Enter into repurchase agreements.
PRINCIPAL 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 markets fluctuate and that prices overall will decline
over short- or long-term periods.
* Sector Risk This is the risk of investments in a particular industry sector.
If the Fund invests a substantial amount of its assets in companies engaged in
a particular industry sector, market or economic factors affecting that
industry could have a major effect on the value of the Fund's investments.
* Capitalization Risk This is the risk of investments in small capitalization
companies. Investments in small- and mid-cap companies may be more volatile
than investments in large-cap companies. Investments in small-cap companies
tend to be more volatile than investments in mid- or large-cap companies. The
Fund's investments in smaller capitalization companies may have additional
risks because these companies often have limited product lines, markets or
financial resources.
* Derivative and Leverage Risk The Fund may make substantial use of derivatives
and employ specialized trading techniques such as short sales, options,
futures, forwards, and other leveraging techniques to increase its exposure to
certain selected securities. Alliance employs these techniques speculatively to
enhance returns and not merely as hedging tools. These techniques are riskier
than many investment strategies and will result in greater volatility for the
Fund, particularly in periods of market declines.
* Non-U.S. Investment Risk This is the risk of investments in issuers located
in countries other than the United States. Investments in securities issued by
non-U.S. companies 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 countries are relatively small, with a limited number of
companies representing a small number of industries. Additionally, non-U.S.
issuers are usually not subject to the same degree of regulation as U.S.
issuers. Reporting, accounting and auditing standards of 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
country other than the United States. In the event of nationalization,
expropriation or other confiscation, the Fund could lose its entire investment.
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* Currency Risk This is the risk that fluctuations in the exchange rates
between the U.S. Dollar and other currencies may negatively affect the value of
the Fund's investments.
* 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[, including its fundamental value approach,] in
making investment decisions for the Fund, but there is no guarantee that its
techniques will produce the intended result.
Portfolio Turnover. The Fund's portfolio turnover is not expected to exceed
100%.
Temporary Defensive Position. For temporary defensive purposes, the Fund may
reduce its position in equity securities and increase without limit its
position in short-term, liquid, high-grade debt securities, which may include
U.S. Government securities, bank deposits, money market instruments, short-term
debt securities, including notes and bonds, or hold its assets in cash. While
the Fund is investing for temporary defensive purposes, it may not meet its
investment objective.
DESCRIPTION OF ADDITIONAL INVESTMENT PRACTICES
This section describes the investment practices of the Fund and risks
associated with these practices.
Convertible Securities. Prior to conversion, convertible securities have the
same general characteristics as nonconvertible debt securities, which generally
provide a stable stream of income with generally higher yields than those of
equity securities of the same or similar issuers. The price of a convertible
security will normally vary with changes in the price of the underlying equity
security, although the higher yield tends to make the price of the convertible
security less volatile than that of the underlying equity security. As with
debt securities, the market values of convertible securities tend to decrease
as interest rates rise and increase as interest rates fall. While convertible
securities generally offer lower interest yields than non-convertible debt
securities of similar quality, they offer investors the potential to benefit
from increases in the market prices of the underlying common stocks.
Convertible securities that are rated Baa or lower by Moody's and BBB or lower
by S&P or, if unrated, determined by Alliance to be of equivalent quality, may
share some or all of the risks of non-convertible debt securities with those
ratings. The Fund may invest up to 20% of its total assets in convertible
securities.
Currency Swaps. Currency swaps involve the individually negotiated exchange by
the Fund with another party of a series of payments in specified currencies. A
currency swap may involve the delivery at the end of the exchange period of a
substantial amount of one designated currency in exchange for the other
designated currency. Therefore, the entire principal value of a currency swap
is subject to the risk that the swap counterparty will default on its
contractual delivery obligations. The Fund will enter into currency swaps for
hedging purposes only. The Fund will not enter into any currency swap unless
the credit quality of the unsecured senior debt or the claims-paying ability of
the counterparty is rated in the highest rating category of at least one
nationally recognized rating organization at the time of entering into the
transaction. If there is a default by the other party to such a transaction,
the Fund will have contractual remedies under the transaction agreements.
Depositary Receipts. Depositary receipts may not necessarily be denominated in
the same currency as the underlying securities into which they may be
converted. In addition, the issuers of the stock of unsponsored depositary
receipts are not obligated to disclose material information in the United
States, and therefore, there may not be a correlation between such information
and the market value of the depositary receipts. ADRs are depositary receipts
typically issued by a U.S. bank or trust company that evidence ownership of
underlying securities issued by a non-U.S. corporation. GDRs and other types of
depositary receipts are typically issued by non-U.S. banks or trust companies
and evidence ownership of underlying securities issued by either a U.S. or a
non-U.S. company. Generally, depositary receipts in registered form are
designed for use in the U.S. securities markets, and depositary receipts in
bearer form are designed for use in securities markets outside of the United
States.
Forward Currency Exchange Contracts. The Fund may purchase or sell forward
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 currency in
order to "lock in" the U.S. Dollar price of the security ("transaction hedge").
The Fund will not engage in transaction hedges with respect to the currency of
a particular country to an extent greater than the aggregate amount of the
Fund's transactions in that currency. When the Fund believes that a 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 currency approximating the
value of some or all of the Fund's portfolio securities denominated in such
currency, or when the Fund believes that the U.S. Dollar may suffer a
substantial decline against another currency, it may enter into a forward
purchase contract to buy that currency for a fixed dollar amount ("position
hedge"). The Fund will not position hedge with respect to a particular currency
to an
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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 currency for a
fixed U.S. dollar amount where the Fund believes that the U.S. Dollar value of
the currency to be sold pursuant to the forward contract will fall whenever
there is a decline in the U.S. Dollar value of the currency in which portfolio
securities of the Fund are denominated ("cross-hedge"). Unanticipated changes
in currency prices may result in poorer overall performance for the Fund than
if it had not entered into such forward contracts. Hedging against a decline
in the value of a currency does not eliminate fluctuations in the prices of
portfolio securities or prevent losses if the prices of such securities
decline. Such transactions also preclude the opportunity for gain if the value
of the hedged currency should rise. Moreover, it may not be possible for 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
devaluation level it anticipates.
Illiquid Securities. The Fund will limit its investment in illiquid securities
to no more than 15% 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 will not be treated as
"illiquid" for purposes of this limit on investments if they meet certain
liquidity guidelines established by the Fund or Alliance.
The Fund may not be able to readily sell securities for which there is no ready
market. Such securities are unlike securities that are traded in the open
market and can be expected to be sold immediately if the market is adequate.
The sale price of illiquid securities may be lower or higher than Alliance's
most recent estimate of their fair value. Generally, less public information is
available about the issuers of such securities than about companies whose
securities are traded on an exchange. To the extent that these securities are
securities issued by non-U.S. companies, 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 of up to 30% of its total assets 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 risk in lending
portfolio securities, as with other extensions of credit, consists of the
possible loss of rights in the collateral should the borrower fail financially.
In determining whether to lend securities to a particular borrower, Alliance
will consider all relevant facts and circumstances, including the
creditworthiness of the borrower. While securities are on loan, the borrower
will pay the Fund any income from the securities. The Fund may invest any cash
collateral in portfolio securities and earn additional income, or receive an
agreed-upon amount of income from a borrower who has delivered equivalent
collateral. 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.
Options on Securities. An option gives the purchaser of the option, upon
payment of a premium, the right to deliver to (in the case of a put) or receive
from (in the case of a call) the writer of the option a specified amount of a
security on or before a fixed date at a predetermined price. A call option
written by the Fund is "covered" if the Fund owns the underlying security, has
an absolute and immediate right to acquire that security upon conversion or
exchange of another security it holds, or holds a call option on the underlying
security with an exercise price equal to or less than that of the call option
it has written. A put option written by the Fund is "covered" if the Fund holds
a put on the underlying securities with an exercise price equal to or greater
than that of the put option it has written.
A call option is for cross-hedging purposes if the Fund does not own the
underlying security and is designed to provide a hedge against a decline in
value in another security which the Fund owns or has the right to acquire. The
Fund may write call options for cross-hedging purposes. The Fund would write a
call option for cross-hedging purposes, instead of writing a covered call
option, when the premium to be received from the cross-hedge transaction would
exceed that which would be received from writing a covered call option, while
at the same time achieving the desired hedge.
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In purchasing an option, the Fund would be in a position to realize a gain if,
during the option period, the price of the underlying security increased (in
the case of a call) or decreased (in the case of a put) by an amount in excess
of the premium paid; otherwise the Fund would experience a loss equal to the
premium paid for the option.
If an option written by the Fund were exercised, the Fund would be obligated to
purchase (in the case of a put) or sell (in the case of a call) the underlying
security at the exercise price. The risk involved in writing an option is that,
if the option is exercised, the underlying security would then be purchased or
sold by the Fund at a disadvantageous price. Entering into a closing
transaction (i.e., by disposing of the option prior to its exercise) could
reduce these risks. The Fund retains the premium received from writing a put or
call option whether or not the option is exercised. The writing of call options
could result in increases in the Fund's portfolio turnover rate, especially
during periods when market prices of the underlying securities appreciate.
The Fund will purchase or write options on securities of the types in which it
is permitted to invest in privately negotiated (i.e., over-the-counter)
transactions only with investment dealers and other financial institutions
(such as commercial banks or savings and loan institutions) deemed creditworthy
by Alliance. Alliance has adopted procedures for monitoring the
creditworthiness of such entities. Options purchased or written by the Fund in
negotiated transactions are illiquid and it may not be possible for the Fund to
effect a closing transaction at an advantageous time.
Options on Securities Indices. An option on a securities index is similar to
an option on a security except that, rather than the right to take or make
delivery of a security at a specified price, an option on a securities index
gives the holder the right to receive, upon exercise of the option, an amount
of cash if the closing level of the chosen index is greater than (in the case
of a call) or less than (in the case of a put) the exercise price of the option.
Options on Currencies. As in the case of other kinds of options, the writing
of an option on a currency constitutes only a partial hedge, up to the amount
of the premium received, and the Fund could be required to purchase or sell
currencies at disadvantageous exchange rates, thereby incurring losses. The
purchase of an option on a currency may constitute an effective hedge against
fluctuations in exchange rates although, in the event of rate movements adverse
to the Fund's position, the Fund may forfeit the entire amount of the premium
plus related transaction costs.
Futures Contracts and Options on Futures Contracts. A "sale" of a futures
contract means the acquisition of a contractual obligation to deliver the
securities or currency or other commodity called for by the contract at a
specified price on a specified date. A "purchase" of a futures contract means
the incurring of an obligation to acquire the securities or currency or other
commodity called for by the contract at a specified price on a specified date.
The purchaser of a futures contract on an index agrees to take or make delivery
of an amount of cash equal to the difference between a specified dollar
multiple of the value of the index on the expiration date of the contract
("current contract value") and the price at which the contract was originally
struck. No physical delivery of the securities underlying the index is made.
Options on Futures contracts are options that, upon exercise, call for the
delivery of futures contracts (or cash payments based on the value of futures
contracts). Options on futures contracts written or purchased by the Fund will
be traded on exchanges worldwide or over-the-counter. These investment
techniques will be used only to hedge against anticipated future changes in
market conditions and interest or exchange rates which otherwise might either
adversely affect the value of the Fund's portfolio securities or adversely
affect the prices of securities which the Fund intends to purchase at a later
date.
The Fund will not enter into any futures contracts or options on futures
contracts if immediately thereafter the market values of the outstanding
futures contracts of the Fund and the currencies and futures contracts subject
to outstanding options written by the Fund would exceed [___]% of its total
assets.
Repurchase Agreements. A repurchase agreement arises when a buyer purchases a
security and simultaneously agrees to resell it to the vendor at an agreed-upon
future date, normally a day or a few days later. The resale price is greater
than the purchase price, reflecting an agreed-upon interest rate for the period
the buyer's money is invested in the security. Such agreements permit 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 prevented from,
selling the collateral for its benefit. Alliance monitors the creditworthiness
of the vendors with which the Fund enters into repurchase agreements.
Rights and Warrants. The Fund will invest in rights or warrants only if the
underlying equity securities themselves are deemed appropriate by Alliance for
inclusion in the Fund's portfolio. Rights and warrants entitle the holder to
buy equity securities at a specific price for a specific period of time. Rights
are similar to warrants except that they have a substantially shorter duration.
Rights and warrants may be considered more speculative than certain other types
of investments in that they
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do not entitle a holder to dividends or voting rights with respect to the
underlying securities nor do they represent any rights in the assets of the
issuing company. The value of a right or warrant does not necessarily change
with the value of the underlying security, although the value of a right or
warrant may decline because of a decrease in the value of the underlying
security, the passage of time or a change in perception as to the potential of
the underlying security, or any combination of these factors. If the market
price of the underlying security is below the exercise price of the warrant on
the expiration date, the warrant will expire worthless. Moreover, a right or
warrant ceases to have value if it is not exercised prior to the expiration
date. The Fund may invest up to 10% of its total assets in rights and warrants.
Short Sales. The Fund may utilize short selling in order to attempt both to
protect its portfolio against the effects of potential downtrends in the
securities markets and as a means of enhancing its overall performance. A short
sale is a transaction in which the Fund sells a security it does not own but
has borrowed in anticipation that the market price of that security will
decline. The Fund may be required to pay a fee to borrow the security and to
pay over to the lender any payments received on the security.
If the price of the security sold short increases between the time of the short
sale and the time the Fund replaces the borrowed security, the Fund will incur
a loss; conversely, if the price declines, the Fund will realize a capital
gain. Although the Fund's gain is limited by the price at which it sold the
security short, its potential loss is unlimited. The Fund may engage in short
sales for up to 33% of its total assets.
Stock Index Futures. The Fund may purchase and sell stock index futures as a
hedge against movements in the equity markets. There are several risks in
connection with the use of stock index futures by the Fund as a hedging device.
One risk arises because of the imperfect correlation between movements in the
price of a stock index future and movements in the price of the securities
which are the subject of the hedge. The price of a stock index future may move
more than or less than the price of the securities being hedged. If the price
of a stock index future moves less than the price of the securities which are
the subject of the hedge, the hedge will not be fully effective but, if the
price of the securities being hedged has moved in an unfavorable direction, the
Fund would be in a better position than if it had not hedged at all. If the
price of the securities being hedged has moved in a favorable direction, this
advantage will be partially offset by the loss on the index futures contract.
If the price of the index future moves more than the price of the stock, the
Fund will experience either a loss or gain on the futures contract which will
not be completely offset by movements in the price of the securities which are
subject to the hedge.
To compensate for the imperfect correlation of movements in the price of
securities being hedged and movements in the price of a stock index future, the
Fund may buy or sell stock index futures contracts in greater dollar amount
than the dollar amount of securities being hedged if the volatility over a
particular time period of the prices of such securities has been greater than
the volatility over such time period of the stock index, or if otherwise deemed
to be appropriate by Alliance. Conversely, the Fund may buy or sell fewer stock
index futures contracts if the volatility over a particular time period of the
prices of the securities being hedged is less than the volatility over such
time period of the stock index, or it is otherwise deemed to be appropriate by
Alliance. It is also possible that, where the Fund has sold futures to hedge
its portfolio against a decline in the market, the market may advance and the
value of securities held in the Fund may decline. If this occurred, the Fund
would lose money on the futures and also experience a decline in value in its
portfolio securities. However, over time the value of a diversified portfolio
should tend to move in the same direction as the market indices upon which the
index futures are based, although there may be deviations arising from
differences between the composition of the Fund and the stock comprising the
index.
Where a stock index futures contract is purchased to hedge against a possible
increase in the price of stock before the Fund is able to invest its cash (or
cash equivalents) in stocks (or options) in an orderly fashion, it is possible
that the market may decline instead. If the Fund then concludes not to invest
in stock or options at that time because of concern as to possible further
market decline or for other reasons, the Fund will realize a loss on the
futures contract that is not offset by a reduction in the price of securities
purchased.
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In addition to the possibility that there may be an imperfect correlation, or
no correlation at all, between movements in stock index futures and the portion
of the portfolio being hedged, the price of stock index futures may not
correlate perfectly with movement in the stock index due to certain market
distortions. Rather than meeting additional margin deposit requirements,
investors may close futures contracts through offsetting transactions which
could distort the normal relationship between the index and futures markets.
From the point of view of speculators, the deposit requirements in the futures
market are less onerous than margin requirements in the securities market.
Therefore, increased participation by speculators in the futures market may
also cause temporary price distortions. Due to the possibility of price
distortion in the futures market, and because of the imperfect correlation
between the movements in a stock index and movements in the price of stock
index futures, a correct forecast of general market trends by Alliance may
still not result in a successful hedging transaction over a short time frame.
Positions in stock index futures may be closed out only on an exchange or board
of trade which provides a secondary market for such futures. Although the Fund
intends to purchase or sell futures only on exchanges or boards of trade where
there appear to be active secondary markets, there is no assurance that a
liquid secondary market on any exchange or board of trade will exist for any
particular futures contract or at any particular time. In such event, it may
not be possible to close a futures investment position, and in the event of
adverse price movements, the Fund would continue to be required to make daily
cash payments of variation margin. However, in the event that futures contracts
have been used to hedge portfolio securities, such securities will not be sold
until the futures contract can be terminated. In such circumstances, an
increase in the price of the securities, if any, may partially or completely
offset losses on the futures contract. As described above, however, there is no
guarantee that the price of the securities will in fact correlate with the
price movements in the futures contract and thus provide an offset on a futures
contract.
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. Unlike
many exchange-traded futures contracts and options on futures contracts, there
are no daily price fluctuation limits for certain options on currencies and
forward contracts, and adverse market movements could therefore continue to an
unlimited extent over a period of time. In addition, the correlation between
movements in the prices of such instruments and movements in the prices of the
securities and currencies hedged or used for cover will not be perfect and
could produce unanticipated losses.
The Fund's ability to dispose of its positions in futures contracts, options
and forward contracts depends on the availability of liquid markets in such
instruments. Markets in options and futures with respect to a number of types
of securities and currencies are relatively new and still developing, and there
is no public market for forward contracts. It is impossible to predict the
amount of trading interest that may exist in various types of futures
contracts, options, and forward contracts. If a secondary market does not exist
for an option purchased or written by the Fund, it might not be possible to
effect a closing transaction in the option (i.e., dispose of the option) with
the result that (i) an option purchased by the Fund would have to be exercised
in order for the Fund to realize any profit and (ii) the Fund may not be able
to sell portfolio securities or currencies covering an option written by the
Fund until the option expires or it delivers the underlying securities,
currency or futures contract upon exercise. Therefore, no assurance can be
given that the Fund will be able to utilize these instruments effectively. In
addition, the Fund's ability to engage in options and futures transactions may
be limited by tax considerations and the use of certain hedging techniques may
adversely impact the characterization of income to the Fund for U.S. federal
income tax purposes.
ADDITIONAL RISK CONSIDERATIONS
Investment in the Fund involves the special risk considerations described
below. These risks may be heightened when investing in emerging markets.
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Currency Considerations. The Fund may receive a portion of its revenues in
currencies other than the U.S. Dollar. Therefore, the dollar equivalent of its
net assets, distributions, and income will be adversely affected by reductions
in the value of certain currencies relative to the U.S. Dollar. If the value of
the currencies in which the Fund receives its income falls relative to the U.S.
Dollar between receipt of the income and the making of Fund distributions, the
Fund may be required to liquidate securities in order to make distributions if
it has insufficient cash in U.S. Dollars to meet distribution requirements that
the Fund must satisfy to qualify as a regulated investment company for federal
income tax purposes. Similarly, if an exchange rate declines between the time
the Fund incurs expenses in U.S. Dollars and the time cash expenses are paid,
the amount of the currency required to be converted into U.S. Dollars in order
to pay expenses in U.S. Dollars could be greater than the equivalent amount of
such expenses in the currency at the time they were incurred. In light of these
risks, the Fund may engage in currency hedging transactions, as described
above, which involve certain special risks.
Securities Issued by Non-U.S. Companies. The securities markets of many
countries outside of the United States 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 may include securities issued by non-U.S. companies
in an amount up to 15% of its total assets, 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 countries require governmental approval prior to investments by foreign
persons or limit investment by foreign persons to only a specified percentage
of an issuer's outstanding securities or a specific class of securities that
may have less advantageous terms (including price) than securities of the
company available for purchase by nationals. These restrictions or controls
may at times limit or preclude investment in certain securities and may
increase the costs and expenses of 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. If a deterioration
occurs in a 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, 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 countries are generally higher than in the United States.
Issuers of securities in jurisdictions other than the United States 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 countries may
differ, in some cases significantly, from U.S. standards in important respects
and less information may be available to investors in securities issued by
non-U.S. companies 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 countries other than the United States 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 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 countries other than the United States governing
business organizations, bankruptcy and insolvency may provide less protection
to security holders such as the Fund than that provided by U.S. laws.
Extreme Governmental Action; Less Protective Laws. In contrast to investing in
the United States., investment in other countries may involve in certain
situations greater risk of nationalization, expropriation, confiscatory
taxation, currency blockage or other extreme governmental action that could
adversely impact the Fund's investments. In the event of certain such actions,
the Fund could lose its entire investment in the country involved. In addition,
laws in various countries other than the United States governing, among other
subjects, business organization and practices, securities and securities
trading, bankruptcy and insolvency may provide less protection to investors
such as the Fund than provided under United States laws.
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Non-U.S. Taxes. The Fund's investment in securities issued by non-U.S.
companies may be subject to taxes withheld at the source on dividend or
interest payments.
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MANAGEMENT OF THE FUND
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INVESTMENT ADVISER AND FUND MANAGER
The Fund's Adviser is Alliance Capital Management L.P., 1345 Avenue of the
Americas, New York, New York 10105. Alliance is a leading international
investment adviser supervising client accounts with assets as of [________],
2001 totaling more than $[___] billion (of which more than $[___] billion
represented the assets of investment companies). As of [_____], 2001, Alliance
managed retirement assets for many of the largest public and private employee
benefit plans (including [__] of the nation's FORTUNE 100 companies), for
public employee retirement funds in [___] states, for investment companies, and
for foundations, endowments, banks and insurance companies worldwide. The [___]
registered investment companies managed by Alliance, comprising [___] separate
portfolios, currently have more than [___] million shareholder accounts.
The persons primarily responsible for the day-to-day management of the Fund are
[_____] and [_____]. [Biography to be inserted here.]
Alliance provides investment advisory services and order placement facilities
for the Fund. For these advisory services, the Fund pays Alliance a fee at an
annualized rate of [___]% of the Fund's average daily net assets. The fee will
be accrued daily and paid monthly.
14
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PURCHASE AND SALE OF SHARES
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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 shares solely:
* through accounts established under a fee-based program, sponsored and
maintained by a registered broker-dealer or other financial intermediary and
approved by the Fund's principal underwriter, Alliance Fund Distributors, Inc.
or AFD;
* through a self-directed defined contribution employee benefit plan (e.g., a
401(k) plan) that has at least 1,000 participants or $25 million in assets;
* by investment advisory clients of, and certain other persons associated with,
Alliance and its affiliates or the Funds; and
* through registered investment advisers or other financial intermediaries who
charge a management, consulting or other fee for their services and who
purchase shares through a broker or agent approved by AFD and clients of such
registered investment advisers or financial intermediaries whose accounts are
linked to the master account of such investment adviser or financial
intermediary on the books of such approved broker or agent.
Generally, a fee-based program must charge an asset-based or other similar fee
and must invest at least $250,000 in Advisor Class shares to be approved by AFD
for investment in Advisor Class shares. The Fund's Statement of Additional
Information has more detailed information about who may purchase and hold
Advisor Class shares.
The Fund may refuse any order to purchase Advisor Class shares. In particular,
the Fund reserves the right to restrict purchases of Advisor Class shares
(including through exchanges) when there appears to be evidence of a pattern of
frequent purchases and sales made in response to short-term considerations.
How To Exchange Shares
You may exchange your Advisor Class shares for Advisor Class shares of other
Alliance Mutual Funds (including AFD Exchange Reserves, a money market fund
managed by Alliance). Exchanges of Advisor Class 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 Exchange is open, either directly or through your financial intermediary.
Your sales price will be the next-determined NAV, less any applicable CDSC,
after the Fund receives your sales request in proper form. Normally, proceeds
will be sent to you within 7 days. If you recently purchased your shares by
check or electronic funds transfer, your redemption payment may be delayed
until the Fund is reasonably satisfied that the check or electronic funds
transfer has been collected (which may take up to 15 days). 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.
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<PAGE>
o 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, less any applicable CDSC. Your financial representative
is responsible for submitting all necessary documentation to the Fund and may
charge you for this service.
o Selling Shares Directly to the Fund
By Mail:
--Send a signed letter of instruction or stock power, along with certificates,
to:
Alliance Fund Services, Inc.
P.O. Box 1520
Secaucus, N.J. 07906-1520
800-221-5672
--For your protection, a bank, a member firm of a national stock exchange, or
other eligible guarantor institution, must guarantee signatures. Stock power
forms are available from your financial intermediary, AFS, and many commercial
banks. Additional documentation is required for the sale of shares by
corporations, intermediaries, fiduciaries, and surviving joint owners. If you
have any questions about these procedures, contact AFS.
By Telephone:
--You may redeem your shares for which no stock certificates have been issued
by telephone request. Call AFS at 800-221-5672 with instructions on how you
wish to receive your sale proceeds.
--A telephone redemption request must be received by 4:00 p.m., Eastern time,
for you to receive that day's NAV, less any applicable CDSC.
--If you have selected electronic funds transfer in your Shareholder
Application, the redemption proceeds will be sent directly to your bank.
Otherwise, the proceeds will be mailed to you.
--Redemption requests by electronic funds transfer may not exceed $100,000 per
day and redemption requests by check cannot exceed $50,000 per day.
--Telephone redemption is not available for shares held in nominee or "street
name" accounts, retirement plan accounts, or shares held by a shareholder who
has changed his or her address of record within the previous 30 calendar days.
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 a Fund that are
different from those described in this prospectus. A transaction, service,
administrative or other similar fee may be charged by your broker-dealer,
agent, financial intermediary or other financial representative with respect to
the purchase, sale or exchange of Advisor Class shares made through such
financial representative. Such financial intermediaries may also impose
requirements with respect to the purchase, sale or exchange of shares that are
different from, or in addition to, those imposed by a Fund, including
requirements as to the minimum initial and subsequent investment amounts.
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DIVIDENDS, DISTRIBUTIONS AND TAXES
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Dividends and Distributions
The income dividend and capital gains distributions, 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 NAV as of the
close of business on the day following the declaration date of the dividend or
distribution equal to the cash amount of the dividend or distribution. You may
make an election to receive dividends and distributions in cash or in shares at
the time you purchase shares. Your election can be changed at any time prior to
a record date for a dividend. There is no sales or other charge on the
reinvestment of dividends or capital gains distributions. Cash dividends may be
paid in check, or at your election, electronically via the ACH network.
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<PAGE>
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.
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 distributions of long-term capital gains generally will be taxable to you
as long-term 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.
Investment income received by the Fund from sources within countries outside of
the United States may be subject to non-U.S. income taxes withheld at the
source.
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.
If you buy shares just before the Fund deducts a distribution from its NAV, you
will pay the full price for the shares and then receive a portion of the price
back as a taxable distribution.
The sale or exchange of Fund shares is a taxable transaction for federal income
tax purposes.
Each year shortly after December 31, the 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.
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CONVERSION FEATURE
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Conversion
As described above, Advisor Class shares may be held solely through certain
fee-based program accounts, employee benefit plans and registered investment
advisory or other financial intermediary relationships, and by investment
advisory clients of, and certain persons associated with, Alliance and its
affiliates or the Funds. If a holder of Advisor Class shares (i) ceases to
participate in the fee-based program or plan, or to be associated with an
eligible investment advisor or financial intermediary or (ii) is otherwise no
longer eligible to purchase Advisor Class shares (each a "Conversion Event"),
then all Advisor Class shares held by the shareholder will convert
automatically to Class A shares of the same Fund. The Fund will provide the
shareholder with at least 30 days advance notice of such conversion. The
failure of a shareholder or a fee-based program to satisfy the minimum
investment requirements to purchase Advisor Class shares will not constitute a
Conversion Event. The conversion would occur on the basis of the relative NAV
of the two classes and without the imposition of any sales load, fee or other
charge.
Description of Class A Shares
The Class A shares of each Fund have a distribution fee of .30% under the
Fund's Rule 12b-1 plan that allows the Fund to pay distribution and service
fees for the distribution and sale of its shares. Because this fee is paid out
of the Fund's assets, Class A shares have a higher expense ratio and may pay
lower dividends and may have a lower NAV than Advisor Class shares.
17
<PAGE>
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GENERAL INFORMATION
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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.
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:
o 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:
o Call the Commission at 1-202-942-8090 for information on the operation of
the Public Reference Room.
o Reports and other information about the Fund are available on the EDGAR
Database on the Commission's Internet site at http://www.sec.gov.
o Copies of the information may be obtained, after paying a fee, by electronic
request at [email protected], or by writing the Commission's Public Reference
Section, Washington, DC 20549-0102.
You also may find more information about Alliance and the Fund on the Internet
at: www.Alliancecapital.com.
18
<PAGE>
SEC File No. [_____________________]
19
<PAGE>
(LOGO)
THE ALLIANCEBERNSTEIN TRUST:
ALLIANCEBERNSTEIN SMALL CAP VALUE FUND
ALLIANCEBERNSTEIN VALUE FUND
ALLIANCEBERNSTEIN INTERNATIONAL VALUE FUND
ALLIANCEBERNSTEIN GLOBAL VALUE FUND
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
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STATEMENT OF ADDITIONAL INFORMATION
[______] [__], 2000
-------------------------------------------------------------------------------
This Statement of Additional Information is not a prospectus but
supplements and should be read in conjunction with the Prospectuses, all dated
[______] [__], 2000, for each of the AllianceBernstein Small Cap Value Fund,
the AllianceBernstein Value Fund, the AllianceBernstein International Value
Fund and the AllianceBernstein Global Value Fund (the "Prospectuses").
Copies of the Prospectuses may be obtained by contacting Alliance Fund
Services, Inc. at the address or the "For Literature" telephone number shown
above.
TABLE OF CONTENTS
-----------------
Description of the Trust and the Funds...............................
Management of the Funds..............................................
Expenses of the Funds................................................
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: Futures Contracts and Options on
Futures Contracts and Foreign Currencies...........................
Appendix B: Certain Employee Benefit Plans..........................
(R): This registered service mark used under license from the owner, Alliance
Capital Management L.P.
<PAGE>
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DESCRIPTION OF THE TRUST AND THE FUNDS
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The AllianceBernstein Trust (the "Trust") is a diversified open-end
management investment trust. The Trust was formed under the laws of the State
of Massachusetts on [_____] [__], 2000. The AllianceBernstein Small Cap Value
Fund, the AllianceBernstein Value Fund, the AllianceBernstein International
Value Fund and the AllianceBernstein Global Value Fund are each a series of the
Trust (each a "Fund" and together the "Funds"). Each Fund's respective
investment objective is "fundamental" and cannot be changed without a
shareholder vote. Except as noted, each Fund's respective investment
policies are not fundamental and thus can be changed without a shareholder
vote. No Fund will change its policies without notifying its shareholders.
There is no guarantee that any Fund will achieve its respective investment
objectives.
Investment Policies and Practices
Each Fund's principal investment policies, practices and risks are set
forth in a Prospectus. The information set forth below concerning the Funds'
investment practices and policies supplements the information in the Prospectus
for each Fund. Except as otherwise noted, the Funds' 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 Trustees of the Trust without shareholder approval. However, no
Fund will change its investment policies without contemporaneous written notice
to shareholders.
ADDITIONAL INVESTMENT POLICIES AND PRACTICES
The following information about the Funds' investment policies and
practices supplements the information set forth in the Prospectus for each Fund.
CURRENCY SWAPS. The Funds may enter into currency swaps for hedging
purposes. Currency swaps involve the exchange by a Fund with another party of
a series of payments in specified currencies. Since currency swaps are
individually negotiated, each Fund expects to achieve an acceptable degree of
correlation between its portfolio investments and its currency swaps positions.
A currency swap may involve the delivery at the end of
2
<PAGE>
the exchange period of a substantial amount of one designated currency in
exchange for the other designated currency. Therefore the entire principal
value of a currency swap is subject to the risk that the other party to the
swap will default on its contractual delivery obligations. The net amount
of the excess, if any, of a Fund's obligations over its entitlements with
respect to each currency swap will be accrued on a daily basis and an amount
of liquid assets having an aggregate net asset value at least equal to the
accrued excess will be maintained in a segregated account for the relevant
Fund by the Funds' custodian. No Fund will enter into any currency swap
unless the credit quality of the unsecured senior debt or the claims-paying
ability of the other party thereto is rated in the highest rating category of
at least one nationally recognized rating organization at the time of entering
into the transaction. If there is a default by the other party to such a
transaction, a Fund entering into a currency swap will have contractual
remedies pursuant to the agreements related to the transactions.
FORWARD COMMITMENTS. The Funds 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 no interest accrues
to the purchaser prior to the settlement date. At the time a 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
canceled in the event that the required conditions did not occur and the trade
was canceled.
The use of forward commitments enables the Funds to protect against
anticipated changes in interest rates and prices. For instance, in periods of
rising interest rates and falling bond
3
<PAGE>
prices, a Fund might sell a security 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, a Fund might sell a security in its
portfolio and purchase the same or a similar security on a when-issued or
forward commitment basis, thereby obtaining the benefit of currently higher
cash yields. However, if Alliance Capital Management L.P., the investment
adviser to each of the Funds (the "Adviser" or "Alliance"), were to forecast
incorrectly the direction of interest rate movements, a Fund might be required
to complete such when-issued or forward transactions at prices less favorable
than current market values.
A Fund's right to receive or deliver a security under a forward commitment
may be sold prior to the settlement date, but a 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 Funds'
custodians will maintain, in the separate account of the relevant Fund, liquid
assets having value equal to, or greater than, any commitments to purchase
securities on a forward commitment basis. If a 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, a Fund might lose the opportunity to invest money at favorable
rates or to dispose of securities at favorable prices.
Although each 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, a Fund subjects itself to a risk of loss on such commitments as
well as on its portfolio securities. Also, a Fund may have to sell assets that
have been set aside in order to meet redemptions. In addition, if a Fund
determines it is advisable as a matter of investment strategy to sell the
forward commitment or when-issued or delayed delivery securities before
delivery, that 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, that 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
4
<PAGE>
securities themselves (which may have a value greater or less than the Fund's
payment obligation).
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS. Each 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.
A Fund may enter into a forward contract, for example, when it enters into
a contract for the purchase or sale of a security denominated in a foreign
currency in order to "lock in" the U.S. Dollar price of the security
("transaction hedge"). The Funds 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 a Fund believes that a foreign currency may suffer a
substantial decline against the U.S. Dollar, it may enter into a forward sale
contract to sell an amount of that foreign currency approximating the value of
some or all of that Fund's securities denominated in such foreign currency, or
when a 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"). No
Fund will 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, a Fund may, in the alternative, enter into a forward
contract to sell a different foreign currency for a fixed U.S. Dollar amount
where the Fund believes that the U.S. Dollar value of the currency to be sold
pursuant to the forward contract will fall whenever there is a decline in the
U.S. Dollar value of the currency in which portfolio securities of the Fund are
denominated ("cross-hedge").
To the extent required by applicable law, the Funds' custodian will place
liquid assets in a separate account of the relevant Fund having a value equal
to the aggregate amount of that 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 Fund's 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 that Fund's
5
<PAGE>
commitments with respect to such contracts. As an alternative to maintaining
all or part of the separate account, a Fund may purchase a call option
permitting that 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 Funds may purchase a put option permitting that 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, each 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 Funds' ability to utilize forward
contracts in the manner set forth in the Prospectus may be restricted.
The Funds will not speculate in forward currency contracts. The Funds
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 a Fund to hedge against a devaluation that is so generally
anticipated that the Fund is not able to contract to sell the currency at a
price above the anticipated devaluation level. Unanticipated changes in
currency prices may result in poorer overall performance for a 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, a Fund may not always be able to enter into
foreign currency forward contracts at attractive prices and this will limit
that Fund's ability to use such contract to hedge or cross-hedge its assets.
Also, with regard to a Fund's use of cross-hedges, there can be no assurance
that historical correlations between the movement of certain foreign currencies
relative to 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 a Fund's cross-hedges and the movements in the exchange
6
<PAGE>
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, each 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, a Fund will
require that interest or dividends on securities loaned be paid to that Fund.
Where voting or consent rights with respect to loaned securities pass to the
borrower, a 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 that 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 Funds 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 Funds 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 Funds may pay reasonable finders',
administrative, and custodial fees in connection with a loan.
OPTIONS. Each Fund may purchase put and call options written by others
and write covered put and call options overlying the types of securities in
which the Fund may invest. A put option (sometimes called a "standby
commitment") gives the purchaser of the option, upon payment of a premium, the
right to deliver a specified amount of a security to the writer of the option
on or before a fixed date at a predetermined price. A call option (sometimes
called a "reverse standby commitment") gives the purchaser of the option, upon
payment of a premium, the right to call upon the writer to deliver a specified
amount of a security on or before a fixed date at a predetermined price.
The Funds may purchase put and call options to provide protection against
adverse price or yield effects from anticipated changes in prevailing interest
rates. For instance, in periods of rising interest rates and falling bond
prices, a Fund might purchase a put option to limit its exposure to falling
prices.
7
<PAGE>
In periods of falling interest rates and rising bond prices, a Fund might
purchase a call option. In purchasing a call option, a Fund would be in
a position to realize a gain if, during the option period, the price of the
security increased by an amount in excess of the premium paid. It would
realize a loss if the price of the security declined or remained the same or
did not increase during the period by more than the amount of the premium. By
purchasing a put option, a Fund would be in a position to realize a gain if,
during the option period, the price of the security declined by an amount in
excess of the premium paid. It would realize a loss if the price of the
security increased or remained the same or did not decrease during that period
by more than the amount of the premium. If a put or call option purchased by a
Fund were permitted to expire without being sold or exercised, its premium
would represent a loss to that Fund.
When a Fund writes a put option it must either own at all times during the
option period an offsetting put option on the same security or maintain in a
segregated account cash or liquid assets in an amount adequate to purchase the
underlying security should the put be exercised. When a Fund writes a call
option it must own at all times during the option period either the underlying
securities or an offsetting call option on the same securities. If a put
option written by a Fund were exercised, that Fund would be obligated to
purchase the underlying security at the exercise price. If a call option
written by a Fund were exercised, that Fund would be obligated to sell the
underlying security at the exercise price.
The Funds may write put options either to earn additional income in the
form of option premiums (anticipating that the price of the underlying security
will remain stable or rise during the option period and the option will
therefore not be exercised) or to acquire the underlying security at a net cost
below the current value (e.g., the option is exercised because of a decline in
the price of the underlying security, but the amount paid by a Fund, offset by
the option premium, is less than the current price).
Each Fund will write covered call options both to reduce the risks
associated with certain of its respective investments and to increase total
investment return through the receipt of premiums. In return for the premium
income, the Funds will give up the opportunity to profit from an increase in
the market price of the underlying security above the exercise price so long as
its obligations under the contract continue, except insofar as the premium
represents a profit. Moreover, in writing the call
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options, the Funds will retain the risk of loss should the price of the
security decline. The premium is intended to offset that loss in whole or in
part. Unlike the situation in which a Fund owns securities not subject to call
options, a Fund, in writing call options, must assume that the call may be
exercised at any time prior to the expiration of its obligation as a writer,
and that in such circumstances the net proceeds realized from the sale of the
underlying securities pursuant to the call may be substantially below the
prevailing market price.
The risk involved in writing a put option is that there could be a
decrease in the market value of the underlying security caused by rising
interest rates or other factors. If this occurred, the option could be
exercised and the underlying security would then be sold to a Fund at a higher
price than its current market value. The risk involved in writing a call
option is that there could be an increase in the market value of the underlying
security caused by declining interest rates or other factors. If this
occurred, the option could be exercised and the underlying security would then
be sold by the respective Fund at a lower price than its current market value.
These risks could be reduced by entering into a closing transaction as
described below. A Fund retains the premium received from writing a put or
call option whether or not the option is exercised.
The Funds may also write covered call options for cross- hedging purposes.
A call option is for cross-hedging purposes if it is designed to provide a
hedge against a decline in value in another security which a Fund owns or has
the right to acquire. In such circumstances, a Fund collateralizes the option
by maintaining, in a segregated account with the Custodian, liquid assets in an
amount not less than the market value of the underlying security, marked to
market daily.
Each Fund may dispose of an option which it has purchased by entering into
a "closing sale transaction" with the writer of the option. A closing sale
transaction terminates the obligation of the writer of the option and does not
result in the ownership of an option. A Fund realizes a profit or loss from a
closing sale transaction if the premium received from the transaction is more
than or less than the cost of the option.
Each Fund may terminate its obligation to the holder of an option written
by a Fund through a "closing purchase transaction." A Fund may not, however,
effect a closing purchase transaction with respect to such an option after it
has been notified of the exercise of such option. A Fund realizes a profit
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or loss from a closing purchase transaction if the cost of the transaction is
more than or less than the premium received by that Fund from writing the
option. A closing purchase transaction for exchange-traded options may be made
only on a national securities exchange. There is no assurance that a liquid
secondary market on a national securities exchange will exist for any
particular option, or at any particular time, and for some options, such as
over-the-counter options, no secondary market on a national securities exchange
may exist. If a Fund is unable to effect a closing purchase transaction, that
Fund will not sell the underlying security until the option expires or the Fund
delivers the underlying security upon exercise.
The Funds may purchase or write options in negotiated transactions. The
Funds may effect such transactions only with investment dealers and other
financial institutions (such as commercial banks or savings and loan
institutions) deemed creditworthy by the Adviser. The Adviser has also adopted
procedures for monitoring the creditworthiness of such entities. Options
traded in the over-the-counter market may not be as actively traded as those
traded on an exchange. Accordingly, it may be more difficult to value such
options. Options purchased or written by a Fund in negotiated transactions may
be considered illiquid and it may not be possible for the Fund to effect a
closing purchase transaction at a time when the Adviser believes it would be
advantageous to do so.
The Funds may enter into contracts (or amend existing contracts) with
primary dealer(s) with whom they write over-the-counter options. The contracts
will provide that the relevant Fund has the absolute right to repurchase an
option it writes at any time at a repurchase price which represents the fair
market value, as determined in good faith through negotiation between the
parties, but which in no event will exceed a price determined pursuant to a
formula contained in the contract. Although the specific details of the
formula may vary between contracts with different primary dealers, the formula
will generally be based on a multiple of the premium received by a Fund for
writing the option, plus the amount, if any, of the option's intrinsic value
(i.e., the amount the option is "in-the-money"). The formula will also include
a factor to account for the difference between the price of the security and
the strike price of the option if the option is written "out-of-the-money."
Although each Fund has established standards of creditworthiness for these
primary dealers, a Fund may still be subject to the risk that firms
participating in such transactions will fail to meet their obligations. With
respect to agreements concerning the over-the-
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counter options a Fund has written, a Fund will treat as illiquid only
securities equal in amount to the formula price described above less the
amount by which the option is "in-the-money," i.e., the amount by which the
price of the option exceeds the exercise price.
OPTIONS ON SECURITIES INDICES. Each Fund may purchase put and call
options and write covered put and call options on securities indexes for the
purpose of hedging against the risk of unfavorable price movements adversely
affecting the value of a Fund's securities or securities it intends to
purchase. An option on a securities index is similar to an option on a
security except that, rather than the right to take or make delivery of a
security at a specified price, an option on a securities index gives the holder
the right to receive, upon exercise of the option, an amount of cash if the
closing level of the chosen index is greater than (in the case of a call) or
less than (in the case of a put) the exercise price of the option. A call
option on a securities index is considered covered, for example, if, so long as
a Fund is obligated as the writer of the call, it holds securities the price
changes of which are, in the opinion of the Adviser, expected to replicate
substantially the movement of the index or indexes upon which the options
written by the Fund are based. A put on a securities index written by a Fund
will be considered covered if, so long as it is obligated as the writer of the
put, a Fund segregates with its custodian liquid assets having a value equal to
or greater than the exercise price of the option.
Through the purchase of listed index options, a Fund could achieve many of
the same objectives as through the use of options on individual securities.
Price movements in a Fund's securities probably will not correlate perfectly
with movements in the level of the index and, therefore, a Fund would bear a
risk of loss on index options purchased by it if favorable price movements of
the hedged portfolio securities do not equal or exceed losses on the options or
if adverse price movements of the hedged portfolio securities are greater than
gains realized from the options.
OPTIONS ON FOREIGN CURRENCIES. The Funds may purchase and write put and
call options on foreign currencies for the purpose of protecting against
declines in the U.S. Dollar value of foreign currency-denominated portfolio
securities and against increases in the U.S. Dollar cost of such securities to
be acquired. As in the case of other kinds of options, however, the writing of
an option on a foreign currency constitutes only a partial hedge, up to the
amount of the premium received, and a
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<PAGE>
Fund could be required to purchase or sell foreign currencies at
disadvantageous exchange rates, thereby incurring losses. The purchase of an
option on a foreign currency may constitute an effective hedge against
fluctuations in exchange rates although, in the event of rate movements adverse
to a Fund's position, it may forfeit the entire amount of the premium plus
related transaction costs. Options on foreign currencies to be written or
purchased by the Funds are exchange-traded or traded over-the-counter. The
Funds will write options on foreign currencies only if they are "covered."
The Funds will not speculate in foreign currency options. Accordingly,
the Funds will not hedge a currency substantially in excess of the market value
of the securities denominated in that currency which it owns or the expected
acquisition price of securities which it anticipates purchasing.
See Appendix A for further discussion of the use, risks and costs of
options on foreign currencies.
FUTURES CONTRACTS AND OPTIONS THEREON. The Funds may purchase and sell
futures contracts and related options on debt securities and on indexes of debt
securities to hedge against anticipated changes in interest rates that might
otherwise have an adverse effect on the value of its assets or assets it
intends to acquire. Each Fund may also enter into futures contracts and
related options on foreign currencies in order to limit its exchange rate risk.
A "sale" of a futures contract means the acquisition of a contractual
obligation to deliver the securities called for by the contract at a specified
price on a specified date. A "purchase" of a futures contract means the
incurring of a contractual obligation to acquire the securities called for by
the contract at a specified price on a specified date. The purchaser of a
futures contract on an index agrees to take or make delivery of an amount of
cash equal to the difference between a specified dollar multiple of the value
of the index on the expiration date of the contract and the price at which the
contract was originally struck. All futures contracts and related options will
be traded on exchanges that are licensed and regulated by the CFTC. The Funds
will only write options on futures contracts which are "covered." These
investment techniques will be used only to hedge against anticipated future
changes in interest or exchange rates which otherwise might either adversely
affect the value of a Fund's securities or adversely affect the prices of
securities which the Fund intends to purchase at a later date. These
investment techniques will not be used for speculation.
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In general, each Fund will limit its use of futures contracts and options
on futures contracts so that either (i) the contracts or options thereon are
for "bona fide hedging" purposes as defined under regulations of the CTFC or
(2) if for other purposes, no more than 5% of the liquidation value of the
respective Fund's total assets will be used for initial margin of option
premiums required to establish non-hedging positions. These instruments will
be used for hedging purposes and not for speculation or to leverage a Fund.
In instances involving the purchase of futures contracts or the writing of
put options thereon by a Fund, an amount of liquid assets equal to the cost of
such futures contracts or options written (less any related margin deposits)
will be deposited in a segregated account with its custodian, thereby insuring
that the use of such futures contracts and options is unleveraged. In
instances involving the sale of futures contracts or the writing of call
options thereon by a Fund, the securities underlying such futures contracts or
options will at all times be maintained by the Fund or, in the case of index
futures and related options, the Fund will own securities the price changes of
which are, in the opinion of the Adviser, expected to replicate substantially
the movement of the index upon which the futures contract or option is based.
Positions taken in the futures markets are not normally held until
delivery or cash settlement is required, but are instead liquidated through
offsetting transactions which may result in a gain or a loss. While futures
positions taken by the Funds will usually be liquidated in this manner, each
Fund may instead make or take delivery of underlying securities whenever it
appears economically advantageous to do so.
Positions in futures contracts may be closed out only on an exchange or a
board of trade which provides the market for such futures. Although each Fund
intends to purchase or sell futures only on exchanges or boards of trade where
there appears to be an active market, there is no guarantee that such will
exist for any particular contract or at any particular time. If there is not a
liquid market at a particular time, it may not be possible to close a futures
position at such time, and, in the event of adverse price movements, a Fund
would continue to be required to make daily cash payments of maintenance
margin. However, in the event futures positions are used to hedge portfolio
securities, the securities will not be sold until the futures positions can be
liquidated. In such circumstances, an increase in the price of
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<PAGE>
securities, if any, may partially or completely offset losses on the futures
contracts.
See Appendix A for further discussion of the use, risks and costs of
futures contracts and options on futures contracts.
REPURCHASE AGREEMENTS. The Funds 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
Funds' ability to enter into repurchase agreements. Currently, each 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 each Fund to keep all of its
assets at work while retaining "overnight" flexibility in pursuit of
investments of a longer-term nature. Each 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, a 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, a
Fund might be delayed in, or prevented from, selling the collateral for its
benefit.
Repurchase agreements may exhibit the characteristics of loans by the
Funds. During the term of a repurchase agreement, a 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 that 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. None of the Funds will invest more than 15% of its
net assets in illiquid securities. For this purpose, illiquid securities are
securities restricted as to
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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 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
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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 a Fund, however, could
affect adversely the marketability of such portfolio securities and that 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 Trustees, will
monitor the liquidity of restricted securities in each 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 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 Funds 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 a Fund may invest similar to the
Securities Act requiring an issuer to register the sale of securities with a
governmental agency or imposing legal restrictions on resales of securities,
either as to length of time the securities may be held or manner of resale.
There may, however, be contractual restrictions on resale of securities.
[RIGHTS AND WARRANTS. The Funds may invest in rights and warrants which entitle
the holder to buy equity securities at a specific price for a specific period
of time. Rights and warrants may be considered more speculative than certain
other types of investments in that they do not entitle a holder to dividends or
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<PAGE>
voting rights with respect to the securities which may be purchased nor do they
represent any rights in the assets of the issuing company. Also, the value of
right or warrant does not necessarily change with the value of the underlying
securities and a right or warrant ceases to have value if it is not exercised
prior to the expiration date. It is expected that the Funds' investments will
ordinarily be traded on exchanges located in the respective countries in which
the various issuers of such securities are principally based and in some case
on other exchanges. As much as 25% of the value of a Fund's total assets may be
invested in the securities of issuers having their principal business
activities in the same industry. [In connection with the qualification or
registration of the Funds' shares for sale under the securities laws of certain
states, the Trust has agreed on behalf of each Fund that a Fund will not invest
in warrants (other than warrants acquired by a Fund as a part of a unit or
attached to securities at the time of purchase) if as a result such warrants
valued at the lower of cost or market would exceed 10% of the value of that
Fund's assets at the time of purchase.] [Is this last sentence unnecessary blue
sky discussion?]] [Note that this entire section is a combination of the
Alliance International Fund SAI and the ASIS SAI.]
PORTFOLIO TURNOVER. Because each Fund will actively use trading to
achieve its investment objective and policies, a 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 a
Fund. Management anticipates that the annual turnover in each Fund, may be in
excess of 100%. An annual turnover rate of 100% occurs, for example, when all
of the securities in a Fund are replaced one time in a period of one year.
The value of a 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 a Fund's investment
objective will be achieved.
CERTAIN RISK CONSIDERATIONS
[RISKS OF INVESTMENTS IN FOREIGN SECURITIES. Investors should understand
and consider carefully the substantial risks involved in securities of foreign
companies and governments of
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foreign nations, some of which are referred to below, and which are in addition
to the usual risks inherent in domestic investments. Investing in securities of
non-United States companies which are generally denominated in foreign
currencies, and utilization of derivative investment products denominated in,
or the value of which is dependent upon movements in the relative value of, a
foreign currency, involve certain considerations comprising both risk and
opportunity not typically associated with investing in United States companies.
These considerations include changes in exchange rates and exchange control
regulations, political and social instability, expropriation, imposition of
foreign taxes, less liquid markets and less available information than are
generally the case in the United States, higher transaction costs, less
government supervision of exchanges, brokers and issuers, difficulty in
enforcing contractual obligations, lack of uniform accounting and auditing
standards and greater price volatility.
There is generally less publicly available information about foreign
companies comparable to reports and ratings that are published about companies
in the United States. Foreign issuers are subject to accounting and auditing
and financial reporting standards, practices 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 Funds 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 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.
It is contemplated that foreign securities will be purchased in
over-the-counter markets or on stock exchanges located in the countries in
which the respective principal offices of the issuers of the various securities
are located, if that is the best available market. Foreign securities markets
are
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generally not as developed or efficient as those in the United States.
While growing in volume, they usually have substantially less volume than the
Exchange, and securities of some foreign companies are less liquid and more
volatile than securities of comparable United States companies. Similarly,
volume and liquidity in most foreign bond markets is less than in the United
States and, at times, volatility of price can be greater than in the United
States. Fixed commissions on foreign stock exchanges are generally higher than
negotiated commissions on United States exchanges, although the Funds will
endeavor to achieve the most favorable net results on its portfolio
transactions. There is generally less government supervision and regulation of
stock exchanges, brokers and listed companies than in the United States.
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 Funds will invest and could
adversely affect a 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 Funds. Certain countries in which the Funds 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 Funds will focus their
investments] [include?] 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 a Fund could be reduced by foreign
income taxes, including withholding taxes. It is impossible to determine the
effective rate of foreign tax in advance. A Fund's net asset value may also be
affected by changes in the rates or methods of taxation applicable to that Fund
or to entities in which that Fund has invested. The Adviser generally
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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 a Fund will not be subject to change. A shareholder
otherwise subject to United States Federal income taxes may, subject to certain
limitations, be entitled to claim a credit or deduction for U.S. Federal income
tax purposes for his or her proportionate share of such foreign taxes paid by
the Fund. See "U.S. Federal Income Taxes."
Although a Fund may value its assets in terms of U.S. dollars, the Funds
do not intend to convert their holdings of foreign currencies into U.S. dollars
on a daily basis. The Funds will do so from time to time, and investors should
be aware of the costs of currency conversion. Although foreign exchange
dealers do not charge a fee for conversion, they do realize a profit based on
the difference (commonly known as the "spread") between the price at which they
are buying and selling various currencies. Thus, a dealer may offer to sell a
foreign currency to a Fund at one rate, while offering a lesser rate of
exchange should that Fund desire to resell that currency to the dealer.
Investors should understand that the expense ratio of a Fund investing in
foreign securities may be higher than investment companies investing only in
domestic securities since, among other things, the cost of maintaining the
custody of foreign securities is higher and the purchase and sale of portfolio
securities may be subject to higher transaction charges, such as stamp duties
and turnover taxes.
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 risk inherent in investing in the securities of foreign issuers.
However, by investing in ADRs rather than directly in stock of foreign issuers,
the Funds can avoid currency risks which might occur during the settlement
period for either purchases or sales. The Funds may purchase foreign
securities directly, as well as through ADRs.] [Note that this section is a
combination of the disclosure in Disciplined Value SAI and Alliance
International Fund SAI.]
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
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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 each 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 each 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 each 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 a Fund to a degree comparable to that of rated
securities which are consistent with that Fund's objectives and policies.
1940 ACT RESTRICTIONS. Under the 1940 Act, a 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 that Fund. In addition, under the 1940 Act, in the event asset
coverage falls below 300%, a 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 a Fund's total assets less liabilities (other than such
borrowings), the asset coverage of that Fund's portfolio would be 300%; while
outstanding borrowings representing 25% of the total assets less liabilities
(other than such borrowings), the asset coverage of the Fund's portfolio would
be 400%. Each 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 a Fund to sell portfolio securities at times
considered disadvantageous by the Adviser and such sales could
21
<PAGE>
cause a Fund to incur related transaction costs and to realize taxable gains.
Under the 1940 Act, each Fund may invest not more than 10% of its total
assets in securities of other investment companies. In addition, under the
1940 Act each 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 each
Fund's total assets may be invested in the securities of any investment company.
The Funds may emphasize investments in particular industries or sectors as
a by-product of the stock selection process rather than as the result of
assigned targets or ranges.
Certain Fundamental Investment Policies
Each Fund has adopted the following investment restrictions, which may not
be changed without the approval of the holders of a majority of the respective
Fund's outstanding voting securities. The approval of a majority of the
respective 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.
Each Fund may not:
(1) 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;
(2) Borrow money or issue senior securities except to the extent
permitted by the 1940 Act;
(3) [Pledge, hypothecate, mortgage or otherwise encumber its assets,
except to secure permitted borrowings;] [Include?]
(4) [Invest in companies for the purpose of exercising control;]
[Include?]
(5) (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
22
<PAGE>
real estate, provided such securities are securities of the type in which a
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 a Fund may acquire restricted securities under
circumstances in which, if such securities were sold, that Fund might be deemed
to be an underwriter for purposes of the Securities Act; or
(6) Concentrate more than 25% of its assets in any particular industry or
group of industries.
-------------------------------------------------------------------------------
MANAGEMENT OF THE FUNDS
-------------------------------------------------------------------------------
Trustees and Officers
The business and affairs of the Funds are managed under the direction of the
Board of Trustees. The Trustees and officers of the Trust, their ages [as of
the date of this Statement of Additional Information] and their principal
occupations during the past five years are set forth below. Each such Trustee
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.
TRUSTEES
JOHN D. CARIFA,(1) 55, Chairman of the Board, is the President, Chief
Operating Officer and a Director of Alliance Capital Management Corporation
("ACMC"), with which he has been associated since prior to 1995.
RUTH BLOCK, 69, was formerly an Executive Vice President and the Chief
Insurance Officer of The Equitable; Chairman and Chief Executive Officer of
Evlico; a Director of Avon, Tandem Financial Group and Donaldson, Lufkin &
Jenrette Securities Corporation. She is currently a Director of Ecolab
Incorporated
------------
(1) An "interested person" of the Fund as defined in the 1940 Act.
23
<PAGE>
(specialty chemicals) and BP Amoco Corporation (oil and gas). Her
address is P.O. Box 4623, Stamford, Connecticut 06903.
DAVID H. DIEVLER, 71, is an independent consultant. Until December 1994
he was a Senior Vice President of ACMC responsible for mutual fund
administration. Prior to joining ACMC in 1984 he was Chief Financial Officer
of Eberstadt Asset Management since 1968. Prior to that he was a Senior
Manager at Price Waterhouse & Co. Member of American Institute of Public
Accountants since 1953. His address is P.O. Box 167, Spring Lake, New Jersey
07762.
JOHN H. DOBKIN, 58, Consultant. Formerly a Senior Advisor from June 1999
- June 2000 and President from December 1989 - May 1999 of Historic Hudson
Valley (historic preservation). Previously, he was Director of the National
Academy of Design. During 1988-92, he was a Director and Chairman of the Audit
Committee of ACMC. His address is P.O. Box 12, Annandale, New York 12504.
WILLIAM H. FOULK, JR., 68, is an Investment Adviser and an independent
consultant. He was formerly Senior Manager of Barrett Associates, Inc., a
registered investment adviser, with which he had been associated since prior to
1995. He was formerly Deputy Comptroller of the State of New York and, prior
thereto, Chief Investment Officer of the New York Bank for Savings. His
address is Room 100, 2 Greenwich Plaza, Greenwich, Connecticut 06830.
DR. JAMES M. HESTER, 76, has been President of the Harry Frank Guggenheim
Foundation, with which he has been associated since prior to 1995. He was
formerly President of New York University and the New York Botanical Garden,
Rector of the United Nations University and Vice Chairman of the Board of the
Federal Reserve Bank of New York. His address is 25 Cleveland Lane, Princeton,
New Jersey 08540.
CLIFFORD L. MICHEL, 61, is a member of the law firm of Cahill Gordon &
Reindel, with which he has been associated since prior to 1995. 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, 66, is Senior Counsel to the law firm of Orrick,
Herrington & Sutcliffe LLP since January 1995. He was formerly a senior
partner and a member of the Executive
24
<PAGE>
Committee of that firm. He was also a member of the Municipal Securities
Rulemaking Board and Trustee of the Museum of the City of New York. His
address is 98 Hell's Peak Road, Weston, Vermont 05161.
OFFICERS
JOHN D. CARIFA, Chairman and President, (see biography, above).
KATHLEEN A. CORBET, Senior Vice President, 40, is an Executive Vice
President of ACMC, with which she has been associated since prior to 1995.
FRANK V. CARUSO, Senior Vice President, 44, is a Senior Vice President of
Shields/ACMC, with which he has been associated since prior to 1995.
EDMUND P. BERGAN, JR., Secretary, 50, 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 1995.
ANDREW L. GANGOLF, Assistant Secretary, 46, is a Senior Vice President and
Assistant General Counsel of AFD, with which he has been associated since prior
to 1995.
DOMENICK PUGLIESE, Assistant Secretary, 39, is a Senior Vice President and
Assistant General Counsel of AFD, with which he has been associated since prior
to 1995.
MARK D. GERSTEN, Treasurer and Chief Financial Officer, 50, is a Senior
Vice President of AFS, with which he has been associated since prior to 1995.
VINCENT S. NOTO, Controller, 35, is a Vice President of AFS, with which he
has been associated since prior to 1995.
[add portfolio managers]
The Trust does not pay any fees to, or reimburse expenses of, its Trustees
who are considered "interested persons" of a Fund. The aggregate compensation
to be paid by the Trust to each of the Trustees during the Funds' fiscal period
ending November 30, 2001 (estimating future payments based upon existing
arrangements), and the aggregate compensation paid to each of the Trustees
during calendar year [2000] by all of the registered
25
<PAGE>
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 Trustees serves
as a director or trustee, are set forth below. None of the Funds 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.
<TABLE>
<CAPTION>
Total Number Total Number
of Investment of Investment
Companies in Portfolios
the Alliance Within the
Total Fund Complex, Alliance
Compensation Including the Fund Complex,
From the Fund, as to Including the
Alliance Fund which the Fund, as to which
Aggregate Complex, Director is a the Director
Name of Compensation Including the Director or is a Director
Director From the Fund Fund Trustee or Trustee
----------- ------------- ------------- ------------- -----------------
<S> <C> <C> <C> <C>
John D. Carifa $ $
Ruth Block $ $
David H. Dievler $ $
John H. Dobkin $ $
William H. Foulk, Jr. $ $
Dr. James M. Hester $ $
Clifford L. Michel $ $
Donald J. Robinson $ $
</TABLE>
As of [_________] [__], 2001, the Trustees and officers of the Funds as a
group owned less than 1% of the shares of each Fund.
Adviser
The Funds' investment adviser, Alliance Capital Management L.P. (the
"Adviser" or "Alliance"), 1345 Avenue of the Americas, New York, New York
10105, is a leading international investment adviser managing client accounts
with assets as of December 31, 2000 totaling more than [$___] billion (of which
more than [$___] billion represented the assets of investment companies). As
of December 31, 2000, the Adviser managed retirement assets for many of the
largest public and private employee benefit plans (including 29 of the nation's
FORTUNE 100 companies), for public employee retirement funds in 33 states, for
investment companies, and for foundations, endowments, banks and insurance
companies worldwide. The [ ] registered investment
26
<PAGE>
companies managed by the Adviser, comprising [ ] separate investment
portfolios, currently have approximately [___] million shareholder accounts.
Alliance Capital Management Corporation ("ACMC") is the general partner of
Alliance and an indirect wholly-owned subsidiary of AXA Financial, Inc. ("AXA
Financial"), a Delaware corporation whose shares are traded on the New York
Stock Exchange ("NYSE"). As of December 31, 2000, AXA Financial and certain of
its subsidiaries were the beneficial owners of approximately [__]% of the
outstanding Alliance units. Alliance Capital Management Holding L.P.
("Alliance Holding") owned approximately [__]% of the outstanding Alliance
units.(2) Equity interests in Alliance Holding are traded on the NYSE in the
form of units. Approximately [__]% of such units are owned by the public and
management or employees of Alliance and approximately [__]% are owned by AXA
Financial. As of December 31, 2000, AXA, a French insurance holding company,
owned approximately [__]% of the issued and outstanding shares of common stock
of AXA Financial.
Under the Advisory Agreement, the Adviser provides investment advisory
services and order placement facilities for the Funds and pays all compensation
of Trustees and officers of the Funds who are affiliated persons of the
Adviser. The Adviser or its affiliates also furnishes the Funds, without
charge, management supervision and assistance and office facilities and
provides persons satisfactory to the Funds' Board of Trustees to serve as the
Funds' officers.
The Adviser is, under the Advisory Agreement, responsible for certain
expenses incurred by the Funds, including, for example, office facilities and
certain administrative services, and any expenses incurred in promoting the
sale of shares of the Funds (other than the portion of the promotional expenses
borne by the Funds in accordance with an effective plan
------------
(2) Until October 29, 1999, Alliance Holding served as the investment adviser
to the Fund. On that date, Alliance Holding reorganized by transferring its
business to the Adviser. Prior thereto, the Adviser had no material business
operations. One result of the organization was that the Advisory Agreement,
then between the Fund and Alliance Holding, was transferred to the Adviser, and
ownership of Alliance Fund Distributors, Inc. and Alliance Fund Services, Inc.,
the Fund's principal underwriter and transfer agent, respectively, also was
transferred to the Adviser.
27
<PAGE>
pursuant to Rule 12b-1 under the 1940 Act, and the costs of printing
prospectuses of the Funds and other reports to shareholders and fees related to
registration with the Securities and Exchange Commission (the "Commission") and
with state regulatory authorities.)
The Funds have, under the Advisory Agreement, assumed the obligation for
payment of all of their other expenses. As to the obtaining of services other
than those specifically provided to the Funds by the Adviser, each Fund may
employ its own personnel. For such services, it may also utilize personnel
employed by the Adviser or by other subsidiaries of Equitable. In such event,
the services will be provided to the Funds at cost and the payments
specifically approved by the Funds' Board of Trustees.
For the services rendered by the Adviser under the Advisory Agreement,
each Fund pays the Adviser at an annualized rate of .75% of the average daily
value of the respective Fund's net assets. The fee is accrued daily and paid
monthly. The Adviser has agreed for the current fiscal year to waive its fee
and bear certain expenses so that total expenses do not exceed on an annual
basis [____]%, [____]%, [____]% and [____]% of average net assets,
respectively, for Class A, Class B, Class C and Advisor Class shares. [The
Fund is not currently offering shares of Advisor Class Common Stock.]
The Advisory Agreement became effective on [_________] [__], 2001. The
Advisory Agreement was approved by the unanimous vote, cast in person, of the
Fund's Trustees including the Trustees who are not parties to the Advisory
Agreement or interested persons as defined in the Act, of any such party, at a
meeting called for the purpose and held on [_________] [__], 2001.
The Advisory Agreement is terminable without penalty on 60 days' written
notice by a vote of a majority of the outstanding voting securities of each
Fund or by a vote of a majority of the Funds' Trustees, 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 [________] [__], 200[_],
and shall continue in effect thereafter
28
<PAGE>
only so long as its continuance is specifically approved at least annually by a
vote of a majority of each Fund's outstanding voting securities or by the Funds'
Board of Trustees, including in either case approval by a majority of the
Trustees 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 Funds. 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 a 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 Funds. When
two or more of the clients of the Adviser (including a 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 Small Cap Fund, Inc.,
Alliance Global Strategic Income Trust, Inc., Alliance Government Reserves,
Alliance Greater China '97 Fund, Inc., Alliance Growth and Income Fund, Inc.,
Alliance Health Care Fund, Inc., Alliance High Yield Fund, Inc., Alliance
Institutional Funds, Inc., Alliance Institutional Reserves, Inc., Alliance
International Fund, Alliance International Premier Growth Fund, Inc., Alliance
Limited Maturity Government Fund, Inc., Alliance Money Market Fund, Alliance
Mortgage Securities Income Fund, Inc., Alliance Multi-Market Strategy Trust,
Inc., Alliance Municipal Income Fund, Inc., Alliance Municipal Income Fund II,
Alliance Municipal Trust, Alliance New Europe Fund, Inc., Alliance North
American Government Income Trust, Inc., Alliance Premier Growth Fund, Inc.,
Alliance Quasar Fund, Inc., Alliance Real Estate Investment Fund, Inc.,
Alliance Select Investor Series, Inc., Alliance Technology Fund, Inc., Alliance
Utility Income Fund, Inc., Alliance Variable Products Series Fund, Inc.,
Alliance Worldwide Privatization Fund, Inc., The Alliance Fund, Inc., The
Alliance Portfolios, and EQ Advisors Trust, all registered open-
29
<PAGE>
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., The Spain Fund,
Inc. [and _____], all registered closed-end investment companies.
-------------------------------------------------------------------------------
EXPENSES OF THE FUNDS
-------------------------------------------------------------------------------
Distribution Services Agreement
The Trust has entered into a Distribution Services Agreement on behalf of
each Fund (the "Agreement") with Alliance Fund Distributors, Inc., the Funds'
principal underwriter (the "Principal Underwriter"), to permit the Principal
Underwriter to distribute the Funds' shares and to permit the Funds to pay
distribution services fees to defray expenses associated with distribution of
their respective 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 of each Fund are designed
to permit an investor to purchase such shares through broker-dealers without
the assessment of an initial sales charge and at the same time to permit the
Principal Underwriter to compensate broker-dealers in connection with the sale
of such shares. In this regard the purpose and function of the combined
contingent deferred sales charge and respective distribution services fee on
the Class B shares and Class C shares of each Fund are the same as those of the
initial sales charge and distribution services fee with respect to the Class A
shares of each Fund 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 relevant Fund's shares.
30
<PAGE>
With respect to Class A shares of each Fund, distribution expenses accrued
by AFD in one fiscal year may not be paid from distribution services fees
received from a Fund in subsequent fiscal years. AFD's compensation with
respect to Class B and Class C shares of each Fund under the Rule 12b-1 Plan is
directly tied to the expenses incurred by AFD. Actual distribution expenses
for Class B and Class C shares of each Fund 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 of each Fund, 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 of each Fund,
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 Trustees of the Funds determined
that there was a reasonable likelihood that the Rule 12b-1 Plan would benefit
each Fund and its shareholders. The distribution services fee of a particular
class will not be used to subsidize the provision of distribution services with
respect to any other class.
The Adviser may from time to time and from its own funds or such other
resources as may be permitted by rules of the Commission make payments for
distribution services to the Principal Underwriter; the latter may in turn pay
part or all of such compensation to brokers or other persons for their
distribution assistance.
The Agreement will continue in effect for successive twelve-month periods
(computed from each [_____] [__]), provided, however, that such continuance is
specifically approved at least annually by the Trustees of the Funds or by vote
of the holders of
31
<PAGE>
a majority of the outstanding voting securities (as defined in the 1940 Act) of
that class of the relevant Fund, and, in either case, by a majority of the
Trustees of the Funds who are not parties to the Agreement or interested
persons, as defined in the 1940 Act, of any such party (other than as trustees
of the Funds) and who have no direct or indirect financial interest in the
operation of the Rule 12b-1 Plan or any agreement related thereto. The
Agreement was approved for an additional annual term by a vote, cast in person,
of the Trustees, including a majority of the Trustees who are not "interested
persons", as defined in the 1940 Act, at their meeting held on [_____] [__],
2001.
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 of a Fund, (i)
no distribution services fees (other than current amounts accrued but not yet
paid) would be owed by that Fund to the Principal Underwriter with respect to
that class and (ii) that 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.
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 or Advisor Class shares of each Fund, plus
reimbursement for out-of-pocket expenses. The transfer agency fee with respect
to the Class B shares and Class C shares of each Fund is higher than the
transfer agency fee with respect to the Class A and Advisor Class shares of
each Fund, reflecting the additional costs associated with the Class B and
Class C contingent deferred sales charge.
Code of Ethics
The Trust, the Adviser and the Principal Underwriter have each adopted
codes of ethics pursuant to Rule 17j-1 of the 1940 Act. These codes of ethics
permit personnel subject to the codes to invest in securities, including
securities that may be purchased or held by a Fund.
32
<PAGE>
-------------------------------------------------------------------------------
PURCHASE OF SHARES
-------------------------------------------------------------------------------
The following information supplements that set forth in each Fund's
Prospectus under the heading "Purchase and Sale of Shares--How to Buy Shares."
General
Shares of each 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"),
or, to investors eligible to purchase Advisor Class shares, without any
initial, contingent deferred or asset-based sales change ("Advisor Class
Shares"), in each case as described below. Shares of the Fund that are offered
subject to a sales charge are offered through (i) investment dealers that are
members of the National Association of Securities Dealers, Inc. and have
entered into selected dealer agreements with the Principal Underwriter
("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, or (iii) by the categories of investors
described in clauses (i) through (iv) below under "--Sales at Net Asset Value"
(other than officers, directors and present and full-time employees of selected
dealers or agents, or relatives of such person, or any trust, individual
retirement account or retirement plan account for the benefit of such relative,
none of whom is eligible on the basis solely of such status to purchase and
hold Advisor Class shares), or (iv) by directors and present or retired
full-time employees of CB Richard Ellis, Inc. Generally, a fee-based program
must charge an asset-based or other similar fee and must invest at least
$250,000 in
33
<PAGE>
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 Funds either through selected
broker-dealers, agents, financial intermediaries or other financial
representatives or directly through the Principal Underwriter. A transaction,
service, administrative or other similar fee may be charged by your
broker-dealer, agent, financial intermediary or other financial representative
with respect to the purchase, sale or exchange of Class A, Class B, Class C or
Advisor Class shares of each Fund 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 a Fund, including requirements as to the minimum initial
and subsequent investment amounts. Sales personnel of selected dealers and
agents distributing a Fund's shares may receive differing compensation for
selling Class A, Class B, Class C or Advisor Class shares. The Funds may
refuse any order for the purchase of shares. Each 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 each Fund is their net asset value,
plus, in the case of Class A shares of each Fund, 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 a Fund and trading in the types of
securities in which a Fund invests might materially affect the value of that
Fund's shares, the per share net asset value is computed in accordance with the
Trust's Declaration of Trust 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 that 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 of each Fund 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 of each Fund may be lower than the per share net
asset values of the Class A and Advisor Class shares of each Fund, as a result
of the differential daily expense accruals of the distribution and transfer
agency fees applicable with
34
<PAGE>
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 their shares to be executed
at the public offering price equal to their net asset value next determined
(plus applicable Class A sales charges), as described below. Orders received
by the Principal Underwriter prior to the close of regular trading on the
Exchange on each day the Exchange is open for trading are priced at the net
asset value computed as of the close of regular trading on the Exchange on that
day (plus applicable Class A sales charges). In the case of orders for 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 a Fund's 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
35
<PAGE>
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 Funds stock certificates representing shares
of the Fund are not issued except upon written request to a Fund by the
shareholder or his or her authorized selected dealer or agent. This
facilitates later redemption and relieves the shareholder of the responsibility
for and inconvenience of lost or stolen certificates. No certificates are
issued for fractional shares, although such shares remain in the shareholder's
account on the books of the relevant 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
Funds. Such additional amounts may be utilized, in whole or in part, to
provide additional compensation to registered representatives who sell shares
of the Funds. 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
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 of each Fund each
represent an interest in the same portfolio of investments of the relevant
Fund, have the same rights and are identical in all respects, except that (i)
Class A shares of each Fund bear the expense of the initial sales charge (or
contingent deferred sales charge when applicable) and Class B and Class C
shares of each Fund bear the expense of the contingent deferred sales charge,
(ii) Class B shares and Class C shares of each Fund each bear the expense of a
higher distribution services fee than that borne by Class A shares of each
Fund, and Advisor Class shares do not bear such a fee (iii) Class B shares and
Class C shares of each Fund bear higher transfer agency costs than those borne
by Class A shares and Advisor Class shares of each Fund, (iv) each of Class A,
Class B and Class C shares of each Fund 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
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under applicable law, provided that, if a 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 of that
Fund, then such amendment will also be submitted to the Class B and Advisor
Class shareholders of that Fund and the Class A, Class B and Advisor Class
shareholders will vote separately by class, and (v) Class B and Advisor Class
shares of each Fund are each subject to a conversion feature. Each class has
different exchange privileges and certain different shareholder service options
available.
The Trustees of the Funds have determined that currently no conflict of
interest exists between or among the Class A, Class B, Class C and Advisor
Class shares of any respective Fund. On an ongoing basis, the Trustees of the
Funds, 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 Shares
The alternative purchase arrangements available with respect to Class A
shares, Class B shares and Class C shares of each Fund 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 a 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 of any Fund. (See Appendix B for information concerning the
eligibility of certain employee benefit plans to purchase Class B shares of a
Fund 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
of a Fund.) Class C shares of a Fund will normally not be suitable for the
investor who qualifies to
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<PAGE>
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 of a Fund are subject to a lower distribution services fee
and, accordingly, pay correspondingly higher dividends per share than Class B
shares or Class C shares of that Fund. However, because initial sales charges
are deducted at the time of purchase, investors purchasing Class A shares of a
Fund 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 of a Fund because the accumulated
continuing distribution charges on Class B shares or Class C shares of that
Fund may exceed the initial sales charge on Class A shares during the life of
the investment. Again, however, such investors must weigh this consideration
against the fact that, because of such initial sales charges, not all their
funds will be invested initially.
Other investors might determine, however, that it would be more
advantageous to purchase Class B shares or Class C shares of a Fund 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 of a Fund would have to hold his or her
investment approximately seven years for the Class C distribution services fee
of that Fund 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 of a Fund.
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Class A Shares
The public offering price of Class A shares of a Fund is the net asset
value plus a sales charge, as set forth below.
Sales Charge
------------
Discount or
Commission
As % of to Dealers
As % of the or Agents
Net Public As % of
Amount of Amount Offering Offering
Purchase Invested Price Price
-------- -------- -------- -----------
Less than
$100,000 4.44% 4.25% 4.00%
$100,000 but
less than
$250,000 3.36 3.25 3.00
$250,000 but
less than
$500,000 2.30 2.25 2.00
$500,000 but
less than
$1,000,000* 1.78 1.75 1.50
_____________* There is no initial sales charge on transactions of $1,000,000
or more.
With respect to purchases of $1,000,000 or more, Class A shares of a Fund
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 of a Fund 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
of a Fund, 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
39
<PAGE>
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 of a Fund 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 that Fund in connection with the sales of
Class A shares, such as the payment of compensation to selected dealers and
agents for selling Class A shares of that Fund. 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 of a Fund issued (i)
pursuant to the automatic reinvestment of income dividends or capital gains
distributions, (ii) in exchange for Class A shares of other "Alliance Mutual
Funds" (as that term is defined under "Combined Purchase Privilege" below),
except that an initial sales charge will be imposed on Class A shares issued in
exchange for Class A shares of AFD Exchange Reserves ("AFDER") that were
purchased for cash without the payment of an initial sales charge and without
being subject to a contingent deferred sales charge or (iii) upon the automatic
conversion of Class B shares or Advisor Class shares of a Fund as described
below under "Class B Shares-Conversion Feature and "-Conversion of Advisor
Class Shares to Class A Shares." The Fund receives the entire net asset value
of its Class A shares sold to investors. The Principal Underwriter's commission
is the sales charge shown above less any applicable discount or commission
"reallowed" to selected dealers and agents. The Principal Underwriter will
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.
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
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<PAGE>
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 a 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
a 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 a 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 Disciplined Value Fund, Inc.
Alliance Global Dollar Government Fund, Inc.
Alliance Global Small Cap Fund, Inc.
Alliance Global Strategic Income Trust, Inc.
Alliance Greater China '97 Fund, Inc.
Alliance Growth and Income Fund, Inc.
Alliance Health Care Fund, Inc.
Alliance High Yield Fund, Inc.
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<PAGE>
Alliance International Fund
Alliance International Premier Growth 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 Select Investor Series, Inc.
-Premier Portfolio
-Technology Portfolio
-Biotechnology Portfolio
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
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 a Fund may qualify for a Cumulative
Quantity Discount. The applicable sales charge will be based on the total of:
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<PAGE>
(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 relevant Fund held by the investor and (b) all
shares of any other Alliance Mutual Fund held by the investor; and
(iii) the net asset value of all shares described in paragraph (ii)
owned by another shareholder eligible to combine his or her purchase with that
of the investor into a single "purchase" (see above).
For example, if an investor owned shares of an Alliance Mutual Fund worth
$200,000 at their then current net asset value and, subsequently, purchased
Class A shares of a 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 that 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 a 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 a 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 a 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.
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<PAGE>
Investors qualifying for the Combined Purchase Privilege described above
may purchase shares of the Alliance Mutual Funds under a single Statement of
Intention. For example, if at the time an investor signs a Statement of
Intention to invest at least $100,000 in Class A shares of a Fund, the investor
and the investor's spouse each purchase shares of that 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 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 a 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 a Fund should complete the
appropriate portion of the Subscription Application found in the Prospectus
while current Class A shareholders of a Fund 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 a 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
44
<PAGE>
initial purchase. The sales charge applicable to such initial purchase of
shares of a 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.
Reinstatement Privilege. A shareholder who has caused any or all of his
or her Class A or Class B shares of a Fund to be redeemed or repurchased may
reinvest all or any portion of the redemption or repurchase proceeds in Class A
shares of that 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 of a Fund, 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 relevant Fund at the address shown on the cover of this Statement of
Additional Information.
Sales at Net Asset Value. A 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 Trustees of the Funds; 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
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<PAGE>
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);
(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; and
(vi) employer-sponsored qualified pension or profit-sharing plans
(including Section 401(k)
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<PAGE>
plans), custodial accounts maintained pursuant to Section 403(b)(7), retirement
plans and individual retirement accounts (including individual retirement
accounts to which simplified employee pension ("SEP") contributions are made),
if such plans or accounts are established or administered under programs
sponsored by administrators or other persons that have been approved by the
Principal Underwriter.
Class B Shares
Investors may purchase Class B shares of a Fund at the public offering
price equal to the net asset value per share of the Class B shares of that Fund
on the date of purchase without the imposition of a sales charge at the time of
purchase. The Class B shares of a Fund 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
of a Fund 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 that 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 a
Fund to sell its Class B shares without a sales charge being deducted at the
time of purchase. The higher distribution services fee incurred by Class B
shares of a Fund will cause such shares to have a higher expense ratio and to
pay lower dividends than those related to Class A shares of a Fund.
Contingent Deferred Sales Charge. Class B shares of a Fund 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.
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To illustrate, assume that an investor purchased 10,000 Class B shares of
a Fund 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 of the Fund 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 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 of a Fund 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 of a Fund, 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
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<PAGE>
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 Trustees
of the Trust, 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 of a Fund
will automatically convert to Class A shares of that Fund and will no longer be
subject to a higher distribution services fee. Such conversion will occur on
the basis of the relative net asset values of the two classes, without the
imposition of any sales load, fee or other charge. The purpose of the
conversion feature is to reduce the distribution services fee paid by holders
of Class B shares of a Fund 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 of a Fund 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 of a Fund in the
shareholder's account (other than those in the sub-account) convert to Class A
shares of that Fund, 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 of a Fund 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 of a Fund
to Class A shares of that Fund 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 of that Fund 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.
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Class C Shares
Investors may purchase Class C shares of a Fund at the public offering
price equal to the net asset value per share of the Class C shares of that Fund
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 of a Fund 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 each Fund to sell its 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 of a Fund do not convert
to any other class of shares of that Fund and incur higher distribution
services fees and transfer agency costs than Class A shares and Advisor Class
shares of the relevant Fund, and will thus have a higher expense ratio and pay
correspondingly lower dividends than Class A shares and Advisor Class shares.
Class C shares of a Fund that are redeemed within one year of purchase
will be subject to a contingent deferred sales charge of 1%, charged as a
percentage of the dollar amount subject thereto. The charge will be assessed on
an amount equal to the lesser of the cost of the shares being redeemed or their
net asset value at the time of redemption. Accordingly, no sales charge will
be imposed on increases in net asset value above the initial purchase price.
In addition, no charge will be assessed on shares derived from reinvestment of
dividends or capital gains distributions. The contingent deferred sales charge
on Class C shares of a Fund 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 of a Fund, 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
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related to providing distribution-related services to a Fund in connection with
the sale of the Class C shares of that Fund, 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
a 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 of a Fund will cause such shares to have a higher expense ratio and to
pay lower dividends than those related to Class A and Advisor Class shares of
the relevant Fund.
The contingent deferred sales charge is waived on redemptions of shares
(i) following the death or disability, as defined in the Code, of a
shareholder, (ii) to the extent that the redemption represents a minimum
required distribution from an individual retirement account or other retirement
plan to a shareholder who has attained the age of 70-1/2, (iii) that had been
purchased by present or former Trustees of the Trust, 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, (iv) pursuant to a systematic withdrawal plan (see
"Shareholder Services - Systematic Withdrawal Plan" below), or (v) sold through
programs offered by financial intermediaries and approved by AFD where such
programs offer only shares which are not subject to a contingent deferred sales
charge and where the financial intermediary establishes a single omnibus
account for each Fund.
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 certain other
persons associated with, the Adviser and its affiliates or the Trust. 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
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A shares of the same Fund during the calendar month following the month in which
the Fund is informed of the occurrence of the Conversion Event. The Fund will
provide the shareholder with at least 30 days' notice of conversion. The
failure of a shareholder or a fee-based program to satisfy the minimum
investment requirements to purchase Advisor Class shares will not constitute a
Conversion Event. The conversion would occur on the basis of the relative net
asset values of the two classes and without the imposition of any sales load,
fee or other charge. Class A shares currently bear a .30% distribution
services fee. 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 whose Advisor Class shares would otherwise convert to Class A
shares would be required to redeem his or her Advisor Class shares, which would
constitute a taxable event under federal income tax law.
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REDEMPTION AND REPURCHASE OF SHARES
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The following information supplements that set forth in each 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 Trust's Declaration
of Trust requires that a Fund redeem the shares tendered to it, as described
below, at a redemption price
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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 of a
Fund, there is no redemption charge. Payment of the redemption price will be
made within seven days after a 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 a Fund of securities owned by it is not reasonably practicable or
as a result of which it is not reasonably practicable for a 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 a 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
relevant Fund's portfolio securities at the time of such redemption or
repurchase. Redemption proceeds on Class A, Class B and Class C shares of a
Fund 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 a Fund for which no stock certificates have been
issued, the registered owner or owners should forward a letter to the relevant
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.
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To redeem shares of a 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 relevant 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 a Fund for redemption must be signed by the
registered owner or owners exactly as the registered name appears on the face
of the certificate or, alternatively, a stock power signed in the same manner
may be attached to the stock certificate or certificates or, where tender is
made by mail, separately mailed to the relevant Fund. The signature or
signatures on the assignment form must be guaranteed in the manner described
above.
Telephone Redemption By Electronic Funds Transfer. Each shareholder of a
Fund 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 shareholder of a Fund is eligible to
request redemption by check of the relevant 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
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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. Each 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. None of the
Funds nor the Adviser, the Principal Underwriter or Alliance Fund Services,
Inc. will be responsible for the authenticity of telephone requests for
redemptions that the Fund reasonably believes to be genuine. Each 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 a Fund did not employ such procedures, the Trust
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 Funds 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 of a
Fund), 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 a Fund to the Principal Underwriter either
directly or through a selected dealer or agent. None of the Funds nor the
Principal Underwriter charges a fee or commission in connection with the
repurchase of shares (except for the contingent deferred
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sales charge, if any, with respect to Class A, Class B and Class C shares of a
Fund). Normally, if shares of a 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 a Fund as described above is a voluntary service of the Funds and a
Fund may suspend or terminate this practice at any time.
General
Each Fund reserves the right to close out an account that through
redemption has remained below $200 for 90 days. Shareholders will receive 60
days' written notice to increase the account value before the account is
closed. No contingent deferred sales charge will be deducted from the proceeds
of this redemption. In the case of a redemption or repurchase of shares of a
Fund recently purchased by check, redemption proceeds will not be made
available until that Fund is reasonably assured that the check has cleared,
normally up to 15 calendar days following the purchase date.
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SHAREHOLDER SERVICES
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The following information supplements that set forth in each 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 of a Fund 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 Funds through an automatic investment
program utilizing electronic funds transfer drawn on the investor's own bank
account. Under such a program,
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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 a Fund for shares of the same class of
other Alliance Mutual Funds (including AFD Exchange Reserves, a money market
fund managed by the Adviser). 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 of a Fund, for the purpose of conversion to Class A shares of that Fund.
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
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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 shareholder of a Fund, and the shareholder's selected dealer, agent
or financial representative, as applicable, are authorized to make telephone
requests for exchanges unless Alliance Fund Services, Inc. receives written
instruction to the contrary from the shareholder, or the shareholder declines
the privilege by checking the appropriate box on the Subscription Application
found in the Prospectus. Such telephone requests cannot be accepted with
respect to shares then represented by stock certificates. Shares acquired
pursuant to a telephone request for exchange will be held under the same
account registration as the shares redeemed through such exchange.
Eligible shareholders desiring to make an exchange should telephone
Alliance Fund Services, Inc. with their account number and other details of the
exchange, at (800) 221-5672 before 4:00 p.m., Eastern time, on a Fund business
day as defined above. Telephone requests for exchange received before 4:00
p.m. Eastern time on a Fund business day will be processed as of the close of
business on that day. During periods of drastic economic or market
developments, such as the market break of October 1987, it is possible that
shareholders would have difficulty in reaching Alliance Fund Services, Inc. by
telephone (although no such difficulty was apparent at any time in connection
with the 1987 market break). If a shareholder were to experience such
difficulty, the shareholder should issue written instructions to Alliance Fund
Services, Inc. at the address shown on the cover of this Statement of
Additional Information.
A shareholder may elect to initiate a monthly "Auto Exchange" whereby a
specified dollar amount's worth of his or her Fund shares (minimum $25) is
automatically exchanged for shares of another Alliance Mutual Fund. Auto
Exchange transactions normally
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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 a Fund reasonably believes to be genuine.
The Funds 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 a Fund did not employ such
procedures, it could be liable for losses arising from unauthorized or
fraudulent telephone instructions. Selected dealers, agents or financial
representatives, as applicable, may charge a commission for handling telephone
requests for exchanges.
The exchange privilege is available only in states where shares of the
Alliance Mutual Fund being acquired may be legally sold. Each Alliance Mutual
Fund reserves the right, at any time on 60 days' notice to its shareholders, to
reject any order to acquire its shares through exchange or otherwise to modify,
restrict or terminate the exchange privilege.
Retirement Plans
The Funds 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 Funds have available forms of such plans pursuant to which investments can
be made in a 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 a 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
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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 a Fund held by the plan can be exchanged
at the plan's request without any sales charge, for Class A shares of that Fund.
Simplified Employee Pension Plan ("SEP"). Sole proprietors, partnerships
and corporations may sponsor a SEP under which they make annual tax-deductible
contributions to an IRA established by each eligible employee within prescribed
limits based on employee compensation.
403(b)(7) Retirement Plan. Certain tax-exempt organizations and public
educational institutions may sponsor retirement plans under which an employee
may agree that monies deducted from his or her compensation (minimum $25 per
pay period) may be contributed by the employer to a custodial account
established for the employee under the plan.
The Alliance Plans Division of Frontier Trust Company, a subsidiary of
Equitable, which serves as custodian or trustee under the retirement plan
prototype forms available from the Funds, 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 Funds.
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.
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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 a Fund having a
current net asset value of at least $4,000 (for quarterly or less frequent
payments), $5,000 (for bi-monthly payments) or $10,000 (for monthly payments)
may establish a systematic withdrawal plan under which the shareholder will
periodically receive a payment in a stated amount of not less than $50 on a
selected date. Systematic withdrawal plan participants must elect to have
their dividends and distributions from a Fund automatically reinvested in
additional shares of that Fund.
Shares of a Fund owned by a participant in each 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 a 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
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a shareholder's account and may subject the shareholder to a 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 a 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 of a Fund 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 of a Fund that are not
subject to a contingent deferred sales charge (such as shares acquired with
reinvested dividends or distributions) will be redeemed first and will count
toward the foregoing limitations. Remaining Class B shares that are held the
longest will be redeemed next. Redemptions of Class B shares in excess of the
foregoing limitations will be subject to any otherwise applicable contingent
deferred sales charge.
With respect to Class C shares of a Fund, 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 a Fund receives semi-annual and annual reports which
include a portfolio of investments, financial
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statements and, in the case of
the annual report, the report of the Funds' independent auditors, [__________],
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.
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NET ASSET VALUE
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The per share net asset value is computed in accordance with the Trust's
Declaration of Trust 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 a Fund on each Fund business day on which such an order is
received and on such other days as the Board of Trustees deems appropriate or
necessary in order to comply with Rule 22c-1 under the 1940 Act. Each Fund's
per share net asset value is calculated by dividing the value of that 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 Trustees. The Board of Trustees has delegated to
the Adviser certain of the Board's duties with respect to the following
procedures. Readily marketable securities listed on the Exchange or on a
foreign securities exchange (other than foreign securities exchanges whose
operations are similar to those of the United States over-the-counter market)
are valued, except as indicated below, at the last sale price reflected on the
consolidated tape at the close of the Exchange or, in the case of a foreign
securities exchange, at the last quoted sale price, in each case on the
business day as of which such value is being determined. If there has been no
sale on such day, the securities are valued at the 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
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be value in good faith at fair value by, or pursuant to procedures established
by, the Board of Trustees. 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 Trustees. 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 Trustees.
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 maturity if their original term to maturity exceeded 60 days
(unless in either case the Board of Trustees 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,
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including institutional size trading in similar groups of securities and any
developments related to specific securities.
All other assets of the Funds are valued in good faith at fair value by,
or in accordance with procedures established by, the Board of Trustees.
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. Each
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 a 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 Trustees.
The Board of Trustees may suspend the determination of a 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 a
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 each Fund's net asset value per share, all
assets and liabilities initially expressed in a foreign currency will be
converted into U.S. dollars at the mean of the current bid and asked prices of
such currency against the U.S. dollar last quoted by a major bank that is a
regular participant in the relevant foreign exchange market or on the basis of
a pricing service that takes into account the quotes provided by a number of
such major banks. If such quotations are not available as of the close of the
Exchange, the rate of
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exchange will be determined in good faith by, or under
the direction of, the Board of Trustees.
The assets attributable to the Class A shares, Class B shares and Class C
shares will be invested together in a single portfolio for each Fund. 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 each Fund in accordance
with Rule 18f-3 under the 1940 Act.
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DIVIDENDS, DISTRIBUTIONS AND TAXES
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Dividends paid by a Fund, if any, with respect to Class A, Class B, Class
C and Advisor Class shares of that Fund 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. Each 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, a Fund must, among other things, (i)
derive at least 90% of its gross income in each taxable year from dividends,
interest, payments with respect to securities loans, gains from the sale or
other disposition of stock or securities or foreign currency, or certain other
income (including, but not limited to, gains from options, futures and forward
contracts) derived with respect to its business of investing in stock,
securities or currency; and (ii) diversify its holdings so that, at the end of
each quarter of its taxable year, the following two conditions are met: (a) at
least 50% of the value of the Fund's assets is represented by cash, U.S.
Government Securities, securities of other regulated investment companies and
other securities with respect to which the Fund's investment is limited, in
respect of any one issuer, to an amount not greater than 5% of the Fund's
assets and 10% of the outstanding voting securities of such issuer, and (b) not
more than 25% of the value of the Fund's assets is invested in
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securities of any one issuer (other than U.S. Government Securities or
securities of other regulated investment companies).
If a 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.
Each 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 a Fund that is subject to corporate income
tax will be considered to have been distributed by that 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 a 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.
Each Fund intends to make timely distributions of its respective taxable
income (including any net capital gain) so that none of the Funds will 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 a
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 each 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
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qualifying dividends received by the relevant Fund. A corporation's
dividends-received deduction will be disallowed unless the corporation holds
shares in a 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 a 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 relevant 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 a 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 relevant Fund.
After the end of the calendar year, the Funds will notify shareholders of
the federal income tax status of any distributions made by the Funds to
shareholders during such year.
A dividend or capital gains distribution with respect to shares of a Fund
held by a tax-deferred or qualified plan, such as an individual retirement
account, 403(b)(7) retirement account or corporate pension or profit-sharing
plan, generally will not be taxable to the plan. Distributions from such plans
will be taxable to individual participants under applicable tax rules without
regard to the character of the income earned by the qualified plan.
It is the present policy of the Funds 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 a
Fund will pay any dividends. The amount of any dividend or distribution paid
on shares of a
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Fund must necessarily depend upon the realization of income and capital gains
from that Fund's investments.
Sales and Redemptions. Any gain or loss arising from a sale or redemption
of Fund shares generally will be capital gain or loss except in the case of
dealers or certain financial institutions. Such gain or loss will be long-term
capital gain or loss if 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 a 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 a
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 relevant Fund's 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 Funds 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 a 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 each Fund's assets to be invested within various countries is not
known.
Backup Withholding. A Fund may be required to withhold federal income tax
at the rate of 31% of all distributions payable to shareholders who fail to
provide the relevant 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
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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 each Fund with respect to the determination
of its "investment company income" each year. This discussion assumes that
each 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 a Fund accrues interest or other receivables or accrues expenses or
other liabilities denominated in a foreign currency and the time that Fund
actually collects such receivables or pays such liabilities are treated as
ordinary income or ordinary loss. Similarly, gains or losses from the
disposition of foreign currencies, from the disposition of debt securities
denominated in a foreign currency, or from the disposition of a forward
contract denominated in a foreign currency, which are attributable to
fluctuations in the value of the foreign currency between the date of
acquisition of the asset and the date of disposition also are treated as
ordinary income or loss. These gains or losses, referred to under the Code as
"section 988" gains or losses, increase or decrease the amount of a Fund's
investment company taxable income available to be distributed to its
shareholders as ordinary income, rather than increasing or decreasing the
amount of that Fund's net capital gain. Because section 988 losses reduce the
amount of ordinary dividends a 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
Funds 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 a Fund on
section 1256 contracts other than forward foreign currency contracts will be
considered 60% long-
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term and 40% short-term capital gain or loss. Gain or loss realized by a 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 that Fund's investment company taxable
income available to be distributed to shareholders as ordinary income, as
described above. A 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 each 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 Funds intends to engage.
Tax Straddles. Any futures contract, forward foreign currency contract,
or other position entered into or held by that 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 a Fund's gains and losses with respect to straddle positions by requiring,
among other things, that (i) loss realized on disposition of one position of a
straddle not be recognized to the extent that the Fund has unrealized gains
with respect to the other position in such straddle; (ii) the Fund's holding
period in straddle positions be suspended while the straddle exists (possibly
resulting in gain being treated as short-term capital gain rather than
long-term capital gain); (iii) losses recognized with respect to certain
straddle positions which are part of a mixed straddle and which are non-section
1256 positions be treated as 60% long-term and 40% short-term capital loss;
(iv) losses recognized with respect to certain straddle positions which would
otherwise constitute short-term capital losses be treated as long-term capital
losses; and (v) the deduction of interest and carrying charges attributable to
certain straddle positions may be deferred. The Treasury Department is
authorized to issue regulations providing for the proper treatment of a mixed
straddle where at least one position is ordinary and at least one position is
capital. No such regulations have yet been issued. Various elections are
available to each Fund which may
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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 Funds all of the offsetting positions of which consist of
section 1256 contracts.
[Foreign Tax Credits. Income received by the Funds from sources within various
foreign countries may be subject to foreign income tax. If more than 50% of the
value of a Fund's total assets at the close of its taxable year consists of the
stock or securities of foreign corporations, that Fund may elect to "pass
through" to the Fund's stockholders the amount of foreign income taxes paid by
the Fund. Pursuant to such election, a stockholder would be required: (i) to
include in gross income his pro-rata share of foreign taxes paid by the Fund;
(ii) to treat his pro-rata share of such foreign taxes as having been paid by
him; and (iii) either to deduct his pro-rata share of foreign taxes in
computing his taxable income, or to use it as a foreign tax credit against
Federal income taxes (but not both). No deduction for foreign taxes could be
claimed by a shareholder who does not itemize deductions. In addition, certain
shareholders may be subject to rules which limit their ability to fully deduct,
or claim a credit for, their pro rata share of the foreign taxes paid by a
Fund. A shareholder's foreign tax credit with respect to a dividend received
from a Fund will be disallowed unless the shareholder holds shares in that 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. There can be no assurance
that a Fund will be able to meet the requirements of the Code to "pass through"
to its shareholders foreign income taxes paid. Each shareholder will be
notified within 60 days after the close of each taxable year of the relevant
Fund whether the foreign taxes paid by that Fund will "pass through" for that
year, and, if so, the amount of each shareholder's pro-rata share (by country)
of (i) the foreign taxes paid, and (ii) the Fund's gross income from foreign
sources. Of course, 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 foreign tax credits.] [This section is
from the Alliance International Fund SAI with minor modifications.]
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-
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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 Funds may be subject to other state and local taxes.
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PORTFOLIO TRANSACTIONS
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The management of the Funds has the responsibility for allocating its
brokerage orders and may direct orders to any broker. It is the Funds' 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 Funds' policy to use the primary
market makers except when a better price can be obtained by using a broker.
The Board of Trustees has approved, as in the best interests of each Fund and
the shareholders, a policy of considering, among other factors, sales of each
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 Funds.
Investment decisions for each Fund are made independently from those for
the other Funds, 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 a Fund and one or more of such other Funds, 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
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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 a Fund or the size of
the position obtainable for the Fund.
Allocations are made by the officers of the Trust 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 Funds 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 a 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 a 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 that Fund. Consistent with the Conduct Rules of the
National Association of Securities Dealers, Inc., and subject to seeking best
execution, each Fund may consider sales of shares of the Fund or other
investment companies managed by the Adviser as a factor in the selection of
brokers to execute portfolio transactions for the Fund.
The Funds 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 each 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 Funds' 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
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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.
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GENERAL INFORMATION
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Description of the Trust [The Trust is organized as a Massachusetts business
trust under the laws of The Commonwealth of Massachusetts by an Agreement and
Declaration of Trust ("Declaration of Trust") dated December 12, 2000, a copy
of which is on file with the Secretary of State of The Commonwealth of
Massachusetts. The Trust is a "series" company as described in Rule 18f-2
under the 1940 Act.
The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of each series and of each class of shares thereof.
The shares of each Fund and each class thereof do not have any preemptive
rights. Upon termination of any Fund or any class thereof, whether pursuant to
liquidation of the Trust or otherwise, shareholders of that Fund or that class
are entitled to share pro rata in the net assets of that Fund or that class
then available for distribution to such shareholders.
The assets received by the Trust for the issue or sale of the Class A, Class B,
Class C and Advisor Class shares of each Fund and all income, earnings,
profits, losses and proceeds therefrom, subject only to the rights of
creditors, are allocated to, and constitute the underlying assets of, the
appropriate class of that Fund. The underlying assets of each Fund and each
class of shares thereof are segregated and are charged with the expenses with
respect to that Fund and that class and with a share of the general expenses of
the Trust. While the expenses of the Trust are allocated to the separate books
of account of each series and
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each class of shares thereof, certain expenses may be legally chargeable
against the assets of all series or a particular class of shares thereof.
The Declaration of Trust provides for the perpetual existence of the Trust.
The Trust or any Fund, however, may be terminated at any time by vote of at
least two-thirds of the outstanding shares of each Fund affected or by Trustees
by written notice to shareholders. The Declaration of Trust further provides
that the Trustees may also terminate the Trust upon written notice to the
shareholders.
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 Trustees.
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 contingent
deferred sales charge. 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 Trustees, that affect
each portfolio and class in substantially the same manner. Class A, Class B,
Class 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, Class C and Advisor Class 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 Trustees and, in liquidation of the Fund, are entitled to receive the
net assets of the Fund.
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Capitalization
[The Trust has an unlimited number of authorized shares of beneficial
interest. The Trustees are authorized to reclassify any unissued shares to any
number of additional series and classes without shareholder approval.
Accordingly, the Trustees 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 would be governed
by the 1940 Act and the law of the Commonwealth of Massachusetts. If shares of
another series were issued in connection with the creation of one or more
additional portfolios, each share of any portfolio would normally be entitled
to one vote for all purposes. Generally, shares of all portfolios would vote
as a single series on matters, such as the election of Trustees, that affected
all 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
Trustees 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.]
At the close of business on [ ], [ ] 2001 there were [ ]
Class A shares, [ ] Class B shares, [____] Class C shares and [ ]
Advisor Class shares of stock of the [AllianceBernstein Small Cap Value Fund]
outstanding. To the knowledge of the Trust, the following persons owned of
record or beneficially 5% or more of a class of outstanding shares of the Fund
as of [ ] [ ], 2001:
No. of % of
Name and Address Shares Class
---------------- ------ -----
Class A
Class B
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Class C
At the close of business on [ ], [ ] 2001 there were [ ]
Class A shares, [ ] Class B shares and [____] Class C shares of common
stock of the [AllianceBernstein Value Fund] outstanding. To the knowledge of
the Trust, the following persons owned of record or beneficially 5% or more of
a class of outstanding shares of the Fund as of [ ] [ ], 2001:
No. of % of
Name and Address Shares Class
---------------- ------ -----
Class A
Class B
Class C
At the close of business on [ ], [ ] 2001 there were [ ]
Class A shares, [ ] Class B shares and [____] Class C shares of common
stock of the [AllianceBernstein International Value Fund] outstanding. To the
knowledge of the Trust, the following persons owned of record or beneficially
5% or more of a class of outstanding shares of the Fund as of [ ] [ ],
2001:
No. of % of
Name and Address Shares Class
---------------- ------ -----
Class A
Class B
Class C
At the close of business on [ ], [ ] 2001 there were [ ]
Class A shares, [ ] Class B shares and [____] Class C shares of common
stock of the [AllianceBernstein Global Value Fund] outstanding. To the
knowledge of the Trust, the following persons owned of record or beneficially
5% or more of a
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class of outstanding shares of the Fund as of [ ] [ ],
2001:
No. of % of
Name and Address Shares Class
---------------- ------ -----
Class A
Class B
Class C
Voting Rights [Adopted from Alliance Portfolios SAI]
[As summarized in the Prospectus, shareholders are entitled to one vote
for each full share held (with fractional votes for fractional shares held) and
will vote (to the extent provided herein) in the election of Trustees and the
termination of the Trust or a Fund and on other matters submitted to the vote
of shareholders.
The ByLaws of the Trust provide that the shareholders of any particular
series or class shall not be entitled to vote on any matters as to which such
series or class is not affected. Except with respect to matters as to which
the Trustees have determined that only the interests of one or more particular
series or classes are affected or as required by law, all of the shares of each
series or class shall, on matters as to which such series or class is entitled
to vote, vote with other series or classes so entitled as a single class.
Notwithstanding the foregoing, with respect to matters which would otherwise be
voted on by two or more series or classes as a single class, the Trustees may,
in their sole discretion, submit such matters to the shareholders of any or all
such series or classes, separately. Rule 18f-2 under the 1940 Act provides in
effect that a series shall be deemed to be affected by a matter unless it is
clear that the interests of each series in the matter are substantially
identical or that the matter does not affect any interest of such series.
Although not governed by Rule 18f-2, shares of each class of a Fund will vote
separately with respect to matters pertaining to the respective Distribution
Plans applicable to each class.
The terms "shareholder approval" and "majority of the outstanding voting
securities" as used in the Prospectus and this
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Statement of Additional Information mean the lesser of (i) 67% or more of the
shares of the applicable Fund or applicable class thereof represented at a
meeting at which more than 50% of the outstanding shares of such Fund or such
class are represented or (ii) more than 50% of the outstanding shares of such
Fund or such class.
There will normally be no meetings of shareholders for the purpose of
electing Trustees except that in accordance with the 1940 Act (i) the Trust
will hold a shareholders' meeting for the election of Trustees at such time as
less than a majority of the Trustees holding office have been elected by
shareholders, and (ii) if, as a result of a vacancy on the Board of Trustees,
less than two-thirds of the Trustees holding office have been elected by the
shareholders, that vacancy may only be filled by a vote of the shareholders.
The Funds' shares have non-cumulative voting rights, which means that the
holders of more than 50% of the shares voting for the election of Trustees can
elect 100% of the Trustees if they choose to do so, and in such event the
holders of the remaining less than 50% of the shares voting for such election
of Trustees will not be able to elect any person or persons to the Board of
Trustees. A special meeting of shareholders for any purpose may be called by
10% of the Trust's outstanding shareholders.
Except as set forth above, the Trustees shall continue to hold office and
may appoint successor Trustees.
Shareholder and Trustee Liability
[Under Massachusetts law shareholders could, under certain circumstances,
be held personally liable for the obligations of the Trust. However, the
Declaration of Trust disclaims shareholder liability for acts or obligations of
the Trust and requires that notice of such disclaimer be given in each
agreement, obligation, or instrument entered into or executed by the Trust or
the Trustees. The Declaration of Trust provides for indemnification out of a
Fund's property for all loss and expense of any shareholder of that Fund held
liable on account of being or
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having been a shareholder. Thus, the risk of a shareholder incurring financial
loss on account of shareholder liability is limited to circumstances in which
the Fund of which he or she was a shareholder would be unable to meet its
obligations.
The Declaration of Trust further provides that the Trustees will not be liable
for errors of judgment or mistakes of fact or law. However, nothing in the
Declaration of Trust protects a Trustee against any liability to which the
Trustee would otherwise be subject by reason of willful misfeasance, bad faith,
gross negligence, or reckless disregard of the duties involved in the conduct
of his or her office. The By Laws of the Trust provide for indemnification by
the Trust of the Trustees and the officers of the Trust but no such person may
be indemnified against any liability to the Trust or the Trust's shareholders
to which he or she would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of his or her office.]
Custodian
[__________], will act as the Funds' custodian for the assets of the Funds
but will play no part in deciding the purchase or sale of portfolio securities.
Subject to the supervision of the Trustees, [__________] 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 Funds' Principal Underwriter, and as such may
solicit orders from the public to purchase shares of the Funds. Under the
Agreement, the Trust, on behalf of each 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 Ropes & Gray, One International Place, Boston,
Massachusetts 02110.
Independent Accountants
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[__________], has been appointed as independent auditors for the Funds.
Performance Information
From time to time each Fund advertises its "total return." Computed
separately for each class, a 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). A 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 a 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.
Fund Performance
Each Fund calculates average annual total return information in the
Performance Table in the Risk/Return Summary according to the Commission
formula as described above. In accordance with Commission guidelines, total
return information is presented for each class for the same time periods, i.e.,
the 1, 5, and 10 years (or over the life of the Fund, if the Fund is less than
10 years old) ending on the last day of the most recent calendar year. Since
different classes of a Fund may have first been sold on different dates
("Actual Inception Dates"), in some cases this can result in return information
being presented for a class for periods prior to its Actual Inception Date.
Where return information is presented for periods prior to the Actual Inception
Date of a Class (a "Younger Class"), such information is calculated by using
the historical performance of the class with the earliest Actual Inception Date
(the "Oldest Class"). For this purpose, a Fund calculates the difference in
total annual fund operating expenses (as a percentage of average net assets)
between the Younger Class and the Oldest Class, divides the difference by 12,
and subtracts the result from the monthly performance at net asset value
(including reinvestment of all dividends and distributions) of the Oldest Class
for each month prior to the Younger Class's Actual Inception Date for which
performance information is to be shown. The resulting "pro forma" monthly
performance information is used to calculate the Younger Class's
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average annual returns for these periods. Any conversion feature applicable to
the Younger Class is assumed to occur in accordance with the Actual Inception
Date for that class, not its hypothetical inception date.
A Fund's total return is computed separately for Class A, Class B, Class C
and Advisor Class shares. A 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 that Fund's portfolio and its expenses.
Total return information is useful in reviewing a 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 a Fund is not fixed and will fluctuate in response to
prevailing market conditions.
Advertisements quoting performance rankings of a 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 a 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.
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-------------------------------------------------------------------------------
FINANCIAL STATEMENTS AND
REPORT OF INDEPENDENT ACCOUNTANTS
-------------------------------------------------------------------------------
The financial statements and the report of Ernst & Young LLP of the Funds
are incorporated herein by reference to the Trust's semi-annual report filing
made with the SEC pursuant to Section 30(b) of the 1940 Act and Rule 30b-2
thereunder. The semi-annual report is dated [ ] [ ], 2000 and it was
filed on [ ] [ ], 2000. It is available without charge upon request by
calling Alliance Fund Services, Inc. at (800) 227-4618.
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APPENDIX A
FUTURES CONTRACTS AND OPTIONS ON
FUTURES CONTRACTS AND FOREIGN CURRENCIES
-------------------------------------------------------------------------------
FUTURES CONTRACTS
The Funds may enter into contracts for the purchase or sale for future
delivery of securities or foreign currencies, or contracts based on financial
indices. U.S. futures contracts have been designed by exchanges which have
been designated "contracts markets" by the CFTC, and must be executed through a
futures commission merchant, or brokerage firm, which is a member of the
relevant contract market. Futures contracts trade on a number of exchange
markets, and, through their clearing corporations, the exchanges guarantee
performance of the contracts as between the clearing members of the exchange.
At the same time a futures contract is purchased or sold, a Fund must
allocate cash or securities as a deposit payment ("initial deposit"). It is
expected that the initial deposit would be approximately 1 1/2%-5% of a
contract's face value. Daily thereafter, the futures contract is valued and
the payment of "variation margin" may be required, since each day that Fund
would provide or receive cash that reflects any decline or increase in the
contract's value.
At the time of delivery of securities pursuant to such a contract,
adjustments are made to recognize differences in value arising from the
delivery of securities with a different interest rate from that specified in
the contract. In some (but not many) cases, securities called for by a futures
contract may not have been issued when the contract was written.
Although futures contracts by their terms call for the actual delivery or
acquisition of securities, in most cases the contractual obligation is
fulfilled before the date of the contract without having to make or take
delivery of the securities. The offsetting of a contractual obligation is
accomplished by buying (or selling, as the case may be) on a commodities
exchange an identical futures contract calling for delivery in the same month.
Such a transaction, which is effected through a member of an exchange, cancels
the obligation to make or take delivery of the securities. Since all
transactions in the
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futures market are made, offset or fulfilled through a clearinghouse
associated with the exchange on which the contracts are traded, a
Fund will incur brokerage fees when it purchases or sells futures contracts.
The purpose of the acquisition or sale of a futures contract may be to
attempt to protect the Funds from fluctuations in foreign exchange rates
without actually buying or selling foreign currencies. For example, if an
exchange rate were expected to decrease, thereby making a foreign currency less
expensive, the Fund might enter into futures contracts for the sale of the
currency. Such a sale would have much the same effect as selling an equivalent
value of the currency. If exchange rates did decrease, the value of the
securities denominated in the particular currency in the portfolio would
decline, but the value of the futures contracts to that Fund would increase at
approximately the same rate, thereby keeping the net asset value of the Fund
from declining as much as it otherwise would have.
The ordinary spreads between prices in the cash and futures markets, due
to differences in the nature of those markets, are subject to distortions.
First, all participants in the futures market are subject to initial deposit
and variation margin requirements. Rather than meeting additional variation
margin requirements, investors may close futures contracts through offsetting
transactions which could distort the normal relationship between the cash and
futures markets. Second, the liquidity of the futures market depends on
participants entering into offsetting transactions rather than making or taking
delivery. To the extent participants decide to make or take delivery,
liquidity in the futures market could be reduced, thus producing distortion.
Third, from the point of view of speculators, the margin deposit requirements
in the futures market are less onerous than margin requirements in the
securities market. Therefore, increased participation by speculators in the
futures market may cause temporary price distortions. Due to the possibility
of distortion, a correct forecast of general interest rate trends by the
Adviser may still not result in a successful transaction.
By establishing an appropriate "short" position in index futures, a Fund
may seek to protect the value of its portfolio against an overall decline in
the market for such securities. Alternatively, in anticipation of a generally
rising market, a Fund can seek to avoid losing the benefit of apparently low
current prices by establishing a "long" position in securities index futures
and later liquidating that position as particular
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securities, are acquired. To the extent that these hedging strategies are
successful, a Fund will be affected to a lesser degree by adverse overall
market price movements than would otherwise be the case.
In addition, futures contracts entail risks. Although each Fund believes
that use of such contracts will benefit that Fund, if the Adviser's investment
judgment about the general direction of exchange rates is incorrect, a Fund's
overall performance would be poorer than if it had not entered into any such
contract. For example, if a Fund has hedged against the possibility of a
change in exchange rates which would adversely affect the values of securities
held in its portfolio and exchange rates instead move in the opposite
direction, that Fund will lose part or all of the benefit of the increased
value of its securities which it has hedged because it will have offsetting
losses in its futures positions. In addition, in such situations, if a Fund
has insufficient cash, it may have to sell securities from its portfolio to
meet daily variation margin requirements. The Fund may have to sell securities
at a time when it may be disadvantageous to do so.
OPTIONS ON FUTURES CONTRACTS
Each Fund intends to purchase and write options on futures contracts for
hedging purposes. The purchase of a call option on a futures contract is
similar in some respects to the purchase of a call option on an individual
security. Depending on the pricing of the option compared to either the price
of the futures contract upon which it is based or the price of the underlying
securities, it may or may not be less risky than ownership of the futures
contract or underlying securities. As with the purchase of futures contracts,
when a Fund is not fully invested it may purchase a call option on a futures
contract to hedge against a market advance due to increasing exchange rates.
The writing of a call option on a futures contract constitutes a partial
hedge against declining prices of the security or foreign currency which is
deliverable upon exercise of the futures contract. If the futures price at
expiration of the option is below the exercise price a Fund will retain the
full amount of the option premium which provides a partial hedge against any
decline that may have occurred in that Fund's holdings. The writing of a put
option on a futures contract constitutes a partial hedge against increasing
prices of the security or foreign currency which is deliverable upon exercise
of the futures contract. If the futures price at expiration of the
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option is higher than the exercise price, a Fund will retain the full amount of
the option premium which provides a partial hedge against any increase in the
price of securities which that Fund intends to purchase. If a put or call
option the Fund has written is exercised, that Fund will incur a loss which
will be reduced by the amount of the premium it receives. Depending on the
degree of correlation between changes in the value of its portfolio securities
and changes in the value of its futures positions, a Fund's losses from
existing options on futures may to some extent be reduced or increased by
changes in the value of portfolio securities. The Funds will not write
"uncovered" options on futures contracts.
The purchase of a put option on a futures contract is similar in some
respects to the purchase of protective put options on portfolio securities.
For example, a Fund may purchase a put option on a futures contract to hedge
that Fund against the risk of rising interest rates.
Upon the exercise of a call, the writer of the option is obligated to sell
the futures contract (to deliver a "long" position to the option holder) at the
option exercise price, which will presumably be lower than the current market
price of the contract in the futures market. Upon exercise of a put, the
writer of the option is obligated to purchase the futures contract (deliver a
"short" position to the option holder) at the option exercise price which will
presumably be higher than the current market price of the contract in the
futures market. When the holder of an option exercises it and assumes a long
futures position, in the case of call, or a short futures position in the case
of a put, its gain will be credited to its futures margin account, while the
loss suffered by the writer of the option will be debited to its futures margin
account and must be immediately paid by the writer. However, as with the
trading of futures, most participants in the options markets do not seek to
realize their gains or losses by exercise of their option rights. Instead, the
holder of an option will usually realize a gain or loss by buying or selling an
offsetting option at a market price that will reflect an increase or a decrease
from the premium originally paid.
Options on futures contracts can be used by a Fund to hedge substantially
the same risks as might be addressed by the direct purchase or sale of the
underlying futures contracts. If a Fund purchases an option on a futures
contract, it may obtain benefits similar to those that would result if it held
the futures position itself. Purchases of options on futures contracts may
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present less risk in hedging than the purchase and sale of the underlying
futures contracts since the potential loss is limited to the amount of the
premium plus related transaction costs.
If a Fund writes options on futures contracts, that Fund will receive a
premium but will assume a risk of adverse movement in the price of the
underlying futures contract comparable to that involved in holding a futures
position. If the option is not exercised, the Fund will realize a gain in the
amount of the premium, which may partially offset unfavorable changes in the
value of securities held in or to be acquired for the Fund. If the option is
exercised, the Fund will incur a loss in the option transaction, which will be
reduced by the amount of the premium it has received, but which will offset any
favorable changes in the value of its portfolio securities or, in the case of a
put, lower prices of securities it intends to acquire.
While the holder or writer of an option on a futures contract may normally
terminate its position by selling or purchasing an offsetting option of the
same series, a Fund's ability to establish and close out options positions at
fairly established prices will be subject to the existence of a liquid market.
A Fund will not purchase or write options on futures contracts unless, in the
Adviser's opinion, the market for such options has sufficient liquidity that
the risks associated with such options transactions are not at unacceptable
levels.
OPTIONS ON FOREIGN CURRENCIES
The Funds may purchase and write options on foreign currencies for hedging
purposes in a manner similar to that in which futures contracts on foreign
currencies, or forward contracts, will be utilized. For example, a decline in
the dollar value of a foreign currency in which portfolio securities are
denominated will reduce the dollar value of such securities, even if their
value in the foreign currency remains constant. In order to protect against
such diminutions in the value of portfolio securities, a Fund may purchase put
options on the foreign currency. If the value of the currency does decline,
that Fund will have the right to sell such currency for a fixed amount in
dollars and will thereby offset, in whole or in part, the adverse effect on its
portfolio which otherwise would have resulted.
Conversely, where a rise in the dollar value of a currency in which
securities to be acquired are denominated is projected, thereby increasing the
cost of such securities, a Fund may purchase call options thereon. The
purchase of such options
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could offset, at least partially, the effects of the adverse movements in
exchange rates. As in the case of other types of options, however, the benefit
to a Fund deriving from purchases of foreign currency options will be reduced
by the amount of the premium and related transaction costs. In addition, where
currency exchange rates do not move in the direction or to the extent
anticipated, a Fund could sustain losses on transactions in foreign currency
options which would require it to forego a portion or all of the benefits of
advantageous changes in such rates.
The Funds may write options on foreign currencies for the same types of
hedging purposes. For example, where a Fund anticipates a decline in the
dollar value of foreign currency denominated securities due to adverse
fluctuations in exchange rates it could, instead of purchasing a put option,
write a call option on the relevant currency. If the expected decline occurs,
the option will most likely not be exercised, and the diminution in value of
portfolio securities will be offset by the amount of the premium received.
Similarly, instead of purchasing a call option to hedge against an
anticipated increase in the dollar cost of securities to be acquired, a Fund
could write a put option on the relevant currency which, if rates move in the
manner projected, will expire unexercised and allow that Fund to hedge such
increased cost up to the amount of the premium. As in the case of other types
of options, however, the writing of a foreign currency option will constitute
only a partial hedge up to the amount of the premium, and only if rates move in
the expected direction. If this does not occur, the option may be exercised and
a Fund would be required to purchase or sell the underlying currency at a loss
which may not be offset by the amount of the premium. Through the writing of
options on foreign currencies, a Fund also may be required to forego all or a
portion of the benefits which might otherwise have been obtained from favorable
movements in exchange rates.
The Funds will write options on foreign currencies only if they are
covered. A put option on a foreign currency written by a Fund will be
considered "covered" if, so long as that Fund is obligated as the writer of the
put, it segregates with the Fund's custodian liquid assets equal at all times
to the aggregate exercise price of the put. A call option on a foreign
currency written by a Fund will be considered "covered" only if that Fund owns
short term debt securities with a value equal to the face amount of the option
contract and denominated in the currency upon which the call is written.
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ADDITIONAL RISKS OF OPTIONS ON FUTURES CONTRACTS,
FORWARD CONTRACTS AND OPTIONS ON FOREIGN CURRENCIES
Unlike transactions entered into by the Funds in futures contracts,
options on foreign currencies and forward contracts are not traded on contract
markets regulated by the CFTC or (with the exception of certain foreign
currency options) by the Commission. To the contrary, such instruments are
traded through financial institutions acting as market-makers, although foreign
currency options are also traded on certain national securities exchanges, such
as the Philadelphia Stock Exchange and the Chicago Board Options Exchange,
subject to Commission regulation. Similarly, options on currencies may be
traded over-the-counter. In an over-the-counter trading environment, many of
the protections afforded to exchange participants will not be available. For
example, there are no daily price fluctuation limits, and adverse market
movements could therefore continue to an unlimited extent over a period of
time. Although the purchase of an option cannot lose more than the amount of
the premium plus related transaction costs, this entire amount could be lost.
Moreover, the option writer and a trader of forward contracts could lose
amounts substantially in excess of their initial investments, due to the margin
and collateral requirements associated with such positions.
Options on foreign currencies traded on national securities exchanges are
within the jurisdiction of the Commission, as are other securities traded on
such exchanges. As a result, many of the protections provided to traders on
organized exchanges will be available with respect to such transactions. In
particular, all foreign currency option positions entered into on a national
securities exchange are cleared and guaranteed by the Options Clearing
Corporation ("OCC"), thereby reducing the risk of counterparty default.
Further, a liquid secondary market in options traded on a national securities
exchange may be more readily available than in the over-the-counter market,
potentially permitting the Fund to liquidate open positions at a profit prior
to exercise or expiration, or to limit losses in the event of adverse market
movements.
The purchase and sale of exchange-traded foreign currency options,
however, is subject to the risks of the availability of a liquid secondary
market described above, as well as the risks regarding adverse market
movements, margining of options written, the nature of the foreign currency
market, possible intervention by governmental authorities and the effects of
other political and economic events. In addition, exchange-
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traded options on foreign currencies involve certain risks not presented by the
over-the-counter market. For example, exercise and settlement of such options
must be made exclusively through the OCC, which has established banking
relationships in applicable foreign countries for this purpose. As a result,
the OCC may, if it determines that foreign governmental restrictions or taxes
would prevent the orderly settlement of foreign currency option exercises, or
would result in undue burdens on the OCC or its clearing member, impose special
procedures on exercise and settlement, such as technical changes in the
mechanics of delivery of currency, the fixing of dollar settlement prices or
prohibitions, on exercise.
In addition, futures contracts, options on futures contracts, forward
contracts and options on foreign currencies may be traded on foreign exchanges.
Such transactions are subject to the risk of governmental actions affecting
trading in or the prices of foreign currencies or securities. The value of
such positions also could be adversely affected by (i) other complex foreign
political and economic factors, (ii) lesser availability than in the United
States of data on which to make trading decisions, (iii) delays in a Fund's
ability to act upon economic events occurring in foreign markets during
nonbusiness hours in the United States, (iv) the imposition of different
requirements than in the United States, and (v) lesser trading volume.
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-------------------------------------------------------------------------------
APPENDIX B:
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 by Merrill Lynch as of the date the plan becomes an
Active Plan.
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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 each 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 relevant 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 relevant Fund held by
the plan would convert to a Class A share of the relevant 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 a 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."
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PART C
OTHER INFORMATION
ITEM 23. Exhibits
(a) Agreement and Declaration of Trust - filed herewith.
(b) By-Laws of the Registrant - filed herewith.
(c) Not applicable.
(d) Advisory Agreement between the Registrant and Alliance Capital Management
L.P. - to be filed by amendment.
(e) (1) Distribution Services Agreement between the Registrant and
AllianceFund Distributors, Inc. - to be filed by amendment.
(2) Selected Dealer Agreement between Alliance Fund Distributors, Inc.
and selected dealers offering shares of Registrant - to be filed by
amendment.
(3) Selected Agent Agreement between Alliance Fund Distributors, Inc.
and selected agents making available shares of Registrant - to be
filed by amendment.
(f) Not applicable.
(g) Custodian Contract - to be filed by amendment.
(h) (1) Transfer Agency Agreement between the Registrant and Alliance Fund
Services, Inc. - to be filed by amendment.
(2) Expense Limitation Agreement between the Registrant and Alliance
Capital Management L.P. - - to be filed by amendment.
(i) Opinion and Consent of Ropes & Gray - to be filed by amendment.
(j) Consent of Independent Accountants - - to be filed by amendment.
(k) Not applicable.
(l) Investment representation letter of Alliance Capital Management L.P. - to
be filed by amendment.
(m) Rule 12b-1 Plan - to be filed by amendment.
(n) Rule 18f-3 Plan - to be filed by amendment.
(o) (1) Code of Ethics for the Fund - to be filed by amendment.
<PAGE>
(2) Code of Ethics for the Alliance Capital Management L.P. and Alliance Fund
Distributors, Inc.
Other Exhibits - Powers of Attorney - to be filed by amendment.
ITEM 24. Persons Controlled by or under Common Control with Registrant.
None. The Registrant is a recently organized corporation and has no
outstanding shares of common stock.
ITEM 25. Indemnification.
Paragraph (l) of Section 3, Article IV of the Registrant's Agreement and
Declaration of Trust provides in relevant part that the Trustees of the Trust
have the power: "(l) To purchase and pay for entirely out of Trust property
such insurance as they may deem necessary or appropriate for the conduct of the
business of the Trust, including, without limitation, insurance policies
insuring the assets of the Trust and payment of distributions and principal on
its portfolio investments, and insurance policies insuring the Shareholders,
Trustees, officers, employees, agents, investment advisers, principal
underwriters or independent contractors of the Trust individually against all
claims and liabilities of every nature arising by reason of holding, being or
having held any such office or position, or by reason of any action alleged to
have been taken or omitted by any such person as Trustee, officer, employee,
agent, investment adviser, principal underwriter or independent contractor,
including any action taken or omitted that may be determined to constitute
negligence, whether or not the Trust would have the power to indemnify such
person against liability;"
Section 2 of Article VII of the Registrant's Agreement and Declaration of Trust
provides in relevant part:
"Limitation of Liability. The Trustees shall not be responsible or liable in
any event for any neglect or wrong-doing of any officer, agent, employee,
Manager or principal underwriter of the Trust, nor shall any Trustee be
responsible for the act or omission of any other Trustee, but nothing herein
contained shall protect any Trustee against any liability to which he or she
would otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of his
or her office.
Every note, bond, contract, instrument, certificate or undertaking and every
other act or thing whatsoever issued, executed or done by or on behalf of the
Trust or the Trustees or any of them in connection with the Trust shall be
conclusively deemed to have been issued, executed or done only in or with
respect to their or his or her capacity as Trustees or Trustee, and such
Trustees or Trustee shall not be personally liable thereon."
Section 2 of Article VIII of the Registrant's Agreement and Declaration of
Trust provides in relevant part: " Trustee's Good Faith Action, Expert Advice,
No Bond or Surety. The exercise by the Trustees of their powers and
discretions hereunder shall be binding upon everyone interested. A Trustee
shall be liable for his or her own willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of the
office of
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Trustee, and for nothing else, and shall not be liable for errors of
judgment or mistakes of fact or law. The Trustees may take advice of counsel
or other experts with respect to the meaning and operation of this Declaration
of Trust, and shall be under no liability for any act or omission in accordance
with such advice or for failing to follow such advice. The Trustees shall not
be required to give any bond as such, nor any surety if a bond is required."
Article 10 of the Registrant's Bylaws provides in relevant part:
"Indemnification
10.1 Trustees, Officers, etc. The Trust shall indemnify each of its Trustees
and officers (including persons who serve at the Trust's request as directors,
officers or trustees of another organization in which the Trust has any
interest as a shareholder, creditor or otherwise) (hereinafter referred to as a
"Covered Person") against all liabilities and expenses, including but not
limited to amounts paid in satisfaction of judgments, in compromise or as fines
and penalties, and counsel fees reasonably incurred by any Covered Person in
connection with the defense or disposition of any action, suit or other
proceeding, whether civil or criminal, before any court or administrative or
legislative body, in which such Covered Person may be or may have been involved
as a party or otherwise or with which such Covered Person may be or may have
been threatened, while in office or thereafter, by reason of any alleged act or
omission as a Trustee or officer or by reason of his or her being or having
been such a Trustee or officer, except with respect to any matter as to which
such Covered Person shall have been finally adjudicated in any such action,
suit or other proceeding not to have acted in good faith in the reasonable
belief that such Covered Person's action was in the best interest of the Trust
and except that no Covered Person shall be indemnified against any liability to
the Trust or its shareholders to which such Covered Person would otherwise be
subject by reason of willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of such Covered
Person's office. Expenses, including counsel fees so incurred by any such
Covered Person, may be paid from time to time by the Trust in advance of the
final disposition of any such action, suit or proceeding on the condition that
the amounts so paid shall be repaid to the Trust if it is ultimately determined
that indemnification of such expenses is not authorized under this Article;
provided, however, that (1) such Covered Person shall provide a security for
his undertaking to repay the advance if it is ultimately determined that
indemnification is not authorized under this Article, (2) the Trust shall be
insured against losses arising by reason of any lawful advances, or (3) a
majority of a quorum of disinterested, non-party directors of the Trust, or an
independent legal counsel in a written opinion, shall determine, based on a
review of readily available facts, that there is reason to believe that such
Covered Person ultimately will be found entitled to indemnification under this
Article. In the case of such a determination or opinion, the relevant
disinterested, non-party directors or independent legal counsel, as the case
may be, shall afford the Covered Person a rebuttable presumption that he has
not engaged in willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of such Covered Person's office.
10.2 Compromise Payment. As to any matter disposed of by a compromise payment
by any such Covered Person referred to in Section 4.1 above, pursuant to a
consent decree or otherwise, no such indemnification either for said payment or
for any other expenses shall be provided unless such compromise shall be
approved as in the best interests of the Trust, after
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notice that it involved such indemnification, (a) by a disinterested majority
of the Trustees then in office; or (b) by a majority of the disinterested
Trustees then in office; or (c) by any disinterested person or persons to whom
the question may be referred by the Trustees, provided that in the case of
approval pursuant to clause (b) or (c) there has been obtained an opinion in
writing of independent legal counsel to the effect that such Covered Person
appears to have acted in good faith in the reasonable belief that his or her
action was in the best interests of the Trust and that such indemnification
would not protect such person against any liability to the Trust or its
shareholders to which such person would otherwise be subject by reason of
willful misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of office; or (d) by vote of shareholders
holding a majority of the Shares entitled to vote thereon, exclusive of any
Shares beneficially owned by any interested Covered Person. Approval by the
Trustees pursuant to clause (a) or (b) or by any disinterested person or
persons pursuant to clause (c) of this Section shall not prevent the recovery
from any Covered Person of any amount paid to such Covered Person in accordance
with any of such clauses as indemnification if such Covered Person is
subsequently adjudicated by a court of competent jurisdiction not to have acted
in good faith in the reasonable belief that such Covered Person's action was in
the best interests of the Trust or to have been liable to the Trust or its
shareholders by reason of willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of such Covered
Person's office.
10.3 Indemnification Not Exclusive. The right of indemnification hereby
provided shall not be exclusive of or affect any other rights to which any such
Covered Person may be entitled. As used in this Article 4, the term "Covered
Person" shall include such person's heirs, executors and administrators; an
"interested Covered Person" is one against whom the action, suit or other
proceeding in question or another action, suit or other proceeding on the same
or similar grounds is then or has been pending; and a "disinterested Trustee"
or "disinterested person" is a Trustee or a person against whom none of such
actions, suits or other proceedings or another action, suit or other proceeding
on the same or similar grounds is then or has been pending. Nothing contained
in this Article shall affect any rights to indemnification to which personnel
of the Trust, other than Trustees and officers, and other persons may be
entitled by contract or otherwise under law, nor the power of the Trust to
purchase and maintain liability insurance on behalf of any such person."
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The foregoing summaries are qualified by the entire text of Registrant's
Agreement and Declaration of Trust and Bylaws. Insofar as indemnification for
liabilities arising under the Securities Act of 1933 (the "Act") may be
permitted to Trustees, Officers and controlling persons of the Trust pursuant
to the foregoing provisions, or otherwise, the Registrant has been advised that
in the opinion of the Securities and Exchange Commission, such indemnification
is against public policy as expressed in the Act, and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Trust of expenses incurred or paid
by a Trustee, Officer or controlling person of the Trust in the successful
defense of any action, suit or proceeding) is asserted by such Trustee, Officer
or controlling person in connection with the securities being registered, the
Trust will, unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
ITEM 26. Business and Other Connections of Adviser.
The descriptions of Alliance Capital Management L.P. under the captions
"Management of the Fund" in the Prospectus and in the Statement of Additional
Information constituting Parts A and B, respectively, of this Registration
Statement are incorporated by reference herein. The information as to the
directors and executive officers of Alliance Capital Management Corporation,
the general partner of Alliance Capital Management L.P., set forth in Alliance
Capital Management L.P.'s Form ADV filed with the Securities and Exchange
Commission on April 21, 1988 (File No. 801-32361) and amended through the date
hereof, is incorporated by reference.
ITEM 27. Principal Underwriters
(a) Alliance Fund Distributors, Inc., the Registrant's Principal Underwriter
in connection with the sale of shares of the Registrant. Alliance Fund
Distributors, Inc. also acts as Principal Underwriter or Distributor for
the following investment companies:
AFD Exchange Reserves
Alliance All-Asia Investment Fund, Inc.
Alliance Balanced Shares, Inc.
Alliance Bond Fund, Inc.
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Alliance Capital Reserves
Alliance Disciplined Value Fund, Inc.
Alliance Global Dollar Government Fund, Inc.
Alliance Global Small Cap Fund, Inc.
Alliance Global Strategic Income Trust, Inc.
Alliance Institutional Funds, Inc.
Alliance Institutional Reserves, Inc.
Alliance International Fund
Alliance International Premier Growth Fund, Inc.
Alliance Limited Maturity Government Fund, Inc.
Alliance Money Market Fund
Alliance Mortgage Securities Income Fund, Inc.
Alliance Multi-Market Strategy Trust, Inc.
Alliance Municipal Income Fund, Inc.
Alliance Municipal Income Fund II
Alliance Municipal Trust
Alliance New Europe Fund, Inc.
Alliance North American Government Income Trust, Inc.
Alliance Premier Growth Fund, Inc.
Alliance Quasar Fund, Inc.
Alliance Real Estate Investment Fund, Inc.
Alliance Select Investor Series, Inc.
Alliance Technology Fund, Inc.
Alliance Utility Income Fund, Inc.
Alliance Variable Products Series Fund, Inc.
Alliance Worldwide Privatization Fund, Inc.
The Alliance Fund, Inc.
The Alliance Portfolios
Sanford C. Bernstein Fund, Inc.
(p) The following are the Directors and Officers of Alliance Fund
Distributors, Inc., the principal place of business of which is 1345 Avenue
of the Americas, New York, New York, 10105.
POSITIONS AND POSITIONS AND
OFFICES WITH OFFICES WITH
NAME UNDERWRITER REGISTRANT
Michael J. Laughlin Director and Chairman
John D. Carifa Director President
Robert L. Errico Director and President
Geoffrey L. Hyde Director and Senior Vice
President
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Dave H. Williams Director
David Conine Executive Vice President
Richard K. Saccullo Executive Vice President
Richard A. Davies Executive Senior Vice President
Managing Director
Edmund P. Bergan, Jr. Senior Vice President,
General Counsel and Secretary
Robert H. Joseph, Jr. Senior Vice President and
Chief Financial Officer
Anne S. Drennan Senior Vice President and
Treasurer
Benji A. Baer Senior Vice President
John R. Bonczek Senior Vice President
John R. Carl Senior Vice President
James S. Comforti Senior Vice President
James L. Cronin Senior Vice President
Richard W. Dabney Senior Vice President
Mark J. Dunbar Senior Vice President
Donald N. Fritts Senior Vice President
Andrew L. Gangolf Senior Vice President Assistant Secretary
and Assistant General Counsel
John Grambone Senior Vice President
William B. Hanigan Senior Vice President
Bradley F. Hanson Senior Vice President
George H. Keith Senior Vice President
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Richard D. Keppler Senior Vice President
Richard E. Khaleel Senior Vice President
Stephen R. Laut Senior Vice President
Susan L. Matteson-King Senior Vice President
Shawn P. McClain Senior Vice President
Daniel D. McGinley Senior Vice President
Joanna D. Murray Senior Vice President
Antonios G. Poleondakis Senior Vice President
Robert E. Powers Senior Vice President
Domenick Pugliese Senior Vice President
and Assistant General
Counsel
Kevin A. Rowell Senior Vice President
John P. Schmidt Senior Vice President
Kurt H. Schoknecht Senior Vice President
Henry J. Schulthesz Senior Vice President
Raymond S. Sclafani Senior Vice President
Gregory K. Shannahan Senior Vice President
Scott C. Sipple Senior Vice President
Joseph F. Sumanski Senior Vice President
Peter J. Szabo Senior Vice President
Michael J. Tobin Senior Vice President
Joseph T. Tocyloski Senior Vice President
David R. Turnbough Senior Vice President
William C. White Senior Vice President
Richard A. Winge Senior Vice President
Emilie D. Wrapp Senior Vice President and
Assistant General Counsel
Gerard J. Friscia Vice President & Controller
Michael W. Alexander Vice President
Ricardo Arreola Vice President
Peter J. Barber Vice President
Kenneth F. Barkoff Vice President
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Adam J. Barnett Vice President
Charles M. Barrett Vice President
Matthew F. Beaudry Vice President
Leo Benitez Vice President
Gregory P. Best Vice President
Dale E. Boyd Vice President
Robert F. Brendli Vice President
Christopher L. Butts Vice President
Thomas C. Callahan Vice President
Kevin T. Cannon Vice President
John M. Capeci Vice President
John P. Chase Vice President
Doris T. Ciliberti Vice President
William W. Collins, Jr. Vice President
Leo H. Cook Vice President
Russell R. Corby Vice President
Dwight P. Cornell Vice President
Michael R. Crimmins Vice President
John W. Cronin Vice President
Robert J. Cruz Vice President
Michael K. DeLuz Vice President
Richard W. Dabney Vice President
Sherry V. Delaney Vice President
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Sophia Demetriades Vice President
Richard P. Dyson Vice President
John C. Endahl Vice President
John E. English Vice President
Sohaila S. Farsheed Vice President
Daniel J. Frank Vice President
Alex G. Garcia Vice President
Michael J. Germain Vice President
Mark D. Gersten Vice President Treasurer
Hyman Glasman Vice President
Alan Halfenger Vice President
Michael S. Hart Vice President
Timothy A. Hill Vice President
George R. Hrabovsky Vice President
Michael J. Hutten Vice President
Scott Hutton Vice President
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Dana A. Ifft Vice President
Theresa Iosca Vice President
Oscar J. Isoba Vice President
Eric G. Kalendar Vice President
Victor Kopelakis Vice President
Richard D. Kozlowski Vice President
Daniel W. Krause Vice President
Donna M. Lamback Vice President
P. Dean Lampe Vice President
Joseph R. Laspina Vice President
Henry Michael Lesmeister Vice President
Eric L. Levinson Vice President
James M. Liptrot Vice President
James P. Luisi Vice President
Michael F. Mahoney Vice President
Kathryn Austin Masters Vice President
Thomas M. McConnell Vice President
David L. McGuire Vice President
Jeffrey P. Mellas Vice President
Michael V. Miller Vice President
Marcia L. Mohler Vice President
Thomas F. Monnerat Vice President
Timothy S. Mulloy Vice President
Michael F. Nash, Jr. Vice President
Timothy H. Nasworthy Vice President
Nicole Nolan-Koester Vice President
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Daniel A. Notto Vice President
Peter J. O'Brien Vice President
John C. O'Connell Vice President
John J. O'Connor Vice President
Daniel P. O'Donnell Vice President
Richard J. Olszewski Vice President
Catherine N. Peterson Vice President
Jeffrey R. Petersen Vice President
James J. Posch Vice President
Bruce W. Reitz Vice President
Karen C. Satterberg Vice President
Robert C. Schultz Vice President
Richard J. Sidell Vice President
Clara Sierra Vice President
Teris A. Sinclair Vice President
Jeffrey C. Smith Vice President
David A. Solon Vice President
Martine H. Stansbery, Jr. Vice President
Eileen Stauber Vice President
Gordon Telfer Vice President
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Benjamin H. Travers Vice President
Andrew B. Vaughey Vice President
Wayne W. Wagner Vice President
Mark E. Westmoreland Vice President
Paul C. Wharf Vice President
Matthew Witschel Vice President
Michael A. Wolfsmith Vice President
Stephen P. Wood Vice President
Keith A. Yoho Vice President
Richard J. Appaluccio Assistant Vice President
Andrew G. Berger Assistant Vice President
Paul G. Bishop Assistant Vice President
Alan T. Brum Assistant Vice President
Mark S. Burns Assistant Vice President
Maria L. Carreras Assistant Vice President
Judith A. Chin Assistant Vice President
Jorge Ciprian Assistant Vice President
Jean A. Coomber Assistant Vice President
Dorsey Davidge Assistant Vice President
Jennifer M. DeLong Assistant Vice President
Janet B. DiBrita Assistant Vice President
Ralph A. DiMeglio Assistant Vice President
Timothy J. Donegan Assistant Vice President
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Joan Eilbott Assistant Vice President
Michael J. Eustic Assistant Vice President
Michele Grossman Assistant Vice President
Arthur F. Hoyt, Jr. Assistant Vice President
David A. Hunt Assistant Vice President
Elizabeth E. Keefe Assistant Vice President
Edward W. Kelly Assistant Vice President
Jeffrey M. Kusterer Assistant Vice President
Alexandra C. Landau Assistant Vice President
Laurel E. Lindner Assistant Vice President
Evamarie C. Lombardo Assistant Vice President
Scott T. Malatesta Assistant Vice President
Amanda C. McNichol Assistant Vice President
Richard F. Meier Assistant Vice President
Charles B. Nanick Assistant Vice President
Alex E. Pady Assistant Vice President
Raymond E. Parker Assistant Vice President
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Wandra M. Perry-Hartsfield Assistant Vice President
Rizwan A. Raja Assistant Vice President
Carol H. Rappa Assistant Vice President
Brendan J. Reynolds Assistant Vice President
Patricia Ridella Assistant Vice President
James A. Rie Assistant Vice President
Lauryn A. Rivello Assistant Vice President
Jessica M. Rozman Assistant Vice President
Christina Santiago Assistant Vice President and
Counsel
Eileen B. Sebold Assistant Vice President
Orlando Soler Assistant Vice President
Nancy D. Testa Assistant Vice President
Sarah R. Tolkin Assistant Vice President
Marie R. Vogel Assistant Vice President
Eric D. Weedon Assistant Vice President
Jesse L. Weissberger Assistant Vice President
Nina C. Wilkinson Assistant Vice President
Mark R. Manley Assistant Secretary
(q) Not applicable.
ITEM 28. Location of Accounts and Records.
The majority of the accounts, books and other documents required to be
maintained by Section 31(a) of the Investment Company Act of 1940 and the rules
thereunder are maintained as follows: journals, ledgers, securities records
and other original records are maintained principally at the offices of
Alliance Fund Services, Inc., 500 Plaza Drive, Secaucus, New Jersey, 07094 and
at the offices of State Street Bank and Trust Company, the Registrant's
custodian, 225 Franklin Street, Boston, Massachusetts 02110. All other records
so required to be maintained are maintained at the offices of Alliance Capital
Management L.P., 1345 Avenue of the Americas, New York, New York, 10105.
ITEM 29. Management Services.
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Not applicable.
ITEM 30. Undertakings.
The Registrant undertakes to furnish to each person to whom a prospectus of the
Registrant is delivered a copy of the Registrant's latest annual report to
shareholders, upon request and without charge.
********************
A copy of the Agreement and Declaration of Trust of Alliance BernsteinTrust
(the "Trust") is on file with the Secretary of The Commonwealth of
Massachusetts and notice is hereby given that this Registration Statement has
been executed on behalf of the Trust by an officer of the Trust as an officer
and by its Trustees as trustees and not individually and the obligations of or
arising out of this Registration Statement are not binding upon any of the
Trustees, officers and shareholders individually but are binding only upon the
assets and property of the Trust.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, and the
Investment Company Act of 1940, as amended, the Registrant has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in The City of New York and the State of New York, on the
14th day of December, 2000.
AllianceBernstein Trust
/s/ Andrew L. Gangolf
________________________
Andrew L. Gangolf
Trustee
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement has been signed below by the following persons in the
capacities and on the date indicated.
Signature Title Date
_______________________ ___________________ ______________
(1) Principal Executive Officer:
/s/ John D. Carifa President December 14, 2000
________________________
John D. Carifa
(2) Principal Financial and
Accounting Officer:
/s/Mark D. Gersten Treasurer December 14, 2000
________________________
Mark D. Gersten
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Index To Exhibits
(a) Agreement and Declaration of Trust
(b) By-laws
