<PAGE>
As filed with the Securities and Exchange
Commission on January 30, 1998
File Nos. 2-10768
and 811-00204
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No.
Post-Effective Amendment No. 121
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 125
The Alliance Fund, Inc.
(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: (800) 221-5672
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:
Thomas G. MacDonald
Seward & Kissel
One Battery Park Plaza
New York, New York 10004
It is proposed that this filing will become effective (check
appropriate box)
__X__immediately upon filing pursuant to paragraph (b)
_____on (date) pursuant to paragraph (b)
_____60 days after filing pursuant to paragraph (a)(1)
_____on (date) pursuant to paragraph (a)(1)
<PAGE>
_____75 days after filing pursuant to paragraph (a)(2)
_____on (date) pursuant to paragraph (a)(2) of rule 485.
If appropriate, check the following box:
_____this post-effective amendment designates a new effective
date for a previously filed post-effective amendment.
<PAGE>
CROSS REFERENCE SHEET
(as required by Rule 404(c))
Form N-1A Item
PART A
(Caption) Location in Prospectus
Item 1. Cover Page.................... Cover Page
Item 2. Synopsis...................... Expense Information
Item 3. Condensed Financial
Information................... Financial Highlights
Item 4. General Description of
Registrant.................... Description of the Fund;
General Information
Item 5. Management of the Fund........ Management of the Fund;
General Information
Item 6. Capital Stock and Other
Securities.................... General Information;
Dividends, Distributions
and Taxes
Item 7. Purchase of Securities Being
Offered....................... Purchase and Sale of
Shares; Shareholder
Services; General
Information
Item 8. Redemption or Repurchase...... Purchase and Sale of
Shares; General
Information
Item 9. Pending Legal Proceedings..... Not Applicable
<PAGE>
PART B Location in Statement of
Caption Additional Information
Item 10. Cover Page.................... Cover Page
Item 11. Table of Contents............. Cover Page
Item 12. General Information and
History....................... Management of the Fund;
General Information
Item 13. Investment Objectives and
Policies...................... Investment Policies and
Restrictions
Item 14. Management of the Fund........ Management of the Fund
Item 15. Control Persons and Principal
Holders of Securities......... General Information
Item 16. Investment Advisory and Other
Services...................... Management of the Fund
Item 17. Brokerage Allocation.......... Allocation of Portfolio
Brokerage
Item 18. Capital Stock and Other
Securities.................... General Information
Item 19. Purchase, Redemption and
Pricing of Securities Being
Offered....................... Purchase and Redemption
of Shares; Net Asset
Value
Item 20. Tax........................... Taxes
Item 21. Underwriters.................. General Information
Item 22. Calculation of Performance
Data.......................... General Information
Item 23. Financial Statements.......... Financial Statements;
Report of Independent
Accountants
<PAGE>
<PAGE>
THE ALLIANCE
- --------------------------------------------------------------------------------
STOCK FUNDS
- --------------------------------------------------------------------------------
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
Prospectus and Application
February 2, 1998
Domestic Stock Funds Global Stock Funds
- -The Alliance Fund -Alliance International Fund
- -Alliance Growth Fund -Alliance Worldwide Privatization Fund
- -Alliance Premier Growth Fund -Alliance New Europe Fund
- -Alliance Technology Fund -Alliance All-Asia Investment Fund
- -Alliance Quasar Fund -Alliance Global Small Cap Fund
-Alliance Global Environment Fund
Total Return Funds
-Alliance Strategic Balanced Fund
-Alliance Balanced Shares
-Alliance Income Builder Fund
-Alliance Utility Income Fund
-Alliance Growth and Income Fund
-Alliance Real Estate Investment Fund
<TABLE>
<CAPTION>
Table of Contents Page
<S> <C>
The Funds at a Glance ..................................................... 2
Expense Information ....................................................... 4
Financial Highlights ...................................................... 7
Glossary .................................................................. 19
Description of the Funds .................................................. 20
Investment Objectives and Policies ..................................... 20
Additional Investment Practices ........................................ 31
Certain Fundamental Investment Policies ................................ 38
Risk Considerations .................................................... 41
Purchase and Sale of Shares ............................................... 46
Management of the Funds ................................................... 49
Dividends, Distributions and Taxes ........................................ 53
General Information ....................................................... 55
</TABLE>
Adviser
Alliance Capital Management L.P.
1345 Avenue Of The Americas
New York, New York 10105
The Alliance Stock Funds provide a broad selection of investment alternatives to
investors seeking capital growth or high total return. The Domestic Stock Funds
invest mainly in the United States equity markets and the Global Stock Funds
diversify their investments among equity markets around the world, while the
Total Return Funds invest in both equity and fixed-income securities.
Each fund or portfolio (each a "Fund") is, or is a series of, an open-end
management investment company. This Prospectus sets forth concisely the
information which a prospective investor should know about each Fund before
investing. A "Statement of Additional Information" for each Fund which provides
further information regarding certain matters discussed in this Prospectus and
other matters which may be of interest to some investors has been filed with the
Securities and Exchange Commission and is incorporated herein by reference. For
a free copy, call or write Alliance Fund Services, Inc. at the indicated address
or call the "For Literature" telephone number shown above.
Each Fund offers three classes of shares through this Prospectus. These shares
may be purchased, at the investor's choice, at a price equal to their net asset
value (i) plus an initial sales charge imposed at the time of purchase (the
"Class A shares"), (ii) with a contingent deferred sales charge imposed on most
redemptions made within four years of purchase (the "Class B shares"), or (iii)
without any initial or contingent deferred sales charge, as long as the shares
are held for one year or more (the "Class C shares"). See "Purchase and Sale of
Shares."
An investment in these securities is not a deposit or obligation of, or
guaranteed or endorsed by, any bank and is not federally insured by the Federal
Deposit Insurance Corporation, the Federal Reserve Board or any other agency.
Investors are advised to read this Prospectus carefully and to retain it for
future reference.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
[LOGO]Alliance(R)
Investing without the Mystery.(SM)
(R)/SM These are registered marks used under licenses from the owner, Alliance
Capital Management L.P.
<PAGE>
The Funds At A Glance
The following summary is qualified in its entirety by the more detailed
information contained in this Prospectus.
The Funds' Investment Adviser Is . . .
Alliance Capital Management L.P. ("Alliance"), a global investment manager
providing diversified services to institutions and individuals through a broad
line of investments including more than 100 mutual funds. Since 1971, Alliance
has earned a reputation as a leader in the investment world with over $217
billion in assets under management as of September 30, 1997. Alliance provides
investment management services to employee benefit plans for 28 of the FORTUNE
100 companies.
Domestic Stock Funds
Alliance Fund
Seeks . . . Long-term growth of capital and income primarily through investment
in common stocks.
Invests Principally in . . . A diversified portfolio of equity securities that,
in the judgment of Alliance, have the potential to achieve capital appreciation.
Growth Fund
Seeks . . . Long-term growth of capital by investing primarily in common stocks
and other equity securities.
Invests Principally in . . . A diversified portfolio of equity securities of
companies with a favorable outlook for earnings and whose rate of growth is
expected to exceed that of the United States economy over time.
Premier Growth Fund
Seeks . . . Long-term growth of capital by investing in the equity securities of
a limited number of large, carefully selected, high-quality American companies
from a relatively small universe of intensively researched companies.
Invests Principally in . . . A diversified portfolio of equity securities that,
in the judgment of Alliance, are likely to achieve superior earnings growth.
Normally, approximately 40 companies will be represented in the Fund's
investment portfolio. The Fund's investments in 25 of these companies most
highly regarded at any point in time by Alliance will usually constitute
approximately 70% of the Fund's net assets.
Technology Fund
Seeks . . . Growth of capital through investment in companies expected to
benefit from advances in technology.
Invests Principally in . . . A diversified portfolio of securities of companies
which use technology extensively in the development of new or improved products
or processes.
Quasar Fund
Seeks . . . Growth of capital by pursuing aggressive investment policies.
Invests Principally in . . . A diversified portfolio of equity securities of any
company and industry and in any type of security which is believed to offer
possibilities for capital appreciation.
Global Stock Funds
International Fund
Seeks . . . A total return on its assets from long-term growth of capital and
from income.
Invests Principally in . . . A diversified portfolio of marketable securities of
established non-United States companies, companies participating in foreign
economies with prospects for growth, and foreign government securities.
Worldwide Privatization Fund
Seeks . . . Long-term capital appreciation.
Invests Principally in . . . A non-diversified portfolio of equity securities
issued by enterprises that are undergoing, or have undergone, privatization. The
balance of the Fund's investment portfolio will include securities of companies
that are believed by Alliance to be beneficiaries of the privatization process.
New Europe Fund
Seeks . . . Long-term capital appreciation through investment primarily in the
equity securities of companies based in Europe.
Invests Principally in . . . A non-diversified portfolio of equity securities of
European companies.
All-Asia Investment Fund
Seeks . . . Long-term capital appreciation.
Invests Principally in . . . A non-diversified portfolio of equity securities of
Asian/Pacific companies.
Global Small Cap Fund
Seeks . . . Long-term growth of capital.
Invests Principally in . . . A diversified global portfolio of the equity
securities of small capitalization companies.
Global Environment Fund
Seeks . . . Long-term capital appreciation.
Invests Principally in . . . A non-diversified portfolio of equity securities of
companies expected to benefit from advances or improvements in products,
processes or services intended to foster the protection of the environment.
Total Return Funds
Strategic Balanced Fund
Seeks . . . A high long-term total return by investing in a combination of
equity and debt securities.
2
<PAGE>
Invests Principally in . . . A diversified portfolio of dividend-paying common
stocks and fixed-income securities, and also in equity-type securities such as
warrants, preferred stocks and convertible debt instruments.
Balanced Shares
Seeks . . . A high return through a combination of current income and capital
appreciation.
Invests Principally in . . . A diversified portfolio of equity and fixed-income
securities such as common and preferred stocks, U.S. Government and agency
obligations, bonds and senior debt securities.
Income Builder Fund
Seeks . . . Both an attractive level of current income and long-term growth of
income and capital.
Invests Principally in . . . A non-diversified portfolio of fixed-income
securities and dividend-paying common stocks. Alliance currently expects to
continue to maintain approximately 60% of the Fund's net assets in fixed-income
securities and 40% in equity securities.
Utility Income Fund
Seeks . . . Current income and capital appreciation through investment in the
utilities industry.
Invests Principally in . . . A diversified portfolio of equity securities, such
as common stocks, securities convertible into common stocks and rights and
warrants to subscribe for purchase of common stocks, and in fixed-income
securities such as bonds and preferred stocks.
Growth and Income Fund
Seeks . . . Income and appreciation through investment in dividend-paying common
stocks of quality companies.
Invests Principally in . . . A diversified portfolio of dividend-paying common
stocks of good quality, and, under certain market conditions, other types of
securities, including bonds, convertible bonds and preferred stocks.
Real Estate Investment Fund
Seeks . . . Total return on its assets from long-term growth of capital and from
income.
Invests Principally in . . . A diversified portfolio of equity securities of
issuers that are primarily engaged in or related to the real estate industry.
Distributions . . .
Balanced Shares, Income Builder Fund, Utility Income Fund, Growth and Income
Fund and Real Estate Investment Fund intend to make distributions quarterly to
shareholders. These distributions may include ordinary income and capital gain
(each of which is taxable) and a return of capital (which is generally
non-taxable). See "Dividends, Distributions and Taxes."
A Word About Risk . . .
The price of the shares of the Alliance Stock Funds will fluctuate as the daily
prices of the individual securities in which they invest fluctuate, so that your
shares, when redeemed, may be worth more or less than their original cost. With
respect to those Funds permitted to invest in foreign currency denominated
securities, these fluctuations may be magnified by changes in foreign exchange
rates. Investment in the Global Stock Funds involves risks not associated with
funds that invest primarily in securities of U.S. issuers. While the Funds
invest principally in common stocks and other equity securities, in order to
achieve their investment objectives the Funds may at times use certain types of
investment derivatives such as options, futures, forwards and swaps. These
involve risks different from, and, in certain cases, greater than, the risks
presented by more traditional investments. An investment in the Real Estate
Investment Fund is subject to certain risks associated with the direct ownership
of real estate in general, including possible declines in the value of real
estate, general and local economic conditions, environmental problems and
changes in interest rates. These risks are fully discussed in this Prospectus.
Getting Started . . .
Shares of the Funds are available through your financial representative and most
banks, insurance companies and brokerage firms nationwide. Shares can be
purchased for a minimum initial investment of $250, and subsequent investments
can be made for as little as $50. For detailed information about purchasing and
selling shares, see "Purchase and Sale of Shares." In addition, the Funds offer
several time and money saving services to investors. Be sure to ask your
financial representative about:
- --------------------------------------------------------------------------------
AUTOMATIC REINVESTMENT
- --------------------------------------------------------------------------------
AUTOMATIC INVESTMENT PROGRAM
- --------------------------------------------------------------------------------
RETIREMENT PLANS
- --------------------------------------------------------------------------------
SHAREHOLDER COMMUNICATIONS
- --------------------------------------------------------------------------------
DIVIDEND DIRECTION PLANS
- --------------------------------------------------------------------------------
AUTO EXCHANGE
- --------------------------------------------------------------------------------
SYSTEMATIC WITHDRAWALS
- --------------------------------------------------------------------------------
A CHOICE OF PURCHASE PLANS
- --------------------------------------------------------------------------------
TELEPHONE TRANSACTIONS
- --------------------------------------------------------------------------------
24-HOUR INFORMATION
- --------------------------------------------------------------------------------
[LOGO]Alliance(R)
Investing without the Mystery.(SM)
(R)/SM These are registered marks used under licenses from the owner, Alliance
Capital Management L.P.
3
<PAGE>
- --------------------------------------------------------------------------------
EXPENSE INFORMATION
- --------------------------------------------------------------------------------
Shareholder Transaction Expenses are one of several factors to consider when you
invest in a Fund. The following table summarizes your maximum transaction costs
from investing in a Fund and annual expenses for each class of shares of each
Fund. For each Fund, the "Examples" to the right of the table below show the
cumulative expenses attributable to a hypothetical $1,000 investment in each
class for the periods specified.
<TABLE>
<CAPTION>
Class A Shares Class B Shares Class C Shares
-------------- -------------- --------------
<S> <C> <C> <C>
Maximum sales charge imposed on purchases (as a percentage of
offering price) ................................................. 4.25%(a) None None
Sales charge imposed on dividend reinvestments .................. None None None
Deferred sales charge (as a
percentage of original purchase
price or redemption proceeds,
whichever is lower) ............................................. None(a) 4.0% 1.0%
during the during the
first year, first year,
decreasing 1.0% 0% thereafter
annually to 0%
after the
fourth year (b)
Exchange fee .................................................... None None None
</TABLE>
- --------------------------------------------------------------------------------
(a) Reduced for larger purchases. Purchases of $1,000,000 or more are not
subject to an initial sales charge but may be subject to a 1% deferred
sales charge on redemptions within one year of purchase. See "Purchase and
Sale of Shares--How to Buy Shares" -page 46.
(b) Class B shares of each Fund other than Premier Growth Fund automatically
convert to Class A shares after eight years and the Class B shares of
Premier Growth Fund convert to Class A shares after six years. See
"Purchase and Sale of Shares--How to Buy Shares" -page 46.
<TABLE>
<CAPTION>
Operating Expenses Examples
- --------------------------------------------------------- -------------------------------------------------------------
Alliance Fund Class A Class B Class C Class A Class B+ Class B++ Class C+ Class C++
------- ------- ------- ---------------- ------------------ ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Management fees .68% .68% .68% After 1 year $ 53 $ 59 $ 19 $ 29 $ 19
12b-1 fees .20% 1.00% 1.00% After 3 years $ 74 $ 78 $ 58 $ 58 $ 58
Other expenses (a) .15% .17% .15% After 5 years $ 97 $100 $100 $ 99 $ 99
---- ---- ---- After 10 years $163 $195(b) $195(b) $215 $215
Total fund
operating expenses 1.03% 1.85% 1.83%
==== ==== ====
<CAPTION>
Growth Fund Class A Class B Class C Class A Class B+ Class B++ Class C+ Class C++
------- ------- ------- ---------------- ------------------ ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Management fees .74% .74% .74% After 1 year $ 55 $ 60 $ 20 $ 30 $ 20
12b-1 fees .30% 1.00% 1.00% After 3 years $ 81 $ 82 $ 62 $ 62 $ 62
Other expenses (a) .22% .22% .23% After 5 years $109 $106 $106 $106 $106
---- ---- ---- After 10 years $188 $210(b) $210(b) $230 $230
Total fund
operating expenses 1.26% 1.96% 1.97%
==== ==== ====
<CAPTION>
Premier Growth Fund Class A Class B Class C Class A Class B+ Class B++ Class C+ Class C++
------- ------- ------- ---------------- ------------------ ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Management fees 1.00% 1.00% 1.00% After 1 year $ 58 $ 63 $ 23 $ 33 $ 23
12b-1 fees .33% 1.00% 1.00% After 3 years $ 90 $ 90 $ 70 $ 70 $ 70
Other expenses (a) .24% .25% .24% After 5 years $124 $120 $120 $120 $120
---- ---- ---- After 10 years $221 $241(b) $241(b) $257 $257
Total fund
operating expenses 1.57% 2.25% 2.24%
==== ==== ====
<CAPTION>
Technology Fund Class A Class B Class C Class A Class B+ Class B++ Class C+ Class C++
------- ------- ------- ---------------- ------------------ ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Management fees (g) 1.04% 1.04% 1.04% After 1 year $ 59 $ 64 $ 24 $ 34 $ 24
12b-1 fees .30% 1.00% 1.00% After 3 years $ 93 $ 94 $ 74 $ 74 $ 74
Other expenses (a) .33% .34% .34% After 5 years $129 $127 $127 $127 $127
---- ---- ---- After 10 years $232 $254(b) $254(b) $272 $272
Total fund
operating expenses 1.67% 2.38% 2.38%
==== ==== ====
</TABLE>
- --------------------------------------------------------------------------------
Please refer to the footnotes on page 6.
4
<PAGE>
<TABLE>
<CAPTION>
Operating Expenses Examples
- --------------------------------------------------------- -------------------------------------------------------------
Quasar Fund Class A Class B Class C Class A Class B+ Class B++ Class C+ Class C++
------- ------- ------- ---------------- ------------------ ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Management fees (g) 1.16% 1.16% 1.16% After 1 year $ 59 $ 65 $ 25 $ 35 $ 25
12b-1 fees .22% 1.00% 1.00% After 3 years $ 93 $ 98 $ 78 $ 78 $ 78
Other expenses (a) .29% .35% .34% After 5 years $129 $134 $134 $133 $133
---- ---- ---- After 10 years $232 $264(b) $264(b) $284 $284
Total fund
operating expenses 1.67% 2.51% 2.50%
==== ==== ====
<CAPTION>
International Fund Class A Class B Class C Class A Class B+ Class B++ Class C+ Class C++
------- ------- ------- ---------------- ------------------ ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Management fees
(after waiver) (c) .85% .85% .85% After 1 year $ 58 $ 65 $ 25 $ 35 $ 25
12b-1 fees .17% 1.00% 1.00% After 3 years $ 90 $ 96 $ 76 $ 75 $ 75
Other expenses (a) .56% .58% .57% After 5 years $125 $130 $130 $129 $129
---- ---- ---- After 10 years $222 $256(b) $256(b) $276 $276
Total fund
operating expenses (d) 1.58% 2.43% 2.42%
==== ==== ====
<CAPTION>
Worldwide Privatization Fund Class A Class B Class C Class A Class B+ Class B++ Class C+ Class C++
------- ------- ------- ---------------- ------------------ ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Management fees 1.00% 1.00% 1.00% After 1 year $ 59 $ 65 $ 25 $ 35 $ 25
12b-1 fees .30% 1.00% 1.00% After 3 years $ 94 $ 96 $ 76 $ 75 $ 75
Other expenses (a) .42% .43% .42% After 5 years $132 $130 $130 $129 $129
---- ---- ---- After 10 years $237 $259(b) $259(b) $276 $276
Total fund
operating expenses 1.72% 2.43% 2.42%
==== ==== ====
<CAPTION>
New Europe Fund Class A Class B Class C Class A Class B+ Class B++ Class C+ Class C++
------- ------- ------- ---------------- ------------------ ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Management fees 1.06% 1.06% 1.06% After 1 year $ 62 $ 68 $ 28 $ 38 $ 28
12b-1 fees .30% 1.00% 1.00% After 3 years $104 $105 $ 85 $ 85 $ 85
Other expenses (a) .69% .69% .68% After 5 years $148 $145 $145 $145 $145
---- ---- ---- After 10 years $270 $291(b) $291(b) $307 $307
Total fund
operating expenses 2.05% 2.75% 2.74%
==== ==== ====
<CAPTION>
All-Asia Investment Fund Class A Class B Class C Class A Class B+ Class B++ Class C+ Class C++
------- ------- ------- ---------------- ------------------ ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Management fees After 1 year $ 63 $ 68 $ 28 $ 38 $ 28
(after waiver) (c) .65% .65% .65% After 3 years $104 $106 $ 86 $ 86 $ 86
12b-1 fees .30% 1.00% 1.00% After 5 years $149 $146 $146 $146 $146
Other expenses After 10 years $271 $293(b) $293(b) $310 $310
Administration fees
(after waiver) (f) .00% .00% .00%
Other operating
expenses (a) 1.11% 1.12% 1.12%
---- ---- ----
Total fund
operating expenses (d) 2.06% 2.77% 2.77%
==== ==== ====
<CAPTION>
Global Small Cap Fund Class A Class B Class C Class A Class B+ Class B++ Class C+ Class C++
------- ------- ------- ---------------- ------------------ ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Management fees 1.00% 1.00% 1.00% After 1 year $ 66 $ 71 $ 31 $ 41 $ 31
12b-1 fees .30% 1.00% 1.00% After 3 years $114 $116 $ 96 $ 96 $ 96
Other expenses (a) 1.11% 1.11% 1.10% After 5 years $166 $163 $163 $163 $163
---- ---- ---- After 10 years $305 $326(b) $326(b) $341 $341
Total fund
operating expenses 2.41% 3.11% 3.10%
==== ==== ====
<CAPTION>
Global Environment Fund Class A Class B Class C Class A Class B+ Class B++ Class C+ Class C++
------- ------- ------- ---------------- ------------------ ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Management fees 1.10% 1.10% 1.10% After 1 year $ 69 $ 74 $ 34 $ 44 $ 34
12b-1 fees .30% 1.00% 1.00% After 3 years $122 $123 $103 $104 $104
Other expenses (a) 1.29% 1.26% 1.29% After 5 years $179 $175 $175 $176 $176
---- ---- ---- After 10 years $332 $350(b) $350(b) $368 $368
Total fund
operating expenses 2.69% 3.36% 3.39%
==== ==== ====
</TABLE>
- --------------------------------------------------------------------------------
Please refer to the footnotes on page 6.
5
<PAGE>
<TABLE>
<CAPTION>
Operating Expenses Examples
- --------------------------------------------------------- -------------------------------------------------------------
Strategic Balanced Fund Class A Class B Class C Class A Class B+ Class B++ Class C+ Class C++
------- ------- ------- ---------------- ------------------ ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Management fees
(after waiver) (c) .09% .09% .09% After 1 year $ 56 $ 62 $ 22 $ 32 $ 22
12b-1 fees .30% 1.00% 1.00% After 3 years $ 85 $ 86 $ 66 $ 66 $ 66
Other expenses (a) 1.02% 1.03% 1.03% After 5 years $116 $114 $114 $114 $114
---- ---- ---- After 10 years $204 $227(b) $227(b) $245 $245
Total fund
operating expenses (d) 1.41% 2.12% 2.12%
==== ==== ====
<CAPTION>
Balanced Shares Class A Class B Class C Class A Class B+ Class B++ Class C+ Class C++
------- ------- ------- ---------------- ------------------ ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Management fees .63% .63% .63% After 1 year $ 57 $ 63 $ 23 $ 33 $ 23
12b-1 fees .24% 1.00% 1.00% After 3 years $ 87 $ 90 $ 70 $ 70 $ 70
Other expenses (a) .60% .62% .60% After 5 years $119 $120 $120 $119 $119
---- ---- ---- After 10 years $211 $239(b) $239(b) $256 $256
Total fund
operating expenses 1.47% 2.25% 2.23%
==== ==== ====
<CAPTION>
Income Builder Fund Class A Class B Class C Class A Class B+ Class B++ Class C+ Class C++
------- ------- ------- ---------------- ------------------ ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Management fees .75% .75% .75% After 1 year $ 63 $ 68 $ 28 $ 38 $ 28
12b-1 fees .30% 1.00% 1.00% After 3 years $105 $107 $ 87 $ 87 $ 87
Other expenses (a) 1.04% 1.05% 1.05% After 5 years $150 $148 $148 $148 $148
---- ---- ---- After 10 years $274 $296(b) $296(b) $313 $313
Total fund
operating expenses 2.09% 2.80% 2.80%
==== ==== ====
<CAPTION>
Utility Income Fund Class A Class B Class C Class A Class B+ Class B++ Class C+ Class C++
------- ------- ------- ---------------- ------------------ ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Management fees 0.00% 0.00% 0.00% After 1 year $ 57 $ 62 $ 22 $ 32 $ 22
(after waiver) (c) After 3 years $ 88 $ 89 $ 69 $ 69 $ 69
12b-1 fees .30% 1.00% 1.00% After 5 years $121 $118 $118 $118 $118
Other expenses (a) 1.20% 1.20% 1.20% After 10 years $214 $236(b) $236(b) $253 $253
---- ---- ----
Total fund
operating expenses (e) 1.50% 2.20% 2.20%
==== ==== ====
<CAPTION>
Growth and Income Fund Class A Class B Class C Class A Class B+ Class B++ Class C+ Class C++
------- ------- ------- ---------------- ------------------ ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Management fees .49% .49% .49% After 1 year $ 51 $ 57 $ 17 $ 27 $ 17
12b-1 fees .22% 1.00% 1.00% After 3 years $ 71 $ 74 $ 54 $ 54 $ 54
Other expenses (a) .21% .23% .22% After 5 years $ 91 $ 93 $ 93 $ 93 $ 93
---- ---- ---- After 10 years $151 $182(b) $182(b) $202 $202
Total fund
operating expenses .92% 1.72% 1.71%
==== ==== ====
<CAPTION>
Real Estate Investment Fund Class A Class B Class C Class A Class B+ Class B++ Class C+ Class C++
------- ------- ------- ---------------- ------------------ ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Management fees .90% .90% .90% After 1 year $ 60 $ 65 $ 25 $ 35 $ 25
12b-1 fees .30% 1.00% 1.00% After 3 years $ 96 $ 96 $ 76 $ 76 $ 76
Other expenses (a) .57% .54% .53% After 5 years $134 $130 $130 $130 $130
---- ---- ---- After 10 years $242 $261(b) $261(b) $277 $277
Total fund
operating expenses 1.77% 2.44% 2.43%
==== ==== ====
</TABLE>
- --------------------------------------------------------------------------------
+ Assumes redemption at end of period.
++ Assumes no redemption at end of period.
(a) These expenses include a transfer agency fee payable to Alliance Fund
Services, Inc., an affiliate of Alliance. The expenses shown do not reflect
the application of credits that reduce Fund expenses.
(b) Assumes Class B shares converted to Class A shares after eight years, or
six years with respect to Premier Growth Fund.
(c) Net of voluntary fee waiver. In the absence of such waiver, management fees
would be .75% for Strategic Balanced Fund and Utility Income Fund, 1.00%
for All-Asia Investment Fund and 1.01% for International Fund.
International Fund's fee, absent the voluntary fee waiver, is calculated
based on average daily net assets. Maximum contractual rate, based on
quarter-end net assets, is 1.00%.
(d) Net of voluntary fee waivers and expense reimbursements. Absent such
waivers and reimbursements, total fund operating expenses for Strategic
Balanced Fund would have been 2.06%, 2.76% and 2.76%, respectively, for
Class A, Class B and Class C shares, total fund operating expenses for
All-Asia Investment Fund would have been 2.56%, 3.27% and 3.27%,
respectively, for Class A, Class B and Class C shares annualized and total
fund operating expenses for International Fund would have been 1.74%, 2.59%
and 2.58%, respectively, for Class A, Class B and Class C annualized.
(e) Net of expense reimbursements. Absent expense reimbursements, total fund
operating expenses for Utility Income Fund would be 3.55%, 4.28%, 4.28%,
respectively, for Class A, Class B and Class C shares.
(f) Net of voluntary fee waiver. Absent such fee waiver, administration fees
would have been .15% for the Fund's Class A, Class B and Class C shares.
Reflects the fees payable by All-Asia Investment Fund to Alliance pursuant
to an adminstration agreement.
(g) Calculated based on average daily net assets. Maximum contractual rate,
based on quarter-end net assets, is 1.00% for Quasar Fund and Technology
Fund.
The purpose of the foregoing table is to assist the investor in understanding
the various costs and expenses that an investor in a Fund will bear directly or
indirectly. Long-term shareholders of a Fund may pay aggregate sales charges
totaling more than the economic equivalent of the maximum initial sales charges
permitted by the Conduct Rules of the National Association of Securities
Dealers, Inc. See "Management of the Funds--Distribution Services Agreements."
The Rule 12b-1 fee for each class comprises a
6
<PAGE>
service fee not exceeding .25% of the aggregate average daily net assets of the
Fund attributable to the class and an asset-based sales charge equal to the
remaining portion of the Rule 12b-1 fee. "Management fees" for International
Fund and All-Asia Investment Fund and "Administration fees" for All-Asia
Investment Fund have been restated to reflect current voluntary fee waivers.
"Other Expenses" for Global Environment Fund are based on estimated amounts for
its current fiscal year. The Examples set forth above assume reinvestment of all
dividends and distributions and utilize a 5% annual rate of return as mandated
by Commission regulations. The Examples should not be considered representative
of past or future expenses; actual expenses may be greater or less than those
shown.
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The tables on the following pages present, for each Fund, per share income and
capital changes for a share outstanding throughout each period indicated. Except
as otherwise indicated, the information in the tables for Alliance Fund, Growth
Fund, Premier Growth Fund, Strategic Balanced Fund, Balanced Shares, Utility
Income Fund, Worldwide Privatization Fund and Growth and Income Fund has been
audited by Price Waterhouse LLP, the independent accountants for each Fund, and
for All-Asia Investment Fund, Technology Fund, Quasar Fund, International Fund,
New Europe Fund, Global Small Cap Fund, Global Environment Fund, Real Estate
Investment Fund and Income Builder Fund by Ernst & Young LLP, the independent
auditors for each Fund. A report of Price Waterhouse LLP or Ernst & Young LLP,
as the case may be, on the information with respect to each Fund, appears in the
Fund's Statement of Additional Information. The following information for each
Fund should be read in conjunction with the financial statements and related
notes which are included in the Fund's Statement of Additional Information.
Further information about a Fund's performance is contained in the Fund's annual
report to shareholders, which may be obtained without charge by contacting
Alliance Fund Services, Inc. at the address or the "For Literature" telephone
number shown on the cover of this Prospectus.
7
<PAGE>
<TABLE>
<CAPTION>
Net Net Net
Asset Realized and Increase
Value Unrealized (Decrease) In Dividends From Distributions
Beginning Of Net Investment Gain (Loss) On Net Asset Value Net Investment From Net
Fiscal Year or Period Period Income (Loss) Investments From Operations Income Realized Gains
------------------- ------------ -------------- -------------- --------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Alliance Fund
Class A
Year ended 11/30/97 ............ $7.71 $(.02)(b) $2.09 $2.07 $(.02) $(1.06)
Year ended 11/30/96 ............ 7.72 .02 1.06 1.08 (.02) (1.07)
Year ended 11/30/95 ............ 6.63 .02 2.08 2.10 (.01) (1.00)
1/1/94 to 11/30/94** ........... 6.85 .01 (.23) (.22) 0.00 0.00
Year ended 12/31/93 ............ 6.68 .02 .93 .95 (.02) (.76)
Year ended 12/31/92 ............ 6.29 .05 .87 .92 (.05) (.48)
Year ended 12/31/91 ............ 5.22 .07 1.70 1.77 (.07) (.63)
Year ended 12/31/90 ............ 6.87 .09 (.32) (.23) (.18) (1.24)
Year ended 12/31/89 ............ 5.60 .12 1.19 1.31 (.04) 0.00
Year ended 12/31/88 ............ 5.15 .08 .80 .88 (.08) (.35)
Class B
Year ended 11/30/97 ............ $7.40 $(.08)(b) $1.99 $1.91 $0.00 $(1.06)
Year ended 11/30/96 ............ 7.49 (.01) .99 .98 0.00 (1.07)
Year ended 11/30/95 ............ 6.50 (.03) 2.02 1.99 0.00 (1.00)
1/1/94 to 11/30/94** ........... 6.76 (.03) (.23) (.26) 0.00 0.00
Year ended 12/31/93 ............ 6.64 (.03) .91 .88 0.00 (.76)
Year ended 12/31/92 ............ 6.27 (.01)(b) .87 .86 (.01) (.48)
3/4/91++ to 12/31/91 ........... 6.14 .01(b) .79 .80 (.04) (.63)
Class C
Year ended 11/30/97 ............ $7.41 $(.08)(b) $1.99 $1.91 $0.00 $(1.06)
Year ended 11/30/96 ............ 7.50 (.02) 1.00 .98 0.00 (1.07)
Year ended 11/30/95 ............ 6.50 (.03) 2.03 2.00 0.00 (1.00)
1/1/94 to 11/30/94** ........... 6.77 (.03) (.24) (.27) 0.00 0.00
5/3/93++ to 12/31/93 ........... 6.67 (.02) .88 .86 0.00 (.76)
Growth Fund (i)
Class A
Year ended 10/31/97 ............ $34.91 $(.10)(b) $10.17 $10.07 $0.00 $(1.03)
Year ended 10/31/96 ............ 29.48 .05 6.20 6.25 (.19) (.63)
Year ended 10/31/95 ............ 25.08 .12 4.80 4.92 (.11) (.41)
5/1/94 to 10/31/94** ........... 23.89 .09 1.10 1.19 0.00 0.00
Year ended 4/30/94 ............. 22.67 (.01)(c) 3.55 3.54 0.00 (2.32)
Year ended 4/30/93 ............. 20.31 .05(c) 3.68 3.73 (.14) (1.23)
Year ended 4/30/92 ............. 17.94 .29(c) 3.95 4.24 (.26) (1.61)
9/4/90++ to 4/30/91 ............ 13.61 .17(c) 4.22 4.39 (.06) 0.00
Class B
Year ended 10/31/97 ............ $29.21 $(.31)(b) $8.44 $8.13 $0.00 $(1.03)
Year ended 10/31/96 ............ 24.78 (.12) 5.18 5.06 0.00 (.63)
Year ended 10/31/95 ............ 21.21 (.02) 4.01 3.99 (.01) (.41)
5/1/94 to 10/31/94** ........... 20.27 .01 .93 .94 0.00 0.00
Year ended 4/30/94 ............. 19.68 (.07)(c) 2.98 2.91 0.00 (2.32)
Year ended 4/30/93 ............. 18.16 (.06)(c) 3.23 3.17 (.03) (1.62)
Year ended 4/30/92 ............. 16.88 .17(c) 3.67 3.84 (.21) (2.35)
Year ended 4/30/91 ............. 14.38 .08(c) 3.22 3.30 (.09) (.71)
Year ended 4/30/90 ............. 14.13 .01(b)(c) 1.26 1.27 0.00 (1.02)
Year ended 4/30/89 ............. 12.76 (.01)(c) 2.44 2.43 0.00 (1.06)
10/23/87+ to 4/30/88 ........... 10.00 (.02)(c) 2.78 2.76 0.00 0.00
Class C
Year ended 10/31/97 ............ $29.22 $(.31)(b) $8.45 $8.14 $0.00 $(1.03)
Year ended 10/31/96 ............ 24.79 (.12) 5.18 5.06 0.00 (.63)
Year ended 10/31/95 ............ 21.22 (.03) 4.02 3.99 (.01) (.41)
5/1/94 to 10/31/94** ........... 20.28 .01 .93 .94 0.00 0.00
8/2/93++ to 4/30/94 ............ 21.47 (.02)(c) 1.15 1.13 0.00 (2.32)
Premier Growth Fund
Class A
Year ended 11/30/97 ............ $17.98 $(.10)(b) $5.20 $5.10 $0.00 $(1.08)
Year ended 11/30/96 ............ 16.09 (.04)(b) 3.20 3.16 0.00 (1.27)
Year ended 11/30/95 ............ 11.41 (.03) 5.38 5.35 0.00 (.67)
Year ended 11/30/94 ............ 11.78 (.09) (.28) (.37) 0.00 0.00
Year ended 11/30/93 ............ 10.79 (.05) 1.05 1.00 (.01) 0.00
9/28/92+ to 11/30/92 ........... 10.00 .01 .78 .79 0.00 0.00
Class B
Year ended 11/30/97 ............ $17.52 $(.23)(b) $5.05 $4.82 $0.00 $(1.08)
Year ended 11/30/96 ............ 15.81 (.14)(b) 3.12 2.98 0.00 (1.27)
Year ended 11/30/95 ............ 11.29 (.11) 5.30 5.19 0.00 (.67)
Year ended 11/30/94 ............ 11.72 (.15) (.28) (.43) 0.00 0.00
Year ended 11/30/93 ............ 10.79 (.10) 1.03 .93 0.00 0.00
9/28/92+ to 11/30/92 ........... 10.00 0.00 .79 .79 0.00 0.00
Class C
Year ended 11/30/97 ............ $17.54 $(.24)(b) $5.07 $4.83 $0.00 $(1.08)
Year ended 11/30/96 ............ 15.82 (.14)(b) 3.13 2.99 0.00 (1.27)
Year ended 11/30/95 ............ 11.30 (.08) 5.27 5.19 0.00 (.67)
Year ended 11/30/94 ............ 11.72 (.09) (.33) (.42) 0.00 0.00
5/3/93++ to 11/30/93 ........... 10.48 (.05) 1.29 1.24 0.00 0.00
</TABLE>
- --------------------------------------------------------------------------------
Please refer to the footnotes on page 18.
8
<PAGE>
<TABLE>
<CAPTION>
Total Net Assets
Total Net Asset Investment At End Of
Dividends Value Return Based Period
And End Of on Net Asset (000's
Fiscal Year or Period Distributions Period Value (a) omitted)
------------------- -------------- ---------- ------------ ------------
<S> <C> <C> <C> <C>
Alliance Fund
Class A
Year ended 11/30/97 ............ $(1.08) $8.70 31.82% $1,201,435
Year ended 11/30/96 ............ (1.09) 7.71 16.49 999,067
Year ended 11/30/95 ............ (1.01) 7.72 37.87 945,309
1/1/94 to 11/30/94** ........... 0.00 6.63 (3.21) 760,679
Year ended 12/31/93 ............ (.78) 6.85 14.26 831,814
Year ended 12/31/92 ............ (.53) 6.68 14.70 794,733
Year ended 12/31/91 ............ (.70) 6.29 33.91 748,226
Year ended 12/31/90 ............ (1.42) 5.22 (4.36) 620,374
Year ended 12/31/89 ............ (.04) 6.87 23.42 837,429
Year ended 12/31/88 ............ (.43) 5.60 17.10 760,619
Class B
Year ended 11/30/97 ............ $(1.06) $8.25 30.74% $ 70,461
Year ended 11/30/96 ............ (1.07) 7.40 15.47 44,450
Year ended 11/30/95 ............ (1.00) 7.49 36.61 31,738
1/1/94 to 11/30/94** ........... 0.00 6.50 (3.85) 18,138
Year ended 12/31/93 ............ (.76) 6.76 13.28 12,402
Year ended 12/31/92 ............ (.49) 6.64 13.75 3,825
3/4/91++ to 12/31/91 ........... (.67) 6.27 13.10 852
Class C
Year ended 11/30/97 ............ $(1.06) $8.26 30.72% $ 18,871
Year ended 11/30/96 ............ (1.07) 7.41 15.48 13,899
Year ended 11/30/95 ............ (1.00) 7.50 36.79 10,078
1/1/94 to 11/30/94** ........... 0.00 6.50 (3.99) 6,230
5/3/93++ to 12/31/93 ........... (.76) 6.77 13.95 4,006
Growth Fund (i)
Class A
Year ended 10/31/97 ............ $(1.03) $43.95 29.54% $ 783,110
Year ended 10/31/96 ............ (.82) 34.91 21.65 499,459
Year ended 10/31/95 ............ (.52) 29.48 20.18 285,161
5/1/94 to 10/31/94** ........... 0.00 25.08 4.98 167,800
Year ended 4/30/94 ............. (2.32) 23.89 15.66 102,406
Year ended 4/30/93 ............. (1.37) 22.67 18.89 13,889
Year ended 4/30/92 ............. (1.87) 20.31 23.61 8,228
9/4/90++ to 4/30/91 ............ (.06) 17.94 32.40 713
Class B
Year ended 10/31/97 ............ $(1.03) $36.31 28.64% $3,578,806
Year ended 10/31/96 ............ (.63) 29.21 20.82 2,498,097
Year ended 10/31/95 ............ (.42) 24.78 19.33 1,052,020
5/1/94 to 10/31/94** ........... 0.00 21.21 4.64 751,521
Year ended 4/30/94 ............. (2.32) 20.27 14.79 394,227
Year ended 4/30/93 ............. (1.65) 19.68 18.16 56,704
Year ended 4/30/92 ............. (2.56) 18.16 22.75 37,845
Year ended 4/30/91 ............. (.80) 16.88 24.72 22,710
Year ended 4/30/90 ............. (1.02) 14.38 8.81 15,800
Year ended 4/30/89 ............. (1.06) 14.13 20.31 7,672
10/23/87+ to 4/30/88 ........... 0.00 12.76 27.60 1,938
Class C
Year ended 10/31/97 ............ $(1.03) $36.33 28.66% $ 599,449
Year ended 10/31/96 ............ (.63) 29.22 20.81 403,478
Year ended 10/31/95 ............ (.42) 24.79 19.32 226,662
5/1/94 to 10/31/94** ........... 0.00 21.22 4.64 114,455
8/2/93++ to 4/30/94 ............ (2.32) 20.28 5.27 64,030
Premier Growth Fund
Class A
Year ended 11/30/97 ............ $(1.08) $22.00 30.46% $ 373,099
Year ended 11/30/96 ............ (1.27) 17.98 21.52 172,870
Year ended 11/30/95 ............ (.67) 16.09 49.95 72,366
Year ended 11/30/94 ............ 0.00 11.41 (3.14) 35,146
Year ended 11/30/93 ............ (.01) 11.78 9.26 40,415
9/28/92+ to 11/30/92 ........... 0.00 10.79 7.90 4,893
Class B
Year ended 11/30/97 ............ $(1.08) $21.26 29.62% $ 858,449
Year ended 11/30/96 ............ (1.27) 17.52 20.70 404,137
Year ended 11/30/95 ............ (.67) 15.81 49.01 238,088
Year ended 11/30/94 ............ 0.00 11.29 (3.67) 139,988
Year ended 11/30/93 ............ 0.00 11.72 8.64 151,600
9/28/92+ to 11/30/92 ........... 0.00 10.79 7.90 19,941
Class C
Year ended 11/30/97 ............ $(1.08) $21.29 29.64% $ 177,923
Year ended 11/30/96 ............ (1.27) 17.54 20.76 60,194
Year ended 11/30/95 ............ (.67) 15.82 48.96 20,679
Year ended 11/30/94 ............ 0.00 11.30 (3.58) 7,332
5/3/93++ to 11/30/93 ........... 0.00 11.72 11.83 3,899
<CAPTION>
Ratio Of Net
Ratio Of Investment
Expenses Income (Loss) Average
To Average To Average Portfolio Commission
Fiscal Year or Period Net Assets Net Assets Turnover Rate Rate (k)
------------------- ----------- ------------- ------------- ----------
<S> <C> <C> <C> <C>
Alliance Fund
Class A
Year ended 11/30/97 ........... 1.03% (.29)% 158% $0.0571
Year ended 11/30/96 ........... 1.04 .30 80 0.0646
Year ended 11/30/95 ........... 1.08 .31 81 --
1/1/94 to 11/30/94** .......... 1.05* .21* 63 --
Year ended 12/31/93 ........... 1.01 .27 66 --
Year ended 12/31/92 ........... .81 .79 58 --
Year ended 12/31/91 ........... .83 1.03 74 --
Year ended 12/31/90 ........... .81 1.56 71 --
Year ended 12/31/89 ........... .75 1.79 81 --
Year ended 12/31/88 ........... .82 1.38 65 --
Class B
Year ended 11/30/97 ........... 1.85% (1.12)% 158% $0.0571
Year ended 11/30/96 ........... 1.87 (.53) 80 0.0646
Year ended 11/30/95 ........... 1.90 (.53) 81 --
1/1/94 to 11/30/94** .......... 1.89* (.60)* 63 --
Year ended 12/31/93 ........... 1.90 (.64) 66 --
Year ended 12/31/92 ........... 1.64 (.04) 58 --
3/4/91++ to 12/31/91 .......... 1.64* .10* 74 --
Class C
Year ended 11/30/97 ........... 1.83% (1.10)% 158% $0.0571
Year ended 11/30/96 ........... 1.86 (.51) 80 0.0646
Year ended 11/30/95 ........... 1.89 (.51) 81 --
1/1/94 to 11/30/94** .......... 1.87* (.59)* 63 --
5/3/93++ to 12/31/93 .......... 1.94* (.74)* 66 --
Growth Fund (i)
Class A
Year ended 10/31/97 ........... 1.26%(l) (.25)% 48% $0.0562
Year ended 10/31/96 ........... 1.30 .15 46 0.0584
Year ended 10/31/95 ........... 1.35 .56 61 --
5/1/94 to 10/31/94** .......... 1.35* .86* 24 --
Year ended 4/30/94 ............ 1.40(f) .32 87 --
Year ended 4/30/93 ............ 1.40(f) .20 124 --
Year ended 4/30/92 ............ 1.40 1.44 137 --
9/4/90++ to 4/30/91 ........... 1.40* 1.99* 130 --
Class B
Year ended 10/31/97 ........... 1.96%(l) (.94)% 48% $0.0562
Year ended 10/31/96 ........... 1.99 (.54) 46 0.0584
Year ended 10/31/95 ........... 2.05 (.15) 61 --
5/1/94 to 10/31/94** .......... 2.05* .16* 24 --
Year ended 4/30/94 ............ 2.10(f) (.36) 87 --
Year ended 4/30/93 ............ 2.15(f) (.53) 124 --
Year ended 4/30/92 ............ 2.15 .78 137 --
Year ended 4/30/91 ............ 2.10 .56 130 --
Year ended 4/30/90 ............ 2.00 .07 165 --
Year ended 4/30/89 ............ 2.00 (.03) 139 --
10/23/87+ to 4/30/88 .......... 2.00* (.40)* 52 --
Class C
Year ended 10/31/97 ........... 1.97%(l) (.95)% 48% $0.0562
Year ended 10/31/96 ........... 2.00 (.55) 46 0.0584
Year ended 10/31/95 ........... 2.05 (.15) 61 --
5/1/94 to 10/31/94** .......... 2.05* .16* 24 --
8/2/93++ to 4/30/94 ........... 2.10*(f) (.31)* 87 --
Premier Growth Fund
Class A
Year ended 11/30/97 ........... 1.57% (.52)% 76% $0.0594
Year ended 11/30/96 ........... 1.65 (.27) 95 0.0651
Year ended 11/30/95 ........... 1.75 (.28) 114 --
Year ended 11/30/94 ........... 1.96 (.67) 98 --
Year ended 11/30/93 ........... 2.18 (.61) 68 --
9/28/92+ to 11/30/92 .......... 2.17* .91* 0 --
Class B
Year ended 11/30/97 ........... 2.25% (1.20)% 76% $0.0594
Year ended 11/30/96 ........... 2.32 (.94) 95 0.0651
Year ended 11/30/95 ........... 2.43 (.95) 114 --
Year ended 11/30/94 ........... 2.47 (1.19) 98 --
Year ended 11/30/93 ........... 2.70 (1.14) 68 --
9/28/92+ to 11/30/92 .......... 2.68* .35* 0 --
Class C
Year ended 11/30/97 ........... 2.24% (1.22)% 76% $0.0594
Year ended 11/30/96 ........... 2.32 (.94) 95 0.0651
Year ended 11/30/95 ........... 2.42 (.97) 114 --
Year ended 11/30/94 ........... 2.47 (1.16) 98 --
5/3/93++ to 11/30/93 .......... 2.79* (1.35)* 68 --
</TABLE>
- --------------------------------------------------------------------------------
9
<PAGE>
<TABLE>
<CAPTION>
Net Net Net
Asset Realized and Increase
Value Unrealized (Decrease) In Dividends From Distributions
Beginning Of Net Investment Gain (Loss) On Net Asset Value Net Investment From Net
Fiscal Year or Period Period Income (Loss) Investments From Operations Income Realized Gains
------------------- ------------ -------------- -------------- --------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Technology Fund
Class A
Year ended 11/30/97 ............ $51.15 $(.51)(b) $4.22 $3.71 $0.00 $(.42)
Year ended 11/30/96 ............ 46.64 (.39)(b) 7.28 6.89 0.00 (2.38)
Year ended 11/30/95 ............ 31.98 (.30) 18.13 17.83 0.00 (3.17)
1/1/94 to 11/30/94** ........... 26.12 (.32) 6.18 5.86 0.00 0.00
Year ended 12/31/93 ............ 28.20 (.29) 6.39 6.10 0.00 (8.18)
Year ended 12/31/92 ............ 26.38 (.22)(b) 4.31 4.09 0.00 (2.27)
Year ended 12/31/91 ............ 19.44 (.02) 10.57 10.55 0.00 (3.61)
Year ended 12/31/90 ............ 21.57 (.03) (.56) (.59) 0.00 (1.54)
Year ended 12/31/89 ............ 20.35 0.00 1.22 1.22 0.00 0.00
Year ended 12/31/88 ............ 20.22 (.03)(c) .16 .13 0.00 0.00
Class B
Year ended 11/30/97 ............ $49.76 $(.88)(b) $4.12 $3.24 $0.00 $(.42)
Year ended 11/30/96 ............ 45.76 (.70)(b) 7.08 6.38 0.00 (2.38)
Year ended 11/30/95 ............ 31.61 (.60)(b) 17.92 17.32 0.00 (3.17)
1/1/94 to 11/30/94** ........... 25.98 (.23) 5.86 5.63 0.00 0.00
5/3/93++ to 12/31/93 ........... 27.44 (.12) 6.84 6.72 0.00 (8.18)
Class C
Year ended 11/30/97 ............ $49.76 $(.88)(b) $4.11 $3.23 $0.00 $(.42)
Year ended 11/30/96 ............ 45.77 (.70)(b) 7.07 6.37 0.00 (2.38)
Year ended 11/30/95 ............ 31.61 (.58)(b) 17.91 17.33 0.00 (3.17)
1/1/94 to 11/30/94** ........... 25.98 (.24) 5.87 5.63 0.00 0.00
5/3/93++ to 12/31/93 ........... 27.44 (.13) 6.85 6.72 0.00 (8.18)
Quasar Fund
Class A
Year ended 9/30/97 ............. $27.92 $(.24)(b) $6.80 $6.56 $0.00 $(4.11)
Year ended 9/30/96 ............. 24.16 (.25) 8.82 8.57 0.00 (4.81)
Year ended 9/30/95 ............. 22.65 (.22)(b) 5.59 5.37 0.00 (3.86)
Year ended 9/30/94 ............. 24.43 (.60) (.36) (.96) 0.00 (.82)
Year ended 9/30/93 ............. 19.34 (.41) 6.38 5.97 0.00 (.88)
Year ended 9/30/92 ............. 21.27 (.24) (1.53) (1.77) 0.00 (.16)
Year ended 9/30/91 ............. 15.67 (.05) 5.71 5.66 (.06) 0.00
Year ended 9/30/90 ............. 24.84 .03(b) (7.18) (7.15) 0.00 (2.02)
Year ended 9/30/89 ............. 17.60 .02(b) 7.40 7.42 0.00 (.18)
Year ended 9/30/88 ............. 24.47 (.08)(c) (2.08) (2.16) 0.00 (4.71)
Class B
Year ended 9/30/97 ............. $26.13 $(.42)(b) $(6.23) $5.81 $0.00 $(4.11)
Year ended 9/30/96 ............. 23.03 (.20) 8.11 7.91 0.00 (4.81)
Year ended 9/30/95 ............. 21.92 (.37)(b) 5.34 4.97 0.00 (3.86)
Year ended 9/30/94 ............. 23.88 (.53) (.61) (1.14) 0.00 (.82)
Year ended 9/30/93 ............. 19.07 (.18) 5.87 5.69 0.00 (.88)
Year ended 9/30/92 ............. 21.14 (.39) (1.52) (1.91) 0.00 (.16)
Year ended 9/30/91 ............. 15.66 (.13) 5.67 5.54 (.06) 0.00
9/17/90++ to 9/30/90 ........... 17.17 (.01) (1.50) (1.51) 0.00 0.00
Class C
Year ended 9/30/97 ............. $26.14 $(.42)(b) $6.24 $5.82 $0.00 $(4.11)
Year ended 9/30/96 ............. 23.05 (.20) 8.10 7.90 0.00 (4.81)
Year ended 9/30/95 ............. 21.92 (.37)(b) 5.36 4.99 0.00 (3.86)
Year ended 9/30/94 ............. 23.88 (.36) (.78) (1.14) 0.00 (.82)
5/3/93++ to 9/30/93 ............ 20.33 (.10) 3.65 3.55 0.00 0.00
International Fund
Class A
Year ended 6/30/97 ............. $18.32 $.06(b) $1.51 $1.57 $(.12) $(1.08)
Year ended 6/30/96 ............. 16.81 .05(b) 2.51 2.56 0.00 (1.05)
Year ended 6/30/95 ............. 18.38 .04 .01 .05 0.00 (1.62)
Year ended 6/30/94 ............. 16.01 (.09) 3.02 2.93 0.00 (.56)
Year ended 6/30/93 ............. 14.98 (.01) 1.17 1.16 (.04) (.09)
Year ended 6/30/92 ............. 14.00 .01(b) 1.04 1.05 (.07) 0.00
Year ended 6/30/91 ............. 17.99 .05 (3.54) (3.49) (.03) (.47)
Year ended 6/30/90 ............. 17.24 .03 2.87 2.90 (.04) (2.11)
Year ended 6/30/89 ............. 16.09 .05 3.73 3.78 (.13) (2.50)
Year ended 6/30/88 ............. 23.70 .17 (1.22) (1.05) (.21) (6.35)
Class B
Year ended 6/30/97 ............. $17.45 $(.09)(b) $1.43 $1.34 $0.00 $(1.08)
Year ended 6/30/96 ............. 16.19 (.07)(b) 2.38 2.31 0.00 (1.05)
Year ended 6/30/95 ............. 17.90 (.01) (.08) (.09) 0.00 (1.62)
Year ended 6/30/94 ............. 15.74 (.19)(b) 2.91 2.72 0.00 (.56)
Year ended 6/30/93 ............. 14.81 (.12) 1.14 1.02 0.00 (.09)
Year ended 6/30/92 ............. 13.93 (.11)(b) 1.02 .91 (.03) 0.00
9/17/90++ to 6/30/91 ........... 15.52 .03 (1.12) (1.09) (.03) (.47)
Class C
Year ended 6/30/97 ............. $17.46 $(.09)(b) $1.44 $1.35 $0.00 $(1.08)
Year ended 6/30/96 ............. 16.20 (.07)(b) 2.38 2.31 0.00 (1.05)
Year ended 6/30/95 ............. 17.91 (.14) .05 (.09) 0.00 (1.62)
Year ended 6/30/94 ............. 15.74 (.11) 2.84 2.73 0.00 (.56)
5/3/93++ to 6/30/93 ............ 15.93 0.00 (.19) (.19) 0.00 0.00
</TABLE>
- --------------------------------------------------------------------------------
Please refer to the footnotes on page 18.
10
<PAGE>
<TABLE>
<CAPTION>
Total Net Assets
Total Net Asset Investment At End Of
Dividends Value Return Based Period
And End Of on Net Asset (000's
Fiscal Year or Period Distributions Period Value (a) omitted)
------------------- -------------- ---------- ------------ ------------
<S> <C> <C> <C> <C>
Technology Fund
Class A
Year ended 11/30/97 ............ $(.42) $54.44 7.32% $ 624,716
Year ended 11/30/96 ............ (2.38) 51.15 16.05 594,861
Year ended 11/30/95 ............ (3.17) 46.64 61.93 398,262
1/1/94 to 11/30/94** ........... 0.00 31.98 22.43 202,929
Year ended 12/31/93 ............ (8.18) 26.12 21.63 173,732
Year ended 12/31/92 ............ (2.27) 28.20 15.50 173,566
Year ended 12/31/91 ............ (3.61) 26.38 54.24 191,693
Year ended 12/31/90 ............ (1.54) 19.44 (3.08) 131,843
Year ended 12/31/89 ............ 0.00 21.57 6.00 141,730
Year ended 12/31/88 ............ 0.00 20.35 0.64 169,856
Class B
Year ended 11/30/97 ............ $(.42) $52.58 6.57% $1,053,436
Year ended 11/30/96 ............ (2.38) 49.76 15.20 660,921
Year ended 11/30/95 ............ (3.17) 45.76 60.95 277,111
1/1/94 to 11/30/94** ........... 0.00 31.61 21.67 18,397
5/3/93++ to 12/31/93 ........... (8.18) 25.98 24.49 1,645
Class C
Year ended 11/30/97 ............ $(.42) $52.57 6.55% $ 184,194
Year ended 11/30/96 ............ (2.38) 49.76 15.17 108,488
Year ended 11/30/95 ............ (3.17) 45.77 60.98 43,161
1/1/94 to 11/30/94** ........... 0.00 31.61 21.67 7,470
5/3/93++ to 12/31/93 ........... (8.18) 25.98 24.49 1,096
Quasar Fund
Class A
Year ended 9/30/97 ............. $(4.11) $30.37 27.81% $ 402,081
Year ended 9/30/96 ............. (4.81) 27.92 42.42 229,798
Year ended 9/30/95 ............. (3.86) 24.16 30.73 146,663
Year ended 9/30/94 ............. (.82) 22.65 (4.05) 155,470
Year ended 9/30/93 ............. (.88) 24.43 31.58 228,874
Year ended 9/30/92 ............. (.16) 19.34 (8.34) 252,140
Year ended 9/30/91 ............. (.06) 21.27 36.28 333,806
Year ended 9/30/90 ............. (2.02) 15.67 (30.81) 251,102
Year ended 9/30/89 ............. (.18) 24.84 42.68 263,099
Year ended 9/30/88 ............. (4.71) 17.60 (8.61) 90,713
Class B
Year ended 9/30/97 ............. $(4.11) $27.83 26.70% $ 503,037
Year ended 9/30/96 ............. (4.81) 26.13 41.48 112,490
Year ended 9/30/95 ............. (3.86) 23.03 29.78 16,604
Year ended 9/30/94 ............. (.82) 21.92 (4.92) 13,901
Year ended 9/30/93 ............. (.88) 23.88 30.53 16,779
Year ended 9/30/92 ............. (.16) 19.07 (9.05) 9,454
Year ended 9/30/91 ............. (.06) 21.14 35.54 7,346
9/17/90++ to 9/30/90 ........... 0.00 15.66 (8.79) 71
Class C
Year ended 9/30/97 ............. $(4.11) $27.85 26.74% $ 145,494
Year ended 9/30/96 ............. (4.81) 26.14 41.46 28,541
Year ended 9/30/95 ............. (3.86) 23.05 29.87 1,611
Year ended 9/30/94 ............. (.82) 21.92 (4.92) 1,220
5/3/93++ to 9/30/93 ............ 0.00 23.88 17.46 118
International Fund
Class A
Year ended 6/30/97 ............. $(1.20) $18.69 9.30% $ 190,173
Year ended 6/30/96 ............. (1.05) 18.32 15.83 196,261
Year ended 6/30/95 ............. (1.62) 16.81 .59 165,584
Year ended 6/30/94 ............. (.56) 18.38 18.68 201,916
Year ended 6/30/93 ............. (.13) 16.01 7.86 161,048
Year ended 6/30/92 ............. (.07) 14.98 7.52 179,807
Year ended 6/30/91 ............. (.50) 14.00 (19.34) 214,442
Year ended 6/30/90 ............. (2.15) 17.99 16.98 265,999
Year ended 6/30/89 ............. (2.63) 17.24 27.65 166,003
Year ended 6/30/88 ............. (6.56) 16.09 (4.20) 132,319
Class B
Year ended 6/30/97 ............. $(1.08) $17.71 8.37% $ 77,725
Year ended 6/30/96 ............. (1.05) 17.45 14.87 72,470
Year ended 6/30/95 ............. (1.62) 16.19 (.22) 48,998
Year ended 6/30/94 ............. (.56) 17.90 17.65 29,943
Year ended 6/30/93 ............. (.09) 15.74 6.98 6,363
Year ended 6/30/92 ............. (.03) 14.81 6.54 5,585
9/17/90++ to 6/30/91 ........... (.50) 13.93 (6.97) 3,515
Class C
Year ended 6/30/97 ............. $(1.08) $17.73 8.42% $ 23,268
Year ended 6/30/96 ............. (1.05) 17.46 14.85 26,965
Year ended 6/30/95 ............. (1.62) 16.20 (.22) 19,395
Year ended 6/30/94 ............. (.56) 17.91 17.72 13,503
5/3/93++ to 6/30/93 ............ 0.00 15.74 (1.19) 229
<CAPTION>
Ratio Of Net
Ratio Of Investment
Expenses Income (Loss) Average
To Average To Average Portfolio Commission
Fiscal Year or Period Net Assets Net Assets Turnover Rate Rate (k)
------------------- ----------- ------------- ------------- ----------
<S> <C> <C> <C> <C>
Technology Fund
Class A
Year ended 11/30/97 ............ 1.67%(l) (.97)% 51% $0.0564
Year ended 11/30/96 ............ 1.74 (.87) 30 0.0612
Year ended 11/30/95 ............ 1.75 (.77) 55 --
1/1/94 to 11/30/94** ........... 1.66* (1.22)* 55 --
Year ended 12/31/93 ............ 1.73 (1.32) 64 --
Year ended 12/31/92 ............ 1.61 (.90) 73 --
Year ended 12/31/91 ............ 1.71 (.20) 134 --
Year ended 12/31/90 ............ 1.77 (.18) 147 --
Year ended 12/31/89 ............ 1.66 .02 139 --
Year ended 12/31/88 ............ 1.42 (.16) 139 --
Class B
Year ended 11/30/97 ............ 2.38%(l) (1.70)% 51% $0.0564
Year ended 11/30/96 ............ 2.44 (1.61) 30 0.0612
Year ended 11/30/95 ............ 2.48 (1.47) 55 --
1/1/94 to 11/30/94** ........... 2.43* (1.95)* 55 --
5/3/93++ to 12/31/93 ........... 2.57* (2.30)* 64 --
Class C
Year ended 11/30/97 ............ 2.38%(l) (1.70)% 51% $0.0564
Year ended 11/30/96 ............ 2.44 (1.60) 30 0.0612
Year ended 11/30/95 ............ 2.48 (1.47) 55 --
1/1/94 to 11/30/94** ........... 2.41* (1.94)* 55 --
5/3/93++ to 12/31/93 ........... 2.52* (2.25)* 64 --
Quasar Fund
Class A
Year ended 9/30/97 ............. 1.67% (.91)% 135% $0.0536
Year ended 9/30/96 ............. 1.79 (1.11) 168 0.0596
Year ended 9/30/95 ............. 1.83 (1.06) 160 --
Year ended 9/30/94 ............. 1.67 (1.15) 110 --
Year ended 9/30/93 ............. 1.65 (1.00) 102 --
Year ended 9/30/92 ............. 1.62 (.89) 128 --
Year ended 9/30/91 ............. 1.64 (.22) 118 --
Year ended 9/30/90 ............. 1.66 .16 90 --
Year ended 9/30/89 ............. 1.73 .10 90 --
Year ended 9/30/88 ............. 1.28 (.40) 58 --
Class B
Year ended 9/30/97 ............. 2.51% (1.73)% 135% $0.0536
Year ended 9/30/96 ............. 2.62 (1.96) 168 0.0596
Year ended 9/30/95 ............. 2.65 (1.88) 160 --
Year ended 9/30/94 ............. 2.50 (1.98) 110 --
Year ended 9/30/93 ............. 2.46 (1.81) 102 --
Year ended 9/30/92 ............. 2.42 (1.67) 128 --
Year ended 9/30/91 ............. 2.41 (1.28) 118 --
9/17/90++ to 9/30/90 ........... 2.09* (.26)* 90 --
Class C
Year ended 9/30/97 ............. 2.50% (1.72)% 135% $0.0536
Year ended 9/30/96 ............. 2.61 (1.94) 168 0.0596
Year ended 9/30/95 ............. 2.64* (1.76)* 160 --
Year ended 9/30/94 ............. 2.48 (1.96) 110 --
5/3/93++ to 9/30/93 ............ 2.49* (1.90)* 102 --
International Fund
Class A
Year ended 6/30/97 ............. 1.74%(l) .31% 94% $0.0363
Year ended 6/30/96 ............. 1.72 .31 78 --
Year ended 6/30/95 ............. 1.73 .26 119 --
Year ended 6/30/94 ............. 1.90 (.50) 97 --
Year ended 6/30/93 ............. 1.88 (.14) 94 --
Year ended 6/30/92 ............. 1.82 .07 72 --
Year ended 6/30/91 ............. 1.73 .37 71 --
Year ended 6/30/90 ............. 1.45 .33 37 --
Year ended 6/30/89 ............. 1.41 .39 87 --
Year ended 6/30/88 ............. 1.41 .84 55 --
Class B
Year ended 6/30/97 ............. 2.59%(l) (.51)% 94% $0.0363
Year ended 6/30/96 ............. 2.55 (.46) 78 --
Year ended 6/30/95 ............. 2.57 (.62) 119 --
Year ended 6/30/94 ............. 2.78 (1.15) 97 --
Year ended 6/30/93 ............. 2.70 (.96) 94 --
Year ended 6/30/92 ............. 2.68 (.70) 72 --
9/17/90++ to 6/30/91 ........... 3.39* .84* 71 --
Class C
Year ended 6/30/97 ............. 2.58%(l) (.51)% 94% $0.0363
Year ended 6/30/96 ............. 2.53 (.47) 78 --
Year ended 6/30/95 ............. 2.54 (.88) 119 --
Year ended 6/30/94 ............. 2.78 (1.12) 97 --
5/3/93++ to 6/30/93 ............ 2.57* .08* 94 --
</TABLE>
- --------------------------------------------------------------------------------
11
<PAGE>
<TABLE>
<CAPTION>
Net Net Net
Asset Realized and Increase
Value Unrealized (Decrease) In Dividends From
Beginning Of Net Investment Gain (Loss) On Net Asset Value Net Investment
Fiscal Year or Period Period Income (Loss) Investments From Operations Income
------------------- ------------ -------------- -------------- --------------- --------------
<S> <C> <C> <C> <C> <C>
Worldwide Privatization Fund
Class A
Year ended 6/30/97........ $12.13 $ .15(b) $2.55 $2.70 $ (.15)
Year ended 6/30/96........ 10.18 .10(b) 1.85 1.95 0.00
Year ended 6/30/95........ 9.75 .06 .37 .43 0.00
6/2/94+ to 6/30/94........ 10.00 .01 (.26) (.25) 0.00
Class B
Year ended 6/30/97........ $11.96 $ .08(b) $2.50 $2.58 $ (.08)
Year ended 6/30/96........ 10.10 (.02) 1.88 1.86 0.00
Year ended 6/30/95........ 9.74 .02 .34 .36 0.00
6/2/94+ to 6/30/94........ 10.00 .00 (.26) (.26) 0.00
Class C
Year ended 6/30/97........ $11.96 $ .12(b) $2.46 $2.58 $ (.08)
Year ended 6/30/96........ 10.10 .03 1.83 1.86 0.00
2/8/95++ to 6/30/95....... 9.53 .05 .52 .57 0.00
New Europe Fund
Class A
Year ended 7/31/97........ $15.84 $ .07(b) $4.20 $4.27 $ (.15)
Year ended 7/31/96........ 15.11 .18 1.02 1.20 0.00
Year ended 7/31/95........ 12.66 .04 2.50 2.54 (.09)
Period ended 7/31/94**.... 12.53 .09 .04 .13 0.00
Year ended 2/28/94........ 9.37 .02(b) 3.14 3.16 0.00
Year ended 2/28/93........ 9.81 .04 (.33) (.29) (.15)
Year ended 2/29/92........ 9.76 .02(b) .05 .07 (.02)
4/2/90+ to 2/28/91........ 11.11(e) .26 (.91) (.65) (.26)
Class B
Year ended 7/31/97........ $15.31 $(.04)(b) $4.02 $3.98 $0.00
Year ended 7/31/96........ 14.71 .08 .99 1.07 0.00
Year ended 7/31/95........ 12.41 (.05) 2.44 2.39 (.09)
Period ended 7/31/94**.... 12.32 .07 .02 .09 0.00
Year ended 2/28/94........ 9.28 (.05)(b) 3.09 3.04 0.00
Year ended 2/28/93........ 9.74 (.02) (.33) (.35) (.11)
3/5/91++ to 2/29/92....... 9.84 (.04)(b) (.04) (.08) (.02)
Class C
Year ended 7/31/97........ $15.33 $(.04)(b) $4.02 $3.98 $0.00
Year ended 7/31/96........ 14.72 .08 1.00 1.08 0.00
Year ended 7/31/95........ 12.42 (.07) 2.46 2.39 (.09)
Period ended 7/31/94**.... 12.33 .06 .03 .09 0.00
5/3/93++ to 2/28/94....... 10.21 (.04)(b) 2.16 2.12 0.00
All-Asia Investment Fund
Class A
Year ended 10/31/97....... $11.04 $(.21)(b)(c) $(2.95) $(3.16) $0.00
Year ended 10/31/96....... 10.45 (.21)(b)(c) .88 .67 0.00
11/28/94+ to 10/31/95..... 10.00 (.19)(c) .64 .45 0.00
Class B
Year ended 10/31/97....... $10.90 $(.28)(b)(c) $(2.89) $(3.17) $0.00
Year ended 10/31/96....... 10.41 (.28)(b)(c) .85 .57 0.00
11/28/94+ to 10/31/95..... 10.00 (.25)(c) .66 .41 0.00
Class C
Year ended 10/31/97....... $10.91 $(.27)(b)(c) $(2.90) $(3.17) $0.00
Year ended 10/31/96....... 10.41 (.28)(b)(c) .86 .58 0.00
11/28/94+ to 10/31/95..... 10.00 (.35)(c) .76 .41 0.00
Global Small Cap Fund
Class A
Year ended 7/31/97........ $11.61 $(.15)(b) $2.97 $2.82 $0.00
Year ended 7/31/96........ 10.38 (.14)(b) 1.90 1.76 0.00
Year ended 7/31/95........ 11.08 (.09) 1.50 1.41 0.00
Period ended 7/31/94**.... 11.24 (.15)(b) (.01) (.16) 0.00
Year ended 9/30/93........ 9.33 (.15) 2.49 2.34 0.00
Year ended 9/30/92........ 10.55 (.16) (1.03) (1.19) 0.00
Year ended 9/30/91........ 8.26 (.06) 2.35 2.29 0.00
Year ended 9/30/90........ 15.54 (.05)(b) (4.12) (4.17) 0.00
Year ended 9/30/89........ 11.41 (.03) 4.25 4.22 0.00
Year ended 9/30/88........ 15.07 (.05) (1.83) (1.88) 0.00
Class B
Year ended 7/31/97........ $11.03 $(.21)(b) $2.77 $2.56 $0.00
Year ended 7/31/96........ 9.95 (.20)(b) 1.81 1.61 0.00
Year ended 7/31/95........ 10.78 (.12) 1.40 1.28 0.00
Period ended 7/31/94**.... 11.00 (.17)(b) (.05) (.22) 0.00
Year ended 9/30/93........ 9.20 (.15) 2.38 2.23 0.00
Year ended 9/30/92........ 10.49 (.20) (1.06) (1.26) 0.00
Year ended 9/30/91........ 8.26 (.07) 2.30 2.23 0.00
9/17/90++ to 9/30/90...... 9.12 (.01) (.85) (.86) 0.00
Class C
Year ended 7/31/97........ $11.05 $(.22)(b) $2.78 $2.56 $0.00
Year ended 7/31/96........ 9.96 (.20)(b) 1.82 1.62 0.00
Year ended 7/31/95........ 10.79 (.17) 1.45 1.28 0.00
Period ended 7/31/94**.... 11.00 (.17)(b) (.04) (.21) 0.00
5/3/93++ to 9/30/93....... 9.86 (.05) 1.19 1.14 0.00
<CAPTION>
Distributions
In Excess Of Distributions
Net Investment From Net
Fiscal Year or Period Income Realized Gains
------------------- -------------- --------------
<S> <C> <C>
Worldwide Privatization Fund
Class A
Year ended 6/30/97........ $0.00 $(1.42)
Year ended 6/30/96........ 0.00 0.00
Year ended 6/30/95........ 0.00 0.00
6/2/94+ to 6/30/94........ 0.00 0.00
Class B
Year ended 6/30/97........ $0.00 $(1.42)
Year ended 6/30/96........ 0.00 0.00
Year ended 6/30/95........ 0.00 0.00
6/2/94+ to 6/30/94........ 0.00 0.00
Class C
Year ended 6/30/97........ $0.00 $(1.42
Year ended 6/30/96........ 0.00 0.00
2/8/95++ to 6/30/95....... 0.00 0.00
New Europe Fund
Class A
Year ended 7/31/97........ $ (.03) $ (1.32)
Year ended 7/31/96........ 0.00 (.47)
Year ended 7/31/95........ 0.00 0.00
Period ended 7/31/94**.... 0.00 0.00
Year ended 2/28/94........ 0.00 0.00
Year ended 2/28/93........ 0.00 0.00
Year ended 2/29/92........ 0.00 0.00
4/2/90+ to 2/28/91........ 0.00 (.44)
Class B
Year ended 7/31/97........ $ (.10) $(1.32)
Year ended 7/31/96........ 0.00 (.47)
Year ended 7/31/95........ 0.00 0.00
Period ended 7/31/94**.... 0.00 0.00
Year ended 2/28/94........ 0.00 0.00
Year ended 2/28/93........ 0.00 0.00
3/5/91++ to 2/29/92....... 0.00 0.00
Class C
Year ended 7/31/97........ $ (.10) $(1.32)
Year ended 7/31/96........ 0.00 (.47)
Year ended 7/31/95........ 0.00 0.00
Period ended 7/31/94**.... 0.00 0.00
5/3/93++ to 2/28/94....... 0.00 0.00
All-Asia Investment Fund
Class A
Year ended 10/31/97....... $0.00 $ (.34)
Year ended 10/31/96....... 0.00 (.08)
11/28/94+ to 10/31/95..... 0.00 0.00
Class B
Year ended 10/31/97....... $0.00 $ (.34)
Year ended 10/31/96....... 0.00 (.08)
11/28/94+ to 10/31/95..... 0.00 0.00
Class C
Year ended 10/31/97....... $0.00 $ (.34)
Year ended 10/31/96....... 0.00 (.08)
11/28/94+ to 10/31/95..... 0.00 0.00
Global Small Cap Fund
Class A
Year ended 7/31/97........ $0.00 $ (1.56)
Year ended 7/31/96........ 0.00 (.53)
Year ended 7/31/95........ 0.00 (2.11)(j)
Period ended 7/31/94**.... 0.00 0.00
Year ended 9/30/93........ 0.00 (.43)
Year ended 9/30/92........ 0.00 (.03)
Year ended 9/30/91........ 0.00 0.00
Year ended 9/30/90........ 0.00 (3.11)
Year ended 9/30/89........ 0.00 (.09)
Year ended 9/30/88........ 0.00 (1.78)
Class B
Year ended 7/31/97........ $0.00 $ (1.56)
Year ended 7/31/96........ 0.00 (.53)
Year ended 7/31/95........ 0.00 (2.11)(j)
Period ended 7/31/94**.... 0.00 0.00
Year ended 9/30/93........ 0.00 (.43)
Year ended 9/30/92........ 0.00 (.03)
Year ended 9/30/91........ 0.00 0.00
9/17/90++ to 9/30/90...... 0.00 0.00
Class C
Year ended 7/31/97........ $0.00 $ (1.56)
Year ended 7/31/96........ 0.00 (.53)
Year ended 7/31/95........ 0.00 (2.11)(j)
Period ended 7/31/94**.... 0.00 0.00
5/3/93++ to 9/30/93....... 0.00 0.00
</TABLE>
- --------------------------------------------------------------------------------
Please refer to footnotes on page 18.
12
<PAGE>
<TABLE>
<CAPTION>
Total Net Assets
Total Net Asset Investment At End Of
Dividends Value Return Based Period
And End Of on Net Asset (000's
Fiscal Year or Period Distributions Period Value (a) omitted)
--------------------- ------------- --------- ------------ ----------
<S> <C> <C> <C> <C>
Worldwide Privatization Fund
Class A
Year ended 6/30/97........ $(1.57) $13.26 25.16% $561,793
Year ended 6/30/96........ 0.00 12.13 19.16 672,732
Year ended 6/30/95........ 0.00 10.18 4.41 13,535
6/2/94+ to 6/30/94........ 0.00 9.75 (2.50) 4,990
Class B
Year ended 6/30/97........ $(1.50) $13.04 24.34% $121,173
Year ended 6/30/96........ 0.00 11.96 18.42 83,050
Year ended 6/30/95........ 0.00 10.10 3.70 79,359
6/2/94+ to 6/30/94........ 0.00 9.74 (2.60) 22,859
Class C
Year ended 6/30/97........ $(1.50) $13.04 24.33% $ 12,929
Year ended 6/30/96........ 0.00 11.96 18.42 2,383
2/8/95++ to 6/30/95....... 0.00 10.10 5.98 338
New Europe Fund
Class A
Year ended 7/31/97........ $(1.50) $18.61 28.78% $ 78,578
Year ended 7/31/96........ (.47) 15.84 8.20 74,026
Year ended 7/31/95........ (.09) 15.11 20.22 86,112
Period ended 7/31/94**.... 0.00 12.66 1.04 86,739
Year ended 2/28/94........ 0.00 12.53 33.73 90,372
Year ended 2/28/93........ (.15) 9.37 (2.82) 79,285
Year ended 2/29/92........ (.02) 9.81 .74 108,510
4/2/90+ to 2/28/91........ (.70) 9.76 (5.63) 188,016
Class B
Year ended 7/31/97........ $(1.42) $17.87 27.76% $ 66,032
Year ended 7/31/96........ (.47) 15.31 7.53 42,662
Year ended 7/31/95........ (.09) 14.71 19.42 34,527
Period ended 7/31/94**.... 0.00 12.41 .73 31,404
Year ended 2/28/94........ 0.00 12.32 32.76 20,729
Year ended 2/28/93........ (.11) 9.28 (3.49) 1,732
3/5/91++ to 2/29/92....... (.02) 9.74 .03 1,423
Class C
Year ended 7/31/97........ $(1.42) $17.89 27.73% $ 16,907
Year ended 7/31/96........ (.47) 15.33 7.59 10,141
Year ended 7/31/95........ (.09) 14.72 19.40 7,802
Period ended 7/31/94**.... 0.00 12.42 .73 11,875
5/3/93++ to 2/28/94....... 0.00 12.33 20.77 10,886
All-Asia Investment Fund
Class A
Year ended 10/31/97....... $ (.34) $ 7.54 (29.61)% $ 5,916
Year ended 10/31/96....... (.08) 11.04 6.43 12,284
11/28/94+ to 10/31/95..... 0.00 10.45 4.50 2,870
Class B
Year ended 10/31/97....... $ (.34) $ 7.39 (30.09)% $ 11,439
Year ended 10/31/96....... (.08) 10.90 5.49 23,784
11/28/94+ to 10/31/95..... 0.00 10.41 4.10 5,170
Class C
Year ended 10/31/97....... $ (.34) $ 7.40 (30.06)% $ 1,859
Year ended 10/31/96....... (.08) 10.91 5.59 4,228
11/28/94+ to 10/31/95..... 0.00 10.41 4.10 597
Global Small Cap Fund
Class A
Year ended 7/31/97........ $(1.56) $12.87 26.47% $ 85,217
Year ended 7/31/96........ (.53) 11.61 17.46 68,623
Year ended 7/31/95........ (2.11) 10.38 16.62 60,057
Period ended 7/31/94**.... 0.00 11.08 (1.42) 61,372
Year ended 9/30/93........ (.43) 11.24 25.83 65,713
Year ended 9/30/92........ (.03) 9.33 (11.30) 58,491
Year ended 9/30/91........ 0.00 10.55 27.72 84,370
Year ended 9/30/90........ (3.11) 8.26 (31.90) 68,316
Year ended 9/30/89........ (.09) 15.54 37.34 113,583
Year ended 9/30/88........ (1.78) 11.41 (8.11) 90,071
Class B
Year ended 7/31/97........ $(1.56) $12.03 25.42% $ 31,946
Year ended 7/31/96........ (.53) 11.03 16.69 14,247
Year ended 7/31/95........ (2.11) 9.95 15.77 5,164
Period ended 7/31/94**.... 0.00 10.78 (2.00) 3,889
Year ended 9/30/93........ (.43) 11.00 24.97 1,150
Year ended 9/30/92........ (.03) 9.20 (12.03) 819
Year ended 9/30/91........ 0.00 10.49 27.00 121
9/17/90++ to 9/30/90...... 0.00 8.26 (9.43) 183
Class C
Year ended 7/31/97........ $(1.56) $12.05 25.37% $ 8,718
Year ended 7/31/96........ (.53) 11.05 16.77 4,119
Year ended 7/31/95........ (2.11) 9.96 15.75 1,407
Period ended 7/31/94**.... 0.00 10.79 (1.91) 1,330
5/3/93++ to 9/30/93....... 0.00 11.00 11.56 261
<CAPTION>
Ratio Of Net
Ratio Of Investment
Expenses Income (Loss) Average
To Average To Average Portfolio Commission
Fiscal Year or Period Net Assets Net Assets Turnover Rate Rate (k)
--------------------- ---------- ---------- ------------- --------
<S> <C> <C> <C> <C>
Worldwide Privatization Fund
Class A
Year ended 6/30/97........ 1.72% 1.27% 48% $0.0132
Year ended 6/30/96........ 1.87 .95 28 --
Year ended 6/30/95........ 2.56 .66 36 --
6/2/94+ to 6/30/94........ 2.75* 1.03* 0 --
Class B
Year ended 6/30/97........ 2.43% .66% 48% $0.0132
Year ended 6/30/96........ 2.83 (.20) 28 --
Year ended 6/30/95........ 3.27 .01 36 --
6/2/94+ to 6/30/94........ 3.45* .33* 0 --
Class C
Year ended 6/30/97........ 2.42% 1.06% 48% $0.0132
Year ended 6/30/96........ 2.57 .63 28 --
2/8/95++ to 6/30/95....... 3.27* 2.65* 36 --
New Europe Fund
Class A
Year ended 7/31/97........ 2.05%(l) .40% 89% $0.0569
Year ended 7/31/96........ 2.14 1.10 69 --
Year ended 7/31/95........ 2.09 .37 74 --
Period ended 7/31/94**.... 2.06* 1.85* 35 --
Year ended 2/28/94........ 2.30 .17 94 --
Year ended 2/28/93........ 2.25 .47 125 --
Year ended 2/29/92........ 2.24 .16 34 --
4/2/90+ to 2/28/91........ 1.52* 2.71* 48 --
Class B
Year ended 7/31/97........ 2.75%(l) (.23)% 89% $0.0569
Year ended 7/31/96........ 2.86 .59 69 --
Year ended 7/31/95........ 2.79 (.33) 74 --
Period ended 7/31/94**.... 2.76* 1.15* 35 --
Year ended 2/28/94........ 3.02 (.52) 94 --
Year ended 2/28/93........ 3.00 (.50) 125 --
3/5/91++ to 2/29/92....... 3.02* (.71)* 34 --
Class C
Year ended 7/31/97........ 2.74%(l) (.23)% 89% $0.0569
Year ended 7/31/96........ 2.87 .58 69 --
Year ended 7/31/95........ 2.78 (.33) 74 --
Period ended 7/31/94**.... 2.76* 1.15* 35 --
5/3/93++ to 2/28/94....... 3.00* (.52)* 94 --
All-Asia Investment Fund
Class A
Year ended 10/31/97....... 3.45%(f) (1.97)% 70% $0.0248
Year ended 10/31/96....... 3.37*(f) (1.75) 66 0.0280
11/28/94+ to 10/31/95..... 4.42*(f) (1.87)* 90 --
Class B
Year ended 10/31/97....... 4.15%(f) (2.67)% 70% $0.0248
Year ended 10/31/96....... 4.07(f) (2.44) 66 0.0280
11/28/94+ to 10/31/95..... 5.20*(f) (2.64)* 90 --
Class C
Year ended 10/31/97....... 4.15%(f) (2.66)% 70% $0.0248
Year ended 10/31/96....... 4.07(f) (2.42) 66 0.0280
11/28/94+ to 10/31/95..... 5.84*(f) (3.41) 90 --
Global Small Cap Fund
Class A
Year ended 7/31/97........ 2.41%(l) (1.25)% 129% $0.0364
Year ended 7/31/96........ 2.51 (1.22) 139 --
Year ended 7/31/95........ 2.54(f) (1.17) 128 --
Period ended 7/31/94**.... 2.42* (1.26)* 78 --
Year ended 9/30/93........ 2.53 (1.13) 97 --
Year ended 9/30/92........ 2.34 (.85) 108 --
Year ended 9/30/91........ 2.29 (.55) 104 --
Year ended 9/30/90........ 1.73 (.46) 89 --
Year ended 9/30/89........ 1.56 (.17) 106 --
Year ended 9/30/88........ 1.54 (.50) 74 --
Class B
Year ended 7/31/97........ 3.11%(l) (1.92)% 129% $0.0364
Year ended 7/31/96........ 3.21 (1.88) 139 --
Year ended 7/31/95........ 3.20(f) (1.92) 128 --
Period ended 7/31/94**.... 3.15* (1.93)* 78 --
Year ended 9/30/93........ 3.26 (1.85) 97 --
Year ended 9/30/92........ 3.11 (1.31) 108 --
Year ended 9/30/91........ 2.98 (1.39) 104 --
9/17/90++ to 9/30/90...... 2.61* (1.30)* 89 --
Class C
Year ended 7/31/97........ 3.10%(l) (1.93)% 129% $0.0364
Year ended 7/31/96........ 3.19 (1.85) 139 --
Year ended 7/31/95........ 3.25 (f) (2.10) 128 --
Period ended 7/31/94**.... 3.13* (1.92)* 78 --
5/3/93++ to 9/30/93....... 3.75* (2.51)* 97 --
</TABLE>
- --------------------------------------------------------------------------------
13
<PAGE>
<TABLE>
<CAPTION>
Net Net Net
Asset Realized and Increase
Value Unrealized (Decrease) In Dividends From Distributions
Beginning Of Net Investment Gain (Loss) On Net Asset Value Net Investment From Net
Fiscal Year or Period Period Income (Loss) Investments From Operations Income Realized Gains
------------------- ------------ -------------- -------------- --------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Global Environment Fund (n)
Class A
Year ended 10/31/97 ............ $16.48 $(.23)(b) $3.65 $3.42 $0.00 $(1.13)
Year ended 10/31/96 ............ 12.37 (.13) 4.26 4.13 (.02) 0.00
Year ended 10/31/95 ............ 11.74 .03 .60 .63 0.00 0.00
Year ended 10/31/94 ............ 10.97 0.00 .77 .77 0.00 0.00
Year ended 10/31/93 ............ 10.78 .01 .18 .19 0.00 0.00
Year ended 10/31/92 ............ 13.12 .01 (2.17) (2.16) (.10) (.08)
Year ended 10/31/91 ............ 12.46 .13 .87 1.00 (.25) (.09)
6/1/90+ to 10/31/90 ............ 13.83 .20 (1.57) (1.37) 0.00 0.00
Class B
10/3/97++ to 10/31/97 .......... 19.92 $(.20)(b) $(.96) $(1.16) $0.00 $0.00
Strategic Balanced Fund (i)
Class A
Year ended 7/31/97 ............. $18.48 $.47(b)(c) $3.56 $4.03 $(.39) $(2.33)
Year ended 7/31/96 ............. 17.98 .35 (b)(c) 1.08 1.43 (.32) (.61)
Year ended 7/31/95 ............. 16.26 .34(c) 1.64 1.98 (.22) (.04)
Period ended 7/31/94** ......... 16.46 .07(c) (.27) (.20) 0.00 0.00
Year ended 4/30/94 ............. 16.97 .16(c) .74 .90 (.24) (1.17)
Year ended 4/30/93 ............. 17.06 .39(c) .59 .98 (.42) (.65)
Year ended 4/30/92 ............. 14.48 .27(c) 2.80 3.07 (.17) (.32)
9/4/90++ to 4/30/91 ............ 12.51 .34(c) 1.66 2.00 (.03) 0.00
Class B
Year ended 7/31/97 ............. $15.89 $.28(b)(c) $3.02 $3.30 $(.27) $(2.33)
Year ended 7/31/96 ............. 15.56 .16(b)(c) .98 1.14 (.20) (.61)
Year ended 7/31/95 ............. 14.10 .22(c) 1.40 1.62 (.12) (.04)
Period ended 7/31/94** ......... 14.30 .03(c) (.23) (.20) 0.00 0.00
Year ended 4/30/94 ............. 14.92 .06(c) .63 .69 (.14) (1.17)
Year ended 4/30/93 ............. 15.51 .23(c) .53 .76 (.25) (1.10)
Year ended 4/30/92 ............. 13.96 .22(c) 2.70 2.92 (.29) (1.08)
Year ended 4/30/91 ............. 12.40 .43(c) 1.60 2.03 (.47) 0.00
Year ended 4/30/90 ............. 11.97 .50(b)(c) .60 1.10 (.25) (.42)
Year ended 4/30/89 ............. 11.45 .48(c) 1.11 1.59 (.30) (.77)
10/23/87+ to 4/30/88 ........... 10.00 .13(c) 1.38 1.51 (.06) 0.00
Class C
Year ended 7/31/97 ............. $15.89 $.28(b)(c) $3.02 $3.30 $(.27) $(2.33)
Year ended 7/31/96 ............. 15.57 .14(b)(c) .99 1.13 (.20) (.61)
Year ended 7/31/95 ............. 14.11 .16(c) 1.46 1.62 (.12) (.04)
Period ended 7/31/94** ......... 14.31 .03(c) (.23) (.20) 0.00 0.00
8/2/93++ to 4/30/94 ............ 15.64 .15(c) (.17) (.02) (.14) (1.17)
Balanced Shares
Class A
Year ended 7/31/97 ............. $14.01 $.31(b) $3.97 $4.28 $(.32) $(1.80)
Year ended 7/31/96 ............. 15.08 .37 .45 .82 (.41) (1.48)
Year ended 7/31/95 ............. 13.38 .46 1.62 2.08 (.36) (.02)
Period ended 7/31/94** ......... 14.40 .29 (.74) (.45) (.28) (.29)
Year ended 9/30/93 ............. 13.20 .34 1.29 1.63 (.43) 0.00
Year ended 9/30/92 ............. 12.64 .44 .57 1.01 (.45) 0.00
Year ended 9/30/91 ............. 10.41 .46 2.17 2.63 (.40) 0.00
Year ended 9/30/90 ............. 14.13 .45 (2.14) (1.69) (.40) (1.63)
Year ended 9/30/89 ............. 12.53 .42 2.18 2.60 (.46) (.54)
Year ended 9/30/88 ............. 16.33 .46 (1.07) (.61) (.44) (2.75)
Class B
Year ended 7/31/97 ............. $13.79 $.19(b) $3.89 $4.08 $(.24) $(1.80)
Year ended 7/31/96 ............. 14.88 .28 .42 .70 (.31) (1.48)
Year ended 7/31/95 ............. 13.23 .30 1.65 1.95 (.28) (.02)
Period ended 7/31/94** ......... 14.27 .22 (.75) (.53) (.22) (.29)
Year ended 9/30/93 ............. 13.13 .29 1.22 1.51 (.37) 0.00
Year ended 9/30/92 ............. 12.61 .37 .54 .91 (.39) 0.00
2/4/91++ to 9/30/91 ............ 11.84 .25 .80 1.05 (.28) 0.00
Class C
Year ended 7/31/97 ............. $13.81 $.20(b) $3.89 $4.09 $(.24) $(1.80)
Year ended 7/31/96 ............. 14.89 .26 .45 .71 (.31) (1.48)
Year ended 7/31/95 ............. 13.24 .30 1.65 1.95 (.28) (.02)
Period ended 7/31/94** ......... 14.28 .24 (.77) (.53) (.22) (.29)
5/3/93++ to 9/30/93 ............ 13.63 .11 .71 .82 (.17) 0.00
Income Builder Fund (h)
Class A
Year ended 10/31/97 ............ $11.57 $.50(b) $1.62 $2.12 $(.51) $(.61)
Year ended 10/31/96 ............ 10.70 .56(b) .98 1.54 (.55) (.12)
Year ended 10/31/95 ............ 9.69 .93(b) .59 1.52 (.51) 0.00
3/25/94++ to 10/31/94 .......... 10.00 .96 (1.02) (.06) (.05)(g) (.20)
Class B
Year ended 10/31/97 ............ $11.55 $.42(b) $1.61 $2.03 $(.44) $(.61)
Year ended 10/31/96 ............ 10.70 .47(b) .98 1.45 (.48) (.12)
Year ended 10/31/95 ............ 9.68 .63(b) .83 1.46 (.44) 0.00
3/25/94++ to 10/31/94 .......... 10.00 .88 (.98) (.10) (.06)(g) (.16)
</TABLE>
- --------------------------------------------------------------------------------
14
<PAGE>
<TABLE>
<CAPTION>
Total Net Assets
Total Net Asset Investment At End Of
Dividends Value Return Based Period
And End Of on Net Asset (000's
Fiscal Year or Period Distributions Period Value (a) omitted)
------------------- -------------- ---------- ------------ ------------
<S> <C> <C> <C> <C>
Global Environment Fund (h)
Class A
Year ended 10/31/97 ............ $(1.13) $18.77 23.51% $ 52,378
Year ended 10/31/96 ............ (.02) 16.48 33.48 100,271
Year ended 10/31/95 ............ 0.00 12.37 5.37 85,416
Year ended 10/31/94 ............ 0.00 11.74 7.02 81,102
Year ended 10/31/93 ............ 0.00 10.97 1.76 75,805
Year ended 10/31/92 ............ (.18) 10.78 (16.59) 74,442
Year ended 10/31/91 ............ (.34) 13.12 8.66 90,612
6/1/90+ to 10/31/90 ............ 0.00 12.46 (10.68) 86,041
Class B
10/3/97++ to 10/31/97 .......... $0.00 $18.76 (5.82)% $ 235
Strategic Balanced Fund (i)
Class A
Year ended 7/31/97 ............. $(2.72) $19.79 23.90% $ 20,312
Year ended 7/31/96 ............. (.93) 18.48 8.05 18,329
Year ended 7/31/95 ............. (.26) 17.98 12.40 10,952
Period ended 7/31/94** ......... 0.00 16.26 (1.22) 9,640
Year ended 4/30/94 ............. (1.41) 16.46 5.06 9,822
Year ended 4/30/93 ............. (1.07) 16.97 5.85 8,637
Year ended 4/30/92 ............. (.49) 17.06 20.96 6,843
9/4/90++ to 4/30/91 ............ (.03) 14.48 16.00 443
Class B
Year ended 7/31/97 ............. $(2.60) $16.59 23.01% $ 28,037
Year ended 7/31/96 ............. (.81) 15.89 7.41 28,492
Year ended 7/31/95 ............. (.16) 15.56 11.63 37,301
Period ended 7/31/94** ......... 0.00 14.10 (1.40) 43,578
Year ended 4/30/94 ............. (1.31) 14.30 4.29 43,616
Year ended 4/30/93 ............. (1.35) 14.92 4.96 36,155
Year ended 4/30/92 ............. (1.37) 15.51 20.14 31,842
Year ended 4/30/91 ............. (.47) 13.96 16.73 22,552
Year ended 4/30/90 ............. (.67) 12.40 8.85 19,523
Year ended 4/30/89 ............. (1.07) 11.97 14.66 5,128
10/23/87+ to 4/30/88 ........... (.06) 11.45 15.10 2,344
Class C
Year ended 7/31/97 ............. $(2.60) $16.59 23.01% $ 3,045
Year ended 7/31/96 ............. (.81) 15.89 7.34 3,157
Year ended 7/31/95 ............. (.16) 15.57 11.62 4,113
Period ended 7/31/94** ......... 0.00 14.11 (1.40) 4,317
8/2/93++ to 4/30/94 ............ (1.31) 14.31 .45 4,289
Balanced Shares
Class A
Year ended 7/31/97 ............. $(2.12) $16.17 33.46% $ 115,500
Year ended 7/31/96 ............. (1.89) 14.01 5.23 102,567
Year ended 7/31/95 ............. (.38) 15.08 15.99 122,033
Period ended 7/31/94** ......... (.57) 13.38 (3.21) 157,637
Year ended 9/30/93 ............. (.43) 14.40 12.52 172,484
Year ended 9/30/92 ............. (.45) 13.20 8.14 143,883
Year ended 9/30/91 ............. (.40) 12.64 25.52 154,230
Year ended 9/30/90 ............. (2.03) 10.41 (13.12) 140,913
Year ended 9/30/89 ............. (1.00) 14.13 22.27 159,290
Year ended 9/30/88 ............. (3.19) 12.53 (1.10) 111,515
Class B
Year ended 7/31/97 ............. $(2.04) $15.83 32.34% $ 24,192
Year ended 7/31/96 ............. (1.79) 13.79 4.45 18,393
Year ended 7/31/95 ............. (.30) 14.88 15.07 15,080
Period ended 7/31/94** ......... (.51) 13.23 (3.80) 14,347
Year ended 9/30/93 ............. (.37) 14.27 11.65 12,789
Year ended 9/30/92 ............. (.39) 13.13 7.32 6,499
2/4/91++ to 9/30/91 ............ (.28) 12.61 8.96 1,830
Class C
Year ended 7/31/97 ............. $(2.04) $15.86 32.37% $ 5,510
Year ended 7/31/96 ............. (1.79) 13.81 4.52 6,096
Year ended 7/31/95 ............. (.30) 14.89 15.06 5,108
Period ended 7/31/94** ......... (.51) 13.24 (3.80) 6,254
5/3/93++ to 9/30/93 ............ (.17) 14.28 6.01 1,487
Income Builder Fund (h)
Class A
Year ended 10/31/97 ............ $(1.12) $12.57 19.36% $ 2,367
Year ended 10/31/96 ............ (.67) 11.57 14.82 2,056
Year ended 10/31/95 ............ (.51) 10.70 16.22 1,398
3/25/94++ to 10/31/94 .......... (.25) 9.69 (.54) 600
Class B
Year ended 10/31/97 ............ $(1.05) $12.53 18.53% $ 8,713
Year ended 10/31/96 ............ (.60) 11.55 13.92 5,775
Year ended 10/31/95 ............ (.44) 10.70 15.55 3,769
3/25/94++ to 10/31/94 .......... (.22) 9.68 (.99) 1,998
<CAPTION>
Ratio Of Net
Ratio Of Investment
Expenses Income (Loss) Average
To Average To Average Portfolio Commission
Fiscal Year or Period Net Assets Net Assets Turnover Rate Rate (k)
------------------- ----------- ------------- ------------- ----------
<S> <C> <C> <C> <C>
Global Environment Fund (h)
Class A
Year ended 10/31/97 ............ 2.39% (1.35)% 145% $0.0506
Year ended 10/31/96 ............ 1.60 (.85) 268 0.0313
Year ended 10/31/95 ............ 1.57 .21 109 --
Year ended 10/31/94 ............ 1.67 (.04) 42 --
Year ended 10/31/93 ............ 1.62 .15 25 --
Year ended 10/31/92 ............ 1.63 .10 41 --
Year ended 10/31/91 ............ 1.49 .95 32 --
6/1/90+ to 10/31/90 ............ 1.72* 3.95* 4 --
Class B
10/3/97++ to 10/31/97 .......... 20.84% (1.03)% 145% $0.0506
Strategic Balanced Fund (i)
Class A
Year ended 7/31/97 ............. 1.41%(f)(l) 2.50%(c) 170% $0.0395
Year ended 7/31/96 ............. 1.40(f) 1.78 173 --
Year ended 7/31/95 ............. 1.40(f) 2.07 172 --
Period ended 7/31/94** ......... 1.40(f) 1.63* 21 --
Year ended 4/30/94 ............. 1.40*(f) 1.67 139 --
Year ended 4/30/93 ............. 1.40(f) 2.29 98 --
Year ended 4/30/92 ............. 1.40 1.92 103 --
9/4/90++ to 4/30/91 ............ 1.40* 3.54* 137 --
Class B
Year ended 7/31/97 ............. 2.12%(f)(l) 1.78% 170% $0.0395
Year ended 7/31/96 ............. 2.10(f) .99 173 --
Year ended 7/31/95 ............. 2.10(f) 1.38 172 --
Period ended 7/31/94** ......... 2.10*(f) .92* 21 --
Year ended 4/30/94 ............. 2.10(f) .93 139 --
Year ended 4/30/93 ............. 2.15(f) 1.55 98 --
Year ended 4/30/92 ............. 2.15 1.34 103 --
Year ended 4/30/91 ............. 2.10 3.23 137 --
Year ended 4/30/90 ............. 2.00 3.85 120 --
Year ended 4/30/89 ............. 2.00 4.31 103 --
10/23/87+ to 4/30/88 ........... 2.00* 2.44* 72 --
Class C
Year ended 7/31/97 ............. 2.12%(f)(l) 1.78% 170% $0.0395
Year ended 7/31/96 ............. 2.10(f) .99 173 --
Year ended 7/31/95 ............. 2.10(f) 1.38 172 --
Period ended 7/31/94** ......... 2.10*(f) .93* 21 --
8/2/93++ to 4/30/94 ............ 2.10*(f) .69* 139 --
Balanced Shares
Class A
Year ended 7/31/97 ............. 1.47%(l) 2.11% 207% $0.0552
Year ended 7/31/96 ............. 1.38 2.41 227 --
Year ended 7/31/95 ............. 1.32 3.12 179 --
Period ended 7/31/94** ......... 1.27* 2.50* 116 --
Year ended 9/30/93 ............. 1.35 2.50 188 --
Year ended 9/30/92 ............. 1.40 3.26 204 --
Year ended 9/30/91 ............. 1.44 3.75 70 --
Year ended 9/30/90 ............. 1.36 4.01 169 --
Year ended 9/30/89 ............. 1.42 3.29 132 --
Year ended 9/30/88 ............. 1.42 3.74 190 --
Class B
Year ended 7/31/97 ............. 2.25%(l) 1.32% 207% $0.0552
Year ended 7/31/96 ............. 2.16 1.61 227 --
Year ended 7/31/95 ............. 2.11 2.30 179 --
Period ended 7/31/94** ......... 2.05* 1.73* 116 --
Year ended 9/30/93 ............. 2.13 1.72 188 --
Year ended 9/30/92 ............. 2.16 2.46 204 --
2/4/91++ to 9/30/91 ............ 2.13* 3.19* 70 --
Class C
Year ended 7/31/97 ............. 2.23%(l) 1.37% 207% $0.0552
Year ended 7/31/96 ............. 2.15 1.63 227 --
Year ended 7/31/95 ............. 2.09 2.32 179 --
Period ended 7/31/94** ......... 2.03* 1.81* 116 --
5/3/93++ to 9/30/93 ............ 2.29* 1.47* 188 --
Income Builder Fund (h)
Class A
Year ended 10/31/97 ............ 2.09% 4.18% 159% $0.0513
Year ended 10/31/96 ............ 2.20 4.92 108 0.0600
Year ended 10/31/95 ............ 2.38 5.44 92 --
3/25/94++ to 10/31/94 .......... 2.52* 6.11* 126 --
Class B
Year ended 10/31/97 ............ 2.80% 3.48% 159% $0.0513
Year ended 10/31/96 ............ 2.92 4.19 108 0.0600
Year ended 10/31/95 ............ 3.09 4.73 92 --
3/25/94++ to 10/31/94 .......... 3.09* 5.07* 126 --
</TABLE>
- --------------------------------------------------------------------------------
15
<PAGE>
<TABLE>
<CAPTION>
Net Net Net
Asset Realized and Increase
Value Unrealized (Decrease) In Dividends From
Beginning Of Net Investment Gain (Loss) On Net Asset Value Net Investment
Fiscal Year or Period Period Income (Loss) Investments From Operations Income
------------------- ------------ -------------- -------------- --------------- --------------
<S> <C> <C> <C> <C> <C>
Income Builder Fund (continued)
Class C
Year ended 10/31/97 ............ $11.52 $.42(b) $1.60 $2.02 $(.44)
Year ended 10/31/96 ............ 10.67 .46(b) .99 1.45 (.48)
Year ended 10/31/95 ............ 9.66 .40(b) 1.05 1.45 (.44)
Year ended 10/31/94 ............ 10.47 .50 (.85) (.35) (.11)(g)
Year ended 10/31/93 ............ 9.80 .52 .51 1.03 (.36)
Year ended 10/31/92 ............ 10.00 .55 (.28) .27 (.47)
10/25/91+ to 10/31/91 .......... 10.00 .01 0.00 .01 (.01)
Utility Income Fund
Class A
Year ended 11/30/97 ............ $10.59 $.32(b)(c) $2.04 $2.36 $(.34)
Year ended 11/30/96 ............ 10.22 .18(b)(c) .65 .83 (.46)
Year ended 11/30/95 ............ 8.97 .27(c) 1.43 1 .70 (.45)
Year ended 11/30/94 ............ 9.92 .42(c) (.89) (.47) (.48)
10/18/93+ to 11/30/93 .......... 10.00 .02(c) (.10) (.08) 0.00
Class B
Year ended 11/30/97 ............ $10.57 $.25(b)(c) $2.04 $2.29 $(.27)
Year ended 11/30/96 ............ 10.20 .10(b)(c) .67 .77 (.40)
Year ended 11/30/95 ............ 8.96 .18(c) 1.45 1.63 (.39)
Year ended 11/30/94 ............ 9.91 .37(c) (.91) (.54) (.41)
10/18/93+ 11/30/93 ............. 10.00 .01(c) (.10) (.09) 0.00
Class C
Year ended 11/30/97 ............ $10.59 $.25(b)(c) $2.03 $2.28 $(.27)
Year ended 11/30/96 ............ 10.22 .11(b)(c) .66 .77 (.40)
Year ended 11/30/95 ............ 8.97 .18(c) 1.46 1.64 (.39)
Year ended 11/30/94 ............ 9.92 .39(c) (.93) (.54) (.41)
10/27/93+ to 11/30/93 .......... 10.00 .01(c) (.09) (.08) 0.00
Growth and Income Fund
Class A
Year ended 10/31/97 ............ $3.00 $.04(b) $ .87 $ .91 $(.05)
Year ended 10/31/96 ............ 2.71 .05 .50 .55 (.05)
Year ended 10/31/95 ............ 2.35 .02 .52 .54 (.06)
Year ended 10/31/94 ............ 2.61 .06 (.08) (.02) (.06)
Year ended 10/31/93 ............ 2.48 .06 .29 .35 (.06)
Year ended 10/31/92 ............ 2.52 .06 .11 .17 (.06)
Year ended 10/31/91 ............ 2.28 .07 .56 .63 (.09)
Year ended 10/31/90 ............ 3.02 .09 (.30) (.21) (.10)
Year ended 10/31/89 ............ 3.05 .10 .43 .53 (.08)
Year ended 10/31/88 ............ 3.48 .10 .33 .43 (.08)
Class B
Year ended 10/31/97 ............ $2.99 $.02(b) $ .85 $ .87 $(.03)
Year ended 10/31/96 ............ 2.69 .03 .51 .54 (.03)
Year ended 10/31/95 ............ 2.34 .01 .49 .50 (.03)
Year ended 10/31/94 ............ 2.60 .04 (.08) (.04) (.04)
Year ended 10/31/93 ............ 2.47 .05 .28 .33 (.04)
Year ended 10/31/92 ............ 2.52 .04 .11 .15 (.05)
2/8/91++ to 10/31/91 ........... 2.40 .04 .12 .16 (.04)
Class C
Year ended 10/31/97 ............ $2.99 $.02(b) $ .85 $ .87 $(.03)
Year ended 10/31/96 ............ 2.70 .03 .50 .53 (.03)
Year ended 10/31/95 ............ 2.34 .01 .50 .51 (.03)
Year ended 10/31/94 ............ 2.60 .04 (.08) (.04) (.04)
5/3/93 ++ to 10/31/93 .......... 2.43 .02 .17 .19 (.02)
Real Estate Investment Fund
Class A
10/1/96+ to 8/31/97 ............ $10.00 $.30(b) $2.88 $3.18 $(.38)(m)
Class B
10/1/96+ to 8/31/97 ............ $10.00 $.23(b) $2.89 $3.12 $(.33)(m)
Class C
10/1/96+ to 8/31/97 ............ $10.00 $.23(b) $2.89 $3.12 $(.33)(m)
<CAPTION>
Distributions
From Net
Fiscal Year or Period Realized Gains
------------------- --------------
<S> <C>
Income Builder Fund (continued)
Class C
Year ended 10/31/97 ............ $(.61)
Year ended 10/31/96 ............ (.12)
Year ended 10/31/95 ............ 0.00
Year ended 10/31/94 ............ (.35)
Year ended 10/31/93 ............ 0.00
Year ended 10/31/92 ............ 0.00
10/25/91+ to 10/31/91 .......... 0.00
Utility Income Fund
Class A
Year ended 11/30/97 ............ $(.13)
Year ended 11/30/96 ............ 0.00
Year ended 11/30/95 ............ 0.00
Year ended 11/30/94 ............ 0.00
10/18/93+ to 11/30/93 .......... 0.00
Class B
Year ended 11/30/97 ............ $(.13)
Year ended 11/30/96 ............ 0.00
Year ended 11/30/95 ............ 0.00
Year ended 11/30/94 ............ 0.00
10/18/93+ 11/30/93 ............. 0.00
Class C
Year ended 11/30/97 ............ $(.13)
Year ended 11/30/96 ............ 0.00
Year ended 11/30/95 ............ 0.00
Year ended 11/30/94 ............ 0.00
10/27/93+ to 11/30/93 .......... 0.00
Growth and Income Fund
Class A
Year ended 10/31/97 ............ $(.38)
Year ended 10/31/96 ............ (.21)
Year ended 10/31/95 ............ (.12)
Year ended 10/31/94 ............ (.18)
Year ended 10/31/93 ............ (.16)
Year ended 10/31/92 ............ (.15)
Year ended 10/31/91 ............ (.30)
Year ended 10/31/90 ............ (.43)
Year ended 10/31/89 ............ (.48)
Year ended 10/31/88 ............ (.78)
Class B
Year ended 10/31/97 ............ $(.38)
Year ended 10/31/96 ............ (.21)
Year ended 10/31/95 ............ (.12)
Year ended 10/31/94 ............ (.18)
Year ended 10/31/93 ............ (.16)
Year ended 10/31/92 ............ (.15)
2/8/91++ to 10/31/91 ........... 0.00
Class C
Year ended 10/31/97 ............ $(.38)
Year ended 10/31/96 ............ (.21)
Year ended 10/31/95 ............ (.12)
Year ended 10/31/94 ............ (.18)
5/3/93 ++ to 10/31/93 .......... 0.00
Real Estate Investment Fund
Class A
10/1/96+ to 8/31/97 ............ $0.00
Class B
10/1/96+ to 8/31/97 ............ $0.00
Class C
10/1/96+ to 8/31/97 ............ $0.00
</TABLE>
- --------------------------------------------------------------------------------
Please refer to the footnotes on page 18.
16
<PAGE>
<TABLE>
<CAPTION>
Total Net Assets
Total Net Asset Investment At End Of
Dividends Value Return Based Period
And End Of on Net Asset (000's
Fiscal Year or Period Distributions Period Value (a) omitted)
------------------- -------------- ---------- ------------ ------------
<S> <C> <C> <C> <C>
Income Builder Fund (continued)
Class C
Year ended 10/31/97 ............ $(1.05) $12.49 18.50% $ 45,765
Year ended 10/31/96 ............ (.60) 11.52 13.96 44,441
Year ended 10/31/95 ............ (.44) 10.67 15.47 49,107
Year ended 10/31/94 ............ (.46) 9.66 (3.44) 64,027
Year ended 10/31/93 ............ (.36) 10.47 10.65 106,034
Year ended 10/31/92 ............ (.47) 9.80 2.70 152,617
10/25/91+ to 10/31/91 .......... (.01) 10.00 .11 41,813
Utility Income Fund
Class A
Year ended 11/30/97 ............ $(.47) $12.48 23.10% $ 4,117
Year ended 11/30/96 ............ (.46) 10.59 8.47 3,294
Year ended 11/30/95 ............ (.45) 10.22 19.58 2,748
Year ended 11/30/94 ............ (.48) 8.97 (4.86) 1,068
10/18/93+ to 11/30/93 .......... 0.00 9.92 (.80) 229
Class B
Year ended 11/30/97 ............ $(.40) $12.46 22.35% $ 14,782
Year ended 11/30/96 ............ (.40) 10.57 7.82 13,561
Year ended 11/30/95 ............ (.39) 10.20 18.66 10,988
Year ended 11/30/94 ............ (.41) 8.96 (5.59) 2,353
10/18/93+ 11/30/93 ............. 0.00 9.91 (.90) 244
Class C
Year ended 11/30/97 ............ $(.40) $12.47 22.21% $ 3,413
Year ended 11/30/96 ............ (.40) 10.59 7.81 3,376
Year ended 11/30/95 ............ (.39) 10.22 18.76 3,500
Year ended 11/30/94 ............ (.41) 8.97 (5.58) 2,651
10/27/93+ to 11/30/93 .......... 0.00 9.92 (.80) 18
Growth and Income Fund
Class A
Year ended 10/31/97 ............ $(.43) $3.48 33.28% $ 787,566
Year ended 10/31/96 ............ (.26) 3.00 21.51 553,151
Year ended 10/31/95 ............ (.18) 2.71 24.21 458,158
Year ended 10/31/94 ............ (.24) 2.35 (.67) 414,386
Year ended 10/31/93 ............ (.22) 2.61 14.98 459,372
Year ended 10/31/92 ............ (.21) 2.48 7.23 417,018
Year ended 10/31/91 ............ (.39) 2.52 31.03 409,597
Year ended 10/31/90 ............ (.53) 2.28 (8.55) 314,670
Year ended 10/31/89 ............ (.56) 3.02 21.59 377,168
Year ended 10/31/88 ............ (.86) 3.05 16.45 350,510
Class B
Year ended 10/31/97 ............ $(.41) $3.45 31.83% $ 456,399
Year ended 10/31/96 ............ (.24) 2.99 21.20 235,263
Year ended 10/31/95 ............ (.15) 2.69 22.84 136,758
Year ended 10/31/94 ............ (.22) 2.34 (1.50) 102,546
Year ended 10/31/93 ............ (.20) 2.60 14.22 76,633
Year ended 10/31/92 ............ (.20) 2.47 6.22 29,656
2/8/91++ to 10/31/91 ........... (.04) 2.52 6.83 10,221
Class C
Year ended 10/31/97 ............ $(.41) $3.45 31.83% $ 106,526
Year ended 10/31/96 ............ (.24) 2.99 20.72 61,356
Year ended 10/31/95 ............ (.15) 2.70 23.30 35,835
Year ended 10/31/94 ............ (.22) 2.34 (1.50) 19,395
5/3/93 ++ to 10/31/93 .......... (.02) 2.60 7.85 7,774
Real Estate Investment Fund
Class A
10/1/96+ to 8/31/97 ............ $(.38) $12.80 32.24% $ 37,638
Class B
10/1/96+ to 8/31/97 ............ $(.33) $12.79 31.49% $ 186,802
Class C
10/1/96+ to 8/31/97 ............ $(.33) $12.79 31.49% $ 42,719
<CAPTION>
Ratio Of Net
Ratio Of Investment
Expenses Income (Loss) Average
To Average To Average Portfolio Commission
Fiscal Year or Period Net Assets Net Assets Turnover Rate Rate (k)
------------------- ----------- ------------- ------------- ----------
<S> <C> <C> <C> <C>
Income Builder Fund (continued)
Class C
Year ended 10/31/97 ............ 2.80% 3.49% 159% $0.0513
Year ended 10/31/96 ............ 2.93 4.13 108 0.0600
Year ended 10/31/95 ............ 3.02 4.81 92 --
Year ended 10/31/94 ............ 2.67 3.82 126 --
Year ended 10/31/93 ............ 2.32 6.85 101 --
Year ended 10/31/92 ............ 2.33 5.47 108 --
10/25/91+ to 10/31/91 .......... 0.00* .94* 0 --
Utility Income Fund
Class A
Year ended 11/30/97 ............ 1.50%(f) 2.89% 37% $0.0442
Year ended 11/30/96 ............ 1.50(f) 1.67 98 0.0536
Year ended 11/30/95 ............ 1.50(f) 2.48 162 --
Year ended 11/30/94 ............ 1.50(f) 4.13 30 --
10/18/93+ to 11/30/93 .......... 1.50*(f) 2.35* 11 --
Class B
Year ended 11/30/97 ............ 2.20%(f) 2.27% 37% $0.0442
Year ended 11/30/96 ............ 2.20(f) .95 98 0.0536
Year ended 11/30/95 ............ 2.20(f) 1.60 162 --
Year ended 11/30/94 ............ 2.20(f) 3.53 30 --
10/18/93+ 11/30/93 ............. 2.20*(f) 2.84* 11 --
Class C
Year ended 11/30/97 ............ 2.20%(f) 2.27% 37% $0.0442
Year ended 11/30/96 ............ 2.20(f) .94 98 0.0536
Year ended 11/30/95 ............ 2.20(f) 1.88 162 --
Year ended 11/30/94 ............ 2.20(f) 3.60 30 --
10/27/93+ to 11/30/93 .......... 2.20*(f) 3.08* 11 --
Growth and Income Fund
Class A
Year ended 10/31/97 ............ .92%(l) 1.39%* 88% $0.0589
Year ended 10/31/96 ............ .97 1.73 88 0.0625
Year ended 10/31/95 ............ 1.05 1.88 142 --
Year ended 10/31/94 ............ 1.03 2.36 68 --
Year ended 10/31/93 ............ 1.07 2.38 91 --
Year ended 10/31/92 ............ 1.09 2.63 104 --
Year ended 10/31/91 ............ 1.14 2.74 84 --
Year ended 10/31/90 ............ 1.09 3.40 76 --
Year ended 10/31/89 ............ 1.08 3.49 79 --
Year ended 10/31/88 ............ 1.09 3.09 66 --
Class B
Year ended 10/31/97 ............ 1.72%(l) .56% 88% $0.0589
Year ended 10/31/96 ............ 1.78 .91 88 0.0625
Year ended 10/31/95 ............ 1.86 1.05 142 --
Year ended 10/31/94 ............ 1.85 1.56 68 --
Year ended 10/31/93 ............ 1.90 1.58 91 --
Year ended 10/31/92 ............ 1.90 1.69 104 --
2/8/91++ to 10/31/91 ........... 1.99* 1.67* 84 --
Class C
Year ended 10/31/97 ............ 1.71%(l) .58% 88% $0.0589
Year ended 10/31/96 ............ 1.76 .93 88 0.0625
Year ended 10/31/95 ............ 1.84 1.04 142 --
Year ended 10/31/94 ............ 1.84 1.61 68 --
5/3/93 ++ to 10/31/93 .......... 1.96* 1.45* 91 --
Real Estate Investment Fund
Class A
10/1/96+ to 8/31/97 ............ 1.77%*(l) 2.73%* 20% $0.0518
Class B
10/1/96+ to 8/31/97 ............ 2.44%*(l) 2.08%* 20% $0.0518
Class C
10/1/96+ to 8/31/97 ............ 2.43%*(l) 2.06%* 20% $0.0518
</TABLE>
- --------------------------------------------------------------------------------
17
<PAGE>
- ----------
+ Commencement of operations.
++ Commencement of distribution.
* Annualized.
** Reflects a change in fiscal year end.
(a) Total investment return is calculated assuming an initial investment made
at the net asset value at the beginning of the period, reinvestment of all
dividends and distributions at the net asset value during the period, and a
redemption on the last day of the period. Initial sales charges or
contingent deferred sales charges are not reflected in the calculation of
total investment return. Total investment returns calculated for periods of
less than one year are not annualized.
(b) Based on average shares outstanding.
(c) Net of fee waiver and expense reimbursement.
(d) Adjusted for a 200% stock dividend paid to shareholders of record on
January 15, 1988.
(e) Net of offering costs of ($.05).
(f) Net of expenses assumed and/or waived/reimbursed. If the following Funds
had borne all expenses in their most recent five fiscal years, their
expense ratios, without giving effect to the expense offset arrangement
described in (l) below, would have been as follows:
<TABLE>
<CAPTION>
1993 1994 1995 1996 1997
All-Asia Investment Fund
<S> <C> <C> <C> <C> <C>
Class A -- -- 10.57%# 3.61% 3.57%
Class B -- -- 11.32%# 4.33% 4.27%
Class C -- -- 11.38%# 4.30% 4.27%
Growth Fund
Class A 1.84% 1.46% -- -- --
Class B 2.52% 2.13% -- -- --
Class C -- 2.13%# --
Global Small Cap Fund
Class A -- -- 2.61% -- --
Class B -- -- 3.27% -- --
Class C -- -- 3.31% -- --
Strategic Balanced Fund
Class A 1.85% 1.70%1 1.81% 1.76% 2.06%
1.94%#2
Class B 2.56% 2.42%1 2.49% 2.47% 2.76%
2.64%#2
Class C -- 2.07%#1 2.50% 2.48% 2.76%
2.64%#2
Utility Income Fund
Class A 145.63%# 13.72% 4.86%# 3.38% 3.55%
Class B 133.62%# 14.42% 5.34%# 4.08% 4.28%
Class C 148.03%# 14.42% 5.99%# 4.07% 4.28%
</TABLE>
- ----------
# annualized
1. For the period ended April 30, 1994
2. For the period ended July 31, 1994
For the expense ratios of the Funds in years prior to fiscal year 1993, assuming
the Funds had borne all expenses, please see the Financial Statements in each
Fund's Statement of Additional Information.
(g) "Dividends from Net Investment Income" includes a return of capital. Income
Builder Fund had a return of capital with respect to Class A shares, for
the period ended October 31, 1994, of $(.01); with respect to Class B
shares, $(.01); and with respect to Class C shares, for the year ended
October 31, 1994, $(.02).
(h) On March 25, 1994, all existing shares of Income Builder Fund, previously
known as Alliance Multi-Market Income and Growth Trust, were converted into
Class C shares.
(i) Prior to July 22, 1993, Equitable Capital Management Corporation
("Equitable Capital") served as the investment adviser to the predecessor
to The Alliance Portfolios, of which Growth Fund and Strategic Balanced
Fund are series. On July 22, 1993, Alliance acquired the business and
substantially all assets of Equitable Capital and became investment adviser
to the Funds.
(j) "Distributions from Net Realized Gains" includes a return of capital of
$(.12).
(k) For fiscal years beginning on or after September 1, 1995, a fund is
required to disclose its average commission rate per share for trades on
which commissions are charged.
(l) Amounts do not reflect the impact of expense offset arrangements with the
transfer agent. Taking into account such expense offset arrangements, the
ratio of expenses to average net assets, assumng the assumption and/or
waiver/reimbursement of expenses described in (f) above, would have been as
follows:
<TABLE>
<CAPTION>
Balanced Shares 1997 International Fund 1997 Strategic Balanced 1997
<S> <C> <C> <C> <C> <C>
Class A 1.46% Class A 1.73% Class A 1.40%
Class B 2.24% Class B 2.58% Class B 2.10%
Class C 2.22% Class C 2.56% Class C 2.10%
Real Estate 1997 Global Small Cap Fund 1997 New Europe 1997
Class A 1.77% Class A 2.38% Class A 2.04%
Class B 2.43% Class B 3.08% Class B 2.74%
Class C 2.42% Class C 3.08% Class C 2.73%
Growth Fund 1997 Technology 1997 Growth and Income 1997
Class A 1.25% Class A 1.66% Class A .91%
Class B 1.95% Class B 2.36% Class B 1.71%
Class C 1.95% Class C 2.37% Class C 1.70%
(m) Distributions from net investment income include a tax return of capital of
$.08, $.09 and $.08 for Class A, B and C shares, respectively.
(n) Global Environment Fund operated as a closed-end investment company
through October 3, 1997, when it converted to an open-end investment
company and all shares of its common stock then outstanding were
reclassified as Class A shares.
</TABLE>
18
<PAGE>
- --------------------------------------------------------------------------------
GLOSSARY
- --------------------------------------------------------------------------------
The following terms are frequently used in this Prospectus.
Equity securities, except as noted otherwise, are (i) common stocks, partnership
interests, business trust shares and other equity or ownership interests in
business enterprises, and (ii) securities convertible into, and rights and
warrants to subscribe for the purchase of, such stocks, shares and
interests.
Debt securities are bonds, debentures, notes, bills, repurchase agreements,
loans, other direct debt instruments and other fixed, floating and variable rate
debt obligations, but do not include convertible securities.
Fixed-income securities are debt securities and dividend-paying preferred stocks
and include floating rate and variable rate instruments.
Convertible securities are fixed-income securities that are convertible into
common stock.
U.S. Government securities are securities issued or guaranteed by the United
States Government, its agencies or instrumentalities.
Foreign government securities are securities issued or guaranteed, as to payment
of principal and interest, by governments, quasi-governmental entities,
governmental agencies or other governmental entities.
Asian company is an entity that (i) is organized under the laws of an Asian
country and conducts business in an Asian country, (ii) derives 50% or more of
its total revenues from business in Asian countries, or (iii) issues equity or
debt securities that are traded principally on a stock exchange in an Asian
country.
Asian countries are Australia, the Democratic Socialist Republic of Sri Lanka,
the Hong Kong Special Administrative Region of the People's Republic of China
(Hong Kong), the Islamic Republic of Pakistan, Japan, the Kingdom of Thailand,
Malaysia, Negara Brunei Darussalam (Brunei), New Zealand, the People's Republic
of China, the People's Republic of Kampuchea (Cambodia), the Republic of China
(Taiwan), the Republic of India, the Republic of Indonesia, the Republic of
Korea (South Korea), the Republic of the Philippines, the Republic of Singapore,
the Socialist Republic of Vietnam and the Union of Myanmar.
Eligible Companies are companies expected to benefit from advances or
improvements in products, processes or services intended to foster the
protection of the environment.
Environmental Companies are Eligible Companies that have a principal business
involving the sale of systems or services intended to foster environmental
protection, such as waste treatment and disposal, remediation, air pollution
control and recycling.
Beneficiary Companies are Eligible Companies whose principal businesses lie
outside the environmental sector but nevertheless anticipate environmental
regulations or consumer preferences through the development of new products,
processes or services that are intended to contribute to a cleaner and healthier
environment, such as companies that anticipate the demand for plastic
substitutes, aerosol substitutes, alternative fuels and processes that generate
less hazardous waste.
Moody's is Moody's Investors Service, Inc.
S&P is Standard & Poor's Ratings Services.
Duff & Phelps is Duff & Phelps Credit Rating Co.
Fitch is Fitch IBCA, Inc
Investment grade securities are fixed-income securities rated Baa and above by
Moody's or BBB and above by S&P, Duff & Phelps or Fitch, or determined by
Alliance to be of equivalent quality.
Lower-rated securities are fixed-income securities rated Ba or below by Moody's
or BB or below by S&P, Duff & Phelps or Fitch, or determined by Alliance to be
of equivalent quality, and are commonly referred to as "junk bonds."
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 having total assets of more than $1
billion and which are members of the Federal Deposit Insurance Corporation.
Rule 144A securities are securities that may be resold pursuant to Rule 144A
under the Securities Act of 1933, as amended (the "Securities Act").
Depositary receipts include American Depositary Receipts ("ADRs"), Global
Depositary Receipts ("GDRs") and other types of depositary receipts.
Commission is the Securities and Exchange Commission.
1940 Act is the Investment Company Act of 1940, as amended.
Code is the Internal Revenue Code of 1986, as amended.
Exchange is the New York Stock Exchange.
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DESCRIPTION OF THE FUNDS
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Except as noted, (i) the Funds' investment objectives are "fundamental" and
cannot be changed without shareholder vote, and (ii) the Funds' investment
policies are not fundamental and thus can be changed without a shareholder vote.
No Fund will change a non-fundamental objective or policy without notifying its
shareholders. There is no guarantee that any Fund will achieve its investment
objective.
INVESTMENT OBJECTIVES AND POLICIES
DOMESTIC STOCK FUNDS
The Domestic Stock Funds have been designed to offer investors seeking capital
appreciation a range of alternative approaches to investing in the U.S. equity
markets.
The Alliance Fund
The Alliance Fund, Inc. ("Alliance Fund") is a diversified investment company
that seeks long-term growth of capital and income primarily through investment
in common stocks. The Fund normally invests substantially all of its assets in
common stocks that Alliance believes will appreciate in value, but it may invest
in other types of securities such as convertible securities, high grade
instruments, U.S. Government securities and high quality, short-term obligations
such as repurchase agreements, bankers' acceptances and domestic certificates of
deposit, and may invest without limit in foreign securities. While the
diversification and generally high quality of the Fund's investments cannot
prevent fluctuations in market values, they tend to limit investment risk and
contribute to achieving the Fund's objective. The Fund generally does not effect
portfolio transactions in order to realize short-term trading profits or
exercise control.
The Fund may also: (i) make secured loans of its portfolio securities equal in
value up to 25% of its total assets to brokers, dealers and financial
institutions; (ii) enter into repurchase agreements of up to one week in
duration with commercial banks, but only if those agreements together with any
restricted securities and any securities which do not have readily available
market quotations do not exceed 10% of its net assets; and (iii) write
exchange-traded covered call options with respect to up to 25% of its total
assets. For additional information on the use, risks and costs of these policies
and practices see "Additional Investment Practices."
Alliance Growth Fund
Alliance Growth Fund ("Growth Fund") is a diversified investment company that
seeks long-term growth of capital. Current income is only an incidental
consideration. The Fund seeks to achieve its objective by investing primarily in
equity securities of companies with favorable earnings outlooks and whose
long-term growth rates are expected to exceed that of the U.S. economy over
time. The Fund's investment objective is not fundamental.
The Fund may also invest up to 25% of its total assets in lower-rated
fixed-income and convertible bonds. See "Risk Considerations--Securities
Ratings" and "--Investment in Lower-Rated Fixed-Income Securities." The Fund
generally will not invest in securities rated at the time of purchase below Caa-
by Moody's and CCC- by S&P, Duff & Phelps or Fitch or in securities judged by
Alliance to be of comparable investment quality. However, from time to time, the
Fund may invest in securities rated in the lowest grades (i.e., C by Moody's or
D or equivalent by S&P, Duff & Phelps or Fitch), or securities Alliance judges
to be of comparable investment quality, if there are prospects for an upgrade or
a favorable conversion into equity securities. If the credit rating of a
security held by the Fund falls below its rating at the time of purchase (or
Alliance determines that the quality of such security has so deteriorated), the
Fund may continue to hold the security if such investment is considered
appropriate under the circumstances.
The Fund may also: (i) invest in "zero-coupon" bonds and "payment-in-kind"
bonds; (ii) invest in foreign securities, although the Fund will not generally
invest more than 15% of its total assets in foreign securities; (iii) invest in
securities that are not publicly traded, including Rule 144A securities; (iv)
buy or sell foreign currencies, options on foreign currencies, foreign currency
futures contracts (and related options) and deal in forward foreign exchange
contracts; (v) lend portfolio securities amounting to not more than 25% of its
total assets; (vi) enter into repurchase agreements of up to 25% of its total
assets and purchase and sell securities on a forward commitment basis; (vii) buy
and sell stock index futures contracts and buy and sell options on those
contracts and on stock indices; (viii) purchase and sell futures contracts,
options thereon and options with respect to U.S. Treasury securities; (ix) write
covered call and put options on securities it owns or in which it may invest;
and (x) purchase and sell put and call options. For additional information on
the use, risks and costs of these policies and practices see "Additional
Investment Practices."
Alliance Premier Growth Fund
Alliance Premier Growth Fund, Inc. ("Premier Growth Fund") is a diversified
investment company that seeks long-term growth of capital by investing
predominantly in the equity securities of a limited number of large, carefully
selected, high-quality U.S. companies that are judged likely to achieve superior
earnings growth. Normally, about 40 companies will be represented in the Fund's
portfolio, with the 25 most highly regarded of these companies usually
constituting approximately 70% of the Fund's net assets. The Fund is thus
atypical from most equity mutual funds in its focus on a relatively small number
of intensively researched companies and is designed for those seeking to
accumulate capital over time with less volatility than that associated with
investment in smaller companies.
As a matter of fundamental policy, the Fund normally invests at least 85% of its
total assets in the equity securities of U.S. companies. These are companies (i)
organized under U.S. law that have their principal office in the U.S., and (ii)
the equity securities of which are traded principally in the U.S.
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Alliance's investment strategy for the Fund emphasizes stock selection and
investment in the securities of a limited number of issuers. Alliance relies
heavily upon the fundamental analysis and research of its large internal
research staff, which generally follows a primary research universe of more than
600 companies that have strong management, superior industry positions,
excellent balance sheets and superior earnings growth prospects. An emphasis is
placed on identifying companies whose substantially above average prospective
earnings growth is not fully reflected in current market valuations.
In managing the Fund, Alliance seeks to utilize market volatility judiciously
(assuming no change in company fundamentals), striving to capitalize on
apparently unwarranted price fluctuations, both to purchase or increase
positions on weakness and to sell or reduce overpriced holdings. The Fund
normally remains nearly fully invested and does not take significant cash
positions for market timing purposes. During market declines, while adding to
positions in favored stocks, the Fund becomes somewhat more aggressive,
gradually reducing the number of companies represented in its portfolio.
Conversely, in rising markets, while reducing or eliminating fully valued
positions, the Fund becomes somewhat more conservative, gradually increasing the
number of companies represented in its portfolio. Alliance thus seeks to gain
positive returns in good markets while providing some measure of protection in
poor markets.
Alliance expects the average market capitalization of companies represented in
the Fund's portfolio normally to be in the range, or in excess, of the average
market capitalization of companies comprising the "S&P 500" (the Standard &
Poor's 500 Composite Stock Price Index, a widely recognized unmanaged index of
market activity).
The Fund may also: (i) invest up to 20% of its net assets in convertible
securities of companies whose common stocks are eligible for purchase by it;
(ii) invest up to 5% of its net assets in rights or warrants; (iii) invest up to
15% of its total assets in securities of foreign issuers whose common stocks are
eligible for purchase by it; (iv) purchase and sell exchange-traded index
options and stock index futures contracts; and (v) write covered exchange-traded
call options on common stocks, unless as a result, the amount of its securities
subject to call options would exceed 15% of its total assets, and purchase and
sell exchange-traded call and put options on common stocks written by others,
but the total cost of all options held by the Fund (including exchange-traded
index options) may not exceed 10% of its total assets. For additional
information on the use, risks and costs of these policies and practices see
"Additional Investment Practices." The Fund will not write put options.
Alliance Technology Fund
Alliance Technology Fund, Inc. ("Technology Fund") is a diversified investment
company that emphasizes growth of capital and invests for capital appreciation,
and only incidentally for current income. The Fund may seek income by writing
listed call options. The Fund invests primarily in securities of companies
expected to benefit from technological advances and improvements (i.e.,
companies that use technology extensively in the development of new or improved
products or processes). The Fund will normally have at least 80% of its assets
invested in the securities of these companies. The Fund normally will have
substantially all its assets invested in equity securities, but it also invests
in debt securities offering an opportunity for price appreciation. The Fund will
invest in listed and unlisted securities and U.S. and foreign securities, but it
will not purchase a foreign security if as a result 10% or more of the Fund's
total assets would be invested in foreign securities.
The Fund's policy is to invest in any company and industry and in any type of
security with potential for capital appreciation. It invests in well-known and
established companies and in new and unseasoned companies.
The Fund may also: (i) write and purchase exchange-listed call options and
purchase listed put options, including exchange-traded index put options; (ii)
invest up to 10% of its total assets in warrants; (iii) invest in restricted
securities and in other assets having no ready market if as a result no more
than 10% of the Fund's net assets are invested in such securities and assets;
(iv) lend portfolio securities equal in value to not more than 30% of the Fund's
total assets; and (v) invest up to 10% of its total assets in foreign
securities. For additional information on the use, risks and costs of the
policies and practices see "Additional Investment Practices."
Alliance Quasar Fund
Alliance Quasar Fund, Inc. ("Quasar Fund") is a diversified investment company
that seeks growth of capital by pursuing aggressive investment policies. It
invests for capital appreciation and only incidentally for current income. The
selection of securities based on the possibility of appreciation cannot prevent
loss in value. Moreover, because the Fund's investment policies are aggressive,
an investment in the Fund is risky and investors who want assured income or
preservation of capital should not invest in the Fund.
The Fund invests in any company and industry and in any type of security with
potential for capital appreciation. It invests in well-known and established
companies and in new and unseasoned companies. When selecting securities,
Alliance considers the economic and political outlook, the values of specific
securities relative to other investments, trends in the determinants of
corporate profits and management capability and practices.
The Fund invests principally in equity securities, but it also invests to a
limited degree in non-convertible bonds and preferred stocks. The Fund invests
in listed and unlisted U.S. and foreign securities. The Fund periodically
invests in special situations, which occur when the securities of a company are
expected to appreciate due to a development particularly or uniquely applicable
to that company and regardless of general business conditions or movements of
the market as a whole.
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The Fund may also: (i) invest in restricted securities and in other assets
having no ready market, but not more than 10% of its total assets may be
invested in such securities or assets; (ii) make short sales of securities
"against the box," but not more than 15% of its net assets may be deposited on
short sales; and (iii) write call options and purchase and sell put and call
options written by others. For additional information on the use, risks and
costs of these policies and practices see "Additional Investment Practices."
GLOBAL STOCK FUNDS
The Global Stock Funds have been designed to enable investors to participate in
the potential for long-term capital appreciation available from investment in
foreign securities.
Alliance International Fund
Alliance International Fund ("International Fund") is a diversified investment
company that seeks a total return on its assets from long-term growth of capital
and from income primarily through a broad portfolio of marketable securities of
established non-U.S. companies, companies participating in foreign economies
with prospects for growth, including U.S. companies having their principal
activities and interests outside the U.S. and foreign government securities.
Normally, more than 80% of the Fund's assets will be invested in such issuers.
The Fund expects to invest primarily in common stocks of established non-U.S.
companies that Alliance believes have potential for capital appreciation or
income or both, but the Fund is not required to invest exclusively in common
stocks or other equity securities, and it may invest in any other type of
investment grade security, including convertible securities, as well as in
warrants, or obligations of the U.S. or foreign governments and their political
subdivisions.
The Fund intends to diversify its investments broadly among countries and
normally invests in at least three foreign countries, although it may invest a
substantial portion of its assets in one or more of such countries. In this
regard, at December 31, 1997, approximately 20% of the Fund's assets were
invested in securities of Japanese issuers. The Fund may invest in companies,
wherever organized, that Alliance judges have their principal activities and
interests outside the U.S. These companies may be located in developing
countries, which involves exposure to economic structures that are generally
less diverse and mature, and to political systems which can be expected to have
less stability, than those of developed countries. The Fund currently does not
intend to invest more than 10% of its total assets in companies in, or
governments of, developing countries.
The Fund may also: (i) purchase or sell forward foreign currency exchange
contracts; (ii) write, sell and purchase U.S. or foreign exchange-listed put and
call options, including exchange-traded index options; (iii) enter into
financial futures contracts, including contracts for the purchase or sale for
future delivery of foreign currencies and stock index futures, and purchase and
write put and call options on futures contracts traded on U.S. or foreign
exchanges or over-the-counter; (iv) purchase and write put options on foreign
currencies traded on securities exchanges or boards of trade or
over-the-counter; (v) lend portfolio securities equal in value to not more than
30% of its total assets; and (vi) enter into repurchase agreements of up to
seven days' duration, provided that not more than 10% of the Fund's total assets
would be so invested. For additional information on the use, risks and costs of
these policies and practices see "Additional Investment Practices."
Alliance Worldwide Privatization Fund
Alliance Worldwide Privatization Fund, Inc. ("Worldwide Privatization Fund") is
a non-diversified investment company that seeks long-term capital appreciation.
As a fundamental policy, the Fund invests at least 65% of its total assets in
equity securities issued by enterprises that are undergoing, or have undergone,
privatization (as described below), although normally significantly more of its
assets will be invested in such securities. The balance of its investments will
include securities of companies believed by Alliance to be beneficiaries of
privatizations. The Fund is designed for investors desiring to take advantage of
investment opportunities, historically inaccessible to U.S. individual
investors, that are created by privatizations of state enterprises in both
established and developing economies, including those in Western Europe and
Scandinavia, Australia, New Zealand, Latin America, Asia and Eastern and Central
Europe and, to a lesser degree, Canada and the United States.
The Fund's investments in enterprises undergoing privatization may comprise
three distinct situations. First, the Fund may invest in the initial offering of
publicly traded equity securities (an "initial equity offering") of a
government-or state-owned or controlled company or enterprise (a "state
enterprise"). Secondly, the Fund may purchase securities of a current or former
state enterprise following its initial equity offering. Finally, the Fund may
make privately negotiated purchases of stock or other equity interests in a
state enterprise that has not yet conducted an initial equity offering. Alliance
believes that substantial potential for capital appreciation exists as
privatizing enterprises rationalize their management structures, operations and
business strategies in order to compete efficiently in a market economy, and the
Fund will thus emphasize investments in such enterprises.
The Fund diversifies its investments among a number of countries and normally
invests in issuers based in at least four, and usually considerably more,
countries. No more than 15% of the Fund's total assets, however, will be
invested in issuers in any one foreign country, except that the Fund may invest
up to 30% of its total assets in issuers in any one of France, Germany, Great
Britain, Italy and Japan. The Fund may invest all of its assets within a single
region of the world. To the extent that the Fund's assets are invested within
any one region, the Fund may be subject to any special risks that may be
associated with that region.
Privatization is a process through which the ownership and control of companies
or assets changes in whole or in part from the public sector to the private
sector. Through
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privatization a government or state divests or transfers all or a portion of its
interest in a state enterprise to some form of private ownership. Governments
and states with established economies, including France, Great Britain, Germany
and Italy, and those with developing economies, including Argentina, Mexico,
Chile, Indonesia, Malaysia, Poland and Hungary, are engaged in privatizations.
The Fund will invest in any country believed to present attractive investment
opportunities.
A major premise of the Fund's approach is that the equity securities of
privatized companies offer opportunities for significant capital appreciation.
In particular, because privatizations are integral to a country's economic
restructuring, securities sold in initial equity offerings often are priced
attractively so as to secure the issuer's successful transition to private
sector ownership. Additionally, these enterprises often dominate their local
markets and typically have the potential for significant managerial and
operational efficiency gains.
Although the Fund anticipates that it will not concentrate its investments in
any industry, it is permitted to invest more than 25% of its total assets in
issuers whose primary business activity is that of national commercial banking.
Prior to so concentrating, however, the Fund's Directors must determine that its
ability to achieve its investment objective would be adversely affected if it
were not permitted to concentrate. The staff of the Commission is of the view
that registered investment companies may not, absent shareholder approval,
change between concentration and non-concentration in a single industry. The
Fund disagrees with the staff's position but has undertaken that it will not
concentrate in the securities of national commercial banks until, if ever, the
issue is resolved. If the Fund were to invest more than 25% of its total assets
in national commercial banks, the Fund's performance could be significantly
influenced by events or conditions affecting this industry, which is subject to,
among other things, increases in interest rates and deteriorations in general
economic conditions, and the Fund's investments may be subject to greater risk
and market fluctuation than if its portfolio represented a broader range of
investments.
The Fund may invest up to 35% of its total assets in debt securities and
convertible debt securities of issuers whose common stocks are eligible for
purchase by the Fund. The Fund may maintain not more than 5% of its net assets
in lower-rated securities. See "Risk Considerations--Securities Ratings" and
"--Investment in Lower-Rated Fixed-Income Securities." The Fund will not retain
a non-convertible security that is downgraded below C or determined by Alliance
to have undergone similar credit quality deterioration following purchase.
The Fund may also: (i) invest up to 20% of its total assets in rights or
warrants; (ii) write covered put and call options and purchase put and call
options on securities of the types in which it is permitted to invest and on
exchange-traded index options; (iii) enter into contracts for the purchase or
sale for future delivery of fixed-income securities or foreign currencies, or
contracts based on financial indices, including any index of U.S. Government
securities, foreign government securities, or common stock and may purchase and
write options on future contracts; (iv) purchase and write put and call options
on foreign currencies for hedging purposes; (v) purchase or sell forward
contracts; (vi) enter in forward commitments for the purchase or sale of
securities; (vii) enter into standby commitment agreements; (viii) enter into
currency swaps for hedging purposes; (ix) enter into repurchase agreements
pertaining to U.S. Government securities with member banks of the Federal
Reserve System or primary dealers in such securities; (x) make short sales of
securities or maintain a short position; and (xi) make secured loans of its
portfolio securities not in excess of 30% of its total assets to entities with
which it can enter into repurchase agreements. For additional information on the
use, risks and costs of these policies and practices see "Additional Investment
Practices."
Alliance New Europe Fund
Alliance New Europe Fund, Inc. ("New Europe Fund") is a non-diversified
investment company that seeks long-term capital appreciation through investment
primarily in the equity securities of companies based in Europe. The Fund
intends to invest substantially all of its assets in the equity securities of
European companies and has a fundamental policy of normally investing at least
65% of its total assets in such securities. Up to 35% of its total assets may be
invested in high quality U.S. dollar or foreign currency denominated
fixed-income securities issued or guaranteed by European governmental entities,
or by European or multinational companies or supranational organizations.
Alliance believes that the quickening pace of economic integration and political
change in Europe creates the potential for many European companies to experience
rapid growth and that the emergence of new market economies in Europe and the
broadening and strengthening of other European economies may significantly
accelerate economic development. The Fund will invest in companies that Alliance
believes possess rapid growth potential. Thus, the Fund will emphasize
investments in larger, established companies, but will also invest in smaller,
emerging companies.
In recent years, economic ties between the former "east bloc" countries of
Eastern Europe and certain other European countries have been strengthened.
Alliance believes that as this strengthening continues, some Western European
financial institutions and other companies will have special opportunities to
facilitate East-West transactions. The Fund will seek investment opportunities
among such companies and, as such become available, within the former "east
bloc," although the Fund will not invest more than 20% of its total assets in
issuers based therein, or more than 10% of its total assets in issuers based in
any one such country.
The Fund diversifies its investments among a number of European countries and,
under normal circumstances, will invest in companies based in at least three
such countries. Subject to the foregoing and to the limitation on investment in
any one former "east bloc" country, the Fund may invest
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without limit in a single European country. While the Fund does not intend to
concentrate its investments in a single country, at times 25% or more of its
assets may be invested in issuers located in a single country. During such
times, the Fund would be subject to a correspondingly greater risk of loss due
to adverse political or regulatory developments, or an economic downturn, within
that country. In this regard, at December 31, 1997, approximately 24% of the
Fund's assets were invested in securities of issuers in the United Kingdom.
The Fund may also: (i) invest up to 10% of its total assets in securities for
which there is no ready market; (ii) invest up to 20% of its total assets in
warrants and rights to purchase equity securities of European companies; (iii)
invest in depositary receipts or other securities convertible into securities of
companies based in European countries, debt securities of supranational entities
denominated in the currency of any European country, debt securities denominated
in European Currency Units of an issuer in a European country (including
supranational issuers) and "semi-governmental securities"; (iv) purchase and
sell forward contracts; (v) write, sell and purchase exchange-traded put and
call options, including exchange-traded index options; (vi) enter into financial
futures contracts, including contracts for the purchase or sale for future
delivery of foreign currencies and futures contracts based on stock indices, and
purchase and write options on futures contracts; (vii) purchase and write put
options on foreign currencies traded on securities exchanges or boards of trade
or over-the-counter; (viii) make secured loans of portfolio securities not in
excess of 30% of its total assets to brokers, dealers and financial
institutions; (ix) enter into forward commitments for the purchase or sale of
securities; and (x) enter into standby commitment agreements. For additional
information on the use, risks and costs of these policies and practices see
"Additional Investment Practices."
Alliance All-Asia Investment Fund
Alliance All-Asia Investment Fund, Inc. ("All-Asia Investment Fund") is a
non-diversified investment company whose investment objective is to seek
long-term capital appreciation. In seeking to achieve its investment objective,
the Fund will invest at least 65% of its total assets in equity securities (for
the purposes of this investment policy, rights, warrants and options to purchase
common stocks are not deemed to be equity securities), preferred stocks and
equity-linked debt securities issued by Asian companies. The Fund may invest up
to 35% of its total assets in debt securities issued or guaranteed by Asian
companies or by Asian governments, their agencies or instrumentalities. The Fund
may also invest in securities issued by non-Asian issuers, provided that the
Fund will invest at least 80% of its total assets in securities issued by Asian
companies and the Asian debt securities referred to above. The Fund expects to
invest, from time to time, a significant portion, but less than 50%, of its
assets in equity securities of Japanese companies.
In the past decade, Asian countries generally have experienced a high level of
real economic growth due to political and economic changes, including foreign
investment and reduced government intervention in the economy. Alliance believes
that certain conditions exist in Asian countries which create the potential for
continued rapid economic growth. These conditions include favorable demographics
and competitive wage rates, increasing levels of foreign direct investment,
rising per capita incomes and consumer demand, a high savings rate and numerous
privatization programs. Asian countries are also becoming more industrialized
and are increasing their intra-Asian exports while reducing their dependence on
Western export demand. Alliance believes that these conditions are important to
the long-term economic growth of Asian countries.
As the economies of many Asian countries move through the "emerging market"
stage, thus increasing the supply of goods, services and capital available to
less developed Asian markets and helping to spur economic growth in those
markets, the potential is created for many Asian companies to experience rapid
growth. In addition, many Asian companies the securities of which are listed on
exchanges in more developed Asian countries will be participants in the rapid
economic growth of the lesser developed countries. These companies generally
offer the advantages of more experienced management and more developed market
regulation.
As their economies have grown, the securities markets in Asian countries have
also expanded. New exchanges have been created and the number of listed
companies, annual trading volume and overall market capitalization have
increased significantly. Additionally, new markets continue to open to foreign
investments. For example, South Korea and India have recently relaxed investment
restrictions and Vietnamese direct investments have recently become available to
U.S. investors. The Fund also offers investors the opportunity to access
relatively restricted markets. Alliance believes that investment opportunities
in Asian countries will continue to expand.
The Fund will invest in companies believed to possess rapid growth potential.
Thus, the Fund will invest in smaller, emerging companies, but will also invest
in larger, more established companies in such growing economic sectors as
capital goods, telecommunications and consumer services.
The Fund will invest in investment grade debt securities, except that the Fund
may maintain not more than 5% of its net assets in lower-rated securities and
lower-rated loans and other lower-rated direct debt instruments. See "Risk
Considerations--Securities Ratings," "--Investment in Lower-Rated Fixed-Income
Securities" and Appendix C in the Fund's Statement of Additional Information for
a description of such ratings. The Fund will not retain a security that is
downgraded below C or determined by Alliance to have undergone similar credit
quality deterioration following purchase.
The Fund may also: (i) invest up to 25% of its net assets in the convertible
securities of companies whose common stocks are eligible for purchase by the
Fund; (ii) invest up to 20% of its net assets in rights or warrants; (iii)
invest in depositary receipts, instruments of supranational entities denominated
in
24
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the currency of any country, securities of multinational companies and
"semi-governmental securities;" (iv) invest up to 25% of its net assets in
equity-linked debt securities with the objective of realizing capital
appreciation; (v) invest up to 25% of its net assets in loans and other direct
debt instruments; (vi) write covered put and call options on securities of the
types in which it is permitted to invest and on exchange-traded index options;
(vii) enter into contracts for the purchase or sale for future delivery of
fixed-income securities or foreign currencies, or contracts based on financial
indices, including any index of U.S. Government securities, securities issued by
foreign government entities, or common stock and may purchase and write options
on future contracts; (viii) purchase and write put and call options on foreign
currencies for hedging purposes; (ix) purchase or sell forward contracts; (x)
enter into interest rate swaps and purchase or sell interest rate caps and
floors; (xi) enter into forward commitments for the purchase or sale of
securities; (xii) enter into standby commitment agreements; (xiii) enter into
currency swaps for hedging purposes; (xiv) enter into repurchase agreements
pertaining to U.S. Government securities with member banks of the Federal
Reserve System or primary dealers in such securities; (xv) make short sales of
securities or maintain a short position, in each case only if "against the box;"
and (xvi) make secured loans of its portfolio securities not in excess of 30% of
its total assets to entities with which it can enter into repurchase agreements.
For additional information on the use, risks and costs of these policies and
practices see "Additional Investment Practices."
Alliance Global Small Cap Fund
Alliance Global Small Cap Fund, Inc. ("Global Small Cap Fund") is a diversified
investment company that seeks long-term growth of capital through investment in
a global portfolio of the equity securities of selected companies with
relatively small market capitalization. The Fund's portfolio emphasizes
companies with market capitalizations that would have placed them (when
purchased) in about the smallest 20% by market capitalization of actively traded
U.S. companies, or market capitalizations of up to about $1.5 billion. Because
the Fund applies the U.S. size standard on a global basis, its foreign
investments might rank above the lowest 20%, and, in fact, might in some
countries rank among the largest, by market capitalization in local markets.
Normally, the Fund invests at least 65% of its assets in equity securities of
these smaller capitalization issuers, and these issuers are located in at least
three countries, one of which may be the U.S. Up to 35% of the Fund's total
assets may be invested in securities of companies whose market capitalizations
exceed the Fund's size standard. The Fund's portfolio securities may be listed
on a U.S. or foreign exchange or traded over-the-counter.
Alliance believes that smaller capitalization issuers often have sales and
earnings growth rates exceeding those of larger companies, and that these growth
rates tend to cause more rapid share price appreciation. Investing in smaller
capitalization stocks, however, involves greater risk than is associated with
larger, more established companies. For example, smaller capitalization
companies often have limited product lines, markets, or financial resources.
They may be dependent for management on one or a few key persons, and can be
more susceptible to losses and risks of bankruptcy. Their securities may be
thinly traded (and therefore have to be sold at a discount from current market
prices or sold in small lots over an extended period of time), may be followed
by fewer investment research analysts and may be subject to wider price swings
and thus may create a greater chance of loss than when investing in securities
of larger capitalization companies. Transaction costs in small capitalization
stocks may be higher than in those of larger capitalization companies.
The Fund may also: (i) invest up to 10% of its total assets in securities for
which there is no ready market; (ii) invest up to 20% of its total assets in
warrants to purchase equity securities; (iii) invest in depositary receipts or
other securities representing securities of companies based in countries other
than the U.S.; (iv) purchase or sell forward foreign currency contracts; (v)
write and purchase exchange-traded call options and purchase exchange-traded put
options, including put options on market indices; and (vi) make secured loans of
portfolio securities not in excess of 30% of its total assets to brokers,
dealers and financial institutions. For additional information on the use, risks
and costs of these policies and practices see "Additional Investment Practices."
Alliance Global Environment Fund
Alliance Global Environment Fund, Inc. ("Global Environment Fund") is a
non-diversified investment company that seeks long-term capital appreciation
through investment in equity securities of Eligible Companies. For purposes of
the Fund's investment objective and investment policies, "equity securities" are
common stocks (but not preferred stocks), rights or warrants to subscribe for or
purchase common stocks, and preferred stocks or debt securities that are
convertible into common stocks without the payment of any further consideration.
Until October 3, 1997, the Fund operated as a closed-end investment company, and
its common stock (which then comprised a single class) was listed on the
Exchange.
The Fund invests in two categories of Eligible Companies--"Environmental
Companies" and "Beneficiary Companies." Environmental Companies are those that
have a principal business involving the sale of systems or services intended to
foster environmental protection, such as waste treatment and disposal,
remediation, air pollution control and recyclying. Under normal circumstances,
the Fund invests at least 65% of its total assets in equity securities of
Environmental Companies. Beneficiary Companies are those whose principal
businesses lie outside the environmental sector but nevertheless anticipate
environmental regulations or consumer preferences through the development of new
products, processes or services that are intended to contribute to a cleaner and
healthier environment. Examples of such companies could be companies that
anticipate the demand for plastic substitutes, aerosol substitutes, alternative
fuels and processes that generate less hazardous waste. In this regard,
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the Fund may invest in an issuer with a broadly diversified business only a part
of which provides such products, processes or services, when Alliance believes
that these products, processes or services will yield a competitive advantage
that significantly enhances the issuer's growth prospects. As a matter of
fundamental policy, the Fund will, under normal circumstances, invest
substantially all of its total assets in equity securities of Eligible
Companies.
A major premise of the Fund's investment approach is that environmental concerns
will be a significant source of future growth opportunities, and that
Environmental Companies will see an increased demand for their systems and
services. Environmental Companies operate in the areas of pollution control,
clean energy, solid waste management, hazardous waste treatment and disposal,
pulp and paper recycling, waste-to-energy alternatives, biodegradable cartons,
packages, plastics and other products, remedial projects and emergency cleanup
efforts, manufacture of environmental supplies and equipment, the achievement of
purer air, groundwater and foods and the detection, evaluation and treatment of
both existing and potential environmental problems including, among others, air
pollution and acid rain.
The environmental services industry is generally positively affected by
increasing governmental action intended to foster environmental protection. As
environmental regulations are developed and enforced, Environmental Companies
providing the means of compliance with such regulations are afforded substantial
opportunities for growth. Beneficiary Companies may also derive an advantage to
the extent that they have anticipated environmental regulation and are therefore
at a competitive advantage.
In the view of Alliance, increasing public and political awareness of
environmental concerns and resultant environmental regulations are long-term
phenomena that are driven by an emerging global consensus that environmental
protection is a vital and increasingly immediate priority. Alliance believes
that Eligible Companies based in the United States and other economically
developed countries will have increasing opportunities for earnings growth
resulting not only from an increased demand for their existing products or
services but also from innovative responses to changing regulations and
priorities and enforcement policies. Such opportunities will arise, in the
opinion of Alliance, not only within developed countries but also within many
economically developing countries, such as those of Eastern Europe and the
Pacific Rim. These countries lag well behind developed countries in the
conservation and efficient use of natural resources and in their implementation
of policies which protect the environment.
Alliance believes that global investing offers opportunities for superior
investment returns. The Fund spreads investment risk among the capital markets
of a number of countries and invests in equity securities of companies based in
at least three, and normally considerably more, such countries. The percentage
of the Fund's assets invested in securities of companies in a particular country
or denominated in a particular currency will vary in accordance with Alliance's
assessment of the appreciation potential of such securities and the strength of
that currency. As of December 31, 1997, approximately 86% of the Fund's net
assets were invested in equity securities of U.S. companies.
The Fund may also: (i) invest up to 20% of its total assets in warrants to
purchase equity securities to the extent consistent with its investment
objective: (ii) invest in depositary receipts; (iii) purchase and write put and
call options on foreign currencies for hedging purposes; (iv) enter into forward
foreign currency transactions for hedging purposes; (v) invest in currency
futures and options on such futures for hedging purposes; and (vi) make secured
loans of its portfolio securities not in excess of 30% of its total assets. For
additional information on the use, risks and costs of these policies and
practices see "Additional Investment Practices."
TOTAL RETURN FUNDS
The Total Return Funds have been designed to provide a range of investment
alternatives to investors seeking both growth of capital and current income.
Alliance Strategic Balanced Fund
Alliance Strategic Balanced Fund ("Strategic Balanced Fund") is a diversified
investment company that seeks a high long-term total return by investing in a
combination of equity and debt securities. The portion of the Fund's assets
invested in each type of security varies in accordance with economic conditions,
the general level of common stock prices, interest rates and other relevant
considerations, including the risks associated with each investment medium. The
Fund's investment objective is not fundamental.
The Fund's equity securities will generally consist of dividend-paying common
stocks and other equity securities of companies with favorable earnings outlooks
and long-term growth rates that Alliance expects will exceed that of the U.S.
economy. The Fund's debt securities may include U.S. Government securities and
securities issued by private corporations. The Fund may also invest in
mortgage-backed securities, adjustable rate securities, asset-backed securities
and so-called "zero-coupon" bonds and "payment-in-kind" bonds.
As a fundamental policy, the Fund will invest at least 25% of its total assets
in fixed-income securities, which for this purpose include debt securities,
preferred stocks and that portion of the value of convertible securities that is
attributable to the fixed-income characteristics of those securities.
The Fund's debt securities will generally be of investment grade. See "Risk
Considerations--Securities Ratings" and "Investment in Lower-Rated Fixed-Income
Securities." In the event that the rating of any debt securities held by the
Fund falls below investment grade, the Fund will not be obligated to dispose of
such obligations and may continue to hold them if considered appropriate under
the circumstances.
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The Fund may also: (i) invest in foreign securities, although the Fund will not
generally invest more than 15% of its total assets in foreign securities; (ii)
invest, without regard to this 15% limit, in Eurodollar CDs, which are
dollar-denominated certificates of deposit issued by foreign branches of U.S.
banks that are not insured by any agency or instrumentality of the U.S.
Government; (iii) write covered call and put options on securities it owns or in
which it may invest; (iv) buy and sell put and call options and buy and sell
combinations of put and call options on the same underlying securities; (v) lend
portfolio securities amounting to not more than 25% of its total assets; (vi)
enter into repurchase agreements on up to 25% of its total assets; (vii)
purchase and sell securities on a forward commitment basis; (viii) buy or sell
foreign currencies, options on foreign currencies, foreign currency futures
contracts (and related options) and deal in forward foreign exchange contracts;
(ix) buy and sell stock index futures contracts and buy and sell options on
those contracts and on stock indices; (x) purchase and sell futures contracts,
options thereon and options with respect to U.S. Treasury securities; and (xi)
invest in securities that are not publicly traded, including Rule 144A
securities. For additional information on the use, risks and costs of these
policies and practices see "Additional Investment Practices."
Alliance Balanced Shares
Alliance Balanced Shares, Inc. ("Balanced Shares") is a diversified investment
company that seeks a high return through a combination of current income and
capital appreciation. Although the Fund's investment objective is not
fundamental, the Fund is a "balanced fund" as a matter of fundamental policy.
The Fund will not purchase a security if as a result less than 25% of its total
assets will be in fixed-income senior securities (including short- and long-term
debt securities, preferred stocks, and convertible debt securities and
convertible preferred stocks to the extent that their values are attributable to
their fixed-income characteristics). Subject to these restrictions, the
percentage of the Fund's assets invested in each type of security will vary. The
Fund's assets are invested in U.S. Government securities, bonds, senior debt
securities and preferred and common stocks in such proportions and of such type
as are deemed best adapted to the current economic and market outlooks. The Fund
may invest up to 15% of the value of its total assets in foreign equity and
fixed-income securities eligible for purchase by the Fund under its investment
policies described above. See "Risk Considerations--Foreign Investment."
The Fund may also: (i) enter into contracts for the purchase or sale for future
delivery of foreign currencies; and (ii) purchase and write put and call options
on foreign currencies and enter into forward foreign currency exchange contracts
for hedging purposes. Subject to market conditions, the Fund may also seek to
realize income by writing covered call options listed on a domestic exchange.
For additional information on the use, risks and costs of these policies and
practices see "Additional Investment Practices."
Alliance Income Builder Fund
Alliance Income Builder Fund, Inc. ("Income Builder Fund") is a non-diversified
investment company that seeks an attractive level of current income and
long-term growth of income and capital by investing principally in fixed-income
securities and dividend-paying common stocks. Its investments in equity
securities emphasize common stocks of companies with a historical or projected
pattern of paying rising dividends. Normally, at least 65% of the Fund's total
assets are invested in income-producing securities. The Fund may vary the
percentage of assets invested in any one type of security based upon Alliance's
evaluation as to the appropriate portfolio structure for achieving the Fund's
investment objective, although Alliance currently maintains approximately 60% of
the Fund's net assets in fixed-income securities and 40% in equity securities.
The Fund may invest in fixed-income securities of domestic and foreign issuers,
including U.S. Government securities and repurchase agreements pertaining
thereto, corporate fixed-income securities of U.S. issuers, qualifying bank
deposits and prime commercial paper.
The Fund may maintain up to 35% of its net assets in lower-rated securities. See
"Risk Considerations--Securities Ratings" and "--Investment in Lower-Rated
Fixed-Income Securities." The Fund will not retain a non-convertible security
that is downgraded below CCC or determined by Alliance to have undergone similar
credit quality deterioration following purchase.
Foreign securities in which the Fund invests may include fixed-income securities
of foreign corporate and governmental issuers, denominated in U.S. Dollars, and
equity securities of foreign corporate issuers, denominated in foreign
currencies or in U.S. Dollars. The Fund will not invest more than 10% of its net
assets in equity securities of foreign issuers nor more than 15% of its total
assets in issuers of any one foreign country. See "Risk Considerations--Foreign
Investment."
The Fund may also: (i) invest up to 5% of its net assets in rights or warrants;
(ii) invest in depositary receipts and U.S. Dollar denominated securities issued
by supranational entities; (iii) write covered put and call options and purchase
put and call options on securities of the types in which it is permitted to
invest that are exchange-traded; (iv) purchase and sell exchange-traded options
on any securities index composed of the types of securities in which it may
invest; (v) enter into contracts for the purchase or sale for future delivery of
fixed-income securities or foreign currencies, or contracts based on financial
indices, including any index of U.S. Government securities, foreign government
securities, corporate fixed income securities, or common stock, and purchase and
write options on future contracts; (vi) purchase and write put and call options
on foreign currencies and enter into forward contracts for hedging purposes;
(vii) enter into interest rate swaps and purchase or sell interest rate caps and
floors; (viii) enter into forward commitments for the purchase or sale of
securities; (ix) enter into standby commitment agreements;
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(x) enter into repurchase agreements pertaining to U.S. Government securities
with member banks of the Federal Reserve System or primary dealers in such
securities; (xi) make short sales of securities or maintain a short position as
described below under "Additional Investment Policies and Practices--Short
Sales;" and (xii) make secured loans of its portfolio securities not in excess
of 20% of its total assets to brokers, dealers and financial institutions. For
additional information on the use, risks and costs of these policies and
practices see "Additional Investment Practices."
Alliance Utility Income Fund
Alliance Utility Income Fund, Inc. ("Utility Income Fund") is a diversified
investment company that seeks current income and capital appreciation by
investing primarily in equity and fixed-income securities of companies in the
utilities industry. The Fund may invest in securities of both U.S. and foreign
issuers, although no more than 15% of the Fund's total assets will be invested
in issuers in any one foreign country. The utilities industry consists of
companies engaged in (i) the manufacture, production, generation, provision,
transmission, sale and distribution of gas and electric energy, and
communications equipment and services, including telephone, telegraph,
satellite, microwave and other companies providing communication facilities for
the public, or (ii) the provision of other utility or utility-related goods and
services, including, but not limited to, entities engaged in water provision,
cogeneration, waste disposal system provision, solid waste electric generation,
independent power producers and non-utility generators. The Fund is designed to
take advantage of the characteristics and historical performance of securities
of utility companies, many of which pay regular dividends and increase their
common stock dividends over time. As a fundamental policy, the Fund normally
invests at least 65% of its total assets in securities of companies in the
utilities industry. The Fund considers a company to be in the utilities industry
if, during the most recent twelve-month period, at least 50% of the company's
gross revenues, on a consolidated basis, were derived from its utilities
activities.
At least 65% of the Fund's total assets are invested in income-producing
securities, but there is otherwise no limit on the allocation of the Fund's
investments between equity securities and fixed-income securities. The Fund may
maintain up to 35% of its net assets in lower-rated securities. See "Risk
Considerations--Securities Ratings" and "--Investment in Lower-Rated
Fixed-Income Securities." The Fund will not retain a security that is downgraded
below B or determined by Alliance to have undergone similar credit quality
deterioration following purchase.
The United States utilities industry has experienced significant changes in
recent years. Electric utility companies in general have been favorably affected
by lower fuel costs, the full or near completion of major construction programs
and lower financing costs. In addition, many utility companies have generated
cash flows in excess of current operating expenses and construction
expenditures, permitting some degree of diversification into unregulated
businesses. Regulatory changes with respect to nuclear and conventionally fueled
generating facilities, however, could increase costs or impair the ability of
such electric utilities to operate such facilities, thus reducing their ability
to service dividend payments with respect to the securities they issue.
Furthermore, rates of return of utility companies generally are subject to
review and limitation by state public utilities commissions and tend to
fluctuate with marginal financing costs. Rate changes, however, ordinarily lag
behind the changes in financing costs, and thus can favorably or unfavorably
affect the earnings or dividend pay-outs on utilities stocks depending upon
whether such rates and costs are declining or rising.
Gas transmission companies, gas distribution companies and telecommunications
companies are also undergoing significant changes. Gas utilities have been
adversely affected by declines in the prices of alternative fuels, and have also
been affected by oversupply conditions and competition. Telephone utilities are
still experiencing the effects of the break-up of American Telephone & Telegraph
Company, including increased competition and rapidly developing technologies
with which traditional telephone companies now compete. Although there can be no
assurance that increased competition and other structural changes will not
adversely affect the profitability of such utilities, or that other negative
factors will not develop in the future, in Alliance's opinion, increased
competition and change may provide better positioned utility companies with
opportunities for enhanced profitability.
Utility companies historically have been subject to the risks of increases in
fuel and other operating costs, high interest costs, costs associated with
compliance with environmental and nuclear safety regulations, service
interruptions, economic slowdowns, surplus capacity, competition and regulatory
changes. There can also be no assurance that regulatory policies or accounting
standards changes will not negatively affect utility companies' earnings or
dividends. Utility companies are subject to regulation by various authorities
and may be affected by the imposition of special tariffs and changes in tax
laws. To the extent that rates are established or reviewed by governmental
authorities, utility companies are subject to the risk that such authorities
will not authorize increased rates. Because of the Fund's policy of
concentrating its investments in utility companies, the Fund is more susceptible
than most other mutual funds to economic, political or regulatory occurrences
affecting the utilities industry.
Foreign utility companies, like those in the U.S., are generally subject to
regulation, although such regulations may or may not be comparable to domestic
regulations. Foreign utility companies in certain countries may be more heavily
regulated by their respective governments than utility companies located in the
U.S. and, as in the U.S., generally are required to seek government approval for
rate increases. In addition, because many foreign utility companies use fuels
that cause more pollution than those used in the U.S., such utilities may yet be
required to invest in pollution control equipment. Foreign utility regulatory
systems vary from country to country and may
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evolve in ways different from regulation in the U.S. The percentage of the
Fund's assets invested in issuers of particular countries will vary. See "Risk
Considerations--Foreign Investment."
The Fund may invest up to 35% of its total assets in equity and fixed-income
securities of domestic and foreign corporate and governmental issuers other than
utility companies, including U.S. Government securities and repurchase
agreements pertaining thereto, foreign government securities, corporate
fixed-income securities of domestic issuers, corporate fixed-income securities
of foreign issuers denominated in foreign currencies or in U.S. dollars (in each
case including fixed-income securities of an issuer in one country denominated
in the currency of another country), qualifying bank deposits and prime
commercial paper.
The Fund may also: (i) invest up to 30% of its net assets in the convertible
securities of companies whose common stocks are eligible for purchase by the
Fund; (ii) invest up to 5% of its net assets in rights or warrants; (iii) invest
in depositary receipts, securities of supranational entities denominated in the
currency of any country, securities denominated in European Currency Units and
"semi-governmental securities;" (iv) write covered put and call options and
purchase put and call options on securities of the types in which it is
permitted to invest that are exchange-traded and over-the-counter; (v) purchase
and sell exchange-traded options on any securities index composed of the types
of securities in which it may invest; (vi) enter into contracts for the purchase
or sale for future delivery of fixed-income securities or foreign currencies, or
contracts based on financial indices, including an index of U.S. Government
securities, foreign government securities, corporate fixed-income securities, or
common stock, and may purchase and write options on futures contracts; (vii)
purchase and write put and call options on foreign currencies traded on U.S. and
foreign exchanges or over-the-counter for hedging purposes; (viii) purchase or
sell forward contracts; (ix) enter into interest rate swaps and purchase or sell
interest rate caps and floors; (x) enter in forward commitments for the purchase
or sale of securities; (xi) enter into standby commitment agreements; (xii)
enter into repurchase agreements pertaining to U.S. Government securities with
member banks of the Federal Reserve System or primary dealers in such
securities; (xiii) make short sales of securities or maintain a short position
as described below under "Additional Investment Practices--Short Sales;" and
(xiv) make secured loans of its portfolio securities not in excess of 20% of its
total assets to brokers, dealers and financial institutions. For additional
information on the use, risk and costs of these policies and practices, see
"Additional Investment Practices."
Alliance Growth and Income Fund
Alliance Growth and Income Fund, Inc. ("Growth and Income Fund") is a
diversified investment company that seeks appreciation through investments
primarily in dividend-paying common stocks of good quality, although it is
permitted to invest in fixed-income securities and convertible securities.
The Fund may also try to realize income by writing covered call options listed
on domestic securities exchanges. The Fund also invests in foreign securities.
Since the purchase of foreign securities entails certain political and economic
risks, the Fund has restricted its investments in securities in this category to
issues of high quality. The Fund may also purchase and sell financial forward
and futures contracts and options thereon for hedging purposes. For additional
information on the use, risk and costs of these policies and practices, see
"Additional Investment Practices."
Alliance Real Estate Investment Fund
Alliance Real Estate Investment Fund, Inc. ("Real Estate Investment Fund") is a
diversified investment company that seeks a total return on its assets from
long-term growth of capital and from income principally through investing in a
portfolio of equity securities of issuers that are primarily engaged in or
related to the real estate industry.
Under normal circumstances, at least 65% of the Fund's total assets will be
invested in equity securities of real estate investment trusts ("REITs") and
other real estate industry companies. A "real estate industry company" is a
company that derives at least 50% of its gross revenues or net profits from the
ownership, development, construction, financing, management or sale of
commercial, industrial or residential real estate or interests therein. The
equity securities in which the Fund will invest for this purpose consist of
common stock, shares of beneficial interest of REITs and securities with common
stock characteristics, such as preferred stock or convertible securities ("Real
Estate Equity Securities").
The Fund may invest up to 35% of its total assets in (a) securities that
directly or indirectly represent participations in, or are collateralized by and
payable from, mortgage loans secured by real property ("Mortgage-Backed
Securities"), such as mortgage pass-through certificates, real estate mortgage
investment conduit ("REMIC") certificates and collateralized mortgage
obligations ("CMOs") and (b) short-term investments. These instruments are
described below. The risks associated with the Fund's transactions in REMICs,
CMOs and other types of mortgage-backed securities, which are considered to be
derivative securities, may include some or all of the following: market risk,
leverage and volatility risk, correlation risk, credit risk and liquidity and
valuation risk. See "Risk Considerations" for a description of these and other
risks.
As to any investment in Real Estate Equity Securities, Alliance's analysis will
focus on determining the degree to which the company involved can achieve
sustainable growth in cash flow and dividend paying capability. Alliance
believes that the primary determinant of this capability is the economic
viability of property markets in which the company operates and that the
secondary determinant of this capability is the ability of management to add
value through strategic focus and operating expertise. The Fund will purchase
Real Estate Equity Securities when, in the judgment of Alliance, their market
price does not adequately reflect this potential. In making this
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determination, Alliance will take into account fundamental trends in underlying
property markets as determined by proprietary models, site visits conducted by
individuals knowledgeable in local real estate markets, price-earnings ratios
(as defined for real estate companies), cash flow growth and stability, the
relationship between asset value and market price of the securities, dividend
payment history, and such other factors which Alliance may determine from time
to time to be relevant. Alliance will attempt to purchase for the Fund Real
Estate Equity Securities of companies whose underlying portfolios are
diversified geographically and by property type.
The Fund may invest without limitation in shares of REITs. REITs are pooled
investment vehicles which invest primarily in income producing real estate or
real estate related loans or interests. REITs are generally classified as equity
REITs, mortgage REITs or a combination of equity and mortgage REITs. Equity
REITs invest the majority of their assets directly in real property and derive
income primarily from the collection of rents. Equity REITs can also realize
capital gains by selling properties that have appreciated in value. Mortgage
REITs invest the majority of their assets in real estate mortgages and derive
income from the collection of interest payments. Similar to investment companies
such as the Fund, REITs are not taxed on income distributed to shareholders
provided they comply with several requirements of the Code. The Fund will
indirectly bear its proportionate share of expenses incurred by REITs in which
the Fund invests in addition to the expenses incurred directly by the Fund.
Investment Process for Real Estate Equity Securities. The Fund's investment
strategy with respect to Real Estate Equity Securities is based on the premise
that property market fundamentals are the primary determinant of growth
underlying the performance of Real Estate Equity Securities. Value added
management further distinguishes the most attractive Real Estate Equity
Securities. The Fund's research and investment process is designed to identify
those companies with strong property fundamentals and strong management teams.
This process is comprised of real estate market research, specific property
inspection and securities analysis. Alliance believes that this process will
result in a portfolio that will consist of Real Estate Equity Securities of
companies that own assets in the most desirable markets across the country,
diversified geographically and by property type.
In implementing the Fund's research and investment process, Alliance will avail
itself of the consulting services of CB Commercial Real Estate Group, Inc.
("CBC"), a publicly held company and the largest real estate services company in
the United States, comprised of real estate brokerage, property and facilities
management, and real estate finance and investment advisory activities (CBC in
August of 1997 acquired Koll Management Services ("Koll"), which previously
provided these consulting services to Alliance). In 1996, CBC (and Koll, on a
combined basis) completed 25,000 sale and lease transactions, managed over 4,100
client properties, created over $3.5 billion in mortgage originations, and
completed over 2,600 appraisal and consulting assignments. In addition, they
advised and managed for institutions over $4 billion in real estate investments.
As consultant to Alliance, CBC provides access to its proprietary model, REIT o
Score, that analyzes the approximately 12,000 properties owned by these 130
companies. Using proprietary databases and algorithms, CBC analyzes local market
rent, expense, and occupancy trends, market specific transaction pricing,
demographic and economic trends, and leading indicators of real estate supply
such as building permits. Over 650 asset-type specific geographic markets are
analyzed and ranked on a relative scale by CBC in compiling its REIT o Score
database. The relative attractiveness of these real estate industry companies is
similarly ranked based on the composite rankings of the properties they own. See
"Management of the Funds--Consultant to Adviser" for more information about CBC.
The universe of property-owning real estate industry firms consists of
approximately 130 companies of sufficient size and quality to merit
consideration for investment by the Fund. Once the universe of real estate
industry companies has been distilled through the market research process, CBC's
local market presence provides the capability to perform site specific
inspections of key properties. This analysis examines specific location,
condition, and sub-market trends. CBC's use of locally based real estate
professionals provides Alliance with a window on the operations of the portfolio
companies as information can immediately be put in the context of local market
events. Only those companies whose specific property portfolios reflect the
promise of their general markets will be considered for initial and continued
investment by the Fund.
Alliance further screens the universe of real estate industry companies by using
rigorous financial models and by engaging in regular contact with management of
targeted companies. Each management's strategic plan and ability to execute the
plan are determined and analyzed. Alliance will make extensive use of CBC's
network of industry analysts in order to assess trends in tenant industries.
This information is then used to further interpret management's strategic plans.
Financial ratio analysis is used to isolate those companies with the ability to
make value-added acquisitions. This information is combined with property market
trends and used to project future earnings potential.
The short-term investments in which Real Estate Investment Fund may invest are:
corporate commercial paper and other short-term commercial obligations, in each
case rated or issued by companies with similar securities outstanding that are
rated Prime-1, Aa or better by Moody's or A-1, AA or better by S&P; obligations
(including certificates of deposit, time deposits, demand deposits and bankers'
acceptances) of banks with securities outstanding that are rated Prime-1, Aa or
better by Moody's or A-1, AA or better by S&P; and obligations issued or
guaranteed by the U.S. Government or its agencies or instrumentalities with
remaining maturities not exceeding 18 months.
The Fund may invest in debt securities rated BBB or higher by S&P or Baa or
higher by Moody's or, if not so rated, of
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equivalent credit quality as determined by Alliance. The Fund expects that it
will not retain a debt security which is downgraded below BBB or Baa or, if
unrated, determined by Alliance to have undergone similar credit quality
deterioration, subsequent to purchase by the Fund.
The Fund may also engage in the following investment practices to the extent
indicated: (i) invest up to 10% of its net assets in rights or warrants; (ii)
invest up to 15% of its net assets in the convertible securities of companies
whose common stocks are eligible for purchase by the Fund; (iii) lend portfolio
securities equal in value to not more than 25% of total assets; (iv) enter into
repurchase agreements of up to seven days' duration; (v) enter into forward
commitment transactions as long as the Fund's aggregate commitments under such
transactions are not more than 30% of the Fund's total assets; (vi) enter into
standby commitment agreements; (vii) make short sales of securities or maintain
a short position but only if at all times when a short position is open not more
than 25% of the Fund's net assets (taken at market value) is held as collateral
for such sales; and (viii) invest in illiquid securities unless, as a result,
more than 15% of its net assets would be so invested.
ADDITIONAL INVESTMENT PRACTICES
Some or all of the Funds may engage in the following investment practices to the
extent described above.
Convertible Securities. Prior to conversion, convertible securities have the
same general characteristics as non-convertible debt securities, which generally
provide a stable stream of income with yields that are generally higher than
those of equity securities of the same or similar issuers. The price of a
convertible security will normally vary with changes in the price of the
underlying stock, although the higher yield tends to make the convertible
security less volatile than the underlying common stock. As with debt
securities, the market value of convertible securities tends to decrease as
interest rates rise and increase as interest rates decline. While convertible
securities generally offer lower interest or dividend yields than
non-convertible debt securities of similar quality, they offer investors the
potential to benefit from increases in the market price of the underlying common
stock. Convertible debt securities that are rated Baa or lower by Moody's or BBB
or lower by S&P, Duff & Phelps or Fitch and comparable unrated securities as
determined by Alliance may share some or all of the risks of non-convertible
debt securities with those ratings. For a description of these risks, see "Risk
Considerations--Securities Ratings" and "--Investment in Lower-Rated
Fixed-Income Securities."
Rights and Warrants. A 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 thereof. If the
market price of the underlying security is below the exercise price set forth in
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.
Depositary Receipts and Securities of Supranational Entities. Depositary
receipts may not necessarily be denominated in the same currency as the
underlying securities into which they may be converted. In addition, the issuers
of the stock of unsponsored depositary receipts are not obligated to disclose
material information in the United States and, therefore, there may not be a
correlation between such information and the market value of the depositary
receipts. ADRs are depositary receipts typically issued by a U.S. bank or trust
company that evidence ownership of underlying securities issued by a foreign
corporation. GDRs and other types of depositary receipts are typically issued by
foreign banks or trust companies and evidence ownership of underlying securities
issued by either a foreign or a U.S. company. Generally, depositary receipts in
registered form are designed for use in the U.S. securities markets, and
depositary receipts in bearer form are designed for use in foreign securities
markets. For purposes of determining the country of issuance, investments in
depositary receipts of either type are deemed to be investments in the
underlying securities except with respect to Growth Fund, Strategic Balanced
Fund and Income Builder Fund, where investments in ADRs are deemed to be
investments in securities issued by U.S. issuers and those in GDRs and other
types of depositary receipts are deemed to be investments in the underlying
securities.
A supranational entity is an entity designated or supported by the national
government of one or more countries to promote economic reconstruction or
development. Examples of supranational entities include, among others, the World
Bank (International Bank for Reconstruction and Development) and the European
Investment Bank. A European Currency Unit is a basket of specified amounts of
the currencies of the member states of the European Economic Community.
"Semi-governmental securities" are securities issued by entities owned by either
a national, state or equivalent government or are obligations of one of such
government jurisdictions which are not backed by its full faith and credit and
general taxing powers.
Mortgage-Backed Securities. Interest and principal payments (including
prepayments) on the mortgages underlying mortgage-backed securities are passed
through to the holders of the securities. As a result of the pass-through of
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prepayments of principal on the underlying securities, mortgage-backed
securities are often subject to more rapid prepayment of principal than their
stated maturity would indicate. Prepayments occur when the mortgagor on a
mortgage prepays the remaining principal before the mortgage's scheduled
maturity date. Because the prepayment characteristics of the underlying
mortgages vary, it is impossible to predict accurately the realized yield or
average life of a particular issue of pass-through certificates. Prepayments are
important because of their effect on the yield and price of the mortgage-backed
securities. During periods of declining interest rates, prepayments can be
expected to accelerate and a Fund investing in such securities would be required
to reinvest the proceeds at the lower interest rates then available. Conversely,
during periods of rising interest rates, a reduction in prepayments may increase
the effective maturity of the securities, subjecting them to a greater risk of
decline in market value in response to rising interest rates. In addition,
prepayments of mortgages underlying securities purchased at a premium could
result in capital losses.
Adjustable Rate Securities. Adjustable rate securities have interest rates that
are reset at periodic intervals, usually by reference to some interest rate
index or market interest rate. Some adjustable rate securities are backed by
pools of mortgage loans. Although the rate-adjustment feature may reduce sharp
changes in the value of adjustable rate securities, these securities can change
in value based on changes in market interest rates or the issuer's
creditworthiness. Changes in the interest rate on adjustable rate securities may
lag behind changes in prevailing market interest rates. Also, some adjustable
rate securities (or the underlying mortgages) are subject to caps or floors that
limit the maximum change in interest rate.
Asset-Backed Securities. Asset-backed securities (unrelated to first mortgage
loans) represent fractional interests in pools of leases, retail installment
loans, revolving credit receivables and other payment obligations, both secured
and unsecured. These assets are generally held by a trust and payments of
principal and interest or interest only are passed through monthly or quarterly
to certificate holders and may be guaranteed up to certain amounts by letters of
credit issued by a financial institution affiliated or unaffiliated with the
trustee or originator of the trust.
Like mortgages underlying mortgage-backed securities, underlying automobile
sales contracts or credit card receivables are subject to prepayment, which may
reduce the overall return to certificate holders. Certificate holders may also
experience delays in payment on the certificates if the full amounts due on
underlying sales contracts or receivables are not realized by the trust because
of unanticipated legal or administrative costs of enforcing the contracts or
because of depreciation or damage to the collateral (usually automobiles)
securing certain contracts, or other factors.
Zero-Coupon and Payment-in-Kind Bonds. Zero-coupon bonds are issued at a
significant discount from their principal amount in lieu of paying interest
periodically. Payment-in-kind bonds allow the issuer to make current interest
payments on the bonds in additional bonds. Because zero-coupon bonds and
payment-in-kind bonds do not pay current interest in cash, their value is
generally subject to greater fluctuation in response to changes in market
interest rates than bonds that pay interest in cash currently. Both zero-coupon
and payment-in-kind bonds allow an issuer to avoid the need to generate cash to
meet current interest payments. Accordingly, such bonds may involve greater
credit risks than bonds paying interest currently. Even though such bonds do not
pay current interest in cash, a Fund is nonetheless required to accrue interest
income on such investments and to distribute such amounts at least annually to
shareholders. Thus, a Fund could be required at times to liquidate other
investments in order to satisfy its dividend requirements.
Equity-Linked Debt Securities. Equity-linked debt securities are securities with
respect to which the amount of interest and/or principal that the issuer thereof
is obligated to pay is linked to the performance of a specified index of equity
securities. Such amount may be significantly greater or less than payment
obligations in respect of other types of debt securities. Adverse changes in
equity securities indices and other adverse changes in the securities markets
may reduce payments made under, and/or the principal of, equity-linked debt
securities held by the Fund. Furthermore, as with any debt securities, the
values of equity-linked debt securities will generally vary inversely with
changes in interest rates. The Fund's ability to dispose of equity-linked debt
securities will depend on the availability of liquid markets for such
securities. Investment in equity-linked debt securities may be considered to be
speculative. As with other securities, the Fund could lose its entire investment
in equity-linked debt securities.
Loans and Other Direct Debt Instruments. Loans and other direct debt instruments
are interests in amounts owed by a corporate, governmental or other borrower to
another party. They may represent amounts owed to lenders or lending syndicates
(loans and loan participations), to suppliers of goods or services (trade claims
or other receivables), or to other creditors. Direct debt instruments involve
the risk of loss in case of default or insolvency of the borrower and may offer
less legal protection to the Fund in the event of fraud or misrepresentation
than debt securities. In addition, loan participations involve a risk of
insolvency of the lending bank or other financial intermediary. Direct debt
instruments may also include standby financing commitments that obligate the
Fund to supply additional cash to the borrower on demand. Loans and other direct
debt instruments are generally illiquid and may be transferred only through
individually negotiated private transactions.
Purchasers of loans and other forms of direct indebtedness depend primarily upon
the creditworthiness of the borrower for payment of principal and interest.
Direct debt instruments may not be rated by any nationally recognized rating
service. If the Fund does not receive scheduled interest or principal payments
on such indebtedness, the Fund's share price and yield could be adversely
affected. Loans that are fully secured offer the
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Fund more protection than unsecured loans in the event of non-payment of
scheduled interest or principal. However, there is no assurance that the
liquidation of collateral from a secured loan would satisfy the borrower's
obligation, or that the collateral can be liquidated. Indebtedness of borrowers
whose creditworthiness is poor may involve substantial risks, and may be highly
speculative.
Borrowers that are in bankruptcy or restructuring may never pay off their
indebtedness, or may pay only a small fraction of the amount owed. Direct
indebtedness of Asian countries will also involve a risk that the governmental
entities responsible for the repayment of the debt may be unable, or unwilling,
to pay interest and repay principal when due.
Investments in loans through direct assignment of a financial institution's
interests with respect to a loan may involve additional risks to the Fund. For
example, if a loan is foreclosed, the Fund could become part owner of any
collateral, and would bear the costs and liabilities associated with owning and
disposing of the collateral. Direct debt instruments may also involve a risk of
insolvency of the lending bank or other intermediary.
A loan is often administered by a bank or other financial institution that acts
as agent for all holders. The agent administers the terms of the loan, as
specified on the loan agreement. Unless, under the terms of the loan or other
indebtedness, the Fund has direct recourse against the borrower, it may have to
rely on the agent to apply appropriate credit remedies against a borrower. If
assets held by the agent for the benefit of the Fund were determined to be
subject to the claims of the agent's general creditors, the Fund might incur
certain costs and delays in realizing payment on the loan or loan participation
and could suffer a loss of principal or interest.
Direct indebtedness purchased by the Fund may include letters of credit,
revolving credit facilities, or other standby financing commitments obligating
the Fund to pay additional cash on demand. These commitments may have the effect
of requiring the Fund to increase its investment in a borrower at a time when it
would not otherwise have done so, even if the borrower's condition makes it
unlikely that the amount will ever be repaid.
Mortgage-Backed Securities and Associated Risks. Mortgage-Backed Securities
include mortgage pass-through certificates and multiple-class pass-through
securities, such as REMIC pass-through certificates, CMOs and stripped
mortgage-backed securities ("SMBS"), and other types of Mortgage-Backed
Securities that may be available in the future.
Guaranteed Mortgage Pass-Through Securities. Real Estate Investment Fund may
invest in guaranteed mortgage pass-through securities which represent
participation interests in pools of residential mortgage loans and are issued by
U.S. governmental or private lenders and guaranteed by the U.S. Government or
one of its agencies or instrumentalities, including but not limited to the
Government National Mortgage Association ("Ginnie Mae"), the Federal National
Mortgage Association ("Fannie Mae") and the Federal Home Loan Mortgage
Corporation ("Freddie Mac"). Ginnie Mae certificates are guaranteed by the full
faith and credit of the United States Government for timely payment of principal
and interest on the certificates. Fannie Mae certificates are guaranteed by
Fannie Mae, a federally chartered and privately-owned corporation for full and
timely payment of principal and interest on the certificates. Freddie Mac
certificates are guaranteed by Freddie Mac, a corporate instrumentality of the
United States Government, for timely payment of interest and the ultimate
collection of all principal of the related mortgage loans.
Multiple-Class Pass-Through Securities and Collateralized Mortgage Obligations.
Mortgage-Backed Securities also include CMOs and REMIC pass-through or
participation certificates, which may be issued by, among others, U.S.
Government agencies and instrumentalities as well as private lenders. CMOs and
REMIC certificates are issued in multiple classes and the principal of and
interest on the mortgage assets may be allocated among the several classes of
CMOs or REMIC certificates in various ways. Each class of CMOs or REMIC
certificates, often referred to as a "tranche," is issued at a specific
adjustable or fixed interest rate and must be fully retired no later than its
final distribution date. Generally, interest is paid or accrues on all classes
of CMOs or REMIC certificates on a monthly basis. Real Estate Investment Fund
will not invest in the lowest tranche of CMOs and REMIC certificates.
Typically, CMOs are collateralized by Ginnie Mae or Freddie Mac certificates but
also may be collateralized by other mortgage assets such as whole loans or
private mortgage pass-through securities. Debt service on CMOs is provided from
payments of principal and interest on collateral of mortgaged assets and any
reinvestment income thereon.
A REMIC is a CMO that qualifies for special tax treatment under the Code and
invests in certain mortgages primarily secured by interests in real property and
other permitted investments. Investors may purchase "regular" and "residual"
interest shares of beneficial interest in REMIC trusts although the Fund does
not intend to invest in residual interests.
Risks. Investing in Mortgage-Backed Securities involves certain unique risks in
addition to those generally associated with investing in the real estate
industry in general. These unique risks include the failure of a counterparty to
meet its commitments, adverse interest rate changes and the effects of
prepayments on mortgage cash flows. See "Risk Considerations--Mortgage-Backed
Securities" for a more complete description of the characteristics of
Mortgage-Backed Securities and associated risks.
Illiquid Securities. Subject to any more restrictive applicable fundamental
investment policy, none of the Funds will maintain more than 15% of its net
assets in illiquid securities. 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
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of unlisted securities, when market makers do not exist or will not entertain
bids or offers), including many individually negotiated currency swaps and any
assets used to cover currency swaps and most privately negotiated investments in
state enterprises that have not yet conducted an initial equity offering, (ii)
over-the-counter options and assets used to cover over-the-counter options, and
(iii) repurchase agreements not terminable within seven days.
Because of the absence of a trading market for illiquid securities, a Fund may
not be able to realize their full value upon sale. With respect to each Fund
that may invest in such securities, Alliance will monitor their illiquidity
under the supervision of the Directors of the Fund. To the extent permitted by
applicable law, Rule 144A securities will not be treated as "illiquid" for
purposes of the foregoing restriction so long as such securities meet liquidity
guidelines established by a Fund's Directors. Investment in non-publicly traded
securities by each of Growth Fund and Strategic Balanced Fund is restricted to
5% of its total assets (not including for these purposes Rule 144A securities,
to the extent permitted by applicable law) and is also subject to the 15%
restriction on investment in illiquid securities described above.
A Fund that invests in securities for which there is no ready market may
therefore not be able to readily sell such securities. To the extent that these
securities are foreign securities, there is no law in many of the countries in
which a Fund may invest similar to the Securities Act requiring an issuer to
register the sale of securities with a governmental agency or imposing legal
restrictions on resales of securities, either as to length of time the
securities may be held or manner of resale. However, there may be contractual
restrictions on resales of securities.
Options. An option gives the purchaser of the option, upon payment of a premium,
the right to deliver to (in the case of a put) or receive from (in the case of a
call) the writer a specified amount of a security on or before a fixed date at a
predetermined price. A call option written by a Fund is "covered" if the Fund
owns the underlying security, has an absolute and immediate right to acquire
that security upon conversion or exchange of another security it holds, or holds
a call option on the underlying security with an exercise price equal to or less
than that of the call option it has written. A put option written by a Fund is
covered if the Fund holds a put option on the underlying securities with an
exercise price equal to or greater than that of the put option it has written.
A call option is for cross-hedging purposes if a Fund does not own the
underlying security, and is designed to provide a hedge against a decline in
value in another security which the Fund owns or has the right to acquire.
Worldwide Privatization Fund, All-Asia Investment Fund, Income Builder Fund and
Utility Income Fund each may write call options for cross-hedging purposes. A
Fund would write a call option for cross-hedging purposes, instead of writing a
covered call option, when the premium to be received from the cross-hedge
transaction would exceed that which would be received from writing a covered
call option, while at the same time achieving the desired hedge.
In purchasing an option, a Fund would be in a position to realize a gain if,
during the option period, the price of the underlying security increased (in the
case of a call) or decreased (in the case of a put) by an amount in excess of
the premium paid; otherwise the Fund would experience a loss equal to the
premium paid for the option.
If an option written by a Fund were exercised, the Fund would be obligated to
purchase (in the case of a put) or sell (in the case of a call) the underlying
security at the exercise price. The risk involved in writing an option is that,
if the option were exercised, the underlying security would then be purchased or
sold by the Fund at a disadvantageous price. These risks could be reduced by
entering into a closing transaction (i.e., by disposing of the option prior to
its exercise). A Fund retains the premium received from writing a put or call
option whether or not the option is exercised. The writing of covered call
options could result in increases in a Fund's portfolio turnover rate,
especially during periods when market prices of the underlying securities
appreciate.
Technology Fund, Quasar Fund, International Fund, New Europe Fund and Global
Small Cap Fund will not write uncovered call options. Technology Fund and Global
Small Cap Fund will not write a call option if the premium to be received by the
Fund in doing so would not produce an annualized return of at least 15% of the
then current market value of the securities subject to the option (without
giving effect to commissions, stock transfer taxes and other expenses that are
deducted from premium receipts). Technology Fund, Quasar Fund and Global Small
Cap Fund will not write a call option if, as a result, the aggregate of the
Fund's portfolio securities subject to outstanding call options (valued at the
lower of the option price or market value of such securities) would exceed 15%
of the Fund's total assets or more than 10% of the Fund's assets would be
committed to call options that at the time of sale have a remaining term of more
than 100 days. The aggregate cost of all outstanding options purchased and held
by each of Premier Growth Fund, Technology Fund, Quasar Fund and Global Small
Cap Fund will at no time exceed 10% of the Fund's total assets. Neither
International Fund nor New Europe Fund will write uncovered put options.
A Fund that purchases or writes options on securities in privately negotiated
(i.e., over-the-counter) transactions will effect such transactions only with
investment dealers and other financial institutions (such as commercial banks or
savings and loan institutions) deemed creditworthy by Alliance, and Alliance has
adopted procedures for monitoring the creditworthiness of such entities. Options
purchased or written by a Fund in negotiated transactions are illiquid and it
may not be possible for the Fund to effect a closing transaction at an
advantageous time. See "Illiquid Securities."
Options on Securities Indices. An option on a securities index is similar to an
option on a security except that, rather than
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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.
Futures Contracts and Options on Futures Contracts. A "sale" of a futures
contract means the acquisition of a contractual obligation to deliver the
securities or foreign currencies or other commodity called for by the contract
at a specified price on a specified date. A "purchase" of a futures contract
means the incurring of an obligation to acquire the securities, foreign
currencies or other commodity called for by the contract at a specified price on
a specified date. The purchaser of a futures contract on an index agrees to take
or make delivery of an amount of cash equal to the difference between a
specified dollar multiple of the value of the index on the expiration date of
the contract ("current contract value") and the price at which the contract was
originally struck. No physical delivery of the securities underlying the index
is made.
Options on futures contracts written or purchased by a Fund will be traded on
U.S. or foreign exchanges or over-the-counter. These investment techniques will
be used only to hedge against anticipated future changes in market conditions
and interest or exchange rates which otherwise might either adversely affect the
value of the Fund's portfolio securities or adversely affect the prices of
securities which the Fund intends to purchase at a later date.
No Fund will enter into any futures contracts or options on futures contracts if
immediately thereafter the market values of the outstanding futures contracts of
the Fund and the currencies and futures contracts subject to outstanding options
written by the Fund would exceed 50% of its total assets, and Income Builder
Fund will also not do so if immediately thereafter the aggregate of initial
margin deposits on all the outstanding futures contracts of the Fund and
premiums paid on outstanding options on futures contracts would exceed 5% of the
market value of the total assets of the Fund. Premier Growth Fund and Growth and
Income Fund may not purchase or sell a stock index future if immediately
thereafter more than 30% of its total assets would be hedged by stock index
futures. Premier Growth Fund and Growth and Income Fund may not purchase or sell
a stock index future if, immediately thereafter, the sum of the amount of margin
deposits on the Fund's existing futures positions would exceed 5% of the market
value of the Fund's total assets.
Options on Foreign Currencies. As in the case of other kinds of options, the
writing of an option on a foreign currency constitutes only a partial hedge, up
to the amount of the premium received, and a Fund could be required to purchase
or sell foreign currencies at disadvantageous exchange rates, 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. See the Statement of Additional
Information of each Fund that may invest in options on foreign currencies for
further discussion of the use, risks and costs of options on foreign currencies.
Forward Foreign Currency Exchange Contracts. A Fund purchases or sells forward
contracts to minimize the risk to it from adverse changes in the relationship
between the U.S. dollar and other currencies. A forward contract is an
obligation to purchase or sell a specific currency for an agreed price at a
future date, and is individually negotiated and privately traded.
A Fund may enter into a forward contract, for example, when it enters into a
contract for the purchase or sale of a security denominated in a foreign
currency in order to "lock in" the U.S. dollar price of the security
("transaction hedge"). A Fund will not engage in transaction hedges with respect
to the currency of a particular country to an extent greater than the aggregate
amount of the Fund's transactions in that currency. When a Fund believes that a
foreign currency may suffer a substantial decline against the U.S. dollar, it
may enter into a forward sale contract to sell an amount of that foreign
currency approximating the value of some or all of the Fund's portfolio
securities denominated in such foreign currency, or when the Fund believes that
the U.S. dollar may suffer a substantial decline against a foreign currency, it
may enter into a forward purchase contract to buy that foreign currency for a
fixed dollar amount ("position hedge"). A Fund will not position hedge with
respect to a particular currency to an extent greater than the aggregate market
value (at the time of making such sale) of the securities held in its portfolio
denominated or quoted in that currency. Instead of entering into a position
hedge, a Fund may, in the alternative, enter into a forward contract to sell a
different foreign currency for a fixed U.S. dollar amount where the Fund
believes that the U.S. dollar value of the currency to be sold pursuant to the
forward contract will fall whenever there is a decline in the U.S. dollar value
of the currency in which portfolio securities of the Fund are denominated
("cross-hedge"). Unanticipated changes in currency prices may result in poorer
overall performance for the Fund than if it had not entered into such forward
contracts.
Hedging against a decline in the value of a currency does not eliminate
fluctuations in the prices of portfolio securities or prevent losses if the
prices of such securities decline. Such transactions also preclude the
opportunity for gain if the value of the hedged currency should rise. Moreover,
it may not be possible for a Fund to hedge against a devaluation that is so
generally anticipated that the Fund is not able to contract to sell the currency
at a price above the devaluation level it anticipates. International Fund, New
Europe Fund and Global Small Cap Fund will not enter into a forward contract
with a term of more than one year or if, as a result, more than 50% of its total
assets would be committed to such contracts. The dealings of International Fund,
New Europe Fund and Global Small Cap Fund in forward contracts will be limited
to hedging involving either specific transactions or portfolio positions.
Growth Fund and Strategic Balanced Fund may also purchase and sell foreign
currency on a spot basis.
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Forward Commitments. Forward commitments for the purchase or sale of securities
may include purchases on a "when-issued" basis or purchases or sales on a
"delayed delivery" basis. In some cases, a forward commitment may be conditioned
upon the occurrence of a subsequent event, such as approval and consummation of
a merger, corporate reorganization or debt restructuring (i.e., a "when, as and
if issued" trade).
When forward commitment transactions are negotiated, the price is fixed at the
time the commitment is made, but delivery and payment for the securities take
place at a later date. Normally, the settlement date occurs within two months
after the transaction, but settlements beyond two months may be negotiated.
Securities purchased or sold under a forward commitment are subject to market
fluctuation, and no interest or dividends accrue to the purchaser prior to the
settlement date. At the time a Fund intends to enter into a forward commitment,
it records the transaction and thereafter reflects 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 a Fund to protect against anticipated
changes in interest rates and prices. For instance, in periods of rising
interest rates and falling bond prices, a Fund might sell securities in its
portfolio on a forward commitment basis to limit its exposure to falling prices.
In periods of falling interest rates and rising bond prices, a Fund might sell a
security in its portfolio and purchase the same or a similar security on a
when-issued or forward commitment basis, thereby obtaining the benefit of
currently higher cash yields. However, if Alliance were to forecast incorrectly
the direction of interest rate movements, a Fund might be required to complete
such when-issued or forward transactions at prices inferior to the then current
market values. When-issued securities and forward commitments may be sold prior
to the settlement date, but a Fund enters into when-issued and forward
commitments only with the intention of actually receiving securities or
delivering them, as the case may be. If a Fund chooses to dispose of the right
to acquire a when-issued security prior to its acquisition or dispose of its
right to deliver or receive against a forward commitment, it may incur a gain or
loss. Any significant commitment of Fund assets to the purchase of securities on
a "when, as and if issued" basis may increase the volatility of the Fund's net
asset value. No forward commitments will be made by New Europe Fund, All-Asia
Investment Fund, Worldwide Privatization Fund, Income Builder Fund, Real Estate
Investment Fund or Utility Income Fund if, as a result, the Fund's aggregate
commitments under such transactions would be more than 30% of the Fund's total
assets. In the event the other party to a forward commitment transaction were to
default, a Fund might lose the opportunity to invest money at favorable rates or
to dispose of securities at favorable prices.
Standby Commitment Agreements. Standby commitment agreements commit a Fund, for
a stated period of time, to purchase a stated amount of a security that may be
issued and sold to the Fund at the option of the issuer. The price and coupon of
the security are fixed at the time of the commitment. At the time of entering
into the agreement the Fund is paid a commitment fee, regardless of whether the
security ultimately is issued, typically equal to approximately 0.5% of the
aggregate purchase price of the security the Fund has committed to purchase. A
Fund will enter into such agreements only for the purpose of investing in the
security underlying the commitment at a yield and price considered advantageous
to the Fund and unavailable on a firm commitment basis. No Fund, other than
Income Builder Fund, will enter into a standby commitment with a remaining term
in excess of 45 days. Investments in standby commitments will be limited so that
the aggregate purchase price of the securities subject to the commitments will
not exceed 25% with respect to New Europe Fund and Real Estate Investment Fund,
50% with respect to Worldwide Privatization Fund and All-Asia Investment Fund,
and 20% with respect to Utility Income Fund, of the Fund's assets taken at the
time of making the commitment.
There is no guarantee that a security subject to a standby commitment will be
issued and the value of the security, if issued, on the delivery date may be
more or less than its purchase price. Since the issuance of the security
underlying the commitment is at the option of the issuer, a Fund will bear the
risk of capital loss in the event the value of the security declines and may not
benefit from an appreciation in the value of the security during the commitment
period if the issuer decides not to issue and sell the security to the Fund.
Currency Swaps. Currency swaps involve the individually negotiated exchange by a
Fund with another party of a series of payments in specified currencies. A
currency swap may involve the delivery at the end of the exchange period of a
substantial amount of one designated currency in exchange for the other
designated currency. Therefore the entire principal value of a currency swap is
subject to the risk that the other party to the swap will default on its
contractual delivery obligations. 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. A Fund will not enter into any currency swap unless
the credit quality of the unsecured senior debt or the claims-paying ability of
the 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,
such Fund will have contractual remedies pursuant to the agreements related to
the transactions.
Interest Rate Transactions. Each Fund that may enter into interest rate
transactions expects to do so primarily to preserve a return or spread on a
particular investment or portion of its portfolio or to protect against any
increase in the price of securities the Fund anticipates purchasing at a later
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date. The Funds do not intend to use these transactions in a speculative manner.
Interest rate swaps involve the exchange by a Fund with another party of their
respective commitments to pay or receive interest (e.g., an exchange of floating
rate payments for fixed rate payments). Interest rate swaps are entered on a net
basis (i.e., the two payment streams are netted out, with the Fund receiving or
paying, as the case may be, only the net amount of the two payments). With
respect to All-Asia Investment Fund and Utility Income Fund, the exchange
commitments can involve payments in the same currency or in different
currencies. The purchase of an interest rate cap entitles the purchaser, to the
extent that a specified index exceeds a predetermined interest rate, to receive
payments of interest on a contractually-based principal amount from the party
selling such interest rate cap. The purchase of an interest rate floor entitles
the purchaser, to the extent that a specified index falls below a predetermined
interest rate, to receive payments of interest on an agreed principal amount
from the party selling the interest rate floor.
A Fund may enter into interest rate swaps, caps and floors on either an
asset-based or liability-based basis, depending upon whether it is hedging its
assets or liabilities. The net amount of the excess, if any, of a Fund's
obligations over its entitlements with respect to each interest rate swap, cap
and floor is accrued daily. A Fund will not enter into an interest rate swap,
cap or floor transaction unless the unsecured senior debt or the claims-paying
ability of the other party thereto is then rated in the highest rating category
of at least one nationally recognized rating organization. Alliance will monitor
the creditworthiness of counterparties on an ongoing basis. The swap market has
grown substantially in recent years, with a large number of banks and investment
banking firms acting both as principals and as agents utilizing standardized
swap documentation. As a result, the swap market has become relatively liquid.
Caps and floors are more recent innovations for which standardized documentation
has not yet been developed and, accordingly, they are less liquid than swaps.
The use of interest rate transactions is a highly specialized activity which
involves investment techniques and risks different from those associated with
ordinary portfolio securities transactions. If Alliance were to incorrectly
forecast market values, interest rates and other applicable factors, the
investment performance of a Fund would be adversely affected by the use of these
investment techniques. Moreover, even if Alliance is correct in its forecasts,
there is a risk that the transaction position may correlate imperfectly with the
price of the asset or liability being hedged. There is no limit on the amount of
interest rate transactions that may be entered into by a Fund that is permitted
to enter into such transactions. These transactions do not involve the delivery
of securities or other underlying assets or principal. Accordingly, the risk of
loss with respect to interest rate transactions is limited to the net amount of
interest payments that a Fund is contractually obligated to make. If the other
party to an interest rate transaction defaults, a Fund's risk of loss consists
of the net amount of interest payments that the Fund contractually is entitled
to receive.
Repurchase Agreements. A repurchase agreement arises when a buyer purchases a
security and simultaneously agrees to resell it to the vendor at an agreed-upon
future date, normally a day or a few days later. The resale price is greater
than the purchase price, reflecting an agreed-upon interest rate for the period
the buyer's money is invested in the security. Such agreements permit a Fund to
keep all of its assets at work while retaining "overnight" flexibility in
pursuit of investments of a longer-term nature. If a vendor defaults on its
repurchase obligation, a Fund would suffer a loss to the extent that the
proceeds from the sale of the collateral were less than the repurchase price. If
a vendor goes bankrupt, a Fund might be delayed in, or prevented from, selling
the collateral for its benefit. Alliance monitors the creditworthiness of the
vendors with which the Fund enters into repurchase agreements. There is no
percentage restriction on a Fund's ability to enter into repurchase agreements,
other than as indicated under "Investment Objectives and Policies."
Short Sales. A short sale is effected by selling a security that a Fund does not
own, or if the Fund does own such security, it is not to be delivered upon
consummation of the sale. A short sale is "against the box" to the extent that a
Fund contemporaneously owns or has the right to obtain securities identical to
those sold short without payment. Worldwide Privatization Fund, All-Asia
Investment Fund, Income Builder Fund and Utility Income Fund each may make short
sales of securities or maintain short positions only for the purpose of
deferring realization of gain or loss for U.S. federal income tax purposes,
provided that at all times when a short position is open the Fund owns an equal
amount of securities of the same issue as, and equal in amount to, the
securities sold short. In addition, each of those Funds may not make a short
sale if as a result more than 10% of the Fund's net assets would be held as
collateral for short sales, except that All-Asia Investment Fund and Real Estate
Investment Fund may not make a short sale if as a result more than 25% of the
Fund's net assets would be held as collateral for short sales. If the price of
the security sold short increases between the time of the short sale and the
time a Fund replaces the borrowed security, the Fund will incur a loss;
conversely, if the price declines, the Fund will realize a capital gain. See
"Certain Fundamental Investment Policies." Certain special federal income tax
considerations may apply to short sales entered into by a Fund. See "Dividends,
Distributions and Taxes" in the relevant Fund's Statement of Additional
Information.
Loans of Portfolio Securities. The risk in lending portfolio securities, as with
other extensions of credit, consists of the possible loss of rights in the
collateral should the borrower fail financially. In determining whether to lend
securities to a particular borrower, Alliance will consider all relevant facts
and circumstances, including the creditworthiness of the borrower. While
securities are on loan, the borrower will pay the Fund any income earned thereon
and the Fund may invest any cash collateral in portfolio securities, thereby
earning additional
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income, or receive an agreed upon amount of income from a borrower who has
delivered equivalent collateral. Each Fund will have the right to regain record
ownership of loaned securities or equivalent securities in order to exercise
ownership rights such as voting rights, subscription rights and rights to
dividends, interest or distributions. A Fund may pay reasonable finders',
administrative and custodial fees in connection with a loan. A Fund will not
lend its portfolio securities to any officer, director, employee or affiliate of
the Fund or Alliance.
General. The successful use of the foregoing investment practices draws upon
Alliance's special skills and experience with respect to such instruments and
usually depends on Alliance's ability to forecast price movements, interest
rates or currency exchange rate movements correctly. Should interest rates,
prices or exchange rates move unexpectedly, a Fund may not achieve the
anticipated benefits of the transactions or may realize losses and thus be in a
worse position than if such strategies had not been used. Unlike many
exchange-traded futures contracts and options on futures contracts, there are no
daily price fluctuation limits with respect to certain options and forward
contracts, and adverse market movements could therefore continue to an unlimited
extent over a period of time. In addition, the correlation between movements in
the prices of futures contracts, options and forward contracts and movements in
the prices of the securities and currencies hedged or used for cover will not be
perfect and could produce unanticipated losses.
A Fund's ability to dispose of its position in futures contracts, options and
forward contracts depends on the availability of liquid markets in such
instruments. Markets in options and futures with respect to a number of types of
securities and currencies are relatively new and still developing, and there is
no public market for forward contracts. It is impossible to predict the amount
of trading interest that may exist in various types of futures contracts,
options and forward contracts. If a secondary market does not exist with respect
to an option purchased or written by a Fund, it might not be possible to effect
a closing transaction in the option (i.e., dispose of the option), with the
result that (i) an option purchased by the Fund would have to be exercised in
order for the Fund to realize any profit and (ii) the Fund may not be able to
sell currencies or portfolio securities covering an option written by the Fund
until the option expires or it delivers the underlying security, futures
contract or currency upon exercise. Therefore, no assurance can be given that
the Funds will be able to utilize these instruments effectively for the purposes
set forth above. Furthermore, a Fund's ability to engage in options and futures
transactions may be limited by tax considerations. See "Dividends, Distributions
and Taxes" in the Statement of Additional Information of each Fund that invests
in options and futures.
Future Developments. A Fund may, following written notice to its shareholders,
take advantage of other investment practices that are not currently contemplated
for use by the Fund or are not available but may yet be developed, to the extent
such investment practices are consistent with the Fund's investment objective
and legally permissible for the Fund. Such investment practices, if they arise,
may involve risks that exceed those involved in the activities described above.
Defensive Position. For temporary defensive purposes, each Fund may invest in
certain types of short-term, liquid, high grade or high quality (depending on
the Fund) debt securities. These securities may include U.S. Government
securities, qualifying bank deposits, money market instruments, prime commercial
paper and other types of short-term debt securities including notes and bonds.
For Funds that may invest in foreign countries, such securities may also include
short-term, foreign-currency denominated securities of the type mentioned above
issued by foreign governmental entities, companies and supranational
organizations. For a complete description of the types of securities each Fund
may invest in while in a temporary defensive position, please see such Fund's
Statement of Additional Information.
Portfolio Turnover. Portfolio turnover rates are set forth under "Financial
Highlights." These portfolio turnover rates are greater than those of most other
investment companies, including those which emphasize capital appreciation as a
basic policy. A high rate of portfolio turnover involves correspondingly greater
brokerage and other expenses than a lower rate, which must be borne by the Fund
and its shareholders. High portfolio turnover also may result in the realization
of substantial net short-term capital gains. See "Dividends, Distributions and
Taxes" in each Fund's Statement of Additional Information.
CERTAIN FUNDAMENTAL INVESTMENT POLICIES
Each Fund has adopted certain fundamental investment policies listed below,
which may not be changed without the approval of its shareholders. Additional
investment restrictions with respect to a Fund are set forth in its Statement of
Additional Information.
Alliance Fund may not: (i) invest more than 5% of its total assets in the
securities of any one issuer (other than the U.S. Government); (ii) acquire more
than 10% of the voting or other securities of any one issuer; or (iii) buy
securities of any company that (including its predecessors) has not been in
business at least three continuous years. Pursuant to investment policies which
are not fundamental, the Fund does not invest (i) in puts or calls (except as
discussed above); (ii) in straddles, spreads, or any combination thereof; (iii)
in oil, gas or other mineral exploration or development programs; or (iv) more
than 5% of its gross assets in securities the disposition of which would be
subject to restrictions under the federal securities laws.
Growth Fund and Strategic Balanced Fund each may not: (i) invest more than 5% of
its total assets in the securities of any one issuer (other than U.S. Government
securities and repurchase agreements relating thereto), although up to 25% of
each Fund's total assets may be invested without regard to this restriction; or
(ii) invest 25% or more of its total assets in the securities of any one
industry.
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Premier Growth Fund may not: (i) purchase more than 10% of the outstanding
voting securities of any one issuer; (ii) invest 25% or more of the value of its
total assets in the same industry; (iii) borrow money or issue senior securities
except for temporary or emergency purposes in an amount not exceeding 5% of the
value of its total assets at the time the borrowing is made; (iv) pledge,
mortgage, hypothecate or otherwise encumber any of its assets except in
connection with the writing of(0) call options and except to secure permitted
borrowings; or (v) invest in the securities of any issuer that has a record of
less than three years of continuous operation (including the operation of any
predecessor) if as a result more than 10% of the value of the total assets of
the Fund would be invested in the securities of such issuer or issuers.
Technology Fund may not: (i) with respect to 75% of its total assets, have such
assets represented by other than:(a) cash and cash items, (b) U.S. Government
securities, or (c) securities of any one issuer (other than the U.S. Government
and its agencies or instrumentalities) not greater in value than 5% of the
Fund's total assets, and not more than 10% of the outstanding voting securities
of such issuer; (ii) purchase the securities of any one issuer, other than the
U.S. Government and its agencies or instrumentalities, if as a result (a) the
value of the holdings of the Fund in the securities of such issuer exceeds 25%
of its total assets, or (b) the Fund owns more than 25% of the outstanding
securities of any one class of securities of such issuer; (iii) concentrate its
investments in any one industry, but the Fund has reserved the right to invest
up to 25% of its total assets in a particular industry; and (iv) invest in the
securities of any issuer which has a record of less than three years of
continuous operation (including the operation of any predecessor) if such
purchase would cause 10% or more of its total assets to be invested in the
securities of such issuers.
Quasar Fund may not: (i) purchase the securities of any one issuer, other than
the U.S. Government or any of its agencies or instrumentalities, if as a result
more than 5% of its total assets would be invested in such issuer or the Fund
would own more than 10% of the outstanding voting securities of such issuer,
except that up to 25% of its total assets may be invested without regard to
these 5% and 10% limitations; (ii) invest more than 25% of its total assets in
any particular industry; (iii) borrow money except for temporary or emergency
purposes in an amount not exceeding 5% of its total assets at the time the
borrowing is made; or (iv) invest more than 10% of its assets in restricted
securities.
International Fund may not: (i) invest more than 5% of the value of its total
assets in securities of a single issuer (including repurchase agreements with
any one entity), except U.S. Government securities or foreign government
securities; provided, however, that the Fund may not, with respect to 75% of its
total assets, invest more than 5% of its total assets in securities of any one
foreign government issuer; (ii) own more than 10% of the outstanding securities
of any class of any issuer (for this purpose, all preferred stocks of an issuer
shall be deemed a single class, and all indebtedness of an issuer shall be
deemed a single class), except U.S. Government securities; (iii) invest more
than 25% of the value of its total assets in securities of issuers having their
principal business activities in the same industry; provided, that this
limitation does not apply to U.S. Government securities or foreign government
securities; (iv) invest more than 5% of the value of its total assets in the
securities of any issuer that has a record of less than three years of
continuous operation (including the operation of any predecessor or
unconditional guarantor), except U.S. Government securities or foreign
government securities; (v) invest more than 5% of the value of its total assets
in securities with legal or contractual restrictions on resale, other than
repurchase agreements, or more than 10% of the value of its total assets in
securities that are not readily marketable (including restricted securities and
repurchase agreements not terminable within seven business days); and (vi)
borrow money, except as a temporary measure for extraordinary or emergency
purposes, and then only from banks in amounts not exceeding 5% of its total
assets.
Worldwide Privatization Fund may not: (i) invest 25% or more of its total assets
in securities of issuers conducting their principal business activities in the
same industry, except that this restriction does not apply to (a) U.S.
Government securities, or (b) the purchase of securities of issuers whose
primary business activity is in the national commercial banking industry, so
long as the Fund's Directors determine, on the basis of factors such as
liquidity, availability of investments and anticipated returns, that the Fund's
ability to achieve its investment objective would be adversely affected if the
Fund were not permitted to invest more than 25% of its total assets in those
securities, and so long as the Fund notifies its shareholders of any decision by
the Directors to permit or cease to permit the Fund to invest more than 25% of
its total assets in those securities, such notice to include a discussion of any
increased investment risks to which the Fund may be subjected as a result of the
Directors' determination; (ii) borrow money except from banks for temporary or
emergency purposes, including the meeting of redemption requests that might
require the untimely disposition of securities; borrowing in the aggregate may
not exceed 15%, and borrowing for purposes other than meeting redemptions may
not exceed 5%, of the Fund's total assets (including the amount borrowed) less
liabilities (not including the amount borrowed) at the time the borrowing is
made; outstanding borrowings in excess of 5% of the value of the Fund's total
assets will be repaid before any investments are made; or (iii) pledge,
hypothecate, mortgage or otherwise encumber its assets, except to secure
permitted borrowings. The exception contained in clause (i)(b) above is subject
to the operating policy regarding concentration described in this Prospectus.
New Europe Fund may not: (i) purchase more than 10% of the outstanding voting
securities of any one issuer; (ii) invest more than 15% of its total assets in
the securities of any one issuer or 25% or more of its total assets in the same
industry, provided, however, that the foregoing restriction shall not be deemed
to prohibit the Fund from purchasing the securities of
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any issuer pursuant to the exercise of rights distributed to the Fund by the
issuer, except that no such purchase may be made if as a result the Fund will
fail to meet the diversification requirements of the Code and any such
acquisition in excess of the foregoing 15% or 25% limits will be sold by the
Fund as soon as reasonably practicable (this restriction does not apply to U.S.
Government securities, but will apply to foreign government securities unless
the Commission permits their exclusion); (iii) borrow money except from banks
for temporary or emergency purposes, including the meeting of redemption
requests that might require the untimely disposition of securities; borrowing in
the aggregate may not exceed 15%, and borrowing for purposes other than meeting
redemptions may not exceed 5%, of the Fund's total assets (including the amount
borrowed) less liabilities (not including the amount borrowed) at the time the
borrowing is made; outstanding borrowings in excess of 5% of the Fund's total
assets will be repaid before any subsequent investments are made; or (iv)
purchase a security (unless the security is acquired pursuant to a plan of
reorganization or an offer of exchange) if, as a result, the Fund would own any
securities of an open-end investment company or more than 3% of the total
outstanding voting stock of any closed-end investment company, or more than 5%
of the value of the Fund's total assets would be invested in securities of any
closed-end investment company, or more than 10% of such value in closed-end
investment companies in general.
All-Asia Investment Fund may not: (i) invest 25% or more of its total assets in
securities of issuers conducting their principal business activities in the same
industry; (ii) borrow money except from banks for temporary or emergency
purposes, including the meeting of redemption requests that might require the
untimely disposition of securities; borrowing in the aggregate may not exceed
15%, and borrowing for purposes other than meeting redemptions may not exceed
5%, of the Fund's total assets (including the amount borrowed) less liabilities
(not including the amount borrowed) at the time the borrowing is made;
outstanding borrowings in excess of 5% of the value of the Fund's total assets
will be repaid before any investments are made; or (iii) pledge, hypothecate,
mortgage or otherwise encumber its assets, except to secure permitted
borrowings.
Global Small Cap Fund may not: (i) purchase the securities of any one issuer,
other than the U.S. Government or any of its agencies or instrumentalities, if
immediately after such purchase more than 5% of the value of its total assets
would be invested in such issuer or the Fund would own more than 10% of the
outstanding voting securities of such issuer, except that up to 25% of the
Fund's total assets may be invested without regard to these 5% and 10%
limitations; (ii) invest 25% or more of its total assets in the same industry;
this restriction does not apply to U.S. Government securities, but will apply to
foreign government securities unless the Commission permits their exclusion;
(iii) borrow money except from banks for emergency or temporary purposes in an
amount not exceeding 5% of the total assets of the Fund; or (iv) make short
sales of securities or maintain a short position, unless at all times when a
short position is open it owns an equal amount of such securities or securities
convertible into or exchangeable for, without payment of any further
consideration, securities of the same issue as, and equal in amount to, the
securities sold short and unless not more than 5% of the Fund's net assets is
held as collateral for such sales at any one time.
Global Environment Fund may not: (i) purchase more than 10% of the outstanding
voting securities of any one issuer; (ii) invest more than 15% of the value of
its total assets in the securities of any one issuer or 25% or more of the value
of its total assets in the same industry, except that the Fund will invest more
than 25% of its total assets in Environmental Companies, provided that this
restriction does not apply to U.S. Government securities, but will apply to
foreign government obligations unless the Commission permits their exclusion;
(iii) borrow money or issue senior securities, except that the Fund may borrow
(a) from a bank if immediately after such borrowing there is asset coverage of
at least 300% as defined in the 1940 Act and (b) for temporary purposes in an
amount not exceeding 5% of the value of the total assets of the Fund; (iv)
pledge, hypothecate, mortgage or otherwise encumber its assets, except (a) to
secure permitted borrowings and (b) in connection with initial and variation
margin deposits relating to futures contracts; (v) purchase a security (unless
the security is acquired pursuant to a plan of reorganization or an offer of
exchange) if, as result, the Fund would own any securities of an open-end
investment company or more than 3% of the total outstanding voting stock of any
closed-end investment company, or more than 5% of the value of the Fund's total
assets would be invested in securities of any closed-end investment company or
more than 10% of such value in closed-end investment companies in the aggregate;
(vi) make short sales of securities or maintain a short position, unless at all
times when a short position is open it owns an equal amount of such securities
or securities convertible into or exchangeable for, without payment of any
further consideration, securities of the same issue as, and equal in amount to,
the securities sold short ("short sales against the box"), and unless not more
than 5% of the Fund's net assets (taken at market value) is held as collateral
for such sales at any one time; or (vii) buy or write (i.e., sell) put or call
options, except (a) the Fund may buy foreign currency options or write covered
foreign currency options and options on foreign currency futures and (b) the
Fund may purchase warrants.
Balanced Shares may not: (i) invest more than 5% of its total assets in the
securities of any one issuer, except U.S. Government securities; or (ii) own
more than 10% of the outstanding voting securities of any one issuer.
Income Builder Fund may not: (i) invest 25% or more of its total assets in
securities of companies engaged principally in any one industry, except that
this restriction does not apply to U.S. Government securities; (ii) borrow money
except from banks for temporary or emergency purposes, including the meeting of
redemption requests that might require the untimely disposition of securities;
borrowing in the aggregate may not exceed 15%, and borrowing for purposes other
than
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meeting redemptions may not exceed 5%, of the Fund's total assets (including the
amount borrowed) less liabilities (not including the amount borrowed) at the
time borrowing is made; securities will not be purchased while borrowings in
excess of 5% of the Fund's total assets are outstanding; or (iii) pledge,
hypothecate, mortgage or otherwise encumber its assets, except to secure
permitted borrowings.
Utility Income Fund may not: (i) invest more than 5% of its total assets in the
securities of any one issuer except the U.S. Government, although with respect
to 25% of its total assets it may invest in any number of issuers; (ii) invest
25% or more of its total assets in the securities of issuers conducting their
principal business activities in any one industry, other than the utilities
industry, except that this restriction does not apply to U.S. Government
securities; (iii) purchase more than 10% of any class of the voting securities
of any one issuer; (iv) borrow money except from banks for temporary or
emergency purposes, including the meeting of redemption requests that might
require the untimely disposition of securities; borrowing in the aggregate may
not exceed 15%, and borrowing for purposes other than meeting redemptions may
not exceed 5%, of the Fund's total assets (including the amount borrowed) less
liabilities (not including the amount borrowed) at the time the borrowing is
made; outstanding borrowings in excess of 5% of the Fund's total assets will be
repaid before any subsequent investments are made; or (v) purchase a security
if, as a result (unless the security is acquired pursuant to a plan of
reorganization or an offer of exchange), the Fund would own any securities of an
open-end investment company or more than 3% of the total outstanding voting
stock of any closed-end investment company or more than 5% of the value of the
Fund's net assets would be invested in securities of any one or more closed-end
investment companies.
Growth and Income Fund may not (i) invest more than 5% of its net assets in the
security of any one issuer, except U.S. Government obligations or (ii) own more
than 10% of the outstanding voting securities of any issuer.
Real Estate Investment Fund may not: (i) with respect to 75% of its total
assets, have such assets represented by other than: (a) cash and cash items, (b)
U.S. Government securities, or (c) securities of any one issuer (other than the
U.S. Government and its agencies or instrumentalities) not greater in value than
5% of the Fund's total assets, and not more than 10% of the outstanding voting
securities of such issuer; (ii) purchase the securities of any one issuer, other
than the U.S. Government and its agencies or instrumentalities, if as a result
(a) the value of the holdings of the Fund in the securities of such issuer
exceeds 25% of its total assets, or (b) the Fund owns more than 25% of the
outstanding securities of any one class of securities of such issuer; (iii)
invest 25% or more of its total assets in the securities of issuers conducting
their principal business activities in any one industry, other than the real
estate industry in which the Fund will invest at least 25% or more of its total
assets, except that this restriction does not apply to U.S. Government
securities; (iv) purchase or sell real estate, except that it may purchase and
sell securities of companies which deal in real estate or interests therein,
including Real Estate Equity Securities; or (v) borrow money except for
temporary or emergency purposes or to meet redemption requests, in an amount not
exceeding 5% of the value of its total assets at the time the borrowing is made.
RISK CONSIDERATIONS
Investment in certain of the Funds involves the special risk considerations
described below. These risks may be heightened when investing in emerging
markets.
Investment in Privatized Enterprises by Worldwide Privatization Fund. In certain
jurisdictions, the ability of foreign entities, such as the Fund, to participate
in privatizations may be limited by local law, or the price or terms on which
the Fund may be able to participate may be less advantageous than for local
investors. Moreover, there can be no assurance that governments that have
embarked on privatization programs will continue to divest their ownership of
state enterprises, that proposed privatizations will be successful or that
governments will not re-nationalize enterprises that have been privatized.
Furthermore, in the case of certain of the enterprises in which the Fund may
invest, large blocks of the stock of those enterprises may be held by a small
group of stockholders, even after the initial equity offerings by those
enterprises. The sale of some portion or all of those blocks could have an
adverse effect on the price of the stock of any such enterprise.
Most state enterprises or former state enterprises go through an internal
reorganization of management prior to conducting an initial equity offering in
an attempt to better enable these enterprises to compete in the private sector.
However, certain reorganizations could result in a management team that does not
function as well as the enterprise's prior management and may have a negative
effect on such enterprise. After making an initial equity offering, enterprises
that may have enjoyed preferential treatment from the respective state or
government that owned or controlled them may no longer receive such preferential
treatment and may become subject to market competition from which they were
previously protected. Some of these enterprises may not be able to effectively
operate in a competitive market and may suffer losses or experience bankruptcy
due to such competition. In addition, the privatization of an enterprise by its
government may occur over a number of years, with the government continuing to
hold a controlling position in the enterprise even after the initial equity
offering for the enterprise.
Currency Considerations. Substantially all of the assets of International Fund,
New Europe Fund, All-Asia Investment Fund, and Worldwide Privatization Fund and
a substantial portion of the assets of Global Small Cap Fund and Global
Environment Fund will be invested in securities denominated in foreign
currencies, and a corresponding portion of these Funds' revenues will be
received in such currencies. Therefore, the dollar equivalent of their net
assets, distributions and income will be adversely affected by reductions in the
value of certain foreign currencies relative to the U.S. dollar. If the value of
the foreign currencies in which a Fund receives its
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income falls relative to the U.S. dollar between receipt of the income and the
making of Fund distributions, the Fund may be required to liquidate securities
in order to make distributions if it has insufficient cash in U.S. dollars to
meet distribution requirements that the Fund must satisfy to qualify as a
regulated investment company for federal income tax purposes. Similarly, if an
exchange rate declines between the time a Fund incurs expenses in U.S. dollars
and the time cash expenses are paid, the amount of the currency required to be
converted into U.S. dollars in order to pay expenses in U.S. dollars could be
greater than the equivalent amount of such expenses in the currency at the time
they were incurred. In light of these risks, a Fund may engage in certain
currency hedging transactions, which themselves involve certain special risks.
See "Additional Investment Practices" above.
Foreign Investment. The securities markets of many foreign countries are
relatively small, with the majority of market capitalization and trading volume
concentrated in a limited number of companies representing a small number of
industries. Consequently, a Fund whose investment portfolio includes such
securities may experience greater price volatility and significantly lower
liquidity than a portfolio invested solely in equity securities of U.S.
companies. These markets may be subject to greater influence by adverse events
generally affecting the market, and by large investors trading significant
blocks of securities, than is usual in the United States. Securities settlements
may in some instances be subject to delays and related administrative
uncertainties. These problems are particularly severe in India, where settlement
is through physical delivery, and, where, currently, a severe shortage of vault
capacity exists among custodial banks, although efforts are being undertaken to
alleviate the shortage. Certain foreign countries require governmental approval
prior to investments by foreign persons or limit investment by foreign persons
to only a specified percentage of an issuer's outstanding securities or a
specific class of securities which may have less advantageous terms (including
price) than securities of the company available for purchase by nationals. These
restrictions or controls may at times limit or preclude investment in certain
securities and may increase the costs and expenses of a Fund. In addition, the
repatriation of investment income, capital or the proceeds of sales of
securities from certain countries is controlled under regulations, including in
some cases the need for certain advance government notification or authority,
and if a deterioration occurs in a country's balance of payments, the country
could impose temporary restrictions on foreign capital remittances.
A Fund could also be adversely affected by delays in, or a refusal to grant, any
required governmental approval for repatriation, as well as by the application
to it of other restrictions on investment. Investing in local markets may
require a Fund to adopt special procedures, which may involve additional costs
to a Fund. The liquidity of a Fund's investments in any country in which any of
these factors exists could be affected and Alliance will monitor the effect of
any such factor or factors on a Fund's investments. Furthermore, transaction
costs including brokerage commissions for transactions both on and off the
securities exchanges in many foreign countries are generally higher than in the
United States.
Issuers of securities in foreign jurisdictions are generally not subject to the
same degree of regulation as are U.S. issuers with respect to such matters as
insider trading rules, restrictions on market manipulation, shareholder proxy
requirements and timely disclosure of information. The reporting, accounting and
auditing standards of foreign countries may differ, in some cases significantly,
from U.S. standards in important respects and less information may be available
to investors in foreign securities than to investors in U.S. securities.
Substantially less information is publicly available about certain non-U.S.
issuers than is available about U.S. issuers.
The economies of individual foreign countries may differ favorably or
unfavorably from the U.S. economy in such respects as growth of gross domestic
product or gross national product, rate of inflation, capital reinvestment,
resource self-sufficiency and balance of payments position. Nationalization,
expropriation or confiscatory taxation, currency blockage, political changes,
government regulation, political or social instability or diplomatic
developments could affect adversely the economy of a foreign country or the
Fund's investments in such country. In the event of expropriation,
nationalization or other confiscation, a Fund could lose its entire investment
in the country involved. In addition, laws in foreign countries governing
business organizations, bankruptcy and insolvency may provide less protection to
security holders such as the Fund than that provided by U.S. laws.
Investment in United Kingdom Issuers. Investment in securities of United Kingdom
issuers involves certain considerations not present with investment in
securities of U.S. issuers. As with any investment not denominated in the U.S.
dollar, the U.S. dollar value of the Fund's investment denominated in the
British pound sterling will fluctuate with pound sterling--dollar exchange rate
movements. Between 1972, when the pound sterling was allowed to float against
other currencies, and the end of 1992, the pound sterling generally depreciated
against most major currencies, including the U.S. dollar. Between September and
December 1992, after the United Kingdom's exit from the Exchange Rate Mechanism
of the European Monetary System, the value of the pound sterling fell by almost
20% against the U.S. dollar. The pound sterling continued to fall in early 1993,
but recovered due to interest rate cuts throughout Europe and an upturn in the
economy of the United Kingdom. The average exchange rate of the U.S. dollar to
the pound sterling was 1.50 in 1993 and 1.56 in 1996. On December 31, 1997 the
U.S. dollar-pound sterling exchange rate was 1.65.
The United Kingdom's largest stock exchange is the London Stock Exchange, which
is the third largest exchange in the world. As measured by the FT-SE 100 index,
the performance of the 100 largest companies in the United Kingdom reached
4118.5 at the end of 1996, up approximately 12% from the end
42
<PAGE>
of 1995. On December 31, 1997 the FT-SE 100 index closed at 5,135.5, up
approximately 25% from the end of 1996.
The public sector borrowing requirement ("PSBR"), a mandated measure of the
amount required to balance the budget, has been, over the last two fiscal years,
higher than forecast. The general government fiscal deficit has been in excess
of the eligibility limit prescribed by the European Union for countries that
intend to participate in the Economic and Monetary Union ("EMU"), which is
scheduled to take effect in January 1999. The government, however, expects that
the deficit will be below that limit in the 1997-98 and 1998-99 fiscal years.
Although the government has not yet made a formal announcement with respect to
the United Kingdom's participation in the EMU, remarks of the Chancellor of the
Exchequer made in mid-October 1997 suggest that the United Kingdom will not
participate in the EMU beginning in January 1999 but may do so thereafter.
From 1979 until 1997 the Conversative Party controlled Parliament. In the May 1,
1997 general elections, however, the Labour Party, led by Tony Blair, won a
majority in Parliament, holding 418 of 658 seats in the House of Commons. Mr.
Blair, who was appointed Prime Minister, has launched a number of reform
initiatives, including an overhaul of the monetary policy framework intended to
protect monetary policy from political forces by vesting responsibility for
setting interest rates in a new Monetary Policy Committee headed by the Governor
of the Bank of England, as opposed to the Treasury. Prime Minister Blair has
also undertaken a comprehensive restructuring of the regulation of the financial
services industry. For further information regarding the United Kingdom, see the
Statement of Additional Information of New Europe Fund.
Investment in Japanese Issuers. Investment in securities of Japanese issuers
involves certain considerations not present with investment in securities of
U.S. issuers. As with any investment not denominated in the U.S. dollar, the
U.S. dollar value of each Fund's investments denominated in the Japanese yen
will fluctuate with yen-dollar exchange rate movements. Between 1985 and 1995,
the Japanese yen generally appreciated against the U.S. dollar, but has since
fallen from its post-World War II high (in 1995) against the U.S. dollar.
Japan's largest stock exchange is the Tokyo Stock Exchange, the First Section of
which is reserved for larger, established companies. As measured by the TOPIX, a
capitalization-weighted composite index of all common stocks listed in the First
Section, the performance of the First Section reached a peak in 1989.
Thereafter, the TOPIX declined approximately 50% through the end of 1993. In
1994, the TOPIX closed at 1,559.09, up approximately 8% from the end of 1993; in
1995, the TOPIX closed at 1,577.70, up approximately 1% from the end of 1994;
and in 1996, the TOPIX closed at 1,470.94, down approximately 7% from the end of
1995. In 1997, the TOPIX closed at 1,175.03, down 20.12% from the end of 1996.
Certain valuation measures, such as price-to-book value and price-to-cash flow
ratios, indicate that the Japanese stock market is near its lowest level in the
last twenty years relative to other world markets.
In recent years, Japan has consistently recorded large current account trade
surpluses with the U.S. that have caused difficulties in the relations between
the two countries. On October 1, 1994, the U.S. and Japan reached an agreement
that may lead to more open Japanese markets with respect to trade in certain
goods and services. In June 1995, the two countries agreed in principle to
increase Japanese imports of American automobiles and automotive parts.
Nevertheless it is expected that the continuing friction between the U.S. and
Japan with respect to trade issues will continue for the foreseeable future.
Each Fund's investments in Japanese issuers will be subject to uncertainty
resulting from the instability of recent Japanese ruling coalitions. From 1955
to 1993, Japan's government was controlled by a single political party. Between
August 1993 and October 1996 Japan was ruled by a series of four coalition
governments. As the result of a general election on October 20, 1996, however,
Japan has returned to a single-party government led by Prime Minister Ryutaro
Hashimoto. While Mr. Hashimoto's party does not control a majority of the seats
in the parliament, it is only three seats short of the 251 seats required to
attain a majority in the House of Representatives (down from a 12-seat shortfall
just after the October 1996 election). For the past several years, Japan's
banking industry has been weakened by a significant amount of problem loans.
Japan's banks also have significant exposure to the current financial turmoil in
other Asian markets. On December 17, 1997 the Japanese government proposed to
strengthen Japan's banks by means of an infusion of public funds and other
measures. It is unclear whether these proposals, which are under consideration
by Japan's parliament, would, if implemented, achieve their intended effect. For
further information regarding Japan, see the Statements of Additional
Information of All-Asia Investment Fund and International Fund.
Investment in Smaller, Emerging Companies. The Funds may invest in smaller,
emerging companies. Global Small Cap Fund and New Europe Fund will emphasize
investment in, and All-Asia Investment Fund and Global Environment Fund may
emphasize investment in, smaller, emerging companies. Investment in such
companies involves greater risks than is customarily associated with securities
of more established companies. Companies in the earlier stages of their
development often have products and management personnel which have not been
thoroughly tested by time or the marketplace; their financial resources may not
be as substantial as those of more established companies. The securities of
smaller companies may have relatively limited marketability and may be subject
to more abrupt or erratic market movements than securities of larger companies
or broad market indices. The revenue flow of such companies may be erratic and
their results of operations may fluctuate widely and may also contribute to
stock price volatility.
Investing in Environmental Companies by Global Environment Fund. Governmental
regulations or other action can inhibit an Environmental Company's performance,
and it may take years to translate environmental legislation into sales and
profits. Environmental Companies generally face competition in fields
43
<PAGE>
often characterized by relatively short product cycles and competitive pricing
policies. Losses may result from large product development or expansion costs,
unprotected marketing or distribution systems, erratic revenue flows and low
profit margins. Additional risks that Environmental Companies may face include
difficulty in financing the high cost of technological development,
uncertainties due to changing governmental regulation or rapid technological
advances, potential liabilities associated with hazardous components and
operations, and difficulty in finding experienced employees.
The Real Estate Industry. Although Real Estate Investment Fund does not invest
directly in real estate, it does invest primarily in Real Estate Equity
Securities and does have a policy of concentration of its investments in the
real estate industry. Therefore, an investment in the Fund is subject to certain
risks associated with the direct ownership of real estate and with the real
estate industry in general. These risks include, among others: possible declines
in the value of real estate; risks related to general and local economic
conditions; possible lack of availability of mortgage funds; overbuilding;
extended vacancies of properties; increases in competition, property taxes and
operating expenses; changes in zoning laws; costs resulting from the clean-up
of, and liability to third parties for damages resulting from, environmental
problems; casualty or condemnation losses; uninsured damages from floods,
earthquakes or other natural disasters; limitations on and variations in rents;
and changes in interest rates. To the extent that assets underlying the Fund's
investments are concentrated geographically, by property type or in certain
other respects, the Fund may be subject to certain of the foregoing risks to a
greater extent.
In addition, if Real Estate Investment Fund receives rental income or income
from the disposition of real property acquired as a result of a default on
securities the Fund owns, the receipt of such income may adversely affect the
Fund's ability to retain its tax status as a regulated investment company. See
"Dividends, Distributions and Taxes" in the Statement of Additional Information.
Investments by the Fund in securities of companies providing mortgage servicing
will be subject to the risks associated with refinancings and their impact on
servicing rights.
REITs. Investing in REITs involves certain unique risks in addition to those
risks associated with investing in the real estate industry in general. Equity
REITs may be affected by changes in the value of the underlying property owned
by the REITs, while mortgage REITs may be affected by the quality of any credit
extended. REITs are dependent upon management skills, are not diversified, are
subject to heavy cash flow dependency, default by borrowers and
self-liquidation. REITs are also subject to the possibilities of failing to
qualify for tax free pass-through of income under the Code and failing to
maintain their exemptions from registration under the 1940 Act.
REITs (especially mortgage REITs) are also subject to interest rate risks. When
interest rates decline, the value of a REIT's investment in fixed rate
obligations can be expected to rise. Conversely, when interest rates rise, the
value of a REIT's investment in fixed rate obligations can be expected to
decline. In contrast, as interest rates on adjustable rate mortgage loans are
reset periodically, yields on a REIT's investments in such loans will gradually
align themselves to reflect changes in market interest rates, causing the value
of such investments to fluctuate less dramatically in response to interest rate
fluctuations than would investments in fixed rate obligations.
Investing in REITs involves risks similar to those associated with investing in
small capitalization companies. REITs may have limited financial resources, may
trade less frequently and in a limited volume and may be subject to more abrupt
or erratic price movements than larger company securities. Historically, small
capitalization stocks, such as REITs, have been more volatile in price than the
larger capitalization stocks included in the S&P Index of 500 Common Stocks.
Mortgage-Backed Securities. As discussed above, investing in Mortgage-Backed
Securities involves certain unique risks in addition to those risks associated
with investment in the real estate industry in general. These risks include the
failure of a counterparty to meet its commitments, adverse interest rate changes
and the effects of prepayments on mortgage cash flows. When interest rates
decline, the value of an investment in fixed rate obligations can be expected to
rise. Conversely, when interest rates rise, the value of an investment in fixed
rate obligations can be expected to decline. In contrast, as interest rates on
adjustable rate mortgage loans are reset periodically, yields on investments in
such loans will gradually align themselves to reflect changes in market interest
rates, causing the value of such investments to fluctuate less dramatically in
response to interest rate fluctuations than would investments in fixed rate
obligations.
Further, the yield characteristics of Mortgage-Backed Securities, such as those
in which Real Estate Investment Fund may invest, differ from those of
traditional fixed-income securities. The major differences typically include
more frequent interest and principal payments (usually monthly), the
adjustability of interest rates, and the possibility that prepayments of
principal may be made substantially earlier than their final distribution dates.
Prepayment rates are influenced by changes in current interest rates and a
variety of economic, geographic, social and other factors, and cannot be
predicted with certainty. Both adjustable rate mortgage loans and fixed rate
mortgage loans may be subject to a greater rate of principal prepayments in a
declining interest rate environment and to a lesser rate of principal
prepayments in an increasing interest rate environment. Early payment associated
with Mortgage-Backed Securities causes these securities to experience
significantly greater price and yield volatility than that experienced by
traditional fixed-income securities. Under certain interest rate and prepayment
rate scenarios, the Fund may fail to recoup fully its investment in
Mortgage-Backed Securities notwithstanding any direct or indirect governmental
or agency guarantee. When the Fund reinvests amounts representing payments and
unscheduled prepayments of principal, it may receive a rate of interest that is
lower than the rate on existing adjustable rate mortgage pass-through
securities.
44
<PAGE>
Thus, Mortgage-Backed Securities, and adjustable rate mortgage pass-through
securities in particular, may be less effective than other types of U.S.
Government securities as a means of "locking in" interest rates.
U.S. and Foreign Taxes. A Fund's investment in foreign securities may be subject
to taxes withheld at the source on dividend or interest payments. Foreign taxes
paid by a Fund may be creditable or deductible by U.S. shareholders for U.S.
income tax purposes. No assurance can be given that applicable tax laws and
interpretations will not change in the future. Moreover, non-U.S. investors may
not be able to credit or deduct such foreign taxes. Investors should review
carefully the information discussed under the heading "Dividends, Distributions
and Taxes" and should discuss with their tax advisers the specific tax
consequences of investing in a Fund.
Fixed-Income Securities. The value of each Fund's shares will fluctuate with the
value of its investments. The value of each Fund's investments in fixed-income
securities will change as the general level of interest rates fluctuates. During
periods of falling interest rates, the values of fixed-income securities
generally rise. Conversely, during periods of rising interest rates, the values
of fixed-income securities generally decline.
Under normal market conditions, the average dollar-weighted maturity of a Fund's
portfolio of debt or other fixed-income securities is expected to vary between
five and 30 years in the case of All-Asia Investment Fund, between eight and 15
years in the case of Income Builder Fund, between five and 25 years in the case
of Utility Income Fund and between one year or less and 30 years in the case of
all other Funds that invest in such securities. In periods of increasing
interest rates, each of the Funds may, to the extent it holds mortgage-backed
securities, be subject to the risk that the average dollar-weighted maturity of
the Fund's portfolio of debt or other fixed- income securities may be extended
as a result of lower than anticipated prepayment rates. See "Additional
Investment Practices--Mortgage-Backed Securities."
Securities Ratings. The ratings of securities by S&P, Moody's, Duff & Phelps and
Fitch are a generally accepted barometer of credit risk. They are, however,
subject to certain limitations from an investor's standpoint. The rating of an
issuer is heavily weighted by past developments and does not necessarily reflect
probable future conditions. There is frequently a lag between the time a rating
is assigned and the time it is updated. In addition, there may be varying
degrees of difference in credit risk of securities within each rating category.
Securities rated Aaa by Moody's and AAA by S&P, Duff & Phelps and Fitch are
considered to be of the highest quality; capacity to pay interest and repay
principal is extremely strong. Securities rated Aa by Moody's and AA by S&P,
Duff & Phelps and Fitch are considered to be high quality; capacity to repay
principal is considered very strong, although elements may exist that make risks
appear somewhat larger than exist with securities rated Aaa or AAA. Securities
rated A are considered by Moody's to possess adequate factors giving security to
principal and interest. S&P, Duff & Phelps and Fitch consider such securities to
have a strong capacity to pay interest and repay principal. Such securities are
more susceptible to adverse changes in economic conditions and circumstances
than higher-rated securities.
Securities rated Baa by Moody's and BBB by S&P, Duff & Phelps and Fitch are
considered to have an adequate capacity to pay interest and repay principal.
Such securities are considered to have speculative characteristics and share
some of the same characteristics as lower-rated securities. Sustained periods of
deteriorating economic conditions or of rising interest rates are more likely to
lead to a weakening in the issuer's capacity to pay interest and repay principal
than in the case of higher-rated securities. Securities rated Ba by Moody's and
BB by S&P, Duff & Phelps and Fitch are considered to have speculative
characteristics with respect to capacity to pay interest and repay principal
over time; their future cannot be considered as well-assured. Securities rated B
by Moody's, S&P, Duff & Phelps and Fitch are considered to have highly
speculative characteristics with respect to capacity to pay interest and repay
principal. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Securities rated Caa by Moody's and CCC by S&P, Duff & Phelps and Fitch are of
poor standing and there is a present danger with respect to payment of principal
or interest. Securities rated Ca by Moody's and CC by S&P and Fitch are
minimally protected, and default in payment of principal or interest is
probable. Securities rated C by Moody's, S&P and Fitch are in imminent default
in payment of principal or interest and have extremely poor prospects of ever
attaining any real investment standing. Securities rated D by S&P and Fitch are
in default. The issuer of securities rated DD by Duff & Phelps is under an order
of liquidation.
Investment in Lower-Rated Fixed-Income Securities. Lower-rated securities, i.e.,
those rated Ba and lower by Moody's or BB and lower by S&P, Duff & Phelps or
Fitch, are subject to greater risk of loss of principal and interest than
higher-rated securities. They are also generally considered to be subject to
greater market risk than higher-rated securities, and the capacity of issuers of
lower-rated securities to pay interest and repay principal is more likely to
weaken than is that of issuers of higher-rated securities in times of
deteriorating economic conditions or rising interest rates. In addition,
lower-rated securities may be more susceptible to real or perceived adverse
economic conditions than investment grade securities.
The market for lower-rated securities may be thinner and less active than that
for higher-rated securities, which can adversely affect the prices at which
these securities can be sold. To the extent that there is no established
secondary market for lower-rated securities, a Fund may experience difficulty in
valuing such securities and, in turn, the Fund's assets. In addition, adverse
publicity and investor perceptions about lower-rated securities, whether or not
factual, may tend to impair their market value and liquidity.
Alliance will try to reduce the risk inherent in investment in lower-rated
securities through credit analysis, diversification and attention to current
developments and trends in interest
45
<PAGE>
rates and economic and political conditions. However, there can be no assurance
that losses will not occur. Since the risk of default is higher for lower-rated
securities, Alliance's research and credit analysis are a correspondingly more
important aspect of its program for managing a Fund's securities than would be
the case if a Fund did not invest in lower-rated securities.
In seeking to achieve a Fund's investment objective, there will be times, such
as during periods of rising interest rates, when depreciation and realization of
capital losses on securities in a Fund's portfolio will be unavoidable.
Moreover, medium- and lower-rated securities and non-rated securities of
comparable quality may be subject to wider fluctuations in yield and market
values than higher-rated securities under certain market conditions. Such
fluctuations after a security is acquired do not affect the cash income received
from that security but are reflected in the net asset value of a Fund. See the
Statement of Additional Information for each Fund that invests in lower-rated
securities for a description of the bond ratings of Moody's, S&P, Duff & Phelps
and Fitch.
Certain lower-rated securities in which Growth Fund, Income Builder Fund,
Strategic Balanced and Utility Income Fund may invest may contain call or
buy-back features that permit the issuers thereof to call or repurchase such
securities. Such securities may present risks based on prepayment expectations.
If an issuer exercises such a provision, a Fund may have to replace the called
security with a lower yielding security, resulting in a decreased rate of return
to the Fund.
Non-Diversified Status. Each of Worldwide Privatization Fund, New Europe Fund,
All-Asia Investment Fund, Global Environment Fund, and Income Builder Fund is a
"non-diversified" investment company, which means the Fund is not limited in the
proportion of its assets that may be invested in the securities of a single
issuer. However, each Fund intends to conduct its operations so as to qualify to
be taxed as a "regulated investment company" for purposes of the Code, which
will relieve the Fund of any liability for federal income tax to the extent its
earnings are distributed to shareholders. See "Dividends, Distributions and
Taxes" in each Fund's Statement of Additional Information. To so qualify, among
other requirements, the Fund will limit its investments so that, at the close of
each quarter of the taxable year, (i) not more than 25% of the Fund's total
assets will be invested in the securities of a single issuer, and (ii) with
respect to 50% of its total assets, not more than 5% of its total assets will be
invested in the securities of a single issuer and the Fund will not own more
than 10% of the outstanding voting securities of a single issuer. A Fund's
investments in U.S. Government securities and other regulated investment
companies are not subject to these limitations. Because each of Worldwide
Privatization Fund, New Europe Fund, All-Asia Investment Fund and Income Builder
Fund is a non-diversified investment company, it may invest in a smaller number
of individual issuers than a diversified investment company, and an investment
in such Fund may, under certain circumstances, present greater risk to an
investor than an investment in a diversified investment company.
Foreign government securities are not treated like U.S. Government securities
for purposes of the diversification tests described in the preceding paragraph,
but instead are subject to these tests in the same manner as the securities of
non-governmental issuers.
Year 2000. Many computer software systems in use today cannot properly process
date-related information from and after January 1, 2000. Should any of the
computer systems employed by the Funds' major service providers fail to process
this type of information properly, that could have a negative impact on the
Funds' operations and the services that are provided to the Funds' shareholders.
Alliance, each Fund's investment adviser, Alliance Fund Distributors, Inc.
("AFD"), each Fund's principal underwriter, and Alliance Fund Services, Inc.
("AFS"), each Fund's registrar, transfer agent and dividend disbursing agent,
have advised the Funds that they are reviewing all of their computer systems
with the goal of modifying or replacing such systems prior to January 1, 2000 to
the extent necessary to foreclose any such negative impact. In addition,
Alliance has been advised by each Fund's custodian that they is also in the
process of reviewing its systems with the same goal. As of the date of this
Prospectus, the Funds and Alliance have no reason to believe that these goals
will not be achieved.
- --------------------------------------------------------------------------------
PURCHASE AND SALE
- --------------------------------------------------------------------------------
OF SHARES
- --------------------------------------------------------------------------------
HOW TO BUY SHARES
You can purchase shares of any of the Funds at a price based on the next
calculation of their net asset value after receipt of a proper purchase order
either through broker-dealers, banks or other financial intermediaries, or
directly through AFD. The minimum initial investment in each Fund is $250. The
minimum for subsequent investments in each Fund is $50. Investments of $25 or
more are allowed under the automatic investment program of each Fund. Share
certificates are issued only upon request. See the Subscription Application and
Statements of Additional Information for more information.
Existing shareholders may make subsequent purchases by electronic funds transfer
if they have completed the appropriate section of the Subscription Application
or the Shareholder Options form obtained from AFS. Telephone purchase orders can
be made by calling 800-221-5672 and may not exceed $500,000.
Each Fund offers three classes of shares through this prospectus, Class A, Class
B and Class C. The Funds may refuse any order to purchase shares. In this
regard, the Funds reserve the right to restrict purchases of shares (including
through exchanges) when they appear to evidence a pattern of frequent purchases
and sales made in response to short-term considerations.
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<PAGE>
Class A Shares--Initial Sales Charge Alternative
You can purchase Class A shares at net asset value plus an initial sales charge,
as follows:
<TABLE>
<CAPTION>
Initial Sales Charge
as % of Commission to
Net Amount as % of Dealer/Agent as %
Amount Purchased Invested Offering Price of Offering Price
- --------------------------------------------------------------------------------------
<S> <C> <C> <C>
Less than $100,000 4.44% 4.25% 4.00%
- --------------------------------------------------------------------------------------
$100,000 to
less than $250,000 3.36 3.25 3.00
- --------------------------------------------------------------------------------------
$250,000 to
less than $500,000 2.30 2.25 2.00
- --------------------------------------------------------------------------------------
$500,000 to
less than $1,000,000 1.78 1.75 1.50
- --------------------------------------------------------------------------------------
</TABLE>
On purchases of $1,000,000 or more, you pay no initial sales charge but may pay
a contingent deferred sales charge ("CDSC") equal to 1% of the lesser of net
asset value at the time of redemption or original cost if you redeem within one
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 in accordance with a 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 Statements of Additional
Information.
Class B Shares--Deferred Sales Charge Alternative
You can purchase Class B shares at net asset value without an initial sales
charge. A Fund will thus receive the full amount of your purchase. However, you
may pay a CDSC if you redeem shares within four years after purchase. The amount
of the CDSC (expressed as a percentage of the lesser of the current net asset
value or original cost) will vary according to the number of years from the
purchase of Class B shares until the redemption of those shares.
The amount of the CDSC for Class B shares for each Fund is as set forth below.
Class B shares of a Fund purchased prior to the date of this Prospectus may be
subject to a different CDSC schedule, which was disclosed in the Fund's
prospectus in use at the time of purchase and is set forth in the Fund's current
Statement of Additional Information.
<TABLE>
<CAPTION>
Year Since Purchase CDSC
--------------------------------------------
<S> <C>
First ................................ 4.0%
Second ............................... 3.0%
Third ................................ 2.0%
Fourth ............................... 1.0%
Fifth ................................ None
</TABLE>
Class B shares are subject to higher distribution fees than Class A shares for a
period (after which they convert to Class A shares) of eight years, or six years
with respect to Premier Growth Fund. The higher fees mean a higher expense
ratio, so Class B shares pay correspondingly lower dividends and may have a
lower net asset value than Class A shares.
Class C Shares--Asset-Based Sales Charge Alternative
You can purchase Class C shares at net asset value without any initial sales
charge. A Fund will thus receive the full amount of your purchase, and, if you
hold your shares for one year or more, you will receive the entire net asset
value of your shares upon redemption. Class C shares incur higher distribution
fees than Class A shares and do not convert to any other class of shares of the
Fund. The higher fees mean a higher expense ratio, so Class C shares pay
correspondingly lower dividends and may have a lower net asset value than Class
A shares.
Class C shares redeemed within one year of purchase will be subject to a CDSC
equal to 1% of the lesser of their original cost or net asset value at the time
of redemption.
Application of the CDSC
Shares obtained from dividend or distribution reinvestment are not subject to
the CDSC. The CDSC is deducted from the amount of the redemption and is paid to
AFD. The CDSC will be waived on redemptions of shares following the death or
disability of a shareholder, to meet the requirements of certain qualified
retirement plans or pursuant to a monthly, bimonthly or quarterly systematic
withdrawal plan. See the Statements of Additional Information.
How the Funds Value Their Shares
The net asset value of each Class of shares of a Fund is calculated by dividing
the value of the Fund's net assets allocable to that Class by the outstanding
shares of that Class. Shares are valued each day the Exchange is open as of the
close of regular trading (currently 4:00 p.m. Eastern time). The securities in a
Fund are valued 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 reflects fair market value.
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 may
also not offer all classes of shares of the Funds. In order to enable
participants investing through Employee Benefit Plans to purchase shares of the
Funds, the maximum and minimum investment amounts may be different for shares
purchased through Employee Benefit Plans from those described in this
Prospectus. In addition, the Class A, Class B and Class C CDSC may be waived for
investments made through Employee Benefit Plans.
General
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 Class
A shares. If you are making a smaller investment, you might consider 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. Consult your
47
<PAGE>
financial agent. 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.
Each Fund offers a fourth class of shares, Advisor Class shares, by means of
separate prospectus. Advisor Class shares may be purchased and held solely by
(i) accounts established under a fee-based program sponsored and maintained by a
registered broker-dealer or other financial intermediary and approved by AFD,
(ii) 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 and (iii)
certain other categories of investors described in the prospectus for the
Advisor Class, including investment advisory clients of, and certain other
persons associated with, Alliance and its affiliates or the Funds. Advisor Class
shares are offered without any initial sales charge or CDSC and without an
ongoing distribution fee and are expected, therefore, to have different
performance than Class A, Class B or Class C shares. You can obtain more
information about Advisor Class shares by contacting AFS at 800-221-5672 or by
contacting your financial representative.
A transaction, service, administrative or other similar fee may be charged by
your broker-dealer, agent, financial intermediary or other financial
representative with respect to the purchase, sale or exchange of Class A, Class
B or Class C shares made through such financial representative. Such financial
intermediaries may also impose requirements with respect to the purchase, sale
or exchange of shares that are different from, or in addition to, those imposed
by a Fund, including requirements as to the minimum initial and subsequent
investment amounts.
In addition to the discount or commission paid to dealers or agents, AFD from
time to time pays additional cash or other incentives to dealers or agents,
including EQ Financial Consultants, Inc., an affiliate of AFD, in connection
with the sale of shares of the Funds. Such additional amounts may be utilized,
in whole or in part, in some cases together with other revenues of such dealers
or agents, to provide additional compensation to registered representatives who
sell shares of the Funds. On some occasions, such cash or other incentives will
be conditioned upon the sale of a specified minimum dollar amount of the shares
of a Fund and/or other Alliance Mutual Funds during a specific period of time.
Such 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 by persons associated with a
dealer or agent and their immediate family members to urban or resort locations
within or outside the United States. Such dealer or agent may elect to receive
cash incentives of equivalent amount in lieu of such payments.
HOW TO SELL SHARES
You may "redeem"(i.e., sell your shares in a Fund to the Fund) on any day the
Exchange is open, either directly or through your financial intermediary. The
price you will receive is the net asset value (less any applicable CDSC) next
calculated after the Fund receives your request in proper form. Proceeds
generally will be sent to you within seven days. However, for shares recently
purchased by check or electronic funds transfer, a Fund will not send proceeds
until it is reasonably satisfied that the check or electronic funds transfer has
been collected (which may take up to 15 days).
Selling Shares Through Your Broker
Your broker must receive your request before 4:00 p.m. Eastern time, and your
broker must transmit your request to the Fund by 5:00 p.m. Eastern time, for you
to receive that day's net asset value (less any applicable CDSC). Your broker is
responsible for furnishing all necessary documentation to a Fund and may charge
you for this service.
Selling Shares Directly To A Fund
Send a signed letter of instruction or stock power form to AFS along with
certificates, if any, that represent the shares you want to sell. For your
protection, signatures must be guaranteed by a bank, a member firm of a national
stock exchange or other eligible guarantor institution. 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. For details contact:
Alliance Fund Services
P.O. Box 1520
Secaucus, NJ 07096-1520
800-221-5672
Alternatively, a request for redemption of shares for which no stock
certificates have been issued can also be made by telephone to 800-221-5672.
Telephone redemption requests must be made by 4:00 p.m. Eastern time on a Fund
business day in order to receive that day's net asset value, and, for
redemptions made before March 1, 1998, may be made only once in any 30-day
period (except for certain omnibus accounts). A shareholder who has completed
the appropriate section of the Subscription Application, or the Shareholder
Options form obtained from AFS, can elect to have the proceeds of his or her
redemption sent to his or her bank via an electronic funds transfer. Proceeds of
telephone redemptions also may be sent by check to a shareholder's address of
record. Redemption requests by electronic funds transfer may not exceed $100,000
and redemption requests by check may not exceed $50,000 per day. Telephone
redemption is not available for shares held in nominee or "street name" accounts
or retirement plan accounts or shares held by a shareholder who has changed his
or her address of record within the previous 30 calendar days.
General
The sale of shares is a taxable transaction for federal tax purposes. Under
unusual circumstances, a Fund may suspend redemptions or postpone payment for up
to seven days or longer, as permitted by federal securities law. The Funds
reserve the right to close an account that through redemption
48
<PAGE>
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
reaching AFS by telephone, in which event you should issue written instructions
to AFS. AFS is not responsible for the authenticity of telephonic 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 fails to do so. Dealers and
agents may charge a commission for handling telephonic 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. A shareholder's
manual explaining all available services will be provided upon request. To
request a shareholder manual, call 800-227-4618.
HOW TO EXCHANGE SHARES
You may exchange your shares of any Fund 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 net asset values next
determined, without sales or service charges. Exchanges may be made by telephone
or written request. Telephone exchange requests must be received by AFS 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 purposes of
determining the CDSC, if any, upon redemption and, in the case of Class B
shares, for the purposes of conversion to Class A shares. After an exchange,
your Class B shares will automatically convert to Class A shares in accordance
with the conversion schedule applicable to the Class B shares of the Alliance
Mutual Fund you originally purchased for cash ("original shares"). When
redemption occurs, the CDSC applicable to the original shares is applied.
Please read carefully the Prospectus of the mutual fund into which you are
exchanging before submitting the request. Call AFS at 800-221-5672 to exchange
uncertificated shares. An exchange is a taxable capital transaction for federal
tax purposes. The exchange service may be changed, suspended, or terminated on
60 days' written notice.
- --------------------------------------------------------------------------------
MANAGEMENT OF THE FUNDS
- --------------------------------------------------------------------------------
ADVISER
Alliance, which is a Delaware limited partnership with principal offices at 1345
Avenue of the Americas, New York, New York 10105, has been retained under an
advisory agreement (the "Advisory Agreement") to provide investment advice and,
in general, to conduct the management and investment program of each Fund,
subject to the general supervision and control of the Directors of the Fund.
The following table lists the person or persons who are primarily responsible
for the day-to-day management of each Fund's portfolio, the length of time that
each person has been primarily responsible, and each person's principal
occupation during the past five years.
<TABLE>
<CAPTION>
Principal occupation
during the past
Fund Employee; year; title five years
- -------------------------------------------------------------------------------------
<S> <C> <C>
Alliance Fund Alden M. Stewart since 1997-- Associated with
Executive Vice President of Alliance since
Alliance Capital Management 1993; prior
Corporation (ACMC*) thereto,
associated with
Equitable Capital
Management
Corporation
("Equitable
Capital")**
Randall E. Haase since 1997-- Associated with
Senior Vice President of ACMC Alliance since July
1993; prior
thereto,
associated with
Equitable Capital
Growth Fund Tyler Smith since inception-- Associated with
Senior Vice President of ACMC Alliance since
July 1993; prior
thereto,
associated with
Equitable Capital
Premier Growth
Fund Alfred Harrison since inception-- Associated with
Vice Chairman of ACMC Alliance
Technology Fund Peter Anastos since 1992-- Associated with
Senior Vice President of ACMC Alliance
Gerald T. Malone since 1992-- Associated with
Senior Vice President of ACMC Alliance since
1992; prior
thereto
associated with
College
Retirement
Equities Fund
Quasar Fund Alden M. Stewart since 1994-- (see above)
(see above)
Randall E. Haase since 1994-- (see above)
(see above)
International Fund A. Rama Krishna since 1993-- Associated with
Senior Vice President of ACMC Alliance since
and director of Asian Equity 1993; prior
research thereto,
Chief Investment
Strategist and
Director--Equity
Research for CS
First Boston
Worldwide
Privatization Fund Mark H. Breedon since inception-- Associated with
Senior Vice President of ACMC Alliance
and Director and Vice President
of Alliance Capital Limited ***
New Europe Fund Steven Beinhacker since 1997-- Associated with
Vice President of ACMC Alliance
All-Asia Investment A. Rama Krishna since inception-- (see above)
Fund (see above)
</TABLE>
49
<PAGE>
<TABLE>
<CAPTION>
Principal occupation
during the past
Fund Employee; year; title five years
- -------------------------------------------------------------------------------------
<S> <C> <C>
Global Small Cap Alden M. Stewart since 1994-- (see above)
Fund (see above)
Randall E. Haase since 1994-- (see above)
(see above)
Ronald L. Simcoe since 1993-- Associated with
Vice President of ACMC Alliance since
1993; prior
thereto,
associated with
Equitable Capital
Global Environment Jeremy R. Kramer since 1995-- Associated with
Fund Vice President of ACMC Alliance since
1993; prior
thereto, securities
analyst with
Neuberger &
Berman
Strategic Balanced Nicholas D.P. Carn Associated with
Fund since 1997-- Alliance since
Vice President of ACMC 1997; prior
thereto, Chief
Investment
Officer and
Portfolio Manager
at Draycott
Partners
Balanced Shares Paul Rissman since 1997-- Associated with
Senior Vice President of ACMC Alliance
Income Builder Fund Andrew M. Aran since 1994-- Associated with
Senior Vice President of ACMC Alliance
Thomas M. Perkins since 1991-- Associated with
Senior Vice President of ACMC Alliance
Vita Marie Pike since 1997 Associated with
Vice President of ACMC Alliance
Corinne Molof Hill since 1997 Associated with
Vice Presidient of ACMC Alliance
Utility Income Fund Paul Rissman since 1996-- Associated with
(See above) Alliance
Growth & Income Paul Rissman since 1994-- Associated with
Fund (see above) Alliance
Real Estate Daniel G. Pine since 1996-- Associated with
Investment Fund Senior Vice President of ACMC Alliance since
1996; prior
thereto, Senior
Vice President of
Desai Capital
Management
David Kruth since 1997-- Associated with
Vice President of ACMC Alliance since
1997; prior
thereto Senior
Vice President of
the Yarmouth
Group
- -------------------------------------------------------------------------------------
</TABLE>
* The sole general partner of Alliance.
** Equitable Capital was, prior to Alliance's acquisition of it, a management
firm under common control with Alliance.
*** An indirect wholly-owned subsidiary of Alliance.
Alliance is a leading international investment manager supervising client
accounts with assets as of September 30, 1997 totaling more than $217 billion
(of which approximately $81 billion represented the assets of investment
companies). Alliance's clients are primarily major corporate employee benefit
funds, public employee retirement systems, investment companies, foundations and
endowment funds. The 56 registered investment companies managed by Alliance
comprising 118 separate investment portfolios currently have over two million
shareholders. As of September 30, 1997, Alliance was an investment manager of
employee benefit plan assets for 28 of the Fortune 100 companies.
ACMC, the sole general partner of, and the owner of a 1% general partnership
interest in, Alliance, is an indirect wholly-owned subsidiary of The Equitable
Life Assurance Society of the United States ("Equitable"), one of the largest
life insurance companies in the United States, which is a wholly-owned
subsidiary of The Equitable Companies Incorporated, a holding company controlled
by AXA-UAP, a French insurance holding company. Certain information concerning
the ownership and control of Equitable by AXA-UAP is set forth in each Fund's
Statement of Additional Information under "Management of the Funds."
Performance of Similarly Managed Portfolios. In addition to managing the assets
of Premier Growth Fund, Mr. Harrison has ultimate responsibility for the
management of discretionary tax-exempt accounts of institutional clients managed
as described below without significant client-imposed restrictions ("Historical
Portfolios"). These accounts have substantially the same investment objectives
and policies and are managed in accordance with essentially the same investment
strategies and techniques as those for Premier Growth Fund, except for the
ability of Premier Growth Fund to use futures and options as hedging tools and
to invest in warrants. The Historical Portfolios are also not subject to certain
limitations, diversification requirements and other restrictions imposed under
the 1940 Act and the Code to which Premier Growth Fund, as a registered
investment company, is subject and which, if applicable to the Historical
Portfolios, may have adversely affected the performance results of the
Historical Portfolios. See "Investment Objective and Policies."
Set forth below is performance data provided by Alliance relating to the
Historical Portfolios for each of the nineteen full calendar years during which
Mr. Harrison has managed the Historical Portfolios as an employee of Alliance
and cumulatively through December 31, 1997. As of December 31, 1997, the assets
in the Historical Portfolios totaled approximately $11.6 billion and the average
size of an institutional account in the Historical Portfolio was $341 million.
Each Historical Portfolio has a nearly identical composition of investment
holdings and related percentage weightings.
The performance data is net of all fees (including brokerage commissions)
charged to those accounts. The performance data is computed in accordance with
standards formulated by the Association of Investment Management and Research
and has not been adjusted to reflect any fees that will be payable by Premier
Growth Fund, which are higher than the fees imposed on the Historical Portfolio
and will result in a higher expense ratio and lower returns for Premier Growth
Fund. Expenses associated with the distribution of Class A, Class B and Class C
shares of
50
<PAGE>
Premier Growth Fund in accordance with the plan adopted by Premier Growth Fund's
Board of Directors pursuant to Rule 12b-1 under the 1940 Act ("distribution
fees") are also excluded. See "Expense Information." The performance data has
also not been adjusted for corporate or individual taxes, if any, payable by the
account owners.
Alliance has calculated the investment performance of the Historical Portfolios
on a trade-date basis. Dividends have been accrued at the end of the month and
cash flows weighted daily. Composite investment performance for all portfolios
has been determined on an asset weighted basis. New accounts are included in the
composite investment performance computations at the beginning of the quarter
following the initial contribution. The total returns set forth below are
calculated using a method that links the monthly return amounts for the
disclosed periods, resulting in a time-weighted rate of return.
As reflected below, the Historical Portfolios have over time performed favorably
when compared with the performance of recognized performance indices. The S&P
500 Index is a widely recognized, unmanaged index of market activity based upon
the aggregate performance of a selected portfolio of publicly traded common
stocks, including monthly adjustments to reflect the reinvestment of dividends
and other distributions. The S&P 500 Index reflects the total return of
securities comprising the Index, including changes in market prices as well as
accrued investment income, which is presumed to be reinvested. The Russell 1000
universe of securities is compiled by Frank Russell Company and is segmented
into two style indices, based on the capitalization-weighted median
book-to-price ratio of each of the securities. At each reconstitution, the
Russell 1000 constituents are ranked by their book-to-price ratio. Once so
ranked, the breakpoint for the two styles is determined by the median market
capitalization of the Russell 1000. Thus, those securities falling within the
top fifty percent of the cumulative market capitalization (as ranked by
descending book-to-price) become members of the Russell Price-Driven Indices.
The Russell 1000 Growth Index is, accordingly, designed to include those Russell
1000 securities with a greater-than-average growth orientation. In contrast with
the securities in the Russell Price-Driven Indices, companies in the Growth
Index tend to exhibit higher price-to-book and price-earnings ratios, lower
dividend yield and higher forecasted growth values.
To the extent Premier Growth Fund does not invest in U.S. common stocks or
utilizes investment techniques such as futures or options, the S&P 500 Index and
Russell 1000 Growth Index may not be substantially comparable to Premier Growth
Fund. The S&P 500 Index and Russell 1000 Growth Index are included to illustrate
material economic and market factors that existed during the time period shown.
The S&P 500 Index and Russell 1000 Growth Index do not reflect the deduction of
any fees. If Premier Growth Fund were to purchase a portfolio of securities
substantially identical to the securities comprising the S&P 500 Index or the
Russell 1000 Growth Index, Premier Growth Fund's performance relative to the
index would be reduced by Premier Growth Fund's expenses, including brokerage
commissions, advisory fees, distribution fees, custodial fees, transfer agency
costs and other administrative expenses, as well as by the impact on Premier
Growth Fund's shareholders of sales charges and income taxes.
The Lipper Growth Fund Index is prepared by Lipper Analytical Services, Inc. and
represents a composite index of the investment performance for the 30 largest
growth mutual funds. The composite investment performance of the Lipper Growth
Fund Index reflects investment management and administrative fees and other
operating expenses paid by these mutual funds and reinvested income dividends
and capital gain distributions, but excludes the impact of any income taxes and
sales charges.
The following performance data is provided solely to illustrate Mr. Harrison's
performance in managing the Historical Portfolios and the Premier Growth Fund as
measured against certain broad based market indices and against the composite
performance of other open-end growth mutual funds. Investors should not rely on
the following performance data of the Historical Portfolios as an indication of
future performance of Premier Growth Fund. The composite investment performance
for the periods presented may not be indicative of future rates of return. Other
methods of computing investment performance may produce different results, and
the results for different periods may vary.
Schedule of Composite Investment PerformanceHistorical Portfolios*
<TABLE>
<CAPTION>
Russell Lipper
Premier Historical S&P 500 1000 Growth
Growth Portfolios Index Growth Index Fund Index
Fund Total Return** Total Return Total Return Total Return
---- -------------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Year ended December:
1997*** 27.05% 34.90% 33.36% 30.49% 25.30%
1996*** 18.84 22.22 22.96 23.12 17.48
1995*** 40.66 40.12 37.58 37.19 32.65
1994 (9.78) (4.83) 1.32 2.66 (1.57)
1993 5.35 10.62 10.08 2.90 11.98
1992 -- 12.27 7.62 5.00 7.63
1991 -- 39.19 30.47 41.16 35.20
1990 -- (1.57) (3.10) (0.26) (5.00)
1989 -- 39.08 31.69 35.92 28.60
1988 -- 10.96 16.61 11.27 15.80
1987 -- 8.57 5.25 5.31 1.00
1986 -- 27.60 18.67 15.36 15.90
1985 -- 37.68 31.73 32.85 30.30
1984 -- (3.33) 6.27 (.95) (2.80)
1983 -- 20.95 22.56 15.98 22.30
1982 -- 28.23 21.55 20.46 20.20
1981 -- (1.10) (4.92) (11.31) (8.40)
1980 -- 51.10 32.50 39.57 37.30
1979 -- 30.99 18.61 23.91 27.40
Cumulative total
return for the
period
January 1,
1979 to
December 31,
1997 -- 3,689% 1,946% 1,683% 1,753%
- ----------------------------------------------------------------------------------------------
</TABLE>
* Total return is a measure of investment performance that is based upon the
change in value of an investment from the beginning to the end of a
specified period and assumes reinvestment of all dividends and other
distributions. The basis of preparation of this data is described in the
preceding discussion. Total returns for Premier Growth Fund are for Class A
shares, with imposition of the maximum 4.25% sales charge.
51
<PAGE>
** Assumes imposition of the maximum advisory fee charged by Alliance for any
Historical Portfolio for the period involved, although not the impact of
the payment of that fee on a quarterly rather than an annual basis and the
compounding effect thereof over the periods for which return information is
provided in the table on page 50, which would correspondingly reduce the
returns presented.
*** During this period, the Historical Portfolios differed from Premier Growth
Fund in that Premier Growth Fund invested a portion of its net assets in
warrants on equity securities in which the Historical Portfolios were
unable, by their investment restrictions, to purchase. In lieu of warrants,
the Historical Portfolios acquired the common stock upon which the warrants
were based.
The average annual total returns presented below are based upon the cumulative
total return as of December 31, 1997 and, for more than one year, assume a
steady compounded rate of return and are not year-by-year results, which
fluctuated over the periods as shown.
<TABLE>
<CAPTION>
Average Annual Total Returns
-----------------------------------------------------------------------
Premier Russell Lipper
Growth Historical S&P 500 1000 Growth
Fund Portfolios** Index Growth Index Fund Index
---- ---------- ----- ------------ ----------
<S> <C> <C> <C> <C> <C>
One year ................ 27.05% 34.90% 33.36% 30.49% 25.30%
Three years ............. 32.32 32.20 31.15 30.14 25.11
Five years .............. 19.14 19.46 20.27 18.41 16.47
Ten years ............... 20.13+ 19.17 18.05 17.94 15.93
Since January 1,
1979 .................. -- 20.08 17.22 16.37 15.86
- ----------------------------------------------------------------------------------------------------
</TABLE>
+ Since inception on 9/28/92
ADMINISTRATOR TO ALL-ASIA INVESTMENT FUND
Alliance has been retained by All-Asia Investment Fund under an administration
agreement (the "Administration Agreement") to perform administrative services
necessary for the operation of the Fund. For a description of such services, see
the Statement of Additional Information of the Fund.
CONSULTANT TO ALLIANCE WITH RESPECT TO INVESTMENT IN REAL ESTATE SECURITIES
Alliance, with respect to investment in real estate securities, has retained as
a consultant CB Commercial Real Estate Group, Inc. ("CBC"), a publicly held
company and the largest real estate services company in the United States,
comprised of real estate brokerage, property and facilities management, and real
estate finance and investment advisory activities (CBC in August of 1997
acquired Koll, which previously provided these consulting services to Alliance).
In 1996, CBC (and Koll, on a combined basis) completed 25,000 sale and lease
transactions, managed over 4,100 client properties, created over $3.5 billion in
mortgage originations, and completed over 2,600 appraisal and consulting
assignments. In addition, they advised and managed for institutions over $4
billion in real estate investments. CBC will make available to Alliance the CBC
National Real Estate Index, which gathers, analyzes and publishes targeted
research data for the 65 largest U.S. markets, based on a variety of
public-sector and private-sector sources as well as CBC's proprietary database
of approximately 60,000 property transactions representing over $400 billion of
investment property. This information provides a substantial component of the
research and data used to create the REIToScore model. As a consultant, CBC
provides to Alliance, at Alliance's expense, such in-depth information regarding
the real estate market, the factors influencing regional valuations and analysts
of recent transactions in office, retail, industrial and multi-family properties
as Alliance shall from time to time request. CBC will not furnish advice or make
recommendations regarding the purchase or sale of securities by the Fund nor
will it be responsible for making investment decisions involving Fund assets.
CBC is one of the three largest fee-based property management firms in the
United States, the largest commercial real estate lease brokerage firm in the
country, the largest investment property brokerage firm in the country, as well
as one of the largest publishers of real estate research, with approximately
6,000 employees nationwide. CBC will provide Alliance with exclusive access to
its REIToScore model which ranks approximately 130 REITS based on the relative
attractiveness of the property markets in which they own real estate. This model
scores the approximately 12,000 individual properties owned by these companies.
REIToScore is in turn based on CBC's National Real Estate Index which gathers,
analyzes and publishes targeted research for the 65 largest U.S. real estate
markets based on a variety of public- and private-sector sources as well as
CBC's proprietary database of 60,000 commercial property transactions
representing over $400 billion of investment property and over 3,000 tracked
properties which report rent and expense data quarterly. CBC has previously
provided access to its REIToScore model results primarily to the institutional
market through subscriptions. The model is no longer provided to any research
publications and the Fund is currently the only mutual fund available to retail
investors that has access to CBC's REIT o Score model.
DISTRIBUTION SERVICES AGREEMENTS
Rule 12b-1 adopted by the Commission under the 1940 Act permits an investment
company to pay expenses associated with the distribution of its shares in
accordance with a duly adopted plan. Each Fund has adopted one or more "Rule
12b-1 plans" (for each Fund, a "Plan") and has entered into a Distribution
Services Agreement (the "Agreement") with AFD. Pursuant to its Plan, a Fund pays
to AFD a Rule 12b-1 distribution services fee, which may not exceed an annual
rate of .30% (.50% with respect to Growth Fund, Premier Growth Fund and
Strategic Balanced Fund) of the Fund's aggregate average daily net assets
attributable to the Class A shares, 1.00% of the Fund's aggregate average daily
net assets attributable to the Class B shares and 1.00% of the Fund's aggregate
average daily net assets attributable to the Class C shares, for distribution
expenses. The Directors of Growth Fund and Strategic Balanced Fund currently
limit payments with respect to Class A shares under the Plan to .30% of each
Fund's aggregate average daily net assets attributable to Class A shares. The
Directors of Premier Growth Fund currently limit payments under the Plan with
respect to sales of Class A shares made after November 1993 to .30% of the
Fund's aggregate average daily net assets. The Plans provide that a portion of
the distribution services fee in an amount not to exceed .25% of the
52
<PAGE>
aggregate average daily net assets of each Fund attributable to each of the
Class A, Class B and Class C shares constitutes a service fee used for personal
service and/or the maintenance of shareholder accounts.
The Plans provide that AFD will use the distribution services fee received from
a Fund in its entirety for payments (i) to compensate broker-dealers or other
persons for providing distribution assistance, (ii) to otherwise promote the
sale of shares of the Fund, and (iii) to compensate broker-dealers, depository
institutions and other financial intermediaries for providing administrative,
accounting and other services with respect to the Fund's shareholders. In this
regard, some payments under the Plans are used to compensate financial
intermediaries with trail or maintenance commissions in an amount equal to .25%,
annualized, with respect to Class A shares and Class B shares, and 1.00%,
annualized, with respect to Class C shares, of the assets maintained in a Fund
by their customers. Distribution services fees received from the Funds, except
Growth Fund and Strategic Balanced Fund, with respect to Class A shares will not
be used to pay any interest expenses, carrying charges or other financing costs
or allocation of overhead of AFD. Distribution services fees received from the
Funds, with respect to Class B and Class C shares, may be used for these
purposes. The Plans also provide that Alliance may use its own resources to
finance the distribution of each Fund's shares.
The Funds are not obligated under the Plans to pay any distribution services fee
in excess of the amounts set forth above. Except as noted below for Growth Fund
and Strategic Balanced Fund, 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 the Fund in subsequent fiscal years.
Except as noted below for Growth Fund and Strategic Balanced Fund, AFD's
compensation with respect to Class B and Class C shares under the Plans of the
other Funds is directly tied to its expenses incurred. Actual distribution
expenses for such Class B and Class C shares for any given year, however, will
probably exceed the distribution services fees payable under the applicable Plan
with respect to the class involved and, in the case of Class B and Class C
shares, payments received from CDSCs. The excess will be carried forward by AFD
and reimbursed from distribution services fees payable under the Plan with
respect to the class involved and, in the case of Class B and Class C shares,
payments subsequently received through CDSCs, so long as the Plan and the
Agreement are in effect. Since AFD's compensation under the Plans of Growth Fund
and Strategic Balanced Fund is not directly tied to the expenses incurred by
AFD, the amount of compensation received by it under the applicable Plan during
any year may be more or less than its actual expenses.
Unreimbursed distribution expenses incurred as of the end of each Fund's most
recently completed fiscal period, and carried over for reimbursement in future
years in respect of the Class B and Class C shares for all Funds were, as of
that time, as follows:
<TABLE>
<CAPTION>
Amount of Unreimbursed Distribution Expenses
(as % of Net Assets of Class)
---------------------------------------------------------------------
Class B Class C
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Alliance Fund ...................................... $ 3,782,063 (5.37%) $ 1,025,156 (5.43%)
Premier Growth Fund ................................ $20,874,319 (2.43%) $ 1,413,557 (0.79%)
Technology Fund .................................... $32,259,341 (3.06%) $ 1,464,569 (0.80%)
Quasar Fund ........................................ $15,242,262 (3.03% $ 1,262,697 (0.90%)
International Fund ................................. $ 2,566,420 (3.30%) $ 807,347 (3.47%)
Worldwide Privatization Fund ....................... $ 5,013,479 (4.14%) $ 251,109 (1.94%)
New Europe Fund .................................... $ 2,535,456 (3.84%) $ 541,239 (3.20%)
All-Asia Investment Fund ........................... $ 1,690,408 (14.78%) $ 162,319 (8.73%)
Global Small Cap Fund .............................. $ 2,055,687 (6.43%) $ 586,919 (6.73%)
Balanced Shares .................................... $ 1,533,382 (6.34%) $ 463,860 (8.42%)
Income Builder Fund ................................ $ 1,096,845 (12.59%) $ 1,904,160 (4.16%)
Utility Income Fund ................................ $ 1,400,456 (9.47%) $ 456,135 (13.37%)
Growth and Income Fund ............................. $11,066,118 (2.42%) $ 1,326,535 (1.25%)
Real Estate Investment Fund ........................ $ 6,726,437 (3.60%) $ 366,120 (0.86%)
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The Plans are 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.
The Glass-Steagall Act and other applicable laws may limit the ability of a bank
or other depository institution to become an underwriter or distributor of
securities. However, in the opinion of the Funds' management, based on the
advice of counsel, these laws do not prohibit such depository institutions from
providing services for investment companies such as the administrative,
accounting and other services referred to in the Agreements. In the event that a
change in these laws prevented a bank from providing such services, it is
expected that other services arrangements would be made and that shareholders
would not be adversely affected. The State of Texas requires that shares of a
Fund may be sold in that state only by dealers or other financial institutions
that are registered there as broker-dealers.
- --------------------------------------------------------------------------------
DIVIDENDS, DISTRIBUTIONS
- --------------------------------------------------------------------------------
AND TAXES
- --------------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS
If you receive an income dividend or capital gains distribution in cash you may,
within 120 days following the date of its payment, reinvest the dividend or
distribution in additional shares of that Fund without charge by returning to
Alliance, with appropriate instructions, the check representing such dividend or
distribution. Thereafter, unless you otherwise specify, you will be deemed to
have elected to reinvest all subsequent dividends and distributions in shares of
that Fund.
53
<PAGE>
Each income dividend and capital gains distribution, if any, declared by a Fund
on its outstanding shares will, at the election of each shareholder, be paid in
cash or in additional shares of the same class of shares of that Fund having an
aggregate net asset value as of the close of business on the day following the
declaration date of such dividend or distribution equal to the cash amount of
such income dividend or distribution. Election to receive dividends and
distributions in cash or shares is made at the time shares are initially
purchased and may be changed at any time prior to the record date for a
particular dividend or distribution. Cash dividends can be paid by check or, if
the shareholder so elects, electronically via the ACH network. There is no sales
or other charge in connection with the reinvestment of dividends and capital
gains distributions. Dividends paid by a Fund, if any, with respect to Class A,
Class B and Class C shares will be calculated in the same manner at the same
time on the same day and will be in the same amount, except that the higher
distribution services fees 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.
While it is the intention of each Fund to distribute to its shareholders
substantially all of each fiscal year's net income and net realized capital
gains, if any, the amount and time of any such dividend or distribution must
necessarily depend upon the realization by such Fund of income and capital gains
from investments. There is no fixed dividend rate, and there can be no assurance
that a Fund will pay any dividends or realize any capital gains. Since REITs pay
distributions based on cash flow, without regard to depreciation and
amortization, it is likely that a portion of the distributions paid to Real
Estate Investment Fund and subsequently distributed to shareholders may be a
nontaxable return of capital. The final determination of the amount of a Fund's
return of capital distributions for the period will be made after the end of
each calendar year.
If you buy shares just before a Fund deducts a distribution from its net asset
value, you will pay the full price for the shares and then receive a portion of
the price back as a taxable distribution.
FOREIGN INCOME TAXES
Investment income received by a Fund from sources within foreign countries may
be subject to foreign income taxes withheld at the source. To the extent that
any Fund is liable for foreign income taxes withheld at the source, each Fund
intends, if possible, to operate so as to meet the requirements of the Code to
"pass through" to the Fund's shareholders credits for foreign income taxes paid
(or to permit shareholders to claim a deduction for such foreign taxes), but
there can be no assurance that any Fund will be able to do so.
U.S. FEDERAL INCOME TAXES
Each Fund intends to qualify to be taxed as a "regulated investment company"
under the Code. To the extent that a Fund distributes its taxable income and net
capital gain to its shareholders, qualification as a regulated investment
company relieves that Fund of federal income taxes on that part of its taxable
income, including net capital gains, which it pays out to its shareholders.
Dividends out of net ordinary income and distributions of net short-term capital
gains are taxable to the recipient shareholders as ordinary income. In the case
of corporate shareholders, such dividends may be eligible for the
dividends-received deduction, except that the amount eligible for the deduction
is limited to the amount of qualifying dividends received by the Fund.
Distributions received from a REIT generally do not constitute qualifying
dividends. A corporation's dividends-received deduction generally will be
disallowed unless the corporation holds shares in the Fund at least 46 days
during the 90-day period beginning 45 days before the date on which the
corporation becomes entitled to receive the dividend. Furthermore, the
dividends-received deduction will be disallowed to the extent a corporation's
investment in shares of a Fund is financed with indebtedness.
Pursuant to the Taxpayer Relief Act of 1997, two different tax rates apply to
net capital gains--that is, the excess of net gains from capital assets held for
more than one year over net losses from capital assets held for not more than
one year. One rate (generally 28%) applies to net gains on capital assets held
for more than one year but not more than 18 months ("mid-term gains"), and a
second rate (generally 20%) applies to the balance of such net capital gains
("adjusted net capital gains"). Distributions of mid-term gains and adjusted net
capital gains will be taxable to shareholders as such, regardless of how long a
shareholder has held shares in the Fund. Distributions of net capital gains are
not eligible for the dividends-received deduction referred to above.
Under the current federal tax law, the amount of an income dividend or capital
gains distribution declared by a Fund during October, November or December of a
year to shareholders of record as of a specified date in such a month that is
paid during January of the following year is includable in the prior year's
taxable income of shareholders that are calendar year taxpayers.
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 or her
as described above. If a shareholder held shares six months or less and during
that period received a distribution of net capital gains, any loss realized on
the sale of such shares during such six-month period would be a long-term
capital loss to the extent of such distribution.
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 plan or corporate pension or profit-sharing plan, generally
will not be taxable to the plan. Distributions from such plans will be taxable
to individual participants under applicable tax rules without regard to the
character of the income earned by the qualified plan.
54
<PAGE>
A Fund will be required to withhold 31% of any payments made to a shareholder if
the shareholder has not provided a certified taxpayer identification number to
the Fund, or the Secretary of the Treasury notifies a Fund that a shareholder
has not reported all interest and dividend income required to be shown on the
shareholder's Federal income tax return.
Under certain circumstances, if a Fund realizes losses (e.g., from fluctuations
in currency exchange rates) after paying a dividend, all or a portion of the
dividend may subsequently be characterized as a return of capital. Returns of
capital are generally nontaxable, but will reduce a shareholder's basis in
shares of a Fund. If that basis is reduced to zero (which could happen if the
shareholder does not reinvest distributions and returns of capital are
significant) any further returns of capital will be taxable as capital gain. See
"Dividends, Distributions and Taxes" in the Statement of Additional Information.
Shareholders will be advised annually as to the federal tax status of dividends
and capital gains and return of capital distributions made by a Fund for the
preceding year. Shareholders are urged to consult their tax advisers regarding
their own tax situation. Distributions by a Fund may be subject to state and
local taxes.
- --------------------------------------------------------------------------------
GENERAL INFORMATION
- --------------------------------------------------------------------------------
PORTFOLIO TRANSACTIONS
Consistent with the Conduct Rules of the National Association of Securities
Dealers, Inc., and subject to seeking best price and execution, a Fund may
consider sales of its shares as a factor in the selection of dealers to enter
into portfolio transactions with the Fund.
ORGANIZATION
Each of the following Funds is a Maryland corporation organized in the year
indicated: The Alliance Fund, Inc. (1938), Alliance Balanced Shares, Inc.
(1932), Alliance Premier Growth Fund, Inc. (1992), Alliance Technology Fund,
Inc. (1980), Alliance Quasar Fund, Inc. (1968), Alliance Worldwide Privatization
Fund, Inc. (1994), Alliance New Europe Fund, Inc. (1990), Alliance All-Asia
Investment Fund, Inc. (1994), Alliance Global Small Cap Fund, Inc. (1966),
Alliance Global Environment Fund, Inc. (1990), Alliance Income Builder Fund,
Inc. (1991), Alliance Utility Income Fund, Inc. (1993), Alliance Growth and
Income Fund, Inc. (1932), and Alliance Real Estate Investment Fund, Inc. (1996).
Each of the following Funds is either a Massachusetts business trust or a series
of a Massachusetts business trust organized in the year indicated: Alliance
Growth Fund and Alliance Strategic Balanced Fund (each a series of The Alliance
Portfolios) (1987), and Alliance International Fund (1980). Prior to August 2,
1993, The Alliance Portfolios was known as The Equitable Funds, Growth Fund was
known as The Equitable Growth Fund and Strategic Balanced Fund was known as The
Equitable Balanced Fund. Prior to March 22, 1994, Income Builder Fund was known
as Alliance Multi-Market Income and Growth Trust, Inc.
It is anticipated that annual shareholder meetings will not be held; shareholder
meetings will be held only when required by federal or state law. Shareholders
have available certain procedures for the removal of Directors.
A shareholder in a Fund will be entitled to share pro rata with other holders of
the same class of shares all dividends and distributions arising from the Fund's
assets and, upon redeeming shares, will receive the then current net asset value
of the Fund represented by the redeemed shares less any applicable CDSC. The
Funds are empowered to establish, without shareholder approval, additional
portfolios, which may have different investment objectives, and additional
classes of shares. If an additional portfolio or class were established in a
Fund, each share of the portfolio or class would normally be entitled to one
vote for all purposes. Generally, shares of each portfolio and class would vote
together as a single class on matters, such as the election of Directors, that
affect each portfolio and class in substantially the same manner. Class A, B, C
and Advisor Class shares have identical voting, dividend, liquidation and other
rights, except that each class bears its own transfer agency expenses, each of
Class A, Class B and Class C shares 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 votes separately with respect to a Fund's
Rule 12b-1 distribution plan and other matters for which separate class voting
is appropriate under applicable law. Shares are freely transferable, are
entitled to dividends as determined by the Directors and, in liquidation of a
Fund, are entitled to receive the net assets of the Fund. Since this Prospectus
sets forth information about all the Funds, it is theoretically possible that a
Fund might be liable for any materially inaccurate or incomplete disclosure in
this Prospectus concerning another Fund. Based on the advice of counsel,
however, the Funds believe that the potential liability of each Fund with
respect to the disclosure in this Prospectus extends only to the disclosure
relating to that Fund. Certain additional matters relating to a Fund's
organization are discussed in its Statement of Additional Information.
REGISTRAR, TRANSFER AGENT AND DIVIDEND-DISBURSING AGENT
AFS, an indirect wholly-owned subsidiary of Alliance, located at 500 Plaza
Drive, Secaucus, New Jersey 07094, acts as each Fund's registrar, transfer agent
and dividend-disbursing agent for a fee based upon the number of shareholder
accounts maintained for the Funds. The transfer agency fee with respect to the
Class B shares will be higher than the transfer agency fee with respect to the
Class A shares or Class C shares.
PRINCIPAL UNDERWRITER
AFD, an indirect wholly-owned subsidiary of Alliance, located at 1345 Avenue of
the Americas, New York, New York 10105, is the principal underwriter of shares
of the Funds.
PERFORMANCE INFORMATION
From time to time, the Funds advertise their "total return," which is computed
separately for Class A, Class B and Class C shares. Such advertisements disclose
a Fund's average annual
55
<PAGE>
compounded total return for the periods prescribed by the Commission. A Fund's
total return for each such period is computed by finding, through the use of a
formula prescribed by the Commission, the average annual compounded rate of
return over the period that would equate an assumed initial amount invested to
the value of the investment at the end of the period. For purposes of computing
total return, income dividends and capital gains distributions paid on shares of
a Fund are assumed to have been reinvested when paid and the maximum sales
charges applicable to purchases and redemptions of a Fund's shares are assumed
to have been paid.
Balanced Shares, Growth and Income Fund, Income Builder Fund, Real Estate
Investment Fund and Utility Income Fund may also advertise their "yield," which
is also computed separately for Class A, Class B and Class C shares. A Fund's
yield for any 30-day (or one-month) period is computed by dividing the net
investment income per share earned during such period by the maximum public
offering price per share on the last day of the period, and then annualizing
such 30-day (or one-month) yield in accordance with a formula prescribed by the
Commission which provides for compounding on a semi-annual basis.
Real Estate Investment Fund, Balanced Shares, Income Builder Fund, Utility
Income Fund and Growth and Income Fund may also state in sales literature an
"actual distribution rate" for each class which is computed in the same manner
as yield except that actual income dividends declared per share during the
period in question are substituted for net investment income per share. The
actual distribution rate is computed separately for Class A, Class B and Class C
shares.
A Fund's advertisements may quote performance rankings or ratings of a Fund by
financial publications or independent organizations such as Lipper Analytical
Services, Inc. and Morningstar, Inc. or compare a Fund's performance to various
indices.
ADDITIONAL INFORMATION
This Prospectus and the Statements of Additional Information, which have been
incorporated by reference herein, do not contain all the information set forth
in the Registration Statements filed by the Funds with the Commission under the
Securities Act. Copies of the Registration Statements 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.
This prospectus does not constitute an offering in any state in which such
offering may not lawfully be made.
This prospectus is intended to constitute an offer by each Fund only of the
securities of which it is the issuer and is not intended to constitute an offer
by any Fund of the securities of any other Fund whose securities are also
offered by this prospectus. No Fund intends to make any representation as to the
accuracy or completeness of the disclosure in this prospectus relating to any
other Fund. See "General Information--Organization."
56
<PAGE>
================================================================================
ALLIANCE STOCK FUNDS
SUBSCRIPTION APPLICATION
================================================================================
The Alliance Fund
Growth Fund
Premier Growth Fund
Technology Fund
Quasar Fund
International Fund
Worldwide Privatization Fund
New Europe Fund
All-Asia Investment Fund
Global Small Cap Fund
Global Environment Fund
Strategic Balanced Fund
Balanced Shares
Income Builder Fund
Real Estate Investment Fund
Utility Income Fund
Growth & Income Fund
To Open Your New Alliance Account...
Please complete the application and mail
it to:
Alliance Fund Services, Inc.
P.o. Box 1520
Secaucus, New Jersey 07096-1520
For certified or overnight deliveries, send to:
Alliance Fund Services, Inc.
500 Plaza Drive
Secaucus, New Jersey 07094
Section 1 Your Account Registration (Required)
Complete one of the available choices. To ensure proper tax reporting to the
IRS:
-- Individuals, Joint Tenants, Transfer on Death and Gift/Transfer to a
Minor:
o Indicate your name(s) exactly as it appears on your social
security card.
-- Transfer on Death:
o Ensure that your state participates
-- Trust/Other:
o Indicate the name of the entity exactly as it appeared on the
notice you received from the IRS when your Employer
Identification number was assigned.
Section 2 Your Address (Required) Complete in full.
-- Non-Resident Alien:
o Indicate your permanent country of residence.
Section 3 Your Initial Investment (Required)
For each Fund in which you are investing: (1) Write the three digit Fund number
in the column titled 'Indicate three digit Fund number located below'. (2) Write
the dollar amount of your initial purchase in the column titled 'Indicate dollar
amount'.
(If you are eligible for a reduced sales charge, you must also complete Section
4F). (3) Check off a distribution
<PAGE>
option for your dividends. (4) Check off a distribution option for your capital
gains. All distributions (dividends and capital gains) will be reinvested into
your fund account unless you direct otherwise. If you want distributions sent
directly to your bank account, then you must complete Section 4D and attach a
preprinted, voided check for that account. If you want your distributions sent
to a third party you must complete Section 4E.
Section 4 Your Shareholder Options (Complete only those options you want)
A. Automatic Investment Plans (AIP) - You can make periodic investments into
any of your Alliance Funds in one of three ways. First, by a periodic
withdrawal ($25 minimum) directly from your bank account and invested into an
Alliance Fund. Second, you can direct your distributions (dividends and capital
gains) from one Alliance Fund into another Fund. Or third, you can
automatically exchange monthly ($25 minimum) shares of one Alliance Fund for
shares of another Fund. To elect one of these options, complete the appropriate
portion of Section 4A & 4D. If more than one dividend direction or monthly
exchange is desired, please call our Literature Center to obtain a Shareholder
Account Services Options Form for completion.
B. Telephone Transactions via EFT - Complete this option if you would like to
be able to transact via telephone between your fund account and your bank
account.
C. Systematic Withdrawal Plans (SWP) - Complete this option if you wish to
periodically redeem dollars from one of your fund accounts. Payments can be
made via Electronic Funds Transfer (EFT) to your bank account or by check.
D. Bank Information - If you have elected any options that involve transactions
between your bank account and your fund account or have elected cash
distribution options and would like the payments sent to your bank account,
please tape a preprinted, voided check of the account you wish to use to this
section of the application.
E. Third Party Payment Details - If you have chosen cash distributions and/or a
Systematic Withdrawal Plan and would like the payments sent to a person and/or
address other than those provided in section 1 or 2, complete this option.
Medallion Signature Guarantee is required if your account is not maintained by
a broker dealer.
F. Reduced Charges (Class A Only) - Complete if you would like to link fund
accounts that have combined balances that might exceed $100,000 so that future
purchases will receive discounts. Complete if you intend to purchase over
$100,000 within 13 months.
Section 5 Shareholder Authorization (Required)
All owners must sign. If it is a custodial, corporate, or trust account, the
custodian, an authorized officer, or the trustee respectively must sign.
If We Can Assist You In Any Way, Please Do Not Hesitate To Call Us At: (800)
221-5672.
================================================================================
For Literature Call: (800) 227-4618
================================================================================
<PAGE>
The Alliance Stock Funds Subscription Application
<TABLE>
- --------------------------------------------------------------------------------------------------------------------------
1. YOUR ACCOUNT REGISTRATION (Please Print in Capital Letters and Mark Check Boxes Where Applicable)
- --------------------------------------------------------------------------------------------------------------------------
<S> <C>
|_| Individual Account { |_| Male |_| Female } --or-- Joint Account --or--
|_| Transfer On Death { |_| Male |_| Female } --or-- Gift/Transfer to a Minor
|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|
Owner or Custodian (First Name) (MI) (Last Name)
|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|
(First Name) Joint Owner*, Transfer On Death Beneficiary or Minor's Name (MI) (Last Name)
|_|_|_|-|_|_|-|_|_|_|_| If Uniform Gift/Transfer
Social Security Number of Owner or Minor (required to open account) to Minor Account:
|_| |_| Minor's State of Residence
If Joint Tenants Account: *The Account will be registered
"Joint Tenants with right of Survivorship" unless you indicate
otherwise below:
|_| In Common |_| By Entirety |_| Community Property
|_| Trust --or-- |_| Corporation --or-- |_| Other_____________________________
|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|
Name of Trustee if applicable (First Name) (MI) (Last Name)
|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|
Name of Trust or Corporation or Other Entity
|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|
Name of Trust or Corporation or Other Entity continued
|_|_|_|_|_|_|_|_| |_|_|_|_|_|_|_|_|_|
Trust Dated (MM,DD,YYYY) Tax ID Number (required to open account)
|_| Employer ID Number --or-- |_| Social Security
Number
- --------------------------------------------------------------------------------------------------------------------------
2. YOUR ADDRESS
- --------------------------------------------------------------------------------------------------------------------------
|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_| |_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|
Street Number Street Name
|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_| |_|_| |_|_|_|_|_|
City State Zip code
|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_| |_|_|_| - |_|_|_| - |_|_|_|_|
If Non-U.S., Specify Country Daytime Phone Number
|_| U.S. Citizen |_| Resident Alien |_| Non-Resident Alien
</TABLE>
Alliance Capital[LOGO](R)
1
<PAGE>
<TABLE>
- --------------------------------------------------------------------------------------------------------------------------
3. Your Initial Investment The minimum investment is $250 per fund.
The maximum investment in Class B is $250,000; Class C is $1,000,000.
- --------------------------------------------------------------------------------------------------------------------------
<S> <C>
I hereby subscribe for shares of the following Alliance Stock Fund(s) and elect distribution options as indicated.
Dividend and Capital Gain Distribution Options:
R Reinvest distributions into my fund account.
- ------------------------------------------ -
Broker/Dealer Use Only: Wire Confirm # C Send my distributions in cash to the address I have provided in
|_|_|_|_|_|_|_|_| - Section 2. (Complete Section 4D for direct deposit to your bank
- ------------------------------------------ account. Complete Section 4E for payment to a third party)
D Direct my distributions to another Alliance Fund. Complete the
- appropriate portion of Section 4A to direct your distributions
(dividends and capital gains) to another Alliance Fund (the $250
minimum investment requirement applies to Funds into which
distributions are directed).
- ------------- ============== ======================== =============================
Indicate three Distributions Options
digit Fund "Check One"
number located Indicate Dollar Amount =============================
below Dividends Captital Gains
Make all ============== ======================== =============================
checks
payable to: |_|_|_| $ R C D R C D
Alliance
Funds |_|_|_| $ R C D R C D
- ------------- |_|_|_| $ R C D R C D
|_|_|_| $ R C D R C D
==========================
Total Investment $
==========================
- --------------------------------------------------------------------------------------------------------------------------
Alliance Stock Fund Names and Numbers
- --------------------------------------------------------------------------------------------------------------------------
============= ============== =================
Contingent
Initial Sales Deferred Sales Asset-Based Sales
Charge Charge Charge
A B C
============= ============== =================
Domestic The Alliance Fund 044 043 344
Growth Fund 031 001 331
Premier Growth Fund 078 079 378
Technology Fund 082 282 382
Quasar Fund 026 029 326
Global International Fund 040 041 340
Worldwide Privatization Fund 112 212 312
New Europe Fund 062 058 362
All-Asia Investment Fund 118 218 318
Global Small Cap Fund 045 048 345
Global Environment Fund 181 281 381
Total Return Balanced Shares 096 075 396
Strategic Balanced Fund 032 002 332
Income Builder Fund 111 211 311
Real Estate Investment Fund 110 210 310
Utility Income Fund 009 209 309
Growth & Income Fund 094 074 394
</TABLE>
2
<PAGE>
<TABLE>
- --------------------------------------------------------------------------------------------------------------------------
4. Your Shareholder Options
- --------------------------------------------------------------------------------------------------------------------------
<S> <C>
A. Automatic Investment Plans (AIP)
|_| Withdraw From My Bank Account Via EFT*
I authorize Alliance to draw on my bank account for investment in my fund account(s) as indicated below
(Complete Section 4D also for the bank account you wish to use).
1- |_|_|_| |_|_|_|_| |_|_| , |_|_|_| .00 |_|
Fund Number Beginning Date (MM,DD) Amount ($25 minimum) Frequency
Frequency:
2- |_|_|_| |_|_|_|_| |_|_| , |_|_|_| .00 |_| M = monthly
Fund Number Beginning Date (MM,DD) Amount ($25 minimum) Frequency Q = quarterly
A = Annually
3- |_|_|_| |_|_|_|_| |_|_| , |_|_|_| .00 |_|
Fund Number Beginning Date (MM,DD) Amount ($25 minimum) Frequency
*Electronic Funds Transfer. Your bank must be a member of the National Automated Clearing House Association (NACHA)
|_| Direct My Distributions
As indicated in Section 3, I would like my dividends and/or capital gains directed to the same class of shares of
another Alliance Fund.
FROM: |_|_|_| |_|_|_|_|_|_|_|_|_|_| - |_|
Fund Number Account Number (if existing)
TO : |_|_|_| |_|_|_|_|_|_|_|_|_|_| - |_|
Fund Number Account Number (if existing)
|_| Exchange My Shares Monthly
I authorize Alliance to transact monthly exchanges, within the same class of shares, between my fund accounts as
listed below.
FROM: |_|_|_| |_|_|_|_|_|_|_|_|_|_| - |_|
Fund Number Account Number (if existing)
|_|_| , |_|_|_| .00 |_|_|
Amount ($25 minimum) Day of Exchange**
TO : |_|_|_| |_|_|_|_|_|_|_|_|_|_| - |_|
Fund Number Account Number (if existing)
**Shares exchanged will be redeemed at the net asset value on the "Day of Exchange" (If the "Day of Exchange" is not a
fund business day, the exchange transaction will be processed on the next fund business day). The exchange privilege is not
available if stock certificates have been issued.
B. Purchases and Redemptions Via EFT
You can call our toll-free number 1-800-221-5672 and instruct Alliance Fund Services, Inc. in a recorded conversation
to purchase, redeem or exchange shares for your account. Purchase and redemption requests will be processed via
electronic funds transfer (EFT) to and from your bank account.
Instructions: o Review the information in the Prospectus about telephone transaction services.
o If you select the telephone purchase or redemption privilege, you must write "VOID" across the face of
a check from the bank account you wish to use and attach it to Section 4D of this application.
|_| Purchases and Redemptions via EFT
I hereby authorize Alliance Fund Services, Inc. to effect the purchase and/or redemption of Fund shares for my account
according to my telephone instructions or telephone instructions from my Broker/Agent, and to withdraw money or credit
money for such shares via EFT from the bank account I have selected.
- --------------------------------------------------------------------------------------------------------------------------
For shares recently purchased by check or electronic funds transfer, redemption proceeds will not be made available
until the Fund is reasonably assured that the check or electronic fund transfer has been collected, normally 15
calendar days after the purchase date.
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
3
<PAGE>
<TABLE>
- --------------------------------------------------------------------------------------------------------------------------
4. Your Shareholder Options (CONTINUED)
- --------------------------------------------------------------------------------------------------------------------------
<S> <C>
C. Systematic Withdrawal Plans (SWP)
In order to establish a SWP, you must reinvest all dividends and capital gains.
|_| I authorize Alliance to transact periodic redemptions from my fund account and send the proceeds to me as indicated
below.
1- |_|_|_| |_|_|_|_| |_|_| , |_|_|_| .00 |_|
Fund Number Beginning Date (MM,DD) Amount ($25 minimum) Frequency
Frequency:
2- |_|_|_| |_|_|_|_| |_|_| , |_|_|_| .00 |_| M = monthly
Fund Number Beginning Date (MM,DD) Amount ($25 minimum) Frequency Q = quarterly
A = Annually
3- |_|_|_| |_|_|_|_| |_|_| , |_|_|_| .00 |_|
Fund Number Beginning Date (MM,DD) Amount ($25 minimum) Frequency
Please send my SWP proceeds to:
|_| My Address of Record (via check) |_| My checking account-via EFT (complete section 4D)
Your bank must be a member of the National
Automated Clearing House Association (NACHA) in
|_| The Payee and address specified in section 4E (via check) order for you to receive SWP proceeds directly
(Medallion Signature Guarantee required) into your bank account. Otherwise payment will be
made by check
D. Bank Information This bank account information will be used for:
|_| Distributions (Section 3) |_| Telephone Transactions (Section 4B)
|_| Automatic Investments (Section 4A) |_| Withdrawals (Section 4C)
- ---------------------------------------------------------------------------------------------------------------------------
Please Tape a Pre-printed Voided Check Here*
- ---------------------------------------------------------------------------------------------------------------------------
* The above services
cannot be established
[GRAPHIC OF BLANK CHECK WITH THE WORD VOID PRINTED ON IT.] without a pre-printed
voided check.
For EFT transactions,
the Fund requires
signatures of bank
account owners exactly
as they appear on bank
records. If the
registration at the
bank differs from that
on the Alliance mutual
fund, all parties must
sign in Section 5.
|_|_|_|_|_|_|_|_|_| |_|_|_|_|_|_|_|_|_|_|_|_|_|
Your Bank's ABA Routing Number Your Bank Account Number
|_| Checking Account |_| Savings Account
</TABLE>
4
<PAGE>
<TABLE>
- --------------------------------------------------------------------------------------------------------------------------
4. YOUR SHAREHOLDER OPTIONS(CONTINUED)
- --------------------------------------------------------------------------------------------------------------------------
<S> <C>
E. THIRD PARTY PAYMENT DETAILS Your signautre(s) in Section 5 must be Medallion Signature Guaranteed if your account is
not maintained by a dealer/broker. This third party payee information will be used for:
|_| Distributions (section 3) |_| Systematic Withdrawals (section 4C)
|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_| |_| |_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_||_|_|_|_|
Name (First Name) (MI) (Last Name)
|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_| |_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|
Street Number Street Name
|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_| |_|_| |_|_|_|_|_|
City State Zip code
F. REDUCED CHARGES (CLASS A ONLY) If you, your spouse or minor children own shares in other Alliance Funds, you may be eligible
for a reduced sales charge. Please complete the Right of Accumulation section or the Statement of Intent section.
A. RIGHT OF ACCUMULATION
Please link the tax identification numbers or account numbers listed below for Right of Accumulation privilieges, so
that this and future purchases will receive any discount for which they are eligible.
|_________________________________| |_________________________________| |_________________________________|
Tax ID or Account Number Tax ID or Account Number Tax ID or Account Number
B. STATEMENT OF INTENT
I want to reduce my sales charge by agreeing to invest the following amount over a 13-month period.
|_| $100,000 |_| $250,000 |_| $500,000 |_| $1,000,000
If the full amount indicated is not purchased within 13 months, I understand that an additional sales charge must be
paid from my account.
- --------------------------------------------------------------------------------------------------------------------------
DEALER/AGENT AUTHORIZATION -- For selected Dealers or Agents ONLY.
- --------------------------------------------------------------------------------------------------------------------------
We hereby authorize Alliance Fund Services, Inc. to act as our agent in connection with transactions under this
authorization form; and we guarantee the signature(s) set forth in Section 5, as well as the legal capacity of
the shareholder.
|_____________________________________________________________| |_______________________________________________________|
Dealer/Agent Firm Authorized Signature
|________________________________________________________| |__| |_______________________________________________________|
Representative First Name MI Last Name
|_____________________________________________________________| |_______________________________________________________|
Dealer/Agent Firm Number Representative Number
|_____________________________________________________________| |_______________________________________________________|
Branch Number Branch Telephone Number
|_____________________________________________________________| |_______________________________________________________|
Branch Office Address
|_____________________________________________________________| |_||_| |_______________________________________________|
City State Zip Code
</TABLE>
5
<PAGE>
- --------------------------------------------------------------------------------
5. SHAREHOLDER AUTHORIZATION -- This section MUST be completed
- --------------------------------------------------------------------------------
Telephone Exchanges and Redemptions by Check
Unless I have checked one or both boxes below, these privileges will
automatically apply, and by signing this application, I hereby authorize
Alliance Fund Services, Inc. to act on my telephone instructions, or on
telephone instructions from any person representing himself to be an
authorized employee of an investment dealer or agent requesting a
redemption or exchange on my behalf. (NOTE: Telephone exchanges may only be
processed between accounts that have identical registrations.) Telephone
redemption checks will only be mailed to the name and address of record;
and the address must not have changed within the last 30 days. The maximum
telephone redemption amount is $50,000. This service can be enacted once
every 30 days.
|_| I do not elect the telephone exchange service.
|_| I do not elect the telephone redemption by check service.
By selecting any of the above telephone privileges, I agree that neither
the Fund nor Alliance, Alliance Fund Distributors, Inc., Alliance Fund
Services, Inc. or other Fund Agent will be liable for any loss, injury,
damage or expense as a result of acting upon telephone instructions
purporting to be on my behalf, that the Fund reasonably believes to be
genuine, and that neither the Fund nor any such party will be responsible
for the authenticity of such telephone instructions. I understand that any
or all of these privileges may be discontinued by me or the Fund at any
time. I understand and agree that the Fund reserves the right to refuse any
telephone instructions and that my investment dealer or agent reserves the
right to refuse to issue any telephone instructions I may request.
For non-residents only: Under penalties of perjury, I certify that to the
best of my knowledge and belief, I qualify as a foreign person as indicated
in Section 2.
I am of legal age and capacity and have received and read the Prospectus
and agree to its terms.
I CERTIFY UNDER PENALTY OF PERJURY THAT THE NUMBER SHOWN IN SECTION 1 OF
THIS FORM IS MY CORRECT TAX IDENTIFICATION NUMBER OR I AM WAITING FOR A
NUMBER TO BE ISSUED TO ME AND THAT I HAVE NOT BEEN NOTIFIED THAT THIS
ACCOUNT IS SUBJECT TO BACKUP WITHHOLDING.
THE INTERNAL REVENUE SERVICE DOES NOT REQUIRE YOUR CONSENT TO ANY PROVISION
OF THIS DOCUMENT OTHER THAN THE CERTIFICATE REQUIRED TO AVOID BACKUP
WITHHOLDING.
|__________________________________________________| |_______________________|
Signature Date
|__________________________________________________| |_______________________|
Signature Date
- ----------------------------------------------
Medallion Signautre Guarantee required if
completing Section 4E and your mutual fund is
not maintained by a broker dealer
Alliance Capital [LOGO]
6
<PAGE>
<PAGE>
THE ALLIANCE
- --------------------------------------------------------------------------------
STOCK FUNDS
- --------------------------------------------------------------------------------
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
Prospectus and Application
Advisor Class
February 2, 1998
Domestic Stock Funds Global Stock Funds
- -The Alliance Fund -Alliance International Fund
- -Alliance Growth Fund -Alliance Worldwide Privatization Fund
- -Alliance Premier Growth Fund -Alliance New Europe Fund
- -Alliance Technology Fund -Alliance All-Asia Investment Fund
- -Alliance Quasar Fund -Alliance Global Small Cap Fund
-Alliance Global Environment Fund
Total Return Funds
-Alliance Strategic Balanced Fund
-Alliance Balanced Shares
-Alliance Income Builder Fund
-Alliance Utility Income Fund
-Alliance Growth and Income Fund
-Alliance Real Estate Investment Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Table of Contents Page
<S> <C>
The Funds at a Glance ..................................................... 2
Expense Information ....................................................... 4
Financial Highlights ...................................................... 7
Glossary .................................................................. 10
Description of the Funds .................................................. 11
Investment Objectives and Policies ..................................... 11
Additional Investment Practices ........................................ 22
Certain Fundamental Investment Policies ................................ 29
Risk Considerations .................................................... 32
Purchase and Sale of Shares ............................................... 37
Management of the Funds ................................................... 39
Dividends, Distributions and Taxes ........................................ 42
Conversion Feature ........................................................ 44
General Information ....................................................... 54
</TABLE>
- --------------------------------------------------------------------------------
Adviser
Alliance Capital Management L.P.
1345 Avenue Of The Americas
New York, New York 10105
The Alliance Stock Funds provide a broad selection of investment alternatives to
investors seeking capital growth or high total return. The Domestic Stock Funds
invest mainly in the United States equity markets and the Global Stock Funds
diversify their investments among equity markets around the world, while the
Total Return Funds invest in both equity and fixed-income securities.
Each fund or portfolio (each a "Fund") is, or is a series of, an open-end
management investment company. This Prospectus sets forth concisely the
information which a prospective investor should know about each Fund before
investing. A "Statement of Additional Information" for each Fund which provides
further information regarding certain matters discussed in this Prospectus and
other matters which may be of interest to some investors has been filed with the
Securities and Exchange Commission and is incorporated herein by reference. For
a free copy, call or write Alliance Fund Services, Inc. at the indicated address
or call the "For Literature" telephone number shown above.
This Prospectus offers the Advisor Class shares of each Fund which may be
purchased at net asset value without any initial or contingent deferred sales
charges and without ongoing distribution expenses. Advisor Class shares are
offered solely to (i) investors participating in fee-based programs meeting
certain standards established by Alliance Fund Distributors, Inc., each Fund's
principal underwriter, (ii) participants in self-directed defined contribution
employee benefit plans (e.g., 401(k) plans) that meet certain minimum standards
and (iii) certain other categories of investors described in the Prospectus,
including investment advisory clients of, and certain other persons associated
with, Alliance Capital Management L.P. and its affiliates or the Funds. See
"Purchase and Sale of Shares."
An investment in these securities is not a deposit or obligation of, or
guaranteed or endorsed by, any bank and is not federally insured by the Federal
Deposit Insurance Corporation, the Federal Reserve Board or any other agency.
Investors are advised to read this Prospectus carefully and to retain it for
future reference.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
[LOGO] Alliance (R)
Investing without the Mystery.(SM)
(R)/SM These are registered marks used under licenses from the owner, Alliance
Capital Management L.P.
<PAGE>
The Funds At A Glance
The following summary is qualified in its entirety by the more detailed
information contained in this Prospectus.
The Funds' Investment Adviser Is . . .
Alliance Capital Management L.P. ("Alliance"), a global investment manager
providing diversified services to institutions and individuals through a broad
line of investments including more than 100 mutual funds. Since 1971, Alliance
has earned a reputation as a leader in the investment world with over $217
billion in assets under management as of September 30, 1997. Alliance provides
investment management services to employee benefit plans for 28 of the FORTUNE
100 companies.
Domestic Stock Funds
Alliance Fund
Seeks . . . Long-term growth of capital and income primarily through investment
in common stocks.
Invests Principally in . . . A diversified portfolio of equity securities that,
in the judgment of Alliance, have the potential to achieve capital appreciation.
Growth Fund
Seeks . . . Long-term growth of capital by investing primarily in common stocks
and other equity securities.
Invests Principally in . . . A diversified portfolio of equity securities of
companies with a favorable outlook for earnings and whose rate of growth is
expected to exceed that of the United States economy over time.
Premier Growth Fund
Seeks . . . Long-term growth of capital by investing in the equity securities of
a limited number of large, carefully selected, high-quality American companies
from a relatively small universe of intensively researched companies.
Invests Principally in . . . A diversified portfolio of equity securities that,
in the judgment of Alliance, are likely to achieve superior earnings growth.
Normally, approximately 40 companies will be represented in the Fund's
investment portfolio. The Fund's investments in 25 of these companies most
highly regarded at any point in time by Alliance will usually constitute
approximately 70% of the Fund's net assets.
Technology Fund
Seeks . . . Growth of capital through investment in companies expected to
benefit from advances in technology.
Invests Principally in . . . A diversified portfolio of securities of companies
which use technology extensively in the development of new or improved products
or processes.
Quasar Fund
Seeks . . . Growth of capital by pursuing aggressive investment policies.
Invests Principally in . . . A diversified portfolio of equity securities of any
company and industry and in any type of security which is believed to offer
possibilities for capital appreciation.
Global Stock Funds
International Fund
Seeks . . . A total return on its assets from long-term growth of capital and
from income.
Invests Principally in . . . A diversified portfolio of marketable securities of
established non-United States companies, companies participating in foreign
economies with prospects for growth, and foreign government securities.
Worldwide Privatization Fund
Seeks . . . Long-term capital appreciation.
Invests Principally in . . . A non-diversified portfolio of equity securities
issued by enterprises that are undergoing, or have undergone, privatization. The
balance of the Fund's investment portfolio will include securities of companies
that are believed by Alliance to be beneficiaries of the privatization process.
New Europe Fund
Seeks . . . Long-term capital appreciation through investment primarily in the
equity securities of companies based in Europe.
Invests Principally in . . . A non-diversified portfolio of equity securities of
European companies.
All-Asia Investment Fund
Seeks . . . Long-term capital appreciation.
Invests Principally in . . . A non-diversified portfolio of equity securities of
Asian/Pacific companies.
Global Small Cap Fund
Seeks . . . Long-term growth of capital.
Invests Principally in . . . A diversified global portfolio of the equity
securities of small capitalization companies.
Global Environment Fund
Seeks . . . Long-term capital appreciation.
Invests Principally in . . . A non-diversified portfolio of equity securities of
companies expected to benefit from advances or improvements in products,
processes or services intended to foster the protection of the environment.
Total Return Funds
Strategic Balanced Fund
Seeks . . . A high long-term total return by investing in a combination of
equity and debt securities.
Invests Principally in . . . A diversified portfolio of dividend-paying common
stocks and fixed-income securities, and also in equity-type securities such as
warrants, preferred stocks and convertible debt instruments.
2
<PAGE>
Balanced Shares
Seeks . . . A high return through a combination of current income and capital
appreciation.
Invests Principally in . . . A diversified portfolio of equity and fixed-income
securities such as common and preferred stocks, U.S. Government and agency
obligations, bonds and senior debt securities.
Income Builder Fund
Seeks . . . Both an attractive level of current income and long-term growth of
income and capital.
Invests Principally in . . . A non-diversified portfolio of fixed-income
securities and dividend-paying common stocks. Alliance currently expects to
continue to maintain approximately 60% of the Fund's net assets in fixed-income
securities and 40% in equity securities.
Utility Income Fund
Seeks . . . Current income and capital appreciation through investment in the
utilities industry.
Invests Principally in . . . A diversified portfolio of equity securities, such
as common stocks, securities convertible into common stocks and rights and
warrants to subscribe for purchase of common stocks, and in fixed-income
securities such as bonds and preferred stocks.
Growth and Income Fund
Seeks . . . Income and appreciation through investment in dividend-paying common
stocks of quality companies.
Invests Principally in . . . A diversified portfolio of dividend-paying common
stocks of good quality, and, under certain market conditions, other types of
securities, including bonds, convertible bonds and preferred stocks.
Real Estate Investment Fund
Seeks . . . Total return on its assets from long-term growth of capital and from
income.
Invests Principally in . . . A diversified portfolio of equity securities of
issuers that are primarily engaged in or related to the real estate industry.
Distributions . . .
Balanced Shares, Income Builder Fund, Utility Income Fund, Growth and Income
Fund and Real Estate Investment Fund intend to make distributions quarterly to
shareholders. These distributions may include ordinary income and capital gain
(each of which is taxable) and a return of capital (which is generally
nontaxable). See "Dividends, Distributions and Taxes."
A Word About Risk . . .
The price of the shares of the Alliance Stock Funds will fluctuate as the daily
prices of the individual securities in which they invest fluctuate, so that your
shares, when redeemed, may be worth more or less than their original cost. With
respect to those Funds permitted to invest in foreign currency denominated
securities, these fluctuations may be magnified by changes in foreign exchange
rates. Investment in the Global Stock Funds involves risks not associated with
funds that invest primarily in securities of U.S. issuers. While the Funds
invest principally in common stocks and other equity securities, in order to
achieve their investment objectives the Funds may at times use certain types of
investment derivatives, such as options, futures, forwards and swaps. These
involve risks different from, and, in certain cases, greater than, the risks
presented by more traditional investments. An investment in the Real Estate
Investment Fund is subject to certain risks associated with the direct ownership
of real estate in general, including possible declines in the value of real
estate, general and local economic conditions, environmental problems and
changes in interest rates. These risks are fully discussed in this Prospectus.
Getting Started . . .
Shares of the Funds are available through your financial representative. Each
Fund offers multiple classes of shares, of which only the Advisor Class is
offered by this Prospectus. Advisor Class shares may be purchased at net asset
value without any initial or contingent deferred sales charges and are not
subject to ongoing distribution expenses. Advisor Class shares may be purchased
and held solely (i) through accounts established under a fee-based program,
sponsored and maintained by a registered broker-dealer or other financial
intermediary and approved by Alliance Fund Distributors, Inc. ("AFD"), each
Fund's principal underwriter, (ii) 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, (iii) by investment advisory clients of, and certain
other persons associated with, Alliance and its affiliates or the Funds, and
(iv) through registered investment advisers or other financial intermediaries
who charge a management, consulting or other fee for their service and who
purchase shares through a broker or agent approved by 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. A shareholder's
Advisor Class shares will automatically convert to Class A shares of the same
Fund under certain circumstances. See "Conversion FeatureConversion to Class A
Shares." Generally, a fee-based program must charge an asset-based or other
similar fee and must invest at least $250,000 in Advisor Class shares of each
Fund in which the program invests in order to be approved by AFD for investment
in Advisor Class shares. For more detailed information about who may purchase
and hold Advisor Class shares see the Statement of Additional Information.
Fee-based and other programs through which Advisor Class shares may be purchased
may impose different requirements with respect to investment in Advisor Class
shares than described above. For detailed information about purchasing and
selling shares, see "Purchase and Sale of Shares."
[LOGO] Alliance (R)
Investing without the Mystery.(SM)
(R)/SM These are registered marks used under licenses from the owner, Alliance
Capital Management L.P.
3
<PAGE>
- --------------------------------------------------------------------------------
EXPENSE INFORMATION
- --------------------------------------------------------------------------------
Shareholder Transaction Expenses are one of several factors to consider when you
invest in a Fund. The following table summarizes your maximum transaction costs
from investing in the Advisor Class shares of each Fund and estimated annual
expenses for Advisor Class shares of each Fund. For each Fund, the "Examples" to
the right of the table below show the cumulative expenses attributable to a
hypothetical $1,000 investment in Advisor Class shares for the periods
specified.
<TABLE>
<CAPTION>
Advisor Class Shares
--------------------
<S> <C>
Maximum sales charge imposed on purchases ........... None
Sales charge imposed on dividend reinvestments ...... None
Deferred sales charge ............................... None
Exchange fee ........................................ None
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Operating Expenses Examples
----------------------------------------- ------------------------------------------
Alliance Fund Advisor Class Advisor Class
------------- -------------
<S> <C> <C> <C>
Management fees .68% After 1 year $ 8
12b-1 fees None After 3 years $ 26
Other expenses (a) .15% After 5 years $ 46
---- After 10 years $103
Total fund
operating expenses (b) .83%
====
<CAPTION>
Growth Fund Advisor Class Advisor Class
------------- -------------
<S> <C> <C> <C>
Management fees .74% After 1 year $ 10
12b-1 fees None After 3 years $ 31
Other expenses (a) .24% After 5 years $ 54
---- After 10 years $120
Total fund
operating expenses (b) .98%
====
<CAPTION>
Premier Growth Fund Advisor Class Advisor Class
------------- -------------
<S> <C> <C> <C>
Management fees 1.00% After 1 year $ 13
12b-1 fees None After 3 years $ 40
Other expenses (a) .25% After 5 years $ 69
---- After 10 years $151
Total fund
operating expenses (b) 1.25%
====
<CAPTION>
Technology Fund Advisor Class Advisor Class
------------- -------------
<S> <C> <C> <C>
Management fees (g) 1.04% After 1 year $ 14
12b-1 fees None After 3 years $ 44
Other expenses (a) .35% After 5 years $ 76
---- After 10 years $167
Total fund
operating expenses (b) 1.39%
====
<CAPTION>
Quasar Fund Advisor Class Advisor Class
------------- -------------
<S> <C> <C> <C>
Management fees (g) 1.16% After 1 year $ 16
12b-1 fees None After 3 years $ 50
Other expenses (a) .42% After 5 years $ 86
---- After 10 years $188
Total fund
operating expenses (b) 1.58%
====
<CAPTION>
International Fund Advisor Class Advisor Class
------------- -------------
<S> <C> <C> <C>
Management fees
(after waiver) (c) .85% After 1 year $ 16
12b-1 fees None After 3 years $ 48
Other expenses (a) .68% After 5 years $ 83
---- After 10 years $182
Total fund
operating expenses (b) (e) 1.53%
====
</TABLE>
- --------------------------------------------------------------------------------
Please refer to the footnotes and the discussion following these tables on page
6.
4
<PAGE>
<TABLE>
<CAPTION>
Operating Expenses Examples
------------------------------------------- ------------------------------------------
Worldwide Privatization Fund Advisor Class Advisor Class
------------- -------------
<S> <C> <C> <C>
Management fees 1.00% After 1 year $ 20
12b-1 fees None After 3 years $ 62
Other expenses (a) .96% After 5 years $106
---- After 10 years $229
Total fund
operating expenses (b) 1.96%
====
<CAPTION>
New Europe Fund Advisor Class Advisor Class
------------- -------------
<S> <C> <C> <C>
Management fees 1.06% After 1 year $ 17
12b-1 fees None After 3 years $ 54
Other expenses (a) .65% After 5 years $ 93
---- After 10 years $202
Total fund
operating expenses (b) 1.71%
====
<CAPTION>
All-Asia Investment Fund Advisor Class Advisor Class
------------- -------------
<S> <C> <C> <C>
Management fees
(after waiver) (c) .65% After 1 year $ 18
12b-1 fees None After 3 years $ 56
Other expenses After 5 years $ 96
Administration fees After 10 years $209
(after waiver) (d) .00%
Other operating expenses (a) 1.13%
----
Total fund
operating expenses (b) (e) 1.78%
====
<CAPTION>
Global Small Cap Fund Advisor Class Advisor Class
------------- -------------
<S> <C> <C> <C>
Management fees 1.00% After 1 year $ 21
12b-1 fees None After 3 years $ 64
Other expenses (a) 1.05% After 5 years $110
---- After 10 years $238
Total fund
operating expenses (b) 2.05%
====
<CAPTION>
Global Environment Fund Advisor Class Advisor Class
------------- -------------
<S> <C> <C> <C>
Management fees 1.10% After 1 year $ 24
12b-1 fees None After 3 years $ 75
Other expenses (a) 1.29% After 5 years $128
---- After 10 year $273
Total fund
operating expenses (b) 2.39%
====
<CAPTION>
Strategic Balanced Fund Advisor Class Advisor Class
------------- -------------
<S> <C> <C> <C>
Management fees
(after waiver) (c) .09% After 1 year $ 11
12b-1 fees None After 3 years $ 35
Other expenses (a) 1.01% After 5 years $ 61
---- After 10 years $134
Total fund
operating expenses (b) (e) 1.10%
====
<CAPTION>
Balanced Shares Advisor Class Advisor Class
------------- -------------
<S> <C> <C> <C>
Management fees .63% After 1 year $ 13
12b-1 fees None After 3 years $ 41
Other expenses (a) .67% After 5 years $ 71
---- After 10 years $157
Total fund
operating expenses (b) 1.30%
====
<CAPTION>
Income Builder Fund Advisor Class Advisor Class
------------- -------------
<S> <C> <C> <C>
Management fees .75% After 1 year $ 17
12b-1 fees None After 3 years $ 52
Other expenses (a) .93% After 5 years $ 89
After 10 years $188
Total fund
operating expenses (b) 1.68%
====
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
Operating Expenses Examples
------------------------------------------- ------------------------------------------
Utility Income Fund Advisor Class Advisor Class
------------- -------------
<S> <C> <C> <C>
Management fees
(after waiver) (c) .00% After 1 year $ 12
12b-1 fees None After 3 years $ 38
Other expenses (a) 1.20% After 5 years $ 66
---- After 10 years $145
Total fund
operating expenses (b) (f) 1.20%
====
<CAPTION>
Growth and Income Fund Advisor Class Advisor Class
------------- -------------
<S> <C> <C> <C>
Management fees .49% After 1 year $ 7
12b-1 fees None After 3 years $ 23
Other expenses (a) .22% After 5 years $ 40
---- After 10 years $ 88
Total fund
operating expenses (b) .71%
====
<CAPTION>
Real Estate Investment Fund Advisor Class Advisor Class
------------- -------------
<S> <C> <C> <C>
Management fees .90% After 1 year $ 15
12b-1 fees None After 3 years $ 46
Other expenses (a) .55% After 5 years $ 79
---- After 10 years $174
Total fund
operating expenses (b) 1.45%
====
</TABLE>
- --------------------------------------------------------------------------------
(a) These expenses include a transfer agency fee payable to Alliance Fund
Services, Inc., an affiliate of Alliance. The expenses shown do not include
the application of credits that reduce Fund expenses.
(b) The expense information does not reflect any charges or expenses imposed by
your financial representative or your employee benefit plan.
(c) Net of voluntary fee waiver. In the absence of such waiver, management fees
would be 1.00% for All-Asia Investment Fund and .75% for Strategic Balanced
Fund and Utility Income Fund and 1.01% for International Fund.
International Fund's fee, absent the voluntary fee waiver, is calculated
based on average daily net assets. Maximum contractual rate, based on
quarter-end net assets, is 1.00%.
(d) Net of voluntary fee waiver. Absent such fee waiver, administration fees
would have been .15%. Reflects the fees payable by All-Asia Investment Fund
to Alliance pursuant to an administration agreement.
(e) Net of voluntary fee waivers and expense reimbursements. Absent such
waivers and reimbursements, total fund operating expenses for Strategic
Balanced Fund would have been 2.35%, total fund operating expenses for
All-Asia Investment Fund would have been 2.28% annualized and total fund
operating expenses for International Fund would have been 1.69%,
annualized.
(f) Net of expense reimbursements. Absent expense reimbursements, total fund
operating expenses for Utility Income Fund would be 3.29%.
(g) Calculated based on average daily net assets. Maximum contractual rate,
based on quarter-end net assets, is 1.00% for Quasar Fund and Technology
Fund.
The purpose of the foregoing table is to assist the investor in understanding
the various costs and expenses that an investor in a Fund will bear directly or
indirectly. For International Fund, Worldwide Privatization Fund, New Europe
Fund, Global Environment Fund, Global Small Cap Fund, Strategic Balanced Fund,
Balanced Shares and Real Estate Investment Fund, "Other Expenses" are based on
estimated amounts for those Funds' current fiscal year. "Management fees" for
International Fund and All-Asia Investment Fund and "Administration fees" for
All-Asia Investment Fund have been restated to reflect current voluntary fee
waivers. "Other Expenses" for Global Environment Fund are based on estimated
amounts for its current fiscal year. The Examples set forth above assume
reinvestment of all dividends and distributions and utilize a 5% annual rate of
return as mandated by Commission regulations. The Examples should not be
considered representative of future expenses; actual expenses may be greater or
less than those shown.
6
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The tables on the following pages present per share income and capital changes
for an Advisor Class share outstanding throughout each period indicated. Except
as otherwise indicated, information for Alliance Fund, Growth Fund, Premier
Growth Fund, Strategic Balanced Fund, Balanced Shares, Utility Income Fund,
Worldwide Privatization Fund and Growth and Income Fund has been audited by
Price Waterhouse LLP, the independent accountants for each such Fund, and for
All-Asia Investment Fund, Technology Fund, Quasar Fund, International Fund, New
Europe Fund, Global Small Cap Fund, Real Estate Investment Fund and Income
Builder Fund by Ernst & Young LLP, the independent auditors for each such Fund.
A report of Price Waterhouse LLP or Ernst & Young LLP, as the case may be, on
the information with respect to each Fund, appears in the Fund's Statement of
Additional Information. The following information for each Fund should be read
in conjunction with the financial statements and related notes which are
included in the Fund's Statement of Additional Information.
Further information about a Fund's performance is contained in the Fund's annual
report to shareholders, which may be obtained without charge by contacting
Alliance Fund Services, Inc. at the address or the "For Literature" telephone
number shown on the cover of this Prospectus.
7
<PAGE>
<TABLE>
<CAPTION>
Net Net Net
Asset Realized and Increase Distributions
Value Unrealized (Decrease) In Dividends From In Excess Of
Beginning Of Net Investment Gain (Loss) On Net Asset Value Net Investment Net Investment
Fiscal Year or Period Period Income (Loss) Investments From Operations Income Income
--------------------- ------------ -------------- -------------- --------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Alliance Fund
Advisor Class
Year ended 11/30/97 $ 7.71 $ (.02)(b) $ 2.10 $ 2.08 $ (.04) $ 0.00
10/2/96+ to 11/30/96 6.99 0.00 .72 .72 0.00 0.00
Growth Fund
Advisor Class
Year ended 10/31/97 $ 34.91 $ (.05)(b) $ 10.25 $ 10.20 $ 0.00 $ 0.00
10/2/96+ to 10/31/96 34.14 0.00(b) .77 .77 0.00 0.00
Premier Growth Fund
Advisor Class
Year ended 11/30/97 $ 17.99 $ (.06)(b) $ 5.25 $ 5.19 $ 0.00 $ 0.00
10/2/96+ to 11/30/96 15.94 (.01)(b) 2.06 2.05 0.00 0.00
Technology Fund
Advisor Class
Year ended 11/30/97 $ 51.17 $ (.45)(b) $ 4.33 $ 3.88 $ 0.00 $ 0.00
10/2/96+ to 11/30/96 47.32 (.05)(b) 3.90 3.85 0.00 0.00
Quasar Fund
Advisor Class
10/2/96+ to 9/30/97 $ 27.82 $ (.17)(b) $ 6.88 $ 6.71 $ 0.00 $ 0.00
International Fund
Advisor Class
10/2/96+ to 6/30/97 $ 17.96 $ .16(b) $ 1.78 $ 1.94 $ (.15) $ 0.00
Worldwide Privatization Fund
Advisor Class
10/2/96+ to 6/30/97 $ 12.14 $ .18(b) $ 2.52 $ 2.70 $ (.19) $ 0.00
New Europe Fund
Advisor Class
10/2/96+ to 7/31/97 $ 16.25 $ .11(b) $ 3.76 $ 3.87 $ (.09) $ (.14)
All-Asia Investment Fund
Advisor Class
Year ended 10/31/97 $ 11.04 $ (.15)(b)(c) $ (2.99) $ (3.14) $ 0.00 $ 0.00
10/2/96+ to 10/31/96 11.65 0.00(c) (.61) (.61) 0.00 0.00
Global Small Cap Fund
Advisor Class
10/2/96+ to 7/31/97 $ 12.56 $ (.08)(b) $ 1.97 $ 1.89 $ 0.00 $ 0.00
Strategic Balanced Fund
Advisor Class
10/2/96+ to 7/31/97 $ 19.49 $ .42(b)(c) $ (.12) $ .30 $ 0.00 $ 0.00
Balanced Shares
Advisor Class
10/2/96+ to 7/31/97 $ 14.79 $ .23 $ 3.22 $ 3.45 $ (.27) $ 0.00
Income Builder Fund
Advisor Class
10/2/96+ to 10/31/97 $ 11.57 $ .61(b) $ 1.53 $ 2.14 $ (.54) $ 0.00
Utility Income Fund
Advisor Class
Year ended 11/30/97 $ 10.59 $ .36(b)(c) $ 2.04 $ 2.40 $ (.37) $ 0.00
10/2/96+ to 11/30/96 9.95 .03(b)(c) .61 .64 0.00 0.00
Growth and Income Fund
Advisor Class
Year ended 10/31/97 $ 3.00 $ .05(b) $ .87 $ .92 $ (0.06) $ 0.00
10/2/96+ to 10/31/96 2.97 0.00 .03 .03 0.00 0.00
Real Estate Investment Fund
Advisor Class
10/1/96+ to 8/31/97 $ 10.00 $ .35(b) $ 2.88 $ 3.23 $ (.41)(f) $ 0.00
</TABLE>
- --------------------------------------------------------------------------------
+ Commencement of distribution.
* Annualized.
(a) Total investment return is calculated assuming an initial investment made
at the net asset value at the beginning of the period, reinvestment of all
dividends and distributions at the net asset value during the period, and
redemption on the last day of the period. Initial sales charges or
contingent deferred sales charges are not reflected in the calculation of
total investment return. Total investment return calculated for a period of
less than one year are not annualized.
(b) Based on average shares outstanding.
(c) Net of fee waiver and expense reimbursement.
(d) Net of expenses assumed and/or waived/reimbursed. If the following Funds
had borne all expenses in their most recent fiscal year, their expense
ratios, without giving effect to the expense offset arrangements described
in (e) below, would have been as follows:
<TABLE>
<CAPTION>
1996 1997 1997
<S> <C> <C> <C> <C>
All-Asia Investment Fund Strategic Balanced
Advisor Class 5.54%# 3.43 Advisor Class 2.35%#
Utility Income Fund
Advisor Class 3.48%# 3.29
Real Estate Investment Fund
Advisor Class -- 1.47%#
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
Total Net Assets Ratio Of Net
Total Net Asset Investment At End Of Ratio Of Investment
Distributions Dividends Value Return Based Period Expenses Income (Loss) Average
From Net And End Of on Net Asset (000's To Average To Average Portfolio Commission
Realized Gains Distributions Period Value (a) omitted) Net Assets Net Assets Turnover Rate Rate
- -------------- ------------- --------- ------------ ---------- ---------- ------------- ------------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ (1.06) $ (1.10) $ 8.69 32.00% $ 10,275 .83% (.21)% 158% $0.0571
0.00 0.00 7.71 10.30 1,083 .89* 0.38* 80 0.0646
$ (1.03) $ (1.03) $ 44.08 29.92% $101,205 .98%(e) (.12)% 48% $0.0562
0.00 0.00 34.91 2.26 946 1.26* 0.50* 46 0.0584
$ (1.08) $ (1.08) $ 22.10 30.98% $ 53,459 1.25% (.28)% 76% $0.0594
0.00 0.00 17.99 12.86 1,922 1.50* (.48)* 95 0.0651
$ (.42) $ (.42) $ 54.63 7.65% $167,120 1.39%(e) (.81)% 51% $0.0564
0.00 0.00 51.17 8.14 566 1.75* (1.21)* 30 0.0612
$ (4.11) $ (4.11) $ 30.42 28.47% $ 62,455 1.58% (.74)% 135% $0.0536
$ (1.08) $ (1.23) $ 18.67 11.57% $ 8,697 1.69%* 1.47%* 94% $0.0363
$ (1.42) $ (1.61) $ 13.23 25.24% $ 374 1.96%* 2.97%* 48% $0.0132
$ (1.32) $ (1.55) $ 18.57 25.76% $ 4,130 1.71%* .77%* 89% $0.0569
$ (.34) $ (.34) $ 7.56 (29.42)% $ 1,338 3.21%(d) (1.51)% 70% $0.0248
0.00 0.00 11.04 (5.24) 27 3.07*(d) 1.63* 66 0.0280
$ (1.56) $ (1.56) $ 12.89 17.08% $ 333 2.05%*(e) (.84)%* 129% $0.0364
$ 0.00 $ 0.00 $ 19.79 1.54% $ 50 1.10%(d)(e)* 3.40%* 170% $0.0395
$ (1.80) $ (2.07) $ 16.17 25.96% $ 1,565 1.30%*(e) 2.15%* 207% $0.0552
$ (.61) $ (1.15) $ 12.56 19.62% $ 80 1.68% 4.55% 159% $0.0513
$ (.13) $ (.50) $ 12.49 23.57% $ 42 1.20% 3.29% 37% $0.0442
0.00 0.00 10.59 6.33 33 1.20*(d) 4.02* 98 0.0536
$ (.38) $ (.44) $ 3.48 33.61% $ 3,207 .71%(e) 1.42% 88% $ .0589
0.00 0.00 3.00 1.01 87 0.37* 3.40* 88 0.0625
$ 0.00 $ (.41) $ 12.82 32.72% $ 2,313 1.45%*(d)(e) 3.07%* 20% $0.0518
</TABLE>
- --------------------------------------------------------------------------------
(e) Amounts do not affect the impact of expense offset arrangements with the
transfer agent. Taking into account such expense offsets arrangements the
rate of expense to average net assets assuming the assumption and/or waived
reimbursement of expenses described in note (d) above would have been as
follows:
<TABLE>
<CAPTION>
1997 1997 1997
---- ---- ----
<S> <C> <C> <C> <C> <C>
International Fund New Europe Fund Growth and Income Fund
Advisor Class 1.69%# Advisor Class 1.71%# Advisor Class .70%
Global Small Cap Fund Balanced Shares Fund Growth Fund
Advisor Class 2.04%# Advisor Class 1.29%# Advisor Class .96%
Strategic Balanced Fund Real Estate Fund Technology Fund
Advisor Class 1.10%# Advisor Class 1.44%# Advisor Class 1.38%
-------------
# annualized
</TABLE>
(f) Distributions from net investment income include a tax return of capital of
$.03.
9
<PAGE>
- --------------------------------------------------------------------------------
GLOSSARY
- --------------------------------------------------------------------------------
The following terms are frequently used in this Prospectus.
Equity securities, except as noted otherwise, are (i) common stocks, partnership
interests, business trust shares and other equity or ownership interests in
business enterprises, and (ii) securities convertible into, and rights and
warrants to subscribe for the purchase of, such stocks, shares and interests.
Debt securities are bonds, debentures, notes, bills, repurchase agreements,
loans, other direct debt instruments and other fixed, floating and variable rate
debt obligations, but do not include convertible securities.
Fixed-income securities are debt securities and dividend-paying preferred stocks
and include floating rate and variable rate instruments.
Convertible securities are fixed-income securities that are convertible into
common stock.
U.S. Government securities are securities issued or guaranteed by the United
States Government, its agencies or instrumentalities.
Foreign government securities are securities issued or guaranteed, as to payment
of principal and interest, by governments, quasi-governmental entities,
governmental agencies or other governmental entities.
Asian company is an entity that (i) is organized under the laws of an Asian
country and conducts business in an Asian country, (ii) derives 50% or more of
its total revenues from business in Asian countries, or (iii) issues equity or
debt securities that are traded principally on a stock exchange in an Asian
country.
Asian countries are Australia, the Democratic Socialist Republic of Sri Lanka,
the Hong Kong Special Administrative Region of the People's Republic of China
(Hong Kong), the Islamic Republic of Pakistan, Japan, the Kingdom of Thailand,
Malaysia, Negara Brunei Darussalam (Brunei), New Zealand, the People's Republic
of China, the People's Republic of Kampuchea (Cambodia), the Republic of China
(Taiwan), the Republic of India, the Republic of Indonesia, the Republic of
Korea (South Korea), the Republic of the Philippines, the Republic of Singapore,
the Socialist Republic of Vietnam and the Union of Myanmar.
Eligible Companies are companies expected to benefit from advances or
improvements in products, processes or services intended to foster the
protection of the environment.
Environmental Companies are Eligible Companies that have a principal business
involving the sale of systems or services intended to foster environmental
protection, such as waste treatment and disposal, remediation, air pollution
control and recycling.
Beneficiary Companies are Eligible Companies whose principal businesses lie
outside the environmental sector but nevertheless anticipate environmental
regulations or consumer preferences through the development of new products,
processes or services that are intended to contribute to a cleaner and healthier
environment, such as companies that anticipate the demand for plastic
substitutes, aerosol substitutes, alternative fuels and processes that generate
less hazardous waste.
Moody's is Moody's Investors Service, Inc.
S&P is Standard & Poor's Ratings Services.
Duff & Phelps is Duff & Phelps Credit Rating Co.
Fitch is Fitch IBCA, Inc.
Investment grade securities are fixed-income securities rated Baa and above by
Moody's or BBB and above by S&P, Duff & Phelps or Fitch, or determined by
Alliance to be of equivalent quality.
Lower-rated securities are fixed-income securities rated Ba or below by Moody's
or BB or below by S&P, Duff & Phelps or Fitch, or determined by Alliance to be
of equivalent quality, and are commonly referred to as "junk bonds."
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 having total assets of more than $1
billion and which are members of the Federal Deposit Insurance Corporation.
Rule 144A securities are securities that may be resold pursuant to Rule 144A
under the Securities Act of 1933, as amended (the "Securities Act").
Depositary receipts include American Depositary Receipts ("ADRs"), Global
Depositary Receipts ("GDRs") and other types of depositary receipts.
Commission is the Securities and Exchange Commission.
1940 Act is the Investment Company Act of 1940, as amended.
Code is the Internal Revenue Code of 1986, as amended.
Exchange is the New York Stock Exchange.
10
<PAGE>
- --------------------------------------------------------------------------------
DESCRIPTION OF THE FUNDS
- --------------------------------------------------------------------------------
Except as noted, (i) the Funds' investment objectives are "fundamental" and
cannot be changed without shareholder vote, and (ii) the Funds' investment
policies are not fundamental and thus can be changed without a shareholder vote.
No Fund will change a non-fundamental objective or policy without notifying its
shareholders. There is no guarantee that any Fund will achieve its investment
objective.
INVESTMENT OBJECTIVES AND POLICIES
DOMESTIC STOCK FUNDS
The Domestic Stock Funds have been designed to offer investors seeking capital
appreciation a range of alternative approaches to investing in the U.S. equity
markets.
The Alliance Fund
The Alliance Fund, Inc. ("Alliance Fund") is a diversified investment company
that seeks long-term growth of capital and income primarily through investment
in common stocks. The Fund normally invests substantially all of its assets in
common stocks that Alliance believes will appreciate in value, but it may invest
in other types of securities such as convertible securities, high grade
instruments, U.S. Government securities and high quality, short-term obligations
such as repurchase agreements, bankers' acceptances and domestic certificates of
deposit, and may invest without limit in foreign securities. While the
diversification and generally high quality of the Fund's investments cannot
prevent fluctuations in market values, they tend to limit investment risk and
contribute to achieving the Fund's objective. The Fund generally does not effect
portfolio transactions in order to realize short-term trading profits or
exercise control.
The Fund may also: (i) make secured loans of its portfolio securities equal in
value up to 25% of its total assets to brokers, dealers and financial
institutions; (ii) enter into repurchase agreements of up to one week in
duration with commercial banks, but only if those agreements together with any
restricted securities and any securities which do not have readily available
market quotations do not exceed 10% of its net assets; and (iii) write
exchange-traded covered call options with respect to up to 25% of its total
assets. For additional information on the use, risks and costs of these policies
and practices see "Additional Investment Practices."
Alliance Growth Fund
Alliance Growth Fund ("Growth Fund") is a diversified investment company that
seeks long-term growth of capital. Current income is only an incidental
consideration. The Fund seeks to achieve its objective by investing primarily in
equity securities of companies with favorable earnings outlooks and whose
long-term growth rates are expected to exceed that of the U.S. economy over
time. The Fund's investment objective is not fundamental.
The Fund may also invest up to 25% of its total assets in lower-rated
fixed-income and convertible securities. See "Risk ConsiderationsSecurities
Ratings" and "--Investment in Lower-Rated Fixed-Income Securities." The Fund
generally will not invest in securities rated at the time of purchase below Caa-
by Moody's and CCC- by S&P, Duff & Phelps or Fitch or in securities judged by
Alliance to be of comparable investment quality. However, from time to time, the
Fund may invest in securities rated in the lowest grades (i.e., C by Moody's or
D or equivalent by S&P, Duff & Phelps or Fitch), or securities Alliance judges
to be of comparable investment quality, if there are prospects for an upgrade or
a favorable conversion into equity securities. If the credit rating of a
security held by the Fund falls below its rating at the time of purchase (or
Alliance determines that the quality of such security has so deteriorated), the
Fund may continue to hold the security if such investment is considered
appropriate under the circumstances.
The Fund may also: (i) invest in "zero-coupon" bonds and "payment-in-kind"
bonds; (ii) invest in foreign securities, although the Fund will not generally
invest more than 15% of its total assets in foreign securities; (iii) invest in
securities that are not publicly traded, including Rule 144A securities; (iv)
buy or sell foreign currencies, options on foreign currencies, foreign currency
futures contracts (and related options) and deal in forward foreign exchange
contracts; (v) lend portfolio securities amounting to not more than 25% of its
total assets; (vi) enter into repurchase agreements of up to 25% of its total
assets and purchase and sell securities on a forward commitment basis; (vii) buy
and sell stock index futures contracts and buy and sell options on those
contracts and on stock indices; (viii) purchase and sell futures contracts,
options thereon and options with respect to U.S. Treasury securities; (ix) write
covered call and put options on securities it owns or in which it may invest;
and (x) purchase and sell put and call options. For additional information on
the use, risks and costs of these policies and practices see "Additional
Investment Practices."
Alliance Premier Growth Fund
Alliance Premier Growth Fund, Inc. ("Premier Growth Fund") is a diversified
investment company that seeks long-term growth of capital by investing
predominantly in the equity securities of a limited number of large, carefully
selected, high-quality U.S. companies that are judged likely to achieve superior
earnings growth. Normally, about 40 companies will be represented in the Fund's
portfolio, with the 25 most highly regarded of these companies usually
constituting approximately 70% of the Fund's net assets. The Fund is thus
atypical from most equity mutual funds in its focus on a relatively small number
of intensively researched companies and is designed for those seeking to
accumulate capital over time with less volatility than that associated with
investment in smaller companies.
As a matter of fundamental policy, the Fund normally invests at least 85% of its
total assets in the equity securities of U.S. companies. These are companies (i)
organized under U.S. law that have their principal office in the U.S., and (ii)
the equity
11
<PAGE>
securities of which are traded principally in the U.S. Alliance's investment
strategy for the Fund emphasizes stock selection and investment in the
securities of a limited number of issuers. Alliance relies heavily upon the
fundamental analysis and research of its large internal research staff, which
generally follows a primary research universe of more than 600 companies that
have strong management, superior industry positions, excellent balance sheets
and superior earnings growth prospects. An emphasis is placed on identifying
companies whose substantially above average prospective earnings growth is not
fully reflected in current market valuations.
In managing the Fund, Alliance seeks to utilize market volatility judiciously
(assuming no change in company fundamentals), striving to capitalize on
apparently unwarranted price fluctuations, both to purchase or increase
positions on weakness and to sell or reduce overpriced holdings. The Fund
normally remains nearly fully invested and does not take significant cash
positions for market timing purposes. During market declines, while adding to
positions in favored stocks, the Fund becomes somewhat more aggressive,
gradually reducing the number of companies represented in its portfolio.
Conversely, in rising markets, while reducing or eliminating fully valued
positions, the Fund becomes somewhat more conservative, gradually increasing the
number of companies represented in its portfolio. Alliance thus seeks to gain
positive returns in good markets while providing some measure of protection in
poor markets.
Alliance expects the average market capitalization of companies represented in
the Fund's portfolio normally to be in the range, or in excess, of the average
market capitalization of companies comprising the "S&P 500" (the Standard &
Poor's 500 Composite Stock Price Index, a widely recognized unmanaged index of
market activity).
The Fund may also: (i) invest up to 20% of its net assets in convertible
securities of companies whose common stocks are eligible for purchase by it;
(ii) invest up to 5% of its net assets in rights or warrants; (iii) invest up to
15% of its total assets in securities of foreign issuers whose common stocks are
eligible for purchase by it; (iv) purchase and sell exchange-traded index
options and stock index futures contracts; and (v) write covered exchange-traded
call options on common stocks, unless as a result, the amount of its securities
subject to call options would exceed 15% of its total assets, and purchase and
sell exchange-traded call and put options on common stocks written by others,
but the total cost of all options held by the Fund (including exchange-traded
index options) may not exceed 10% of its total assets. For additional
information on the use, risks and costs of these policies and practices see
"Additional Investment Practices." The Fund will not write put options.
Alliance Technology Fund
Alliance Technology Fund, Inc. ("Technology Fund") is a diversified investment
company that emphasizes growth of capital and invests for capital appreciation,
and only incidentally for current income. The Fund may seek income by writing
listed call options. The Fund invests primarily in securities of companies
expected to benefit from technological advances and improvements (i.e.,
companies that use technology extensively in the development of new or improved
products or processes). The Fund will normally have at least 80% of its assets
invested in the securities of these companies. The Fund normally will have
substantially all its assets invested in equity securities, but it also invests
in debt securities offering an opportunity for price appreciation. The Fund will
invest in listed and unlisted securities and U.S. and foreign securities, but it
will not purchase a foreign security if as a result 10% or more of the Fund's
total assets would be invested in foreign securities.
The Fund's policy is to invest in any company and industry and in any type of
security with potential for capital appreciation. It invests in well-known and
established companies and in new and unseasoned companies.
The Fund may also: (i) write and purchase exchange-listed call options and
purchase listed put options, including exchange-traded index put options; (ii)
invest up to 10% of its total assets in warrants; (iii) invest in restricted
securities and in other assets having no ready market if as a result no more
than 10% of the Fund's net assets are invested in such securities and assets;
(iv) lend portfolio securities equal in value to not more than 30% of the Fund's
total assets; and (v) invest up to 10% of its total assets in foreign
securities. For additional information on the use, risks and costs of the
policies and practices see "Additional Investment Practices."
Alliance Quasar Fund
Alliance Quasar Fund, Inc. ("Quasar Fund") is a diversified investment company
that seeks growth of capital by pursuing aggressive investment policies. It
invests for capital appreciation and only incidentally for current income. The
selection of securities based on the possibility of appreciation cannot prevent
loss in value. Moreover, because the Fund's investment policies are aggressive,
an investment in the Fund is risky and investors who want assured income or
preservation of capital should not invest in the Fund.
The Fund invests in any company and industry and in any type of security with
potential for capital appreciation. It invests in well-known and established
companies and in new and unseasoned companies. When selecting securities,
Alliance considers the economic and political outlook, the values of specific
securities relative to other investments, trends in the determinants of
corporate profits and management capability and practices.
The Fund invests principally in equity securities, but it also invests to a
limited degree in non-convertible bonds and preferred stocks. The Fund invests
in listed and unlisted U.S. and foreign securities. The Fund periodically
invests in special situations, which occur when the securities of a company are
expected to appreciate due to a development particularly or uniquely applicable
to that company and regardless of general business conditions or movements of
the market as a whole.
The Fund may also: (i) invest in restricted securities and in other assets
having no ready market, but not more than 10%
12
<PAGE>
of its total assets may be invested in such securities or assets; (ii) make
short sales of securities "against the box," but not more than 15% of its net
assets may be deposited on short sales; and (iii) write call options and
purchase and sell put and call options written by others. For additional
information on the use, risks and costs of these policies and practices see
"Additional Investment Practices."
GLOBAL STOCK FUNDS
The Global Stock Funds have been designed to enable investors to participate in
the potential for long-term capital appreciation available from investment in
foreign securities.
Alliance International Fund
Alliance International Fund ("International Fund") is a diversified investment
company that seeks a total return on its assets from long-term growth of capital
and from income primarily through a broad portfolio of marketable securities of
established non-U.S. companies, companies participating in foreign economies
with prospects for growth, including U.S. companies having their principal
activities and interests outside the U.S. and foreign government securities.
Normally, more than 80% of the Fund's assets will be invested in such issuers.
The Fund expects to invest primarily in common stocks of established non-U.S.
companies that Alliance believes have potential for capital appreciation or
income or both, but the Fund is not required to invest exclusively in common
stocks or other equity securities, and it may invest in any other type of
investment grade security, including convertible securities, as well as in
warrants, or obligations of the U.S. or foreign governments and their political
subdivisions.
The Fund intends to diversify its investments broadly among countries and
normally invests in at least three foreign countries, although it may invest a
substantial portion of its assets in one or more of such countries. In this
regard, at December 31, 1997, approximately 20% of the Fund's assets were
invested in securities of Japanese issuers. The Fund may invest in companies,
wherever organized, that Alliance judges have their principal activities and
interests outside the U.S. These companies may be located in developing
countries, which involves exposure to economic structures that are generally
less diverse and mature, and to political systems which can be expected to have
less stability, than those of developed countries. The Fund currently does not
intend to invest more than 10% of its total assets in companies in, or
governments of, developing countries.
The Fund may also: (i) purchase or sell forward foreign currency exchange
contracts; (ii) write, sell and purchase U.S. or foreign exchange-listed put and
call options, including exchange-traded index options; (iii) enter into
financial futures contracts, including contracts for the purchase or sale for
future delivery of foreign currencies and stock index futures, and purchase and
write put and call options on futures contracts traded on U.S. or foreign
exchanges or over-the-counter; (iv) purchase and write put options on foreign
currencies traded on securities exchanges or boards of trade or
over-the-counter; (v) lend portfolio securities equal in value to not more than
30% of its total assets; and (vi) enter into repurchase agreements of up to
seven days' duration, provided that not more than 10% of the Fund's total assets
would be so invested. For additional information on the use, risks and costs of
these policies and practices see "Additional Investment Practices."
Alliance Worldwide Privatization Fund
Alliance Worldwide Privatization Fund, Inc. ("Worldwide Privatization Fund") is
a non-diversified investment company that seeks long-term capital appreciation.
As a fundamental policy, the Fund invests at least 65% of its total assets in
equity securities issued by enterprises that are undergoing, or have undergone,
privatization (as described below), although normally significantly more of its
assets will be invested in such securities. The balance of its investments will
include securities of companies believed by Alliance to be beneficiaries of
privatizations. The Fund is designed for investors desiring to take advantage of
investment opportunities, historically inaccessible to U.S. individual
investors, that are created by privatizations of state enterprises in both
established and developing economies, including those in Western Europe and
Scandinavia, Australia, New Zealand, Latin America, Asia and Eastern and Central
Europe and, to a lesser degree, Canada and the United States.
The Fund's investments in enterprises undergoing privatization may comprise
three distinct situations. First, the Fund may invest in the initial offering of
publicly traded equity securities (an "initial equity offering") of a
government- or state-owned or controlled company or enterprise (a "state
enterprise"). Secondly, the Fund may purchase securities of a current or former
state enterprise following its initial equity offering. Finally, the Fund may
make privately negotiated purchases of stock or other equity interests in a
state enterprise that has not yet conducted an initial equity offering. Alliance
believes that substantial potential for capital appreciation exists as
privatizing enterprises rationalize their management structures, operations and
business strategies in order to compete efficiently in a market economy, and the
Fund will thus emphasize investments in such enterprises.
The Fund diversifies its investments among a number of countries and normally
invests in issuers based in at least four, and usually considerably more,
countries. No more than 15% of the Fund's total assets, however, will be
invested in issuers in any one foreign country, except that the Fund may invest
up to 30% of its total assets in issuers in any one of France, Germany, Great
Britain, Italy and Japan. The Fund may invest all of its assets within a single
region of the world. To the extent that the Fund's assets are invested within
any one region, the Fund may be subject to any special risks that may be
associated with that region.
Privatization is a process through which the ownership and control of companies
or assets changes in whole or in part from the public sector to the private
sector. Through
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privatization a government or state divests or transfers all or a portion of its
interest in a state enterprise to some form of private ownership. Governments
and states with established economies, including France, Great Britain, Germany
and Italy, and those with developing economies, including Argentina, Mexico,
Chile, Indonesia, Malaysia, Poland and Hungary, are engaged in privatizations.
The Fund will invest in any country believed to present attractive investment
opportunities.
A major premise of the Fund's approach is that the equity securities of
privatized companies offer opportunities for significant capital appreciation.
In particular, because privatizations are integral to a country's economic
restructuring, securities sold in initial equity offerings often are priced
attractively so as to secure the issuer's successful transition to private
sector ownership. Additionally, these enterprises often dominate their local
markets and typically have the potential for significant managerial and
operational efficiency gains.
Although the Fund anticipates that it will not concentrate its investments in
any industry, it is permitted to invest more than 25% of its total assets in
issuers whose primary business activity is that of national commercial banking.
Prior to so concentrating, however, the Fund's Directors must determine that its
ability to achieve its investment objective would be adversely affected if it
were not permitted to concentrate. The staff of the Commission is of the view
that registered investment companies may not, absent shareholder approval,
change between concentration and non-concentration in a single industry. The
Fund disagrees with the staff's position but has undertaken that it will not
concentrate in the securities of national commercial banks until, if ever, the
issue is resolved. If the Fund were to invest more than 25% of its total assets
in national commercial banks, the Fund's performance could be significantly
influenced by events or conditions affecting this industry, which is subject to,
among other things, increases in interest rates and deteriorations in general
economic conditions, and the Fund's investments may be subject to greater risk
and market fluctuation than if its portfolio represented a broader range of
investments.
The Fund may invest up to 35% of its total assets in debt securities and
convertible debt securities of issuers whose common stocks are eligible for
purchase by the Fund. The Fund may maintain not more than 5% of its net assets
in lower-rated securities. See "Risk Considerations--Securities Ratings" and
"--Investment in Lower-Rated Fixed-Income Securities." The Fund will not retain
a non-convertible security that is downgraded below C or determined by Alliance
to have undergone similar credit quality deterioration following purchase.
The Fund may also: (i) invest up to 20% of its total assets in rights or
warrants; (ii) write covered put and call options and purchase put and call
options on securities of the types in which it is permitted to invest and on
exchange-traded index options; (iii) enter into contracts for the purchase or
sale for future delivery of fixed-income securities or foreign currencies, or
contracts based on financial indices, including any index of U.S. Government
securities, foreign government securities, or common stock and may purchase and
write options on future contracts; (iv) purchase and write put and call options
on foreign currencies for hedging purposes; (v) purchase or sell forward
contracts; (vi) enter in forward commitments for the purchase or sale of
securities; (vii) enter into standby commitment agreements; (viii) enter into
currency swaps for hedging purposes; (ix) enter into repurchase agreements
pertaining to U.S. Government securities with member banks of the Federal
Reserve System or primary dealers in such securities; (x) make short sales of
securities or maintain a short position; and (xi) make secured loans of its
portfolio securities not in excess of 30% of its total assets to entities with
which it can enter into repurchase agreements. For additional information on the
use, risks and costs of these policies and practices see "Additional Investment
Practices."
Alliance New Europe Fund
Alliance New Europe Fund, Inc. ("New Europe Fund") is a non-diversified
investment company that seeks long-term capital appreciation through investment
primarily in the equity securities of companies based in Europe. The Fund
intends to invest substantially all of its assets in the equity securities of
European companies and has a fundamental policy of normally investing at least
65% of its total assets in such securities. Up to 35% of its total assets may be
invested in high quality U.S. dollar or foreign currency denominated
fixed-income securities issued or guaranteed by European governmental entities,
or by European or multinational companies or supranational organizations.
Alliance believes that the quickening pace of economic integration and political
change in Europe creates the potential for many European companies to experience
rapid growth and that the emergence of new market economies in Europe and the
broadening and strengthening of other European economies may significantly
accelerate economic development. The Fund will invest in companies that Alliance
believes possess rapid growth potential. Thus, the Fund will emphasize
investments in larger, established companies, but will also invest in smaller,
emerging companies.
In recent years, economic ties between the former "east bloc" countries of
Eastern Europe and certain other European countries have been strengthened.
Alliance believes that as this strengthening continues, some Western European
financial institutions and other companies will have special opportunities to
facilitate East-West transactions. The Fund will seek investment opportunities
among such companies and, as such become available, within the former "east
bloc," although the Fund will not invest more than 20% of its total assets in
issuers based therein, or more than 10% of its total assets in issuers based in
any one such country.
The Fund diversifies its investments among a number of European countries and,
under normal circumstances, will invest in companies based in at least three
such countries. Subject to the foregoing and to the limitation on investment in
any one former "east bloc" country, the Fund may invest without limit in a
single European country. While the Fund does not intend to concentrate its
investments in a single country, at times 25% or more of its assets may be
invested in issuers located in a single country. During such times, the Fund
would
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be subject to a correspondingly greater risk of loss due to adverse political or
regulatory developments, or an economic downturn, within that country. In this
regard, at December 31, 1997, approximately 24% of the Fund's assets were
invested in securities of issuers in the United Kingdom.
The Fund may also: (i) invest up to 10% of its total assets in securities for
which there is no ready market; (ii) invest up to 20% of its total assets in
warrants and rights to purchase equity securities of European companies; (iii)
invest in depositary receipts or other securities convertible into securities of
companies based in European countries, debt securities of supranational entities
denominated in the currency of any European country, debt securities denominated
in European Currency Units of an issuer in a European country (including
supranational issuers) and "semi-governmental securities"; (iv) purchase and
sell forward contracts; (v) write, sell and purchase exchange-traded put and
call options, including exchange-traded index options; (vi) enter into financial
futures contracts, including contracts for the purchase or sale for future
delivery of foreign currencies and futures contracts based on stock indices, and
purchase and write options on futures contracts; (vii) purchase and write put
options on foreign currencies traded on securities exchanges or boards of trade
or over-the-counter; (viii) make secured loans of portfolio securities not in
excess of 30% of its total assets to brokers, dealers and financial
institutions; (ix) enter into forward commitments for the purchase or sale of
securities; and (x) enter into standby commitment agreements. For additional
information on the use, risks and costs of these policies and practices see
"Additional Investment Practices."
Alliance All-Asia Investment Fund
Alliance All-Asia Investment Fund, Inc. ("All-Asia Investment Fund") is a
non-diversified investment company whose investment objective is to seek
long-term capital appreciation. In seeking to achieve its investment objective,
the Fund will invest at least 65% of its total assets in equity securities (for
the purposes of this investment policy, rights, warrants and options to purchase
common stocks are not deemed to be equity securities), preferred stocks and
equity-linked debt securities issued by Asian companies. The Fund may invest up
to 35% of its total assets in debt securities issued or guaranteed by Asian
companies or by Asian governments, their agencies or instrumentalities. The Fund
may also invest in securities issued by non-Asian issuers, provided that the
Fund will invest at least 80% of its total assets in securities issued by Asian
companies and the Asian debt securities referred to above. The Fund expects to
invest, from time to time, a significant portion, but less than 50%, of its
assets in equity securities of Japanese companies.
In the past decade, Asian countries generally have experienced a high level of
real economic growth due to political and economic changes, including foreign
investment and reduced government intervention in the economy. Alliance believes
that certain conditions exist in Asian countries which create the potential for
continued rapid economic growth. These conditions include favorable demographics
and competitive wage rates, increasing levels of foreign direct investment,
rising per capita incomes and consumer demand, a high savings rate and numerous
privatization programs. Asian countries are also becoming more industrialized
and are increasing their intra-Asian exports while reducing their dependence on
Western export demand. Alliance believes that these conditions are important to
the long-term economic growth of Asian countries.
As the economies of many Asian countries move through the "emerging market"
stage, thus increasing the supply of goods, services and capital available to
less developed Asian markets and helping to spur economic growth in those
markets, the potential is created for many Asian companies to experience rapid
growth. In addition, many Asian companies the securities of which are listed on
exchanges in more developed Asian countries will be participants in the rapid
economic growth of the lesser developed countries. These companies generally
offer the advantages of more experienced management and more developed market
regulation.
As their economies have grown, the securities markets in Asian countries have
also expanded. New exchanges have been created and the number of listed
companies, annual trading volume and overall market capitalization have
increased significantly. Additionally, new markets continue to open to foreign
investments. For example, South Korea and India have recently relaxed investment
restrictions and Vietnamese direct investments have recently become available to
U.S. investors. The Fund also offers investors the opportunity to access
relatively restricted markets. Alliance believes that investment opportunities
in Asian countries will continue to expand.
The Fund will invest in companies believed to possess rapid growth potential.
Thus, the Fund will invest in smaller, emerging companies, but will also invest
in larger, more established companies in such growing economic sectors as
capital goods, telecommunications and consumer services.
The Fund will invest in investment grade debt securities, except that the Fund
may maintain not more than 5% of its net assets in lower-rated securities and
lower-rated loans and other lower-rated direct debt instruments. See "Risk
Considerations--Securities Ratings," "--Investment in Lower-Rated Fixed-Income
Securities" and Appendix C in the Fund's Statement of Additional Information for
a description of such ratings. The Fund will not retain a security that is
downgraded below C or determined by Alliance to have undergone similar credit
quality deterioration following purchase.
The Fund may also: (i) invest up to 25% of its net assets in the convertible
securities of companies whose common stocks are eligible for purchase by the
Fund; (ii) invest up to 20% of its net assets in rights or warrants; (iii)
invest in depositary receipts, instruments of supranational entities denominated
in the currency of any country, securities of multinational companies and
"semi-governmental securities;" (iv) invest up to 25% of its net assets in
equity-linked debt securities with the objective of realizing capital
appreciation; (v) invest up to 25% of its net assets in loans and other direct
debt instruments; (vi) write
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covered put and call options on securities of the types in which it is permitted
to invest and on exchange-traded index options; (vii) enter into contracts for
the purchase or sale for future delivery of fixed-income securities or foreign
currencies, or contracts based on financial indices, including any index of U.S.
Government securities, securities issued by foreign government entities, or
common stock and may purchase and write options on future contracts; (viii)
purchase and write put and call options on foreign currencies for hedging
purposes; (ix) purchase or sell forward contracts; (x) enter into interest rate
swaps and purchase or sell interest rate caps and floors; (xi) enter into
forward commitments for the purchase or sale of securities; (xii) enter into
standby commitment agreements; (xiii) enter into currency swaps for hedging
purposes; (xiv) enter into repurchase agreements pertaining to U.S. Government
securities with member banks of the Federal Reserve System or primary dealers in
such securities; (xv) make short sales of securities or maintain a short
position, in each case only if "against the box;" and (xvi) make secured loans
of its portfolio securities not in excess of 30% of its total assets to entities
with which it can enter into repurchase agreements. For additional information
on the use, risks and costs of these policies and practices see "Additional
Investment Practices."
Alliance Global Small Cap Fund
Alliance Global Small Cap Fund, Inc. ("Global Small Cap Fund") is a diversified
investment company that seeks long-term growth of capital through investment in
a global portfolio of the equity securities of selected companies with
relatively small market capitalization. The Fund's portfolio emphasizes
companies with market capitalizations that would have placed them (when
purchased) in about the smallest 20% by market capitalization of actively traded
U.S. companies, or market capitalizations of up to about $1.5 billion. Because
the Fund applies the U.S. size standard on a global basis, its foreign
investments might rank above the lowest 20%, and, in fact, might in some
countries rank among the largest, by market capitalization in local markets.
Normally, the Fund invests at least 65% of its assets in equity securities of
these smaller capitalization issuers, and these issuers are located in at least
three countries, one of which may be the U.S. Up to 35% of the Fund's total
assets may be invested in securities of companies whose market capitalizations
exceed the Fund's size standard. The Fund's portfolio securities may be listed
on a U.S. or foreign exchange or traded over-the-counter.
Alliance believes that smaller capitalization issuers often have sales and
earnings growth rates exceeding those of larger companies, and that these growth
rates tend to cause more rapid share price appreciation. Investing in smaller
capitalization stocks, however, involves greater risk than is associated with
larger, more established companies. For example, smaller capitalization
companies often have limited product lines, markets, or financial resources.
They may be dependent for management on one or a few key persons, and can be
more susceptible to losses and risks of bankruptcy. Their securities may be
thinly traded (and therefore have to be sold at a discount from current market
prices or sold in small lots over an extended period of time), may be followed
by fewer investment research analysts and may be subject to wider price swings
and thus may create a greater chance of loss than when investing in securities
of larger capitalization companies. Transaction costs in small capitalization
stocks may be higher than in those of larger capitalization companies.
The Fund may also: (i) invest up to 10% of its total assets in securities for
which there is no ready market; (ii) invest up to 20% of its total assets in
warrants to purchase equity securities; (iii) invest in depositary receipts or
other securities representing securities of companies based in countries other
than the U.S.; (iv) purchase or sell forward foreign currency contracts; (v)
write and purchase exchange-traded call options and purchase exchange-traded put
options, including put options on market indices; and (vi) make secured loans of
portfolio securities not in excess of 30% of its total assets to brokers,
dealers and financial institutions. For additional information on the use, risks
and costs of these policies and practices see "Additional Investment Practices."
Alliance Global Environment Fund
Alliance Global Environment Fund, Inc. ("Global Environment Fund") is a
non-diversified investment company that seeks long-term capital appreciation
through investment in equity securities of Eligible Companies. For purposes of
the Fund's investment objective and investment policies, "equity securities" are
common stocks (but not preferred stocks), rights or warrants to subscribe for or
purchase common stocks, and preferred stocks or debt securities that are
convertible into common stocks without the payment of any further consideration.
Until October 3, 1997, the Fund operated as a closed-end investment company, and
its common stock (which then comprised a single class) was listed on the
Exchange.
The Fund invests in two categories of Eligible Companies--"Environmental
Companies" and "Beneficiary Companies." Environmental Companies are those that
have a principal business involving the sale of systems or services intended to
foster environmental protection, such as waste treatment and disposal,
remediation, air pollution control and recycling. Under normal circumstances,
the Fund invests at least 65% of its total assets in equity securities of
Environmental Companies. Beneficiary Companies are those whose principal
businesses lie outside the environmental sector but nevertheless anticipate
environmental regulations or consumer preferences through the development of new
products, processes or services that are intended to contribute to a cleaner and
healthier environment. Examples of such companies could be companies that
anticipate the demand for plastic substitutes, aerosol substitutes, alternative
fuels and processes that generate less hazardous waste. In this regard, the Fund
may invest in an issuer with a broadly diversified business only a part of which
provides such products, processes or services, when Alliance believes that these
products, processes or services will yield a competitive advantage that
significantly enhances the issuer's growth prospects. As a matter of fundamental
policy, the Fund will, under normal circumstances,
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invest substantially all of its total assets in equity securities of Eligible
Companies.
A major premise of the Fund's investment approach is that environmental concerns
will be a significant source of future growth opportunities, and that
Environmental Companies will see an increased demand for their systems and
services. Environmental Companies operate in the areas of pollution control,
clean energy, solid waste management, hazardous waste treatment and disposal,
pulp and paper recycling, waste-to-energy alternatives, biodegradable cartons,
packages, plastics and other products, remedial projects and emergency cleanup
efforts, manufacture of environmental supplies and equipment, the achievement of
purer air, groundwater and foods and the detection, evaluation and treatment of
both existing and potential environmental problems including, among others, air
pollution and acid rain.
The environmental services industry is generally positively affected by
increasing governmental action intended to foster environmental protection. As
environmental regulations are developed and enforced, Environmental Companies
providing the means of compliance with such regulations are afforded substantial
opportunities for growth. Beneficiary Companies may also derive an advantage to
the extent that they have anticipated environmental regulation and are therefore
at a competitive advantage.
In the view of Alliance, increasing public and political awareness of
environmental concerns and resultant environmental regulations are long-term
phenomena that are driven by an emerging global consensus that environmental
protection is a vital and increasingly immediate priority. Alliance believes
that Eligible Companies based in the United States and other economically
developed countries will have increasing opportunities for earnings growth
resulting not only from an increased demand for their existing products or
services but also from innovative responses to changing regulations and
priorities and enforcement policies. Such opportunities will arise, in the
opinion of Alliance, not only within developed countries but also within many
economically developing countries, such as those of Eastern Europe and the
Pacific Rim. These countries lag well behind developed countries in the
conservation and efficient use of natural resources and in their implementation
of policies which protect the environment.
Alliance believes that global investing offers opportunities for superior
investment returns. The Fund spreads investment risk among the capital markets
of a number of countries and invests in equity securities of companies based in
at least three, and normally considerably more, such countries. The percentage
of the Fund's assets invested in securities of companies in a particular country
or denominated in a particular currency will vary in accordance with Alliance's
assessment of the appreciation potential of such securities and the strength of
that currency. As of December 31, 1997, approximately 86% of the Fund's net
assets were invested in equity securities of U.S. companies.
The Fund may also: (i) invest up to 20% of its total assets in warrants to
purchase equity securities to the extent consistent with its investment
objective; (ii) invest in depositary receipts; (iii) purchase and write put and
call options on foreign currencies for hedging purposes; (iv) enter into forward
foreign currency transactions for hedging purposes; (v) invest in currency
futures and options on such futures for hedging purposes; and (vi) make secured
loans of its portfolio securities not in excess of 30% of its total assets. For
additional information on the use, risks and costs of these policies and
practices see "Additional Investment Practices."
TOTAL RETURN FUNDS
The Total Return Funds have been designed to provide a range of investment
alternatives to investors seeking both growth of capital and current income.
Alliance Strategic Balanced Fund
Alliance Strategic Balanced Fund ("Strategic Balanced Fund") is a diversified
investment company that seeks a high long-term total return by investing in a
combination of equity and debt securities. The portion of the Fund's assets
invested in each type of security varies in accordance with economic conditions,
the general level of common stock prices, interest rates and other relevant
considerations, including the risks associated with each investment medium. The
Fund's investment objective is not fundamental.
The Fund's equity securities will generally consist of dividend-paying common
stocks and other equity securities of companies with favorable earnings outlooks
and long-term growth rates that Alliance expects will exceed that of the U.S.
economy. The Fund's debt securities may include U.S. Government securities and
securities issued by private corporations. The Fund may also invest in
mortgage-backed securities, adjustable rate securities, asset-backed securities
and so-called "zero-coupon" bonds and "payment-in-kind" bonds.
As a fundamental policy, the Fund will invest at least 25% of its total assets
in fixed-income securities, which for this purpose include debt securities,
preferred stocks and that portion of the value of convertible securities that is
attributable to the fixed-income characteristics of those securities.
The Fund's debt securities will generally be of investment grade. See "Risk
Considerations--Securities Ratings" and "Investment in Lower-Rated Fixed-Income
Securities." In the event that the rating of any debt securities held by the
Fund falls below investment grade, the Fund will not be obligated to dispose of
such obligations and may continue to hold them if considered appropriate under
the circumstances.
The Fund may also: (i) invest in foreign securities, although the Fund will not
generally invest more than 15% of its total assets in foreign securities; (ii)
invest, without regard to this 15% limit, in Eurodollar CDs, which are
dollar-denominated certificates of deposit issued by foreign branches of U.S.
banks that are not insured by any agency or instrumentality of the U.S.
Government; (iii) write covered call and put options on securities it owns or in
which it may invest; (iv) buy and sell put and call options and buy and sell
combinations of put and
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call options on the same underlying securities; (v) lend portfolio securities
amounting to not more than 25% of its total assets; (vi) enter into repurchase
agreements on up to 25% of its total assets; (vii) purchase and sell securities
on a forward commitment basis; (viii) buy or sell foreign currencies, options on
foreign currencies, foreign currency futures contracts (and related options) and
deal in forward foreign exchange contracts; (ix) buy and sell stock index
futures contracts and buy and sell options on those contracts and on stock
indices; (x) purchase and sell futures contracts, options thereon and options
with respect to U.S. Treasury securities; and (xi) invest in securities that are
not publicly traded, including Rule 144A securities. For additional information
on the use, risks and costs of these policies and practices see "Additional
Investment Practices."
Alliance Balanced Shares
Alliance Balanced Shares, Inc. ("Balanced Shares") is a diversified investment
company that seeks a high return through a combination of current income and
capital appreciation. Although the Fund's investment objective is not
fundamental, the Fund is a "balanced fund" as a matter of fundamental policy.
The Fund will not purchase a security if as a result less than 25% of its total
assets will be in fixed-income senior securities (including short- and long-term
debt securities, preferred stocks, and convertible debt securities and
convertible preferred stocks to the extent that their values are attributable to
their fixed-income characteristics). Subject to these restrictions, the
percentage of the Fund's assets invested in each type of security will vary. The
Fund's assets are invested in U.S. Government securities, bonds, senior debt
securities and preferred and common stocks in such proportions and of such type
as are deemed best adapted to the current economic and market outlooks. The Fund
may invest up to 15% of the value of its total assets in foreign equity and
fixed-income securities eligible for purchase by the Fund under its investment
policies described above. See "Risk Considerations--Foreign Investment."
The Fund may also: (i) enter into contracts for the purchase or sale for future
delivery of foreign currencies; and (ii) purchase and write put and call options
on foreign currencies and enter into forward foreign currency exchange contracts
for hedging purposes. Subject to market conditions, the Fund may also seek to
realize income by writing covered call options listed on a domestic exchange.
For additional information on the use, risks and costs of these policies and
practices see "Additional Investment Practices."
Alliance Income Builder Fund
Alliance Income Builder Fund, Inc. ("Income Builder Fund") is a non-diversified
investment company that seeks an attractive level of current income and
long-term growth of income and capital by investing principally in fixed-income
securities and dividend-paying common stocks. Its investments in equity
securities emphasize common stocks of companies with a historical or projected
pattern of paying rising dividends. Normally, at least 65% of the Fund's total
assets are invested in income-producing securities. The Fund may vary the
percentage of assets invested in any one type of security based upon Alliance's
evaluation as to the appropriate portfolio structure for achieving the Fund's
investment objective, although Alliance currently maintains approximately 60% of
the Fund's net assets in fixed-income securities and 40% in equity securities.
The Fund may invest in fixed-income securities of domestic and foreign issuers,
including U.S. Government securities and repurchase agreements pertaining
thereto, corporate fixed-income securities of U.S. issuers, qualifying bank
deposits and prime commercial paper.
The Fund may maintain up to 35% of its net assets in lower-rated securities. See
"Risk Considerations--Securities Ratings" and "--Investment in Lower-Rated
Fixed-Income Securities." The Fund will not retain a non-convertible security
that is downgraded below CCC or determined by Alliance to have undergone similar
credit quality deterioration following purchase.
Foreign securities in which the Fund invests may include fixed-income securities
of foreign corporate and governmental issuers, denominated in U.S. Dollars, and
equity securities of foreign corporate issuers, denominated in foreign
currencies or in U.S. Dollars. The Fund will not invest more than 10% of its net
assets in equity securities of foreign issuers nor more than 15% of its total
assets in issuers of any one foreign country. See "Risk Considerations--Foreign
Investment."
The Fund may also: (i) invest up to 5% of its net assets in rights or warrants;
(ii) invest in depositary receipts and U.S. Dollar denominated securities issued
by supranational entities; (iii) write covered put and call options and purchase
put and call options on securities of the types in which it is permitted to
invest that are exchange-traded; (iv) purchase and sell exchange-traded options
on any securities index composed of the types of securities in which it may
invest; (v) enter into contracts for the purchase or sale for future delivery of
fixed-income securities or foreign currencies, or contracts based on financial
indices, including any index of U.S. Government securities, foreign government
securities, corporate fixed income securities, or common stock, and purchase and
write options on future contracts; (vi) purchase and write put and call options
on foreign currencies and enter into forward contracts for hedging purposes;
(vii) enter into interest rate swaps and purchase or sell interest rate caps and
floors; (viii) enter into forward commitments for the purchase or sale of
securities; (ix) enter into standby commitment agreements; (x) enter into
repurchase agreements pertaining to U.S. Government securities with member banks
of the Federal Reserve System or primary dealers in such securities; (xi) make
short sales of securities or maintain a short position as described below under
"Additional Investment Policies and PracticesShort Sales;" and (xii) make
secured loans of its portfolio securities not in excess of 20% of its total
assets to brokers, dealers and financial institutions. For additional
information on the use, risks and costs of these policies and practices see
"Additional Investment Practices."
Alliance Utility Income Fund
Alliance Utility Income Fund, Inc. ("Utility Income Fund") is a diversified
investment company that seeks current income and
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capital appreciation by investing primarily in equity and fixed-income
securities of companies in the utilities industry. The Fund may invest in
securities of both U.S. and foreign issuers, although no more than 15% of the
Fund's total assets will be invested in issuers in any one foreign country. The
utilities industry consists of companies engaged in (i) the manufacture,
production, generation, provision, transmission, sale and distribution of gas
and electric energy, and communications equipment and services, including
telephone, telegraph, satellite, microwave and other companies providing
communication facilities for the public, or (ii) the provision of other utility
or utility-related goods and services, including, but not limited to, entities
engaged in water provision, cogeneration, waste disposal system provision, solid
waste electric generation, independent power producers and non-utility
generators. The Fund is designed to take advantage of the characteristics and
historical performance of securities of utility companies, many of which pay
regular dividends and increase their common stock dividends over time. As a
fundamental policy, the Fund normally invests at least 65% of its total assets
in securities of companies in the utilities industry. The Fund considers a
company to be in the utilities industry if, during the most recent twelve-month
period, at least 50% of the company's gross revenues, on a consolidated basis,
were derived from its utilities activities.
At least 65% of the Fund's total assets are invested in income-producing
securities, but there is otherwise no limit on the allocation of the Fund's
investments between equity securities and fixed-income securities. The Fund may
maintain up to 35% of its net assets in lower-rated securities. See "Risk
Considerations--Securities Ratings" and "--Investment in Lower-Rated
Fixed-Income Securities." The Fund will not retain a security that is downgraded
below B or determined by Alliance to have undergone similar credit quality
deterioration following purchase.
The United States utilities industry has experienced significant changes in
recent years. Electric utility companies in general have been favorably affected
by lower fuel costs, the full or near completion of major construction programs
and lower financing costs. In addition, many utility companies have generated
cash flows in excess of current operating expenses and construction
expenditures, permitting some degree of diversification into unregulated
businesses. Regulatory changes with respect to nuclear and conventionally fueled
generating facilities, however, could increase costs or impair the ability of
such electric utilities to operate such facilities, thus reducing their ability
to service dividend payments with respect to the securities they issue.
Furthermore, rates of return of utility companies generally are subject to
review and limitation by state public utilities commissions and tend to
fluctuate with marginal financing costs. Rate changes, however, ordinarily lag
behind the changes in financing costs, and thus can favorably or unfavorably
affect the earnings or dividend pay-outs on utilities stocks depending upon
whether such rates and costs are declining or rising.
Gas transmission companies, gas distribution companies and telecommunications
companies are also undergoing significant changes. Gas utilities have been
adversely affected by declines in the prices of alternative fuels, and have also
been affected by oversupply conditions and competition. Telephone utilities are
still experiencing the effects of the break-up of American Telephone & Telegraph
Company, including increased competition and rapidly developing technologies
with which traditional telephone companies now compete. Although there can be no
assurance that increased competition and other structural changes will not
adversely affect the profitability of such utilities, or that other negative
factors will not develop in the future, in Alliance's opinion, increased
competition and change may provide better positioned utility companies with
opportunities for enhanced profitability.
Utility companies historically have been subject to the risks of increases in
fuel and other operating costs, high interest costs, costs associated with
compliance with environmental and nuclear safety regulations, service
interruptions, economic slowdowns, surplus capacity, competition and regulatory
changes. There can also be no assurance that regulatory policies or accounting
standards changes will not negatively affect utility companies' earnings or
dividends. Utility companies are subject to regulation by various authorities
and may be affected by the imposition of special tariffs and changes in tax
laws. To the extent that rates are established or reviewed by governmental
authorities, utility companies are subject to the risk that such authorities
will not authorize increased rates. Because of the Fund's policy of
concentrating its investments in utility companies, the Fund is more susceptible
than most other mutual funds to economic, political or regulatory occurrences
affecting the utilities industry.
Foreign utility companies, like those in the U.S., are generally subject to
regulation, although such regulations may or may not be comparable to domestic
regulations. Foreign utility companies in certain countries may be more heavily
regulated by their respective governments than utility companies located in the
U.S. and, as in the U.S., generally are required to seek government approval for
rate increases. In addition, because many foreign utility companies use fuels
that cause more pollution than those used in the U.S., such utilities may yet be
required to invest in pollution control equipment. Foreign utility regulatory
systems vary from country to country and may evolve in ways different from
regulation in the U.S. The percentage of the Fund's assets invested in issuers
of particular countries will vary. See "Risk Considerations--Foreign
Investment."
The Fund may invest up to 35% of its total assets in equity and fixed-income
securities of domestic and foreign corporate and governmental issuers other than
utility companies, including U.S. Government securities and repurchase
agreements pertaining thereto, foreign government securities, corporate
fixed-income securities of domestic issuers, corporate fixed-income securities
of foreign issuers denominated in foreign currencies or in U.S. dollars (in each
case including fixed-income securities of an issuer in one country denominated
in the currency of another country), qualifying bank deposits and prime
commercial paper.
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The Fund may also: (i) invest up to 30% of its net assets in the convertible
securities of companies whose common stocks are eligible for purchase by the
Fund; (ii) invest up to 5% of its net assets in rights or warrants; (iii) invest
in depositary receipts, securities of supranational entities denominated in the
currency of any country, securities denominated in European Currency Units and
"semi-governmental securities;" (iv) write covered put and call options and
purchase put and call options on securities of the types in which it is
permitted to invest that are exchange-traded and over-the-counter; (v) purchase
and sell exchange-traded options on any securities index composed of the types
of securities in which it may invest; (vi) enter into contracts for the purchase
or sale for future delivery of fixed-income securities or foreign currencies, or
contracts based on financial indices, including an index of U.S. Government
securities, foreign government securities, corporate fixed-income securities, or
common stock, and may purchase and write options on futures contracts; (vii)
purchase and write put and call options on foreign currencies traded on U.S. and
foreign exchanges or over-the-counter for hedging purposes; (viii) purchase or
sell forward contracts; (ix) enter into interest rate swaps and purchase or sell
interest rate caps and floors; (x) enter in forward commitments for the purchase
or sale of securities; (xi) enter into standby commitment agreements; (xii)
enter into repurchase agreements pertaining to U.S. Government securities with
member banks of the Federal Reserve System or primary dealers in such
securities; (xiii) make short sales of securities or maintain a short position
as described below under "Additional Investment Practices--Short Sales;" and
(xiv) make secured loans of its portfolio securities not in excess of 20% of its
total assets to brokers, dealers and financial institutions. For additional
information on the use, risk and costs of these policies and practices, see
"Additional Investment Practices."
Alliance Growth and Income Fund
Alliance Growth and Income Fund, Inc. ("Growth and Income Fund") is a
diversified investment company that seeks appreciation through investments
primarily in dividend-paying common stocks of good quality, although it is
permitted to invest in fixed-income securities and convertible securities.
The Fund may also try to realize income by writing covered call options listed
on domestic securities exchanges. The Fund also invests in foreign securities.
Since the purchase of foreign securities entails certain political and economic
risks, the Fund has restricted its investments in securities in this category to
issues of high quality. The Fund may also purchase and sell financial forward
and futures contracts and options thereon for hedging purposes. For additional
information on the use, rights and costs of these policies and practices, see
"Additional Investment Practices."
Alliance Real Estate Investment Fund
Alliance Real Estate Investment Fund, Inc. ("Real Estate Investment Fund") is a
diversified investment company that seeks a total return on its assets from
long-term growth of capital and from income principally through investing in a
portfolio of equity securities of issuers that are primarily engaged in or
related to the real estate industry.
Under normal circumstances, at least 65% of the Fund's total assets will be
invested in equity securities of real estate investment trusts ("REITs") and
other real estate industry companies. A "real estate industry company" is a
company that derives at least 50% of its gross revenues or net profits from the
ownership, development, construction, financing, management or sale of
commercial, industrial or residential real estate or interests therein. The
equity securities in which the Fund will invest for this purpose consist of
common stock, shares of beneficial interest of REITs and securities with common
stock characteristics, such as preferred stock or convertible securities ("Real
Estate Equity Securities").
The Fund may invest up to 35% of its total assets in (a) securities that
directly or indirectly represent participations in, or are collateralized by and
payable from, mortgage loans secured by real property ("Mortgage-Backed
Securities"), such as mortgage pass-through certificates, real estate mortgage
investment conduit ("REMIC") certificates and collateralized mortgage
obligations ("CMOs") and (b) short-term investments. These instruments are
described below. The risks associated with the Fund's transactions in REMICs,
CMOs and other types of mortgage-backed securities, which are considered to be
derivative securities, may include some or all of the following: market risk,
leverage and volatility risk, correlation risk, credit risk and liquidity and
valuation risk. See "Risk Considerations" for a description of these and other
risks.
As to any investment in Real Estate Equity Securities, Alliance's analysis will
focus on determining the degree to which the company involved can achieve
sustainable growth in cash flow and dividend paying capability. Alliance
believes that the primary determinant of this capability is the economic
viability of property markets in which the company operates and that the
secondary determinant of this capability is the ability of management to add
value through strategic focus and operating expertise. The Fund will purchase
Real Estate Equity Securities when, in the judgment of Alliance, their market
price does not adequately reflect this potential. In making this determination,
Alliance will take into account fundamental trends in underlying property
markets as determined by proprietary models, site visits conducted by
individuals knowledgeable in local real estate markets, price-earnings ratios
(as defined for real estate companies), cash flow growth and stability, the
relationship between asset value and market price of the securities, dividend
payment history, and such other factors which Alliance may determine from time
to time to be relevant. Alliance will attempt to purchase for the Fund Real
Estate Equity Securities of companies whose underlying portfolios are
diversified geographically and by property type.
The Fund may invest without limitation in shares of REITs. REITs are pooled
investment vehicles which invest primarily in income producing real estate or
real estate related loans or interests. REITs are generally classified as equity
REITs, mortgage REITs or a combination of equity and mortgage REITs. Equity
REITs invest the majority of their assets directly
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in real property and derive income primarily from the collection of rents.
Equity REITs can also realize capital gains by selling properties that have
appreciated in value. Mortgage REITs invest the majority of their assets in real
estate mortgages and derive income from the collection of interest payments.
Similar to investment companies such as the Fund, REITs are not taxed on income
distributed to shareholders provided they comply with several requirements of
the Code. The Fund will indirectly bear its proportionate share of expenses
incurred by REITs in which the Fund invests in addition to the expenses incurred
directly by the Fund.
Investment Process for Real Estate Equity Securities. The Fund's investment
strategy with respect to Real Estate Equity Securities is based on the premise
that property market fundamentals are the primary determinant of growth
underlying the performance of Real Estate Equity Securities. Value added
management further distinguishes the most attractive Real Estate Equity
Securities. The Fund's research and investment process is designed to identify
those companies with strong property fundamentals and strong management teams.
This process is comprised of real estate market research, specific property
inspection and securities analysis. Alliance believes that this process will
result in a portfolio that will consist of Real Estate Equity Securities of
companies that own assets in the most desirable markets across the country,
diversified geographically and by property type.
In implementing the Fund's research and investment process, Alliance will avail
itself of the consulting services of CB Commercial Real Estate Group, Inc.
("CBC"), a publicly held company and the largest real estate services company in
the United States, comprised of real estate brokerage, property and facilities
management, and real estate finance and investment advisory activities (CBC in
August of 1997 acquired Koll Management Services ("Koll"), which previously
provided these consulting services to Alliance). In 1996, CBC (and Koll, on a
combined basis) completed 25,000 sale and lease transactions, managed over 4,100
client properties, created over $3.5 billion in mortgage originations, and
completed over 2,600 appraisal and consulting assignments. In addition, they
advised and managed for institutions over $4 billion in real estate investments.
As consultant to Alliance, CBC provides access to its proprietary model,
REIToScore, that analyzes the approximately 12,000 properties owned by these 130
companies. Using proprietary databases and algorithms, CBC analyzes local market
rent, expense, and occupancy trends, market specific transaction pricing,
demographic and economic trends, and leading indicators of real estate supply
such as building permits. Over 650 asset-type specific geographic markets are
analyzed and ranked on a relative scale by CBC in compiling its REIToScore
database. The relative attractiveness of these real estate industry companies is
similarly ranked based on the composite rankings of the properties they own. See
"Management of the Funds--Consultant to Advisor" for more information about CBC.
The universe of property-owning real estate industry firms consists of
approximately 130 companies of sufficient size and quality to merit
consideration for investment by the Fund. Once the universe of real estate
industry companies has been distilled through the market research process, CBC's
local market presence provides the capability to perform site specific
inspections of key properties. This analysis examines specific location,
condition, and sub-market trends. CBC's use of locally based real estate
professionals provides Alliance with a window on the operations of the portfolio
companies as information can immediately be put in the context of local market
events. Only those companies whose specific property portfolios reflect the
promise of their general markets will be considered for initial and continued
investment by the Fund.
Alliance further screens the universe of real estate industry companies by using
rigorous financial models and by engaging in regular contact with management of
targeted companies. Each management's strategic plan and ability to execute the
plan are determined and analyzed. Alliance will make extensive use of CBC's
network of industry analysts in order to assess trends in tenant industries.
This information is then used to further interpret management's strategic plans.
Financial ratio analysis is used to isolate those companies with the ability to
make value-added acquisitions. This information is combined with property market
trends and used to project future earnings potential.
The short-term investments in which Real Estate Investment Fund may invest are:
corporate commercial paper and other short-term commercial obligations, in each
case rated or issued by companies with similar securities outstanding that are
rated Prime-1, Aa or better by Moody's or A-1, AA or better by S&P; obligations
(including certificates of deposit, time deposits, demand deposits and bankers'
acceptances) of banks with securities outstanding that are rated Prime-1, Aa or
better by Moody's or A-1, AA or better by S&P; and obligations issued or
guaranteed by the U.S. Government or its agencies or instrumentalities with
remaining maturities not exceeding 18 months.
The Fund may invest in debt securities rated BBB or higher by S&P or Baa or
higher by Moody's or, if not so rated, of equivalent credit quality as
determined by Alliance. The Fund expects that it will not retain a debt security
which is downgraded below BBB or Baa or, if unrated, determined by Alliance to
have undergone similar credit quality deterioration, subsequent to purchase by
the Fund.
The Fund may also engage in the following investment practices to the extent
indicated: (i) invest up to 10% of its net assets in rights or warrants; (ii)
invest up to 15% of its net assets in the convertible securities of companies
whose common stocks are eligible for purchase by the Fund; (iii) lend portfolio
securities equal in value to not more than 25% of total assets; (iv) enter into
repurchase agreements of up to seven days' duration; (v) enter into forward
commitments transactions as long as the Fund's aggregate commitments under such
transactions are not more than 30% of the Fund's total assets; (vi) enter into
standby commitment agreements; (vii) make short sales of securities or maintain
a short position but only if at all times when a short position is open not more
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than 25% of the Fund's net assets (taken at market value) is held as collateral
for such sales; and (viii) invest in illiquid securities unless, as a result,
more than 15% of its net assets would be so invested.
ADDITIONAL INVESTMENT PRACTICES
Some or all of the Funds may engage in the following investment practices to the
extent described above.
Convertible Securities. Prior to conversion, convertible securities have the
same general characteristics as non-convertible debt securities, which generally
provide a stable stream of income with yields that are generally higher than
those of equity securities of the same or similar issuers. The price of a
convertible security will normally vary with changes in the price of the
underlying stock, although the higher yield tends to make the convertible
security less volatile than the underlying common stock. As with debt
securities, the market value of convertible securities tends to decrease as
interest rates rise and increase as interest rates decline. While convertible
securities generally offer lower interest or dividend yields than
non-convertible debt securities of similar quality, they offer investors the
potential to benefit from increases in the market price of the underlying common
stock. Convertible debt securities that are rated Baa or lower by Moody's or BBB
or lower by S&P, Duff & Phelps or Fitch and comparable unrated securities as
determined by Alliance may share some or all of the risks of non-convertible
debt securities with those ratings. For a description of these risks, see "Risk
Considerations--Securities Ratings" and "--Investment in Lower-Rated
Fixed-Income Securities."
Rights and Warrants. A 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 thereof. If the market price of the
underlying security is below the exercise price set forth in 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.
Depositary Receipts and Securities of Supranational Entities. Depositary
receipts may not necessarily be denominated in the same currency as the
underlying securities into which they may be converted. In addition, the issuers
of the stock of unsponsored depositary receipts are not obligated to disclose
material information in the United States and, therefore, there may not be a
correlation between such information and the market value of the depositary
receipts. ADRs are depositary receipts typically issued by a U.S. bank or trust
company that evidence ownership of underlying securities issued by a foreign
corporation. GDRs and other types of depositary receipts are typically issued by
foreign banks or trust companies and evidence ownership of underlying securities
issued by either a foreign or a U.S. company. Generally, depositary receipts in
registered form are designed for use in the U.S. securities markets, and
depositary receipts in bearer form are designed for use in foreign securities
markets. For purposes of determining the country of issuance, investments in
depositary receipts of either type are deemed to be investments in the
underlying securities except with respect to Growth Fund, Strategic Balanced
Fund and Income Builder Fund, where investments in ADRs are deemed to be
investments in securities issued by U.S. issuers and those in GDRs and other
types of depositary receipts are deemed to be investments in the underlying
securities.
A supranational entity is an entity designated or supported by the national
government of one or more countries to promote economic reconstruction or
development. Examples of supranational entities include, among others, the World
Bank (International Bank for Reconstruction and Development) and the European
Investment Bank. A European Currency Unit is a basket of specified amounts of
the currencies of the member states of the European Economic Community.
"Semi-governmental securities" are securities issued by entities owned by either
a national, state or equivalent government or are obligations of one of such
government jurisdictions which are not backed by its full faith and credit and
general taxing powers.
Mortgage-Backed Securities. Interest and principal payments (including
prepayments) on the mortgages underlying mortgage-backed securities are passed
through to the holders of the securities. As a result of the pass-through of
prepayments of principal on the underlying securities, mortgage-backed
securities are often subject to more rapid prepayment of principal than their
stated maturity would indicate. Prepayments occur when the mortgagor on a
mortgage prepays the remaining principal before the mortgage's scheduled
maturity date. Because the prepayment characteristics of the underlying
mortgages vary, it is impossible to predict accurately the realized yield or
average life of a particular issue of pass-through certificates. Prepayments are
important because of their effect on the yield and price of the mortgage-backed
securities. During periods of declining interest rates, prepayments can be
expected to accelerate and a Fund investing in such securities would be required
to reinvest the proceeds at the lower interest rates then available. Conversely,
during periods of rising interest rates, a reduction in prepayments may increase
the effective maturity of the securities, subjecting them to a greater risk of
decline in market value in response to rising interest rates. In addition,
prepayments of mortgages underlying securities purchased at a premium could
result in capital losses.
Adjustable Rate Securities. Adjustable rate securities have interest rates that
are reset at periodic intervals, usually by
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reference to some interest rate index or market interest rate. Some adjustable
rate securities are backed by pools of mortgage loans. Although the
rate-adjustment feature may reduce sharp changes in the value of adjustable rate
securities, these securities can change in value based on changes in market
interest rates or the issuer's creditworthiness. Changes in the interest rate on
adjustable rate securities may lag behind changes in prevailing market interest
rates. Also, some adjustable rate securities (or the underlying mortgages) are
subject to caps or floors that limit the maximum change in interest rate.
Asset-Backed Securities. Asset-backed securities (unrelated to first mortgage
loans) represent fractional interests in pools of leases, retail installment
loans, revolving credit receivables and other payment obligations, both secured
and unsecured. These assets are generally held by a trust and payments of
principal and interest or interest only are passed through monthly or quarterly
to certificate holders and may be guaranteed up to certain amounts by letters of
credit issued by a financial institution affiliated or unaffiliated with the
trustee or originator of the trust.
Like mortgages underlying mortgage-backed securities, underlying automobile
sales contracts or credit card receivables are subject to prepayment, which may
reduce the overall return to certificate holders. Certificate holders may also
experience delays in payment on the certificates if the full amounts due on
underlying sales contracts or receivables are not realized by the trust because
of unanticipated legal or administrative costs of enforcing the contracts or
because of depreciation or damage to the collateral (usually automobiles)
securing certain contracts, or other factors.
Zero-Coupon and Payment-in-Kind Bonds. Zero-coupon bonds are issued at a
significant discount from their principal amount in lieu of paying interest
periodically. Payment-in-kind bonds allow the issuer to make current interest
payments on the bonds in additional bonds. Because zero-coupon bonds and
payment-in-kind bonds do not pay current interest in cash, their value is
generally subject to greater fluctuation in response to changes in market
interest rates than bonds that pay interest in cash currently. Both zero-coupon
and payment-in-kind bonds allow an issuer to avoid the need to generate cash to
meet current interest payments. Accordingly, such bonds may involve greater
credit risks than bonds paying interest currently. Even though such bonds do not
pay current interest in cash, a Fund is nonetheless required to accrue interest
income on such investments and to distribute such amounts at least annually to
shareholders. Thus, a Fund could be required at times to liquidate other
investments in order to satisfy its dividend requirements.
Equity-Linked Debt Securities. Equity-linked debt securities are securities with
respect to which the amount of interest and/or principal that the issuer thereof
is obligated to pay is linked to the performance of a specified index of equity
securities. Such amount may be significantly greater or less than payment
obligations in respect of other types of debt securities. Adverse changes in
equity securities indices and other adverse changes in the securities markets
may reduce payments made under, and/or the principal of, equity-linked debt
securities held by the Fund. Furthermore, as with any debt securities, the
values of equity-linked debt securities will generally vary inversely with
changes in interest rates. The Fund's ability to dispose of equity-linked debt
securities will depend on the availability of liquid markets for such
securities. Investment in equity-linked debt securities may be considered to be
speculative. As with other securities, the Fund could lose its entire investment
in equity-linked debt securities.
Loans and Other Direct Debt Instruments. Loans and other direct debt instruments
are interests in amounts owed by a corporate, governmental or other borrower to
another party. They may represent amounts owed to lenders or lending syndicates
(loans and loan participations), to suppliers of goods or services (trade claims
or other receivables), or to other creditors. Direct debt instruments involve
the risk of loss in case of default or insolvency of the borrower and may offer
less legal protection to the Fund in the event of fraud or misrepresentation
than debt securities. In addition, loan participations involve a risk of
insolvency of the lending bank or other financial intermediary. Direct debt
instruments may also include standby financing commitments that obligate the
Fund to supply additional cash to the borrower on demand. Loans and other direct
debt instruments are generally illiquid and may be transferred only through
individually negotiated private transactions.
Purchasers of loans and other forms of direct indebtedness depend primarily upon
the creditworthiness of the borrower for payment of principal and interest.
Direct debt instruments may not be rated by any nationally recognized rating
service. If the Fund does not receive scheduled interest or principal payments
on such indebtedness, the Fund's share price and yield could be adversely
affected. Loans that are fully secured offer the Fund more protection than
unsecured loans in the event of non-payment of scheduled interest or principal.
However, there is no assurance that the liquidation of collateral from a secured
loan would satisfy the borrower's obligation, or that the collateral can be
liquidated. Indebtedness of borrowers whose creditworthiness is poor may involve
substantial risks, and may be highly speculative.
Borrowers that are in bankruptcy or restructuring may never pay off their
indebtedness, or may pay only a small fraction of the amount owed. Direct
indebtedness of Asian countries will also involve a risk that the governmental
entities responsible for the repayment of the debt may be unable, or unwilling,
to pay interest and repay principal when due.
Investments in loans through direct assignment of a financial institution's
interests with respect to a loan may involve additional risks to the Fund. For
example, if a loan is foreclosed, the Fund could become part owner of any
collateral, and would bear the costs and liabilities associated with owning and
disposing of the collateral. Direct debt instruments may also involve a risk of
insolvency of the lending bank or other intermediary.
A loan is often administered by a bank or other financial institution that acts
as agent for all holders. The agent
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administers the terms of the loan, as specified on the loan agreement. Unless,
under the terms of the loan or other indebtedness, the Fund has direct recourse
against the borrower, it may have to rely on the agent to apply appropriate
credit remedies against a borrower. If assets held by the agent for the benefit
of the Fund were determined to be subject to the claims of the agent's general
creditors, the Fund might incur certain costs and delays in realizing payment on
the loan or loan participation and could suffer a loss of principal or interest.
Direct indebtedness purchased by the Fund may include letters of credit,
revolving credit facilities, or other standby financing commitments obligating
the Fund to pay additional cash on demand. These commitments may have the effect
of requiring the Fund to increase its investment in a borrower at a time when it
would not otherwise have done so, even if the borrower's condition makes it
unlikely that the amount will ever be repaid.
Mortgage-Backed Securities and Associated Risks. Mortgage-Backed Securities
include mortgage pass-through certificates and multiple-class pass-through
securities, such as REMIC pass-through certificates, CMOs and stripped
mortgage-backed securities ("SMBS"), and other types of Mortgage-Backed
Securities that may be available in the future.
Guaranteed Mortgage Pass-Through Securities. Real Estate Investment Fund may
invest in guaranteed mortgage pass-through securities which represent
participation interests in pools of residential mortgage loans and are issued by
U.S. governmental or private lenders and guaranteed by the U.S. Government or
one of its agencies or instrumentalities, including but not limited to the
Government National Mortgage Association ("Ginnie Mae"), the Federal National
Mortgage Association ("Fannie Mae") and the Federal Home Loan Mortgage
Corporation ("Freddie Mac"). Ginnie Mae certificates are guaranteed by the full
faith and credit of the United States Government for timely payment of principal
and interest on the certificates. Fannie Mae certificates are guaranteed by
Fannie Mae, a federally chartered and privately-owned corporation for full and
timely payment of principal and interest on the certificates. Freddie Mac
certificates are guaranteed by Freddie Mac, a corporate instrumentality of the
United States Government, for timely payment of interest and the ultimate
collection of all principal of the related mortgage loans.
Multiple-Class Pass-Through Securities and Collateralized Mortgage Obligations.
Mortgage-Backed Securities also include CMOs and REMIC pass-through or
participation certificates, which may be issued by, among others, U.S.
Government agencies and instrumentalities as well as private lenders. CMOs and
REMIC certificates are issued in multiple classes and the principal of and
interest on the mortgage assets may be allocated among the several classes of
CMOs or REMIC certificates in various ways. Each class of CMOs or REMIC
certificates, often referred to as a "tranche," is issued at a specific
adjustable or fixed interest rate and must be fully retired no later than its
final distribution date. Generally, interest is paid or accrues on all classes
of CMOs or REMIC certificates on a monthly basis. Real Estate Investment Fund
will not invest in the lowest tranche of CMOs and REMIC certificates.
Typically, CMOs are collateralized by Ginnie Mae or Freddie Mac certificates but
also may be collateralized by other mortgage assets such as whole loans or
private mortgage pass-through securities. Debt service on CMOs is provided from
payments of principal and interest on collateral of mortgaged assets and any
reinvestment income thereon.
A REMIC is a CMO that qualifies for special tax treatment under the Code and
invests in certain mortgages primarily secured by interests in real property and
other permitted investments. Investors may purchase "regular" and "residual"
interest shares of beneficial interest in REMIC trusts although the Fund does
not intend to invest in residual interests.
Risks. Investing in Mortgage-Backed Securities involves certain unique risks in
addition to those generally associated with investing in the real estate
industry in general. These unique risks include the failure of a counterparty to
meet its commitments, adverse interest rate changes and the effects of
prepayments on mortgage cash flows. See "Risk Considerations--Mortgage-Backed
Securities" for a more complete description of the characteristics of
Mortgage-Backed Securities and associated risks.
Illiquid Securities. Subject to any more restrictive applicable fundamental
investment policy, none of the Funds will maintain more than 15% of its net
assets in illiquid securities. Illiquid securities generally include (i) direct
placements or other securities that are subject to legal or contractual
restrictions on resale or for which there is no readily available market (e.g.,
when trading in the security is suspended or, in the case of unlisted
securities, when market makers do not exist or will not entertain bids or
offers), including many individually negotiated currency swaps and any assets
used to cover currency swaps and most privately negotiated investments in state
enterprises that have not yet conducted an initial equity offering, (ii)
over-the-counter options and assets used to cover over-the-counter options, and
(iii) repurchase agreements not terminable within seven days.
Because of the absence of a trading market for illiquid securities, a Fund may
not be able to realize their full value upon sale. With respect to each Fund
that may invest in such securities, Alliance will monitor their illiquidity
under the supervision of the Directors of the Fund. To the extent permitted by
applicable law, Rule 144A securities will not be treated as "illiquid" for
purposes of the foregoing restriction so long as such securities meet liquidity
guidelines established by a Fund's Directors. Investment in non-publicly traded
securities by each of Growth Fund and Strategic Balanced Fund is restricted to
5% of its total assets (not including for these purposes Rule 144A securities,
to the extent permitted by applicable law) and is also subject to the 15%
restriction on investment in illiquid securities described above.
A Fund that invests in securities for which there is no ready market may
therefore not be able to readily sell such securities. 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
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agency or imposing legal restrictions on resales of securities, either as to
length of time the securities may be held or manner of resale. However, there
may be contractual restrictions on resales of securities.
Options. An option gives the purchaser of the option, upon payment of a premium,
the right to deliver to (in the case of a put) or receive from (in the case of a
call) the writer a specified amount of a security on or before a fixed date at a
predetermined price. A call option written by a Fund is "covered" if the Fund
owns the underlying security, has an absolute and immediate right to acquire
that security upon conversion or exchange of another security it holds, or holds
a call option on the underlying security with an exercise price equal to or less
than that of the call option it has written. A put option written by a Fund is
covered if the Fund holds a put option on the underlying securities with an
exercise price equal to or greater than that of the put option it has written.
A call option is for cross-hedging purposes if a Fund does not own the
underlying security, and is designed to provide a hedge against a decline in
value in another security which the Fund owns or has the right to acquire.
Worldwide Privatization Fund, All-Asia Investment Fund, Income Builder Fund and
Utility Income Fund each may write call options for cross-hedging purposes. A
Fund would write a call option for cross-hedging purposes, instead of writing a
covered call option, when the premium to be received from the cross-hedge
transaction would exceed that which would be received from writing a covered
call option, while at the same time achieving the desired hedge.
In purchasing an option, a Fund would be in a position to realize a gain if,
during the option period, the price of the underlying security increased (in the
case of a call) or decreased (in the case of a put) by an amount in excess of
the premium paid; otherwise the Fund would experience a loss equal to the
premium paid for the option.
If an option written by a Fund were exercised, the Fund would be obligated to
purchase (in the case of a put) or sell (in the case of a call) the underlying
security at the exercise price. The risk involved in writing an option is that,
if the option were exercised, the underlying security would then be purchased or
sold by the Fund at a disadvantageous price. These risks could be reduced by
entering into a closing transaction (i.e., by disposing of the option prior to
its exercise). A Fund retains the premium received from writing a put or call
option whether or not the option is exercised. The writing of covered call
options could result in increases in a Fund's portfolio turnover rate,
especially during periods when market prices of the underlying securities
appreciate.
Technology Fund, Quasar Fund, International Fund, New Europe Fund and Global
Small Cap Fund will not write uncovered call options. Technology Fund and Global
Small Cap Fund will not write a call option if the premium to be received by the
Fund in doing so would not produce an annualized return of at least 15% of the
then current market value of the securities subject to the option (without
giving effect to commissions, stock transfer taxes and other expenses that are
deducted from premium receipts). Technology Fund, Quasar Fund and Global Small
Cap Fund will not write a call option if, as a result, the aggregate of the
Fund's portfolio securities subject to outstanding call options (valued at the
lower of the option price or market value of such securities) would exceed 15%
of the Fund's total assets or more than 10% of the Fund's assets would be
committed to call options that at the time of sale have a remaining term of more
than 100 days. The aggregate cost of all outstanding options purchased and held
by each of Premier Growth Fund, Technology Fund, Quasar Fund and Global Small
Cap Fund will at no time exceed 10% of the Fund's total assets. Neither
International Fund nor New Europe Fund will write uncovered put options.
A Fund that purchases or writes options on securities in privately negotiated
(i.e., over-the-counter) transactions will effect such transactions only with
investment dealers and other financial institutions (such as commercial banks or
savings and loan institutions) deemed creditworthy by Alliance, and Alliance has
adopted procedures for monitoring the creditworthiness of such entities. Options
purchased or written by a Fund in negotiated transactions are illiquid and it
may not be possible for the Fund to effect a closing transaction at an
advantageous time. See "Illiquid Securities."
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.
Futures Contracts and Options on Futures Contracts. A "sale" of a futures
contract means the acquisition of a contractual obligation to deliver the
securities or foreign currencies or other commodity called for by the contract
at a specified price on a specified date. A "purchase" of a futures contract
means the incurring of an obligation to acquire the securities, foreign
currencies or other commodity called for by the contract at a specified price on
a specified date. The purchaser of a futures contract on an index agrees to take
or make delivery of an amount of cash equal to the difference between a
specified dollar multiple of the value of the index on the expiration date of
the contract ("current contract value") and the price at which the contract was
originally struck. No physical delivery of the securities underlying the index
is made.
Options on futures contracts written or purchased by a Fund will be traded on
U.S. or foreign exchanges or over-the-counter. These investment techniques will
be used only to hedge against anticipated future changes in market conditions
and interest or exchange rates which otherwise might either adversely affect the
value of the Fund's portfolio securities or adversely affect the prices of
securities which the Fund intends to purchase at a later date.
No Fund will enter into any futures contracts or options on futures contracts if
immediately thereafter the market values of
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the outstanding futures contracts of the Fund and the currencies and futures
contracts subject to outstanding options written by the Fund would exceed 50% of
its total assets, and Income Builder Fund will also not do so if immediately
thereafter the aggregate of initial margin deposits on all the outstanding
futures contracts of the Fund and premiums paid on outstanding options on
futures contracts would exceed 5% of the market value of the total assets of the
Fund. Premier Growth Fund and Growth and Income Fund may not purchase or sell a
stock index future if immediately thereafter more than 30% of its total assets
would be hedged by stock index futures. Premier Growth Fund and Growth and
Income Fund may not purchase or sell a stock index future if, immediately
thereafter, the sum of the amount of margin deposits on the Fund's existing
futures positions would exceed 5% of the market value of the Fund's total
assets.
Options on Foreign Currencies. As in the case of other kinds of options, the
writing of an option on a foreign currency constitutes only a partial hedge, up
to the amount of the premium received, and a Fund could be required to purchase
or sell foreign currencies at disadvantageous exchange rates, 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. See the Statement of Additional
Information of each Fund that may invest in options on foreign currencies for
further discussion of the use, risks and costs of options on foreign currencies.
Forward Foreign Currency Exchange Contracts. A Fund purchases or sells forward
contracts to minimize the risk to it from adverse changes in the relationship
between the U.S. dollar and other currencies. A forward contract is an
obligation to purchase or sell a specific currency for an agreed price at a
future date, and is individually negotiated and privately traded.
A Fund may enter into a forward contract, for example, when it enters into a
contract for the purchase or sale of a security denominated in a foreign
currency in order to "lock in" the U.S. dollar price of the security
("transaction hedge"). A Fund will not engage in transaction hedges with respect
to the currency of a particular country to an extent greater than the aggregate
amount of the Fund's transactions in that currency. When a Fund believes that a
foreign currency may suffer a substantial decline against the U.S. dollar, it
may enter into a forward sale contract to sell an amount of that foreign
currency approximating the value of some or all of the Fund's portfolio
securities denominated in such foreign currency, or when the Fund believes that
the U.S. dollar may suffer a substantial decline against a foreign currency, it
may enter into a forward purchase contract to buy that foreign currency for a
fixed dollar amount ("position hedge"). A Fund will not position hedge with
respect to a particular currency to an extent greater than the aggregate market
value (at the time of making such sale) of the securities held in its portfolio
denominated or quoted in that currency. Instead of entering into a position
hedge, a Fund may, in the alternative, enter into a forward contract to sell a
different foreign currency for a fixed U.S. dollar amount where the Fund
believes that the U.S. dollar value of the currency to be sold pursuant to the
forward contract will fall whenever there is a decline in the U.S. dollar value
of the currency in which portfolio securities of the Fund are denominated
("cross-hedge"). Unanticipated changes in currency prices may result in poorer
overall performance for the Fund than if it had not entered into such forward
contracts.
Hedging against a decline in the value of a currency does not eliminate
fluctuations in the prices of portfolio securities or prevent losses if the
prices of such securities decline. Such transactions also preclude the
opportunity for gain if the value of the hedged currency should rise. Moreover,
it may not be possible for a Fund to hedge against a devaluation that is so
generally anticipated that the Fund is not able to contract to sell the currency
at a price above the devaluation level it anticipates. International Fund, New
Europe Fund and Global Small Cap Fund will not enter into a forward contract
with a term of more than one year or if, as a result, more than 50% of its total
assets would be committed to such contracts. The dealings of International Fund,
New Europe Fund and Global Small Cap Fund in forward contracts will be limited
to hedging involving either specific transactions or portfolio positions. Growth
Fund and Strategic Balanced Fund may also purchase and sell foreign currency on
a spot basis.
Forward Commitments. Forward commitments for the purchase or sale of securities
may include purchases on a "when-issued" basis or purchases or sales on a
"delayed delivery" basis. In some cases, a forward commitment may be conditioned
upon the occurrence of a subsequent event, such as approval and consummation of
a merger, corporate reorganization or debt restructuring (i.e., a "when, as and
if issued" trade).
When forward commitment transactions are negotiated, the price is fixed at the
time the commitment is made, but delivery and payment for the securities take
place at a later date. Normally, the settlement date occurs within two months
after the transaction, but settlements beyond two months may be negotiated.
Securities purchased or sold under a forward commitment are subject to market
fluctuation, and no interest or dividends accrue to the purchaser prior to the
settlement date. At the time a Fund intends to enter into a forward commitment,
it records the transaction and thereafter reflects 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 a Fund to protect against anticipated
changes in interest rates and prices. For instance, in periods of rising
interest rates and falling bond prices, a Fund might sell securities in its
portfolio on a forward commitment basis to limit its exposure to falling prices.
In periods of falling interest rates and rising bond prices, a Fund might sell a
security in its portfolio and purchase the same or
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a similar security on a when-issued or forward commitment basis, thereby
obtaining the benefit of currently higher cash yields. However, if Alliance were
to forecast incorrectly the direction of interest rate movements, a Fund might
be required to complete such when-issued or forward transactions at prices
inferior to the then current market values. When-issued securities and forward
commitments may be sold prior to the settlement date, but a Fund enters into
when-issued and forward commitments only with the intention of actually
receiving securities or delivering them, as the case may be. If a Fund chooses
to dispose of the right to acquire a when-issued security prior to its
acquisition or dispose of its right to deliver or receive against a forward
commitment, it may incur a gain or loss. Any significant commitment of Fund
assets to the purchase of securities on a "when, as and if issued" basis may
increase the volatility of the Fund's net asset value. No forward commitments
will be made by New Europe Fund, All-Asia Investment Fund, Worldwide
Privatization Fund, Income Builder Fund, Utility Income Fund or Real Estate
Investment Fund if, as a result, the Fund's aggregate commitments under such
transactions would be more than 30% of the Fund's total assets. In the event the
other party to a forward commitment transaction were to default, a Fund might
lose the opportunity to invest money at favorable rates or to dispose of
securities at favorable prices.
Standby Commitment Agreements. Standby commitment agreements commit a Fund, for
a stated period of time, to purchase a stated amount of a security that may be
issued and sold to the Fund at the option of the issuer. The price and coupon of
the security are fixed at the time of the commitment. At the time of entering
into the agreement the Fund is paid a commitment fee, regardless of whether the
security ultimately is issued, typically equal to approximately 0.5% of the
aggregate purchase price of the security the Fund has committed to purchase. A
Fund will enter into such agreements only for the purpose of investing in the
security underlying the commitment at a yield and price considered advantageous
to the Fund and unavailable on a firm commitment basis. No Fund, other than
Income Builder Fund, will enter into a standby commitment with a remaining term
in excess of 45 days. Investments in standby commitments will be limited so that
the aggregate purchase price of the securities subject to the commitments will
not exceed 25% with respect to New Europe Fund and Real Estate Investment Fund,
50% with respect to Worldwide Privatization Fund and All-Asia Investment Fund,
and 20% with respect to Utility Income Fund, of the Fund's assets taken at the
time of making the commitment.
There is no guarantee that a security subject to a standby commitment will be
issued and the value of the security, if issued, on the delivery date may be
more or less than its purchase price. Since the issuance of the security
underlying the commitment is at the option of the issuer, a Fund will bear the
risk of capital loss in the event the value of the security declines and may not
benefit from an appreciation in the value of the security during the commitment
period if the issuer decides not to issue and sell the security to the Fund.
Currency Swaps. Currency swaps involve the individually negotiated exchange by a
Fund with another party of a series of payments in specified currencies. A
currency swap may involve the delivery at the end of the exchange period of a
substantial amount of one designated currency in exchange for the other
designated currency. Therefore the entire principal value of a currency swap is
subject to the risk that the other party to the swap will default on its
contractual delivery obligations. 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. A Fund will not enter into any currency swap unless
the credit quality of the unsecured senior debt or the claims-paying ability of
the 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,
such Fund will have contractual remedies pursuant to the agreements related to
the transactions.
Interest Rate Transactions. Each Fund that may enter into interest rate
transactions expects to do so primarily to preserve a return or spread on a
particular investment or portion of its portfolio or to protect against any
increase in the price of securities the Fund anticipates purchasing at a later
date. The Funds do not intend to use these transactions in a speculative manner.
Interest rate swaps involve the exchange by a Fund with another party of their
respective commitments to pay or receive interest (e.g., an exchange of floating
rate payments for fixed rate payments). Interest rate swaps are entered on a net
basis (i.e., the two payment streams are netted out, with the Fund receiving or
paying, as the case may be, only the net amount of the two payments). With
respect to All-Asia Investment Fund and Utility Income Fund, the exchange
commitments can involve payments in the same currency or in different
currencies. The purchase of an interest rate cap entitles the purchaser, to the
extent that a specified index exceeds a predetermined interest rate, to receive
payments of interest on a contractually-based principal amount from the party
selling such interest rate cap. The purchase of an interest rate floor entitles
the purchaser, to the extent that a specified index falls below a predetermined
interest rate, to receive payments of interest on an agreed principal amount
from the party selling the interest rate floor.
A Fund may enter into interest rate swaps, caps and floors on either an
asset-based or liability-based basis, depending upon whether it is hedging its
assets or liabilities. The net amount of the excess, if any, of a Fund's
obligations over its entitlements with respect to each interest rate swap, cap
and floor is accrued daily. A Fund will not enter into an interest rate swap,
cap or floor transaction unless the unsecured senior debt or the claims-paying
ability of the other party thereto is then rated in the highest rating category
of at least one nationally recognized rating organization. Alliance will monitor
the creditworthiness of counterparties on an ongoing basis. The swap market has
grown substantially in recent years, with a large number of banks and investment
banking firms acting
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both as principals and as agents utilizing standardized swap documentation. As a
result, the swap market has become relatively liquid. Caps and floors are more
recent innovations for which standardized documentation has not yet been
developed and, accordingly, they are less liquid than swaps.
The use of interest rate transactions is a highly specialized activity which
involves investment techniques and risks different from those associated with
ordinary portfolio securities transactions. If Alliance were to incorrectly
forecast market values, interest rates and other applicable factors, the
investment performance of a Fund would be adversely affected by the use of these
investment techniques. Moreover, even if Alliance is correct in its forecasts,
there is a risk that the transaction position may correlate imperfectly with the
price of the asset or liability being hedged. There is no limit on the amount of
interest rate transactions that may be entered into by a Fund that is permitted
to enter into such transactions. These transactions do not involve the delivery
of securities or other underlying assets or principal. Accordingly, the risk of
loss with respect to interest rate transactions is limited to the net amount of
interest payments that a Fund is contractually obligated to make. If the other
party to an interest rate transaction defaults, a Fund's risk of loss consists
of the net amount of interest payments that the Fund contractually is entitled
to receive.
Repurchase Agreements. A repurchase agreement arises when a buyer purchases a
security and simultaneously agrees to resell it to the vendor at an agreed-upon
future date, normally a day or a few days later. The resale price is greater
than the purchase price, reflecting an agreed-upon interest rate for the period
the buyer's money is invested in the security. Such agreements permit a Fund to
keep all of its assets at work while retaining "overnight" flexibility in
pursuit of investments of a longer-term nature. If a vendor defaults on its
repurchase obligation, a Fund would suffer a loss to the extent that the
proceeds from the sale of the collateral were less than the repurchase price. If
a vendor goes bankrupt, a Fund might be delayed in, or prevented from, selling
the collateral for its benefit. Alliance monitors the creditworthiness of the
vendors with which the Fund enters into repurchase agreements. There is no
percentage restriction on a Fund's ability to enter into repurchase agreements,
other than as indicated under "Investment Objectives and Policies."
Short Sales. A short sale is effected by selling a security that a Fund does not
own, or if the Fund does own such security, it is not to be delivered upon
consummation of the sale. A short sale is "against the box" to the extent that a
Fund contemporaneously owns or has the right to obtain securities identical to
those sold short without payment. Worldwide Privatization Fund, All-Asia
Investment Fund, Income Builder Fund and Utility Income Fund each may make short
sales of securities or maintain short positions only for the purpose of
deferring realization of gain or loss for U.S. federal income tax purposes,
provided that at all times when a short position is open the Fund owns an equal
amount of securities of the same issue as, and equal in amount to, the
securities sold short. In addition, each of those Funds may not make a short
sale if as a result more than 10% of the Fund's net assets would be held as
collateral for short sales, except that All-Asia Investment Fund and Real Estate
Investment Fund may not make a short sale if as a result more than 25% of the
Fund's net assets would be held as collateral for short sales. If the price of
the security sold short increases between the time of the short sale and the
time a Fund replaces the borrowed security, the Fund will incur a loss;
conversely, if the price declines, the Fund will realize a capital gain. See
"Certain Fundamental Investment Policies." Certain special federal income tax
considerations may apply to short sales entered into by a Fund. See "Dividends,
Distributions and Taxes" in the relevant Fund's Statement of Additional
Information.
Loans of Portfolio Securities. The risk in lending portfolio securities, as with
other extensions of credit, consists of the possible loss of rights in the
collateral should the borrower fail financially. In determining whether to lend
securities to a particular borrower, Alliance will consider all relevant facts
and circumstances, including the creditworthiness of the borrower. While
securities are on loan, the borrower will pay the Fund any income earned thereon
and the Fund may invest any cash collateral in portfolio securities, thereby
earning additional income, or receive an agreed upon amount of income from a
borrower who has delivered equivalent collateral. Each Fund will have the right
to regain record ownership of loaned securities or equivalent securities in
order to exercise ownership rights such as voting rights, subscription rights
and rights to dividends, interest or distributions. A Fund may pay reasonable
finders', administrative and custodial fees in connection with a loan. A Fund
will not lend its portfolio securities to any officer, director, employee or
affiliate of the Fund or Alliance.
General. The successful use of the foregoing investment practices draws upon
Alliance's special skills and experience with respect to such instruments and
usually depends on Alliance's ability to forecast price movements, interest
rates or currency exchange rate movements correctly. Should interest rates,
prices or exchange rates move unexpectedly, a Fund may not achieve the
anticipated benefits of the transactions or may realize losses and thus be in a
worse position than if such strategies had not been used. Unlike many
exchange-traded futures contracts and options on futures contracts, there are no
daily price fluctuation limits with respect to certain options and forward
contracts, and adverse market movements could therefore continue to an unlimited
extent over a period of time. In addition, the correlation between movements in
the prices of futures contracts, options and forward contracts and movements in
the prices of the securities and currencies hedged or used for cover will not be
perfect and could produce unanticipated losses.
A Fund's ability to dispose of its position in futures contracts, options and
forward contracts depends on the availability of liquid markets in such
instruments. Markets in options and futures with respect to a number of types of
securities and currencies are relatively new and still developing, and there is
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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 with respect
to an option purchased or written by a Fund, it might not be possible to effect
a closing transaction in the option (i.e., dispose of the option), with the
result that (i) an option purchased by the Fund would have to be exercised in
order for the Fund to realize any profit and (ii) the Fund may not be able to
sell currencies or portfolio securities covering an option written by the Fund
until the option expires or it delivers the underlying security, futures
contract or currency upon exercise. Therefore, no assurance can be given that
the Funds will be able to utilize these instruments effectively for the purposes
set forth above. Furthermore, a Fund's ability to engage in options and futures
transactions may be limited by tax considerations. See "Dividends, Distributions
and Taxes" in the Statement of Additional Information of each Fund that invests
in options and futures.
Future Developments. A Fund may, following written notice to its shareholders,
take advantage of other investment practices that are not currently contemplated
for use by the Fund or are not available but may yet be developed, to the extent
such investment practices are consistent with the Fund's investment objective
and legally permissible for the Fund. Such investment practices, if they arise,
may involve risks that exceed those involved in the activities described above.
Defensive Position. For temporary defensive purposes, each Fund may invest in
certain types of short-term, liquid, high grade or high quality (depending on
the Fund) debt securities. These securities may include U.S. Government
securities, qualifying bank deposits, money market instruments, prime commercial
paper and other types of short-term debt securities including notes and bonds.
For Funds that may invest in foreign countries, such securities may also include
short-term, foreign-currency denominated securities of the type mentioned above
issued by foreign governmental entities, companies and supranational
organizations. For a complete description of the types of securities each Fund
may invest in while in a temporary defensive position, please see such Fund's
Statement of Additional Information.
Portfolio Turnover. Portfolio turnover rates for the existing classes of shares
of the Fund are set forth in the tables that begin on page 8. These portfolio
turnover rates are greater than those of most other investment companies,
including those which emphasize capital appreciation as a basic policy. A high
rate of portfolio turnover involves correspondingly greater brokerage and other
expenses than a lower rate, which must be borne by the Fund and its
shareholders. High portfolio turnover also may result in the realization of
substantial net short-term capital gains. See "Dividends, Distributions and
Taxes" in each Fund's Statement of Additional Information.
CERTAIN FUNDAMENTAL INVESTMENT POLICIES
Each Fund has adopted certain fundamental investment policies listed below,
which may not be changed without the approval of its shareholders. Additional
investment restrictions with respect to a Fund are set forth in its Statement of
Additional Information.
Alliance Fund may not: (i) invest more than 5% of its total assets in the
securities of any one issuer (other than the U.S. Government); (ii) acquire more
than 10% of the voting or other securities of any one issuer; or (iii) buy
securities of any company that (including its predecessors) has not been in
business at least three continuous years. Pursuant to investment policies which
are not fundamental, the Fund does not invest (i) in puts or calls (except as
discussed above); (ii) in straddles, spreads, or any combination thereof; (iii)
in oil, gas or other mineral exploration or development programs; or (iv) more
than 5% of its gross assets in securities the disposition of which would be
subject to restrictions under the federal securities laws.
Growth Fund and Strategic Balanced Fund each may not: (i) invest more than 5% of
its total assets in the securities of any one issuer (other than U.S. Government
securities and repurchase agreements relating thereto), although up to 25% of
each Fund's total assets may be invested without regard to this restriction; or
(ii) invest 25% or more of its total assets in the securities of any one
industry.
Premier Growth Fund may not: (i) purchase more than 10% of the outstanding
voting securities of any one issuer; (ii) invest 25% or more of the value of its
total assets in the same industry; (iii) borrow money or issue senior securities
except for temporary or emergency purposes in an amount not exceeding 5% of the
value of its total assets at the time the borrowing is made; (iv) pledge,
mortgage, hypothecate or otherwise encumber any of its assets except in
connection with the writing of call options and except to secure permitted
borrowings; or (v) invest in the securities of any issuer that has a record of
less than three years of continuous operation (including the operation of any
predecessor) if as a result more than 10% of the value of the total assets of
the Fund would be invested in the securities of such issuer or issuers.
Technology Fund may not: (i) with respect to 75% of its total assets, have such
assets represented by other than: (a) cash and cash items, (b) U.S. Government
securities, or (c) securities of any one issuer (other than the U.S. Government
and its agencies or instrumentalities) not greater in value than 5% of the
Fund's total assets, and not more than 10% of the outstanding voting securities
of such issuer; (ii) purchase the securities of any one issuer, other than the
U.S. Government and its agencies or instrumentalities, if as a result (a) the
value of the holdings of the Fund in the securities of such issuer exceeds 25%
of its total assets, or (b) the Fund owns more than 25% of the outstanding
securities of any one class of securities of such issuer; (iii) concentrate its
investments in any one industry, but the Fund has reserved the right to invest
up to 25% of its total assets in a particular industry; and (iv) invest in the
securities of any issuer which has a record of less than three years of
continuous operation (including the operation of any predecessor) if such
purchase
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would cause 10% or more of its total assets to be invested in the securities of
such issuers.
Quasar Fund may not: (i) purchase the securities of any one issuer, other than
the U.S. Government or any of its agencies or instrumentalities, if as a result
more than 5% of its total assets would be invested in such issuer or the Fund
would own more than 10% of the outstanding voting securities of such issuer,
except that up to 25% of its total assets may be invested without regard to
these 5% and 10% limitations; (ii) invest more than 25% of its total assets in
any particular industry; (iii) borrow money except for temporary or emergency
purposes in an amount not exceeding 5% of its total assets at the time the
borrowing is made; or (iv) invest more than 10% of its assets in restricted
securities.
International Fund may not: (i) invest more than 5% of the value of its total
assets in securities of a single issuer (including repurchase agreements with
any one entity), except U.S. Government securities or foreign government
securities; provided, however, that the Fund may not, with respect to 75% of its
total assets, invest more than 5% of its total assets in securities of any one
foreign government issuer; (ii) own more than 10% of the outstanding securities
of any class of any issuer (for this purpose, all preferred stocks of an issuer
shall be deemed a single class, and all indebtedness of an issuer shall be
deemed a single class), except U.S. Government securities; (iii) invest more
than 25% of the value of its total assets in securities of issuers having their
principal business activities in the same industry; provided, that this
limitation does not apply to U.S. Government securities or foreign government
securities; (iv) invest more than 5% of the value of its total assets in the
securities of any issuer that has a record of less than three years of
continuous operation (including the operation of any predecessor or
unconditional guarantor), except U.S. Government securities or foreign
government securities; (v) invest more than 5% of the value of its total assets
in securities with legal or contractual restrictions on resale, other than
repurchase agreements, or more than 10% of the value of its total assets in
securities that are not readily marketable (including restricted securities and
repurchase agreements not terminable within seven business days); and (vi)
borrow money, except as a temporary measure for extraordinary or emergency
purposes, and then only from banks in amounts not exceeding 5% of its total
assets.
Worldwide Privatization Fund may not: (i) invest 25% or more of its total assets
in securities of issuers conducting their principal business activities in the
same industry, except that this restriction does not apply to (a) U.S.
Government securities, or (b) the purchase of securities of issuers whose
primary business activity is in the national commercial banking industry, so
long as the Fund's Directors determine, on the basis of factors such as
liquidity, availability of investments and anticipated returns, that the Fund's
ability to achieve its investment objective would be adversely affected if the
Fund were not permitted to invest more than 25% of its total assets in those
securities, and so long as the Fund notifies its shareholders of any decision by
the Directors to permit or cease to permit the Fund to invest more than 25% of
its total assets in those securities, such notice to include a discussion of any
increased investment risks to which the Fund may be subjected as a result of the
Directors' determination; (ii) borrow money except from banks for temporary or
emergency purposes, including the meeting of redemption requests that might
require the untimely disposition of securities; borrowing in the aggregate may
not exceed 15%, and borrowing for purposes other than meeting redemptions may
not exceed 5%, of the Fund's total assets (including the amount borrowed) less
liabilities (not including the amount borrowed) at the time the borrowing is
made; outstanding borrowings in excess of 5% of the value of the Fund's total
assets will be repaid before any investments are made; or (iii) pledge,
hypothecate, mortgage or otherwise encumber its assets, except to secure
permitted borrowings. The exception contained in clause (i)(b) above is subject
to the operating policy regarding concentration described in this Prospectus.
New Europe Fund may not: (i) purchase more than 10% of the outstanding voting
securities of any one issuer; (ii) invest more than 15% of its total assets in
the securities of any one issuer or 25% or more of its total assets in the same
industry, provided, however, that the foregoing restriction shall not be deemed
to prohibit the Fund from purchasing the securities of any issuer pursuant to
the exercise of rights distributed to the Fund by the issuer, except that no
such purchase may be made if as a result the Fund will fail to meet the
diversification requirements of the Code and any such acquisition in excess of
the foregoing 15% or 25% limits will be sold by the Fund as soon as reasonably
practicable (this restriction does not apply to U.S. Government securities, but
will apply to foreign government securities unless the Commission permits their
exclusion); (iii) borrow money except from banks for temporary or emergency
purposes, including the meeting of redemption requests that might require the
untimely disposition of securities; borrowing in the aggregate may not exceed
15%, and borrowing for purposes other than meeting redemptions may not exceed
5%, of the Fund's total assets (including the amount borrowed) less liabilities
(not including the amount borrowed) at the time the borrowing is made;
outstanding borrowings in excess of 5% of the Fund's total assets will be repaid
before any subsequent investments are made; or (iv) purchase a security (unless
the security is acquired pursuant to a plan of reorganization or an offer of
exchange) if, as a result, the Fund would own any securities of an open-end
investment company or more than 3% of the total outstanding voting stock of any
closed-end investment company, or more than 5% of the value of the Fund's total
assets would be invested in securities of any closed-end investment company, or
more than 10% of such value in closed-end investment companies in general.
All-Asia Investment Fund may not: (i) invest 25% or more of its total assets in
securities of issuers conducting their principal business activities in the same
industry; (ii) borrow money except from banks for temporary or emergency
purposes, including the meeting of redemption requests that might require the
untimely disposition of securities; borrowing in the aggregate may not
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exceed 15%, and borrowing for purposes other than meeting redemptions may not
exceed 5%, of the Fund's total assets (including the amount borrowed) less
liabilities (not including the amount borrowed) at the time the borrowing is
made; outstanding borrowings in excess of 5% of the value of the Fund's total
assets will be repaid before any investments are made; or (iii) pledge,
hypothecate, mortgage or otherwise encumber its assets, except to secure
permitted borrowings.
Global Small Cap Fund may not: (i) purchase the securities of any one issuer,
other than the U.S. Government or any of its agencies or instrumentalities, if
immediately after such purchase more than 5% of the value of its total assets
would be invested in such issuer or the Fund would own more than 10% of the
outstanding voting securities of such issuer, except that up to 25% of the
Fund's total assets may be invested without regard to these 5% and 10%
limitations; (ii) invest 25% or more of its total assets in the same industry;
this restriction does not apply to U.S. Government securities, but will apply to
foreign government securities unless the Commission permits their exclusion;
(iii) borrow money except from banks for emergency or temporary purposes in an
amount not exceeding 5% of the total assets of the Fund; or (iv) make short
sales of securities or maintain a short position, unless at all times when a
short position is open it owns an equal amount of such securities or securities
convertible into or exchangeable for, without payment of any further
consideration, securities of the same issue as, and equal in amount to, the
securities sold short and unless not more than 5% of the Fund's net assets is
held as collateral for such sales at any one time.
Global Environment Fund may not: (i) purchase more than 10% of the outstanding
voting securities of any one issuer; (ii) invest more than 15% of the value of
its total assets in the securities of any one issuer or 25% or more of the value
of its total assets in the same industry, except that the Fund will invest more
than 25% of its total assets in Environmental Companies, provided that this
restriction does not apply to U.S. Government securities, but will apply to
foreign government obligations unless the Commission permits their exclusion;
(iii) borrow money or issue senior securities, except that the Fund may borrow
(a) from a bank if immediately after such borrowing there is asset coverage of
at least 300% as defined in the 1940 Act and (b) for temporary purposes in an
amount not exceeding 5% of the value of the total assets of the Fund; (iv)
pledge, hypothecate, mortgage or otherwise encumber its assets, except (a) to
secure permitted borrowings and (b) in connection with initial and variation
margin deposits relating to futures contracts; (v) purchase a security (unless
the security is acquired pursuant to a plan of reorganization or an offer of
exchange) if, as a result, the Fund would own any securities of an open-end
investment company or more than 3% of the total outstanding voting stock of any
closed-end investment company, or more than 5% of the value of the Fund's total
assets would be invested in securities of any closed-end investment company or
more than 10% of such value in closed-end investment companies in the aggregate;
(vi) make short sales of securities or maintain a short position, unless at all
times when a short position is open it owns an equal amount of such securities
or securities convertible into or exchangeable for, without payment of any
further consideration, securities of the same issue as, and equal in amount to,
the securities sold short ("short sales against the box"), and unless not more
than 5% of the Fund's net assets (taken at market value) is held as collateral
for such sales at any onetime; or (vii) buy or write (i.e., sell) put or call
options, except (a) the Fund may buy foreign currency options or write covered
foreign currency options and options on foreign currency futures and (b) the
Fund may purchase warrants.
Balanced Shares may not: (i) invest more than 5% of its total assets in the
securities of any one issuer, except U.S. Government securities; or (ii) own
more than 10% of the outstanding voting securities of any one issuer.
Income Builder Fund may not: (i) invest 25% or more of its total assets in
securities of companies engaged principally in any one industry, except that
this restriction does not apply to U.S. Government securities; (ii) borrow money
except from banks for temporary or emergency purposes, including the meeting of
redemption requests that might require the untimely disposition of securities;
borrowing in the aggregate may not exceed 15%, and borrowing for purposes other
than meeting redemptions may not exceed 5%, of the Fund's total assets
(including the amount borrowed) less liabilities (not including the amount
borrowed) at the time borrowing is made; securities will not be purchased while
borrowings in excess of 5% of the Fund's total assets are outstanding; or (iii)
pledge, hypothecate, mortgage or otherwise encumber its assets, except to secure
permitted borrowings.
Utility Income Fund may not: (i) invest more than 5% of its total assets in the
securities of any one issuer except the U.S. Government, although with respect
to 25% of its total assets it may invest in any number of issuers; (ii) invest
25% or more of its total assets in the securities of issuers conducting their
principal business activities in any one industry, other than the utilities
industry, except that this restriction does not apply to U.S. Government
securities; (iii) purchase more than 10% of any class of the voting securities
of any one issuer; (iv) borrow money except from banks for temporary or
emergency purposes, including the meeting of redemption requests that might
require the untimely disposition of securities; borrowing in the aggregate may
not exceed 15%, and borrowing for purposes other than meeting redemptions may
not exceed 5%, of the Fund's total assets (including the amount borrowed) less
liabilities (not including the amount borrowed) at the time the borrowing is
made; outstanding borrowings in excess of 5% of the Fund's total assets will be
repaid before any subsequent investments are made; or (v) purchase a security
if, as a result (unless the security is acquired pursuant to a plan of
reorganization or an offer of exchange), the Fund would own any securities of an
open-end investment company or more than 3% of the total outstanding voting
stock of any closed-end investment company or more than 5% of the value of the
Fund's net assets would be invested in securities of any one or more closed-end
investment companies.
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Growth and Income Fund may not (i) invest more than 5% of its net assets in the
security of any one issuer, except U.S. Government obligations or (ii) own more
than 10% of the outstanding voting securities of any issuer.
Real Estate Investment Fund may not: (i) with respect to 75% of its total
assets, have such assets represented by other than: (a) cash and cash items, (b)
U.S. Government securities, or (c) securities of any one issuer (other than the
U.S. Government and its agencies or instrumentalities) not greater in value than
5% of the Fund's total assets, and not more than 10% of the outstanding voting
securities of such issuer; (ii) purchase the securities of any one issuer, other
than the U.S. Government and its agencies or instrumentalities, if as a result
(a) the value of the holdings of the Fund in the securities of such issuer
exceeds 25% of its total assets, or (b) the Fund owns more than 25% of the
outstanding securities of any one class of securities of such issuer; (iii)
invest 25% or more of its total assets in the securities of issuers conducting
their principal business activities in any one industry, other than the real
estate industry in which the Fund will invest at least 25% or more of its total
assets, except that this restriction does not apply to U.S. Government
securities; (iv) purchase or sell real estate, except that it may purchase and
sell securities of companies which deal in real estate or interests therein,
including Real Estate Equity securities; or (v) borrow money except for
temporary or emergency purposes or to meet redemption requests, in an amount not
exceeding 5% of the value of its total assets at the time the borrowing is made.
RISK CONSIDERATIONS
Investment in certain of the Funds involves the special risk considerations
described below. These risks may be heightened when investing in emerging
markets.
Investment in Privatized Enterprises by Worldwide Privatization Fund. In certain
jurisdictions, the ability of foreign entities, such as the Fund, to participate
in privatizations may be limited by local law, or the price or terms on which
the Fund may be able to participate may be less advantageous than for local
investors. Moreover, there can be no assurance that governments that have
embarked on privatization programs will continue to divest their ownership of
state enterprises, that proposed privatizations will be successful or that
governments will not re-nationalize enterprises that have been privatized.
Furthermore, in the case of certain of the enterprises in which the Fund may
invest, large blocks of the stock of those enterprises may be held by a small
group of stockholders, even after the initial equity offerings by those
enterprises. The sale of some portion or all of those blocks could have an
adverse effect on the price of the stock of any such enterprise.
Most state enterprises or former state enterprises go through an internal
reorganization of management prior to conducting an initial equity offering in
an attempt to better enable these enterprises to compete in the private sector.
However, certain reorganizations could result in a management team that does not
function as well as the enterprise's prior management and may have a negative
effect on such enterprise. After making an initial equity offering, enterprises
that may have enjoyed preferential treatment from the respective state or
government that owned or controlled them may no longer receive such preferential
treatment and may become subject to market competition from which they were
previously protected. Some of these enterprises may not be able to effectively
operate in a competitive market and may suffer losses or experience bankruptcy
due to such competition. In addition, the privatization of an enterprise by its
government may occur over a number of years, with the government continuing to
hold a controlling position in the enterprise even after the initial equity
offering for the enterprise.
Currency Considerations. Substantially all of the assets of International Fund,
New Europe Fund, All-Asia Investment Fund, and Worldwide Privatization Fund and
a substantial portion of the assets of Global Small Cap Fund and Global
Environment Fund will be invested in securities denominated in foreign
currencies, and a corresponding portion of these Funds' revenues will be
received in such currencies. Therefore, the dollar equivalent of their net
assets, distributions and income will be adversely affected by reductions in the
value of certain foreign currencies relative to the U.S. dollar. If the value of
the foreign currencies in which a Fund receives its income falls relative to the
U.S. dollar between receipt of the income and the making of Fund distributions,
the Fund may be required to liquidate securities in order to make distributions
if it has insufficient cash in U.S. dollars to meet distribution requirements
that the Fund must satisfy to qualify as a regulated investment company for
federal income tax purposes. Similarly, if an exchange rate declines between the
time a Fund incurs expenses in U.S. dollars and the time cash expenses are paid,
the amount of the currency required to be converted into U.S. dollars in order
to pay expenses in U.S. dollars could be greater than the equivalent amount of
such expenses in the currency at the time they were incurred. In light of these
risks, a Fund may engage in certain currency hedging transactions, which
themselves involve certain special risks. See "Additional Investment Practices"
above.
Foreign Investment. The securities markets of many foreign countries are
relatively small, with the majority of market capitalization and trading volume
concentrated in a limited number of companies representing a small number of
industries. Consequently, a Fund whose investment portfolio includes such
securities may experience greater price volatility and significantly lower
liquidity than a portfolio invested solely in equity securities of U.S.
companies. These markets may be subject to greater influence by adverse events
generally affecting the market, and by large investors trading significant
blocks of securities, than is usual in the United States. Securities settlements
may in some instances be subject to delays and related administrative
uncertainties. These problems are particularly severe in India, where settlement
is through physical delivery, and, where, currently, a severe shortage of vault
capacity exists among custodial banks, although efforts are being undertaken to
alleviate the shortage. Certain foreign countries require governmental approval
prior to investments by foreign persons or limit investment by foreign persons
to only a specified percentage
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of an issuer's outstanding securities or a specific class of securities which
may have less advantageous terms (including price) than securities of the
company available for purchase by nationals. These restrictions or controls may
at times limit or preclude investment in certain securities and may increase the
costs and expenses of a Fund. In addition, the repatriation of investment
income, capital or the proceeds of sales of securities from certain countries is
controlled under regulations, including in some cases the need for certain
advance government notification or authority, and if a deterioration occurs in a
country's balance of payments, the country could impose temporary restrictions
on foreign capital remittances.
A Fund could also be adversely affected by delays in, or a refusal to grant, any
required governmental approval for repatriation, as well as by the application
to it of other restrictions on investment. Investing in local markets may
require a Fund to adopt special procedures, which may involve additional costs
to a Fund. The liquidity of a Fund's investments in any country in which any of
these factors exists could be affected and Alliance will monitor the effect of
any such factor or factors on a Fund's investments. Furthermore, transaction
costs including brokerage commissions for transactions both on and off the
securities exchanges in many foreign countries are generally higher than in the
United States.
Issuers of securities in foreign jurisdictions are generally not subject to the
same degree of regulation as are U.S. issuers with respect to such matters as
insider trading rules, restrictions on market manipulation, shareholder proxy
requirements and timely disclosure of information. The reporting, accounting and
auditing standards of foreign countries may differ, in some cases significantly,
from U.S. standards in important respects and less information may be available
to investors in foreign securities than to investors in U.S. securities.
Substantially less information is publicly available about certain non-U.S.
issuers than is available about U.S. issuers.
The economies of individual foreign countries may differ favorably or
unfavorably from the U.S. economy in such respects as growth of gross domestic
product or gross national product, rate of inflation, capital reinvestment,
resource self-sufficiency and balance of payments position. Nationalization,
expropriation or confiscatory taxation, currency blockage, political changes,
government regulation, political or social instability or diplomatic
developments could affect adversely the economy of a foreign country or the
Fund's investments in such country. In the event of expropriation,
nationalization or other confiscation, a Fund could lose its entire investment
in the country involved. In addition, laws in foreign countries governing
business organizations, bankruptcy and insolvency may provide less protection to
security holders such as the Fund than that provided by U.S. laws.
Investment in United Kingdom Issuers. Investment in securities of United Kingdom
issuers involves certain considerations not present with investment in
securities of U.S. issuers. As with any investment not denominated in the U.S.
dollar, the U.S. dollar value of the Fund's investment denominated in the
British pound sterling will fluctuate with pound sterling--dollar exchange rate
movements. Between 1972, when the pound sterling was allowed to float against
other currencies, and the end of 1992, the pound sterling generally depreciated
against most major currencies, including the U.S. dollar. Between September and
December 1992, after the United Kingdom's exit from the Exchange Rate Mechanism
of the European Monetary System, the value of the pound sterling fell by almost
20% against the U.S. dollar. The pound sterling continued to fall in early 1993,
but recovered due to interest rate cuts throughout Europe and an upturn in the
economy of the United Kingdom. The average exchange rate of the U.S. dollar to
the pound sterling was 1.50 in 1993 and 1.56 in 1996. On December 31, 1997 the
U.S. dollar-pound sterling exchange rate was 1.65.
The United Kingdom's largest stock exchange is the London Stock Exchange, which
is the third largest exchange in the world. As measured by the FT-SE 100 index,
the performance of the 100 largest companies in the United Kingdom reached
4118.5 at the end of 1996, up approximately 12% from the end of 1995. On
December 31, 1997 the FT-SE 100 index closed at 5,135.5, up approximately 25%
from the end of 1996.
The public sector borrowing requirement, a mandated measure of the amount
required to balance the budget, has been, over the last two fiscal years, higher
than forecast. The general government fiscal deficit has been in excess of the
eligibility limit prescribed by the European Union for countries that intend to
participate in the Economic and Monetary Union ("EMU"), which is scheduled to
take effect in January 1999. The government, however, expects that the deficit
will be below that limit in the 1997-98 and 1998-99 fiscal years. Although the
government has not yet made a formal announcement with respect to the United
Kingdom's participation in the EMU, remarks of the Chancellor of the Exchequer
made in mid-October 1997 suggest that the United Kingdom will not participate in
the EMU beginning in January 1999 but may do so thereafter.
From 1979 until 1997 the Conservative Party controlled Parliament. In the May 1,
1997 general elections, however, the Labour Party, led by Tony Blair, won a
majority in Parliament, holding 418 of 658 seats in the House of Commons. Mr.
Blair, who was appointed Prime Minister, has launched a number of reform
initiatives, including an overhaul of the monetary policy framework intended to
protect monetary policy from political forces by vesting responsibility for
setting interest rates in a new Monetary Policy Committee headed by the Governor
of the Bank of England, as opposed to the Treasury. Prime Minister Blair has
also undertaken a comprehensive restructuring of the regulation of the financial
services industry. For further information regarding the United Kingdom, see the
Statement of Additional Information of New Europe Fund.
Investment in Japanese Issuers. Investment in securities of Japanese issuers
involves certain considerations not present with investment in securities of
U.S. issuers. As with any investment not denominated in the U.S. dollar, the
U.S. dollar value of each Fund's investments denominated in the Japanese yen
will fluctuate with yen-dollar exchange rate movements. Between 1985 and 1995,
the Japanese yen generally
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appreciated against the U.S. dollar, but has since fallen from its post-World
War II high (in 1995) against the U.S. dollar.
Japan's largest stock exchange is the Tokyo Stock Exchange, the First Section of
which is reserved for larger, established companies. As measured by the TOPIX, a
capitalization-weighted composite index of all common stocks listed in the First
Section, the performance of the First Section reached a peak in 1989.
Thereafter, the TOPIX declined approximately 50% through the end of 1993. In
1994, the TOPIX closed at 1,559.09, up approximately 8% from the end of 1993; in
1995, the TOPIX closed at 1,577.70, up approximately 1% from the end of 1994;
and in 1996, the TOPIX closed at 1,470.94, down approximately 7% from the end of
1995. In 1997, the TOPIX closed at 1,175.03, down 20.12% from the end of 1996.
Certain valuation measures, such as price-to-book value and price-to-cash flow
ratios, indicate that the Japanese stock market is near its lowest level in the
last twenty years relative to other world markets.
In recent years, Japan has consistently recorded large current account trade
surpluses with the U.S. that have caused difficulties in the relations between
the two countries. On October 1, 1994, the U.S. and Japan reached an agreement
that may lead to more open Japanese markets with respect to trade in certain
goods and services. In June 1995, the two countries agreed in principle to
increase Japanese imports of American automobiles and automotive parts.
Nevertheless it is expected that the continuing friction between the U.S. and
Japan with respect to trade issues will continue for the foreseeable future.
Each Fund's investments in Japanese issuers will be subject to uncertainty
resulting from the instability of recent Japanese ruling coalitions. From 1955
to 1993, Japan's government was controlled by a single political party. Between
August 1993 and October 1996 Japan was ruled by a series of four coalition
governments. As the result of a general election on October 20, 1996, however,
Japan has returned to a single-party government led by Prime Minister Ryutaro
Hashimoto. While Mr. Hashimoto's party does not control a majority of the seats
in the parliament, it is only three seats short of the 251 seats required to
attain a majority in the House of Representatives (down from a 12-seat shortfall
just after the October 1996 election).
For the past several years, Japan's banking industry has been weakened by a
significant amount of problem loans. Japan's banks also have significant
exposure to the current financial turmoil in other Asian markets. On December
17, 1997 the Japanese government proposed to strengthen Japan's banks by means
of an infusion of public funds and other measures. It is unclear whether these
proposals, which are under consideration by Japan's parliament, would, if
implemented, achieve their intended effect. For further information regarding
Japan, see the Statements of Additional Information for All-Asia Investment Fund
and International Fund.
Investment in Smaller, Emerging Companies. The Funds may invest in smaller,
emerging companies. Global Small Cap Fund and New Europe Fund will emphasize
investment in, and All-Asia Investment Fund and Global Environment Fund may
emphasize investment in, smaller, emerging companies.
Investment in such companies involves greater risks than is customarily
associated with securities of more established companies. Companies in the
earlier stages of their development often have products and management personnel
which have not been thoroughly tested by time or the marketplace; their
financial resources may not be as substantial as those of more established
companies. The securities of smaller companies may have relatively limited
marketability and may be subject to more abrupt or erratic market movements than
securities of larger companies or broad market indices. The revenue flow of such
companies may be erratic and their results of operations may fluctuate widely
and may also contribute to stock price volatility.
Investing in Environmental Companies by Global Environment Fund. Governmental
regulations or other action can inhibit an Environmental Company's performance,
and it may take years to translate environmental legislation into sales and
profits. Environmental Companies generally face competition in fields often
characterized by relatively short product cycles and competitive pricing
policies. Losses may result from large product development or expansion costs,
unprotected marketing or distribution systems, erratic revenue flows and low
profit margins. Additional risks that Environmental Companies may face include
difficulty in financing the high cost of technological development,
uncertainties due to changing governmental regulation or rapid technological
advances, potential liabilities associated with hazardous components and
operations, and difficult in finding experienced employees.
The Real Estate Industry. Although Real Estate Investment Fund does not invest
directly in real estate, it does invest primarily in Real Estate Equity
Securities and does have a policy of concentration of its investments in the
real estate industry.
Therefore, an investment in the Fund is subject to certain risks associated with
the direct ownership of real estate and with the real estate industry in
general. These risks include, among others: possible declines in the value of
real estate; risks related to general and local economic conditions; possible
lack of availability of mortgage funds; overbuilding; extended vacancies of
properties; increases in competition, property taxes and operating expenses;
changes in zoning laws; costs resulting from the clean-up of, and liability to
third parties for damages resulting from, environmental problems; casualty or
condemnation losses; uninsured damages from floods, earthquakes or other natural
disasters; limitations on and variations in rents; and changes in interest
rates. To the extent that assets underlying the Fund's investments are
concentrated geographically, by property type or in certain other respects, the
Fund may be subject to certain of the foregoing risks to a greater extent.
In addition, if Real Estate Investment Fund receives rental income or income
from the disposition of real property acquired as a result of a default on
securities the Fund owns, the receipt of such income may adversely affect the
Fund's ability to retain its tax status as a regulated investment company. See
"Dividends, Distributions and Taxes" in the Statement of Additional Information.
Investments by the Fund
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in securities of companies providing mortgage servicing will be subject to the
risks associated with refinancings and their impact on servicing rights.
REITs. Investing in REITs involves certain unique risks in addition to those
risks associated with investing in the real estate industry in general. Equity
REITs may be affected by changes in the value of the underlying property owned
by the REITs, while mortgage REITs may be affected by the quality of any credit
extended. REITs are dependent upon management skills, are not diversified, are
subject to heavy cash flow dependency, default by borrowers and
self-liquidation. REITs are also subject to the possibilities of failing to
qualify for tax free pass-through of income under the Code and failing to
maintain their exemptions from registration under the 1940 Act.
REITs (especially mortgage REITs) are also subject to interest rate risks. When
interest rates decline, the value of a REIT's investment in fixed rate
obligations can be expected to rise. Conversely, when interest rates rise, the
value of a REIT's investment in fixed rate obligations can be expected to
decline. In contrast, as interest rates on adjustable rate mortgage loans are
reset periodically, yields on a REIT's investments in such loans will gradually
align themselves to reflect changes in market interest rates, causing the value
of such investments to fluctuate less dramatically in response to interest rate
fluctuations than would investments in fixed rate obligations.
Investing in REITs involves risks similar to those associated with investing in
small capitalization companies. REITs may have limited financial resources, may
trade less frequently and in a limited volume and may be subject to more abrupt
or erratic price movements than larger company securities. Historically, small
capitalization stocks, such as REITs, have been more volatile in price than the
larger capitalization stocks included in the S&P Index of 500 Common Stocks.
Mortgage-Backed Securities. As discussed above, investing in Mortgage-Backed
Securities involves certain unique risks in addition to those risks associated
with investment in the real estate industry in general. These risks include the
failure of a counterparty to meet its commitments, adverse interest rate changes
and the effects of prepayments on mortgage cash flows. When interest rates
decline, the value of an investment in fixed rate obligations can be expected to
rise. Conversely, when interest rates rise, the value of an investment in fixed
rate obligations can be expected to decline. In contrast, as interest rates on
adjustable rate mortgage loans are reset periodically, yields on investments in
such loans will gradually align themselves to reflect changes in market interest
rates, causing the value of such investments to fluctuate less dramatically in
response to interest rate fluctuations than would investments in fixed rate
obligations.
Further, the yield characteristics of Mortgage-Backed Securities, such as those
in which Real Estate Investment Fund may invest, differ from those of
traditional fixed-income securities. The major differences typically include
more frequent interest and principal payments (usually monthly), the
adjustability of interest rates, and the possibility that prepayments of
principal may be made substantially earlier than their final distribution dates.
Prepayment rates are influenced by changes in current interest rates and a
variety of economic, geographic, social and other factors, and cannot be
predicted with certainty. Both adjustable rate mortgage loans and fixed rate
mortgage loans may be subject to a greater rate of principal prepayments in a
declining interest rate environment and to a lesser rate of principal
prepayments in an increasing interest rate environment. Early payment associated
with Mortgage-Backed Securities causes these securities to experience
significantly greater price and yield volatility than that experienced by
traditional fixed-income securities. Under certain interest rate and prepayment
rate scenarios, the Fund may fail to recoup fully its investment in
Mortgage-Backed Securities notwithstanding any direct or indirect governmental
or agency guarantee. When the Fund reinvests amounts representing payments and
unscheduled prepayments of principal, it may receive a rate of interest that is
lower than the rate on existing adjustable rate mortgage pass-through
securities. Thus, Mortgage-Backed Securities, and adjustable rate mortgage
pass-through securities in particular, may be less effective than other types of
U.S. Government securities as a means of "locking in" interest rates.
U.S. and Foreign Taxes. A Fund's investment in foreign securities may be subject
to taxes withheld at the source on dividend or interest payments. Foreign taxes
paid by a Fund may be creditable or deductible by U.S. shareholders for U.S.
income tax purposes. No assurance can be given that applicable tax laws and
interpretations will not change in the future. Moreover, non-U.S. investors may
not be able to credit or deduct such foreign taxes. Investors should review
carefully the information discussed under the heading "Dividends, Distributions
and Taxes" and should discuss with their tax advisers the specific tax
consequences of investing in a Fund.
Fixed-Income Securities. The value of each Fund's shares will fluctuate with the
value of its investments. The value of each Fund's investments in fixed-income
securities will change as the general level of interest rates fluctuates. During
periods of falling interest rates, the values of fixed-income securities
generally rise. Conversely, during periods of rising interest rates, the values
of fixed-income securities generally decline.
Under normal market conditions, the average dollar-weighted maturity of a Fund's
portfolio of debt or other fixed-income securities is expected to vary between
five and 30 years in the case of All-Asia Investment Fund, between eight and 15
years in the case of Income Builder Fund, between five and 25 years in the case
of Utility Income Fund and between one year or less and 30 years in the case of
all other Funds that invest in such securities. In periods of increasing
interest rates, each of the Funds may, to the extent it holds mortgage-backed
securities, be subject to the risk that the average dollar-weighted maturity of
the Fund's portfolio of debt or other fixed-income securities may be extended as
a result of lower than anticipated prepayment rates. See "Additional Investment
Practices--Mortgage-Backed Securities."
Securities Ratings. The ratings of securities by S&P, Moody's, Duff & Phelps and
Fitch are a generally accepted barometer of
35
<PAGE>
credit risk. They are, however, subject to certain limitations from an
investor's standpoint. The rating of an issuer is heavily weighted by past
developments and does not necessarily reflect probable future conditions. There
is frequently a lag between the time a rating is assigned and the time it is
updated. In addition, there may be varying degrees of difference in credit risk
of securities within each rating category.
Securities rated Aaa by Moody's and AAA by S&P, Duff & Phelps and Fitch are
considered to be of the highest quality; capacity to pay interest and repay
principal is extremely strong. Securities rated Aa by Moody's and AA by S&P,
Duff & Phelps and Fitch are considered to be high quality; capacity to repay
principal is considered very strong, although elements may exist that make risks
appear somewhat larger than exist with securities rated Aaa or AAA. Securities
rated A are considered by Moody's to possess adequate factors giving security to
principal and interest. S&P, Duff & Phelps and Fitch consider such securities to
have a strong capacity to pay interest and repay principal. Such securities are
more susceptible to adverse changes in economic conditions and circumstances
than higher-rated securities.
Securities rated Baa by Moody's and BBB by S&P, Duff & Phelps and Fitch are
considered to have an adequate capacity to pay interest and repay principal.
Such securities are considered to have speculative characteristics and share
some of the same characteristics as lower-rated securities. Sustained periods of
deteriorating economic conditions or of rising interest rates are more likely to
lead to a weakening in the issuer's capacity to pay interest and repay principal
than in the case of higher-rated securities. Securities rated Ba by Moody's and
BB by S&P, Duff & Phelps and Fitch are considered to have speculative
characteristics with respect to capacity to pay interest and repay principal
over time; their future cannot be considered as well-assured. Securities rated B
by Moody's, S&P, Duff & Phelps and Fitch are considered to have highly
speculative characteristics with respect to capacity to pay interest and repay
principal. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Securities rated Caa by Moody's and CCC by S&P, Duff & Phelps and Fitch are of
poor standing and there is a present danger with respect to payment of principal
or interest. Securities rated Ca by Moody's and CC by S&P and Fitch are
minimally protected, and default in payment of principal or interest is
probable. Securities rated C by Moody's, S&P and Fitch are in imminent default
in payment of principal or interest and have extremely poor prospects of ever
attaining any real investment standing. Securities rated D by S&P and Fitch are
in default. The issuer of securities rated DD by Duff & Phelps is under an order
of liquidation.
Investment in Lower-Rated Fixed-Income Securities. Lower-rated securities, i.e.,
those rated Ba and lower by Moody's or BB and lower by S&P, Duff & Phelps or
Fitch, are subject to greater risk of loss of principal and interest than
higher-rated securities. They are also generally considered to be subject to
greater market risk than higher-rated securities, and the capacity of issuers of
lower-rated securities to pay interest and repay principal is more likely to
weaken than is that of issuers of higher-rated securities in times of
deteriorating economic conditions or rising interest rates. In addition,
lower-rated securities may be more susceptible to real or perceived adverse
economic conditions than investment grade securities.
The market for lower-rated securities may be thinner and less active than that
for higher-rated securities, which can adversely affect the prices at which
these securities can be sold. To the extent that there is no established
secondary market for lower-rated securities, a Fund may experience difficulty in
valuing such securities and, in turn, the Fund's assets. In addition, adverse
publicity and investor perceptions about lower-rated securities, whether or not
factual, may tend to impair their market value and liquidity.
Alliance will try to reduce the risk inherent in investment in lower-rated
securities through credit analysis, diversification and attention to current
developments and trends in interest rates and economic and political conditions.
However, there can be no assurance that losses will not occur. Since the risk of
default is higher for lower-rated securities, Alliance's research and credit
analysis are a correspondingly more important aspect of its program for managing
a Fund's securities than would be the case if a Fund did not invest in
lower-rated securities.
In seeking to achieve a Fund's investment objective, there will be times, such
as during periods of rising interest rates, when depreciation and realization of
capital losses on securities in a Fund's portfolio will be unavoidable.
Moreover, medium- and lower-rated securities and non-rated securities of
comparable quality may be subject to wider fluctuations in yield and market
values than higher-rated securities under certain market conditions. Such
fluctuations after a security is acquired do not affect the cash income received
from that security but are reflected in the net asset value of a Fund. See the
Statement of Additional Information for each Fund that invests in lower-rated
securities for a description of the bond ratings of Moody's, S&P, Duff & Phelps
and Fitch.
Certain lower-rated securities in which Growth Fund, Income Builder Fund,
Strategic Balanced Fund and Utility Income Fund may invest may contain call or
buy-back features that permit the issuers thereof to call or repurchase such
securities. Such securities may present risks based on prepayment expectations.
If an issuer exercises such a provision, a Fund may have to replace the called
security with a lower yielding security, resulting in a decreased rate of return
to the Fund.
Non-Diversified Status. Each of Worldwide Privatization Fund, New Europe Fund,
All-Asia Investment Fund, Global Environmental Fund and Income Builder Fund is a
"non-diversified" investment company, which means the Fund is not limited in the
proportion of its assets that may be invested in the securities of a single
issuer. However, each Fund intends to conduct its operations so as to qualify to
be taxed as a "regulated investment company" for purposes of the Code, which
will relieve the Fund of any liability for federal income tax to the extent its
earnings are distributed to shareholders. See "Dividends, Distributions and
Taxes" in each Fund's Statement
36
<PAGE>
of Additional Information. To so qualify, among other requirements, the Fund
will limit its investments so that, at the close of each quarter of the taxable
year, (i) not more than 25% of the Fund's total assets will be invested in the
securities of a single issuer, and (ii) with respect to 50% of its total assets,
not more than 5% of its total assets will be invested in the securities of a
single issuer and the Fund will not own more than 10% of the outstanding voting
securities of a single issuer. A Fund's investments in U.S. Government
securities and other regulated investment companies are not subject to these
limitations. Because each of Worldwide Privatization Fund, New Europe Fund,
All-Asia Investment Fund and Income Builder Fund is a non-diversified investment
company, it may invest in a smaller number of individual issuers than a
diversified investment company, and an investment in such Fund may, under
certain circumstances, present greater risk to an investor than an investment in
a diversified investment company.
Foreign government securities are not treated like U.S. Government securities
for purposes of the diversification tests described in the preceding paragraph,
but instead are subject to these tests in the same manner as the securities of
non-governmental issuers.
Year 2000. Many computer software systems in use today cannot properly process
date-related information from and after January 1, 2000. Should any of the
computer systems employed by the Fund's major service providers fail to process
this type of information properly, that could have a negative impact on the
Fund's operations and the services that are provided to the Fund's shareholders.
Alliance, each Fund's investment adviser, Alliance Fund Distributors, Inc.
("AFD"), each Fund's principal underwriter, and Alliance Fund Services, Inc.
("AFS"), each Fund's registrar, transfer agent and dividend disbursing agent,
have advised the Funds that they are reviewing all of their computer systems
with the goal of modifying or replacing such systems prior to January 1, 2000 to
the extent necessary to foreclose any such negative impact. In addition,
Alliance has been advised by each Fund's custodian that they are also in the
process of reviewing their systems with the same goal. As of the date of this
Prospectus, the Funds and Alliance have no reason to believe that these goals
will not be achieved.
- --------------------------------------------------------------------------------
PURCHASE AND SALE
- --------------------------------------------------------------------------------
OF SHARES
- --------------------------------------------------------------------------------
HOW TO BUY SHARES
Each Fund offers multiple classes of shares, of which only the Advisor Class is
offered by this Prospectus. Advisor Class shares of each Fund may be purchased
through your financial representative at net asset value without any initial or
contingent deferred sales charges and are not subject to ongoing distribution
expenses. Advisor Class shares may be purchased and held solely (i) through
accounts established under a fee-based program, sponsored and maintained by a
registered broker-dealer or other financial intermediary and approved by AFD,
(ii) 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,
(iii) by investment advisory clients of, and certain other persons associated
with, Alliance and its affiliates or the Funds, and (iv) through registered
investment advisers or other financial intermediaries who charge a management,
consulting or other fee for their service and who purchase shares through a
broker or agent approved by 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. For more detailed information about who may
purchase and hold Advisor Class shares see the Statements of Additional
Information. A shareholder's Advisor Class shares will automatically convert to
Class A shares of the same Fund under certain circumstances. For a more detailed
description of the conversion feature and Class A shares, see "Conversion
Feature."
Generally, a fee-based program must charge an asset-based or other similar fee
and must invest at least $250,000 in Advisor Class shares of each Fund in which
the program invests in order to be approved by AFD for investment in Advisor
Class shares. Share certificates are issued only upon request. See the
Subscription Application and the Statements of Additional Information for more
information.
The Funds may refuse any order to purchase Advisor Class shares. In this regard,
the Funds reserve the right to restrict purchases of Advisor Class shares
(including through exchanges) when there appears to be evidence of a pattern of
frequent purchases and sales made in response to short-term considerations.
How the Funds Value Their Shares
The net asset value of Advisor Class shares of a Fund is calculated by dividing
the value of the Fund's net assets allocable to the Advisor Class by the
outstanding shares of the Advisor Class. Shares are valued each day the Exchange
is open as of the close of regular trading (currently 4:00 p.m. Eastern time).
The securities in a Fund are valued 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 reflects fair
market value.
HOW TO SELL SHARES
You may "redeem" (i.e., sell your shares in a Fund to the Fund) on any day the
Exchange is open, either directly or through your financial representative. The
price you will receive is the net asset value next calculated after the Fund
receives your request in proper form. Proceeds generally will be sent to you
within seven days. However, for shares recently purchased by check or electronic
funds transfer, a Fund will not send proceeds until it 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 documents are required by your
fee-based program or employee benefit plan, you should contact your financial
representative.
37
<PAGE>
Selling Shares Through Your Financial Representative
Your financial representative must receive your request before 4:00 p.m. Eastern
time, and your financial representative must transmit your request to the Fund
by 5:00 p.m. Eastern time, for you to receive that day's net asset value. Your
financial representative is responsible for furnishing all necessary
documentation to a Fund and may charge you for this service.
Selling Shares Directly To A Fund
Send a signed letter of instruction or stock power form to AFS along with
certificates, if any, that represent the shares you want to sell. For your
protection, signatures must be guaranteed by a bank, a member firm of a national
stock exchange or other eligible guarantor institution. Stock power forms are
available from your financial representative, AFS, and many commercial banks.
Additional documentation is required for the sale of shares by corporations,
intermediaries, fiduciaries and surviving joint owners. For details contact:
Alliance Fund Services
P.O. Box 1520
Secaucus, NJ 07096-1520
800-221-5672
Alternatively, a request for redemption of shares for which no stock
certificates have been issued can also be made by telephone to 800-221-5672.
Telephone redemption requests must be made by 4 p.m. Eastern time on a Fund
business day in order to receive that day's net asset value, and, for
redemptions made before March 1, 1998 may be made only once in any 30-day period
(except for certain omnibus accounts). A shareholder who has completed the
appropriate section of the Subscription Application, or the Shareholder Options
form obtained from AFS, can elect to have the proceeds of his or her redemption
sent to his or her bank via an electronic funds transfer. Proceeds of telephone
redemptions also may be sent by check to a shareholder's address of record.
Except for certain omnibus accounts, redemption requests by electronic funds
transfer may not exceed $100,000 and redemption requests by check may not exceed
$50,000 per day. Telephone redemption is not available for shares held in
nominee or "street name" accounts or retirement plan accounts or shares held by
a shareholder who has changed his or her address of record within the previous
30 calendar days.
General
The sale of shares is a taxable transaction for federal tax purposes. Under
unusual circumstances, a Fund may suspend redemptions or postpone payment for up
to seven days or longer, as permitted by federal securities law. The Funds
reserve the right to close an account that through redemption has remained below
$200 for 90 days. Shareholders will receive 60 days' written notice to increase
the account value before the account is closed.
During drastic economic or market developments, you might have difficulty
reaching AFS by telephone, in which event you should issue written instructions
to AFS. AFS is not responsible for the authenticity of telephonic 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 telephonic 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.
HOW TO EXCHANGE SHARES
You may exchange your Advisor Class shares of any Fund for Advisor Classshares
of other Alliance Mutual Funds (including AFD Exchange Reserves, a money market
fund managed by Alliance). 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
AFS by 4:00 p.m. Eastern time on a Fund business day in order to receive that
day's net asset value.
Please read carefully the prospectus of the mutual fund into which you are
exchanging before submitting the request. Call AFS at 800-221-5672 to exchange
uncertificated shares. An exchange is a taxable capital transaction for federal
tax purposes. The exchange service may be changed, suspended, or terminated on
60 days' written notice.
GENERAL
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.
Each Fund offers three classes of shares other than the Advisor Class, which are
Class A, Class B and Class C. All classes of shares of a Fund have a common
investment objective and investment portfolio. Class A shares are offered with
an initial sales charge and pay a distribution services fee. Class B shares have
a contingent deferred sales charge (a "CDSC") and also pay a distribution
services fee. Class C shares have no initial sales charge or CDSC as long as
they are not redeemed within one year of purchase, but pay a distribution
services fee. Because
38
<PAGE>
Advisor Class shares have no initial sales charge or CDSC and pay no
distribution services fee, Advisor Class shares are expected to have different
performance from Class A, Class B or Class C shares. You can obtain more
information about Class A, Class B and Class C shares, which are not offered by
this Prospectus, by contacting AFS by telephone at 800-221-5672 or by contacting
your financial representative.
- --------------------------------------------------------------------------------
MANAGEMENT OF THE FUNDS
- --------------------------------------------------------------------------------
ADVISER
Alliance, which is a Delaware limited partnership with principal offices at 1345
Avenue of the Americas, New York, New York 10105, has been retained under an
advisory agreement (the "Advisory Agreement") to provide investment advice and,
in general, to conduct the management and investment program of each Fund,
subject to the general supervision and control of the Directors of the Fund.
The following table lists the person or persons who are primarily responsible
for the day-to-day management of each Fund's portfolio, the length of time that
each person has been primarily responsible, and each person's principal
occupation during the past five years.
<TABLE>
<CAPTION>
Principal occupation
during the past
Fund Employee; year; title five years
- -----------------------------------------------------------------------------------------
<S> <C> <C>
Alliance Fund Alden M. Stewart since 1997-- Associated with
Executive Vice President of Alliance since
Alliance Capital Management 1993; prior
Corporation ("ACMC")* thereto,
associated with
Equitable Capital
Management
Corporation
("Equitable
Capital")**
Randall E. Haase since 1997-- Associated with
Senior Vice President of ACMC Alliance since July
1993; prior
thereto,
associated with
Equitable Capital
Growth Fund Tyler Smith since inception-- Associated with
Senior Vice President of ACMC Alliance since
July 1993; prior
thereto,
associated with
Equitable Capital
Premier Growth Fund Alfred Harrison since inception-- Associated with
Vice Chairman of ACMC Alliance
Technology Fund Peter Anastos since 1992-- Associated with
Senior Vice President of ACMC Alliance
Gerald T. Malone since 1992-- Associated with
Senior Vice President of ACMC Alliance since
1992; prior
thereto
associated with
College
Retirement
Equities Fund
Quasar Fund Alden M. Stewart since 1994-- (see above)
(see above)
Randall E. Haase since 1994-- (see above)
(see above)
International Fund A. Rama Krishna since 1993-- Associated with
Senior Vice President of ACMC Alliance since
and director of Asian Equity 1993, prior
research thereto,
Chief Investment
Strategist and
Director--Equity
Research for CS
First Boston
Worldwide Privatization Mark H. Breedon since inception-- Associated with
Fund Senior Vice President of ACMC Alliance
and Director and Vice President
of Alliance Capital Limited ***
New Europe Fund Steven Beinhacker since 1997-- Associated with
Vice President of ACMC Alliance
All-Asia Investment A. Rama Krishna since inception-- (see above)
Fund (see above)
Global Small Cap Alden M. Stewart since 1994-- (see above)
Fund (see above)
Randall E. Haase since 1994-- (see above)
(see above)
Ronald L. Simcoe since 1993-- Associated with
Vice President of ACMC Alliance since
1993; prior
thereto,
associated with
Equitable Capital
Global Environment Jeremy R. Kramer since 1995-- Associated with
Fund Vice President of ACMC Alliance since
1993; prior
thereto, securities
analyst with
Neuberger &
Berman
Strategic Balanced Nicholas D.P. Carn since 1997-- Associated with
Fund Vice President of ACMC Alliance since
1997; prior
thereto, Chief
Investment
Officer and
Portfolio Manager
at Draycott
Partners
Balanced Shares Paul Rissman since 1997-- Associated with
Senior Vice President of ACMC Alliance
Income Builder Fund Andrew M. Aran since 1994-- Associated with
Senior Vice President of ACMC Alliance
Thomas M. Perkins since 1991-- Associated with
Senior Vice President of ACMC Alliance
Vita Marie Pike since 1997-- Associated with
Vice President of ACMC Alliance
Corinne Molof Hill since 1997-- Associated with
Vice President of ACMC Alliance
Utility Income Fund Paul Rissman since 1996-- Associated with
(see above) Alliance
Growth & Income Paul Rissman since 1994-- Associated with
Fund (see above) Alliance
</TABLE>
39
<PAGE>
<TABLE>
<CAPTION>
Principal occupation
during the past
Fund Employee; year; title five years
- -----------------------------------------------------------------------------------------
<S> <C> <C>
Real Estate Daniel G. Pine since 1996 Associated with
Investment Fund Senior Vice President Alliance since
of ACMC 1996; prior
thereto, Senior
Vice President of
Desai Capital
Management
David Kruth since 1997-- Associated with
Vice President of ACMC Alliance since
1997; prior
thereto Senior
Vice President of
the Yarmouth
Group
</TABLE>
- --------------------------------------------------------------------------------
* The sole general partner of Alliance.
** Equitable Capital was, prior to Alliance's acquisition of it, a management
firm under common control with Alliance.
*** An indirect wholly-owned subsidiary of Alliance.
Alliance is a leading international investment manager supervising client
accounts with assets as of September 30, 1997 totaling more than $217 billion
(of which approximately $81 billion represented the assets of investment
companies). Alliance's clients are primarily major corporate employee benefit
funds, public employee retirement systems, investment companies, foundations and
endowment funds. The 56 registered investment companies managed by Alliance
comprising 118 separate investment portfolios currently have over two million
shareholders. As of September 30, 1997, Alliance was an investment manager of
employee benefit plan assets for 28 of the Fortune 100 companies.
ACMC, the sole general partner of, and the owner of a 1% general partnership
interest in, Alliance, is an indirect wholly-owned subsidiary of The Equitable
Life Assurance Society of the United States ("Equitable"), one of the largest
life insurance companies in the United States, which is a wholly-owned
subsidiary of The Equitable Companies Incorporated, a holding company controlled
by AXA-UAP, a French insurance holding company. Certain information concerning
the ownership and control of Equitable by AXA-UAP is set forth in each Fund's
Statement of Additional Information under "Management of the Funds."
Performance of Similarly Managed Portfolios. In addition to managing the assets
of Premier Growth Fund, Mr. Harrison has ultimate responsibility for the
management of discretionary tax-exempt accounts of institutional clients managed
as described below without significant client-imposed restrictions ("Historical
Portfolios"). These accounts have substantially the same investment objectives
and policies and are managed in accordance with essentially the same investment
strategies and techniques as those for Premier Growth Fund, except for the
ability of Premier Growth Fund to use futures and options as hedging tools and
to invest in warrants. The Historical Portfolios are also not subject to certain
limitations, diversification requirements and other restrictions imposed under
the 1940 Act and the Code to which Premier Growth Fund, as a registered
investment company, is subject and which, if applicable to the Historical
Portfolios, may have adversely affected the performance results of the
Historical Portfolios. See "Investment Objective and Policies."
Set forth below is performance data provided by Alliance relating to the
Historical Portfolios for each of the nineteen full calendar years during which
Mr. Harrison has managed the Historical Portfolios as an employee of Alliance
and cumulatively through December 31, 1997. As of December 31, 1997, the assets
in the Historical Portfolios totaled approximately $11.6 billion and the average
size of an institutional account in the Historical Portfolio was $341 million.
Each Historical Portfolio has a nearly identical composition of investment
holdings and related percentage weightings.
The performance data is net of all fees (including brokerage commissions)
charged to those accounts. The performance data is computed in accordance with
standards formulated by the Association of Investment Management and Research
and has not been adjusted to reflect any fees that will be payable by Premier
Growth Fund, which are higher than the fees imposed on the Historical Portfolio
and will result in a higher expense ratio and lower returns for Premier Growth
Fund. Expenses associated with the distribution of Class A, Class B and Class C
shares of Premier Growth Fund in accordance with the plan adopted by Premier
Growth Fund's Board of Directors pursuant to Rule 12b-1 under the 1940 Act
("distribution fees") are also excluded. See "Expense Information." The
performance data has also not been adjusted for corporate or individual taxes,
if any, payable by the account owners.
Alliance has calculated the investment performance of the Historical Portfolios
on a trade-date basis. Dividends have been accrued at the end of the month and
cash flows weighted daily. Composite investment performance for all portfolios
has been determined on an asset-weighted basis. New accounts are included in the
composite investment performance computations at the beginning of the quarter
following the initial contribution. The total returns set forth below are
calculated using a method that links the monthly return amounts for the
disclosed periods, resulting in a time-weighted rate of return.
As reflected below, the Historical Portfolios have over time performed favorably
when compared with the performance of recognized performance indices. The S&P
500 Index is a widely recognized, unmanaged index of market activity based upon
the aggregate performance of a selected portfolio of publicly traded common
stocks, including monthly adjustments to reflect the reinvestment of dividends
and other distributions. The S&P 500 Index reflects the total return of
securities comprising the Index, including changes in market prices as well as
accrued investment income, which is presumed to be reinvested. The Russell 1000
universe of securities is
40
<PAGE>
compiled by Frank Russell Company and is segmented into two style indices, based
on the capitalization-weighted median book-to-price ratio of each of the
securities. At each reconstitution, the Russell 1000 constituents are ranked by
their book-to-price ratio. Once so ranked, the breakpoint for the two styles is
determined by the median market capitalization of the Russell 1000. Thus, those
securities falling within the top fifty percent of the cumulative market
capitalization (as ranked by descending book-to-price) become members of the
Russell Price-Driven Indices. The Russell 1000 Growth Index is, accordingly,
designed to include those Russell 1000 securities with a greater-than-average
growth orientation. In contrast with the securities in the Russell Price-Driven
Indices, companies in the Growth Index tend to exhibit higher price-to-book and
price-earnings ratios, lower dividend yield and higher forecasted growth values.
To the extent Premier Growth Fund does not invest in U.S. common stocks or
utilizes investment techniques such as futures or options, the S&P 500 Index and
Russell 1000 Growth Index may not be substantially comparable to Premier Growth
Fund. The S&P 500 Index and Russell 1000 Growth Index are included to illustrate
material economic and market factors that existed during the time period shown.
The S&P 500 Index and Russell 1000 Growth Index do not reflect the deduction of
any fees. If Premier Growth Fund were to purchase a portfolio of securities
substantially identical to the securities comprising the S&P 500 Index or the
Russell 1000 Growth Index, Premier Growth Fund's performance relative to the
index would be reduced by Premier Growth Fund's expenses, including brokerage
commissions, advisory fees, distribution fees, custodial fees, transfer agency
costs and other administrative expenses as well as by the impact on Premier
Growth Fund's shareholders of sales charges and income taxes.
The Lipper Growth Fund Index is prepared by Lipper Analytical Services, Inc. and
represents a composite index of the investment performance for the 30 largest
growth mutual funds. The composite investment performance of the Lipper Growth
Fund Index reflects investment management and administrative fees and other
operating expenses paid by these mutual funds and reinvested income dividends
and capital gain distributions, but excludes the impact of any income taxes and
sales charges.
The following performance data is provided solely to illustrate Mr. Harrison's
performance in managing the Historical Portfolios and the Premier Growth Fund as
measured against certain broad based market indices and against the composite
performance of other open-end growth mutual funds. Investors should not rely on
the following performance data of the Historical Portfolios as an indication of
future performance of Premier Growth Fund. The composite investment performance
for the periods presented may not be indicative of future rates of return. Other
methods of computing investment performance may produce different results, and
the results for different periods may vary.
Schedule of Composite Investment Performance--Historical Portfolios*
<TABLE>
<CAPTION>
Russell Lipper
Premier Historical S&P 500 1000 Growth
Growth Portfolios Index Growth Index Fund Index
Fund Total Return** Total Return Total Return Total Return
------- -------------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Year ended:
1997*** .......... 27.05% 34.90% 33.36% 30.49% 25.30%
1996*** .......... 18.84 22.22 22.96 23.12 17.48
1995*** .......... 40.66 40.12 37.58 37.19 32.65
1994 ............. (9.78) (4.83) 1.32 2.66 (1.57)
1993 ............. 5.35 10.62 10.08 2.90 11.98
1992 ............. -- 12.27 7.62 5.00 7.63
1991 ............. -- 39.19 30.47 41.16 35.20
1990 ............. -- (1.57) (3.10) (0.26) (5.00)
1989 ............. -- 39.08 31.69 35.92 28.60
1988 ............. -- 10.96 16.61 11.27 15.80
1987 ............. -- 8.57 5.25 5.31 1.00
1986 ............. -- 27.60 18.67 15.36 15.90
1985 ............. -- 37.68 31.73 32.85 30.30
1984 ............. -- (3.33) 6.27 (.95) (2.80)
1983 ............. -- 20.95 22.56 15.98 22.30
1982 ............. -- 28.23 21.55 20.46 20.20
1981 ............. -- (1.10) (4.92) (11.31) (8.40)
1980 ............. -- 51.10 32.50 39.57 37.30
1979 ............. -- 30.99 18.61 23.91 27.40
Cumulative total
return for
the period
January 1,
1979 to
December 31,
1997 ............. -- 3,689% 1,946% 1,683% 1,753%
</TABLE>
- --------------------------------------------------------------------------------
* Total return is a measure of investment performance that is based upon the
change in value of an investment from the beginning to the end of a
specified period and assumes reinvestment of all dividends and other
distributions. The basis of preparation of this data is described in the
preceding discussion. Total returns for Premier Growth Fund are for Class A
Shares with imposition of the maximum 4.25% sales charge.
** Assumes imposition of the maximum advisory fee charged by Alliance for any
Historical Portfolio for the period involved, although not the impact of
the payment of that fee on a quarterly rather than an annual basis and the
compounding effect thereof over the periods for which return information is
provided in the table on page 50, which would correspondingly reduce the
returns presented.
*** During this period, the Historical Portfolios differed from Premier Growth
Fund in that Premier Growth Fund invested a portion of its net assets in
warrants on equity securities in which the Historical Portfolios were
unable, by their investment restrictions, to purchase. In lieu of warrants,
the Historical Portfolios acquired the common stock upon which the warrants
were based.
The average annual total returns presented below are based upon the cumulative
total return as of December 31, 1997, and for more than one year assume a steady
compounded rate of return and are not year-by-year results, which fluctuated
over the periods as shown.
<TABLE>
<CAPTION>
Average Annual Total Returns
-------------------------------------------------------------------------------------
Premier Russell Lipper
Growth Historical S&P 500 1000 Growth
Fund Portfolios** Index Growth Index Fund Index
------- ---------- ------- ------------ ----------
<S> <C> <C> <C> <C> <C>
One year ............................ 27.05% 34.90% 33.36% 30.49% 25.30%
Three years ......................... 32.32 32.20 31.15 30.14 25.11
Five years .......................... 19.14 19.46 20.27 18.41 16.47
Ten years+ .......................... 20.13 19.17 18.05 17.94 15.93
Since January 1,
1979 .............................. -- 20.08 17.22 16.37 15.86
</TABLE>
- --------------------------------------------------------------------------------
+ Since inception on 9/28/92
41
<PAGE>
ADMINISTRATOR TO ALL-ASIA INVESTMENT FUND
Alliance has been retained by All-Asia Investment Fund under an administration
agreement (the "Administration Agreement") to perform administrative services
necessary for the operation of the Fund. For a description of such services, see
the Statement of Additional Information of the Fund.
CONSULTANT TO ALLIANCE WITH RESPECT TO INVESTMENT
IN REAL ESTATE SECURITIES
Alliance, with respect to investment in real estate securities, has retained as
a consultant CB Commercial Real Estate Group, Inc. ("CBC"), a publicly held
company and the largest real estate services company in the United States,
comprised of real estate brokerage, property and facilities management, and real
estate finance and investment advisory activities (CBC in August of 1997
acquired Koll, which previously provided these consulting services to Alliance).
In 1996, CBC (and Koll, on a combined basis) completed 25,000 sale and lease
transactions, managed over 4,100 client properties, created over $3.5 billion in
mortgage originations, and completed over 2,600 appraisal and consulting
assignments. In addition, they advised and managed for institutions over $4
billion in real estate investments. CBC will make available to Alliance the CBC
National Real Estate Index, which gathers, analyzes and publishes targeted
research data for the 65 largest U.S. markets, based on a variety of
public-sector and private-sector sources as well as CBC's proprietary database
of approximately 60,000 property transactions representing over $400 billion of
investment property. This information provides a substantial component of the
research and data used to create the REIToScore model. As a consultant, CBC
provides to Alliance, at Alliance's expense, such in-depth information regarding
the real estate market, the factors influencing regional valuations and analysts
of recent transactions in office, retail, industrial and multi-family properties
as Alliance shall from time to time request. CBC will not furnish advice or make
recommendations regarding the purchase or sale of securities by the Fund nor
will it be responsible for making investment decisions involving Fund assets.
CBC is one of the three largest fee-based property management firms in the
United States, the largest commercial real estate lease brokerage firm in the
country, the largest investment property brokerage firm in the country, as well
as one of the largest publishers of real estate research, with approximately
6,000 employees nationwide. CBC will provide Alliance with exclusive access to
its REIToScore model which ranks approximately 130 REITs based on the relative
attractiveness of the property markets in which they own real estate. This model
scores the approximately 12,000 individual properties owned by these companies.
REIToScore is in turn based on CBC's National Real Estate Index which gathers,
analyzes and publishes targeted research for the 65 largest U.S. real estate
markets based on a variety of public- and private-sector sources as well as
CBC's proprietary database of 60,000 commercial property transactions
representing over $400 billion of investment property and over 3,000 tracked
properties which report rent and expense data quarterly. CBC has previously
provided access to its REIToScore model results primarily to the institutional
market through subscriptions. The model is no longer provided to any research
publications and the Fund is currently the only mutual fund available to retail
investors that has access to CBC's REIToScore model.
DISTRIBUTION SERVICES AGREEMENTS
Each Fund has entered into a Distribution Services Agreement with AFD with
respect to the Advisor Class shares. The Glass-Steagall Act and other applicable
laws may limit the ability of a bank or other depository institution to become
an underwriter or distributor of securities. However, in the opinion of the
Funds' management, based on the advice of counsel, these laws do not prohibit
such depository institutions from providing services for investment companies
such as the administrative, accounting and other services referred to in the
Agreements. In the event that a change in these laws prevented a bank from
providing such services, it is expected that other service arrangements would be
made and that shareholders would not be adversely affected. The State of Texas
requires that shares of a Fund may be sold in that state only by dealers or
other financial institutions that are registered there as broker-dealers.
- --------------------------------------------------------------------------------
DIVIDENDS, DISTRIBUTIONS
- --------------------------------------------------------------------------------
AND TAXES
- --------------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS
If you receive an income dividend or capital gains distribution in cash you may,
within 120 days following the date of its payment, reinvest the dividend or
distribution in additional shares of that Fund without charge by returning to
Alliance, with appropriate instructions, the check representing such dividend or
distribution. Thereafter, unless you otherwise specify, you will be deemed to
have elected to reinvest all subsequent dividends and distributions in shares of
that Fund.
Each income dividend and capital gains distribution, if any, declared by a Fund
on its outstanding shares will, at the election of each shareholder, be paid in
cash or in additional shares of the same class of shares of that Fund having an
aggregate net asset value as of the payment date of such dividend or
distribution equal to the cash amount of such income dividend or distribution.
Election to receive dividends and distributions in cash or shares is made at the
time shares are initially purchased and may be changed at any time prior to the
record date for a particular dividend or distribution. Cash dividends can be
paid by check or, if the shareholder so elects, electronically via the ACH
network. There is no sales or other charge in connection with the reinvestment
of dividends and capital gains distributions.
While it is the intention of each Fund to distribute to its shareholders
substantially all of each fiscal year's net income and net realized
42
<PAGE>
capital gains, if any, the amount and time of any such dividend or distribution
must necessarily depend upon the realization by such Fund of income and capital
gains from investments. There is no fixed dividend rate, and there can be no
assurance that a Fund will pay any dividends or realize any capital gains. Since
REITs pay distributions based on cash flow, without regard to depreciation and
amortization, it is likely that a portion of the distributions paid to Real
Estate Investment Fund and subsequently distributed to shareholders may be a
nontaxable return of capital. The final determination of the amount of a Fund's
return of capital distributions for the period will be made after the end of
each calendar year.
If you buy shares just before a Fund deducts a distribution from its net asset
value, you will pay the full price for the shares and then receive a portion of
the price back as a taxable distribution.
FOREIGN INCOME TAXES
Investment income received by a Fund from sources within foreign countries may
be subject to foreign income taxes withheld at the source. To the extent that
any Fund is liable for foreign income taxes withheld at the source, each Fund
intends, if possible, to operate so as to meet the requirements of the Code to
"pass through" to the Fund's shareholders credits for foreign income taxes paid
(or to permit shareholders to claim a deduction for such foreign taxes), but
there can be no assurance that any Fund will be able to do so.
U.S. FEDERAL INCOME TAXES
Each Fund intends to qualify to be taxed as a "regulated investment company"
under the Code. To the extent that a Fund distributes its taxable income and net
capital gain to its shareholders, qualification as a regulated investment
company relieves that Fund of federal income taxes on that part of its taxable
income including net capital gains which it pays out to its shareholders.
Dividends out of net ordinary income and distributions of net short-term capital
gains are taxable to the recipient shareholders as ordinary income. In the case
of corporate shareholders, such dividends may be eligible for the
dividends-received deduction, except that the amount eligible for the deduction
is limited to the amount of qualifying dividends received by the Fund. Dividends
received from REITs generally do not constitute qualifying dividends. A
corporation's dividends-received deduction generally will be disallowed unless
the corporation holds shares in the Fund at least 46 days during the 90 day
period beginning 45 days before the date on which the corporation becomes
entitled to receive the dividend. Furthermore, the dividends-received deduction
will be disallowed to the extent a corporation's investment in shares of a Fund
is financed with indebtedness.
Pursuant to the Taxpayer Relief Act of 1997, two different tax rates apply to
net capital gains--that is, the excess of net gains from capital assets held for
more than one year over net losses from capital assets held for not more than
one year. One rate (generally 28%) applies to net gains on capital assets held
for more than one year but not more than 18 months ("mid-term gains"), and a
second rate (generally 20%) applies to the balance of such net capital gains
("adjusted net capital gains"). Distributions of mid-term gains and adjusted net
capital gains will be taxable to shareholders as such, regardless of how long a
shareholder has held shares in the Fund. Distributions of net capital gains are
not eligible for the dividends-received deduction referred to above.
Under the current federal tax law, the amount of an income dividend or capital
gains distribution declared by a Fund during October, November or December of a
year to shareholders of record as of a specified date in such a month that is
paid during January of the following year is includable in the prior year's
taxable income of shareholders that are calendar year taxpayers.
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 or her
as described above. If a shareholder held shares six months or less and during
that period received a distribution of net capital gains, any loss realized on
the sale of such shares during such six-month period would be a long-term
capital loss to the extent of such distribution.
A dividend or capital gains distribution with respect to shares of a Fund held
by a tax-deferred or qualified plan, generally such as an individual retirement
account, 403(b)(7) retirement plan or corporate pension or profit-sharing plan,
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.
A Fund will be required to withhold 31% of any payments made to a shareholder if
the shareholder has not provided a certified taxpayer identification number to
the Fund, or the Secretary of the Treasury notifies a Fund that a shareholder
has not reported all interest and dividend income required to be shown on the
shareholder's Federal income tax return.
Under certain circumstances, if a Fund realizes losses (e.g., from fluctuations
in currency exchange rates) after paying a dividend, all or a portion of the
dividend may subsequently be characterized as a return of capital. Returns of
capital are generally nontaxable, but will reduce a shareholder's basis in
shares of a Fund. If that basis is reduced to zero (which could happen if the
shareholder does not reinvest distributions and returns of capital are
significant) any further returns of capital will be taxable as capital gain. See
"Dividends, Distributions and Taxes" in the Statements of Additional
Information. Shareholders will be advised annually as to the tax status of
dividends and capital gains and return of capital distributions. Shareholders
are urged to consult their tax advisors regarding their own tax situation.
Distributions by a Fund may be subject to state and local taxes.
43
<PAGE>
- --------------------------------------------------------------------------------
CONVERSION FEATURE
- --------------------------------------------------------------------------------
CONVERSION 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 and Sale of SharesHow
to Buy Shares," and by investment advisory clients of, and certain other persons
associated with, Alliance and its affiliates or the Funds. If (i) a holder of
Advisor Class shares ceases to participate in the fee-based program or plan, or
to be associated with an investment advisor or financial intermediary, in each
case that satisfies the requirements to purchase shares set forth under
"Purchase and Sale of Shares--How to Buy Shares" or (ii) the holder is otherwise
no longer eligible to purchase Advisor Class shares as described in this
Prospectus (each, a "Conversion Event"), then all Advisor Class shares held by
the shareholder will convert automatically and without notice to the
shareholder, other than the notice contained in this Prospectus, to Class A
shares of the Fund during the calendar month following the month in which the
Fund is informed of the occurrence of the Conversion Event. The 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.
DESCRIPTION OF CLASS A SHARES
The following sets forth maximum transaction costs, annual expenses, per share
income and capital charges for Class A shares of each of the Funds. Class A
shares are subject to a distribution fee that may not exceed an annual rate of
.30%. The higher fees mean a higher expense ratio, so Class A shares pay
correspondingly lower dividends and may have a lower net asset value than
Advisor Class shares.
Shareholder Transaction Expenses are one of several factors to consider when you
invest in a Fund. The following table summarizes your maximum transaction costs
from investing in Class A shares of a Fund and annual expenses for Class A
shares of each Fund. For each Fund, the "Examples" to the right of the table
below show the cumulative expenses attributable to a hypothetical $1,000
investment for the periods specified.
<TABLE>
<CAPTION>
Class A Shares
--------------
<S> <C>
Maximum sales charge imposed on purchases (as a percentage of
offering price) (a) ..................................................... None (sales
charge waived)
Sales charge imposed on dividend reinvestments .......................... None
Deferred sales charge (as a percentage of original purchase price or
redemption proceeds, whichever is lower) ................................ None
Exchange fee ............................................................ None
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Operating Expenses Examples(a)
- --------------------------------------- ----------------------------
Alliance Fund Class A Class A
------- -------
<S> <C> <C> <C>
Management fees .68% After 1 year $ 11
12b-1 fees .20% After 3 years $ 33
Other expenses (b) .15% After 5 years $ 57
---- After 10 years $126
Total fund
operating expenses 1.03%
====
<CAPTION>
Growth Fund Class A Class A
------- -------
<S> <C> <C> <C>
Management fees .74% After 1 year $ 13
12b-1 fees .30% After 3 years $ 40
Other expenses (b) .22% After 5 years $ 69
---- After 10 years $152
Total fund
operating expenses 1.26%
====
</TABLE>
- --------------------------------------------------------------------------------
Please refer to the footnotes on page 46.
44
<PAGE>
<TABLE>
<CAPTION>
Operating Expenses Examples(a)
- ----------------------------------------- ----------------------------
Premier Growth Fund Class A Class A
------- -------
<S> <C> <C> <C>
Management fees 1.00% After 1 year $ 16
12b-1 fees .33% After 3 years $ 50
Other expenses (b) .24% After 5 years $ 86
---- After 10 years $187
Total fund
operating expenses 1.57%
====
<CAPTION>
Technology Fund Class A Class A
------- -------
<S> <C> <C> <C>
Management fees (g) 1.04% After 1 year $ 17
12b-1 fees .30% After 3 years $ 53
Other expenses (b) .33% After 5 years $ 91
---- After 10 years $198
Total fund
operating expenses 1.67%
====
<CAPTION>
Quasar Fund Class A Class A
------- -------
<S> <C> <C> <C>
Management fees (g) 1.16% After 1 year $ 17
12b-1 fees .22% After 3 years $ 53
Other expenses (b) .29% After 5 years $ 91
---- After 10 years $198
Total fund
operating expenses 1.67%
====
<CAPTION>
International Fund Class A Class A
------- -------
<S> <C> <C> <C>
Management fees
(after waiver) (c) .85% After 1 year $ 16
12b-1 fees .17% After 3 years $ 50
Other expenses (b) .56% After 5 years $ 86
---- After 10 years $188
Total fund
operating expenses (d) 1.58%
====
<CAPTION>
Worldwide Privatization Fund Class A Class A
------- -------
<S> <C> <C> <C>
Management fees 1.00% After 1 year $ 17
12b-1 fees .30% After 3 years $ 54
Other expenses (b) .42% After 5 years $ 93
---- After 10 years $203
Total fund
operating expenses 1.72%
====
<CAPTION>
New Europe Fund Class A Class A
------- -------
<S> <C> <C> <C>
Management fees 1.06% After 1 year $ 21
12b-1 fees .30% After 3 years $ 64
Other expenses (b) .69% After 5 years $110
---- After 10 years $238
Total fund
operating expenses 2.05%
====
<CAPTION>
All-Asia Investment Fund Class A Class A
------- -------
<S> <C> <C> <C>
Management fees After 1 year $ 21
(after waiver) (c) .65% After 3 years $ 65
12b-1 fees .30% After 5 years $111
Other expenses After 10 years $239
Administration fees
(after waiver) (d) 0.00%
Other operating expenses(b) 1.11%
----
Total fund
operating expenses (e) 2.06%
====
<CAPTION>
Global Small Cap Fund Class A Class A
------- -------
<S> <C> <C> <C>
Management fees 1.00% After 1 year $ 24
12b-1 fees .30% After 3 years $ 75
Other expenses (b) 1.11% After 5 years $129
---- After 10 years $275
Total fund
operating expenses 2.41%
====
</TABLE>
- --------------------------------------------------------------------------------
Please refer to the footnotes on page 46.
45
<PAGE>
<TABLE>
<CAPTION>
Operating Expenses Examples(a)
- --------------------------------------- ----------------------------
Global Environment Fund Class A Class A
------- -------
<S> <C> <C> <C>
bb bb
Management fees 1.10% After 1 year $ 27
12b-1 fees .30% After 3 years $ 84
Other expenses (b) 1.29% After 5 years $142
---- After 10 years $302
Total fund
operating expenses 2.69%
====
<CAPTION>
Strategic Balanced Fund Class A Class A
------- -------
<S> <C> <C> <C>
Management fees
(after waiver) (c) .09% After 1 year $ 14
12b-1 fees .30% After 3 years $ 44
Other expenses (b) 1.01% After 5 years $ 77
---- After 10 years $168
Total fund
operating expenses (e) 1.40%
====
<CAPTION>
Balanced Shares Class A Class A
------- -------
<S> <C> <C> <C>
Management fees .63% After 1 year $ 15
12b-1 fees .24% After 3 years $ 46
Other expenses (b) .60% After 5 years $ 80
---- After 10 years $176
Total fund
operating expenses 1.47%
====
<CAPTION>
Income Builder Fund Class A Class A
------- -------
<S> <C> <C> <C>
Management fees .75% After 1 year $ 21
12b-1 fees .30% After 3 years $ 65
Other expenses (b) 1.04% After 5 years $112
---- After 10 years $242
Total fund
operating expenses 2.09%
====
<CAPTION>
Utility Income Fund Class A Class A
------- -------
<S> <C> <C> <C>
Management fees
(after waiver) (c) 0.00% After 1 year $ 15
12b-1 fees .30% After 3 years $ 47
Other expenses (b) 1.20% After 5 years $ 82
---- After 10 years $179
Total fund
operating expenses (f) 1.50%
====
<CAPTION>
Growth and Income Fund Class A Class A
------- -------
<S> <C> <C> <C>
Management fees .49% After 1 year $ 9
12b-1 fees .22% After 3 years $ 29
Other expenses (b) .21% After 5 years $ 51
---- After 10 years $113
Total fund
operating expenses .92%
====
<CAPTION>
Real Estate Investment Fund Class A Class A
------- -------
<S> <C> <C> <C>
Management fees .90% After 1 year $ 18
12b-1 fees .30% After 3 years $ 56
Other expenses (b) .57% After 5 years $ 96
---- After 10 years $208
Total fund
operating expenses 1.77%
====
</TABLE>
- --------------------------------------------------------------------------------
(a) Advisor Class shares convert to Class A shares at net asset value and
without the imposition of any sales charge and accordingly the maximum
sales charge of 4.25% on most purchases of Class A shares for cash does not
apply.
(b) These expenses include a transfer agency fee payable to Alliance Fund
Services, Inc., an affiliate of Alliance.
(c) Net of voluntary fee waiver. In the absence of such waiver, management fees
would be .75% for Strategic Balanced Fund and Utility Income Fund and 1.00%
for All-Asia Investment Fund and 1.01% for International Fund.
International Fund's fee, absent the voluntary fee waiver, is calculated
based on average daily net assets. Maximum contractual rate, based on
quarter-end net assets, is 1.00%.
(d) Net voluntary fee waiver. Absent such fee waiver, administration fees would
have been .15% for the Fund's Class A shares. Reflects the fees payable by
All-Asia Investment Fund to Alliance pursuant to an administration
agreement.
(e) Net of voluntary fee waivers and expense reimbursements. Absent such
waivers and reimbursements, total fund operating expenses for Strategic
Balanced Fund would have been 2.08 for Class A shares. Total fund operating
expenses for All-Asia Investment Fund would have been 2.56% for Class A
shares annualized and total fund operating expenses for International Fund
would have been 1.74%, for Class A, annualized.
(f) Net of expense reimbursements. Absent expense reimbursements, total fund
operating expenses for Utility Income Fund would be 3.55% for Class A
shares.
(g) Calculated based on average daily net assets. Maximum contractual rate,
based on quarter-end net assets, is 1.00% for Quasar Fund and Technology
Fund.
46
<PAGE>
The purpose of the foregoing table is to assist the investor in understanding
the various costs and expenses that an investor in a Fund will bear directly or
indirectly. Long-term shareholders of Class A shares of a Fund may pay aggregate
sales charges totaling more than the economic equivalent of the maximum initial
sales charges permitted by the Conduct Rules of the National Association of
Securities Dealers, Inc. The Rule 12b-1 fee for Class A comprises a service fee
not exceeding .25% of the aggregate average daily net assets of the Fund
attributable to Class A and an asset-based sales charge equal to the remaining
portion of the Rule 12b-1 fee. "Management fees" for International Fund and
All-Asia Investment Fund and "Administration fees" for All-Asia Investment Fund
have been restated to reflect current voluntary fee waivers. "Other Expenses"
are based on estimated amounts for the Global Environment Fund's current fiscal
year. The Examples set forth above assume reinvestment of all dividends and
distributions and utilize a 5% annual rate of return as mandated by Commission
regulations.
The Examples should not be considered representative of past or future expenses;
actual expenses may be greater or less than those shown.
Financial Highlights. The tables on the following pages present, for each Fund,
per share income and capital changes for a Class A share outstanding throughout
each period indicated. Except as indicated below, the information in the tables
for Alliance Fund, Growth Fund, Premier Growth Fund, Strategic Balanced Fund,
Balanced Shares, Utility Income Fund, Worldwide Privatization Fund and Growth
and Income Fund has been audited by Price Waterhouse LLP, the independent
accountants for each Fund, and for All-Asia Investment Fund, Technology Fund,
Quasar Fund, International Fund, New Europe Fund, Global Small Cap Fund, Global
Environment Fund, Real Estate Investment Fund and Income Builder Fund by Ernst &
Young LLP, the independent auditors for each Fund. A report of Price Waterhouse
LLP or Ernst & Young LLP, as the case may be, on the information with respect to
each Fund, appears in the Fund's Statement of Additional Information. The
following information for each Fund should be read in conjunction with the
financial statements and related notes which are included in the Fund's
Statement of Additional Information.
Further information about a Fund's performance is contained in the Fund's annual
report to shareholders, which may be obtained without charge by contacting AFS
at the address or the "For Literature" telephone number shown on the cover of
this Prospectus.
47
<PAGE>
<TABLE>
<CAPTION>
Net Net Net
Asset Realized and Increase
Value Unrealized (Decrease) In Dividends From Distributions
Beginning Of Net Investment Gain (Loss) On Net Asset Value Net Investment From Net
Fiscal Year or Period Period Income (Loss) Investments From Operations Income Realized Gains
--------------------- ------------ -------------- -------------- --------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Alliance Fund
Class A
Year ended 11/30/97 ..... $ 7.71 $ (.02)(b) $ 2.09 $ 2.07 $ (.02) $ (1.06)
Year ended 11/30/96 ..... 7.72 .02 1.06 1.08 (.02) (1.07)
Year ended 11/30/95 ..... 6.63 .02 2.08 2.10 (.01) (1.00)
1/1/94 to 11/30/94** .... 6.85 .01 (.23) (.22) 0.00 0.00
Year ended 12/31/93 ..... 6.68 .02 .93 .95 (.02) (.76)
Year ended 12/31/92 ..... 6.29 .05 .87 .92 (.05) (.48)
Year ended 12/31/91 ..... 5.22 .07 1.70 1.77 (.07) (.63)
Year ended 12/31/90 ..... 6.87 .09 (.32) (.23) (.18) (1.24)
Year ended 12/31/89 ..... 5.60 .12 1.19 1.31 (.04) 0.00
Year ended 12/31/88 ..... 5.15 .08 .80 .88 (.08) (.35)
Growth Fund (i)
Class A
Year ended 10/31/97 ..... $ 34.91 $ (.10)(b) $ 10.17 $ 10.07 $ 0.00 $ (1.03)
Year ended 10/31/96 ..... 29.48 .05 6.20 6.25 (.19) (.63)
Year ended 10/31/95 ..... 25.08 .12 4.80 4.92 (.11) (.41)
5/1/94 to 10/31/94** .... 23.89 .09 1.10 1.19 0.00 0.00
Year ended 4/30/94 ...... 22.67 (.01)(c) 3.55 3.54 0.00 (2.32)
Year ended 4/30/93 ...... 20.31 .05(c) 3.68 3.73 (.14) (1.23)
Year ended 4/30/92 ...... 17.94 .29(c) 3.95 4.24 (.26) (1.61)
9/4/90++ to 4/30/91 ..... 13.61 .17(c) 4.22 4.39 (.06) 0.00
Premier Growth Fund
Class A
Year ended 11/30/97 ..... $ 17.98 $ (.10)(b) $ 5.20 $ 5.10 $ 0.00 $ (1.08)
Year ended 11/30/96 ..... 16.09 (.04)(b) 3.20 3.16 0.00 (1.27)
Year ended 11/30/95 ..... 11.41 (.03) 5.38 5.35 0.00 (.67)
Year ended 11/30/94 ..... 11.78 (.09) (.28) (.37) 0.00 0.00
Year ended 11/30/93 ..... 10.79 (.05) 1.05 1.00 (.01) 0.00
9/28/92+ to 11/30/92 .... 10.00 .01 .78 .79 0.00 0.00
Technology Fund
Class A
Year ended 11/30/97 ..... $ 51.15 $ (.51)(b) $ 4.22 $ 3.71 $ 0.00 $ (.42)
Year ended 11/30/96 ..... 46.64 .39 (b) 7.28 6.89 0.00 (2.38)
Year ended 11/30/95 ..... 31.98 (.30)(b) 18.13 17.83 0.00 (3.17)
1/1/94 to 11/30/94** .... 26.12 (.32) 6.18 5.86 0.00 0.00
Year ended 12/31/93 ..... 28.20 (.29) 6.39 6.10 0.00 (8.18)
Year ended 12/31/92 ..... 26.38 (.22)(b) 4.31 4.09 0.00 (2.27)
Year ended 12/31/91 ..... 19.44 (.02) 10.57 10.55 0.00 (3.61)
Year ended 12/31/90 ..... 21.57 (.03) (.56) (.59) 0.00 (1.54)
Year ended 12/31/89 ..... 20.35 0.00 1.22 1.22 0.00 0.00
Year ended 12/31/88 ..... 20.22 (.03) .16 .13 0.00 0.00
Quasar Fund
Class A
Year ended 9/30/97 ...... $ 27.92 $ (.24)(b) $ 6.80 $ 6.56 $ 0.00 $ (4.11)
Year ended 9/30/96 ...... 24.16 (.25) 8.82 8.57 0.00 (4.81)
Year ended 9/30/95 ...... 22.65 (.22)(b) 5.59 5.37 0.00 (3.86)
Year ended 9/30/94 ...... 24.43 (.60) (.36) (.96) 0.00 (.82)
Year ended 9/30/93 ...... 19.34 (.41) 6.38 5.97 0.00 (.88)
Year ended 9/30/92 ...... 21.27 (.24) (1.53) (1.77) 0.00 (.16)
Year ended 9/30/91 ...... 15.67 (.05) 5.71 5.66 (.06) 0.00
Year ended 9/30/90 ...... 24.84 .03(b) (7.18) (7.15) 0.00 (2.02)
Year ended 9/30/89 ...... 17.60 .02(b) 7.40 7.42 0.00 (.18)
Year ended 9/30/88 ...... 24.47 (.08) (2.08) (2.16) 0.00 (4.71)
International Fund
Class A
Year ended 6/30/97 ...... $ 18.32 $ .06(b) $ 1.51 $ 1.57 $ (.12) $ (1.08)
Year ended 6/30/96 ...... 16.81 .05(b) 2.51 2.56 0.00 (1.05)
Year ended 6/30/95 ...... 18.38 .04 .01 .05 0.00 (1.62)
Year ended 6/30/94 ...... 16.01 (.09) 3.02 2.93 0.00 (.56)
Year ended 6/30/93 ...... 14.98 (.01) 1.17 1.16 (.04) (.09)
Year ended 6/30/92 ...... 14.00 .01(b) 1.04 1.05 (.07) 0.00
Year ended 6/30/91 ...... 17.99 .05 (3.54) (3.49) (.03) (.47)
Year ended 6/30/90 ...... 17.24 .03 2.87 2.90 (.04) (2.11)
Year ended 6/30/89 ...... 16.09 .05 3.73 3.78 (.13) (2.50)
Year ended 6/30/88 ...... 23.70 .17 (1.22) (1.05) (.21) (6.35)
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Please refer to footnotes on page 52.
48
<PAGE>
<TABLE>
<CAPTION>
Total Net Assets Ratio of Net
Total Net Asset Investment At End Of Ratio Of Investment
Dividends Value Return Based Period Expenses Income (Loss) Average
And End Of on Net Asset (000's To Average To Average Portfolio Commission
Fiscal Year or Period Distributions Period Value (a) omitted) Net Assets Net Assets Turnover Rate Rate(k)
--------------------- ------------- --------- ----------- ----------- ----------- ----------- ------------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Alliance Fund
Class A
Year ended 11/30/97...... $ (1.08) $ 8.70 31.82% $ 1,201,435 1.03% (.29)% 158% $ 0.0571
Year ended 11/30/96...... (1.09) 7.71 16.49 999,067 1.04 .30 80 0.0646
Year ended 11/30/95...... (1.01) 7.72 37.87 945,309 1.08 .31 81 --
1/1/94 to 11/30/94**..... 0.00 6.63 (3.21) 760,679 1.05* .21* 63 --
Year ended 12/31/93...... (.78) 6.85 14.26 831,814 1.01 .27 66 --
Year ended 12/31/92...... (.53) 6.68 14.70 794,733 .81 .79 58 --
Year ended 12/31/91...... (.70) 6.29 33.91 748,226 .83 1.03 74 --
Year ended 12/31/90...... (1.42) 5.22 (4.36) 620,374 .81 1.56 71 --
Year ended 12/31/89...... (.04) 6.87 23.42 837,429 .75 1.79 81 --
Year ended 12/31/88...... (.43) 5.60 17.10 760,619 .82 1.38 65 --
Growth Fund (i)
Class A
Year ended 10/31/97...... $ (1.03) $ 43.95 29.54% $ 783,110 1.26%(l) (.25)% 48% $ 0.0562
Year ended 10/31/96...... (.82) 34.91 21.65 499,459 1.30 .15 46 0.0584
Year ended 10/31/95...... (.52) 29.48 20.18 285,161 1.35 .56 61 --
5/1/94 to 10/31/94**..... 0.00 25.08 4.98 167,800 1.35* .86* 24 --
Year ended 4/30/94....... (2.32) 23.89 15.66 102,406 1.40 (f) .32 87 --
Year ended 4/30/93....... (1.37) 22.67 18.89 13,889 1.40 (f) .20 124 --
Year ended 4/30/92....... (1.87) 20.31 23.61 8,228 1.40 1.44 137 --
9/4/90++ to 4/30/91...... (.06) 17.94 32.40 713 1.40* 1.99* 130 --
Premier Growth Fund
Class A
Year ended 11/30/97...... $ (1.08) $ 22.00 30.46% $ 373,099 1.57% (.52)% 76% $ 0.0594
Year ended 11/30/96...... (1.27) 17.98 21.52 172,870 1.65 (.27) 95 0.0651
Year ended 11/30/95...... (.67) 16.09 49.95 72,366 1.75 (.28) 114 --
Year ended 11/30/94...... 0.00 11.41 (3.14) 35,146 1.96 (.67) 98 --
Year ended 11/30/93...... (.01) 11.78 9.26 40,415 2.18 (.61) 68 --
9/28/92+ to 11/30/92..... 0.00 10.79 7.90 4,893 2.17* .91* 0 --
Technology Fund
Class A
Year ended 11/30/97...... $ (.42) $ 54.44 7.32% $ 624,716 1.67%(l) (.97)% 51% $ 0.0564
Year ended 11/30/96...... (2.38) 51.15 16.05 594,861 1.74 (.87) 30 0.0612
Year ended 11/30/95...... (3.17) 46.64 61.93 398,262 1.75 (.77) 55 --
1/1/94 to 11/30/94**..... 0.00 31.98 22.43 202,929 1.66* (1.22)* 55 --
Year ended 12/31/93...... (8.18) 26.12 21.63 173,732 1.73 (1.32) 64 --
Year ended 12/31/92...... (2.27) 28.20 15.50 173,566 1.61 (.90) 73 --
Year ended 12/31/91...... (3.61) 26.38 54.24 191,693 1.71 (.20) 134 --
Year ended 12/31/90...... (1.54) 19.44 (3.08) 131,843 1.77 (.18) 147 --
Year ended 12/31/89...... 0.00 21.57 6.00 141,730 1.66 .02 139 --
Year ended 12/31/88...... 0.00 20.35 0.64 169,856 1.42 (.16) 139 --
Quasar Fund
Class A
Year ended 9/30/97....... $ (4.11) $ 30.37 27.81% $ 402,081 1.67% (.91)% 135% $ 0.0536
Year ended 9/30/96....... (4.81) 27.92 42.42 229,798 1.79 (1.11) 168 0.0596
Year ended 9/30/95....... (3.86) 24.16 30.73 146,663 1.83 (1.06) 160 --
Year ended 9/30/94....... (.82) 22.65 (4.05) 155,470 1.67 (1.15) 110 --
Year ended 9/30/93....... (.88) 24.43 31.58 228,874 1.65 (1.00) 102 --
Year ended 9/30/92....... (.16) 19.34 (8.34) 252,140 1.62 (.89) 128 --
Year ended 9/30/91....... (.06) 21.27 36.28 333,806 1.64 (.22) 118 --
Year ended 9/30/90....... (2.02) 15.67 (30.81) 251,102 1.66 .16 90 --
Year ended 9/30/89....... (.18) 24.84 42.68 263,099 1.73 .10 90 --
Year ended 9/30/88....... (4.71) 17.60 (8.61) 90,713 1.28 (.40) 58 --
International Fund
Class A
Year ended 6/30/97....... $ (1.20) $ 18.69 9.30% $ 190,173 1.74% .31% 94% $ 0.0363
Year ended 6/30/96....... (1.05) 18.32 15.83 196,261 1.72 .31 78 --
Year ended 6/30/95....... (1.62) 16.81 .59 165,584 1.73 .26 119 --
Year ended 6/30/94....... (.56) 18.38 18.68 201,916 1.90 (.50) 97 --
Year ended 6/30/93....... (.13) 16.01 7.86 161,048 1.88 (.14) 94 --
Year ended 6/30/92....... (.07) 14.98 7.52 179,807 1.82 .07 72 --
Year ended 6/30/91....... (.50) 14.00 (19.34) 214,442 1.73 .37 71 --
Year ended 6/30/90....... (2.15) 17.99 16.98 265,999 1.45 .33 37 --
Year ended 6/30/89....... (2.63) 17.24 27.65 166,003 1.41 .39 87 --
Year ended 6/30/88....... (6.56) 16.09 (4.20) 132,319 1.41 .84 55 --
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
49
<PAGE>
<TABLE>
<CAPTION>
Net Net Net Distributions
Asset Realized and Increase In Excess
Value Unrealized (Decrease) In Dividends From Of Net Distributions
Beginning Of Net Investment Gain(Loss)On Net Asset Value Net Investment Investment From Net
Fiscal Year or Period Period Income (Loss) Investments From Operations Income Income Realized Gains
--------------------- ------------- -------------- ------------- --------------- ------------- ----------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
Worldwide Privatization Fund
Class A
Year ended 6/30/97 ...... $ 12.13 $ .15(b) $ 2.55 $ 2.70 $ (.15) $ 0.00 $ (1.42)
Year ended 6/30/96 ...... 10.18 .10(b) 1.85 1.95 0.00 0.00 0.00
Year ended 6/30/95 ...... 9.75 .06 .37 .43 0.00 0.00 0.00
6/2/94+ to 6/30/94 ...... 10.00 .01 (.26) (.25) 0.00 0.00 0.00
New Europe Fund
Class A
Year ended 7/31/97 ...... $ 15.84 $ .07(b) $ 4.20 $ 4.27 $ (.15) $ (.03) $ (1.32)
Year ended 7/31/96 ...... 15.11 .18 1.02 1.20 0.00 0.00 (.47)
Year ended 7/31/95 ...... 12.66 .04 2.50 2.54 (.09) 0.00 0.00
Period ended 7/31/94** .. 12.53 .09 .04 .13 0.00 0.00 0.00
Year ended 2/28/94 ...... 9.37 .02(b) 3.14 3.16 0.00 0.00 0.00
Year ended 2/28/93 ...... 9.81 .04 (.33) (.29) (.15) 0.00 0.00
Year ended 2/29/92 ...... 9.76 .02(b) .05 .07 (.02) 0.00 0.00
4/2/90+ to 2/28/91 ...... 11.11(e) .26 (.91) (.65) (.26) 0.00 (.44)
All-Asia Investment Fund
Class A
Year ended 10/31/97 ..... $ 11.04 $ (.21)(b)(c) $ (2.95) $ (3.16) $ 0.00 $ 0.00 $ (.34)
Year ended 10/31/96 ..... 10.45 (.21)(b)(c) .88 .67 0.00 0.00 (.08)
11/28/94+ to 10/31/95 ... 10.00 (.19)(c) .64 .45 0.00 0.00 0.00
Global Small Cap Fund
Class A
Year ended 7/31/97 ...... $ 11.61 $ (.15)(b) $ 2.97 $ 2.82 $ 0.00 $ 0.00 $ (1.56)
Year ended 7/31/96 ...... 10.38 (.14)(b) 1.90 1.76 0.00 0.00 (.53)
Year ended 7/31/95 ...... 11.08 (.09) 1.50 1.41 0.00 0.00 (2.11)(j)
Period ended 7/31/94** .. 11.24 (.15)(b) (.01) (.16) 0.00 0.00 0.00
Year ended 9/30/93 ...... 9.33 (.15) 2.49 2.34 0.00 0.00 (.43)
Year ended 9/30/92 ...... 10.55 (.16) (1.03) (1.19) 0.00 0.00 (.03)
Year ended 9/30/91 ...... 8.26 (.06) 2.35 2.29 0.00 0.00 0.00
Year ended 9/30/90 ...... 15.54 (.05)(b) (4.12) (4.17) 0.00 0.00 (3.11)
Year ended 9/30/89 ...... 11.41 (.03) 4.25 4.22 0.00 0.00 (.09)
Year ended 9/30/88 ...... 15.07 (.05) (1.83) (1.88) 0.00 0.00 (1.78)
Global Environment Fund (n)
Class A
Year ended 10/31/97 ..... $ 16.48 $ (.23)(b) $ 3.65 $ 3.42 $ 0.00 $ 0.00 $ (1.13)
Year ended 10/31/96 ..... 12.37 (.13) 4.26 4.13 (.02) 0.00 0.00
Year ended 10/31/95 ..... 11.74 .03 .60 .63 0.00 0.00 0.00
Year ended 10/31/94 ..... 10.97 0.00 .77 .77 0.00 0.00 0.00
Year ended 10/31/93 ..... 10.78 .01 .18 .19 0.00 0.00 0.00
Year ended 10/31/92 ..... 13.12 .01 (2.17) (2.16) (.10) 0.00 (.08)
Year ended 10/31/91 ..... 12.46 .13 .87 1.00 (.25) 0.00 (.09)
1/1/90+ to 10/31/90 ..... 13.83 .20 (1.57) (1.37) 0.00 0.00 0.00
Strategic Balanced Fund (i)
Class A
Year ended 7/31/97 ...... $ 18.48 $ .47(b)(c) $ 3.56 $ 4.03 $ (.39) $ 0.00 $ (2.33)
Year ended 7/31/96 ...... 17.98 .35(b)(c) 1.08 1.43 (.32) 0.00 (.61)
Year ended 7/31/95 ...... 16.26 .34(c) 1.64 1.98 (.22) 0.00 (.04)
Period ended 7/31/94** .. 16.46 .07(c) (.27) (.20) 0.00 0.00 0.00
Year ended 4/30/94 ...... 16.97 .16(c) .74 .90 (.24) 0.00 (1.17)
Year ended 4/30/93 ...... 17.06 .39(c) .59 .98 (.42) 0.00 (.65)
Year ended 4/30/92 ...... 14.48 .27(c) 2.80 3.07 (.17) 0.00 (.32)
9/4/90++ to 4/30/91 ..... 12.51 .34(c) 1.66 2.00 (.03) 0.00 0.00
Balanced Shares
Class A
Year ended 7/31/97 ...... $ 14.01 $ .31(b) $ 3.97 $ 4.28 $ (.32) $ 0.00 $ (.18)
Year ended 7/31/96 ...... 15.08 .37 .45 .82 (.41) 0.00 (1.48)
Year ended 7/31/95 ...... 13.38 .46 1.62 2.08 (.36) 0.00 (.02)
Period ended 7/31/94** .. 14.40 .29 (.74) (.45) (.28) 0.00 (.29)
Year ended 9/30/93 ...... 13.20 .34 1.29 1.63 (.43) 0.00 0.00
Year ended 9/30/92 ...... 12.64 .44 .57 1.01 (.45) 0.00 0.00
Year ended 9/30/91 ...... 10.41 .46 2.17 2.63 (.40) 0.00 0.00
Year ended 9/30/90 ...... 14.13 .45 (2.14) (1.69) (.40) 0.00 (1.63)
Year ended 9/30/89 ...... 12.53 .42 2.18 2.60 (.46) 0.00 (.54)
Year ended 9/30/88 ...... 16.33 .46 (1.07) (.61) (.44) 0.00 (2.75)
Income Builder Fund (h)
Class A
Year ended 10/31/97 ..... $ 11.57 $ .50(b) $ 1.62 $ 2.12 $ (.51) $ 0.00 $ (.61)
Year ended 10/31/96 ..... 10.70 .56(b) .98 1.54 (.55) 0.00 (.12)
Year ended 10/31/95 ..... 9.69 .93(b) .59 1.52 (.51) 0.00 0.00
3/25/94++ to 10/31/94 ... 10.00 .96 (1.02) (.06) (.05)(g) 0.00 (.20)
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Please refer to the footnotes on page 52.
50
<PAGE>
<TABLE>
<CAPTION>
Total Net Assets Ratio of Net
Total Net Asset Investment At End Of Ratio Of Investment
Dividends Value Return Based Period Expenses Income (Loss) Average
And End Of on Net Asset (000's To Average To Average Portfolio Commission
Fiscal Year or Period Distributions Period Value(a) omitted) Net Assets Net Assets Turnover Rate Rate(k)
--------------------- ------------- --------- ------------ ---------- ---------- ----------- ------------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Worldwide Privatization Fund
Class A
Year ended 6/30/97 ...... $ (1.57) $ 13.26 25.16% $ 561,793 1.72% 1.27% 48% $0.0132
Year ended 6/30/96 ...... 0.00 12.13 19.16 672,732 1.87 .95 28 --
Year ended 6/30/95 ...... 0.00 10.18 4.41 13,535 2.56 .66 36 --
6/2/94+ to 6/30/94 ...... 0.00 9.75 (2.50) 4,990 2.75* 1.03* 0 --
New Europe Fund
Class A
Year ended 7/31/97 ...... $ (1.50) $ 18.61 28.78% $ 78,578 2.05%(l) .40% 89% $0.0569
Year ended 7/31/96 ...... (.47) 15.84 8.20 74,026 2.14 1.10 69 --
Year ended 7/31/95 ...... (.09) 15.11 20.22 86,112 2.09 .37 74 --
Period ended 7/31/94** .. 0.00 12.66 1.04 86,739 2.06* 1.85* 35 --
Year ended 2/28/94 ...... 0.00 12.53 33.73 90,372 2.30 .17 94 --
Year ended 2/28/93 ...... (.15) 9.37 (2.82) 79,285 2.25 .47 125 --
Year ended 2/29/92 ...... (.02) 9.81 .74 108,510 2.24 .16 34 --
4/2/90+ to 2/28/91 ...... (.70) 9.76 (5.63) 188,016 1.52* 2.71* 48 --
All-Asia Investment Fund
Class A
Year ended 10/31/97 ..... $ (.34) $ 7.54 (29.61)% $ 5,916 3.45%(f) (1.97)% 70% $0.0248
Year ended 10/31/96 ..... (.08) 11.04 6.43 12,284 3.37(f) (1.75) 66 0.0280
11/28/94+ to 10/31/95 ... 0.00 10.45 4.50 2,870 4.42(f)* (1.87)* 90 --
Global Small Cap Fund
Class A
Year ended 7/31/97 ...... $ (1.56) $ 12.87 26.47% $ 85,217 2.41%(l) (1.25)% 129% $0.0364
Year ended 7/31/96 ...... (.53) 11.61 17.46 68,623 2.51 (1.22) 139 --
Year ended 7/31/95 ...... (2.11) 10.38 16.62 60,057 2.54(f) (1.17) 128 --
Period ended 7/31/94** .. 0.00 11.08 (1.42) 61,372 2.42* (1.26)* 78 --
Year ended 9/30/93 ...... (.43) 11.24 25.83 65,713 2.53 (1.13) 97 --
Year ended 9/30/92 ...... (.03) 9.33 (11.30) 58,491 2.34 (.85) 108 --
Year ended 9/30/91 ...... 0.00 10.55 27.72 84,370 2.29 (.55) 104 --
Year ended 9/30/90 ...... (3.11) 8.26 (31.90) 68,316 1.73 (.46) 89 --
Year ended 9/30/89 ...... (.09) 15.54 37.34 113,583 1.56 (.17) 106 --
Year ended 9/30/88 ...... (1.78) 11.41 (8.11) 90,071 1.54 (.50) 74 --
Global Environment Fund (n)
Class A
Year ended 10/31/97 ..... $ (1.13) $ 18.77 23.51% $ 52,378 2.39% (1.35)% 145% $0.0506
Year ended 10/31/96 ..... (.02) 16.48 33.48 100,271 1.60 (.85) 268 0.0313
Year ended 10/31/95 ..... 0.00 12.37 5.37 85,416 1.57 .21 109 --
Year ended 10/31/94 ..... 0.00 11.74 7.02 81,102 1.67 (.04) 42 --
Year ended 10/31/93 ..... 0.00 10.97 1.76 75,805 1.62 .15 25 --
Year ended 10/31/92 ..... (.18) 10.78 (16.59) 74,442 1.63 .10 41 --
Year ended 10/31/91 ..... (.34) 13.12 8.66 90,612 1.49 .95 32 --
1/1/90+ to 10/31/90 ..... 0.00 12.46 (10.68) 86,041 1.72* 3.95* 4 --
Strategic Balanced Fund (i)
Class A
Year ended 7/31/97 ...... $ (2.72) $ 19.79 23.90% $ 20,312 1.41%(f)(l) 2.50% 170% $0.0395
Year ended 7/31/96 ...... (.93) 18.48 8.05 18,329 1.40(f) 1.78 173 --
Year ended 7/31/95 ...... (.26) 17.98 12.40 10,952 1.40(f) 2.07 172 --
Period ended 7/31/94** .. 0.00 16.26 (1.22) 9,640 1.40*(f) 1.63* 21 --
Year ended 4/30/94 ...... (1.41) 16.46 5.06 9,822 1.40(f) 1.67 139 --
Year ended 4/30/93 ...... (1.07) 16.97 5.85 8,637 1.40(f) 2.29 98 --
Year ended 4/30/92 ...... (.49) 17.06 20.96 6,843 1.40 1.92 103 --
9/4/90++ to 4/30/91 ..... (.03) 14.48 16.00 443 1.40* 3.54* 137 --
Balanced Shares
Class A
Year ended 7/31/97 ...... $ (2.12) $ 16.17 33.46% $ 115,500 1.47%(m) 2.11% 207% $0.0552
Year ended 7/31/96 ...... (1.89) 14.01 5.23 102,567 1.38 2.41 227 --
Year ended 7/31/95 ...... (.38) 15.08 15.99 122,033 1.32 3.12 179 --
Period ended 7/31/94** .. (.57) 13.38 (3.21) 157,637 1.27* 2.50* 116 --
Year ended 9/30/93 ...... (.43) 14.40 12.52 172,484 1.35 2.50 188 --
Year ended 9/30/92 ...... (.45) 13.20 8.14 143,883 1.40 3.26 204 --
Year ended 9/30/91 ...... (.40) 12.64 25.52 154,230 1.44 3.75 70 --
Year ended 9/30/90 ...... (2.03) 10.41 (13.12) 140,913 1.36 4.01 169 --
Year ended 9/30/89 ...... (1.00) 14.13 22.27 159,290 1.42 3.29 132 --
Year ended 9/30/88 ...... (3.19) 12.53 (1.10) 111,515 1.42 3.74 190 --
Income Builder Fund (h)
Class A
Year ended 10/31/97 ..... $ (1.12) $ 12.57 19.36% $ 2,367 2.09% 4.18% 159% $0.0513
Year ended 10/31/96 ..... (.67) 11.57 14.82 2,056 2.20 4.92 108 0.0600
Year ended 10/31/95 ..... (.51) 10.70 16.22 1,398 2.38 5.44 92 --
3/25/94++ to 10/31/94 ... (.25) 9.69 (.54) 600 2.52* 6.11* 126 --
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
51
<PAGE>
<TABLE>
<CAPTION>
Net Net Net Distributions
Asset Realized and Increase In Excess
Value Unrealized (Decrease) In Dividends From Of Net Distributions
Beginning Of Net Investment Gain(Loss)On Net Asset Value Net Investment Investment From Net
Fiscal Year or Period Period Income (Loss) Investments From Operations Income Income Realized Gains
--------------------- ------------- -------------- ------------- --------------- ------------- ----------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
Utility Income Fund
Class A
Year ended 11/30/97 ..... $ 10.59 $ .32(b)(c) $ 2.04 $ 2.36 $ (.34) $ 0.00 $ (.13)
Year ended 11/30/96 ..... 10.22 .18(b)(c) .65 .83 (.46) 0.00 0.00
Year ended 11/30/95 ..... 8.97 .27(c) 1.43 1.70 (.45) 0.00 0.00
Year ended 11/30/94 ..... 9.92 .42(c) (.89) (.47) (.48) 0.00 0.00
10/18/93+ to 11/30/93 ... 10.00 .02(c) (.10) (.08) 0.00 0.00 0.00
Growth and Income Fund
Class A
Year ended 10/31/97 ..... $ 3.00 $ .04(b) $ .87 $ .91 $ (.05) $ 0.00 $ (.38)
Year ended 10/31/96 ..... 2.71 .05 .50 .55 (.05) 0.00 (.21)
Year ended 10/31/95 ..... 2.35 .02 .52 .54 (.06) 0.00 (.12)
Year ended 10/31/94 ..... 2.61 .06 (.08) (.02) (.06) 0.00 (.18)
Year ended 10/31/93 ..... 2.48 .06 .29 .35 (.06) 0.00 (.16)
Year ended 10/31/92 ..... 2.52 .06 .11 .17 (.06) 0.00 (.15)
Year ended 10/31/91 ..... 2.28 .07 .56 .63 (.09) 0.00 (.30)
Year ended 10/31/90 ..... 3.02 .09 (.30) (.21) (.10) 0.00 (.43)
Year ended 10/31/89 ..... 3.05 .10 .43 .53 (.08) 0.00 (.48)
Year ended 10/31/88 ..... 3.48 .10 .33 .43 (.08) 0.00 (.78)
Real Estate Investment Fund
Class A
10/1/96+ to 8/31/97 ..... $ 10.00 $ .30(b) $ 2.88 $ 3.18 $ (.38)(m) $ 0.00 $ 0.00
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
+ Commencement of operations.
++ Commencement of distribution.
* Annualized.
** Reflects a change in fiscal year end.
(a) Total investment return is calculated assuming an initial investment made
at the net asset value at the beginning of the period, reinvestment of all
dividends and distributions at the net asset value during the period, and
redemption on the last day of the period. Initial sales charges or
contingent deferred sales charges are not reflected in the calculation of
total investment returns. Total investment returns calculated for a period
of less than one year is not annualized.
(b) Based on average shares outstanding.
(c) Net of fee waivers and expense reimbursements.
(d) Adjusted for a 200% stock dividend paid to shareholders of record on
January 15, 1988.
(e) Net of offering costs of ($.05).
(f) Net of expenses assumed and/or waived/reimbursed. If the following Funds
had borne all expenses in their most recent five fiscal years, their
expense ratios, without giving effect to the expense offset arrangement
described in (l) below, would have been as follows:
<TABLE>
<CAPTION>
1993 1994 1995 1996 1997
<S> <C> <C> <C> <C> <C>
All-Asia Investment Fund
Class A -- -- 10.57%# 3.61% 3.57%
Growth Fund
Class A 1.84% 1.46% -- --
Global Small Cap Fund
Class A -- -- 2.61% --
Strategic Balanced Fund
Class A 1.85% 1.70%1 1.81% 1.76% 2.06%
1.94%#2
Utility Income Fund
Class A 145.63%# 13.72% 4.86%# 3.38% 3.55%
</TABLE>
- ------------
# annualized
1. For the period ended April 30, 1994
2. For the period ended July 31, 1994
For the expense ratios of the Funds in years prior to fiscal year 1993,
assuming the Funds had borne all expenses, please see the Financial
Statements in each Fund's Statement of Additional Information.
(g) "Dividends from Net Investment Income" includes a return of capital. Income
Builder Fund had a return of capital with respect to Class A shares, for
the period ended October 31, 1994, of $(.01).
(h) On March 25, 1994, all existing shares of Income Builder Fund, previously
known as Alliance Multi-Market Income and Growth Trust, were converted into
Class C shares.
(i) Prior to July 22, 1993, Equitable Capital Management Corporation
("Equitable Capital") served as the investment adviser to the predecessor
to The Alliance Portfolios, of which Growth Fund and Strategic Balanced
Fund are series. On July 22, 1993, Alliance acquired the business and
substantially all assets of Equitable Capital and became investment adviser
to the Funds.
(j) "Distributions from Net Realized Gains" includes a return of capital.
Global Small Cap Fund had a return of capital with respect to Class A
shares, for the year ended July 31, 1995, of $(.12).
(k) For fiscal years beginning on or after September 1, 1995, a fund is
required to disclose its average commission rate per share for trades on
which commissions are changed.
(l) Amounts do not reflect the impact of expense offset arrangements with the
transfer agent. Taking into account such expense offset arrangements, the
ratios of expenses to average net assets, assuming the assumption and/or
waiver/reimbursement of expenses described in (f) above, would have been as
follows:
<TABLE>
<CAPTION>
1997 1997
---- ----
<S> <C> <C> <C>
International Fund Growth Fund
Class A 1.73% Class A 1.25%
Global Small Cap Fund Technology Fund
Class A 2.38% Class A 1.66%
Strategic Balanced Fund
Class A 1.40%
New Europe Fund
Class A 2.04%
Balanced Shares
Class A 1.46%
Growth and Income
Class A .91%
</TABLE>
(m) Distributions from net investment income include a tax return of capital of
$0.08.
(n) The Global Environment Fund operated as a closed-end investment company
through October 3, 1997 when it converted to an open-end investment company
and all shares of its common stock then outstanding were reclassified as
Class A shares.
52
<PAGE>
<TABLE>
<CAPTION>
Total Net Assets Ratio of Net
Total Net Asset Investment At End Of Ratio Of Investment
Dividends Value Return Based Period Expenses Income (Loss) Average
And End Of on Net Asset (000's To Average To Average Portfolio Commission
Fiscal Year or Period Distributions Period Value(a) omitted) Net Assets Net Assets Turnover Rate Rate(k)
--------------------- ------------- --------- ------------ ---------- ---------- ----------- ------------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Utility Income Fund
Class A
Year ended 11/30/97 ..... $ (.47) $ 12.48 23.10% $ 4,117 1.50%(f) 2.89% 37% $ 0.0442
Year ended 11/30/96 ..... (.46) 10.59 8.47 3,294 1.50 (f) 1.67 98 0.0536
Year ended 11/30/95 ..... (.45) 10.22 19.58 2,748 1.50 (f) 2.48 162 --
Year ended 11/30/94 ..... (.48) 8.97 (4.86) 1,068 1.50 (f) 4.13 30 --
10/18/93+ to 11/30/93 ... 0.00 9.92 (.80) 229 1.50*(f) 2.35* 11 --
Growth and Income Fund
Class A
Year ended 10/31/97 ..... $ (.43) $ 3.48 33.28% $ 787,566 .92%(l) 1.39% 88% $ 0.0589
Year ended 10/31/96 ..... (.26) 3.00 21.51 553,151 .97 1.73 88 0.0625
Year ended 10/31/95 ..... (.18) 2.71 24.21 458,158 1.05 1.88 142 --
Year ended 10/31/94 ..... (.24) 2.35 (.67) 414,386 1.03 2.36 68 --
Year ended 10/31/93 ..... (.22) 2.61 14.98 459,372 1.07 2.38 91 --
Year ended 10/31/92 ..... (.21) 2.48 7.23 417,018 1.09 2.63 104 --
Year ended 10/31/91 ..... (.39) 2.52 31.03 409,597 1.14 2.74 84 --
Year ended 10/31/90 ..... (.53) 2.28 (8.55) 314,670 1.09 3.40 76 --
Year ended 10/31/89 ..... (.56) 3.02 21.59 377,168 1.08 3.49 79 --
Year ended 10/31/88 ..... (.86) 3.05 16.45 350,510 1.09 3.09 66 --
Real Estate Investment Fund
Class A
10/1/96+ to 8/31/97 ..... $ (.38) $ 12.80 32.24% $ 37,638 1.77%(l) 2.73%* 20% $ 0.0518
</TABLE>
53
<PAGE>
- --------------------------------------------------------------------------------
GENERAL INFORMATION
- --------------------------------------------------------------------------------
PORTFOLIO TRANSACTIONS
Consistent with the Conduct Rules of the National Association of Securities
Dealers, Inc., and subject to seeking best price and execution, a Fund may
consider sales of its shares as a factor in the selection of dealers to enter
into portfolio transactions with the Fund.
ORGANIZATION
Each of the following Funds is a Maryland corporation organized in the year
indicated: The Alliance Fund, Inc. (1938), Alliance Balanced Shares, Inc.
(1932), Alliance Premier Growth Fund, Inc. (1992), Alliance Technology Fund,
Inc. (1980), Alliance Quasar Fund, Inc. (1968), Alliance Worldwide Privatization
Fund, Inc. (1994), Alliance New Europe Fund, Inc. (1990), Alliance All-Asia
Investment Fund, Inc. (1994), Alliance Global Small Cap Fund, Inc. (1966),
Alliance Global Environment Fund, Inc. (1990), Alliance Income Builder Fund,
Inc. (1991), Alliance Utility Income Fund, Inc. (1993), Alliance Growth and
Income Fund, Inc. (1932) and Real Estate Investment Fund, Inc. (1996). Each of
the following Funds is either a Massachusetts business trust or a series of a
Massachusetts business trust organized in the year indicated: Alliance Growth
Fund and Alliance Strategic Balanced Fund (each a series of The Alliance
Portfolios) (1987), and Alliance International Fund (1980). Prior to August 2,
1993, The Alliance Portfolios was known as The Equitable Funds, Growth Fund was
known as The Equitable Growth Fund and Strategic Balanced Fund was known as The
Equitable Balanced Fund. Prior to March 22, 1994, Income Builder Fund was known
as Alliance Multi-Market Income and Growth Trust, Inc.
It is anticipated that annual shareholder meetings will not be held; shareholder
meetings will be held only when required by federal or state law. Shareholders
have available certain procedures for the removal of Directors.
A shareholder in a Fund 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. The Funds are empowered to
establish, without shareholder approval, additional portfolios, which may have
different investment objectives, and additional classes of shares. If an
additional portfolio or class were established in a Fund, each share of the
portfolio or class would normally be entitled to one vote for all purposes.
Generally, shares of each portfolio and class would vote together as a single
class on matters, such as the election of Directors, that affect each portfolio
and class in substantially the same manner. Advisor Class, Class A, Class B and
Class C shares have identical voting, dividend, liquidation and other rights,
except that each class bears its own transfer agency expenses, each of Class A,
Class B and Class C shares bears its own distribution expenses and Class B and
Advisor Class shares convert to Class A shares under certain circumstances. Each
class of shares votes separately with respect to matters for which separate
class voting is appropriate under applicable law. Shares are freely
transferable, are entitled to dividends as determined by the Directors and, in
liquidation of a Fund, are entitled to receive the net assets of the Fund. Since
this Prospectus sets forth information about all the Funds, it is theoretically
possible that a Fund might be liable for any materially inaccurate or incomplete
disclosure in this Prospectus concerning another Fund. Based on the advice of
counsel, however, the Funds believe that the potential liability of each Fund
with respect to the disclosure in this Prospectus extends only to the disclosure
relating to that Fund. Certain additional matters relating to a Fund's
organization are discussed in its Statement of Additional Information.
REGISTRAR, TRANSFER AGENT AND DIVIDEND-DISBURSING AGENT
AFS, an indirect wholly-owned subsidiary of Alliance, located at 500 Plaza
Drive, Secaucus, New Jersey 07094, acts as each Fund's registrar, transfer agent
and dividend-disbursing agent for a fee based upon the number of shareholder
accounts maintained for the Funds.
PRINCIPAL UNDERWRITER
AFD, an indirect wholly-owned subsidiary of Alliance, located at 1345 Avenue of
the Americas, New York, New York 10105, is the principal underwriter of shares
of the Funds.
PERFORMANCE INFORMATION
From time to time, the Funds advertise their "total return," which is computed
separately for each class of shares, including Advisor Class shares. Such
advertisements disclose a Fund's average annual compounded total return for the
periods prescribed by the Commission. A Fund's total return for each such period
is computed by finding, through the use of a formula prescribed by the
Commission, the average annual compounded rate of return over the period that
would equate an assumed initial amount invested to the value of the investment
at the end of the period. For purposes of computing total return, income
dividends and capital gains distributions paid on shares of a Fund are assumed
to have been reinvested when paid and the maximum sales charges applicable to
purchases and redemptions of a Fund's shares are assumed to have been paid.
Balanced Shares, Growth and Income Fund, Income Builder Fund, Real Estate
Investment Fund and Utility Income Fund may also advertise their "yield," which
is also computed separately for each class of shares, including Advisor Class
shares. A Fund's yield for any 30-day (or one-month) period is computed by
dividing the net investment income per share earned during such period by the
maximum public offering price per share on the last day of the period, and then
annualizing such 30-day (or one-month) yield in accordance with a formula
prescribed by the Commission which provides for compounding on a semi-annual
basis.
54
<PAGE>
Balanced Shares, Income Builder Fund, Utility Income Fund, Real Estate
Investment Fund and Growth and Income Fund may also state in sales literature an
"actual distribution rate" for each class which is computed in the same manner
as yield except that actual income dividends declared per share during the
period in question are substituted for net investment income per share. The
actual distribution rate is computed separately for each class of shares,
including Advisor Class shares.
A Fund's advertisements may quote performance rankings or ratings of a Fund by
financial publications or independent organizations such as Lipper Analytical
Services, Inc. and Morningstar, Inc. or compare a Fund's performance to various
indices.
ADDITIONAL INFORMATION
This Prospectus and the Statements of Additional Information, which have been
incorporated by reference herein, do not contain all the information set forth
in the Registration Statements filed by the Funds with the Commission under the
Securities Act. Copies of the Registration Statements 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.
This prospectus does not constitute an offering in any state in which such
offering may not lawfully be made.
This prospectus is intended to constitute an offer by each Fund only of the
securities of which it is the issuer and is not intended to constitute an offer
by any Fund of the securities of any other Fund whose securities are also
offered by this prospectus. No Fund intends to make any representation as to the
accuracy or completeness of the disclosure in this prospectus relating to any
other Fund. See "General Information--Organization."
55
<PAGE>
================================================================================
Alliance Stock Funds
Subscription Application
- - Advisor Class
================================================================================
The Alliance Fund
Growth Fund
Premier Growth Fund
Technology Fund
Quasar Fund
International Fund
Worldwide Privatization Fund
New Europe Fund
All-Asia Investment Fund
Global Small Cap Fund
Global Environment Fund
Strategic Balanced Fund
Balanced Shares
Income Builder Fund
Real Estate Investment Fund
Utility Income Fund
Growth & Income Fund
To Open Your New Alliance Account...
Please complete the application and mail
it to:
Alliance Fund Services, Inc.
P.O. Box 1520
Secaucus, New Jersey 07096-1520
For certified or overnight deliveries, send to:
Alliance Fund Services, Inc.
500 Plaza Drive
Secaucus, New Jersey 07094
Section 1 Your Account Registration (Required)
Complete one of the available choices. To ensure proper tax reporting to the
IRS:
-- Individuals, Joint Tenants, Transfer on Death and Gift/Transfer to a
Minor:
o Indicate your name(s) exactly as it appears on your social
security card.
-- Transfer on Death:
o Ensure that your state participates
-- Trust/Other:
o Indicate the name of the entity exactly as it appeared on the
notice you received from the IRS when your Employer
Identification number was assigned.
Section 2 Your Address (Required) Complete in full.
-- Non-Resident Alien:
o Indicate your permanent country of residence.
Section 3 Your Initial Investment (Required)
For each Fund in which you are investing: (1) Write the three digit Fund number
in the column titled 'Indicate three digit Fund number located below'.
(2) Write the dollar amount of your initial purchase in the column titled
'Indicate Dollar Amount'.
(3) Check off a distribution
<PAGE>
option for your dividends. (4) Check off a distribution option for your capital
gains. All distributions (dividends and capital gains) will be reinvested into
your fund account unless you direct otherwise. If you want distributions sent
directly to your bank account, then you must complete Section 4D and attach a
preprinted, voided check for that account. If you want your distributions sent
to a third party you must complete Section 4E.
Section 4 Your Shareholder Options (Complete only those options you want)
A. Automatic Investment Plans (AIP) - You can make periodic investments into any
of your Alliance Funds in one of three ways. First, by a periodic withdrawal
($25 minimum) directly from your bank account and invested into an Alliance
Fund. Second, you can direct your distributions (dividends and capital gains)
from one Alliance Fund into another Fund. Or third, you can automatically
exchange monthly ($25 minimum) shares of one Alliance Fund for shares of another
Fund. To elect one of these options, complete the appropriate portion of Section
4A & 4D. If more than one dividend direction or monthly exchange is desired,
please call our Literature Center to obtain a Shareholder Account Services
Options Form for completion.
B. Telephone Transactions via EFT - Complete this option if you would like to be
able to transact via telephone between your fund account and your bank account.
C. Systematic Withdrawal Plans (SWP) - Complete this option if you wish to
periodically redeem dollars from one of your fund accounts. Payments can be made
via Electronic Funds Transfer (EFT) to your bank account or by check.
D. Bank Information - If you have elected any options that involve transactions
between your bank account and your fund account or have elected cash
distribution options and would like the payments sent to your bank account,
please tape a preprinted, voided check of the account you wish to use to this
section of the application.
E. Third Party Payment Details - If you have chosen cash distributions and/or a
Systematic Withdrawal Plan and would like the payments sent to a person and/or
address other than those provided in section 1 or 2, complete this option.
Medallion Signature Guarantee is required if your account is not maintained by a
broker dealer.
Section 5 Shareholder Authorization (Required)
All owners must sign. If it is a custodial, corporate, or trust account, the
custodian, an authorized officer, or the trustee respectively must sign.
If We Can Assist You In Any Way, Please Do Not Hesitate To Call Us At:
(800)221-5672.
================================================================================
For Literature Call: (800) 227-4618
================================================================================
<PAGE>
The Alliance Stock Funds Subscription Application - Advisor Class
<TABLE>
- --------------------------------------------------------------------------------------------------------------------------
1. YOUR ACCOUNT REGISTRATION (Please Print in Capital Letters and Mark Check Boxes Where Applicable)
- --------------------------------------------------------------------------------------------------------------------------
<S> <C>
|_| Individual Account { |_| Male |_| Female } --or-- Joint Account --or--
|_| Transfer On Death { |_| Male |_| Female } --or-- Gift/Transfer to a Minor
|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|
Owner or Custodian (First Name) (MI) (Last Name)
|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|
(First Name) Joint Owner*, Transfer On Death Beneficiary or Minor's Name (MI) (Last Name)
|_|_|_|-|_|_|-|_|_|_|_| If Uniform Gift/Transfer
Social Security Number of Owner or Minor (required to open account) to Minor Account:
|_| |_| Minor's State of Residence
If Joint Tenants Account: *The Account will be registered
"Joint Tenants with right of Survivorship" unless you indicate
otherwise below:
|_| In Common |_| By Entirety |_| Community Property
|_| Trust --or-- |_| Corporation --or-- |_| Other_____________________________
|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|
Name of Trustee if applicable (First Name) (MI) (Last Name)
|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|
Name of Trust or Corporation or Other Entity
|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|
Name of Trust or Corporation or Other Entity continued
|_|_|_|_|_|_|_|_| |_|_|_|_|_|_|_|_|_|
Trust Dated (MM,DD,YYYY) Tax ID Number (required to open account)
|_| Employer ID Number --or-- |_| Social Security
Number
- --------------------------------------------------------------------------------------------------------------------------
2. YOUR ADDRESS
- --------------------------------------------------------------------------------------------------------------------------
|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_| |_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|
Street Number Street Name
|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_| |_|_| |_|_|_|_|_|
City State Zip code
|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_| |_|_|_| - |_|_|_| - |_|_|_|_|
If Non-U.S., Specify Country Daytime Phone Number
|_| U.S. Citizen |_| Resident Alien |_| Non-Resident Alien
</TABLE>
Alliance Capital[LOGO](R)
1
<PAGE>
<TABLE>
- --------------------------------------------------------------------------------------------------------------------------
3. Your Initial Investment
- --------------------------------------------------------------------------------------------------------------------------
<S> <C>
I hereby subscribe for shares of the following Alliance Stock Fund(s) and elect distribution options as indicated.
Dividend and Capital Gain Distribution Options:
R Reinvest distributions into my fund account.
- ------------------------------------------ -
Broker/Dealer Use Only: Wire Confirm # C Send my distributions in cash to the address I have provided in
|_|_|_|_|_|_|_|_| - Section 2. (Complete Section 4D for direct deposit to your bank
- ------------------------------------------ account. Complete Section 4E for payment to a third party).
D Direct my distributions to another Alliance Fund. Complete the
- appropriate portion of Section 4A to direct your distributions
(dividends and capital gains) to another Alliance Fund.
- ------------- ============== ======================== =============================
Indicate three Distributions Options
digit Fund "Check One"
number located Indicate Dollar Amount =============================
below Dividends Captital Gains
Make all ============== ======================== =============================
checks
payable to: |_|_|_| $ R C D R C D
Alliance
Funds |_|_|_| $ R C D R C D
- ------------- |_|_|_| $ R C D R C D
|_|_|_| $ R C D R C D
==========================
Total Investment $
==========================
- --------------------------------------------------------------------------------------------------------------------------
Alliance Stock Fund Names and Numbers
- --------------------------------------------------------------------------------------------------------------------------
=======
Advisor
Class
=======
Domestic The Alliance Fund 444
Growth Fund 431
Premier Growth Fund 478
Technology Fund 482
Quasar Fund 426
Global International Fund 440
Worldwide Privatization Fund 412
New Europe Fund 462
All-Asia Investment Fund 418
Global Small Cap Fund 445
Global Environment Fund 481
Total Return Strategic Balanced Fund 432
Balanced Shares 496
Income Builder Fund 411
Real Estate Investment Fund 410
Utility Income Fund 409
Growth & Income Fund 494
</TABLE>
2
<PAGE>
<TABLE>
- --------------------------------------------------------------------------------------------------------------------------
4. Your Shareholder Options
- --------------------------------------------------------------------------------------------------------------------------
<S> <C>
A. Automatic Investment Plans (AIP)
|_| Withdraw From My Bank Account Via EFT*
I authorize Alliance to draw on my bank account for investment in my fund account(s) as indicated below
(Complete Section 4D also for the bank account you wish to use).
1- |_|_|_| |_|_|_|_| |_|_| , |_|_|_| .00 |_|
Fund Number Beginning Date (MM,DD) Amount ($25 minimum) Frequency
Frequency:
2- |_|_|_| |_|_|_|_| |_|_| , |_|_|_| .00 |_| M = monthly
Fund Number Beginning Date (MM,DD) Amount ($25 minimum) Frequency Q = quarterly
A = Annually
3- |_|_|_| |_|_|_|_| |_|_| , |_|_|_| .00 |_|
Fund Number Beginning Date (MM,DD) Amount ($25 minimum) Frequency
*Electronic Funds Transfer. Your bank must be a member of the National Automated Clearing House Association (NACHA)
|_| Direct My Distributions
As indicated in Section 3, I would like my dividends and/or capital gains directed to the same class of shares of
another Alliance Fund.
FROM: |_|_|_| |_|_|_|_|_|_|_|_|_|_| - |_|
Fund Number Account Number (if existing)
TO : |_|_|_| |_|_|_|_|_|_|_|_|_|_| - |_|
Fund Number Account Number (if existing)
|_| Exchange My Shares Monthly
I authorize Alliance to transact monthly exchanges, within the same class of shares, between my fund accounts as
listed below.
FROM: |_|_|_| |_|_|_|_|_|_|_|_|_|_| - |_|
Fund Number Account Number (if existing)
|_|_| , |_|_|_| .00 |_|_|
Amount ($25 minimum) Day of Exchange**
TO : |_|_|_| |_|_|_|_|_|_|_|_|_|_| - |_|
Fund Number Account Number (if existing)
**Shares exchanged will be redeemed at the net asset value on the "Day of Exchange" (If the "Day of Exchange" is not a
fund business day, the exchange transaction will be processed on the next fund business day). The exchange privilege is not
available if stock certificates have been issued.
B. Purchases and Redemptions Via EFT
You can call our toll-free number 1-800-221-5672 and instruct Alliance Fund Services, Inc. in a recorded conversation
to purchase, redeem or exchange shares for your account. Purchase and redemption requests will be processed via
electronic funds transfer (EFT) to and from your bank account.
Instructions: o Review the information in the Prospectus about telephone transaction services.
o If you select the telephone purchase or redemption privilege, you must write "VOID" across the face of
a check from the bank account you wish to use and attach it to Section 4D of this application.
|_| Purchases and Redemptions via EFT
I hereby authorize Alliance Fund Services, Inc. to effect the purchase and/or redemption of Fund shares for my account
according to my telephone instructions or telephone instructions from my Broker/Agent, and to withdraw money or credit
money for such shares via EFT from the bank account I have selected.
- --------------------------------------------------------------------------------------------------------------------------
For shares recently purchased by check or electronic funds transfer, redemption proceeds will not be made available
until the Fund is reasonably assured that the check or electronic fund transfer has been collected, normally 15
calendar days after the purchase date.
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
3
<PAGE>
<TABLE>
- --------------------------------------------------------------------------------------------------------------------------
4. Your Shareholder Options (CONTINUED)
- --------------------------------------------------------------------------------------------------------------------------
<S> <C>
C. Systematic Withdrawal Plans (SWP)
In order to establish a SWP, you must reinvest all dividends and capital gains.
|_| I authorize Alliance to transact periodic redemptions from my fund account and send the proceeds to me as indicated
below.
1- |_|_|_| |_|_|_|_| |_|_| , |_|_|_| .00 |_|
Fund Number Beginning Date (MM,DD) Amount ($25 minimum) Frequency
Frequency:
2- |_|_|_| |_|_|_|_| |_|_| , |_|_|_| .00 |_| M = monthly
Fund Number Beginning Date (MM,DD) Amount ($25 minimum) Frequency Q = quarterly
A = Annually
3- |_|_|_| |_|_|_|_| |_|_| , |_|_|_| .00 |_|
Fund Number Beginning Date (MM,DD) Amount ($25 minimum) Frequency
Please send my SWP proceeds to:
|_| My Address of Record (via check) |_| My checking account-via EFT (complete section 4D)
Your bank must be a member of the National
Automated Clearing House Association (NACHA) in
|_| The Payee and address specified in section 4E (via check) order for you to receive SWP proceeds directly
(Medallion Signature Guarantee required) into your bank account. Otherwise payment will be
made by check
D. Bank Information This bank account information will be used for:
|_| Distributions (Section 3) |_| Telephone Transactions (Section 4B)
|_| Automatic Investments (Section 4A) |_| Withdrawals (Section 4C)
- ---------------------------------------------------------------------------------------------------------------------------
Please Tape a Pre-printed Voided Check Here*
- ---------------------------------------------------------------------------------------------------------------------------
* The above services
cannot be established
[GRAPHIC OF BLANK CHECK WITH THE WORD VOID PRINTED ON IT.] without a pre-printed
voided check.
For EFT transactions,
the Fund requires
signatures of bank
account owners exactly
as they appear on bank
records. If the
registration at the
bank differs from that
on the Alliance mutual
fund, all parties must
sign in Section 5.
|_|_|_|_|_|_|_|_|_| |_|_|_|_|_|_|_|_|_|_|_|_|_|
Your Bank's ABA Routing Number Your Bank Account Number
|_| Checking Account |_| Savings Account
</TABLE>
4
<PAGE>
<TABLE>
- --------------------------------------------------------------------------------------------------------------------------
4. YOUR SHAREHOLDER OPTIONS(CONTINUED)
- --------------------------------------------------------------------------------------------------------------------------
<S> <C>
E. THIRD PARTY PAYMENT DETAILS Your signautre(s) in Section 5 must be Medallion Signature Guaranteed if your account is
not maintained by a dealer/broker. This third party payee information will be used for:
|_| Distributions (section 3) |_| Systematic Withdrawals (section 4C)
|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_| |_| |_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_||_|_|_|_|
Name (First Name) (MI) (Last Name)
|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_| |_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|
Street Number Street Name
|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_| |_|_| |_|_|_|_|_|
City State Zip code
- --------------------------------------------------------------------------------------------------------------------------
DEALER/AGENT AUTHORIZATION -- For selected Dealers or Agents ONLY.
- --------------------------------------------------------------------------------------------------------------------------
We hereby authorize Alliance Fund Services, Inc. to act as our agent in connection with transactions under this
authorization form; and we guarantee the signature(s) set forth in Section 5, as well as the legal capacity of
the shareholder.
|_____________________________________________________________| |_______________________________________________________|
Dealer/Agent Firm Authorized Signature
|________________________________________________________| |__| |_______________________________________________________|
Representative First Name MI Last Name
|_____________________________________________________________| |_______________________________________________________|
Dealer/Agent Firm Number Representative Number
|_____________________________________________________________| |_______________________________________________________|
Branch Number Branch Telephone Number
|_____________________________________________________________| |_______________________________________________________|
Branch Office Address
|_____________________________________________________________| |_||_| |_______________________________________________|
City State Zip Code
</TABLE>
5
<PAGE>
- --------------------------------------------------------------------------------
5. SHAREHOLDER AUTHORIZATION -- This section MUST be completed
- --------------------------------------------------------------------------------
Telephone Exchanges and Redemptions by Check
Unless I have checked one or both boxes below, these privileges will
automatically apply, and by signing this application, I hereby authorize
Alliance Fund Services, Inc. to act on my telephone instructions, or on
telephone instructions from any person representing himself to be an
authorized employee of an investment dealer or agent requesting a
redemption or exchange on my behalf. (NOTE: Telephone exchanges may only be
processed between accounts that have identical registrations.) Telephone
redemption checks will only be mailed to the name and address of record;
and the address must not have changed within the last 30 days. The maximum
telephone redemption amount is $50,000 for redemptions by check.
|_| I do not elect the telephone exchange service.
|_| I do not elect the telephone redemption by check service.
By selecting any of the above telephone privileges, I agree that neither
the Fund nor Alliance, Alliance Fund Distributors, Inc., Alliance Fund
Services, Inc. or other Fund Agent will be liable for any loss, injury,
damage or expense as a result of acting upon telephone instructions
purporting to be on my behalf, that the Fund reasonably believes to be
genuine, and that neither the Fund nor any such party will be responsible
for the authenticity of such telephone instructions. I understand that any
or all of these privileges may be discontinued by me or the Fund at any
time. I understand and agree that the Fund reserves the right to refuse any
telephone instructions and that my investment dealer or agent reserves the
right to refuse to issue any telephone instructions I may request.
For non-residents only: Under penalties of perjury, I certify that to the
best of my knowledge and belief, I qualify as a foreign person as indicated
in Section 2.
I am of legal age and capacity and have received and read the Prospectus
and agree to its terms.
I CERTIFY UNDER PENALTY OF PERJURY THAT THE NUMBER SHOWN IN SECTION 1 OF
THIS FORM IS MY CORRECT TAX IDENTIFICATION NUMBER OR I AM WAITING FOR A
NUMBER TO BE ISSUED TO ME AND THAT I HAVE NOT BEEN NOTIFIED THAT THIS
ACCOUNT IS SUBJECT TO BACKUP WITHHOLDING.
THE INTERNAL REVENUE SERVICE DOES NOT REQUIRE YOUR CONSENT TO ANY PROVISION
OF THIS DOCUMENT OTHER THAN THE CERTIFICATE REQUIRED TO AVOID BACKUP
WITHHOLDING.
|__________________________________________________| |_______________________|
Signature Date
|__________________________________________________| |_______________________|
Signature Date
- ----------------------------------------------
Medallion Signautre Guarantee required if
completing Section 4E and your mutual fund is
not maintained by a broker dealer
Alliance Capital [LOGO]
6
<PAGE>
THE ALLIANCE FUND, INC.
____________________________________________________________
c/o Alliance Fund Services, Inc.
P.O. Box 1520, Secaucus, New Jersey 07096-1520
Toll Free (800) 221-5672
For Literature: Toll Free (800) 227-4618
____________________________________________________________
STATEMENT OF ADDITIONAL INFORMATION
February 2, 1998
____________________________________________________________
This Statement of Additional Information is not a prospectus but
supplements and should be read in conjunction with the current
Prospectus for The Alliance Fund, Inc. (the "Fund") that offers
Class A, Class B and Class C shares of the Fund and the current
Prospectus for the Fund that offers the Advisor Class shares of
the Fund (the "Advisor Class Prospectus" and, together with the
Prospectus for the Fund that offers the Class A, Class B, and
Class C shares of the Fund, the "Prospectus"). 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
PAGE
DESCRIPTION OF THE FUND...............................
MANAGEMENT OF THE FUND................................
EXPENSES OF THE FUND..................................
PURCHASE OF SHARES....................................
REDEMPTION AND REPURCHASE OF SHARES...................
SHAREHOLDER SERVICES..................................
NET ASSET VALUE.......................................
DIVIDENDS, DISTRIBUTIONS AND TAXES....................
BROKERAGE AND PORTFOLIO TRANSACTIONS..................
GENERAL INFORMATION...................................
REPORT OF INDEPENDENT AUDITORS AND FINANCIAL
STATEMENTS..........................................
________________________
(R) This registered service mark used under license from the
owner, Alliance Capital Management L.P.
<PAGE>
_______________________________________________________________
DESCRIPTION OF THE FUND
_______________________________________________________________
Except as otherwise indicated, investment policies of
the Fund are not "fundamental policies" within the meaning of the
Investment Company Act of 1940, as amended (the "1940 Act"), and
may, therefore, be changed by the Fund's Board of Directors
without a shareholder vote. However, the Fund will not change
its investment policies without contemporaneous written notice to
shareholders. The Fund's investment objective may not be changed
without shareholder approval. There can be, of course, no
assurance that the Fund will achieve its investment objective.
Investment Objective
The Fund's investment objective is long-term growth of
capital and income primarily through investment in common stocks.
Investments will be made based on their potential for
appreciation.
How The Fund Pursues its Objective
The Fund will normally invest substantially all of its
assets in common stocks which it believes will appreciate in
value. However, when appropriate in the opinion of Alliance
Capital Management L.P., the Fund's investment manager (the
"Manager"), it may also invest in other types of securities such
as convertible preferred stocks and debentures, high grade bonds,
debentures and preferred stocks, securities issued, created or
fully guaranteed by the United States Government and other high-
quality short-term securities such as repurchase agreements,
bankers' acceptances, domestic certificates of deposit and other
evidences of indebtedness maturing in less than one year. For
temporary defensive purposes, the Fund may invest a substantial
portion of its assets in such U.S. Government and other short-
term securities. The Fund may also invest in foreign securities
and the Fund has not adopted any limitation on the percentage of
net assets that may be invested in such securities.
Although the diversification and generally high quality
of the Fund's investments cannot prevent fluctuations in the
market value of the Fund's assets, they do tend to limit
investment risk and should contribute to achieving the Fund's
objective.
It is not the Fund's policy to effect portfolio
transactions for the purpose of realizing short-term trading
profits or for the purpose of exercising control. The Fund does
not invest in puts, calls (except as discussed below), straddles,
2
<PAGE>
spreads, or any combination thereof, nor in oil, gas or other
mineral exploration or development programs. Furthermore, it
will not invest more than 5% of its gross assets, taken at
market, in securities the disposition of which would be subject
to restrictions under the federal securities laws, except Rule
144A securities.
The above investment policies can be changed by the
Board of Directors if in its judgment the change is in the
interest of the Fund.
Additional Investment Policies and Practices
Options. The Fund may write covered call options which
are traded on national securities exchanges with respect to
common stocks in its portfolio (the Fund must at all times have
in its portfolio the securities which it may be obligated to
deliver if the option is exercised). The Fund may write covered
call options on these common stocks in an attempt to realize a
greater current return than would be realized on the securities
alone or to provide greater flexibility in disposing of such
securities. A "call option" gives the holder the right to
purchase the underlying securities from the Fund at a specified
price (the "exercise price") for a stated period of time. Prior
to the expiration of the option, the seller (the "writer") of the
option has an obligation to sell the underlying security to the
holder of the option at the exercise price regardless of the
market price of the security at the time the option is exercised.
The premium received by the Fund is recorded as a liability and
is subsequently adjusted to the current market value of the
option written. Premiums received from writing options which
expire unexercised are treated by the Fund on the expiration date
as realized capital gains. The difference between the premium
and the amount paid upon executing a closing purchase
transaction, including brokerage commissions, is also treated as
a gain, or if the premium is less than the amount paid for the
closing purchase transaction, as a loss. If a call option is
exercised, the premium is added to the proceeds from the sale in
determining whether the Fund has realized a gain or loss. All
options written will be "covered", which means that the Fund will
own the securities underlying the option or securities
convertible into or carrying rights to acquire such securities,
which securities will be segregated and held under an escrow
arrangement with or through the custodian for the Fund's
securities. Management will be instructed initially to cease
writing options if, and so long as, 25% of total assets are
subject to outstanding option contracts or if required under
applicable regulations of state securities administrators. In
the event the option is exercised, the writer may either deliver
the underlying securities at the exercise price or if it does not
wish to deliver its own securities, purchase new securities at a
3
<PAGE>
cost to the writer, which may be more than the exercise price
plus premium received and deliver the new securities for the
exercised option.
In view of its investment objective, the Fund generally
would write covered call options only in circumstances where the
Manager does not anticipate significant appreciation of the
underlying securities in the near future or has otherwise
determined to dispose of the securities. In the event an option
is exercised, the Fund's potential for gain is limited to the
difference between the exercise price plus the premium less the
cost of the security. Alternatively, the option's position could
be closed out by purchasing a like option. Although the writing
of covered call options only on national securities exchanges
increases the likelihood of the Fund being able to make closing
purchase transactions, there is no assurance that the Fund will
be able to effect closing purchase transactions at any particular
time or at an acceptable price. If the price of a security
declines below the amount to be received from the exercise price
less the amount of the call premium received and if the option
could not be closed, the Fund would hold a security which might
otherwise have been sold to protect against depreciation. The
writing of covered call options could result in increases in the
Fund's portfolio turnover rate, especially during periods when
market prices of the underlying securities appreciate.
Loans of Portfolio Securities. The Fund may make
secured loans of its portfolio securities to brokers, dealers and
financial institutions provided that liquid assets or bank
letters of credit equal to at least 100% of the market value of
the securities loaned is deposited and maintained by the borrower
with the Fund and is adjusted (marking-to-market) with the
borrower each day the securities are on loan to provide for price
fluctuations. The risks in lending portfolio securities, as with
other extensions of credit, consist of possible loss of rights in
the collateral should the borrower fail financially. In
determining whether to lend securities to a particular borrower,
the Manager (subject to review by the Directors) 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 earned thereon and the
Fund may invest any cash collateral in portfolio securities,
thereby earning additional income, or receive an agreed upon
amount of income from a borrower who has delivered equivalent
collateral. The Fund will not lend its portfolio securities if
such loans are not permitted by the laws or regulations of any
state within which its shares are qualified for sale. Loans will
be subject to termination by the Fund in the normal settlement
time, currently five business days after notice, or by the
borrower on one day's notice. Although voting rights may pass
with the loaned securities, if a material event affecting the
4
<PAGE>
investment is to be voted on, the loan must be terminated and the
securities voted by the Fund. Borrowed or equivalent securities
must be returned when the loan is terminated. Any gain or loss
in the market price of the borrowed securities that occurs during
the term of the loan inures to the Fund and its shareholders.
The Fund may pay reasonable finders', administrative and
custodial fees in connection with a loan. The Fund will not lend
portfolio securities in excess of 25% of the value of its total
assets nor will the Fund lend its portfolio securities to any
officer, director, employee or affiliate of either the Fund or
the Manager.
Repurchase Agreements. A "repurchase agreement" is an
instrument whereby the Fund acquires an underlying money market
instrument subject to resale at a fixed price. These
transactions will be entered into only with commercial banks.
The Fund advances cash to the banks which the banks collateralize
with securities, owned by the banks, issued or guaranteed by the
U.S. Government or its agencies or instrumentalities. Repurchase
agreements usually are for short periods. The Fund will not
enter into repurchase agreements of more than one week in
duration. Repurchase agreements together with the purchase of
restricted securities and any securities which do not have
readily available market quotations cannot amount to more than
10% of the Fund's net assets. Repurchase agreements could
involve certain risks in the event of bankruptcy or other
defaults by the seller, including possible delays and expenses in
liquidating the collateral, decline in collateral value and loss
of interest.
Foreign Securities. The Fund may invest in securities
of foreign issuers. Foreign securities investments may be
affected by changes in currency rates or exchange control
regulations, application of foreign tax laws, changes in
governmental administration or economic or monetary policy (in
the United States and abroad) or changed circumstances in
dealings between nations. Costs may be incurred in connection
with conversions between various currencies held by the Fund. In
addition, there may be less publicly available information about
foreign issuers than about domestic issuers, and foreign issuers
may not be subject to accounting, auditing and financial
reporting standards and requirements comparable to those of
domestic issuers. Securities of some foreign issuers are less
liquid and more volatile than securities of comparable domestic
issuers, and foreign brokerage commissions are generally higher
than in the United States. Foreign securities markets may also
be less liquid, more volatile, and less subject to governmental
supervision than in the United States. Investments in foreign
countries could be affected by other factors not present in the
United States, including expropriation, confiscatory taxation and
potential difficulties in enforcing contractual obligations.
5
<PAGE>
Securities of Other Investment Companies. The Fund will
not invest in securities of other investment companies except by
purchase in the open market where no commission or profit to a
sponsor or dealer results from such purchase other than the
customary broker's commission (the Fund has no current intention
to invest in securities of other investment companies), or except
when such purchase, though not made in the open market, is part
of a plan of merger or consolidation.
Portfolio Turnover. There can be no assurance that the
Fund will achieve its investment objectives since market risks
are inherent in all securities to varying degrees, although the
Manager will try to limit these risks. Ordinarily, the annual
portfolio turnover rate will not exceed 100%. A portfolio
turnover rate of approximately 100% involves correspondingly
greater brokerage commission expenses than would a lower rate,
which must be borne by the Fund and its shareholders. The Fund's
portfolio turnover rate, exclusive of short-term notes, for the
fiscal years ended in 1996 and 1997 were 80% and 158%,
respectively.
Certain Fundamental Investment Policies
The following restrictions may not be changed without
the affirmative vote of the holders of a majority of the Fund's
outstanding voting securities, which means (1) 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 (2) more
than 50% of the outstanding shares, whichever is less. The Fund
may not:
1. Borrow money;
2. Mortgage or pledge any of its assets except in
connection with the writing of covered call options
(see below);
3. Purchase securities on margin or sell short;
4. Lend any of its assets other than (i) through the
purchase of notes, bonds, certificates of deposit,
or evidences of indebtedness of a type commonly
distributed publicly or privately to financial
institutions (except that it will not purchase any
such privately offered securities under
circumstances in which it will become an
"underwriter" as defined in the Securities Act of
1933, as amended (the "Securities Act")),
(ii) through fully collateralized loans of
portfolio securities, or (iii) through loans to
6
<PAGE>
banks against such obligations as repurchase
agreements (see below);
5. Underwrite or participate in any underwriting of
securities (the Fund might be deemed to be an
underwriter if it sells restricted securities);
6. Buy more than 10% of the voting or other class of
outstanding securities of any one issuer;
7. Invest more than 25% of the value of its assets in
securities of issuers in any one industry;
8. Invest more than 5% of its gross assets at the time
of purchase (taken at market value) in securities
of any one issuer, other than the U.S. Government;
9. Buy or sell any securities from, to or through its
officers or directors or other "interested persons"
except for purchases or sales of Fund shares, or in
transactions on a securities exchange including
only regular exchange commissions and charges;
10. Buy securities of any company that (including its
predecessors) has not been in business at least
three continuous years;
11. Buy or hold securities of any issuer if any officer
or director of the Fund, the Manager or any
officer, director or 10% shareholder of the Manager
owns individually 1/2 of 1% of a class of
securities of such issuer, and such persons
together own beneficially more than 5% of such
securities; or
12. Buy or sell any real estate, commodities or
commodity contracts including commodity futures
contracts.
In connection with the qualification or registration of
the Fund's shares for sale under the securities laws of certain
states the Fund has agreed, in addition to the foregoing
investment restrictions, that it (i) will not invest more than 5%
of its net assets in warrants nor more than 2% of its net assets
in unlisted warrants; (ii) will not invest in real estate or
interests therein, excluding readily marketable securities of
companies which invest in real estate; (iii) will not invest in
oil, gas or other mineral leases.
Whenever any investment policy or restriction states a
minimum or maximum percentage of the Fund's assets which may be
7
<PAGE>
invested in any security or other asset, it is intended that such
minimum or maximum percentage limitation be determined
immediately after and as a result of the Fund's acquisition of
such security or other asset. Accordingly, any later increase or
decrease in percentage beyond the specified limitations resulting
from a change in values or net assets will not be considered a
violation of any such maximum.
_______________________________________________________________
MANAGEMENT OF THE FUND
_______________________________________________________________
Manager
Alliance Capital Management L.P., a Delaware limited
partnership with principal offices at 1345 Avenue of the
Americas, New York, New York 10105, has been retained under an
investment management agreement (the "Management Agreement") to
provide investment advice and, in general, to conduct the
management and investment program of the Fund under the
supervision of the Fund's Board of Directors (see "Management of
the Fund" in the Prospectus).
The Adviser is a leading international investment
manager supervising client accounts with assets as of September
30, 1997 totaling more than $217 billion (of which approximately
$81 billion represented the assets of investment companies). The
Manager's clients are primarily major corporate employee benefit
funds, public employee retirement systems, investment companies,
foundation and endowment funds. As of September 30, 1997, the
Manager was an investment manager of employee benefit fund assets
for 28 of the FORTUNE 100 companies. As of that date, the
Manager and its subsidiaries employed approximately 1,500
employees who operated out of domestic offices and the offices of
subsidiaries in Bahrain, Bangalore, Chennai, Istanbul, London,
Madrid, Mumbai, Paris, Singapore, Tokyo and Toronto and affiliate
offices located in Vienna, Warsaw, Hong Kong, Sao Paulo and
Moscow. The 56 registered investment companies comprising more
than 118 separate investment portfolios managed by the Manager
currently have more than two million shareholders.
Alliance Capital Management Corporation, the sole
general partner of, and the owner of a 1% general partnership
interest in, the Manager, is an indirect wholly-owned subsidiary
of The Equitable Life Assurance Society of the United States
("Equitable"), one of the largest life insurance companies in the
United States and a wholly-owned subsidiary of The Equitable
Companies Incorporated ("ECI"). ECI is a holding company
controlled by AXA-UAP, a French insurance holding company which
at September 30, 1997, beneficially owned approximately 59% of
8
<PAGE>
the outstanding voting shares of ECI. As of June 30, 1997, ACMC,
Inc. and Equitable Capital Management Corporation, each a wholly-
owned direct or indirect subsidiary of Equitable, together with
Equitable, owned in the aggregate approximately 57% of the issued
and outstanding units representing assignments of beneficial
ownership of limited partnership interests in the Manager.
AXA-UAP is a holding company for an international group
of insurance and related financial services companies. AXA-UAP's
insurance operations include activities in life insurance,
property and casualty insurance and reinsurance. The insurance
operations are diverse geographically, with activities
principally in Western Europe, North America and the Asia/Pacific
area. AXA-UAP is also engaged in asset management, investment
banking, securities trading, brokerage, real estate and other
financial services activities principally in the United States,
as well as in Western Europe and the Asia/Pacific area.
Based on information provided by AXA-UAP, as of
September 30, 1997 more than 25% of the voting power of AXA-UAP
was controlled directly and indirectly by FINAXA, a French
holding company. As of September 30, 1997 more than 25% of the
voting power of FINAXA was controlled directly and indirectly by
four French mutual insurance companies (the "Mutuelles AXA"), one
of which, AXA Assurances I.A.R.D. Mutuelle, itself controlled
directly and indirectly more than 25% of the voting power of
FINAXA. Acting as a group, the Mutuelles AXA control AXA-UAP and
FINAXA.
The Management Agreement provides that the Manager shall
manage the investment and reinvestment of the assets of the Fund
and administer its business and affairs, subject to the overall
supervision of the Fund's Board of Directors. In addition the
Manager furnishes the Fund with office space and clerical and
bookkeeping services and payroll compensation of the Fund's
officers and those directors who are affiliated persons of the
Manager.
The Fund has, under the Management Agreement, assumed
the obligation for payment of all of its other expenses. As to
the obtaining of services other than those specifically provided
to the Fund by the Manager, the Fund may employ its own
personnel. For such services, it also may utilize personnel
employed by the Adviser or by other subsidiaries of Equitable
and, in such event, the services will be provided to the Fund at
cost and the payments therefore must be specifically approved by
the Fund's Directors. The Fund paid to the Manager a total of
$123,000 in respect of such services during the fiscal year of
the Fund ended in 1997.
9
<PAGE>
The Management Agreement became effective on April 20,
1993. For its services under the Management Agreement, the
Manager receives a monthly fee at an annualized rate of .75% of
the first $500 million of the Fund's average daily net assets,
.65% of the excess over $500 million of such net assets up to
$1 billion and .55% of the excess over $1 billion of such net
assets. During the fiscal years of the Fund ended in 1995, 1996
and 1997, the Fund paid the Manager total management fees of
$6,096,506, $6,794,888 and $7,855,807, respectively.
In order to provide the Manager with access to
supplemental research and security and economic analyses provided
by brokers and of use to the Fund, and to maintain good business
relationships with brokers who are important block traders or who
have special knowledge of potential buyers and sellers in
securities the Fund may wish to buy or sell, the Management
Agreement authorizes the Manager to allocate brokerage business
to such brokers even though they execute transactions at higher
rates to the Fund than may be available from other brokers who
are providing only execution service.
The Management Agreement also permits the Board of
Directors to authorize the payment by the Fund of additional
compensation to others for consulting services, supplemental
research, and security and economic analyses. Such outside
research would supplement the research of the Manager and make it
possible to obtain the benefit of information or expert opinion
not otherwise available to the Fund or the Manager. The payment
for such outside research in cash might be in lieu of brokerage
commissions, which are now charged to principal and would be in
addition to the management fee. The Board may determine that such
payment be charged to the extent permitted by generally accepted
accounting principles to principal or income of the Fund as it
deems appropriate.
The Management Agreement continues in force for
successive twelve-month periods (computed from each August 1),
provided that such continuance is specifically approved at least
annually by the Fund's Directors or by a majority vote of the
holders of the outstanding voting securities of the Fund, and, in
either case, by a majority of the Directors who are not parties
to the Management Agreement or interested persons as defined in
the 1940 Act of any such party. Most recently, the continuance
of the Management Agreement until July 31, 1998 was approved by a
vote, cast in person, of the Directors, including a majority of
the Directors who are not parties to the Management Agreement or
interested persons of any such party, at a meeting called for
that purpose and held on July 15, 1997.
The Management Agreement is terminable without penalty
on 60 days' written notice by a vote of a majority of the Fund's
10
<PAGE>
outstanding voting securities or by a vote of a majority of the
Fund's Directors, or by the Manager on any January 1 on not less
than 60 days' written notice to the Fund, and will automatically
terminate in the event of its assignment. The Management
Agreement provides that in the absence of willful misfeasance,
bad faith or gross negligence on the part of the Manager, or of
reckless disregard of its obligations thereunder, the Manager
shall not be liable for any action or failure to act in
accordance with its duties thereunder.
Certain other clients of the Manager may have investment
objectives and policies similar to those of the Fund. The Manager
may, from time to time, make recommendations which result in the
purchase or sale of a particular security by its other clients
simultaneously with the Fund. If transactions on behalf of more
than one client during the same period increase the demand for
securities being purchased or the supply of securities being
sold, there may be an adverse effect on price or quantity. It is
the policy of the Manager to allocate management recommendations
and the placing of orders in a manner which is deemed equitable
by the Manager to the accounts involved, including the Fund.
When two or more of the clients of the Manager (including the
Fund) are purchasing or selling the same security on a given day
from the same broker-dealer, such transactions may be averaged as
to price.
The Adviser may act as an investment adviser to other
persons, firms or corporations, including investment companies,
and is investment adviser to ACM Institutional Reserves, Inc.,
AFD Exchange Reserves, Alliance All-Asia Investment Fund, Inc.,
Alliance Balanced Shares, Inc., Alliance Bond Fund, Inc.,
Alliance Capital Reserves, Alliance Developing Markets Fund,
Inc., Alliance Global Dollar Government Fund, Inc., Alliance
Global Environment Fund, Inc., Alliance Global Small Cap Fund,
Inc., Alliance Global Strategic Income Trust, Inc., Alliance
Government Reserves, Alliance Greater China '97 Fund, Inc.,
Alliance Growth and Income Fund, Inc., Alliance High Yield Fund,
Inc., Alliance Income Builder Fund, Inc., Alliance Institutional
Funds, 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/Regent Sector Opportunity Fund, Inc., Alliance Short-
Term Multi-Market Trust, Inc., Alliance Technology Fund, Inc.,
Alliance Utility Income Fund, Inc., Alliance Variable Products
Series Fund, Inc., Alliance World Income Trust, Inc., Alliance
11
<PAGE>
Worldwide Privatization Fund, Inc., The Alliance Portfolios,
Fiduciary Management Associates and The Hudson River Trust, all
registered open-end investment companies; and to ACM Government
Income Fund, Inc., ACM Government Securities Fund, Inc., ACM
Government Spectrum Fund, Inc., ACM Government Opportunity Fund,
Inc., ACM Managed Income Fund, Inc., ACM Managed Dollar Income
Fund, Inc., ACM Municipal Securities Income Fund, Inc., Alliance
All-Market Advantage Fund, Inc., Alliance World Dollar Government
Fund, Inc., Alliance World Dollar Government Fund II, Inc., The
Austria Fund, Inc., The Korean Investment Fund, Inc., The
Southern Africa Fund, Inc., and The Spain Fund, Inc., all
registered closed-end investment companies.
Directors and Officers
The Directors and principal officers of the Fund, their
ages and their principal occupations during the past five years
are set forth below. Each such Director and officer is also a
director, trustee or officer of other registered investment
companies sponsored by the Manager. Unless otherwise specified,
the address of each of the following persons is 1345 Avenue of
the Americas, New York, New York 10105.
Directors
JOHN D. CARIFA,1 52, Chairman and President of the
Fund, is the President and Chief Operating Officer and a Director
of Alliance Capital Management Corporation ("ACMC"), with which
he has been associated since prior to 1993.
RUTH BLOCK, 67, was formerly an Executive Vice President
and the Chief Insurance Officer of Equitable. She is a Director
of Ecolab Incorporated (specialty chemicals) and Amoco
Corporation (oil and gas). Her address is P.O. Box 4653,
Stamford, Connecticut 06903.
DAVID H. DIEVLER, 68, was formerly a Senior Vice
President of ACMC, with which he had been associated since prior
to 1992 through 1994. He is currently an independent consultant.
His address is P.O. Box 167, Spring Lake, New Jersey 07762.
JOHN H. DOBKIN, 55, has been the President of Historic
Hudson Valley (historic preservation) prior to 1993. Previously,
he was Director of the National Academy of Design. His address
is Historic Hudson Valley, 150 White Plains Road, New York, New
York 10591.
_________________________
1 An "interested person" of the Fund as defined in the
1940 Act.
12
<PAGE>
WILLIAM H. FOULK, JR., 65, 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 1993. His address is
Suite 100, 2 Greenwich Plaza, Greenwich, Connecticut 06830.
DR. JAMES M. HESTER, 73, is President of the Harry Frank
Guggenheim Foundation and a Director of Union Carbide
Corporation, with which he has been associated since prior to
1993. He was formerly President of New York University, the New
York Botanical Garden and Rector of the United Nations
University. His address is 45 East 89th Street, New York, New
York 10128.
CLIFFORD L. MICHEL, 58, is a partner in the law firm of
Cahill Gordon & Reindel since prior to 1993. He is President,
Chief Executive Officer and a Director of Wenonah Development
Company (investments) and a Director of Placer Dome, Inc.
(mining). His address is 80 Pine Street, New York, New York,
10005.
DONALD J. ROBINSON, 63, was formerly a senior partner in
the law firm of Orrick, Herrington & Sutcliffe and is currently
senior counsel to that firm. His address is 666 Fifth Avenue,
New York, New York, 10103.
Officers
JOHN D. CARIFA, President, see biography above.
ALDEN M. STEWART, Executive Vice President, 51, is an
Executive Vice President of ACMC with which she has been
associated since July, 1993. Previously, he was associated with
ECMC since prior to 1993.
KATHLEEN A. CORBET, Senior Vice President, 37, is an
Executive Vice President of ACMC since July 1993. Prior thereto,
she headed Equitable Capital Management Corporation's Fixed
Income Management Department since prior to 1993.
THOMAS J. BARDONG, Vice President, 52, is a Senior Vice
President of ACMC, with which he has been associated since prior
to 1993.
RANDALL E. HAASE, Vice President, 32, has been a Vice
President of ACMC since July, 1993. Prior thereto he was
associated with ECMC.
DANIEL V. PANKER, Vice President, 58, is a Senior Vice
President of ACMC with which he has been associated since prior
to 1993.
13
<PAGE>
EDMUND P. BERGAN, JR., Secretary, 47, is Senior Vice
President and General Counsel of Alliance Fund Distributors, Inc.
("AFD"), with which he has been associated since prior to
1993.
DOMENICK PUGLIESE, Assistant Secretary, 36, is a Vice
President and Assistant General Counsel of AFD with which he has
been associated since May 1995. Previously, he was Vice
President and Counsel of Concord Holding Corporation since 1994
and Vice President and Associate General Counsel of Prudential
Securities since prior to 1993.
ANDREW L. GANGOLF, Assistant Secretary, 43, is Vice
President and Assistant General Counsel of AFD since December
1994. Prior thereto, he was Vice President and Assistant
Secretary of Delaware Management Co., Inc. since prior to
1993.
EMILIE D. WRAPP, Assistant Secretary, 41, is a Vice
President and Special Counsel of AFD, with which she has been
associated since prior to 1993.
MARK D. GERSTEN, Treasurer and Chief Financial Officer,
47, is a Senior Vice President of Alliance Fund Services, Inc.
("AFS"), with which he has been associated since prior to
1993.
VINCENT S. NOTO, Controller, 33, is a Vice President of
AFS with which he has been associated since prior to 1993.
PHYLLIS CLARKE, Assistant Controller, 37, is an
Accounting Manager of Mutual Funds for AFS with which she has
been associated since prior to 1993.
JOSEPH MANTINEO, Assistant Controller, 38, has been a
Vice President of AFS with which he has been associated since
prior to 1993.
JUAN J. RODRIGUEZ, 40, Assistant Controller, is an
Assistant Vice President of AFS with which he has been associated
since prior to 1993.
The aggregate compensation paid by the Fund to each of
the Directors during its fiscal year ended November 30, 1997, the
aggregate compensation paid to each of the Directors during
calendar year 1997 by all of the registered investment companies
to which the Manager provides investment advisory services
(collectively, the "Alliance Fund Complex") and the total number
of registered investment companies (and separate investment
portfolios within those companies) in the Alliance Fund Complex
with respect to which each of the Directors serves as a director
14
<PAGE>
or trustee, are set forth below. Neither the Fund nor any other
registered investment company in the Alliance Fund Complex
provides compensation in the form of pension or retirement
benefits to any of its directors or trustees. Each of the
Directors is a director or trustee of one or more other
registered investment companies in the Alliance Fund Complex.
Total Number Total Number
of Investment of Investment
Companies in Portfolios
the Alliance Within the
Total Fund Complex, Alliance Fund
Compensation Including the Complex Including
From the Fund, as to the Fund, as
Alliance Fund which the to which the
Aggregate Complex, Director is a Director is
Compensation Including the Director or a Director or
Name of Director From the Fund Fund Trustee Trustee
John D. Carifa $-0- $ -0- 54 118
Ruth Block $4,312 $163,997 40 80
David H. Dievler $4,314 $188,526 47 83
John H. Dobkin $4,345 $127,775 44 80
William H. Foulk, Jr. $4,358 $174,996 48 113
Dr. James M. Hester $4,298 $156,499 40 76
Clifford L. Michel $4,298 $194,499 41 92
Donald J. Robinson $4,285 $235,500 41 94
As of January 5, 1998, the Directors and officers of the
Fund as a group owned 5% of the Advisor Class shares of the Fund
and less than 1% of the shares of any other class of shares of
the Fund.
_______________________________________________________________
EXPENSES OF THE FUND
_______________________________________________________________
Distribution Services Agreement
The Fund has entered into a Distribution Services
Agreement (the "Agreement") with Alliance Fund Distributors,
Inc., the Fund's principal underwriter (the "Principal
Underwriter"), to permit the Principal Underwriter to distribute
the Funds shares and to permit the Fund to pay distribution
services fees to defray expenses associated with distribution of
its Class A, Class B and Class C shares in accordance with a plan
of distribution which is included in the Agreement and has been
duly adopted and approved in accordance with Rule 12b-1 adopted
by the Securities and Exchange Commission (the "Commission")
under the 1940 Act (the "Rule 12b-1 Plan").
15
<PAGE>
Distribution services fees are accrued daily and paid
monthly and are charged as expenses of the Fund as accrued. The
distribution services fees attributable to the Class B shares and
Class C shares are designed to permit an investor to purchase
such shares through broker-dealers without the assessment of an
initial sales charge, and at the same time to permit the
Principal Underwriter to compensate broker-dealers in connection
with the sale of such shares. In this regard the purpose and
function of the combined contingent deferred sales charge and
distribution services fee on the Class B shares and Class C
shares are the same as those of the initial sales charge and
distribution services fee with respect to the Class A shares in
that in each case the sales charge and distribution services fee
provide for the financing of the distribution of the relevant
class of the Fund's shares.
Under the Agreement, the Treasurer of the Fund reports
the amounts expended under the Rule 12b-1 Plan and the purposes
for which such expenditures were made to the Directors of the
Fund for their review on a quarterly basis. Also, the Agreement
provides that the selection and nomination of Directors who are
not "interested persons" of the Fund, as defined in the 1940 Act,
are committed to the discretion of such disinterested Directors
then in office.
The Agreement will continue in effect for successive
twelve-month periods (computed from each August 1), provided,
however, that such continuance is specifically approved at least
annually by the Directors of the Fund or by vote of the holders
of a majority of the outstanding voting securities (as defined in
the 1940 Act) of that class, and, in either case, by a majority
of the Directors of the Fund who are not parties to the Agreement
or interested persons, as defined in the 1940 Act, of any such
party (other than as directors of the Fund) and who have no
direct or indirect financial interest in the operation of the
Rule 12b-1 Plan or any agreement related thereto. Most recently
the continuance of the Agreement until July 31, 1998 was approved
by a vote, cast in person, of the Directors, including a majority
of the Directors who are not "interested persons", as defined in
the 1940 Act, at their meeting held on July 15, 1997.
The Agreement became effective on July 22, 1992, was
amended as of April 30, 1993 to permit the distribution of
Class C shares and again on July 16, 1996 to permit the
distribution of Advisor Class shares.
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
16
<PAGE>
such compensation to brokers or other persons for their
distribution assistance.
During the Fund's fiscal year ended November 30, 1997,
the Fund paid distribution services fees for expenditures under
the Agreement, with respect to Class A shares, in amounts
aggregating $2,098,235 which constituted approximately .20% of
the Fund's average daily net assets attributable to Class A
shares during the period, and the Manager made payments from its
own resources as described above, aggregating $417,552. Of the
$2,515,787 paid by the Fund and the Manager under the Agreement,
$114,836 was spent on advertising, $10,568 on the printing and
mailing of prospectuses for persons other than current
shareholders, $1,969,247 for compensation to broker-dealers and
other financial intermediaries (including, $245,666 to the Fund's
Principal Underwriter), $64,987 for compensation to sales
personnel, $356,149 was spent on the printing of sales
literature, travel, entertainment, due diligence and other
promotional expenses and $0 was spent on interest on Class A
shares financing.
During the Fund's fiscal year ended November 30, 1997,
the Fund paid distribution services fees for expenditures under
the Agreement, with respect to Class B shares, in amounts
aggregating $542,302 which constituted approximately 1.00% of the
Fund's average daily net assets attributable to Class B shares
during the period, and the Manager made payments from its own
resources as described above, aggregating $1,063,272. Of the
$1,605,574 paid by the Fund and the Manager under the Agreement,
$111,278 was spent on advertising, $10,381 on the printing and
mailing of prospectuses for persons other than current
shareholders, $1,110,405 for compensation to broker-dealers and
other financial intermediaries (including, $228,439 to the Fund's
Principal Underwriter), $14,028 for compensation to sales
personnel, $297,305 was spent on the printing of sales
literature, travel, entertainment, due diligence and other
promotional expenses and $62,177 was spent on interest on Class B
shares financing.
During the Fund's fiscal year ended November 30, 1997,
the Fund paid distribution services fees for expenditures under
the Agreement, with respect to Class C shares, in amounts
aggregating $162,266 which constituted approximately 1.00% of the
Fund's average daily net assets attributable to Class C shares
during the period, and the Manager made payments from its own
resources as described above, aggregating $209,603. Of the
$371,869 paid by the Fund and the Manager under the Agreement,
$32,675 was spent on advertising, $2,976 on the printing and
mailing of prospectuses for persons other than current
shareholders, $231,353 for compensation to broker-dealers and
other financial intermediaries (including, $66,259 to the Fund's
17
<PAGE>
Principal Underwriter), $4,069 for compensation to sales
personnel, $84,005 was spent on printing of sales literature,
travel, entertainment, due diligence and other promotional
expenses and $16,791 was spent on the interest on Class C shares
financing.
In the event that the Agreement is terminated or not
continued with respect to the Class A shares, Class B shares or
Class C shares, (i) no distribution services fees (other than
current amounts accrued but not yet paid) would be owed by the
Fund to the Principal Underwriter with respect to that class, and
(ii) the Fund would not be obligated to pay the Principal
Underwriter for any amounts expended under the Agreement not
previously recovered by the Principal Underwriter from
distribution services fees in respect of shares of such class or
through deferred sales charges.
All material amendments to the Agreement must be
approved by a majority vote of the Directors or the holders of
the Fund's outstanding voting securities, voting separately by
class, and in either case, by a majority of the disinterested
Directors, cast in person, at a meeting called for the purpose of
voting on such approval; and the Agreement may not be amended in
order to increase materially the costs that the Fund may bear
pursuant to the Agreement without the approval of a majority of
the holders of the outstanding voting shares of the class or
classes affected. The Agreement may be terminated (a) by the
Fund without penalty at any time by a majority vote of the
holders of the outstanding voting securities of the Fund, voting
separately by class or by a majority vote of the Directors who
are not "interested persons" as defined in the 1940 Act, or
(b) by the Principal Underwriter. To terminate the Agreement,
any party must give the other party 60 days' written notice,
except that the Principal Underwriter may only terminate the
Agreement, after 60 days' notice, on any August 1; to terminate
the Rule 12b-1 Plan only, the Fund need give no notice to the
Principal Underwriter. The Agreement will terminate
automatically in the event of its assignment.
Transfer Agency Agreement
Alliance Fund Services, Inc., an indirect wholly-owned
subsidiary of the Manager, receives a transfer agency fee per
account holder of each of the Class A, Class B, Class C and
Advisor Class shares of the Fund, plus reimbursement for out-of-
pocket expenses. The transfer agency fee with respect to the
Class B and Class C shares is higher than the transfer agency
costs with respect to the Class A and Advisor Class shares,
reflecting the additional costs associated with the Class B and
Class C contingent deferred sales charges. For the fiscal year
18
<PAGE>
ended November 30, 1997, the Fund paid AFS $705,717 pursuant to
the Transfer Agency Agreement.
_______________________________________________________________
PURCHASE OF SHARES
_______________________________________________________________
The following information supplements that set forth in
the Fund's Prospectus under the heading "Purchase and Sale of
Shares--How to Buy Shares."
General
Shares of the Fund are offered on a continuous basis at
a price equal to their net asset value plus an initial sales
charge at the time of purchase ("Class A shares"), with a
contingent deferred sales charge ("Class B shares"), without any
initial sales charge and, as long as the shares are held for one
year or more, without any contingent deferred sales charge
("Class C shares"), or, to investors eligible to purchase Advisor
Class shares, without any initial, contingent deferred or asset-
based sales charge, in each case as described below. Shares of
the Fund that are offered subject to a sales charge are offered
through (i) investment dealers that are members of the National
Association of Securities Dealers, Inc. and have entered into
selected dealer agreements with the Principal Underwriter
("selected dealers"), (ii) depository institutions and other
financial intermediaries or their affiliates, that have entered
into selected agent agreements with the Principal Underwriter
("selected agents") and (iii) the Principal Underwriter.
Advisor Class shares of the Fund may be purchased and
held solely (i) through accounts established under fee-based
programs, sponsored and maintained by registered broker-dealers
or other financial intermediaries and approved by the Principal
Underwriter, (ii) through self-directed defined contribution
employee benefit plans (e.g., 401(k) plans) that have at least
1,000 participants or $25 million in assets (iii) by the
categories of investors described in clauses (i) through (iv)
below under "--Sales at Net Asset Value" (other than officers,
directors and present and full-time employees of selected dealers
or agents, or relatives of such person, or any trust, individual
retirement account or retirement plan account for the benefit of
such relative, none of whom is eligible on the basis solely of
such status to purchase and hold Advisor Class shares), or
(iv) by directors and present or retired full-time employees of
CB Commercial Real Estate Group, Inc. Generally, a fee-based
program must charge an asset-based or other similar fee and must
invest at least $250,000 in Advisor Class shares of the Fund in
19
<PAGE>
order to be approved by the Principal Underwriter for investment
in Advisor Class shares.
Investors may purchase shares of the Fund either through
selected broker-dealers, agents, financial intermediaries or
other financial representatives or directly through the Principal
Underwriter. A transaction, service, administrative or other
similar fee may be charged by your broker-dealer, agent,
financial intermediary or other financial representative with
respect to the purchase, sale or exchange of Class A, Class B,
Class C or Advisor Class shares made through such financial
representative. Such financial representative may also impose
requirements with respect to the purchase, sale or exchange of
shares that are different from, or in addition to, those imposed
by the Fund, including requirements as to the minimum initial and
subsequent investment amounts. Sales personnel of selected
dealers and agents distributing the Fund's shares may receive
differing compensation for selling Class A, Class B, Class C or
Advisor Class shares.
The Fund may refuse any order for the purchase of
shares. The Fund reserves the right to suspend the sale of its
shares to the public in response to conditions in the securities
markets or for other reasons.
The public offering price of shares of the Fund is their
net asset value, plus, in the case of Class A shares, a sales
charge which will vary depending on the purchase alternative
chosen by the investor, as shown in the table below under
"--Class A Shares." On each Fund business day on which a
purchase or redemption order is received by the Fund and trading
in the types of securities in which the Fund invests might
materially affect the value of Fund shares, the per share net
asset value is computed in accordance with the Fund's Articles of
Incorporation and By-Laws as of the next close of regular trading
on the New York Stock Exchange (the "Exchange") (currently 4:00
p.m. Eastern time) by dividing the value of the Fund's total
assets, less its liabilities, by the total number of its shares
then outstanding. A Fund business day is any day on which the
Exchange is open for trading.
The respective per share net asset values of the
Class A, Class B, Class C and Advisor Class shares are expected
to be substantially the same. Under certain circumstances,
however, the per share net asset values of the Class B and
Class C shares may be lower than the per share net asset values
of the Class A and Advisor Class shares, as a result of the
differential daily expense accruals of the distribution and
transfer agency fees applicable with respect to those classes of
shares. Even under those circumstances, the per share net asset
values of the four classes eventually will tend to converge
20
<PAGE>
immediately after the payment of dividends, which will differ by
approximately the amount of the expense accrual differential
among the classes.
The Fund will accept unconditional orders for its shares
to be executed at the public offering price equal to their net
asset value next determined (plus applicable Class A sales
charges), as described below. Orders received by the Principal
Underwriter prior to the close of regular trading on the Exchange
on each day the Exchange is open for trading are priced at the
net asset value computed as of the close of regular trading on
the Exchange on that day (plus applicable Class A sales charges).
In the case of orders for 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 its close of business that same
day (normally 5:00 p.m. Eastern time). The selected dealer,
agent or financial representative, as applicable, is responsible
for transmitting such orders by 5:00 p.m. If the selected
dealer, agent or financial representative fails to do so, the
investor's right to that day's closing price must be settled
between the investor and the selected dealer, agent or financial
representative, as applicable. If the selected dealer, agent or
financial representative, as applicable, receives the order after
the close of regular trading on the Exchange, the price will be
based on the net asset value determined as of the close of
regular trading on the Exchange on the next day it is open for
trading.
Following the initial purchase of Fund shares, a
shareholder may place orders to purchase additional shares by
telephone if the shareholder has completed the appropriate
portion of the Subscription Application or an "Autobuy"
application obtained by calling the "For Literature" telephone
number shown on the cover of this Statement of Additional
Information. Except with respect to certain omnibus accounts,
telephone purchase orders may not exceed $500,000. Payment for
shares purchased by telephone can be made only by Electronic
Funds Transfer from a bank account maintained by the shareholder
at a bank that is a member of the National Automated Clearing
House Association ("NACHA"). If a shareholder's telephone
purchase request is received before 3:00 p.m. Eastern time on a
Fund business day, the order to purchase shares is automatically
placed the following Fund business day, and the applicable public
offering price will be the public offering price determined as of
the close of business on such following business day.
21
<PAGE>
Full and fractional shares are credited to a
subscriber's account in the amount of his or her subscription.
As a convenience to the subscriber, and to avoid unnecessary
expense to the Fund, share certificates representing shares of
the Fund are not issued except upon written request to the Fund
by the shareholder or his or her authorized selected dealer or
agent. This facilitates later redemption and relieves the
shareholder of the responsibility for and inconvenience of lost
or stolen certificates. No certificates are issued for
fractional shares, although such shares remain in the
shareholder's account on the books of the Fund.
In addition to the discount or commission paid to
dealers or agents, the Principal Underwriter from time to time
pays additional cash or other incentives to dealers or agents,
including EQ Financial Consultants, Inc., formerly Equico
Securities, Inc., an affiliate of the Principal Underwriter, in
connection with the sale of shares of the Fund. Such additional
amounts may be utilized, in whole or in part to provide
additional compensation to registered representatives who sell
shares of the Fund. On some occasions, cash or other incentives
will be conditioned upon the sale of a specified minimum dollar
amount of the shares of the Fund and/or other Alliance Mutual
Funds, as defined below, during a specific period of time. On
some occasions, such cash or other incentives may take the form
of payment for attendance at seminars, meals, sporting events or
theater performances, or payment for travel, lodging and
entertainment incurred in connection with travel taken by persons
associated with a dealer or agent and their immediate family
members to urban or resort locations within or outside the United
States. Such dealer or agent may elect to receive cash
incentives of equivalent amount in lieu of such payments.
Class A, Class B, Class C and Advisor Class shares each
represent an interest in the same portfolio of investments of the
Fund, have the same rights and are identical in all respects,
except that (i) Class A shares bear the expense of the initial
sales charge (or contingent deferred sales charge, when
applicable) and Class B and Class C shares bear the expense of
the deferred sales charge, (ii) Class B shares and Class C shares
each bear the expense of a higher distribution services fee than
that borne by Class A shares, and Advisor Class shares do not
bear such a fee, (iii) Class B shares and Class C shares bear
higher transfer agency costs than those borne by Class A shares
and Advisor Class shares, (iv) each of Class A, Class B and
Class C has exclusive voting rights with respect to provisions of
the Rule 12b-1 Plan pursuant to which its distribution services
fee is paid and other matters for which separate class voting is
appropriate under applicable law, provided that, if the Fund
submits to a vote of the Class A shareholders, an amendment to
the Rule 12b-1 Plan that would materially increase the amount to
22
<PAGE>
be paid thereunder with respect to the Class A shares, then such
amendment will also be submitted to the Class B shareholders and
the Advisor Class shareholders and the Class A, Class B and
Advisor Class shareholders will vote separately by class and
(v) Class B shares and Advisor Class shares are subject to a
conversion feature. Each class has different exchange privileges
and certain different shareholder service options available.
The Directors of the Fund have determined that currently
no conflict of interest exists between or among the Class A,
Class B, Class C and Advisor Class shares. On an ongoing basis,
the Directors of the Fund, pursuant to their fiduciary duties
under the 1940 Act and state law, will seek to ensure that no
such conflict arises.
Alternative Retail Purchase Arrangements -- Class A, Class B and
Class C Shares2
The alternative purchase arrangements available with
respect to Class A, Class B and Class C shares permit an investor
to choose the method of purchasing shares that is most beneficial
given the amount of the purchase, the length of time the investor
expects to hold the shares, and other circumstances. Investors
should consider whether, during the anticipated life of their
investment in the Fund, the accumulated distribution services fee
and contingent deferred sales charge on Class B shares prior to
conversion, or the accumulated distribution services fee and
contingent deferred sales charge on Class C shares, would be less
than the initial sales charge and accumulated distribution
services fee on Class A shares purchased at the same time, and to
what extent such differential would be offset by the higher
return of Class A shares. Class A shares will normally be more
beneficial than Class B shares to the investor who qualifies for
reduced initial sales charges on Class A shares, as described
below. In this regard, the Principal Underwriter will reject any
order (except orders from certain retirement plans) for more than
$250,000 for Class B shares. Class C shares will normally not be
suitable for the investor who qualifies to purchase Class A
shares at net asset value. For this reason, the Principal
Underwriter will reject any order for more than $1,000,000 for
Class C shares.
Class A shares are subject to a lower distribution
services fee and, accordingly, pay correspondingly higher
dividends per share than Class B shares or Class C shares.
However, because initial sales charges are deducted at the time
of purchase, investors purchasing Class A shares would not have
_________________________
2Advisor Class shares are sold only to investors described
above in this section under "--General.
23
<PAGE>
all their funds invested initially and, therefore, would
initially own fewer shares. Investors not qualifying for reduced
initial sales charges who expect to maintain their investment for
an extended period of time might consider purchasing Class A
shares because the accumulated continuing distribution charges on
Class B shares or Class C shares may exceed the initial sales
charge on Class A shares during the life of the investment.
Again, however, such investors must weigh this consideration
against the fact that, because of such initial sales charges, not
all their funds will be invested initially.
Other investors might determine, however, that it would
be more advantageous to purchase Class B shares or Class C shares
in order to have all their funds invested initially, although
remaining subject to higher continuing distribution charges and
being subject to a contingent deferred sales charge for a four-
year and one-year period, respectively. For example, based on
current fees and expenses, an investor subject to the 4.25%
initial sales charge on Class A shares would have to hold his or
her investment approximately seven years for the Class C
distribution services fee to exceed the initial sales charge plus
the accumulated distribution services fee of Class A shares. In
this example, an investor intending to maintain his or her
investment for a longer period might consider purchasing Class A
shares. This example does not take into account the time value
of money, which further reduces the impact of the Class C
distribution services fees on the investment, fluctuations in net
asset value or the effect of different performance
assumptions.
Those investors who prefer to have all of their funds
invested initially but may not wish to retain Fund shares for the
four-year period during which Class B shares are subject to a
contingent deferred sales charge may find it more advantageous to
purchase Class C shares.
During the Fund's fiscal years ended in 1996 and 1995,
the aggregate amount of underwriting commission payable with
respect to shares of the Fund were $180,526, $362,677 and
$316,792, respectively. Of that amount, the Principal
Underwriter received the amounts of $9,940, $48,517 and $49,229,
respectively, representing that portion of the sales charges paid
on shares of the Fund sold during the year which was not
reallowed to selected dealers (and was, accordingly, retained by
the Principal Underwriter). During the Fund's fiscal years ended
in 1997, 1996 and 1995, the Principal Underwriter received
contingent deferred sales charges of $3, $0 and $0, respectively,
on Class A shares, $154,336, $60,344 and $49,596, respectively,
on Class B shares, and $0, $360 and $0, respectively on Class C
shares.
24
<PAGE>
Class A Shares
The public offering price of Class A shares is the net
asset value plus a sales charge, as set forth below.
Sales Charge
Discount or
Commission
As % of to Dealers
As % of the Public or Agents
Amount of Net Amount Offering as % of
Purchase Invested Price Offering Price
Less than
$100,000 4.44% 4.25% 4.00%
$100,000 but less
than $250,000 3.36 3.25 3.00
$250,000 but less
than $500,000 2.30 2.25 2.00
$500,000 but less
than $1,000,000* 1.78 1.75 1.50
________________
* There is no initial sales charge on transactions of $1,000,000
or more.
With respect to purchases of $1,000,000 or more, Class A
shares redeemed within one year of purchase will be subject to a
contingent deferred sales charge equal to 1% of the lesser of the
cost of the shares being redeemed or their net asset value at the
time of redemption. Accordingly, no sales charge will be imposed
on increases in net asset value above the initial purchase price.
In addition, no charge will be assessed on shares derived from
reinvestment of dividends or capital gains distributions. The
contingent deferred sales charge on Class A shares will be waived
on certain redemptions, as described below under "--Class B
Shares." In determining the contingent deferred sales charge
applicable to a redemption of Class A shares, it will be assumed
that the redemption is, first, of any shares that are not subject
to a contingent deferred sales charge (for example, because an
initial sales charge was paid with respect to the shares, or they
have been held beyond the period during which the charge applies
or were acquired upon the reinvestment of dividends or
distributions) and, second, of shares held longest during the
time they are subject to the sales charge. Proceeds from the
contingent deferred sales charge on Class A shares are paid to
the Principal Underwriter and are used by the Principal
Underwriter to defray the expenses of the Principal Underwriter
related to providing distribution-related services to the Fund in
connection with the sales of Class A shares, such as the payment
25
<PAGE>
of compensation to selected dealers and agents for selling
Class A shares. With respect to purchases of $1,000,000 or more
made through selected dealers and agents, the Manager may,
pursuant to the Distribution Services Agreement described above,
pay such dealers or agents from its own resources a fee of up to
1% of the amount invested to compensate such dealers or agents
for their distribution assistance in connection with such
purchases.
No initial sales charge is imposed on Class A shares
issued (i) pursuant to the automatic reinvestment of income
dividends or capital gains distributions, (ii) in exchange for
Class A shares of other "Alliance Mutual Funds" (as that term is
defined under "Combined Purchase Privilege" below), except that
an initial sales charge will be imposed on Class A shares issued
in exchange for Class A shares of AFD Exchange Reserves ("AFDER")
that were purchased for cash without the payment of an initial
sales charge and without being subject to a contingent deferred
sales charge or (iii) upon the automatic conversion of Class B
shares or Advisor Class shares as described below under "Class B
Shares-Conversion Feature" and "--Conversion of Advisor Class
Shares to Class A Shares." The Fund receives the entire net
asset value of its Class A shares sold to investors. The
Principal Underwriter's commission is the sales charge shown
above less any applicable discount or commission "reallowed" to
selected dealers and agents. The Principal Underwriter will
reallow discounts to selected dealers and agents in the amounts
indicated in the table above. In this regard, the Principal
Underwriter may elect to reallow the entire sales charge to
selected dealers and agents for all sales with respect to which
orders are placed with the Principal Underwriter. A selected
dealer who receives reallowance in excess of 90% of such a sales
charge may be deemed to be an "underwriter" under the Securities
Act.
Set forth below is an example of the method of computing
the offering price of the Class A shares. The example assumes a
purchase of Class A shares of the Fund aggregating less than
$100,000 subject to the schedule of sales charges set forth above
at a price based upon the net asset value of Class A shares of
the Fund at November 30, 1997.
26
<PAGE>
Net Asset Value per Class A Share
at January 5, 1998 $8.70
Class A Per Share Sales Charge -
4.25% of offering price (4.44%
of net asset value per share) $ .39
-----
Class A Per Share Offering Price
to the public $9.09
=====
Investors choosing the initial sales charge alternative may under
certain circumstances be entitled to pay (i) no initial sales
charge (but may be subject in most such cases to a contingent
deferred sales charge) or (ii) a reduced initial sales charge.
The circumstances under which such investors may pay a reduced
initial sales charge are described below.
Combined Purchase Privilege. Certain persons may
qualify for the sales charge reductions indicated in the schedule
of such charges above by combining purchases of shares of the
Fund into a single "purchase," if the resulting "purchase" totals
at least $100,000. The term "purchase" refers to: (i) a single
purchase by an individual, or to concurrent purchases, which in
the aggregate are at least equal to the prescribed amounts, by an
individual, his or her spouse and their children under the age of
21 years purchasing shares of the Fund for his, her or their own
account(s); (ii) a single purchase by a trustee or other
fiduciary purchasing shares for a single trust, estate or single
fiduciary account although more than one beneficiary is involved;
or (iii) a single purchase for the employee benefit plans of a
single employer. The term "purchase" also includes purchases by
any "company," as the term is defined in the 1940 Act, but does
not include purchases by any such company which has not been in
existence for at least six months or which has no purpose other
than the purchase of shares of the Fund or shares of other
registered investment companies at a discount. The term
"purchase" does not include purchases by any group of individuals
whose sole organizational nexus is that the participants therein
are credit card holders of a company, policy holders of an
insurance company, customers of either a bank or broker-dealer or
clients of an investment adviser. A "purchase" may also include
shares, purchased at the same time through a single selected
dealer or agent, of any other "Alliance Mutual Fund." Currently,
the Alliance Mutual Funds include:
AFD Exchange Reserves
The Alliance Fund, Inc.
Alliance All-Asia Investment Fund, Inc.
Alliance Balanced Shares, Inc.
27
<PAGE>
Alliance Bond Fund, Inc.
-Corporate Bond Portfolio
-U.S. Government Portfolio
Alliance Developing Markets Fund, Inc.
Alliance Global Dollar Government Fund, Inc.
Alliance Global Environment Fund, Inc.
Alliance Global Small Cap Fund, Inc.
Alliance Global Strategic Income Trust, Inc.
Alliance Greater China '97 Fund, Inc.
Alliance Growth and Income Fund, Inc.
Alliance High Yield Fund, Inc.
Alliance Income Builder Fund, Inc.
Alliance International FundAlliance International Premier Growth
Fund, Inc.
Alliance Limited Maturity Government Fund, Inc.
Alliance Mortgage Securities Income Fund, Inc.
Alliance Multi-Market Strategy Trust, Inc.
Alliance Municipal Income Fund, Inc.
-California Portfolio
-Insured California Portfolio
-Insured National Portfolio
-National Portfolio
-New York Portfolio
Alliance Municipal Income Fund II
-Arizona Portfolio
-Florida Portfolio
-Massachusetts Portfolio
-Michigan Portfolio
-Minnesota Portfolio
-New Jersey Portfolio
-Ohio Portfolio
-Pennsylvania Portfolio
-Virginia Portfolio
Alliance New Europe Fund, Inc.
Alliance North American Government Income Trust, Inc.
Alliance Premier Growth Fund, Inc.
Alliance Quasar Fund, Inc.
Alliance Real Estate Investment Fund, Inc.
Alliance/Regent Sector Opportunity Fund, Inc.
Alliance Short-Term Multi-Market Trust, Inc.
Alliance Technology Fund, Inc.
Alliance Utility Income Fund, Inc.
Alliance World Income Trust, Inc.
Alliance Worldwide Privatization Fund, Inc.
The Alliance Portfolios
-Alliance Growth Fund
-Alliance Conservative Investors Fund
-Alliance Growth Investors Fund
-Alliance Strategic Balanced Fund
-Alliance Short-Term U.S. Government Fund
28
<PAGE>
Prospectuses for the Alliance Mutual Funds may be
obtained without charge by contacting Alliance Fund Services,
Inc. at the address or the "For Literature" telephone number
shown on the front cover of this Statement of Additional
Information.
Cumulative Quantity Discount (Right of Accumulation). An
investor's purchase of additional Class A shares of the Fund may
qualify for a Cumulative Quantity Discount. The applicable sales
charge will be based on the total of:
(i) the investor's current purchase;
(ii) the net asset value (at the close of business on
the previous day) of (a) all shares of the Fund
held by the investor and (b) all shares of any
other Alliance Mutual Fund held by the investor;
and
(iii) the net asset value of all shares described in
paragraph (ii) owned by another shareholder
eligible to combine his or her purchase with that
of the investor into a single "purchase" (see
above).
For example, if an investor owned shares of an Alliance
Mutual Fund worth $200,000 at their then current net asset value
and, subsequently, purchased Class A shares of the Fund worth an
additional $100,000, the initial sales charge for the $100,000
purchase would be at the 2.25% rate applicable to a single
$300,000 purchase of shares of the Fund, rather than the 3.25%
rate.
To qualify for the Combined Purchase Privilege or to
obtain the Cumulative Quantity Discount on a purchase through a
selected dealer or agent, the investor or selected dealer or
agent must provide the Principal Underwriter with sufficient
information to verify that each purchase qualifies for the
privilege or discount.
Statement of Intention. Class A investors may also
obtain the reduced sales charges shown in the table above by
means of a written Statement of Intention, which expresses the
investor's intention to invest not less than $100,000 within a
period of 13 months in Class A shares (or Class A, Class B,
Class C and/or Advisor Class shares) of the Fund or any other
Alliance Mutual Fund. Each purchase of shares under a Statement
of Intention will be made at the public offering price or prices
applicable at the time of such purchase to a single transaction
of the dollar amount indicated in the Statement of Intention. At
the investor's option, a Statement of Intention may include
29
<PAGE>
purchases of shares of the Fund or any other Alliance Mutual Fund
made not more than 90 days prior to the date that the investor
signs the Statement of Intention; however, the 13-month period
during which the Statement of Intention is in effect will begin
on the date of the earliest purchase to be included.
Investors qualifying for the Combined Purchase Privilege
described above may purchase shares of the Alliance Mutual Funds
under a single Statement of Intention. For example, if at the
time an investor signs a Statement of Intention to invest at
least $100,000 in Class A shares of the Fund, the investor and
the investor's spouse each purchase shares of the Fund worth
$20,000 (for a total of $40,000), it will only be necessary to
invest a total of $60,000 during the following 13 months in
shares of the Fund or any other Alliance Mutual Fund, to qualify
for the 3.25% sales charge on the total amount being invested
(the sales charge applicable to an investment of $100,000).
The Statement of Intention is not a binding obligation
upon the investor to purchase the full amount indicated. The
minimum initial investment under a Statement of Intention is 5%
of such amount. Shares purchased with the first 5% of such
amount will be held in escrow (while remaining registered in the
name of the investor) to secure payment of the higher sales
charge applicable to the shares actually purchased if the full
amount indicated is not purchased, and such escrowed shares will
be involuntarily redeemed to pay the additional sales charge, if
necessary. Dividends on escrowed shares, whether paid in cash or
reinvested in additional Fund shares, are not subject to escrow.
When the full amount indicated has been purchased, the escrow
will be released. To the extent that an investor purchases more
than the dollar amount indicated on the Statement of Intention
and qualifies for a further reduced sales charge, the sales
charge will be adjusted for the entire amount purchased at the
end of the 13-month period. The difference in the sales charge
will be used to purchase additional shares of the Fund subject to
the rate of the sales charge applicable to the actual amount of
the aggregate purchases.
Investors wishing to enter into a Statement of Intention
in conjunction with their initial investment in Class A shares of
the Fund should complete the appropriate portion of the
Subscription Application found in the Prospectus while current
Class A shareholders desiring to do so can obtain a form of
Statement of Intention by contacting Alliance Fund Services, Inc.
at the address or telephone numbers shown on the cover of this
Statement of Additional Information.
Certain Retirement Plans. Multiple participant payroll
deduction retirement plans may also purchase shares of the Fund
or any other Alliance Mutual Fund at a reduced sales charge on a
30
<PAGE>
monthly basis during the 13-month period following such a plan's
initial purchase. The sales charge applicable to such initial
purchase of shares of the Fund will be that normally applicable,
under the schedule of 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 the Fund to
be redeemed or repurchased may reinvest all or any portion of the
redemption or repurchase proceeds in Class A shares of the Fund
at net asset value without any sales charge, provided that
(i) such reinvestment is made within 120 calendar days after the
redemption or repurchase date, and (ii) for Class B shares, a
contingent deferred sales charge has been paid and the Principal
Underwriter has approved, at its discretion, the reinvestment of
such shares. Shares are sold to a reinvesting shareholder at the
net asset value next determined as described above. A
reinstatement pursuant to this privilege will not cancel the
redemption or repurchase transaction; therefore, any gain or loss
so realized will be recognized for federal income tax purposes
except that no loss will be recognized to the extent that the
proceeds are reinvested in shares of the Fund within 30 calendar
days after the redemption or repurchase transaction. Investors
may exercise the reinstatement privilege by written request sent
to the Fund at the address shown on the cover of this Statement
of Additional Information.
Sales at Net Asset Value. The Fund may sell its Class A
shares at net asset value (i.e., without an initial sales charge)
and without contingent deferred sales charge to certain
categories of investors including: (i) investment management
clients of the Manager or its affiliates; (ii) officers and
present or former Directors of the Fund; present or former
directors and trustees of other investment companies managed by
the Manager; present or retired full-time employees of the
Manager, the Principal Underwriter, Alliance Fund Services, Inc.
and their affiliates; officers and directors of ACMC, the
Principal Underwriter, Alliance Fund Services, Inc. and their
affiliates; officers, directors and present, full-time employees
of selected dealers or agents; or the spouse, sibling, direct
ancestor or direct descendant (collectively "relatives") of any
such person; or any trust, individual retirement account or
retirement plan account for the benefit of any such person or
31
<PAGE>
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 Manager, the Principal
Underwriter, Alliance Fund Services, Inc. and their affiliates;
and certain employee benefit plans for employees of the Manager,
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 affiliates or agents, for services in the nature of
investment management or administrative services; (vi) persons
who establish to the Principal Underwriter's satisfaction that
they are investing within such time period as may be designated
by the Principal Underwriter, proceeds of redemption of shares of
such other registered investment companies as may be designated
from time to time by the Principal Underwriter; and
(vii) employer-sponsored qualified pension or profit-sharing
plans (including Section 401(k) plans), custodial accounts
maintained pursuant to Section 403(b)(7) retirement plans and
individual retirement accounts (including individual retirement
accounts to which simplified employee pension ("SEP")
contributions are made), if such plans or accounts are
established or administered under programs sponsored by
administrators or other persons that have been approved by the
Principal Underwriter.
Class B Shares
Investors may purchase Class B shares at the public
offering price equal to the net asset value per share of the
Class B shares on the date of purchase without the imposition of
a sales charge at the time of purchase. The Class B shares are
sold without an initial sales charge so that the Fund will
receive the full amount of the investor's purchase payment.
Proceeds from the contingent deferred sales charge on
the Class B shares are paid to the Principal Underwriter and are
used by the Principal Underwriter to defray the expenses of the
Principal Underwriter related to providing distribution-related
services to the Fund in connection with the sale of the Class B
shares, such as the payment of compensation to selected dealers
and agents for selling Class B shares. The combination of the
32
<PAGE>
contingent deferred sales charge and the distribution services
fee enables the Fund to sell the Class B shares without a sales
charge being deducted at the time of purchase. The higher
distribution services fee incurred by Class B shares will cause
such shares to have a higher expense ratio and to pay lower
dividends than those related to Class A shares.
Contingent Deferred Sales Charge. Class B shares that
are redeemed within four years of purchase will be subject to a
contingent deferred sales charge at the rates set forth below
charged as a percentage of the dollar amount subject thereto.
The charge will be assessed on an amount equal to the lesser of
the cost of the shares being redeemed or their net asset value at
the time of redemption. Accordingly, no sales charge will be
imposed on increases in net asset value above the initial
purchase price. In addition, no charge will be assessed on shares
derived from reinvestment of dividends or capital gains
distributions.
To illustrate, assume that on or after November 19, 1993
an investor purchased 100 Class B shares at $10 per share (at a
cost of $1,000) and in the second year after purchase, the net
asset value per share is $12 and, during such time, the investor
has acquired 10 additional Class B shares upon dividend
reinvestment. If at such time the investor makes his or her first
redemption of 50 Class B shares (proceeds of $600), 10 Class B
shares will not be subject to the charge because of dividend
reinvestment. With respect to the remaining 40 Class B shares,
the charge is applied only to the original cost of $10 per share
and not to the increase in net asset value of $2 per share.
Therefore, $400 of the $600 redemption proceeds will be charged
at a rate of 3.0% (the applicable rate in the second year after
purchase as set forth below).
The amount of the contingent deferred sales charge, if
any, will vary depending on the number of years from the time of
payment for the purchase of Class B shares until the time of
redemption of such shares.
33
<PAGE>
Contingent Deferred Sales Charge as a %
of Dollar Amount Subject to Charge
Shares Purchased Shares Purchased
Years before on or after
Since Purchase November 19, 1993 November 19, 1993
First 5.5% 4.0%
Second 4.5% 3.0%
Third 3.5% 2.0%
Fourth 2.5% 1.0%
Fifth 1.5% None
Sixth 0.5% None
Seventh and thereafter None None
In determining the contingent deferred sales charge
applicable to a redemption of Class B shares, it will be assumed
that the redemption is, first, of any shares that were acquired
upon the reinvestment of dividends or distributions and, second,
of shares held longest during the time they are subject to the
sales charge. When shares acquired in an exchange are redeemed,
the applicable contingent deferred sales charge and conversion
schedules will be the schedules that applied at the time of the
purchase of shares of the corresponding class of the Alliance
Mutual Fund originally purchased by the shareholder.
The contingent deferred sales charge is waived on
redemptions of shares (i) following the death or disability, as
defined in the Internal Revenue Code of 1986, as amended (the
"Code"), of a shareholder, (ii) to the extent that the redemption
represents a minimum required distribution from an individual
retirement account or other retirement plan to a shareholder who
has attained the age of 70-1/2, (iii) that had been purchased by
present or former Directors of the Fund, by the relative of any
such person, by any trust, individual retirement account or
retirement plan account for the benefit of any such person or
relative, or by the estate of any such person or relative, or
(iv) pursuant to a systematic withdrawal plan (see "Shareholder
Services--Systematic Withdrawal Plan" below).
Conversion Feature. Eight years after the end of the
calendar month in which the shareholder's purchase order was
accepted, Class B shares will automatically convert to Class A
shares and will no longer be subject to a higher distribution
services fee. Such conversion occurs on the basis of the
relative net asset values of the two classes, without the
imposition of any sales load, fee or other charge. The purpose
of the conversion feature is to reduce the distribution services
fee paid by holders of Class B shares that have been outstanding
long enough for the Principal Underwriter to have been
34
<PAGE>
compensated for distribution expenses incurred in the sale of
such shares.
For purposes of conversion to Class A, Class B shares
purchased through the reinvestment of dividends and distributions
paid in respect of Class B shares in a shareholder's account will
be considered to be held in a separate sub-account. Each time
any Class B shares in the shareholder's account (other than those
in the sub-account) convert to Class A, an equal pro-rata portion
of the Class B shares in the sub-account will also convert to
Class A.
The conversion of Class B shares to Class A shares is
subject to the continuing availability of an opinion of counsel
to the effect that the conversion of Class B shares to Class A
shares does not constitute a taxable event under federal income
tax law. The conversion of Class B shares to Class A shares may
be suspended if such an opinion is no longer available at the
time such conversion is to occur. In that event, no further
conversions of Class B shares would occur, and shares might
continue to be subject to the higher distribution services fee
for an indefinite period which may extend beyond the period
ending eight years after the end of the calendar month in which
the shareholder's purchase order was accepted.
Class C Shares
Investors may purchase Class C shares at the public
offering price equal to the net asset value per share of the
Class C shares on the date of purchase without the imposition of
a sales charge either at the time of purchase or, as long as the
shares are held for one year or more, upon redemption. Class C
shares are sold without an initial sales charge so that the Fund
will receive the full amount of the investor's purchase payment
and, as long as the shares are held for one year or more,
without a contingent deferred sales charge so that the investor
will receive as proceeds upon redemption the entire net asset
value of his or her Class C shares. The Class C distribution
services fee enables the Fund to sell Class C shares without
either an initial or contingent deferred sales charge, as long as
the shares are held for one year or more. Class C shares do not
convert to any other class of shares of the Fund and incur higher
distribution services fees and transfer agency costs than Class A
shares and Advisor Class shares, and will thus have a higher
expense ratio and pay correspondingly lower dividends than
Class A shares and Advisor Class shares.
Class C shares that are redeemed within one year of
purchase will be subject to a contingent deferred sales charge of
1%, charged as a percentage of the dollar amount subject thereto.
The charge will be assessed on an amount equal to the lesser of
35
<PAGE>
the cost of the shares being redeemed or their net asset value at
the time of redemption. Accordingly, no sales charge will be
imposed on increases in net asset value above the initial
purchase price. In addition, no charge will be assessed on
shares derived from reinvestment of dividends or capital gains
distributions. The contingent deferred sales charge on Class C
shares will be waived on certain redemptions, as described above
under "--Class B Shares." In determining the contingent deferred
sales charge applicable to a redemption of Class C shares, it
will be assumed that the redemption is, first, of any shares that
are not subject to a contingent deferred sales charge (for
example, because the shares have been held beyond the period
during which the charge applies or were acquired upon the
reinvestment of dividends or distributions) and, second, of
shares held longest during the time they are subject to the sales
charge.
Proceeds from the contingent deferred sales charge are
paid to the Principal Underwriter and are used by the Principal
Underwriter to defray the expenses of the Principal Underwriter
related to providing distribution-related services to the Fund in
connection with the sale of the Class C shares, such as the
payment of compensation to selected dealers and agents for
selling Class C shares. The combination of the contingent
deferred sales charge and the distribution services fee enables
the Fund to sell the Class C shares without a sales charge being
deducted at the time of purchase. The higher distribution
services fee incurred by Class C shares will cause such shares to
have a higher expense ratio and to pay lower dividends than those
related to Class A shares and Advisor Class shares.
Conversion of Advisor Class Shares to Class A Shares
Advisor Class shares may be held solely through the fee-
based program accounts and employee benefit plans and registered
investment advisory or other financial intermediary relationships
described above under "Purchase of Shares--General" and by
investment advisory clients of, and by certain other persons
associated with, the Manager and its affiliates or the Fund. If
(i) a holder of Advisor Class shares ceases to participate in the
fee-based program or plan, or to be associated with the
investment adviser or financial intermediary, in each case, that
satisfies the requirements to purchase shares set forth under
"Purchase of Shares--General" or (ii) the holder is otherwise no
longer eligible to purchase Advisor Class shares as described in
the Advisor Class Prospectus and this Statement of Additional
Information (each, a "Conversion Event"), then all Advisor Class
shares held by the shareholder will convert automatically and
without notice to the shareholder, other than the notice
contained in the Advisor Class Prospectus and this Statement of
Additional Information, to Class A shares of the Fund during the
36
<PAGE>
calendar month following the month in which the Fund is informed
of the occurrence of the Conversion Event. 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
and have a higher expense ratio than Advisor Class shares. As a
result, Class A shares may pay correspondingly lower dividends
and have a lower net asset value than Advisor Class shares.
The conversion of Advisor Class shares to Class A shares
is subject to the continuing availability of an opinion of
counsel to the effect that the conversion of Advisor Class shares
to Class A shares does not constitute a taxable event under
federal income tax law. The conversion of Advisor Class shares
to Class A shares may be suspended if such an opinion is no
longer available at the time such conversion is to occur. In
that event, the Advisor Class shareholder would be required to
redeem his Advisor Class shares, which would constitute a taxable
event under federal income tax law.
_______________________________________________________________
REDEMPTION AND REPURCHASE OF SHARES
_______________________________________________________________
The following information supplements that set forth in
the Fund's Prospectus under the heading "Purchase and Sale of
Shares--How to Sell Shares." If you are an Advisor Class
shareholder through an account established under a fee-based
program your fee-based program may impose requirements with
respect to the purchase, sale or exchange of Advisor Class shares
of the Fund that are different from those described herein. A
transaction fee may be charged by your financial representative
with respect to the purchase, sale or exchange of Advisor Class
shares made through such financial representative.
Redemption
Subject only to the limitations described below, the
Fund's Articles of Incorporation require that the Fund redeems
the shares tendered to it, as described below, at a redemption
price equal to their net asset value as next computed following
the receipt of shares tendered for redemption in proper form.
Except for any contingent deferred sales charge which may be
applicable to Class A, Class B or Class C shares, there is no
redemption charge. Payment of the redemption price will be made
within seven days after the Fund's receipt of such tender for
redemption. If a shareholder is in doubt about what documents
37
<PAGE>
are required by his or her fee-based program or employee benefit
plan, the shareholder should contact his or her financial
representative.
The right of redemption may not be suspended or the date
of payment upon redemption postponed for more than seven days
after shares are tendered for redemption, except for any period
during which the Exchange is closed (other than customary weekend
and holiday closings) or during which the Commission determines
that trading thereon is restricted, or for any period during
which an emergency (as determined by the Commission) exists as a
result of which disposal by the Fund of securities owned by it is
not reasonably practicable or as a result of which it is not
reasonably practicable for the Fund fairly to determine the value
of its net assets, or for such other periods as the Commission
may by order permit for the protection of security holders of the
Fund.
Payment of the redemption price will be made in cash.
The value of a shareholder's shares on redemption or repurchase
may be more or less than the cost of such shares to the
shareholder, depending upon the market value of the Fund's
portfolio securities at the time of such redemption or
repurchase. Redemption proceeds on Class A, Class B and Class C
shares will reflect the deduction of the contingent deferred
sales charge, if any. Payment received by a shareholder upon
redemption or repurchase of his shares, assuming the shares
constitute capital assets in his hands, will result in long-term
or short-term capital gains (or loss) depending upon the
shareholder's holding period and basis in respect of the shares
redeemed.
To redeem shares of the Fund for which no stock
certificates have been issued, the registered owner or owners
should forward a letter to the Fund containing a request for
redemption. The signature or signatures on the letter must be
guaranteed by an "eligible guarantor institution" as defined in
Rule 17Ad-15 under the Securities Exchange Act of 1934, as
amended.
To redeem shares of the Fund represented by stock
certificates, the investor should forward the appropriate stock
certificate or certificates, endorsed in blank or with blank
stock powers attached, to the Fund with the request that the
shares represented thereby, or a specified portion thereof, be
redeemed. The stock assignment form on the reverse side of each
stock certificate surrendered to the Fund for redemption must be
signed by the registered owner or owners exactly as the
registered name appears on the face of the certificate or,
alternatively, a stock power signed in the same manner may be
attached to the stock certificate or certificates or, where
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<PAGE>
tender is made by mail, separately mailed to the Fund. The
signature or signatures on the assignment form must be guaranteed
in the manner described above.
Telephone Redemption By Electronic Funds Transfer. Each
Fund shareholder is entitled to request redemption by electronic
funds transfer of shares for which no stock certificates have
been issued by telephone at (800) 221-5672 by a shareholder who
has completed the appropriate portion of the Subscription
Application or, in the case of an existing shareholder, an
"Autosell" application obtained from Alliance Fund Services, Inc.
Prior to March 1, 1998, this service can be employed only once in
any 30-day period (except for certain omnibus accounts). A
telephone redemption request by electronic funds transfer may not
exceed $100,000 (except for certain omnibus accounts) and must be
made by 4:00 p.m. Eastern time on a Fund business day as defined
above. Proceeds of telephone redemptions will be sent by
Electronic Funds Transfer to a shareholder's designated bank
account at a bank selected by the shareholder that is a member of
the NACHA.
Telephone Redemption By Check. Each Fund shareholder is
eligible to request redemption by check of Fund shares for which
no stock certificates have been issued by telephone at (800) 221-
5672 before 4:00 p.m. Eastern time on a Fund business day in an
amount not exceeding $50,000. Prior to March 1, 1998, this
service can be employed only once in any 30-day period (except
for certain omnibus accounts). 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 AFS by telephone (although no such
difficulty was apparent at any time in connection with the 1987
market break). If a shareholder were to experience such
difficulty, the shareholder should issue written instructions to
Alliance Fund Services, Inc. at the address shown on the cover of
this Statement of Additional Information. The Fund reserves the
right to suspend or terminate its telephone redemption service at
any time without notice. Telephone redemption is not available
with respect to shares (i) for which certificates have been
issued, (ii) held in nominee or "street name" accounts,
(iii) held by a shareholder who has changed his or her address of
record within the preceding 30 calendar days or (iv) held in any
retirement plan account. Neither the Fund nor the Adviser, the
Principal Underwriter or Alliance Fund Services, Inc. will be
39
<PAGE>
responsible for the authenticity of telephone requests for
redemptions that the Fund reasonably believes to be genuine. The
Fund will employ reasonable procedures in order to verify that
telephone requests for redemptions are genuine, including, among
others, recording such telephone instructions and causing written
confirmations of the resulting transactions to be sent to
shareholders. If the Fund did not employ such procedures, it
could be liable for losses arising from unauthorized or
fraudulent telephone instructions. Selected dealers or agents
may charge a commission for handling telephone requests for
redemptions.
Repurchase
The Fund may repurchase shares through the Principal
Underwriter, selected financial intermediaries or selected
dealers or agents. The repurchase price will be the net asset
value next determined after the Principal Underwriter receives
the request (less the contingent deferred sales charge, if any,
with respect to the Class A Class B and Class C shares), except
that requests placed through selected dealers or agents before
the close of regular trading on the Exchange on any day will be
executed at the net asset value determined as of such close of
regular trading on that day if received by the Principal
Underwriter prior to its close of business on that day (normally
5:00 p.m. Eastern time). The financial intermediary or selected
dealer or agent is responsible for transmitting the request to
the Principal Underwriter by 5:00 p.m. If the financial
intermediary or selected dealer or agent fails to do so, the
shareholder's right to receive that day's closing price must be
settled between the shareholder and the dealer or agent. A
shareholder may offer shares of the Fund to the Principal
Underwriter either directly or through a selected dealer or
agent. Neither the Fund nor the Principal Underwriter charges a
fee or commission in connection with the repurchase of shares
(except for the contingent deferred sales charge, if any, with
respect to Class A, Class B and Class C shares). Normally, if
shares of the Fund are offered through a financial intermediary
selected dealer or agent, the repurchase is settled by the
shareholder as an ordinary transaction with or through the
selected dealer or agent, who may charge the shareholder for this
service. The repurchase of shares of the Fund as described above
is a voluntary service of the Fund and the Fund may suspend or
terminate this practice at any time.
General
The Fund reserves the right to close out an account that
through redemption has remained below $200 for 90 days.
Shareholders will receive 60 days' written notice to increase the
account value before the account is closed. No contingent
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<PAGE>
deferred sales charge will be deducted from the proceeds of this
redemption. In the case of a redemption or repurchase of shares
of the Fund recently purchased by check, redemption proceeds will
not be made available until the Fund is reasonably assured that
the check has cleared, normally up to 15 calendar days following
the purchase date.
_______________________________________________________________
SHAREHOLDER SERVICES
_______________________________________________________________
The following information supplements that set forth in
the Fund's Prospectus under the heading "Purchase and Sale of
Shares--Shareholder Services." The shareholder services set
forth below are applicable to Class A, Class B, Class C and
Advisor Class shares unless otherwise indicated. If you are an
Advisor Class shareholder through an account established under a
fee-based program your fee-based program may impose requirements
with respect to the purchase, sale or exchange of Advisor Class
shares of the Fund that are different from those described
herein. A transaction fee may be charged by your financial
representative with respect to the purchase, sale or exchange of
Advisor Class shares made through such financial representative.
Automatic Investment Program
Investors may purchase shares of the Fund through an
automatic investment program utilizing electronic funds transfer
drawn on the investor's own bank account. Under such a program,
pre-authorized monthly drafts for a fixed amount (at least $25)
are used to purchase shares through the selected dealer or
selected agent designated by the investor at the public offering
price next determined after the Principal Underwriter receives
the proceeds from the investor's bank. In electronic form,
drafts can be made on or about a date each month selected by the
shareholder. Investors wishing to establish an automatic
investment program in connection with their initial investment
should complete the appropriate portion of the Subscription
Application found in the Prospectus. Current shareholders should
contact Alliance Fund Services, Inc. at the address or telephone
numbers shown on the cover of this Statement of Additional
Information to establish an automatic investment program.
Exchange Privilege
You may exchange your investment in the Fund for shares
of the same class of other Alliance Mutual Funds (including AFD
Exchange Reserves, a money market fund managed by the Manager).
In addition, (i) present officers and full-time employees of the
Manager, (ii) present Directors or Trustees of any Alliance
41
<PAGE>
Mutual Fund and (iii) certain employee benefit plans for
employees of the Manager, the Principal Underwriter, Alliance
Fund Services, Inc. and their affiliates may, on a tax-free
basis, exchange Class A shares of the Fund for Advisor Class
shares of the Fund. Exchanges of shares are made at the net
asset value next determined and without sales or service charges.
Exchanges may be made by telephone or written request. Telephone
exchange requests must be received by Alliance Fund Services,
Inc. by 4:00 p.m. Eastern time on a Fund business day in order to
receive that day's net asset value.
Shares will continue to age without regard to exchanges
for purpose of determining the CDSC, if any, upon redemption and,
in the case of Class B shares, for the purpose of conversion to
Class A shares. After an exchange, your Class B shares will
automatically convert to Class A shares in accordance with the
conversion schedule applicable to the Class B shares of the
Alliance Mutual Fund you originally purchased for cash ("original
shares"). When redemption occurs, the CDSC applicable to the
original shares is applied.
Please read carefully the prospectus of the mutual fund
into which you are exchanging before submitting the request.
Call Alliance Fund Services, Inc. at (800) 221-5672 to exchange
uncertificated shares. Except with respect to exchanges of
Class A shares of the Fund for Advisor Class shares of the Fund,
exchanges of shares as described above in this section are
taxable transactions for federal income tax purposes. The
exchange service may be changed, suspended, or terminated on 60
days' written notice.
All exchanges are subject to the minimum investment
requirements and any other applicable terms set forth in the
prospectus for the Alliance Mutual Fund whose shares are being
acquired. An exchange is effected through the redemption of the
shares tendered for exchange and the purchase of shares being
acquired at their respective net asset values as next determined
following receipt by the Alliance Mutual Fund whose shares are
being exchanged of (i) proper instructions and all necessary
supporting documents as described in such fund's prospectus, or
(ii) a telephone request for such exchange in accordance with the
procedures set forth in the following paragraph. Exchanges
involving the redemption of shares recently purchased by check
will be permitted only after the Alliance Mutual Fund whose
shares have been tendered for exchange is reasonably assured that
the check has cleared, normally up to 15 calendar days following
the purchase date.
Each Fund shareholder and the shareholder's selected
dealer, agent or financial representative, as applicable, are
authorized to make telephone requests for exchanges unless
42
<PAGE>
Alliance Fund Services, Inc., receives written instruction to the
contrary from the shareholder, or the shareholder declines the
privilege by checking the appropriate box on the Subscription
Application found in the Prospectus. Such telephone requests
cannot be accepted with respect to shares then represented by
stock certificates. Shares acquired pursuant to a telephone
request for exchange will be held under the same account
registration as the shares redeemed through such exchange.
Eligible shareholders desiring to make an exchange
should telephone Alliance Fund Services, Inc. with their account
number and other details of the exchange, at (800) 221-5672
before 4:00 p.m., Eastern time, on a Fund business day as defined
above. Telephone requests for exchange received before 4:00 p.m.
Eastern time on a Fund business day will be processed as of the
close of business on that day. During periods of drastic
economic or market developments, such as the market break of
October 1987, it is possible that shareholders would have
difficulty in reaching Alliance Fund Services, Inc. by telephone
(although no such difficulty was apparent at any time in
connection with the 1987 market break). If a shareholder were to
experience such difficulty, the shareholder should issue written
instructions to Alliance Fund Services, Inc. at the address shown
on the cover of this Statement of Additional Information.
A shareholder may elect to initiate a monthly "Auto
Exchange" whereby a specified dollar amount's worth of his or her
Fund shares (minimum $25) is automatically exchanged for shares
of another Alliance Mutual Fund. Auto Exchange transactions
normally occur on the 12th day of each month, or the Fund
business day prior thereto.
None of the Alliance Mutual Funds, the Manager, the
Principal Underwriter or Alliance Fund Services, Inc. will be
responsible for the authenticity of telephone requests for
exchanges that the Fund reasonably believes to be genuine. The
Fund will employ reasonable procedures in order to verify that
telephone requests for exchanges are genuine, including, among
others, recording such telephone instructions and causing written
confirmations of the resulting transactions to be sent to
shareholders. If the Fund did not employ such procedures, it
could be liable for losses arising from unauthorized or
fraudulent telephone instructions. Selected dealers, agents or
financial representatives, as applicable, may charge a commission
for handling telephone requests for exchanges.
The exchange privilege is available only in states where
shares of the Alliance Mutual Fund being acquired may be legally
sold. Each Alliance Mutual Fund reserves the right, at any time
on 60 days' notice to its shareholders, to reject any order to
43
<PAGE>
acquire its shares through exchange or otherwise to modify,
restrict or terminate the exchange privilege.
Retirement Plans
The Fund may be a suitable investment vehicle for part
or all of the assets held in various types of retirement plans,
such as those listed below. The Fund has available forms of such
plans pursuant to which investments can be made in the Fund and
other Alliance Mutual Funds. Persons desiring information
concerning these plans should contact Alliance Fund Services,
Inc. at the "For Literature" telephone number on the cover of
this Statement of Additional Information, or write to:
Alliance Fund Services, Inc.
Retirement Plans
P.O. Box 1520
Secaucus, New Jersey 07096-1520
Individual Retirement Account ("IRA"). Individuals who
receive compensation, including earnings from self-employment,
are entitled to establish and make contributions to an IRA.
Taxation of the income and gains paid to an IRA by the Fund is
deferred until distribution from the IRA. An individual's
eligible contribution to an IRA will be deductible if neither the
individual nor his or her spouse is an active participant in an
employer-sponsored retirement plan. If the individual or his or
her spouse is an active participant in an employer-sponsored
retirement plan, the individual's contributions to an IRA may be
deductible, in whole or in part, depending on the amount of the
adjusted gross income of the individual and his or her spouse.
Employer-Sponsored Qualified Retirement Plans. Sole
proprietors, partnerships and corporations may sponsor qualified
money purchase pension and profit-sharing plans, including
Section 401(k) plans ("qualified plans"), under which annual tax-
deductible contributions are made within prescribed limits based
on compensation paid to participating individuals. The minimum
initial investment requirement may be waived with respect to
certain of these qualified plans.
If the aggregate net asset value of shares of the
Alliance Mutual Funds held by a qualified plan reaches $1 million
on or before December 15 in any year, all Class B or Class C
shares of the Fund held by the plan can be exchanged, at the
plan's request, without any sales charge, for Class A shares of
the Fund.
Simplified Employee Pension Plan ("SEP"). Sole
proprietors, partnerships and corporations may sponsor a SEP
under which they make annual tax-deductible contributions to an
44
<PAGE>
IRA established by each eligible employee within prescribed
limits based on employee compensation.
403(b)(7) Retirement Plan. Certain tax-exempt
organizations and public educational institutions may sponsor
retirement plans under which an employee may agree that monies
deducted from his or her compensation (minimum $25 per pay
period) may be contributed by the employer to a custodial account
established for the employee under the plan.
The Alliance Plans Division of Frontier Trust Company, a
subsidiary of Equitable, which serves as custodian or trustee
under the retirement plan prototype forms available from the
Fund, charges certain nominal fees for establishing an account
and for annual maintenance. A portion of these fees is remitted
to Alliance Fund Services, Inc. as compensation for its services
to the retirement plan accounts maintained with the Fund.
Distributions from retirement plans are subject to
certain Code requirements in addition to normal redemption
procedures. For additional information please contact Alliance
Fund Services, Inc.
Dividend Direction Plan
A shareholder who already maintains, in addition to his
or her Class A, Class B, Class C or Advisor Class Fund account, a
Class A, Class B Class C or Advisor Class account with one or
more other Alliance Mutual Funds may direct that income dividends
and/or capital gains paid on the shareholder's Class A, Class B,
Class C or Advisor Class Fund shares be automatically reinvested,
in any amount, without the payment of any sales or service
charges, in shares of the same class of such other Alliance
Mutual Fund(s). Further information can be obtained by
contacting Alliance Fund Services, Inc. at the address or the
"For Literature" telephone number shown on the cover of this
Statement of Additional Information. Investors wishing to
establish a dividend direction plan in connection with their
initial investment should complete the appropriate section of the
Subscription Application found in the Prospectus. Current
shareholders should contact Alliance Fund Services, Inc. to
establish a dividend direction plan.
Systematic Withdrawal Plan
General. Any shareholder who owns or purchases shares
of the Fund having a current net asset value of at least $4,000
(for quarterly or less frequent payments), $5,000 (for bi-monthly
payments) or $10,000 (for monthly payments) may establish a
systematic withdrawal plan under which the shareholder will
periodically receive a payment in a stated amount of not less
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<PAGE>
than $50 on a selected date. Systematic withdrawal plan
participants must elect to have their dividends and distributions
from the Fund automatically reinvested in additional shares of
the Fund.
Shares of the Fund owned by a participant in the Fund's
systematic withdrawal plan will be redeemed as necessary to meet
withdrawal payments and such payments will be subject to any
taxes applicable to redemptions and, except as discussed below,
any applicable contingent deferred sales charge. Shares acquired
with reinvested dividends and distributions will be liquidated
first to provide such withdrawal payments and thereafter other
shares will be liquidated to the extent necessary, and depending
upon the amount withdrawn, the investor's principal may be
depleted. A systematic withdrawal plan may be terminated at any
time by the shareholder or the Fund.
Withdrawal payments will not automatically end when a
shareholder's account reaches a certain minimum level.
Therefore, redemptions of shares under the plan may reduce or
even liquidate a shareholder's account and may subject the
shareholder to the Fund's involuntary redemption provisions. See
"Redemption and Repurchase of Shares--General." Purchases of
additional shares concurrently with withdrawals are undesirable
because of sales charges when purchases are made. While an
occasional lump-sum investment may be made by a holder of Class A
shares who is maintaining a systematic withdrawal plan, such
investment should normally be an amount equivalent to three times
the annual withdrawal or $5,000, whichever is less.
Payments under a systematic withdrawal plan may be made
by check or electronically via the Automated Clearing House
("ACH") network. Investors wishing to establish a systematic
withdrawal plan in conjunction with their initial investment in
shares of the Fund should complete the appropriate portion of the
Subscription Application found in the Prospectus, while current
Fund shareholders desiring to do so can obtain an application
form by contacting Alliance Fund Services, Inc. at the address or
the "For Literature" telephone number shown on the cover of this
Statement of Additional Information.
CDSC Waiver for Class B and Class C Shares. Under a
systematic withdrawal plan, up to 1% monthly, 2% bi-monthly or 3%
quarterly of the value at the time of redemption of the Class B
or Class C shares in a shareholder's account may be redeemed free
of any contingent deferred sales charge.
With respect to Class B shares, the waiver applies only
with respect to shares acquired after July 1, 1995. Class B
shares that are not subject to a contingent deferred sales charge
(such as shares acquired with reinvested dividends or
46
<PAGE>
distributions) will be redeemed first and will count toward the
foregoing limitations. Remaining Class B shares that are held
the longest will be redeemed next. Redemptions of Class B shares
in excess of the foregoing limitations will be subject to any
otherwise applicable contingent deferred sales charge.
With respect to Class C shares, shares held the longest
will be redeemed first and will count toward the foregoing
limitations. Redemptions in excess of those limitations will be
subject to any otherwise applicable contingent deferred sales
charge.
Statements and Reports
Each shareholder of the Fund receives semi-annual and
annual reports which include a portfolio of investments,
financial statements and, in the case of the annual report, the
report of the Fund's independent accountants, Price Waterhouse
LLP, as well as a confirmation of each purchase and redemption.
By contacting his or her broker or Alliance Fund Services, Inc.,
a shareholder can arrange for copies of his or her account
statements to be sent to another person.
_______________________________________________________________
NET ASSET VALUE
_______________________________________________________________
The per share net asset value is computed in accordance
with the Fund's Articles of Incorporation and By-Laws at the next
close of regular trading on the Exchange (ordinarily 4:00 p.m.
Eastern time) following receipt of a purchase or redemption order
by the Fund on each Fund business day on which such an order is
received and on such other days as the Board of Directors deems
appropriate or necessary in order to comply with Rule 22c-1 under
the 1940 Act. The Fund's per share net asset value is calculated
by dividing the value of the Fund's total assets, less its
liabilities, by the total number of its shares then outstanding.
A Fund business day is any weekday on which the Exchange is open
for trading.
In accordance with applicable rules under the 1940 Act,
portfolio securities are valued at current market value or at
fair value as determined in good faith by the Board of Directors.
The Board of Directors has delegated to the Adviser certain of
the Board's duties with respect to the following procedures.
Readily marketable securities listed on the Exchange or on a
foreign securities exchange (other than foreign securities
exchanges whose operations are similar to those of the United
States over-the-counter market) are valued, except as indicted
below, at the last sale price reflected on the consolidated tape
47
<PAGE>
at the close of the Exchange or, in the case of a foreign
securities exchange, at the last quoted sale price, in each case
on the business day as of which such value is being determined.
If there has been no sale on such day, the securities are valued
at the mean of the closing bid and asked prices on such day. If
no bid or asked prices are quoted on such day, then the security
is valued in good faith at fair value by, or in accordance with
procedures established by, the Board of Directors. Readily
marketable securities not listed on the Exchange or on a foreign
securities exchange but listed on other United States national
securities exchanges or traded on The Nasdaq Stock Market, Inc.
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 in the over-the-
counter market, securities listed on a foreign securities
exchange whose operations are similar to those of the United
States over-the-counter market, and securities listed on a U.S.
national securities exchange whose primary market is believed to
be over-the-counter (but excluding securities traded on The
Nasdaq Stock Market, Inc.), are valued at the mean of the current
bid and asked prices as reported by Nasdaq or, in the case of
securities not quoted by Nasdaq, the National Quotation Bureau or
another comparable sources.
Listed put or call options purchased by the Fund are
valued at the last sale price. If there has been no sale on that
day, such securities will be valued at the closing bid prices on
that day.
Open futures contracts and options thereon will be
valued using the closing settlement price or, in the absence of
such a price, the most recent quoted bid price, If there are no
quotations available for the day of valuations, the last
available closing settlement price will be used.
U.S. Government securities and other debt instruments
having 60 days or less remaining until maturity are valued at
amortized cost if their original maturity was 60 days or less, or
by amortizing their fair value as of the 61st day prior to
maturity if their original term to maturity exceeded 60 days
(unless in either case the Board of Directors determines that
this method does not represent fair value).
Fixed-income securities may be valued on the basis of
prices provided by a pricing service when such prices are
48
<PAGE>
believed to reflect the fair market value of such securities.
The prices provided by pricing service take into account many
factors, including institutional size trading in similar groups
of securities and any developments related to specific
securities.
All other assets of the Fund are valued in good faith at
fair value by, or in accordance with procedures established by,
the Board of Directors.
Trading in securities on Far Eastern and European
securities exchanges and over-the-counter markets is normally
completed well before the close of business of each Fund business
day. In addition, trading in foreign markets may not take place
on all Fund business days. Furthermore, trading may take place
in various foreign markets on days that are not Fund business
days. The Fund's calculation of the net asset value per share,
therefore, does not always take place contemporaneously with the
most recent determination of the prices of portfolio securities
in these markets. Events affecting the values of these portfolio
securities that occur between the time their prices are
determined in accordance with the above procedures and the close
of the Exchange will not be reflected in the Fund's calculation
of net asset value unless it is believed that these prices do not
reflect current market value, in which case the securities will
be valued in good faith by, or in accordance with procedures
established by, the Board of Directors at fair value.
The Board of Directors may suspend the determination of
the Fund's, net asset value (and the offering and sale of
shares), subject to the rules of the Commission and other
governmental rules and regulations, at a time when: (1) the
Exchange is closed, other than customary weekend and holiday
closings, (2) an emergency exists as a result of which it is not
reasonably practicable for the Fund to dispose of securities
owned by it or to determine fairly the value of its net assets,
or (3) for the protection of shareholders, the Commission by
order permits a suspension of the right of redemption or a
postponement of the date of payment on redemption.
For purposes of determining the Fund's net asset value
per share, all assets and liabilities initially expressed in a
foreign currency will be converted into U.S. dollars at the mean
of the current bid and asked prices of such currency against the
U.S. dollar last quoted by a major bank that is a regular
participant in the relevant foreign exchange market or on the
basis of a pricing service that takes into account the quotes
provided by a number of such major banks. If such quotations are
not available as of the close of the Exchange, the rate of
exchange will be determined in good faith by, or under the
direction of, the Board of Directors.
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<PAGE>
The assets attributable to the Class A shares, Class B
shares, Class C shares and Advisor Class shares will be invested
together in a single portfolio. The net asset value of each
class will be determined separately by subtracting the
liabilities allocated to that class from the assets belonging to
that class in conformance with the provisions of a plan adopted
by the Fund in accordance with Rule 18f-3 under the 1940 Act.
_______________________________________________________________
DIVIDENDS, DISTRIBUTIONS AND TAXES
_______________________________________________________________
The Prospectus describes generally the tax treatment of
dividends and distributions by the Fund. This section of the
Statement of Additional Information includes additional
information concerning Federal taxes.
The Fund intends for each taxable year to qualify as a
"regulated investment company" under the Code. Qualification as
a regulated investment company under the Code requires, among
other things, that (a) at least 90% of the Fund's annual gross
income, without offset for losses from the sale or other
disposition of securities, be derived from interest, payments
with respect to securities loans, dividends and gains from the
sale or other disposition of securities or options thereon and
certain other qualifying income; and (b) the Fund diversify its
holdings so that, at the end of each quarter of the taxable year,
(i) at least 50% of the market value of the Fund's assets is
represented by cash, government securities and other securities
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 (ii) not more than 25% of the
value of its assets is invested in the securities of any one
issuer (other than government securities). In addition, in order
to qualify as a regulated investment company, the Fund must
distribute to its shareholders as ordinary dividends at least 90%
of its net investment income other than net capital gains earned
in each year.
The Fund intends to declare and distribute dividends in
the amounts and at the times necessary to meet this requirement.
The Fund also intends to declare and distribute dividends in the
amounts and at the times necessary to avoid the application of
the 4% Federal excise tax imposed on certain undistributed income
of regulated investment companies. For Federal income and excise
tax purposes, dividends declared and payable to shareholders of
record as of a date in October, November or December but actually
paid during the following January will be treated as having been
distributed by the Fund, and will be taxable to these
shareholders, for the year declared, and not in the subsequent
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<PAGE>
calendar year in which the shareholders actually receive the
dividend.
It is the present policy of the Fund to distribute to
shareholders all net investment income semi-annually and to
distribute net realized capital gains, if any, annually. The
amount of any such distributions must necessarily depend upon the
realization by the Fund of income and capital gains from
investments.
The Fund may be required to withhold United States
federal income tax at the rate of 31% of all distributions
payable to shareholders who fail to provide the Fund with their
correct taxpayer identifications 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 types of shareholders specified in
the Code are exempt from such backup withholding. Backup
withholding is not an additional tax; any amounts so withheld may
be credited against a shareholder's United States federal income
tax liability or refunded.
Gains or losses on sales of securities by the Fund will
be long-term capital gains or losses if the securities have been
held by it for more than one year, except in certain cases where
the Fund has written a call option thereon. Other gains or
losses on the sale of securities will be short-term capital gains
or losses. If an option written by the Fund lapses or is
terminated through a closing transaction, such as a repurchase by
the Fund of the option from its holder, the Fund may realize a
short-term capital gain or loss, depending on whether the premium
income is greater or less than the amount paid by the Fund in the
closing transaction. If securities are sold by the Fund pursuant
to the exercise of a call option written by it, the Fund will add
the premium received to the sale price of the securities
delivered in determining the amount of gain or loss on the sale.
Pursuant to the Taxpayer Relief Act of 1997, two
different tax rates apply to net capital gains--that is, the
excess of net gains from capital assets held for more than one
year over net losses from capital assets held for not more than
one year. One rate (generally 28%) applies to net gains on
capital assets held for more than one year but not more than 18
months ("mid-term gains"), and a second rate (generally 20%)
applies to the balance of such net capital gains ("adjusted net
capital gains"). Distributions of net capital gains will be
treated in the hands of shareholders as mid-term gains to the
extent designated by the Fund as deriving from net gains from
assets held for more than one year but not more than 18 months,
and the balance will be treated as adjusted net capital gains.
Distributions of mid-term gains and adjusted net capital gains
51
<PAGE>
will be taxable to shareholders as such, regardless of how long a
shareholder has held shares in the Fund.
________________________________________________________________
BROKERAGE AND PORTFOLIO TRANSACTIONS
________________________________________________________________
It is the policy of the Fund to place portfolio
transactions where the Manager believes it can obtain the most
favorable price and execution and to deal directly with a
principal market maker in connection with over-the-counter
transactions. To obtain best execution means primarily to obtain
the most favorable net price but also includes such factors as
confidential treatment, good clearance facilities, promptness,
reliability, knowledge of a particular market, appropriate
capitalization and proven ability to handle the particular type
of transaction involved. When this primary consideration is met,
the Manager may place the Fund's brokerage business with brokers
partly on the basis of other factors such as the furnishing of
supplemental research and other services deemed to be of value in
managing the Fund.
Investment decisions for the Fund are made independently
from those of other investment companies which are also managed
by the Manager, and those of private accounts advised by the
Manager. When these entities and accounts are simultaneously
engaged in the purchase or sale of the same securities, the
transactions are averaged as to price and allocated as to amount
in accordance with a formula deemed equitable to each. In some
cases this system may adversely affect the price paid or received
by the Fund or the size of the position obtainable for the Fund.
Consistent with the Conduct Rules of the National
Association of Securities Dealers, Inc. and subject to seeking
the most favorable price and execution available and such other
policies as the Directors may determine, the Manager may consider
sales of shares of the Fund as a factor in the selection of
broker-dealers to execute portfolio transactions for the Fund.
The Management Agreement authorizes the Manager, subject
to review by the Board of Directors, to place orders with brokers
in return for supplemental research and other services and for
special execution services of benefit to the Fund, even though
the rates at which such orders may be executed are higher than
those charged for execution only. These various services may also
be useful to the Manager in connection with its services to other
clients and not all such services may be used in connection with
the Fund.
52
<PAGE>
The Fund may from time to time place orders for the
purchase or sale of securities with Donaldson Lufkin and Jenrette
Securities Corporation, an affiliate of the Manager ("DLJ"), and
with brokers which may have their transactions cleared or
settled, or both, by the Pershing Division of DLJ, for which DLJ
may receive a portion of the brokerage commissions. In such
instances, the placement of orders with such brokers would be
consistent with the Fund's objective of obtaining best execution
and would not be dependent upon the fact that DLJ is an affiliate
of the Manager.
During the fiscal years ended November 30, 1997, 1996
and 1995, the Fund incurred brokerage commissions amounting in
the aggregate to $3,623,347, $1,682,047 and $1,823,026. During
the fiscal years ended November 30, 1997, 1996 and 1995,
brokerage commissions amounting in the aggregate to $26,805, $0
and $0, respectively, were paid to DLJ and brokerage commissions
amounting in the aggregate to $2,500, $0 and $0, respectively,
were paid to brokers utilizing the Pershing Division of DLJ.
During the fiscal year ended November 30, 1997, the brokerage
commissions paid to DLJ constituted 0.72% of the fund's aggregate
brokerage commissions and the brokerage commissions paid to
brokers utilizing the Pershing Division of DLJ constituted 0.07%
of the Fund's aggregate brokerage commissions. During the fiscal
year ended November 30, 1997, of the Fund's aggregate dollar
amount of brokerage transactions involving the payment of
commissions 0% were effected through DLJ and 0% were effected
through brokers utilizing the Pershing Division of DLJ. During
the fiscal year ended November 30, 1997, transactions in the
portfolio securities of the Fund aggregating $1,145,770,646 with
associated brokerage commissions of approximately $1,133,367 were
allocated to persons or firms supplying research services to the
Fund or the Manager.
_______________________________________________________________
GENERAL INFORMATION
________________________________________________________________
Capitalization
The Fund was organized as a Maryland corporation in 1979
under the name "Chemical Fund, Inc." and is the successor to a
Delaware corporation of the same name organized in 1938. The
name of the Fund became "The Alliance Fund, Inc." on March 13,
1987.
The authorized capital stock of the Fund currently
consists of 300,000,000 shares of Class A Common Stock,
150,000,000 shares of Class B Common Stock, 150,000,000 shares of
53
<PAGE>
Class C Common Stock and 300,000,000 shares of Advisor
Class Common Stock, each having a par value of $.01 per share.
The Board of Directors is authorized to reclassify and
issue any unissued shares to any number of additional series and
classes without shareholder approval. Accordingly, the Board in
the future, for reasons such as the desire to establish one or
more additional portfolios of the Fund with different investment
objectives, policies or restrictions, may create additional
series of shares. Any issuance of shares of another series would
be governed by the 1940 Act and the law of the State of Maryland.
If shares of another series were issued in connection with the
creation of a second portfolio, each share of either portfolio
would normally be entitled to one vote for all purposes.
Generally, shares of both portfolios would vote as a single
series for the election of Directors and on any other matter that
affected both portfolios in substantially the same manner. As to
matters affecting each portfolio differently, such as approval of
the Management Agreement and changes in investment policy, shares
of each portfolio would vote as separate series.
Procedures for calling a shareholder's meeting for the
removal of Directors of the Fund, similar to those set forth in
Section 16(c) of the 1940 Act, are available to shareholders of
the Fund. Meetings of shareholders may be called by 10% of the
Fund's outstanding shareholders. 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.
The outstanding voting shares of the Fund as of
January 5, 1998 consisted of 191,691,780 shares of common stock.
Of this amount 173,581,454 shares were Class A, 12,084,767 shares
were Class B, 3,586,131 were Class C and 2,439,428 shares were
Advisor Class. To the knowledge of the Fund, the following
persons owned of record or beneficially 5% or more of a class of
the outstanding shares of the Fund as of January 5, 1998:
54
<PAGE>
No. of % of
Shares % of % of % of Advisor
Name and Address of Class Class A Class B Class C Class
Merrill Lynch 1,257,650 10.41%
4800 Deer Lake Dr. 577,067 16.09%
East
Jacksonville, FL 32266
Brookhaven Capital
Assets
3355 N. Five Mile Rd.
Suite 317
Boise, ID 83704 220,561 6.15%
Bank of New York C/F
Equity League Pen. Tr.
7 Wall Street
New York, NY 10005 310,559 12.73%
Bank of New York C/F
Annuity Fund of Local
Number One
7 Wall Street
New York, NY 10005 155,280 6.37%
Bank of New York C/F
AFM & EPW Fd. 9
7 Wall Street
New York, NY 10005 310,559 12.73%
John Carifa
164 North Murray
Ridgewood, NJ 07450 123,581 5.07%
Alliance Capital Mgmt
Profit Sharing Plan
1345 Avenue of the
Americas
New York, NY 1,242,936 50.95%
Custodian
State Street Bank and Trust Company, 225 Franklin
Street, Boston, Massachusetts 02110, will act as the Fund's
custodian for the assets of the Fund but plays no part in
deciding the purchase or sale of portfolio securities. Subject
to the supervision of the Fund's Directors, State Street Bank and
Trust Company may enter into sub-custodial agreements for the
holding of the Fund's foreign securities.
55
<PAGE>
Principal Underwriter
Alliance Fund Distributors, Inc., 1345 Avenue of the
Americas, New York, New York 10105, serves as the Fund's
Principal Underwriter, and as such may solicit orders from the
public to purchase shares of the Fund. Under the Distribution
Services Agreement 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
shares of Common Stock offered hereby are passed upon by Seward &
Kissel, New York, New York. Seward & Kissel has relied upon the
opinion of Venable, Baetjer and Howard, LLP, Baltimore, Maryland
for matters relating to Maryland law.
Independent Accountants
Price Waterhouse LLP, New York, New York has been
appointed as the independent accountants for the Fund.
Performance Information
From time to time, the Fund advertises its "total
return" computed separately for each class. The Fund's "total
return" is its average annual total return for its most recently
completed one, five and ten year period. The Fund's total return
for each such period is computed, through the use of a formula
prescribed by the Securities and Exchange Commission, by finding
the average annual compounded rate of return over the period that
would equate an assumed initial amount invested to the value of
such investment at the end of the period. For purposes of
computing total return, income dividends and capital gains
distributions paid on shares of the Fund are assumed to have been
reinvested when received and the maximum sales charge applicable
to purchases of Fund shares is assumed to have been paid.
The Fund's average total return is computed separately
for Class A, Class B, Class C and Advisor Class shares. The
average annual total return based on net asset value for each
class of shares for the one-, five- and ten-year periods ended
November 30, 1997 (or since inception through that date, as
noted) was as follows:
56
<PAGE>
12 Months
Ended 5 Years Ended 10 Years Ended
11/30/97 11/30/97 11/30/97
_________ _____________ ______________
Class A 31.82% 19.00% 19.00%
Class B 30.74% 17.98% 17.05%*
Class C 30.72% 19.43%* N/A
Advisor Class 32.00% 37.86%* N/A
*Inception Dates: Class B - March 4, 1991
Class C - April 30, 1993
Advisor Class - October 1, 1996
The Fund's total return is computed separately for
Class A, Class B, Class C and Advisor Class shares. The Fund's
total return is not fixed and will fluctuate in response to
prevailing market conditions or as a function of the type and
quality of the securities in the Fund's portfolio and the Fund's
expenses. Total return information is useful in reviewing the
Fund's performance but such information may not provide a basis
for comparison with bank deposits or other investments which pay
a fixed return for a stated period of time. An investor's
principal invested in the Fund is not fixed and will fluctuate in
response to prevailing market conditions.
Advertisements quoting performance rankings of the Fund
as measured by financial publications or independent
organizations such as Lipper Analytical Services, Inc. and
Morningstar, Inc. and advertisements presenting the historical
record of payments of income dividends by the Fund may also from
time to time be sent to investors or placed in magazines such as
Barron's, Business Week, Changing Times, Fortune, Forbes and
Money Magazine, newspapers such as The New York Times or 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 other financial adviser 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. 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.
57
<PAGE>
______________________________________________________________
REPORT OF INDEPENDENT ACCOUNTANTS AND
FINANCIAL STATEMENTS
______________________________________________________________
58
<PAGE>
THE ALLIANCE FUND
ANNUAL REPORT
NOVEMBER 30, 1997
ALLIANCE CAPITAL
PORTFOLIO OF INVESTMENTS
NOVEMBER 30, 1997 THE ALLIANCE FUND
_______________________________________________________________________________
COMPANY SHARES VALUE
- -------------------------------------------------------------------------
COMMON & PREFERRED STOCKS-100.0%
FINANCE-22.7%
BANKING - MONEY CENTER-0.3%
Chase Manhattan Corp. 30,000 $ 3,258,750
GreenPoint Financial Corp. 15,500 1,032,688
------------
4,291,438
BROKERAGE & MONEY MANAGEMENT-9.8%
Edwards (A.G.), Inc. 450,000 15,243,750
Legg Mason, Inc. 340,000 16,447,500
Merrill Lynch & Co., Inc. 660,000 46,323,750
Morgan Stanley, Dean Witter,
Discover and Co. 900,000 48,881,250
------------
126,896,250
INSURANCE-7.2%
CNA Financial Corp. (a) 375,000 45,937,500
IPC Holdings Ltd. 112,100 3,377,012
Life Re Corp. 100,000 5,712,500
NAC Re Corp. 63,300 2,824,763
Travelers Group, Inc. 700,000 35,350,000
------------
93,201,775
REAL ESTATE-0.6%
Excel Realty Trust, Inc. 158,000 4,819,000
Imperial Credit Mortgage Holdings 187,500 3,316,406
------------
8,135,406
MISCELLANEOUS-4.8%
MBNA Corp. 2,130,000 56,578,125
PMI Group, Inc. 100,000 6,500,000
------------
63,078,125
------------
295,602,994
CONSUMER SERVICES-22.5%
AIRLINES-10.6%
America West Holding Corp. Cl.B (a) 258,200 4,115,062
Continental Airlines, Inc. Cl.B (a) 1,600,000 72,900,000
Delta Air Lines, Inc. 58,000 6,463,375
KLM Royal Dutch Air 275,000 9,900,000
Northwest Airlines Corp. Cl.A (a) 1,000,000 41,500,000
Southwest Airlines Co. 150,000 3,665,625
------------
138,544,062
APPAREL-0.1%
Wolverine World Wide, Inc. 50,000 1,140,625
BROADCASTING & CABLE-5.4%
Millicom International
Cellular, S.A. (a)(b) 350,000 13,037,500
Nextel Communications, Inc. Cl.A (a) 335,000 8,458,750
Telephone and Data Systems, Inc. 1,025,000 45,035,937
United States Satellite Broadcasting
Co., Inc. Cl.A (a) 57,500 481,563
Vanguard Cellular Systems, Inc. Cl.A (a) 220,000 3,066,250
------------
70,080,000
ENTERTAINMENT & LEISURE-0.1%
Pep Boys Manny, Moe & Jack 50,000 1,256,250
RESTAURANTS & LODGING-2.6%
Extended Stay America, Inc. (a) 1,000,000 11,500,000
Host Marriott Corp. (a) 1,100,000 22,893,750
------------
34,393,750
6
THE ALLIANCE FUND
_______________________________________________________________________________
COMPANY SHARES VALUE
- -------------------------------------------------------------------------
RETAIL - GENERAL MERCHANDISE-1.5%
Circuit City Stores-Circuit City Group 400,000 $ 13,125,000
The Limited, Inc. 250,000 6,015,625
------------
19,140,625
MISCELLANEOUS-2.2%
CUC International, Inc. (a) 1,000,000 28,750,000
------------
293,305,312
ENERGY-21.7%
DOMESTIC PRODUCERS-1.5%
Apache Corp. 15,000 551,250
Brown (Tom), Inc. (a) 243,500 5,341,781
Gulf Canada Resources, Ltd. (a)(c) 1,000,000 7,000,000
Union Pacific Resources Group, Inc. 250,000 6,218,750
------------
19,111,781
OIL SERVICE-16.7%
Baker Hughes, Inc. 420,000 17,587,500
Dresser Industries, Inc. 120,000 4,485,000
Halliburton Co. 1,220,000 65,803,750
Lukoil Holdings (ADR) (d)
Common 10,000 762,500
Preferred 80,000 2,080,000
Nabors Industries, Inc. (a) 320,000 11,220,000
Noble Drilling Corp. (a) 525,000 15,782,812
Oceaneering International, Inc. (a) 167,400 3,452,625
Parker Drilling Co. (a) 1,750,000 23,078,125
Rowan Cos., Inc. (a) 1,600,000 54,400,000
Schlumberger, Ltd. 230,000 18,931,875
------------
217,584,187
MISCELLANEOUS-3.5%
Diamond Offshore Drilling, Inc. 760,000 37,905,000
Ultramar Diamond Shamrock 252,500 7,685,469
------------
45,590,469
------------
282,286,437
UTILITIES-12.4%
TELEPHONE UTILITY-12.4%
Bell Canada International, Inc. (a)(c) 16,600 241,478
MCI Communications Corp. 200,000 8,787,500
Telecomunicacoes Brasileras SA (ADR) (e) 120,000 12,525,000
Teleport Communications
Group, Inc. Cl.A (a) 1,250,000 61,250,000
United States Cellular Corp. (a) 920,000 30,130,000
WorldCom, Inc. (a) 1,500,000 48,000,000
------------
160,933,978
TECHNOLOGY-6.1%
COMMUNICATION EQUIPMENT-3.4%
ADC Telecommunications, Inc. (a) 720,000 26,775,000
DSC Communications Corp. (a) 420,000 9,476,250
Powertel, Inc. (a) 40,000 776,250
Sterling Commerce, Inc. (a) 120,000 4,170,000
Tellabs, Inc. (a) 50,000 2,600,000
------------
43,797,500
COMPUTER HARDWARE-0.2%
Micron Electronics, Inc. (a) 173,100 1,925,738
COMPUTER SERVICES-0.2%
DBT Online, Inc. (a) 114,000 2,935,500
7
PORTFOLIO OF INVESTMENTS (CONTINUED) THE ALLIANCE FUND
_______________________________________________________________________________
COMPANY SHARES VALUE
- -------------------------------------------------------------------------
COMPUTER SOFTWARE-1.8%
Checkfree Corp. (a) 160,000 $ 4,190,000
HNC Software, Inc. (a) 100,000 3,150,000
Network Associates, Inc. (a) 360,000 16,470,000
------------
23,810,000
NETWORK SOFTWARE-0.1%
America Online, Inc. (a) 20,000 1,510,000
SEMI-CONDUCTOR CAPITAL EQUIPMENT-0.3%
Teradyne, Inc. (a) 100,000 3,281,250
SEMI-CONDUCTOR COMPONENTS-0.1%
Xilinx, Inc. (a) 50,000 1,728,125
------------
78,988,113
CONSUMER MANUFACTURING-5.4%
AUTO & RELATED-4.8%
Republic Industries, Inc. (a) 2,370,000 61,768,125
BUILDING & RELATED-0.1%
IRI International Corp. (a) 84,400 1,360,950
TEXTILE PRODUCTS-0.2%
Tommy Hilfiger Corp. (a) 55,500 2,178,375
MISCELLANEOUS-0.3%
Industrie Natuzzi S.P.A. (ADR) (f) 209,800 4,510,700
------------
69,818,150
HEALTH CARE-4.4%
BIOTECHNOLOGY-4.4%
Centocor, Inc. (a) 431,300 18,761,550
GelTex Pharmaceuticals, Inc. (a) 500,000 14,000,000
Genzyme Corp. (a) 150,000 4,021,875
IDEC Pharmaceuticals Corp. (a) 35,600 1,243,775
MedImmune, Inc. (a) 500,000 19,125,000
------------
57,152,200
CONSUMER STAPLES-3.3%
FOOD-0.4%
Tyson Foods, Inc. Cl.A 270,000 4,893,750
HOUSEHOLD PRODUCTS-0.0%
Viad Corp. 20,000 381,250
TOBACCO-2.9%
Loews Corp. 360,000 38,205,000
------------
43,480,000
CAPITAL GOODS-0.8%
ELECTRICAL EQUIPMENT-0.2%
Western Wireless Corp. Cl.A (a) 110,000 2,048,750
MISCELLANEOUS-0.6%
United States Filter Corp. (a) 255,000 8,000,625
------------
10,049,375
TRANSPORTATION-0.6%
MISCELLANEOUS-0.6%
Knightsbridge Tankers, Ltd. 175,000 5,337,500
OMI Corp. (a) 220,000 2,255,000
------------
7,592,500
8
THE ALLIANCE FUND
_______________________________________________________________________________
SHARES OR
PRINCIPAL
AMOUNT
COMPANY (000) VALUE
- -------------------------------------------------------------------------
MULTI INDUSTRY COMPANIES-0.1%
Dynex Capital, Inc. 100,000 $ 1,387,500
Total Common & Preferred Stocks
(cost $1,068,832,294) 1,300,596,559
SHORT-TERM INVESTMENT-0.4%
COMMERCIAL PAPER-0.4%
Prudential Funding
5.67%, 12/01/97
(amortized cost $5,440,000) $ 5,440 5,440,000
TOTAL INVESTMENTS-100.4%
(cost $1,074,272,294) $ 1,306,036,559
Other assets less liabilities-(0.4%) (4,994,557)
NET ASSETS-100% $ 1,301,042,002
(a) Non-income producing security.
(b) Country of origin--Luxembourg.
(c) Country of origin--Canada.
(d) Country of origin--Russia.
(e) Country of origin--Brazil.
(f) Country of origin--Italy.
Glossary:
ADR - American Depositary Receipt.
See notes to financial statements.
9
STATEMENT OF ASSETS AND LIABILITIES
NOVEMBER 30, 1997 THE ALLIANCE FUND
_______________________________________________________________________________
ASSETS
Investments in securities, at value (cost $1,074,272,294) $ 1,306,036,559
Cash 9,991
Receivable for investment securities sold 11,300,808
Receivable for capital stock sold 1,081,102
Dividends receivable 619,712
Total assets 1,319,048,172
LIABILITIES
Payable for investment securities purchased 14,953,142
Unclaimed dividends 1,005,964
Management fee payable 723,260
Payable for capital stock redeemed 663,178
Distribution fee payable 275,949
Accrued expenses 384,677
Total liabilities 18,006,170
NET ASSETS $ 1,301,042,002
COMPOSITION OF NET ASSETS
Capital stock, at par $ 1,501,821
Additional paid-in capital 761,648,965
Accumulated net realized gain on investments and
foreign currency transactions 306,126,951
Net unrealized appreciation of investments 231,764,265
$ 1,301,042,002
CALCULATION OF MAXIMUM OFFERING PRICE
CLASS A SHARES
Net asset value and redemption price per share
($1,201,434,799/138,170,619 shares of capital stock
issued and outstanding) $8.70
Sales charge--4.25% of public offering price .39
Maximum offering price $9.09
CLASS B SHARES
Net asset value and offering price per share ($70,461,310/
8,543,581 shares of capital stock issued and outstanding) $8.25
CLASS C SHARES
Net asset value and offering price per share ($18,871,346/
2,286,041 shares of capital stock issued and outstanding) $8.26
ADVISOR CLASS SHARES
Net asset value, redemption and offering price per share
($10,274,547 / 1,181,832 shares of capital stock
issued and outstanding) $8.69
See notes to financial statements.
10
STATEMENT OF OPERATIONS
YEAR ENDED NOVEMBER 30, 1997 THE ALLIANCE FUND
_______________________________________________________________________________
INVESTMENT INCOME
Dividends (net of foreign taxes
withheld of $36,434) $ 7,821,041
Interest 677,101 $ 8,498,142
EXPENSES
Management fee 7,855,807
Distribution fee - Class A 2,098,235
Distribution fee - Class B 542,302
Distribution fee - Class C 162,266
Transfer agency 903,185
Custodian 251,455
Printing 124,786
Administrative 123,000
Registration 121,995
Audit and legal 103,882
Taxes 72,900
Directors' fees 33,000
Miscellaneous 43,603
Total expenses 12,436,416
Net investment loss (3,938,274)
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain on investment transactions 312,629,476
Net realized loss on foreign
currency transactions (84,569)
Net change in unrealized appreciation of
investments and foreign currency
denominated assets and liabilities 4,067,927
Net gain on investments and foreign
currency transactions 316,612,834
NET INCREASE IN NET ASSETS FROM OPERATIONS $ 312,674,560
See notes to financial statements.
11
STATEMENT OF CHANGES IN NET ASSETS THE ALLIANCE FUND
_______________________________________________________________________________
YEAR ENDED YEAR ENDED
NOV. 30, NOV. 30,
1997 1996
--------------- ----------------
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS
Net investment income (loss) $ (3,938,274) $ 2,471,666
Net realized gain on investments and
foreign currency transactions 312,544,907 143,836,346
Net change in unrealized appreciation of
investments and foreign currency
denominated assets and liabilities 4,067,927 4,238,507
Net increase in net assets from operations 312,674,560 150,546,519
DIVIDENDS AND DISTRIBUTIONS TO
SHAREHOLDERS FROM:
Net investment income
Class A (2,584,179) (2,437,233)
Advisor Class (4,914) -0-
Net realized gain on investments
Class A (136,315,610) (129,777,164)
Class B (6,355,169) (4,556,157)
Class C (1,970,589) (1,766,904)
Advisor Class (148,119) -0-
CAPITAL STOCK TRANSACTIONS
Net increase 77,246,571 59,364,620
Total increase 242,542,551 71,373,681
NET ASSETS
Beginning of year 1,058,499,451 987,125,770
End of year (including undistributed
net investment income of $2,417,164
at November 30, 1996) $ 1,301,042,002 $ 1,058,499,451
See notes to financial statements.
12
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 1997 THE ALLIANCE FUND
_______________________________________________________________________________
NOTE A: SIGNIFICANT ACCOUNTING POLICIES
The Alliance Fund, Inc. (the "Fund") is registered under the Investment Company
Act of 1940 as a diversified, open-end management investment company. The Fund
offers Class A, Class B, Class C and Advisor Class shares. Class A shares are
sold with a front-end sales charge of up to 4.25% for purchases not exceeding
$1,000,000. With respect to purchases of $1,000,000 or more, Class A shares
redeemed within one year of purchase will be subject to a contingent deferred
sales charge of 1%. Class B shares are currently sold with a contingent
deferred sales charge which declines from 4% to zero depending on the period of
time the shares are held. Class B shares will automatically convert to Class A
shares eight years after the end of the calendar month of purchase. Class
Cshares are subject to a contingent deferred sales charge of 1% on redemptions
made within the first year after purchase. Advisor Class shares are sold
without an initial or contingent deferred sales charge and are not subject to
ongoing distribution expenses. Advisor Class shares are offered to investors
participating in fee based programs and to certain retirement plan accounts.
All four classes of shares have identical voting, dividend, liquidation and
other rights, except that each class bears different distribution expenses and
has exclusive voting rights with respect to its distribution plan. The
following is a summary of significant accounting policies followed by the Fund.
1. SECURITY VALUATION
Portfolio securities traded on a national securities exchange or on a foreign
securities exchange (other than foreign securities exchanges whose operations
are similar to those of the United States over-the-counter market) are
generally valued at the last reported sales price or if no sale occurred, at
the mean of the closing bid and asked prices on that day. Readily marketable
securities traded in the over-the-counter market, securities listed on a
foreign securities exchange whose operations are similar to the U.S.
over-the-counter market, and securities listed on a national securities
exchange whose primary market is believed to be over-the-counter, are valued at
the mean of the current bid and asked prices. U.S. government and fixed income
securities which mature in 60 days or less are valued at amortized cost, unless
this method does not represent fair value. Securities for which current market
quotations are not readily available are valued at their fair value as
determined in good faith by, or in accordance with procedures adopted by, the
Fund's Board of Directors. Fixed income securities may be valued on the basis
of prices obtained from a pricing service when such prices are believed to
reflect the fair value of such securities.
2. CURRENCY TRANSLATION
Assets and liabilities denominated in foreign currencies and commitments under
forward exchange currency contracts are translated into U.S. dollars at the
mean of the quoted bid and asked price of such currencies against the U.S.
dollar. Purchases and sales of portfolio securities are translated into U.S.
dollars at the rates of exchange prevailing when such securities were acquired
or sold. Income and expenses are translated into U.S. dollars at rates of
exchange prevailing when earned or accrued.
Net realized foreign currency gains and losses represent foreign exchange gains
and losses from sales and maturities of debt securities, currency gains and
losses realized between the trade and settlement dates on security transactions
and the difference between the amounts of interest recorded on the Fund's books
and the U.S. dollar equivalent amounts actually received or paid. The Fund does
not isolate the effect of fluctuations in foreign currency exchange rates when
determining the gain or loss upon the sale of equity securities. Net currency
gains and losses from valuing foreign currency denominated assets and
liabilities at year end exchange rates are reflected as a component of
unrealized appreciation or depreciation of investments and foreign currency
denominated assets and liabilities.
3. TAXES
It is the Fund's policy to meet the requirements of the Internal Revenue Code
applicable to regulated investment companies and to distribute all of its
investment company taxable income and net realized gains, if any, to
shareholders. Therefore, no provisions for federal income or excise taxes are
required.
4. INVESTMENT INCOME AND INVESTMENT TRANSACTIONS
Dividend income is recorded on the ex-dividend date. Interest income is accrued
daily. Investment transactions are accounted for on the trade date securities
are purchased or sold. The Fund accretes discounts and
13
NOTES TO FINANCIAL STATEMENTS (CONTINUED) THE ALLIANCE FUND
_______________________________________________________________________________
amortizes premiums. Investment gains and losses are determined on the
identified cost basis.
5. INCOME AND EXPENSES
All income earned and expenses incurred by the Fund are borne on a pro-rata
basis by each outstanding class of shares, based on the proportionate interest
in the Fund represented by the net assets of such class, except that the Fund's
Class B and Class C shares bear higher distribution and transfer agent fees
than Class A shares and the Advisory Class shares have no distribution fees.
6. DIVIDENDS AND DISTRIBUTIONS
Dividends and distributions to shareholders are recorded on the ex-dividend
date. Income dividend and capital gains distributions are determined in
accordance with federal tax regulations and may differ from those determined in
accordance with generally accepted accounting principles. To the extent these
differences are permanent, such amounts are reclassified within the capital
accounts based on their federal tax basis treatment; temporary differences, do
not require such reclassification. During the current fiscal year, permanent
differences, primarily due to net operating losses, resulted in a net decrease
in accumulated net investment losses and a corresponding decrease in
accumulated net realized gain on investments and foreign currency transactions.
This reclassification had no effect on net assets.
NOTE B: MANAGEMENT FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Under the terms of the management agreement, the Fund pays Alliance Capital
Management L.P., (the "Manager") a fee at an annual rate of .75% on the first
$500 million of average daily net assets, .65% on the next $500 million of
average daily net assets and .55% on average daily net assets in excess of $1
billion. The fee is accrued daily and paid monthly.
Pursuant to the management agreement, the Fund paid $122,810 to the Manager
representing the cost of certain legal and accounting services provided to the
Fund by the Manager for the year ended November 30, 1997.
The Fund compensates Alliance Fund Services, Inc., a wholly-owned subsidiary of
the Manager, for providing personnel and facilities to perform transfer agency
services for the Fund. Such compensation amounted to $705,717 for the year
ended November 30, 1997.
Alliance Fund Distributors, Inc., (the "Distributor"), a wholly-owned
subsidiary of the Manager, serves as the Distributor of the Fund's shares. The
Distributor received front-end sales charges of $9,940 from the sale of Class A
shares and $154,336 in contingent deferred sales charges imposed upon
redemptions by shareholders of Class B shares, respectively, for the year ended
November 30, 1997.
Brokerage commissions paid for the year ended November 30, 1997 on investment
transactions amounted to $3,707,259, of which $2,500 was paid to brokers
utilizing the services of the Pershing Division of Donaldson, Lufkin & Jenrette
Securities Corp., ("DLJ"), and $26,805 was paid to DLJ directly. Both are
affiliates of the Manager.
NOTE C: DISTRIBUTION SERVICES AGREEMENT
The Fund has adopted a Distribution Services Agreement (the "Agreement")
pursuant to Rule 12b-1 under the Investment Company Act of 1940. Under the
Agreement, the Fund pays a distribution fee to the Distributor at an annual
rate of up to .30% of the Fund's average daily net assets attributable to the
Class A shares and 1% of the average daily net assets attributable to the Class
B and Class C shares. There is no distribution fee on the Advisor Class shares.
The fees are accrued daily and paid monthly. The Agreement provides that the
Distributor will use such payments in their entirety for distribution
assistance and promotional activities. The Distributor has incurred expenses in
excess of the distribution costs reimbursed by the Fund in the amount of
$3,782,063 and $1,025,156, for Class B and C shares, respectively; such costs
may be recovered from the Fund in future periods so long as the Agreement is in
effect. In accordance with
14
THE ALLIANCE FUND
_______________________________________________________________________________
the Agreement, there is no provision for recovery of unreimbursed distribution
costs, incurred by the Distributor, beyond the current fiscal year for Class A
shares. The Agreement also provides that the Manager may use its own resources
to finance the distribution of the Fund's shares.
NOTE D: INVESTMENT TRANSACTIONS
Purchases and sales of investment securities (excluding short-term investments
and U.S. government securities) aggregated $1,809,193,913 and $1,823,969,457,
respectively, for the year ended November 30, 1997. There were no purchases but
there were sales of $27,445,724 of U.S. government or government agency
obligations for the year ended November 30, 1997. At November 30, 1997, the
cost of investments for federal income tax purposes was $1,091,540,501.
Accordingly, gross unrealized appreciation of investments was $237,034,742 and
gross unrealized depreciation of investments was $22,538,684, resulting in net
unrealized appreciation of $214,496,058.
NOTE E: CAPITAL STOCK
There are 900,000,000 shares of $0.01 par value capital stock authorized,
divided into four classes, designated Class A, Class B, Class C and Advisor
Class shares. Class A shares consists of 300,000,000 shares. Class B and Class
C shares each consist of 150,000,000 shares and Advisor Class shares consist of
300,000,000 shares. Transactions in capital stock were as follows:
SHARES AMOUNT
--------------------------- ------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
NOV. 30, NOV. 30, NOV. 30, NOV. 30,
1997 1996 1997 1996
------------ ------------ -------------- --------------
CLASS A
Shares sold 6,987,684 4,150,468 $ 57,214,484 $ 28,384,296
Shares issued in
reinvestment of
dividends and
distributions 16,635,560 15,446,742 106,301,324 100,712,758
Shares converted
from Class B 212,659 118,728 1,657,992 823,774
Shares redeemed (15,229,370) (12,552,838) (116,622,533) (86,836,564)
Net increase 8,606,533 7,163,100 $ 48,551,267 $ 43,084,264
CLASS B
Shares sold 4,424,115 2,617,216 $ 33,748,548 $ 17,347,199
Shares issued in
reinvestment of
distributions 865,292 586,032 5,287,064 3,697,861
Shares converted
to Class A (223,476) (123,214) (1,657,992) (823,774)
Shares redeemed (2,525,999) (1,311,534) (18,835,577) (8,719,518)
Net increase 2,539,932 1,768,500 $ 18,542,043 $ 11,501,768
CLASS C
Shares sold 2,634,424 1,402,282 $ 20,389,284 $ 9,611,884
Shares issued in
reinvestment of
distributions 248,536 175,223 1,518,562 1,105,657
Shares redeemed (2,472,942) (1,045,876) (19,320,033) (6,946,611)
Net increase 410,018 531,629 $ 2,587,813 $ 3,770,930
15
NOTES TO FINANCIAL STATEMENTS (CONTINUED) THE ALLIANCE FUND
_______________________________________________________________________________
SHARES AMOUNT
--------------------------- ------------------------------
YEAR ENDED OCT. 2, 1996(A) YEAR ENDED OCT. 2, 1996(A)
NOV. 30, TO NOV. 30, TO
1997 NOV. 30, 1996 1997 NOV. 30, 1996
------------ ------------ -------------- --------------
ADVISOR CLASS
Shares sold 2,621,487 140,391 $ 21,634,966 $ 1,007,658
Shares issued in
reinvestment of
dividends and
distributions 22,857 -0- 145,601 -0-
Shares redeemed (1,602,903) -0- (14,215,119) -0-
Net increase 1,041,441 140,391 $ 7,565,448 $ 1,007,658
(a) Commencement of distribution.
16
FINANCIAL HIGHLIGHTS THE ALLIANCE FUND
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
CLASS A
-------------------------------------------------------------------
JAN. 1, 1994
YEAR ENDED NOVEMBER 30, TO YEAR ENDED
--------------------------------------- NOV. 30, DEC. 31,
1997 1996 1995 1994(A) 1993
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 7.71 $ 7.72 $ 6.63 $ 6.85 $ 6.68
INCOME FROM INVESTMENT OPERATIONS
Net investment income (loss) (.02)(b) .02 .02(b) .01 .02
Net realized and unrealized gain (loss)
on investment transactions 2.09 1.06 2.08 (.23) .93
Net increase (decrease) in net asset
value from operations 2.07 1.08 2.10 (.22) .95
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (.02) (.02) (.01) -0- (.02)
Distributions from net realized gains (1.06) (1.07) (1.00) -0- (.76)
Total dividends and distributions (1.08) (1.09) (1.01) -0- (.78)
Net asset value, end of period $ 8.70 $ 7.71 $ 7.72 $ 6.63 $ 6.85
TOTAL RETURN
Total investment return based on
net asset value (c) 31.82% 16.49% 37.87% (3.21)% 14.26%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $1,201,435 $999,067 $945,309 $760,679 $831,814
Ratio of expenses to average net assets 1.03% 1.04% 1.08% 1.05%(d) 1.01%
Ratio of net investment income (loss)
to average net assets (.29)% .30% .31% .21%(d) .27%
Portfolio turnover rate 158% 80% 81% 63% 66%
Average commission rate (e) $.0571 $.0646 -- -- --
</TABLE>
See footnote summary on page 20.
17
FINANCIAL HIGHLIGHTS (CONTINUED) THE ALLIANCE FUND
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
CLASS B
-------------------------------------------------------------------
JAN. 1, 1994
YEAR ENDED NOVEMBER 30, TO YEAR ENDED
--------------------------------------- NOV. 30, DEC. 31,
1997 1996 1995 1994(A) 1993
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 7.40 $ 7.49 $ 6.50 $ 6.76 $ 6.64
INCOME FROM INVESTMENT OPERATIONS
Net investment loss (.08)(b) (.01) (.03)(b) (.03) (.03)
Net realized and unrealized gain (loss)
on investment transactions 1.99 .99 2.02 (.23) .91
Net increase (decrease) in net asset
value from operations 1.91 .98 1.99 (.26) .88
LESS: DISTRIBUTIONS
Distributions from net realized gains (1.06) (1.07) (1.00) -0- (.76)
Net asset value, end of period $ 8.25 $ 7.40 $ 7.49 $ 6.50 $ 6.76
TOTAL RETURN
Total investment return based on
net asset value (c) 30.74% 15.47% 36.61% (3.85)% 13.28%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $70,461 $44,450 $31,738 $18,138 $12,402
Ratio of expenses to average net assets 1.85% 1.87% 1.90% 1.89%(d) 1.90%
Ratio of net investment loss to
average net assets (1.12)% (.53)% (.53)% (.60)%(d) (.64)%
Portfolio turnover rate 158% 80% 81% 63% 66%
Average commission rate (e) $.0571 $.0646 -- -- --
</TABLE>
See footnote summary on page 20.
18
THE ALLIANCE FUND
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
CLASS C
-------------------------------------------------------------------
JAN. 1, 1994 MAY 3,
YEAR ENDED NOVEMBER 30, TO 1993(F) TO
--------------------------------------- NOV. 30, DEC. 31,
1997 1996 1995 1994(A) 1993
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 7.41 $ 7.50 $ 6.50 $ 6.77 $ 6.67
INCOME FROM INVESTMENT OPERATIONS
Net investment loss (.08)(b) (.02) (.03)(b) (.03) (.02)
Net realized and unrealized gain (loss)
on investment transactions 1.99 1.00 2.03 (.24) .88
Net increase (decrease) in net asset
value from operations 1.91 .98 2.00 (.27) .86
LESS: DISTRIBUTIONS
Distributions from net realized gains (1.06) (1.07) (1.00) -0- (.76)
Net asset value, end of period $ 8.26 $ 7.41 $ 7.50 $ 6.50 $ 6.77
TOTAL RETURN
Total investment return based on
net asset value (c) 30.72% 15.48% 36.79% (3.99)% 13.95%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $18,871 $13,899 $10,078 $6,230 $4,006
Ratio of expenses to average net assets 1.83% 1.86% 1.89% 1.87%(d) 1.94%(d)
Ratio of net investment loss to
average net assets (1.10)% (.51)% (.51)% (.59)%(d) (.74)%(d)
Portfolio turnover rate 158% 80% 81% 63% 66%
Average commission rate (e) $.0571 $.0646 -- -- --
</TABLE>
See footnote summary on page 20.
19
FINANCIAL HIGHLIGHTS (CONTINUED) THE ALLIANCE FUND
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
ADVISOR CLASS
---------------------------
OCTOBER 2,
1996(F)
YEAR ENDED TO
NOVEMBER 30, NOVEMBER 30,
1997 1996
------------ ------------
Net asset value, beginning of period $ 7.71 $ 6.99
INCOME FROM INVESTMENT OPERATIONS
Net investment loss (.02)(b) -0-
Net realized and unrealized gain on
investment transactions 2.10 .72
Net increase in net asset value from operations 2.08 .72
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (.04) -0-
Distributions from net realized gains (1.06) -0-
Total dividends and distributions (1.10) -0-
Net asset value, end of period $ 8.69 $ 7.71
TOTAL RETURN
Total investment return based on
net asset value (c) 32.00% 10.30%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $10,275 $1,083
Ratio of expenses to average net assets .83% .89%(d)
Ratio of net investment income (loss) to
average net assets (.21)% .38%(d)
Portfolio turnover rate 158% 80%
Average commission rate $.0571 $.0646
(a) The Fund changed its fiscal year end from December 31 to November 30.
(b) Based on average shares outstanding.
(c) Total investment return is calculated assuming an initial investment made
at the net asset value at the beginning of the period, reinvestment of all
dividends and distributions at net asset value during the period, and
redemption on the last day of the period. Initial sales charges or contingent
deferred sales charges are not reflected in the calculation of total investment
return. Total investment returns calculated for periods of less than one year
are not annualized.
(d) Annualized.
(e) For fiscal year beginning on or after September 1, 1995, a fund is
required to disclose its average commission rate per share for trades on which
commissions are charged.
(f) Commencement of distribution.
20
REPORT OF INDEPENDENT ACCOUNTANTS THE ALLIANCE FUND
_______________________________________________________________________________
TO THE BOARD OF DIRECTORS AND SHAREHOLDERS OF
THE ALLIANCE FUND, INC.
In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of The Alliance Fund, Inc. (the
"Fund") at November30, 1997, the results of its operations for the year then
ended, the changes in its net assets for each of the two years in the period
then ended and the financial highlights for each of the periods indicated, in
conformity with generally accepted accounting principles. These financial
statements and financial highlights (hereafter referred to as "financial
statements") are the responsibility of the Fund's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement
presentation. We believe that our audits, which included confirmation of
securities at November 30, 1997 by correspondence with the custodian and
brokers and the application of alternative auditing procedures where
confirmations from brokers were not received, provide a reasonable basis for
the opinion expressed above.
PRICE WATERHOUSE LLP
New York, New York
January 9, 1998
21
59
<PAGE>
PART C
OTHER INFORMATION
ITEM 24. Financial Statements and Exhibits
(a) Financial Statements
Included in the Prospectus:
Financial Highlights
Included in the Statement of Additional Information:
Portfolio of Investments, November 30, 1997
Statement of Assets and Liabilities, November 30, 1997
Statement of Operations, year ended November 30, 1997
Statement of Changes in Net Assets, years ended
November 30, 1996 and November 30, 1997
Notes to Financial Statements, for the years ended
November 30, 1993 through November 30, 1997
Financial Highlights - for the years ended November 30,
1993 through November 30, 1997
Report of Independent Accountants
Included in Part C of the Registration Statement:
All other financial statements or schedules are not
required or the required information is shown in the
Statement of Assets and Liabilities or the notes
thereto.
(b) Exhibits:
(1) Articles of Incorporation of the Registrant -
(incorporated by reference to Exhibit 1 to
Registration Statement on Form N-1A (filed
October 31, 1997 - File Nos. 2-10768 and
811-00204)). Articles of Amendment thereto - filed
herewith. Articles of Restatement threreto - filed
herewith.
(2) By-Laws of the Registrant as amended July 17, 1989 -
(incorporated by reference to Exhibit 2 to
Registration Statement on Form N-1A (filed
October 31, 1997 - File Nos. 2-10768 and
811-00204)).
(3) Not applicable.
(4) See Exhibits 1 and 2.
C-1
<PAGE>
(5) (a) Management Agreement between the Registrant and
Alliance Capital Management L.P. - filed herewith
(6) (a) Distribution Services Agreement between the
Registrant and Alliance Fund Distributors, Inc. -
(incorporated by reference to Exhibit 6 to
Registration Statement on Form N-1A (filed
October 31, 1997 - File Nos. 2-10768 and
811-00204)).
(b) Amendment to Distribution Services Agreement between
the Registrant and Alliance Fund Distributors, Inc.
- (incorporated by reference to Exhibit 6 to
Registration Statement on Form N-1A (filed
October 31, 1997 - File Nos. 2-10768 and
811-00204)).
(c) Selected Dealer Agreement between Alliance Fund
Distributors, Inc. and selected dealers offering
shares of Registrant - (incorporated by reference to
Exhibit 6 to Registration Statement on Form N-1A
(filed October 31, 1997 - File Nos. 2-10768 and
811-00204)).
(d) Selected Agent Agreement between Alliance Fund
Distributors, Inc. and selected agents making
available shares of Registrant - (incorporated by
reference to Exhibit 6 to Registration Statement on
Form N-1A (filed October 31, 1997 - File Nos.
2-10768 and 811-00204)).
(7) Not applicable.
(8) Custodian Contract between the Registrant and State
Street Bank and Trust Company - filed herewith.
(9) Transfer Agency Agreement between the Registrant and
Alliance Fund Services, Inc. - filed herewith.
(10) Not applicable.
(11) Consent of Independent Accountants - filed herewith.
(12) Not applicable.
(13) Not applicable.
(14) Not applicable.
(15) Rule 12b-1 Plan - See Exhibit 6(a) hereto.
C-2
<PAGE>
(16) Schedule for computation of each performance
quotation (incorporated by reference to Exhibit
16 to Registration Statement on Form N-1A (filed
April 29, 1988 - File No. 2-10768).
(18) Amended and Restated Rule 18f-3 Plan - (incorporated
by reference to Exhibit 18 to Registration Statement
on Form N-1A (filed October 1, 1996 - File Nos.
2-10768 and 811-00204)).
(27) Financial Data Schedule - filed herewith.
Other Exhibits:
Powers of Attorney for: Ruth Block, John D. Carifa,
David H. Dievler, John H. Dobkin, William H. Foulk, Jr.,
James M. Hester, Clifford L. Michel and Donald J.
Robinson - (incorporated by reference to Registration
Statement on Form N-1A (filed October 1, 1996 - File Nos.
2-10768 and 811-00204)).
ITEM 25. Persons Controlled by or under Common Control with
Registrant
None.
ITEM 26. Number of Holders of Securities.
Title of Class Number of Record Holders
As of (January 5, 1998)
Common Stock par value $.01
Class A 40,325
Class B 3,995
Class C 933
Advisor Class
ITEM 27. Indemnification
Reference is made to the response to Item 27 of Part
C of the Post-Effective Amendments No. 92 and 96 to
Registrant's Registration Statement on Form N-1A
dated April 30, 1986 and April 29, 1988,
respectively, which is on file with the Commission
(see File Nos. 2-10768 and 811-00204) and is
incorporated by reference.
ITEM 28. Business and Other Connections of Investment
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,
C-3
<PAGE>
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 29. 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:
ACM Institutional Reserves, Inc.
AFD Exchange Reserves
Alliance All-Asia Investment Fund, Inc.
Alliance Balanced Shares, Inc.
Alliance Bond Fund, Inc.
Alliance Capital Reserves
Alliance Developing Markets Fund, Inc.
Alliance Global Dollar Government Fund, Inc.
Alliance Global Environment Fund, Inc.
Alliance Global Small Cap Fund, Inc.
Alliance Global Strategic Income Trust, Inc.
Alliance Government Reserves
Alliance Greater China `97 Fund, Inc.
Alliance Growth and Income Fund, Inc.
Alliance Income Builder Fund, Inc.
Alliance International Premier Growth Fund, Inc.
Alliance Institutional Funds, Inc.
Alliance International Fund
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.
C-4
<PAGE>
Alliance Real Estate Investment Fund, Inc.
Alliance/Regent Sector Opportunity Fund, Inc.
Alliance Short-Term Multi-Market Trust, Inc.
Alliance Technology Fund, Inc.
Alliance Utility Income Fund, Inc.
Alliance Variable Products Series Fund, Inc.
Alliance World Income Trust, Inc.
Alliance Worldwide Privatization Fund, Inc.
Fiduciary Management Associates
The Alliance Fund, Inc.
The Alliance Portfolios
(b) The following are the Directors and Officers of
Alliance Fund Distributors, Inc., the principal
place of business of which is 1345 Avenue of the
Americas, New York, New York, 10105.
POSITIONS AND POSITIONS AND
OFFICES WITH OFFICES WITH
NAME UNDERWRITER REGISTRANT
Michael J. Laughlin Chairman
Robert L. Errico President
Edmund P. Bergan, Jr. Senior Vice President, Secretary
General Counsel
and Secretary
Karen J. Bullot Senior Vice President
James S. Comforti Senior Vice President
James L. Cronin Senior Vice President
Daniel J. Dart Senior Vice President
Richard A. Davies Senior Vice President,
Managing Director
Byron M. Davis Senior Vice President
Anne S. Drennan Senior Vice President
& Treasurer
Mark J. Dunbar Senior Vice President
Bradley F. Hanson Senior Vice President
Geoffrey L. Hyde Senior Vice President
C-5
<PAGE>
Robert H. Joseph, Jr. Senior Vice President
and Chief Financial Officer
Richard E. Khaleel Senior Vice President
Stephen R. Laut Senior Vice President
Daniel D. McGinley Senior Vice President
Ryne A. Nishimi Senior Vice President
Antonios G. Poleondakis Senior Vice President
Robert E. Powers Senior Vice President
Richard K. Sacculo Senior Vice President
Gregory K. Shannahan Senior Vice President
Joseph F. Sumanski Senior Vice President
Peter J. Szabo Senior Vice President
Nicholas K. Willett Senior Vice President
Richard A. Winge Senior Vice President
Jamie A. Atkinson Vice President
Benji A. Baer Vice President
Kenneth F. Barkoff Vice President
Michael E. Brannan Vice President
Casimir F. Bolanowski Vice President
Timothy W. Call Vice President
Kevin T. Cannon Vice President
John R. Carl Vice President
William W. Collins, Jr. Vice President
Leo H. Cook Vice President
Richard W. Dabney Vice President
John F. Dolan Vice President
C-6
<PAGE>
John C. Endahl Vice President
Sohaila S. Farsheed Vice President
William C. Fisher Vice President
Gerard J. Friscia Vice President &
Controller
Andrew L. Gangolf Vice President and Assistant Secretary
Assistant General
Counsel
Mark D. Gersten Vice President Treasurer and Chief
Financial Officer
Joseph W. Gibson Vice President
Charles M. Greenberg Vice President
Alan Halfenger Vice President
William B. Hanigan Vice President
Daniel M. Hazard Vice President
Scott F. Heyer Vice President
George R. Hrabovsky Vice President
Valerie J. Hugo Vice President
Scott Hutton Vice President
Thomas K. Intoccia Vice President
Larry P. Johns Vice President
Richard D. Keppler Vice President
Gwenn M. Kessler Vice President
Donna M. Lamback Vice President
James M. Liptrot Vice President
James P. Luisi Vice President
Christopher J. MacDonald Vice President
Michael F. Mahoney Vice President
C-7
<PAGE>
Lori E. Master Vice President
Shawn P. McClain Vice President
Maura A. McGrath Vice President
Matthew P. Mintzer Vice President
Thomas F. Monnerat Vice President
Joanna D. Murray Vice President
Jeanette M. Nardella Vice President
Nicole Nolan-Koester Vice President
John C. O'Connell Vice President
John J. O'Connor Vice President
Robert T. Pigozzi Vice President
James J. Posch Vice President
Domenick Pugliese Vice President and Assistant Secretary
Assistant General
Counsel
Bruce W. Reitz Vice President
Dennis A. Sanford Vice President
Karen C. Satterberg Vice President
Robert C. Schultz Vice President
Raymond S. Sclafani Vice President
Richard J. Sidell Vice President
Teris A. Sinclair Vice President
Andrew D. Strauss Vice President
Michael J. Tobin Vice President
Joseph T. Tocyloski Vice President
Martha D. Volcker Vice President
Patrick E. Walsh Vice President
C-8
<PAGE>
William C. White Vice President
Emilie D. Wrapp Vice President and Assistant Secretary
Special Counsel
Michael W. Alexander Assistant Vice President
Richard J. Appaluccio Assistant Vice President
Charles M. Barrett Assistant Vice President
Robert F. Brendli Assistant Vice President
Maria L. Carreras Assistant Vice President
John P. Chase Assistant Vice President
Russell R. Corby Assistant Vice President
John W. Cronin Assistant Vice President
Terri J. Daly Assistant Vice President
Ralph A. DiMeglio Assistant Vice President
Faith C. Dunn Assistant Vice President
John E. English Assistant Vice President
Duff C. Ferguson Assistant Vice President
John Grambone Assistant Vice President
Brian S. Hanigan Assistant Vice President
James J. Hill Assistant Vice President
Edward W. Kelly Assistant Vice President
Michael Laino Assistant Vice President
Nicholas J. Lapi Assistant Vice President
Kristine J. Luisi Assistant Vice President
Patrick Look Assistant Vice President &
Assistant Treasurer
Richard F. Meier Assistant Vice President
Richard J. Olszewski Assistant Vice President
C-9
<PAGE>
Catherine N. Peterson Assistant Vice President
Carol H. Rappa Assistant Vice President
Clara Sierra Assistant Vice President
Gayle S. Stamer Assistant Vice President
Vincent T. Strangio Assistant Vice President
Wesley S. Williams Assistant Vice President
Christopher J. Zingaro Assistant Vice President
Mark R. Manley Assistant Secretary
(c) Not applicable.
ITEM 30. Location of Accounts and Records.
The accounts, books and other documents required to be
maintained by Section 31(a) of the Investment Company Act
of 1940 and the Rules thereunder are maintained as
follows: journals, ledgers, securities records and other
original records are maintained principally at the
offices of Alliance Fund Services, Inc., 500 Plaza Drive,
Secaucus, New Jersey 07094 and at the offices of 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 3l. Management Services.
Not applicable.
ITEM 32. Undertakings.
The Registrant undertakes to furnish each person whom the
prospectus is delivered with a copy of the Registrant's
latest report to Shareholders, upon request and without
charge.
The Registrant undertakes to provide assistance to
shareholders in communications concerning the removal of
any Director of the Fund in accordance with Section 16 of
the Investment Company Act of 1940.
C-10
<PAGE>
R=6.50 SIGNATURES
Pursuant to the requirements of the Securities Act of
1933, as amended, and the Investment Company Act of 1940, as
amended, the Registrant certifies that it meets all of the
requirements for effectiveness of this Amendment to its
Registration Statement pursuant to Rule 485(b) under the
Securities Act of 1933 and has duly caused this Amendment to its
Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of New York
and the State of New York, on the 30th day of January, 1998.
THE ALLIANCE FUND, INC.
By /s/John D. Carifa
_______________________
John D. Carifa
Chairman and President
Pursuant to the requirements of the Securities Act of
1933, as amended, this Amendment to the 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 January 30, 1998
_____________________ Chairman
John D. Carifa and President
(2) Principal Financial and
Accounting Officer
/s/ Mark D. Gersten January 30, 1998
_____________________ Treasurer
Mark D. Gersten
<PAGE>
(3) All of the Directors
Ruth Block
John D. Carifa
David H. Dievler
John H. Dobkin
William H. Foulk, Jr.
James M. Hester
Clifford L. Michel
Donald J. Robinson
Robert C. White
by /s/ Edmund P. Bergan, Jr. January 30, 1998
_________________________
(Attorney-in-fact)
Edmund P. Bergan, Jr.
<PAGE>
Index to Exhibits
Exhibit No. Description of Exhibits Page
(1)(b) Articles of Amendment
(1)(c) Articles of Restatement
(5)(a) Management Agreement between the Registrant and
Alliance Capital Management L.P.
(8) Custodian Contract Between the Registrant and State
Street Bank and Trust Company
(9) Transfer Agency Agreement between the Registrant
and Alliance Fund Services, Inc.
(11) Consent of Independent Accountants
(27) Financial Data Schedule
13
00250430.AN9
<PAGE>
ARTICLES OF AMENDMENT
OF
ARTICLES OF INCORPORATION
OF
CHEMICAL FUND, INC.
THIS IS TO CERTIFY:
FIRST: That the Articles of Incorporation of CHEMICAL FUND,
INC., a Maryland corporation having its principal office in the
City of Baltimore in that State (the "Corporation"), are hereby
amended as follows:
Paragraph C of Article EIGHTH is amended to read in its
entirety as follows:
"C. The directors of the Corporation may receive compensation
for their services."
SECOND: That the foregoing amendment has been duly advised
by the Board of Directors and approved by the stockholders of the
Corporation.
IN WITNESS WHEREOF, CHEMICAL FUND, INC. has caused these
Articles of Amendment to be signed in its name and on its behalf
by its President and its corporate seal eo be hereto affixed and
<PAGE>
attested by its Secretary, and the said officers of the
Corporation further acknowledge said instrument to be the
corporate act of the Corporation and state under the penalties of
perjury that, to the test of~their knowledge, information and
belief, the matters and facts therein set forth with respect to
approval are true in all material respects, all on the 6th day of
April, 1981.
CHEMICAL FUND, INC.
By /s/ John H. Dobkin
____________________
President
SEAL
ATTEST:
/s/ Mary A. Barry
_____________________
Secretary
2
00250430.AM6
<PAGE>
THE ALLIANCE FUND, INC.
ARTICLES OF RESTATEMENT
THE ALLIANCE FUND, INC., a Maryland corporation having
its principal office in the City of Baltimore (hereinafter called
the "Corporation"), hereby certifies to the State Department of
Assessments and Taxation of Maryland that:
I. The Corporation desires to restate its Charter as
currently in effect.
II. The Charter as restated is as follows:
I, the undersigned, Francisco A. Garcia, whose address
is 125 Broad Street, New York, New York 10004, being at least 18
years of age, do hereby act as an incorporator under and by
virtue of the General Laws of the State of Maryland authorizing
the formation of corporations and, with the intention of forming
a corporation, DO HEREBY CERTIFY AS FOLLOWS:
FIRST: The name of this corporation, which is
hereinafter referred to as the "Corporation", is The Alliance
Fund, Inc.
SECOND: The address of the principal office of the
Corporation in the State of Maryland is c/o The Corporation Trust
Incorporated, 32 South Street, Baltimore, Maryland 21202. The
name of the resident agent of the Corporation in the State of
Maryland is The Corporation Trust Incorporated, a Maryland
corporation, and the address of the resident agent is 32 South
Street, Baltimore, Maryland 21202.
THIRD: The nature of the business or objects or
purposes to be transacted, promoted or carried on by the
Corporation are as follows:
A. To engage in the business of holding, investing,
reinvesting, or otherwise placing the funds of the Corporation in
securities (as defined herein); to acquire through purchase,
exchange, subscription, or otherwise, to own, hold, possess for
investment, resale, or otherwise and to dispose of through sale,
exchange, or otherwise securities and to exercise all rights,
powers, and privileges with reference to such business or
incident to the ownership, use and enjoyment of such funds or of
securities, including, but without limitation, the right, power
and privilege to own, vote, hold, purchase, sell, negotiate,
assign, exchange, transfer, or otherwise deal with, dispose of,
use, exercise, or enjoy any rights, title, interest, powers or
privileges under or with reference to any securities owned or
<PAGE>
held, including the payment of any assessments, subscriptions and
other sums of money the Corporation may deem expedient for the
protection of its interest as owner or holder of such securities,
and to invest or utilize the proceeds, interest, dividends, or
other returns therefrom in such manner as is consistent with the
purposes, business, or objects of the Corporation; provided,
however, that the Corporation shall not:
1. Purchase or otherwise acquire any securities from
or through or sell or otherwise dispose of any securities to
or through an interested person (as defined herein), directly
or indirectly. This restriction shall not apply to shares of
the Corporation, to purchases or sales on a securities
exchange in connection with which only the regular exchange
commissions and charges are imposed, or to any acquisition of
any securities to which the Corporation may become entitled
as described below; or
This Paragraph 1 shall not apply to securities to
which the Corporation may become entitled, because of
securities then owned or held, pursuant to a distribution to
stockholders, an offering to stockholders, whether or not in
satisfaction of preemptive rights, a merger, consolidation,
reorganization, recapitalization, readjustment,
reclassification of securities, sale or lease of all or
substantially all of the property and assets or similar
proceedings.
2. Lend any of its funds or other assets other than
loans of portfolio securities on a fully collateralized basis
or in connection with loans to banks against such obligations
as repurchase agreements. The purchase by the Corporation of
notes, bonds and other evidences of indebtedness shall not be
construed as a loan.
3. Sell any securities short.
4. Purchase any securities on margin.
5. Borrow money or mortgage or pledge any of its
assets except in connection with the writing of covered call
options.
6. Underwrite or participate in any underwriting of
securities.
7. Purchase any securities if such purchase would
cause the Corporation to have more than 5% of its gross
assets taken at market invested in stock or securities or
both, of any one corporation, other than securities issued,
created or fully guaranteed by the United States Government.
2
<PAGE>
8. Purchase any securities if such purchase would
cause the Corporation to own, at the time of purchase, more
than 10% of the outstanding stock or securities, or both, of
any one corporation, other than securities issued, created or
fully guaranteed by the United States.
B. To issue and sell its shares in such amounts, on
such terms and conditions for such purposes and for such
consideration now or hereafter permitted by the General Laws of
the State of Maryland and by these Articles of Incorporation, as
its Board of Directors may determine.
C. To acquire, through purchase, exchange, or
otherwise, hold, dispose of, transfer, reissue or cancel its own
shares in any manner and to the extent now or hereafter permitted
by the General Laws of the State of Maryland and by these
Articles of Incorporation without the vote or consent of the
holders of any class of stock of the Corporation.
D. To have one or more offices within or without the
State of Maryland, to carry on all or any of its operations, and
to conduct its business, so far as permitted by law, in any and
all states, territories, dependencies and colonies of the United
States, its possessions, and in the District of Columbia and in
foreign countries.
E. To do any and all such further acts and things and
to exercise any and all such further powers as may be necessary,
appropriate or desirable for, or in connection with, or
incidental to, the accomplishment, carrying out or attainment of
all or any of the foregoing purposes and objects.
The foregoing clauses shall be construed as powers as
well as objects and purposes and the matters expressed in each
clause shall, except if otherwise expressly provided, be in no
way limited or restricted by reference to or inference from the
terms of any other clause of this or any other Article of these
Articles of Incorporation but shall be regarded as independent
objects, purposes and powers, and the enumeration of specific
objects, purposes and powers shall not be construed to limit or
restrict in any manner the meaning of general terms or the
general powers of the Corporation, nor shall the expression of
one thing be deemed to exclude another not expressed, although it
be of like nature.
FOURTH: A. The total number of shares which the
Corporation has authority to issue is 300 million (300,000,000)
shares of capital stock of the par value of twelve and one-half
cents ($.125) each consisting of 150 million (150,000,000) shares
designated "Class A Common Stock" and 150 million (150,000,000)
shares designated "Class B Common Stock," having an aggregate par
3
<PAGE>
value of $37,500,000. The shares of the Corporation's capital
stock issued and outstanding at the effective time of the
amendment adding this provision are hereby reclassified as
"Class A Common Stock."
B. As more fully set forth hereafter, the assets and
liabilities and the income and expenses of each class of the
Corporation's stock may be determined separately and,
accordingly, the net asset value, the liquidating value, the
dividends payable to holders, and the amounts distributable in
the event of dissolution of the Corporation to holders of shares
of the Corporation's stock may vary from class to class. Except
for these differences and certain other differences hereafter set
forth, each class of the Corporation's stock shall have the same
preferences, conversion and other rights, voting powers,
restrictions, limitations as to dividends, qualifications and
terms and conditions of and rights to require redemption.
C. All consideration received by the Corporation for
the issue or sale of shares of a class of the Corporation's
stock, together with all funds derived from any investment and
reinvestment thereof and, in the case of Class A Common Stock,
all assets attributable to shares of Common A Common Stock into
which shares of Class B Common Stock have been converted, shall
irrevocably belong to that class for all purposes, subject only
to the automatic conversion of Class B Common Stock into Class A
Common Stock and the rights of creditors, and shall be so
recorded upon the books of account of the Corporation. Such
consideration and assets attributable to shares that have been
converted as well as any funds derived from any investment and
reinvestment are herein referred to as "assets belonging to" that
class. The assets belonging to the Class A Common Stock and the
assets belonging to the Class B Common Stock shall be jointly
invested in the same investment portfolio of the Corporation.
Income or gain from investments by the Corporation will be
allocated to each class based on the net asset value of each
class. The assets belonging to a class of the Corporation's
stock shall be charged with the liabilities of the Corporation
with respect to that class and with that class' share of the
liabilities of the Corporation not attributable to any particular
class, in the latter case in the proportion that the net asset
value of that class (determined without regard to such
liabilities) bears to the net asset value of all classes of the
Corporation's stock (determined without regard to such
liabilities). The determination of the Board of Directors shall
be conclusive as to the allocation of liabilities, including
accrued expenses and reserves, and assets to a particular class
or classes.
D. In the event of the liquidation or dissolution of
the Corporation, the stockholders of a class of the Corporation's
4
<PAGE>
stock shall be entitled to receive, as a class, out of the assets
of the Corporation available for distribution to stockholders,
the assets belonging to that class less the liabilities allocated
to that class. The assets so distributable to the stockholders
of a class shall be distributed among such stockholders in
proportion to the number of shares of that class held by them and
recorded on the books of the Corporation. In the event that
there are any assets available for distribution that are not
attributable to any particular class of stock, such assets shall
be allocated to all classes in proportion to the net asset value
of the respective classes.
E. No holder of shares shall have any preferential,
preemptive, or other right to subscribe for or purchase any
securities of the Corporation other than such rights, if any, as
the Board of Directors may from time to time determine to offer
to holders of shares at the time outstanding.
F. Except as otherwise provided by law, each
stockholder shall be entitled to one vote for each share. The
holders of the Class A Common Stock shall have (1) exclusive
voting rights with respect to provisions of any distribution plan
adopted by the Corporation pursuant to Rule 12b-1 under the
Investment Company Act of 1940 (a "Plan") applicable to the
Class A Common Stock and (2) no voting rights with respect to
provisions of any Plan applicable to the Class B Common Stock.
The holders of the Class B Common Stock shall have (i) exclusive
rights with respect to provisions of any Plan adopted by the
Corporation applicable to the Class B Common Stock and (ii) no
voting rights with respect to provisions of any Plan applicable
to the Class A Common Stock.
G. The minimum amount of capital with which the
Corporation will commence business is one thousand dollars
($1,000).
FIFTH: The number of directors of the Corporation shall
be three (3), which number may be increased or decreased from
time to time pursuant to the by-laws of the Corporation or in the
manner provided therein but shall not be less than three.
SIXTH: The Corporation is to have perpetual existence.
SEVENTH: The private property of the stockholders shall
not be subject to the payment of corporate debts to any extent
whatever.
EIGHTH: The following provisions are inserted for the
management of the business and for the conduct of the affairs of
the Corporation, and for creating, defining, limiting and
5
<PAGE>
regulating the powers of the Corporation, the directors and the
stockholders:
A. Directors need not be stockholders nor residents of
Maryland. Elections of directors need not be by ballot, unless
the by-laws so require.
B. The Board of Directors shall have the entire
management and control of the property, business and affairs of
the Corporation, and is hereby vested with all the powers
possessed by the Corporation itself so far as this delegation of
authority is not inconsistent with law or these Articles of
Incorporation. In furtherance and without limitation of the
foregoing provisions, it is expressly declared that, subject to
these Articles of Incorporation, the Board of Directors shall
have power:
1. To make, alter, amend or repeal from time to time
by-laws of the Corporation, but any by-laws made by the Board
of Directors may be altered, amended or repealed by the
stockholders at any annual meeting or special meeting,
provided that notice of the substance of such proposed
alteration, amendment or repeal is included in the notice of
such meeting.
2. To authorize the purchase, pursuant to paragraphs D
and E of this Article, of shares of the Corporation, upon
tender thereof by the holder or holders thereof or otherwise,
provided the Corporation has assets legally available for
such purpose, and to pay for such shares in cash, securities
or other assets then held or owned by the Corporation.
3. To determine, in accordance with accepted
accounting practice, what constitutes annual or other net
profits, net assets (as defined herein) and the asset value
and liquidating value (as defined herein) of the shares of
the Corporation; from time to time to fix and vary the amount
to be reserved as working capital; to set apart out of any
surplus of the Corporation such reserves in such amounts and
for such proper purposes as it shall determine and to abolish
any such reserves or any part thereof; to determine the
matters mentioned in paragraph D of the definition of asset
and liquidating value, contained in Article Ninth hereof,
with the force and effect provided by said paragraph; and to
determine, from time to time, the withdrawal charge, if any,
to be imposed on the purchase of its shares, pursuant to
paragraph D of this Article. Such withdrawal charge shall
not be in excess of the estimated expense to the Corporation
in connection with such purchases and, in any event, shall
not exceed 1% of the purchase price, apart from such charge.
6
<PAGE>
4. By resolution or resolutions, passed by a majority
of the whole Board of Directors, to designate one or more
committees, each committee to consist of two or more of the
Directors of the Corporation, which, to the extent provided
in said resolution or resolutions or in the by-laws of the
Corporation, shall have and may exercise the powers of the
Board of Directors in the management of the business and
affairs of the Corporation to the extent permitted by the
General Laws of the State of Maryland, and may have power to
authorize the seal of the Corporation to be affixed to all
papers which may require it. Whenever in these Articles of
Incorporation it is provided that any action may be taken or
omitted by the Board of Directors, the term "Board of
Directors" shall be deemed to mean the Board of Directors or
any duly authorized committee thereof designated as herein
provided.
5. To authorize the issue or sale of shares of the
Corporation, including treasury shares, from time to time as
follows:
a. One hundred (100) shares for a consideration,
per share, to the Corporation, of ten dollars ($10), at
any time after the incorporation of the Corporation, to
provide the minimum amount of capital with which the
Corporation will commence business. All shares issued
pursuant to the foregoing authorization shall constitute
the initial issue.
b. After the initial issue, any and all its
shares for a consideration, per share, to the
Corporation not less than the asset value, per share, of
the outstanding shares of the Corporation. Such asset
value shall be computed as of any time on the same day
as, on the business day preceding, or on the second
business day preceding, such issue or sale, as may be
determined by the Board of Directors in respect of the
issue or sale covered by such determination.
c. All shares issued in accordance with the
provisions of this paragraph 5, for which the full
consideration shall have been paid, shall be fully paid
and non-assessable.
6. To distribute dividends in such amounts, if any,
and in such manner and to the stockholders of record as of
such date, as the Board of Directors may determine, but,
except for dividends payable in shares of the Corporation and
liquidating dividends, whether in complete or partial
liquidation, only from (a) net profits or (b) earned surplus,
including, for the purposes of this paragraph, surplus
7
<PAGE>
arising from net realized gains from the sale or other
disposition of assets (and any such surplus arising in any
year shall be available for dividends notwithstanding that
for the preceding year or years the Corporation may have
realized a net loss from the sale or other disposition of
assets), or (c) any other source legally available for the
purpose to the extent of the accumulated undistributed net
aggregate of that part of the consideration received by the
Corporation for the issuance or sale of shares less that part
of the consideration paid by the Corporation on the
redemption or repurchase of shares which represents, in
effect, the net amount available for dividends pursuant to
this paragraph included among the assets of the Corporation
in computing the sale price and the repurchase price of its
shares so issued or sold or redeemed or repurchased. There
shall accompany any dividend representing in whole or in part
any realized gains from the sale or other disposition of
assets a statement of the amount per share of such gains
included in such dividends. Dividends with respect to the
Class A Common Stock and the Class B Common Stock shall be in
such amount as may be declared from time to time by the Board
of Directors and such dividends may vary as between such
classes to reflect differing allocations of the expenses of
the Corporation between the holders of the Class A Common
Stock and the holders of the Class B Common Stock and any
resultant differences between the net asset value of the
Class A Common Stock and the net asset value of the Class B
Common Stock to such extent and for such purposes as the
Board of Directors may deem appropriate.
7. To authorize the execution, even though some or all
of the directors and officers of the Corporation are
directors, officers, employees, stockholders or otherwise
interested in the person or persons with whom the Corporation
contracts, of a contract or contracts, which may be exclusive
contracts, providing:
a. For the management and supervision of its
affairs by a Manager in return for a quarterly payment
of an amount not greater than .1375 of 1% of the average
(fixed as provided in such contract or contracts but
based only on business days) net assets of the
Corporation for such quarter, less the amount of any
compensation paid or payable by the Corporation to its
officers for such quarter.
b. For the distribution of its shares by a
Distributor and for a discount, concession or commission
to be paid or allowed by the Corporation to the
Distributor in connection with such distribution,
provided, however, that the consideration per share to
8
<PAGE>
be received by the Corporation, after deduction of any
such discount, concession or commission, shall not be
less than the consideration for which shares of the
Corporation may be issued or sold pursuant to
paragraph 5 of this paragraph B. The distribution
contract or contracts shall provide, in substance, that
the Distributor is to pay, or reimburse the Corporation
for, all expenses of qualifying shares of the
Corporation for sale under the Blue Sky laws of any
state (except expenses of any action by the Corporation
relating to its Articles of Incorporation or other
matters in which the Corporation has a direct concern),
and expenses of preparing, printing and distributing
advertising and sales literature (apart from expenses of
registering shares under the Securities Act of 1933 and
the Investment Company Act of 1940 and the preparation
and printing of Prospectuses and reports as required by
said Acts and the direct expenses of the issue of
shares, except that the Distributor will pay the cost of
the preparation and printing of Prospectuses and
shareholders' reports used by it and by others in the
sale of the Corporation's shares to the extent such cost
is not paid by others).
In the absence of willful misconduct or fraud, no
director or officer of the Corporation, whether or not a
director, officer, employee or stockholder of or
otherwise interested in a person with whom any such
contract shall be made by the Corporation, shall be
liable to the Corporation or to any stockholder or
creditor thereof or to any other person for any loss
incurred by the Corporation under any such contract, or
be accountable for any gains or profits realized
thereon, and the shares of the Corporation are issued
and sold on the foregoing condition and understanding
evidenced by acceptance of certificates therefor.
8. To determine in their discretion the manner and
purposes of the allocation of brokerage commissions to be
paid by the Corporation and the selection of the brokers and
dealers that shall receive or share directly or indirectly in
any such commissions and the basis of such receiving or
sharing therein, including, but not limited to, sales of
shares of the Corporation and any other funds having the same
investment adviser and statistical and other information and
wire and other services provided to the Corporation or the
Manager.
C. The directors of the Corporation may receive
compensation for their services.
9
<PAGE>
D. The holders of shares of the Corporation shall be
entitled on any business day upon request, accompanied by
surrender of the certificates for any or all such shares, to
cause the shares so surrendered to be purchased by the
Corporation, subject to the General Laws of the State of Maryland
and to such reasonable regulations, not inconsistent with the
provisions of these Articles of Incorporation, as may be adopted
from time to time by the Board of Directors. Such purchases
shall be made and the purchase price determined and paid as
follows:
1. There shall be tendered to the Corporation or to a
custodian of the Corporation, designated for the purpose,
during such usual business hours on a business day as the
Board of Directors may designate:
a. The certificates representing the shares to be
purchased, in form for transfer to the Corporation or in
blank, as the Corporation may request, together with
such proof of the authenticity of signatures as may be
required by the Corporation and proper transfer tax
stamps, and
b. A request for the repurchase of such shares in
form acceptable to the Corporation. Such tender shall
be irrevocable and the Corporation or a custodian of the
Corporation, designated for the purpose, as the case may
be, shall be required to receive and accept the
documents specified above and to purchase the shares so
tendered as of a time immediately after the time for the
computation of the liquidating value of such shares, as
set forth in paragraph 2 of this paragraph D
(hereinafter sometimes referred to as the time of
purchase).
2. The purchase price, per share, to be paid by the
Corporation shall be the liquidating value, per share, of the
shares to be purchased less such withdrawal charge, if any,
as may be fixed by the Board of Directors pursuant to
paragraph 3 of paragraph B of this Article Eighth. The
proceeds of the redemption of a share of the Class B Common
Stock (including a fractional share) shall be reduced by the
amount of any applicable contingent deferred sales charge
payable on such redemption. Such liquidating value, per
share, shall be computed as of the time for closing of the
New York Stock Exchange or such other time or times as may be
established by the Board of Directors in its absolute
discretion. Such price, per share, if resulting in a
fraction of a cent, shall be adjusted to the next lower whole
cent.
10
<PAGE>
3. Payment of the purchase price by the Corporation
shall be made in cash within a reasonable time as provided by
law after a proper tender, pursuant to paragraph 1 of this
paragraph D, except that any payment, at the option of the
Corporation, may be made in whole or in part in kind if, in
the judgment of the Board of Directors of the Corporation
(based on the closing of the New York Stock Exchange, the
happening of any event usually recognized as force majeure,
or the inability for any reason at any time prior to actual
payment to liquidate securities in orderly fashion) payment
in cash would be prejudicial to the best interests of the
remaining stockholders. In making any such payment in whole
or in part in kind the Corporation shall, as nearly as may be
practicable, deliver a cross section of its portfolio. The
value of any part of such payment to be made in kind shall be
determined as provided in paragraph C of the definition of
asset and liquidating value contained in Article Ninth hereof
and any determination by or pursuant to the direction of the
Board of Directors of the Corporation in respect thereof
shall be binding pursuant to paragraph D of such definition.
Delivery of the securities included in any payment in kind
shall be made as promptly as any necessary transfers on the
books of the several corporations whose securities are to be
delivered may be made.
4. The right of the former holder of shares to receive
dividends thereon and all other rights of such former holder
with respect to such shares shall forthwith cease and
terminate from and after the time of purchase of such shares,
except the right of such former holder to receive, in cash or
in kind or partly in cash and partly in kind, the purchase
price of such shares from the Corporation or, if such
purchase price has been deposited with a custodian of the
Corporation in trust for such holder and notice thereof has
been mailed to him, at his address as the same appears on the
books of the Corporation, from such custodian.
E. The Board of Directors is hereby empowered to
authorize the purchase of shares of the Corporation in the open
market or otherwise at prices not in excess of their asset value,
determined by the asset value used at the time such shares are
purchased in the calculation of the retail offering price of
shares of the Corporation, and to take all other steps deemed
necessary or advisable in connection therewith.
F. The holders of shares of the Corporation shall have
the right to inspect the records, documents, accounts and books
of the Corporation, subject to such reasonable restrictions, not
contrary to Maryland law, as may be imposed by the Board of
Directors of the Corporation with respect to whether and to what
11
<PAGE>
extent, and at what times and places, and under what conditions
and regulations, such right shall be exercised.
G. The Corporation shall have as custodian or
custodians one or more trust companies or national banks of good
standing, each having a capital, surplus and undivided profits
aggregating not less than two million, five hundred thousand
dollars ($2,500,000) and the funds and securities held by the
Corporation shall be kept in the custody of one or more such
custodians, provided such custodian or custodians can be found
ready and willing to act, and further provided that the
Corporation or any such custodian or custodians may deposit the
securities of the Corporation in one or more securities
depositories to the extent permitted by the Investment Company
Act of 1940 and the rules and regulations thereunder.
1. The custodian shall not surrender possession of any
assets held for account of the Corporation to the
Corporation.
2. The custodian shall not surrender possession of or
pay out any money held for account of the Corporation except
in the following cases:
a. Upon the purchase of securities or other
property by or for account of the Corporation and the
delivery of such securities or other property to the
custodian;
b. In connection with the conversion, exercise,
exchange, or surrender of securities held for account of
the Corporation pursuant to provisions for conversion
or, in the case of warrants, rights or similar
securities, for exercise, contained in such securities
or pursuant to any plan of merger, consolidation,
recapitalization, reorganization or readjustment of
securities of the issuer of securities so held, provided
in any such case the new securities and cash, if any, to
be received are to be delivered to the custodian;
c. For repurchase or redemption of capital stock
issued by the Corporation;
d. In payment of a dividend on capital stock of
the Corporation;
e. For redeposit with a subcustodian;
f. In payment of any expense or liability of the
Corporation incurred in connection with the management
or operation of the assets or business of the
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<PAGE>
Corporation or in making any disbursement authorized by
the Corporation; and
g. As provided in paragraph 6 of this
paragraph G.
3. The custodian shall not surrender possession of any
securities or property, other than money, held for account of
the Corporation except in the following cases:
a. Upon sale of any such securities or other
property for account of the Corporation and receipt of
payment therefor;
b. To the issuer of securities so held or to an
agent of such issuer after such securities have been
called, redeemed, retired or otherwise become payable,
provided in any such case the proceeds to be received
are to be delivered to the custodian;
c. To the issuer of securities so held or to an
agent of such issuer for transfer into the name of the
Corporation or of the custodian or of a nominee for the
Corporation or the custodian, or for exchange for
definitive securities, or for exchange for securities in
different denominations, provided in any such case the
securities to be received are to be delivered to the
custodian;
d. To the broker selling such securities for
examination in accordance with the "street delivery"
custom;
e. In connection with the conversion, exercise,
exchange or surrender of securities held for account of
the Corporation pursuant to provision for conversion or,
in the case of warrants, rights or similar securities,
for exercise contained in such securities or pursuant to
any plan of merger, consolidation, recapitalization,
reorganization or readjustment of securities of the
issuer of securities so held, provided in any such case
the new securities and cash, if any, to be received are
to be delivered to the custodian;
f. The delivery of securities or other property
held by the Corporation in redemption in kind, in whole
or in part, of shares of capital stock issued by the
Corporation;
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<PAGE>
g. The delivery in payment of a dividend, in
whole or in part on shares of capital stock of the
Corporation; and
h. As provided in paragraph 6 of this
paragraph G.
4. The custodian shall make payment in cash or
delivery of securities as provided in paragraph 2 and 3 of
this paragraph G only upon the following conditions:
a. The custodian, without specific direction of
the Corporation, may surrender securities upon the
payment thereof, may surrender interim receipts for
securities or temporary securities to be replaced by
permanent securities and may effect such exchanges of
securities as may be required by reason of there having
occurred a change in par value or reclassification of
any securities held for account of the Corporation or a
merger, consolidation, recapitalization, reorganization
or readjustment of securities of the issuer of any such
securities, or any combination of the foregoing.
b. In all other cases, only as directed from time
to time in writing signed in the name of the Corporation
by two of its officers.
5. The custodian shall be entitled to reimbursement of
all of its expenses for acting as custodian, including
transfer and other taxes and counsel fees, and to payment of
such reasonable compensation as may be mutually agreed by the
Corporation and the custodian.
6. Any custodian agreement may be terminated at any
time by the Corporation by written instrument signed by a
majority of the whole Board of Directors of the Corporation
and delivered to the custodian. Upon any such termination
the custodian shall deliver the assets held by it for account
of the Corporation only:
a. To a successor custodian appointed as such by
the Corporation; or
b. If the Corporation has not appointed a
successor custodian by the time fixed for termination of
the custodian agreement, to a successor custodian
designated by the custodian; or
c. In accordance with instructions of the
Corporation authorized by the stockholders of the
Corporation, provided that if such instructions require
14
<PAGE>
delivery other than to a successor custodian, such
stockholders shall have considered whether the
Corporation shall be liquidated or shall function
without a custodian.
The Corporation may also have such transfer agents and
registrars for its shares as the Board of Directors shall from
time to time determine. Subject to the foregoing provisions of
this paragraph G, the Board of Directors may employ and fix the
powers, rights, duties, responsibilities, privileges, immunities
and compensation of any such custodian, transfer agent or
registrar.
H. Any vote authorizing liquidation of the Corporation
or proceedings for its dissolution may authorize the Board of
Directors to determine the value of assets and may divide, or
authorize the Board of Directors to divide, such assets among the
stockholders in such manner that every stockholder will receive a
proportionate amount in value (determined as aforesaid) of cash
or property of the Corporation upon such liquidation or
dissolution.
I. The Corporation reserves the right to take any
lawful action and to make any amendment of these Articles of
Incorporation, including the right to make any amendment which
changes the terms of any shares of the Corporation of any class
now or hereafter authorized by classification, reclassification
or otherwise, and to make any amendment authorizing any sale,
lease, exchange or transfer of the property and assets of the
Corporation as an entirety, or substantially as an entirety, with
or without its good-will and franchise, and to make any amendment
of these Articles of Incorporation in any form, manner or
substance now or hereafter authorized or permitted by law;
provided, however, that no such amendment, excepting any
amendment or amendments increasing or decreasing the total number
of shares, of the class referred to in Article Fourth hereof,
which the Corporation shall have authority to issue, shall become
effective unless notice of its adoption by the stockholders of
the Corporation shall have been mailed to each stockholder of the
Corporation who shall have been entitled to vote and who shall
have failed to vote or shall have voted in the negative upon the
question of its adoption, at his address as the same appears on
the books of the Corporation, and until at least ten days after
such mailing. Nothing contained in this subdivision shall be
deemed to limit or restrict the Corporation in the full and
proper use and enjoyment of its purposes, objects and powers, or
otherwise, as now or hereafter set forth in these Articles of
Incorporation or any amendment hereof hereafter in force, or as
now or hereafter authorized or permitted by law. All holders of
shares of the Corporation by acceptance of the certificate or
certificates representing their shares agree that all rights to
15
<PAGE>
which such shares entitle them are subject to the foregoing
provisions of this sub-division and all other provisions of these
Articles of Incorporation from the time of the issuance thereof.
J. The books of account of the Corporation shall be
examined by an independent firm of public accountants as of the
close of each fiscal year and such other times, if any, as may be
directed by the Board of Directors of the Corporation. A report
to stockholders based upon such annual examination shall show the
assets and liabilities of the Corporation, its income and
expenses, the asset value of its outstanding shares, the
securities in which the funds of the Corporation are then
invested and such other matters as the Board of Directors shall
determine. A copy of such report shall be mailed to each
stockholder of the Corporation, of record on such date as
determined by or pursuant to the direction or authorization of
the Board of Directors, at his address as the same appears on the
books of the Corporation.
K. 1. Each share of the Class B Common Stock, other
than a share purchased through the automatic reinvestment of
a dividend or a distribution with respect to the Class B
Common Stock, shall be converted automatically, and without
any action or choice on the part of the holder thereof, into
shares of the Class A Common Stock on the date that is the
first Corporation business day in the month following the
month in which the eighth anniversary date of the date of
issuance of the share falls (the "Conversion Date").
2. Each share of Class B Common Stock purchased
through the automatic reinvestment of a dividend or a
distribution with respect to the Class B Common Stock shall
be segregated in a separate sub-account on the stock records
of the Corporation for each of the holders of record thereof.
On any Conversion Date, a number of the shares held in the
sub-account of the holder of record of the share or shares
being converted, calculated in accordance with the next
following sentence, shall be converted automatically, and
without any action or choice on the part of the holder, into
shares of the Class A Common Stock. The number of shares in
the holder's sub-account so converted shall bear the same
relation to the total number of shares maintained in the
sub-account on the Conversion Date (immediately prior to
conversion) as the number of shares of the holder converted
on the Conversion Date pursuant to paragraph 1 hereof bears
to the total number of shares of the Class B Common Stock of
the holder on the Conversion Date (immediately prior to
conversion) not purchased through the automatic reinvestment
of dividends or distributions with respect to the Class B
Common Stock.
16
<PAGE>
3. The number of shares of the Class A Common Stock
into which a share of the Class B Common Stock is converted
pursuant to paragraphs 1 and 2 hereof shall equal the number
(including for this purpose fractions of a share) obtained by
dividing the net asset value per share of the Class B Common
Stock for purposes of sales and redemptions thereof on the
Conversion Date by the net asset value per share of the
Class A Common Stock for purposes of sales and redemptions
thereof on the Conversion Date.
4. On the Conversion Date, the shares of the Class B
Common Stock converted into shares of the Class A Common
Stock will cease to accrue dividends and will no longer be
deemed outstanding and the rights of the holders thereof
(except the right to receive the number of shares of Class A
Common Stock into which the shares of Class B Common Stock
have been converted and declared but unpaid dividends to the
Conversion Date) will cease. Certificates representing
shares of the Class A Common Stock resulting from the
conversion need not be issued until certificates representing
shares of the Class B Common Stock converted, if issued, have
been received by the Corporation or its agent duly endorsed
for transfer.
NINTH: As used in these Articles of Incorporation, the
following terms shall have the following meanings:
"Security" shall include any note, stock, treasury
stock, bond, debenture, evidence of indebtedness, coupon, scrip,
certificate of interest or participation in any profit-sharing
agreement, collateral trust certificate, transferable share,
voting trust certificate, certificate of deposit for a security,
or any certificate of interest or participation in, temporary or
interim certificate for, receipt for, guarantee of or warrant or
right to subscribe to or purchase, any of the foregoing.
"Person" shall mean a natural person, corporation, joint
stock company, association, partnership, trust or syndicate.
"Interested person" shall mean a person with whom the
Corporation has any contract providing for the general
distribution of securities issued by the Corporation; a person
with whom the Corporation has any contract providing for the
rendering by such person to the Corporation of management or
advisory service for compensation; a person who is a director or
officer of the Corporation and a person of whom a partner or of
which a director or officer is a director or officer of the
Corporation.
17
<PAGE>
"Net assets" shall mean the aggregate asset value of the
shares of the Corporation, excluding brokerage, stamp taxes and
odd-lot premiums, if any.
"Asset value" and "liquidating value" of any shares of
the Corporation outstanding (exclusive of treasury stock) shall
be determined, by or pursuant to the direction of the Board of
Directors, in accordance with the following paragraphs A to D
inclusive.
A. Asset value of each share of a class of the capital
stock of the Corporation shall be determined by dividing:
1. The total value of the assets belonging to that
class determined as provided in paragraph C below (except
that there may be added to the market value of all securities
listed or traded in on any exchange, if the Board of
Directors so determines, brokerage, stamp taxes and odd-lot
premiums at, or substantially at, the rates which would be
applicable if such securities were being presently
purchased), less, to the extent determined by or pursuant to
the direction of the Board of Directors in accordance with
accepted accounting practice, all debts, obligations and
liabilities belonging to that class (which debts, obligations
and liabilities shall include, without limitation of the
generality of the foregoing, any and all debts, obligations,
liabilities, or claims, of any and every kind and nature,
fixed, accrued, unmatured or contingent, including the
estimated accrued expense of management and supervision, and
any reserves or charges for any or all of the foregoing,
whether for taxes, expenses, contingencies, or otherwise) but
excluding the Corporation's liability upon its shares and its
surplus, by
2. The total number of shares of that class
outstanding (shares sold by the Corporation whether or not
paid for being treated as outstanding and shares purchased by
the Corporation whether or not paid for and treasury shares
being treated as not outstanding).
B. Liquidating value shall be determined in the same
manner as asset value, expect that there shall be excluded the
brokerage, stamp taxes and odd-lot premiums, if any, included in
the computation of asset value and there may be deducted from the
market value of all securities listed or traded in on any
exchange, if the Board of Directors so determines, brokerage,
stamp taxes and odd-lot premiums at, or substantially at, the
rates which would be applicable if such securities were being
presently sold.
18
<PAGE>
C. In determining for the purposes of these Articles
of Incorporation the total value of the assets of the Corporation
at any time, securities shall be taken at their market value and
all other assets at fair value, determined as follows:
1. The market value of each security which shall be
listed or traded on the New York Stock Exchange or the
American Stock Exchange shall be determined by the price of
the last-reported sale of such security, ascertained by any
method which may be selected by or under the direction of the
Board of Directors, on either of said exchanges on the date
as of which such market value is being determined. In case
there shall be no such sale of such security on such date,
then such market value shall be fixed by or pursuant to the
authorization of the Board of Directors, but not less than
the last bid price nor more than the last asked price, if
any, on either of said exchanges for such security on such
date, so ascertained.
2. The market value of each security which shall not
be listed or traded in on the New York Stock Exchange or the
American Stock Exchange shall be determined by any quotation
or method approved by or pursuant to the direction of the
Board of Directors.
3. Dividends declared but not yet received and rights,
in respect of securities which are quoted ex-dividend or
ex-rights, shall be included at the fair value thereof as
determined by or pursuant to the direction of the Board of
Directors which may, but need not be, the fair value so
determined on the day the particular securities are first
quoted ex-dividend or ex-rights.
4. The fair value of any other assets of the
Corporation (or the value of any of the assets mentioned in
1,2, or 3 in situations not covered thereby or in the event
of the closing of the New York Stock Exchange or any other
happening determined by the Board of Directors in their
discretion to make other methods of valuation advisable)
shall be determined in accordance with accepted accounting
practice in such manner as may be approved from time to time
by or pursuant to the direction of the Board of Directors.
D. Any determination made in good faith and, so far as
accounting matters are involved, in accordance with accepted
accounting practice by or pursuant to the direction of the Board
of Directors, as to the amount of the assets, debts, obligations
or liabilities of the Corporation, as to the amount of any
reserves or charges set up and the propriety thereof, as to the
time of or purpose for creating such reserves or charges, as to
the use, alteration or cancellation of any reserves or charges
19
<PAGE>
(whether or not any debt, obligation or liability for which such
reserves or charges shall have been created shall have been paid
or discharged or shall be then or thereafter required to be paid
or discharged), as to the price or closing bid or asked price of
any security owned or held by the Corporation, as to the market
value of any security or fair value of any other asset of the
Corporation, as to the number of shares of the Corporation
outstanding, as to the estimated expense to the Corporation in
connection with purchases of its shares, as to the ability to
liquidate securities in orderly fashion, as to the extent to
which it is practicable to deliver a cross-section of the
portfolio of the Corporation in payment for any such shares, as
to the method of payment for any such shares repurchased, or as
to any other matters relating to the issue, sale, purchase and/or
other acquisition or disposition of securities or shares of the
Corporation shall be final and conclusive, and shall be binding
upon the Corporation and all holders of its shares, past, present
and future, and shares of the Corporation are issued and sold on
the condition and understanding evidenced by acceptance of
certificates for such shares, that any and all determinations
shall be binding as aforesaid.
TENTH: Notwithstanding any provision of law requiring
action to be taken or authorized by the affirmative vote of the
holders of a designated proportion greater than a majority of the
shares of capital stock of the Corporation, such action shall be
valid and effective if taken or authorized by the affirmative
vote of the holders of a majority of the total number of shares
of capital stock outstanding and entitled to vote thereon
pursuant to the provisions of these Articles of Incorporation.
III. The provisions set forth in these Articles of
Restatement constitute all of the provisions of the Charter of
the Corporation currently in effect.
IV. The restatement of the Charter of the Corporation
has been approved by a majority of the entire board of directors.
The Corporation has eight directors currently in office. These
directors are David H. Dievler, Ruth Block, John D. Carifa,
General Andrew J. Goodpaster, Dr. James M. Hester, Hon. James D.
Hodgson, Clifford L. Michel and Rear Admiral Chester W. Nimitz,
Jr.
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<PAGE>
V. The Charter is not amended by these Articles of
Restatement.
VI. The current address of the principal office of the
Corporation and the name and address of the current resident
agent of the Corporation are as set forth in the Charter as
reported.
21
<PAGE>
IN WITNESS WHEREOF, The Alliance Fund, Inc. has caused
these presents to be signed in its name and on its behalf by its
President and attested by its Secretary on May 6, 1991.
THE ALLIANCE FUND, INC.
By: /s/ David H. Dievler
______________________
David H. Dievler
President
Attested:
[seal]
/s/ Mary A. Barry
______________________
Mary A. Barry
Secretary
THE UNDERSIGNED, the President of The Alliance Fund,
Inc., who executed on behalf of said Corporation the foregoing
Articles of Restatement, hereby acknowledges, in the name and on
behalf of said Corporation, the foregoing Articles of Restatement
to be the corporate act of said Corporation and further certifies
that, to the best of his knowledge, information and belief, all
matters and facts set forth therein with respect to the approval
thereof of said Articles of Restatement are true in all material
respects, under the penalties of perjury.
/s/ David H. Dievler
_________________________
David H. Dievler
President
22
00250430.AB6
<PAGE>
MANAGEMENT AGREEMENT
between
THE ALLIANCE FUND, INC.
and
ALLIANCE CAPITAL MANAGEMENT L.P.
MANAGEMENT AGREEMENT, made this 20th day of April, 1993
between THE ALLIANCE FUND, INC., a Maryland corporation
(hereinafter called the "Investment Corporation"), and ALLIANCE
CAPITAL MANAGEMENT L.P., a Delaware corporation (hereinafter
called the "Manager").
WHEREAS, the Investment Corporation has been organized
for the purpose of investing its funds in chemical, government and
other permitted securities and desires to avail itself of the
experience, sources of information, advice, assistance and
facilities available to the Manager and to have the Manager
perform for it various management, statistical, accounting and
clerical services; and the Manager is willing to furnish such
advice, facilities and services on the terms and conditions
hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and
mutual covenants herein contained, it is agreed as follows:
1. The Investment Corporation hereby employs the
Manager to manage the investment and reinvestment of the assets of
the Investment Corporation and to administer its affairs, subject
to the overall supervision of the Board of Directors of the
Investment Corporation for the period and on the terms as set
forth herein. The Manager hereby accepts such employment and
<PAGE>
agrees during such period, at its expense, to render the services
and to assume the obligations as set forth herein for the
compensation provided herein.
2. The Manager will recommend from time to time to the
Board of Directors or a committee thereof a general investment
program and, subject to the overall supervision of the Board of
Directors of the Investment Corporation, will manage the
investment and reinvestment of the assets of the Investment
Corporation. Such general investment program and the
implementation thereof will be in accordance with the policies and
restrictions set forth in the Investment Corporation's
Registration Statement under the Investment Company Act of 1940
and its Prospectus which is part of such Registration Statement
under the Securities Act of 1933, and such other policies as may
from time to time be adopted by the Board of Directors.
3. The Manager will administer the Investment
Corporation's corporate affairs, subject to the overall
supervision of the Board of Directors of the Investment
Corporation and, in connection therewith, shall furnish the
Investment Corporation with an office, and with ordinary clerical
and bookkeeping services at such office, and shall authorize and
permit any of its directors, officers and employees who may be
elected as directors or officers of the Investment Corporation, to
serve in the capacities in which they are elected. All services
to be furnished by the Manager under this Agreement may be
2
<PAGE>
furnished through the medium of any such directors, officers or
employees of the Manager.
In connection with the administration of the corporate
affairs of the Investment Corporation, the Manager will bear all
of the following expenses:
(i) the salaries and expenses of all personnel,
except the fees and expenses of directors who are not
affiliated persons of the manager, and
(ii) all expenses incurred by the Manager or by the
Investment Corporation in connection with the management
of the investment and reinvestment of the assets of the
Investment Corporation and in the ordinary course of the
administration of the corporate affairs of the Investment
Corporation, other than those specifically assumed by the
Investment Corporation herein.
Except as otherwise expressly provided above, the Investment
Corporation assumes and will pay expenses of the Investment
Corporation, including without limitation:
(a) the fees and expenses of directors who are not
affiliated persons of the Manager,
(b) the fees and expenses of the custodian which
relate to (i) the custodial function and the record-
keeping connection therewith, (ii) the providing of
records to the Manager useful to the Manager in
connection with the Manager's obligation to maintain the
3
<PAGE>
required accounting records of the Investment
Corporation, (iii) the pricing of the shares of the
Investment Corporation, and (iv) for mail orders, the
cashiering function in connection with the issuance and
redemption of the Investment Corporation's securities,
(c) the fees and expenses of the Investment
Corporation's transfer agent or shareholder servicing
agent, which may be the custodian, which relate to
(i) maintenance of each shareholder account, including
all transactions in that account from regular corporate
transactions or in accordance with various investment or
withdrawal plans provided by the Investment corporation,
(ii) providing information with respect to dealers, if
any, who participated in the sale of Investment
Corporation shares, and (iii) providing information
necessary in computing the amount available for a
shareholder's privilege to purchase other funds managed
by the Manager or any affiliated persons of the Manager,
(d) the cost of personnel, who may be employees of
the Manager or its affiliates, rendering to the
Investment Company such clerical, accounting and other
services as the Investment Company may from time to time
request of the Manager; provided, that all time devoted
to the investment or reinvestment of the portfolio assets
4
<PAGE>
of the Investment Company shall be for the account of the
Manager,
(e) the charges and expenses of auditors,
(f) brokers' commissions and any issue or transfer
taxes chargeable to the Investment Corporation in
connection with its securities transactions,
(g) all taxes and corporate fees payable by the
Investment Corporation to federal, state or other
governmental agencies,
(h) the allocated portion of the fees of any trade
association of which the Investment Corporation may be a
member,
(i) the cost of stock certificates representing
shares of the Investment Corporation,
(j) the fees and expenses involved in registering
and maintaining registrations of the Investment
Corporation and of its shares with the Securities and
Exchange Commission and with State regulatory
authorities,
(k) all expenses of shareholders' and directors'
meetings and of preparing and printing reports to
shareholders in the amount necessary for distribution to
the shareholders, and
(l) the charges and expenses of legal counsel for
the Investment Corporation in connection with legal
5
<PAGE>
matters relating to the Investment Corporation, including
without limitation, legal services rendered in connection
with the Investment Corporation's corporate existence,
corporate and financial structure and relations with its
shareholders, and registration and qualifications of
securities under federal law, and litigation.
4. With respect to the Investment Corporation's
portfolio securities, the Manager shall purchase such securities
from or through and sell such securities to or through such
persons, brokers or dealers as it shall deem appropriate. In
placing orders for such purchases and sales which are being placed
with brokers and dealers in accordance with a policy of seeking
"best execution" of such orders, it is recognized that the Manager
may give consideration to the relationships of the Manager or its
parent with brokers or dealers and to research, statistical and
other services furnished by brokers or dealers to the Manager or
its parent for their use. No security transactions shall be
executed through any broker-dealer affiliated with the Manager
without the specific approval of a majority of the directors of
the Investment Corporation who are not affiliated persons of the
Manager.
Notwithstanding the above paragraph, it is understood
that it is desirable for the Manager to have access to
supplemental research and security and economic analysis provided
by brokers and of use to the Investment Corporation, even though
6
<PAGE>
such access may require the allocation of brokerage business to
brokers who execute brokerage transactions at higher rates to the
Investment Corporation than may be available from other brokers
who are providing only execution service. Similarly it is
important to the Investment Corporation for the Manager to have
good business relationships with broker-dealers who, in the
Manager's judgement, are important block traders, or have special
knowledge of potential buyers and sellers of substantial blocks
of, or who are important dealers in, securities which the
Investment Corporation may wish to buy or sell. Therefore, the
Manager is authorized to place orders for the purchase and sale of
the Investment Corporation's securities with such brokers, subject
to the review by the Board of Directors from time to time with
respect to the extent and continuation of this policy. It is
understood that the services provided by such brokers may also be
useful to the Manager or its parent in connection with service to
other clients.
The Board of Directors may authorize the payment by the
Investment Corporation of additional compensation to others for
consulting services, supplemental research and security and
economic analysis. Such authorization may be on the Board's own
initiative or based on recommendations by the Manager. The Board
may also determine to the extent permitted by generally accepted
accounting principles that such payment may be charged to
principal or income of the Investment Corporation as they deem
7
<PAGE>
appropriate depending on the purpose of such charges and the
extent to which such services replace brokerage information which
was previously paid for by brokerage commissions.
5. No director, officer or employee of the Investment
Corporation shall receive from the Investment Corporation any
salary or other compensation as such director, officer or employee
while he is at the same time a director, officer or employee of
the Manager. This paragraph shall not apply to consultants and
other persons who are not regular members of the Manager's staff.
6. In consideration of the foregoing the Investment
Corporation will pay the Manager a monthly fee at an annualized
rate of .75% of the first $500 million of the Investment Company's
average daily net assets, .65% of the excess over $500 million of
such net assets up to $1 billion and .55% of the excess over $1
billion of such net assets. Such fee shall be payable in arrears
on the last day of each calendar month for services performed
hereunder during such month. If this agreement terminates prior
to the end of a month, such fee shall be prorated according to the
proportion which such portion of the month bears to the full
month.
7. The Manager assumes no responsibility under this
Agreement other than to render the services called for hereunder
in good faith and shall not be responsible for any action of the
Board of Director of the Investment Corporation in following or
declining to follow any advice or recommendations of the Manager.
8
<PAGE>
8. (a) Nothing in this Agreement shall limit or
restrict the right of any director, officer or employee of the
Manager who may also be a director, officer or employee of the
Investment Corporation to engage in any other business or to
devote his time and attention in part to the management or other
aspects of any business, whether of a similar nature or a
dissimilar nature, nor to limit or restrict the right of the
Manager to engage in any other business or to render services of
any kind to any other corporation, firm, individual or
association.
(b) You will notify us of any change in the general
partners of your partnership within a reasonable time after such
change.
9. As used in this Agreement, the terms "security",
"chemical security", "government security", other "permitted
security" and "net assets", defined in Article Eighth of the
Articles of Incorporation of the Investment Corporation, shall
have the meanings ascribed to them herein, and the terms
"assignment" and "majority of the outstanding voting securities"
shall have the meanings given to them by Section 2(a)(4) and
2(a)(42), respectively, of the Investment Company Act of 1940.
10. This Agreement shall terminate automatically in the
event of its assignment.
11. This Agreement may be terminated at any time,
without the payment of any penalty, (a) by the Board of Directors
9
<PAGE>
of the Investment Corporation or by vote of a majority of the
outstanding voting securities of the Investment Corporation by
written notice given not less than 60 days prior to the
termination date addressed to the Manager at its principal place
of business and (b) by the Manager on any January 1, commencing
January 1, 1994, by written notice given not less than sixty days
prior to such January 1 addressed to the Investment Corporation at
its principal place of business.
12. This Agreement shall be submitted for approval to
the Board of Directors of the Investment Corporation annually.
This Agreement shall continue in effect only so long as its
continuance is specifically approved annually by the Board of
Directors of the Investment Corporation or by vote of a majority
of the outstanding voting securities of the Investment Corporation
and, in either case, by vote of a majority of those directors who
are not parties to this Agreement or "interested persons" (as
defined in the Investment Company Act of 1940) of any party to
this Agreement cast in person at a meeting called for the purpose
of voting on such approval.
13. This Management Agreement shall become effective on
the date hereof.
10
<PAGE>
I
Agreement to be executed by their officers "hereunto duly
authorized.
THE ALLIANCE FUND, INC.
/s/ David H. Dievler
_________________________
David H. Dievler
Chairman
(Corporate Seal)
Attest:
By /s/
__________________________
Secretary
ALLIANCE CAPITAL MANAGEMENT L.P.
By Alliance Capital Management
Corporation, General Partner
/s/ John D. Carifa
___________________________
John D. Carifa
Executive Vice President
(Corporate Seal)
Attest:
By /s/
__________________________
Assistant Secretary
11
00250430.AN6
<PAGE>
CUSTODIAN CONTRACT
Between
CHEMICAL FUND, INC.
and
STATE STREET BANK AND TRUST COMPANY
<PAGE>
TABLE OF CONTENTS
Page
1. Employment of Custodian and Property to be
Held By It................................................1
2. Duties of the Custodian with Respect to Property
of the Fund Held by the Custodian.........................2
2.1 Holding Securities..................................2
2.2 Delivery of Securities..............................2
2.3 Registration of Securities..........................6
2.4 Bank Accounts.......................................7
2.5 Payments for Shares.................................8
2.6 Investment and Availability of Federal Funds........8
2.7 Collection of Income................................9
2.8 Payment of Fund Moneys..............................9
2.9 Liability for Payment in Advance of
Receipt of Securities Purchased....................12
2.10 Payments for Repurchases or Redemptions
of Shares of the Fund..............................12
2.11 Appointment of Agents..............................13
2.12 Deposit of Fund Assets in Securities System........14
2.13 Ownership Certificates for Tax Purposes............17
2.14 Proxies............................................17
2.15 Communications Relating to Fund
Portfolio Securities...............................17
2.16 Proper Instructions................................18
2.17 Actions Permitted Without Express Authority........19
2.18 Evidence of Authority..............................19
3. Duties of Custodian With Respect to the Books
of Account and Calculation of Net Asset Value
and Net Income...........................................20
4. Records..................................................20
5. Opinion of Fund's Independent Accountant.................21
6. Reports to Fund by Independent Public Accountants........21
7. Compensation of Custodian................................22
8. Responsibility of Custodian..............................22
9. Effective Period, Termination and Amendment..............23
10. Successor Custodian......................................25
11. Interpretive and Additional Provisions...................26
<PAGE>
12. Massachusetts Law to Apply...............................26
13. Prior Contracts..........................................27
<PAGE>
CUSTODIAN CONTRACT
This Contract between Chemical Fund, Inc., a corporation
organized and existing under the laws of Maryland, having its
principal place of business at 140 Broadway, New York, New York
10005, hereinafter called the "Fund", and State Street Bank and
Trust Company, a Massachusetts trust company, having its
principal place of business at 225 Franklin Street, Boston,
Massachusetts, 02110, hereinafter called the "Custodian",
WITNESSETH: That in consideration of the mutual
covenants and agreements hereinafter contained, the parties
hereto agree as follows:
1. Employment of Custodian and Property to be Held by It
The Fund hereby employs the Custodian as the custodian
of its assets pursuant to the provisions of the Articles of
Incorporation. The Fund agrees to deliver to the Custodian all
securities and cash owned by it, and all payments of income,
payments of principal or capital distributions received by it
with respect to all securities owned by the Fund from time to
time, and the cash consideration received by it for such new or
treasury shares of capital stock, $.125 par value, ("Shares") of
the Fund as may be issued or sold from time to time. The
Custodian shall not be responsible for any property of the Fund
held or received by the Fund and not delivered to the Custodian.
Upon receipt of "Proper Instructions" (within the
meaning of Section 2.16), the Custodian shall from time to time
1
<PAGE>
employ one or more sub-custodians, but only in accordance with an
applicable vote by the Board of Directors of the Fund, and
provided that the Custodian shall have no more or less
responsibility or liability to the Fund on account of any actions
or omissions of any sub-custodian so employed than any such sub-
custodian has to the Custodian.
2. Duties of the Custodian with Respect to Property of the Fund
Held By the Custodian
2.1 Holding Securities. The Custodian shall hold and
physically segregate for the account of the Fund all
non-cash property, including all securities owned by the
Fund, other than securities which are maintained
pursuant to Section 2.12 in a clearing agency which acts
as a securities depository or in a book-entry system
authorized by the U.S. Department of the Treasury,
collectively referred to herein as "Securities System".
2.2 Delivery of Securities. The Custodian shall release and
deliver securities owned by the Fund held by the
Custodian or in a Securities System account of the
Custodian only upon receipt of Proper Instructions,
which may be continuing instructions when deemed
appropriate by the parties, and only in the following
cases:
1) Upon sale of such securities for the account
of the Fund and receipt of payment therefor;
2
<PAGE>
2) Upon the receipt of payment in connection with
any repurchase agreement related to such
securities entered into by the Fund;
3) In the case of a sale effected through a
Securities System, in accordance with the
provisions of Section 2.12 hereof;
4) To the depository agent in connection with
tender or other similar offers for portfolio
securities of the Fund;
5) To the issuer thereof or its agent when such
securities are called, redeemed, retired or
otherwise become payable; provided that, in
any such case, the cash or other consideration
is to be delivered to the Custodian;
6) To the issuer thereof, or its agent, for
transfer into the name of the Fund or into the
name of any nominee or nominees of the
Custodian or into the name or nominee name of
any agent appointed pursuant to Section 2.11
or into the name or nominee name of any sub-
custodian appointed pursuant to Article 1; or
for exchange for a different number of bonds,
certificates or other evidence representing
the same aggregate face amount or number of
units; provided that, in any such case, the
3
<PAGE>
new securities are to be delivered to the
Custodian;
7) To the broker selling the same for examination
in accordance with the "street delivery"
custom;
8) For exchange or conversion pursuant to any
plan of merger, consolidation'
recapitalization, reorganization or
readjustment of the securities of the issuer
of such securities, or pursuant to provisions
for conversion contained in such securities,
or pursuant to any deposit agreement; provided
that, in any such case, the new securities and
cash, if any, are to be delivered to the
Custodian;
9) In the case of warrants, rights or similar
securities, the surrender thereof in the
exercise of such warrants, rights or similar
securities or the surrender of interim
receipts or temporary securities for
definitive securities; provided that, in any
such case, the new securities and cash, if
any, are to be delivered to the Custodian;
10) For delivery in connection with any loans of
securities made by the Fund, but only against
4
<PAGE>
receipt of adequate collateral as agreed upon
from time to time by the Custodian and the
Fund, which may be in the form of cash or
obligations issued by the United States
government, its agencies or instrumentalities,
except that in connection with any loans for
which collateral is to be credited to the
Custodian's account in the book-entry system
authorized by the U.S. Department of the
Treasury, the Custodian will not be held
liable or responsible for the delivery of
securities owned by the Fund prior to the
receipt of such collateral;
11) For delivery as security in connection with
any borrowings by the Fund requiring a pledge
of assets by the Fund, but only against
receipt of amounts borrowed;
12) Upon receipt of instructions from the transfer
agent ("Transfer Agent") for the Fund, for
delivery to such Transfer Agent or to the
holders of shares in connection with
distributions in kind, as may be described
from time to time in the Fund's currently
effective prospectus, in satisfaction of
5
<PAGE>
requests by holders of Shares for repurchase
or redemption;
13) To the designated brokers under covered call
options, provided however, that such
securities shall be released only upon payment
to the Custodian of monies for the premium due
and a receipt for the securities which are to
be held in escrow. Upon exercise of the
option, or at expiration, to receive from
brokers the securities previously deposited.
The Custodian will act strictly in accordance
with Proper Instructions in the delivery of
securities to be held in escrow and will have
no responsibility or liability for any such
securities which are not returned promptly
when due other than to make proper request for
such return;
14) For any other proper corporate purpose, but
only upon receipt of, in addition to Proper
Instructions, a certified copy of a resolution
of the Board of Directors or of the Executive
Committee signed by an officer of the Fund and
certified by the Secretary or an Assistant
Secretary, specifying the securities to be
delivered, setting forth the purpose for which
6
<PAGE>
such delivery is to be made, declaring such
purposes to be proper corporate purposes, and
naming the person or persons to whom delivery
of such securities shall be made.
2.3 Registration of Securities. Securities held by the
Custodian (other than bearer securities) shall be
registered in the name of the Fund or in the name of any
nominee of the Fund or of any nominee of the Custodian
which nominee shall be assigned exclusively to the Fund,
unless the Fund has authorized in writing the
appointment of a nominee to be used in common with other
registered investment companies having the same
investment adviser as the Fund, or in the name or
nominee name of any agent appointed pursuant to Section
2.11 or in the name or nominee name of any sub-custodian
appointed pursuant to Article 1. All securities
accepted by the Custodian on behalf of the Fund under
the terms of this Contract shall be in "street name" or
other good delivery form.
2.4 Bank Accounts. The Custodian shall open and maintain a
separate bank account or accounts in the name of the
Fund, subject only to draft or order by the Custodian
acting pursuant to the terms of this Contract, and shall
hold in such account or accounts, subject to the
7
<PAGE>
provisions hereof, all cash received by it from or for
the account of the Fund, other than cash maintained by
the Fund in a bank account established and used in
accordance with Rule 17f-3 under the Investment Company
Act of 1940. Funds held by the Custodian for the Fund
may be deposited by it to its credit as Custodian in the
Banking Department of the Custodian or in such other
banks or trust companies as it may in its discretion
deem necessary or desirable; provided, however, that
every such bank or trust company shall be qualified to
act as a custodian under the Investment Company Act of
1940 and that each such bank or trust company and the
funds to be deposited with each such bank or trust
company shall be approved by vote of a majority of the
Board of Directors of the Fund. Such funds shall be
deposited by the Custodian in its capacity as Custodian
and shall be withdrawable by the Custodian only in that
capacity.
2.5 Payments for Shares. The Custodian shall receive from
the distributor for the Fund's Shares or from the
Transfer Agent of the Fund and deposit into the Fund's
account such payments as are received for Shares of the
Fund issued or sold from time to time by the Fund. The
Custodian will provide timely notification to the Fund
8
<PAGE>
and the Transfer Agent of any receipt by it of payments
for Shares of the Fund.
2.6 Investment and Availability of Federal Funds. Upon
mutual agreement between the Fund and the Custodian, the
Custodian shall, upon the receipt of Proper
Instructions,
1) invest in such instruments as may be set forth
in such instructions on the same day as
received all federal funds received after a
time agreed upon between the Custodian and the
Fund; and
2) make federal funds available to the Fund as of
specified times agreed upon from time to time
by the Fund and the Custodian in the amount of
checks received in payment for Shares of the
Fund which are deposited into the Fund's
account.
2.7 Collection of Income. The Custodian shall collect on a
timely basis all income and other payments with respect
to registered securities held hereunder to which the
Fund shall be entitled either by law or pursuant to
custom in the securities business, and shall collect on
a timely basis all income and other payments with
respect to bearer securities if, on the date of payment
by the issuer, such securities are held by the Custodian
9
<PAGE>
or agent thereof and shall credit such income, as
collected, to the Fund's custodian account. Without
limiting the generality of the foregoing, the Custodian
shall detach and present for payment all coupons and
other income items requiring presentation as and when
they become due and shall collect interest when due on
securities held hereunder. Income due the Fund on
securities loaned pursuant to the provisions of Section
2.2 (10) shall be the responsibility of the Fund. The
Custodian will have no duty or responsibility in
connection therewith, other than to provide the Fund
with such information or data as may be necessary to
assist the Fund in arranging for the timely delivery to
the Custodian of the income to which the Fund is
properly entitled.
2.8 Payment of Fund Moneys. Upon receipt of Proper
Instructions, which may be continuing instructions when
deemed appropriate by the parties, the Custodian shall
pay out moneys of the Fund in the following cases only:
1) Upon the purchase of securities for the
account of the Fund but only (a) against the
delivery of such securities to the Custodian
(or any bank, banking firm or trust company
doing business in the United States or abroad
which is qualified under the Investment
10
<PAGE>
Company Act of 1940, as amended, to act as a
custodian and has been designated by the
Custodian as its agent for this purpose)
registered in the name of the Fund or in the
name of a nominee of the Custodian referred to
in Section 2.3 hereof or in proper form for
transfer; (b) in the case of a purchase
effected through a Securities System, in
accordance with the conditions set forth in
Section 2.12 hereof or (c) in the case of
repurchase agreements entered into between the
Fund and the Custodian, or another bank, (i)
against delivery of the securities either in
certificate form or through an entry crediting
the Custodian's account at the Federal Reserve
Bank with such securities or (ii) against
delivery of the receipt evidencing purchase by
the Fund of securities owned by the Custodian
along with written evidence of the agreement
by the Custodian to repurchase such securities
from the Fund;
2) In connection with conversion, exchange or
surrender of securities owned by the Fund as
set forth in Section 2.2 hereof;
11
<PAGE>
3) For the redemption or repurchase of Shares
issued by the Fund as set forth in Section
2.10 hereof;
4) For the payment of any expense or liability
incurred by the Fund, including but not
limited to the following payments for the
account of the Fund: interest, taxes,
management, accounting, transfer agent and
legal fees, and operating expenses of the Fund
whether or not such expenses are to be in
whole or part capitalized or treated as
deferred expenses;
5) For the payment of any dividends declared
pursuant to the governing documents of the
Fund;
6) For any other proper purpose, but only upon
receipt of, in addition to Proper
Instructions, a certified copy of a resolution
of the Board of Directors or of the Executive
Committee of the Fund signed by an officer of
the Fund and certified by its Secretary or an
Assistant Secretary, specifying the amount of
such payment, setting forth the purpose for
which such payment is to be made, declaring
such purpose to be a proper purpose, and
12
<PAGE>
naming the person or persons to whom such
payment is to be made.
2.9 Liability for Payment in Advance of Receipt of
Securities Purchased. In any and every case where
payment for purchase of securities for the account of
the Fund is made by the Custodian in advance of receipt
of the securities purchased in the absence of specific
written instructions from the Fund to so pay in advance,
the Custodian shall be absolutely liable to the Fund for
such securities to the same extent as if the securities
had been received by the Custodian, except that in the
case of repurchase agreements entered into by the Fund
with a bank which is a member of the Federal Reserve
System, the Custodian may transfer funds to the account
of such bank prior to the receipt of written evidence
that the securities subject to such repurchase agreement
have been transferred by book-entry into a segregated
non-proprietary account of the Custodian maintained with
the Federal Reserve Bank of Boston or of the safe-
keeping receipt, provided that such securities have in
fact been so transferred by book-entry.
2.10 Payments for Repurchases or Redemptions of Shares of the
Fund. From such funds as may be available for the
purpose but subject to the limitations of the Articles
of Incorporation and any applicable votes of the Board
13
<PAGE>
of Directors of the Fund pursuant thereto, the Custodian
shall, upon receipt of instructions from the Transfer
Agent, make funds available for payment to holders of
Shares who have delivered to the Transfer Agent a
request for redemption or repurchase of their Shares.
In connection with the redemption or repurchase of
Shares of the Fund, the Custodian is authorized upon
receipt of instructions from the Transfer Agent to wire
funds to or through a commercial bank designated by the
redeeming shareholders.
2.11 Appointment of Agents. The Custodian may at any time or
times in its discretion appoint (and may at any time
remove) any other bank or trust company which is itself
qualified under the Investment Company Act of 1940, as
amended, to act as a custodian, as its agent to carry
out such of the provisions of this Article 2 as the
Custodian may from time to time direct; provided,
however, that the appointment of any agent shall not
relieve the Custodian of its responsibilities or
liabilities hereunder.
2.12 Deposit of Fund Assets in Securities Systems. The
Custodian may deposit and/or maintain securities owned
by the Fund in a clearing agency registered with the
Securities and Exchange Commission under Section 17A of
the Securities Exchange Act of 1934, which acts as a
14
<PAGE>
securities depository, or in the book-entry system
authorized by the U.S. Department of the Treasury and
certain federal agencies, collectively referred to
herein as "Securities System" in accordance with
applicable Federal Reserve Board and Securities and
Exchange Commission rules and regulations, if any, and
subject to the following provisions:
1) The Custodian may keep securities of the Fund
in a Securities System provided that such
securities are represented in an account
("Account") of the Custodian in the Securities
System which shall not include any assets of
the Custodian other than assets held as a
fiduciary, custodian or otherwise for
customers;
2) The records of the Custodian with respect to
securities of the Fund which are maintained in
a Securities System shall identify by book-
entry those securities belonging to the Fund;
3) The Custodian shall pay for securities
purchased for the account of the Fund upon (i)
receipt of advice from the Securities System
that such securities have been transferred to
the Account, and (ii) the making of an entry
on the records of the Custodian to reflect
15
<PAGE>
such payment and transfer for the account of
the Fund. The Custodian shall transfer
securities sold for the account of the Fund
upon (i) receipt of advice from the Securities
System that payment for such securities has
been transferred to the Account, and (ii) the
making of an entry on the records of the
Custodian to reflect such transfer and payment
for the account of the Fund. Copies of all
advices from the Securities System of
transfers of securities for the account of the
Fund shall identify the Fund, be maintained
for the Fund by the Custodian and be provided
to the Fund at its request. The Custodian
shall furnish the Fund confirmation of each
transfer to or from the account of the Fund in
the form of a written advice or notice and
shall furnish to the Fund copies of daily
transaction sheets reflecting each day's
transactions in the Securities System for the
account of the Fund.
4) The Custodian shall provide the Fund with any
report obtained by the Custodian on the
Securities System's accounting system,
internal accounting control and procedures for
16
<PAGE>
safeguarding securities deposited in the
Securities System;
5) The Custodian shall have received the initial
or annual certificate, as the case may be,
required by Article 9 hereof;
6) Anything to the contrary in this Contract
notwithstanding, the Custodian shall be liable
to the Fund for any loss or damage to the Fund
resulting from use of the Securities System by
reason of any negligence, misfeasance or
misconduct of the Custodian or any of its
agents or of any of its or their employees or
from failure of the Custodian or any such
agent to enforce effectively such rights as it
may have against the Securities System; at the
election of the Fund, it shall be entitled to
be subrogated to the rights of the Custodian
with respect to any claim against the
Securities System or any other person which
the Custodian may have as a consequence of any
such loss or damage if and to the extent that
the Fund has not been made whole for any such
loss or damage.
2.13 Ownership Certificates for Tax Purposes. The Custodian
shall execute ownership and other certificates and
17
<PAGE>
affidavits for all federal and state tax purposes in
connection with receipt of income or other payments with
respect to securities of the Fund held by it and in
connection with transfers of securities.
2.14 Proxies. The Custodian shall, with respect to the
securities held hereunder, cause to be promptly executed
by the registered holder of such securities, if the
securities are registered otherwise than in the name of
the Fund or a nominee of the Fund, all proxies, without
indication of the manner in which such proxies are to be
voted, and shall promptly deliver to the Fund such
proxies, all proxy soliciting materials and all notices
relating to such securities.
2.15 Communications Relating to Fund Portfolio Securities.
The Custodian shall transmit promptly to the Fund all
written information (including, without limitation,
pendency of calls and maturities of securities and
expirations of rights in connection therewith) received
by the Custodian from issuers of the securities being
held for the Fund. With respect to tender or exchange
offers, the Custodian shall transmit promptly to the
Fund all written information received by the Custodian
from issuers of the securities whose tender or exchange
is sought and from the party (or his agents) making the
tender or exchange offer. If the Fund desires to take
18
<PAGE>
action with respect to any tender offer, exchange offer
or any other similar transaction, the Fund shall notify
the Custodian at least three business days prior to the
date on which the Custodian is to take such action.
2.16 Proper Instructions. Proper Instructions as used
throughout this Article 2 means a writing signed or
initialed by one or more person or persons as the Board
of Directors shall have from time to time authorized.
Each such writing shall set forth the specific
transaction or type of transaction involved, including a
specific statement of the purpose for which such action
is requested. Oral instructions will be considered
Proper Instructions if the Custodian reasonably believes
them to have been given by a person authorized to give
such instructions with respect to the transaction
involved. The Fund shall cause all oral instructions to
be confirmed in writing. Upon receipt of a certificate
of the Secretary or an Assistant Secretary as to the
authorization by the Board of Directors of the Fund
accompanied by a detailed description of procedures
approved by the Board of Directors, Proper Instructions
may include communications effected directly between
electro-mechanical or electronic devices provided that
the Board of Directors and the Custodian are satisfied
19
<PAGE>
that such procedures afford adequate safeguards for the
Fund's assets.
2.17 Actions Permitted without Express Authority. The
Custodian may in its discretion, without express
authority from the Fund:
1) make payments to itself or others for minor
expenses of handling securities or other
similar items relating to its duties under
this Contract, provided that all such payments
shall be accounted for to the Fund;
2) surrender securities in temporary form for
securities in definitive form;
3) endorse for collection, in the name of the
Fund, checks, drafts and other negotiable
instruments; and
4) in general, attend to all non-discretionary
details in connection with the sale, exchange,
substitution, purchase, transfer and other
dealings with the securities and property of
the Fund except as otherwise directed by the
Board of Directors of the Fund.
2.18 Evidence of Authority. The Custodian shall be protected
in acting upon any instructions, notice, request,
consent, certificate or other instrument or paper
believed by it to be genuine and to have been properly
20
<PAGE>
executed by or on behalf of the Fund. The Custodian may
receive and accept a certified copy of a vote of the
Board of Directors of the Fund as conclusive evidence
(a) of the authority of any person to act in accordance
with such vote or (b) of any determination or of any
action by the Board of Directors pursuant to the
Articles of Incorporation as described in such vote, and
such vote may be considered as in full force and effect
until receipt by the Custodian of written notice to the
contrary.
3. Duties of Custodian with Respect to the Books of Account
and Calculation of Net Asset Value and Net Income.
The Custodian shall cooperate with and supply necessary
information to the entity or entities appointed by the Board of
Directors of the Fund to keep the books of account of the Fund
and/or compute the net asset value per share of the outstanding
shares of the Fund or, if directed in writing to do so by the
Fund, shall itself keep such books of account and/or compute such
net asset value per share. If so directed, the Custodian shall
also calculate daily the net income of the Fund as described in
the Fund's currently effective prospectus and shall advise the
Fund and the Transfer Agent daily of the total amounts of such
net income and, if instructed in writing by an officer of the
Fund to do so, shall advise the Transfer Agent periodically of
the division of such net income among its various components.
21
<PAGE>
The calculations of the net asset value per share and the daily
income of the Fund shall be made at the time or times described
from time to time in the Fund's currently effective prospectus.
4. Records The Custodian shall create and maintain all
records relating to its activities and
obligations under this Contract in such manner
as will meet the obligations of the Fund under
the Investment Company Act of 1940, with
particular attention to Section 31 thereof and
Rules 31a-1 and 31a-2 thereunder, applicable
federal and state tax laws and any other law
or administrative rules or procedures which
may be applicable to the Fund. All such
records shall be the property of the Fund and
shall at all times during the regular business
hours of the Custodian be open for inspection
by duly authorized officers, employees or
agents of the Fund and employees and agents of
the Securities and Exchange Commission. The
Custodian shall, at the Fund's request, supply
the Fund with a tabulation of securities owned
by the Fund and held by the Custodian and
shall, when requested to do so by the Fund and
for such compensation as shall be agreed upon
22
<PAGE>
between the Fund and the Custodian, include
certificate numbers in such tabulations.
5. Opinion of Fund's Independent Accountant
The Custodian shall take all reasonable action, as the
Fund may from time to time request, to obtain from year to year
favorable opinions from the Fund's independent accountants with
respect to its activities hereunder in connection with the
preparation of the Fund's Form N-1, and Form N-1R or other annual
reports to the Securities and Exchange Commission and with
respect to any other requirements of such Commission.
6. Reports to Fund by Independent Public Accountants
The Custodian shall provide the Fund, at such times as
the Fund may reasonably require, with reports by independent
public accountants on the accounting system, internal accounting
control and procedures for safeguarding securities, including
securities deposited and/or maintained in a Securities System,
relating to the services provided by the Custodian under this
Contract; such reports, which shall be of sufficient scope and in
sufficient detail, as may reasonably be required by the Fund, to
provide reasonable assurance that any material inadequacies would
be disclosed by such examination, and, if there are no such
inadequacies, shall so state.
7. Compensation of Custodian
23
<PAGE>
The Custodian shall be entitled to reasonable
compensation for its services and expenses as Custodian, as
agreed upon from time to time between the Fund and the Custodian.
8. Responsibility of Custodian
So long as and to the extent that it is in the exercise
of reasonable care, the Custodian shall not be responsible for
the title, validity or genuineness of any property or evidence of
title thereto received by it or delivered by it pursuant to this
Contract and shall be held harmless in acting upon any notice,
request, consent, certificate or other instrument reasonably
believed by it to be genuine and to be signed by the proper party
or parties. The Custodian shall be held to the exercise of
reasonable care in carrying out the provisions of this Contract,
but shall be kept indemnified by and shall be without liability
to the Fund for any action taken or omitted by it in good faith
without negligence. It shall be entitled to rely on and may act
upon advice of counsel (who may be counsel for the Fund) on all
matters, and shall be without liability for any action reasonably
taken or omitted pursuant to such advice. In order that the
indemnification provisions contained in this Article 8 shall
apply, however, it is understood that if in any case the Fund may
be asked to indemnify or save the Custodian harmless, the Fund
shall be fully and promptly advised of all pertinent facts
concerning the situation in question, and it is further
understood that the Custodian will use all reasonable care to
24
<PAGE>
identify, and to notify the Fund promptly concerning, any
situation which presents or appears likely to present the
probability of such a claim for indemnification against the Fund.
The Fund shall have the option to defend the Custodian against
any claim which may be the subject of this indemnification, and
in the event that the Fund so elects it will so notify the
Custodian, and thereupon the Fund shall take over complete
defense of the claim, and the Custodian shall in such situations
initiate no further legal or other expenses for which it shall
seek indemnification under this Article 8. The Custodian shall
in no case settle, confess to any claim or make any compromise in
any case in which the Fund will be asked to indemnify the
Custodian except with the Fund's prior written consent.
If the Fund requires the Custodian to take any action
with respect to securities, which action involves the payment of
money or which action may, in the opinion of the Custodian,
result in the Custodian or its nominee assigned to the Fund being
liable for the payment of money or incurring liability of some
other form, the Fund, as a prerequisite to requiring the
Custodian to take such action, shall provide indemnity to the
Custodian in an amount and form satisfactory to it.
If the Fund requires the Custodian to advance cash or
securities for any purpose or in the event that the Custodian or
its nominee shall incur or be assessed any taxes, charges,
expenses, assessments, claims or liabilities in connection with
25
<PAGE>
the performance of this Contract, except such as may arise from
its or its nominee's own negligent action, negligent failure to
act or willful misconduct, any property at any time held for the
account of the Fund shall be security therefor and should the
Fund fail to repay the Custodian promptly, the Custodian shall be
entitled to utilize available cash and to dispose of the Fund
assets to the extent necessary to obtain reimbursement.
9. Effective Period, Termination and Amendment
This Contract shall become effective as of its
execution, shall continue in full force and effect until
terminated as hereinafter provided, may be amended at any time by
mutual agreement of the parties hereto and may be terminated by
either party by an instrument in writing delivered or mailed,
postage prepaid to the other party, such termination to take
effect not sooner than thirty (30) days after the date of such
delivery or mailing; provided, however that the Custodian shall
not act under Section 2.12 hereof in the absence of receipt of an
initial certificate of the Secretary or an Assistant Secretary
that the Board of Directors of the Fund have approved the initial
use of a particular Securities System and the receipt of an
annual certificate of the Secretary or an Assistant Secretary
that the Board of Directors have reviewed the use by the Fund of
such Securities System as required, in each case, by Rule 17f-4
under the Investment Company Act of 1940, as amended; provided
further, however, that the Fund shall not amend or terminate this
26
<PAGE>
Contract in contravention of any applicable federal or state
regulations, or any provision of the Articles of Incorporation,
and further provided, that the Fund may at any time by action of
its Board of Directors (i) substitute another bank or trust
company for the Custodian by giving notice as described above to
the Custodian, or (ii) immediately terminate this Contract in the
event of the appointment of a conservator or receiver for the
Custodian by the Comptroller of the Currency or upon the
happening of a like event at the direction of an appropriate
regulatory agency or court of competent jurisdiction.
Upon termination of the Contract, the Fund shall pay to
the Custodian such compensation as may be due as of the date of
such termination and shall likewise reimburse the Custodian for
its costs, expenses and disbursements.
10. Successor Custodian
If a successor custodian shall be appointed by the Board
of Directors of the Fund, the Custodian shall, upon termination,
deliver to such successor custodian at the office of the
Custodian, duly endorsed and in the form for transfer, all
securities then held by it hereunder and shall transfer to an
account of the successor custodian all of the Fund's securities
held in a Securities System.
If no such successor custodian shall be appointed, the
Custodian shall, in like manner, upon receipt of a certified copy
of a vote of the Board of Directors of the Fund, deliver at the
27
<PAGE>
office of the Custodian and transfer such securities, funds and
other properties in accordance with such vote.
In the event that no written order designating a
successor custodian or certified copy of a vote of the Board of
Directors shall have been delivered to the Custodian on or before
the date when such termination shall become effective, then the
Custodian shall have the right to deliver to a bank or trust
company, which is a "bank" as defined in the Investment Company
Act of 1940, doing business in Boston, Massachusetts, of its own
selection, having an aggregate capital, surplus, and undivided
profits, as shown by its last published report, of not less than
$25,000,000, all securities, funds and other properties held by
the Custodian and all instruments held by the Custodian relative
thereto and all other property held by it under this Contract and
to transfer to an account of such successor custodian all of the
Fund's securities held in any Securities System. Thereafter,
such bank or trust company shall be the successor of the
Custodian under this Contract.
In the event that securities, funds and other properties
remain in the possession of the Custodian after the date of
termination hereof owing to failure of the Fund to procure the
certified copy of vote referred to or of the Board of Directors
to appoint a successor custodian, the Custodian shall be entitled
to fair compensation for its services during such period as the
Custodian retains possession of such securities, funds and other
28
<PAGE>
properties and the provisions of this Contract relating to the
duties and obligations of the Custodian shall remain in full
force and effect.
11. Interpretive and Additional Provisions
In connection with the operation of this Contract, the
Custodian and the Fund may from time to time agree on such
provisions interpretive of or in addition to the provisions of
this Contract as may in their joint opinion be consistent with
the general tenor of this Contract. Any such interpretive or
additional provisions shall be in a writing signed by both
parties and shall be annexed hereto, provided that no such
interpretive or additional provisions shall contravene any
applicable federal or state regulations or any provision of the
Articles of Incorporation of the Fund. No interpretive or
additional provisions made as provided in the preceding sentence
shall be deemed to be an amendment of this Contract.
12. Massachusetts Law to Apply
This Contract shall be construed and the provisions
thereof interpreted under and in accordance with laws of The
Commonwealth of Massachusetts.
13. Prior Contracts
This Contract supersedes and terminates, as of the date
hereof, all prior contracts between the Fund and the Custodian
relating to the custody of the Fund's assets.
29
<PAGE>
IN WITNESS WHEREOF, each of the parties has caused this
instrument to be executed in its name and behalf by its duly
authorized representative and its seal to be hereunder affixed as
of the 1st day of February, 1985.
ATTEST CHEMICAL FUND, INC.
/s/ Mary A. Barry /s/ David H. Dievler
______________________________ _______________________________
Mary A. Barry David H. Dievler
ATTEST STATE STREET BANK AND TRUST
COMPANY
/s/ Kathleen M. Kubit /s/ B. Weidlich
______________________________ By:____________________________
Kathleen M. Kubit B. Weidlich
Assistant Secretary Vice President
30
00250430.AN3
<PAGE>
ALLIANCE FUND SERVICES, INC.
TRANSFER AGENCY AGREEMENT
AGREEMENT, dated as of October 18, 1988, between
THE ALLIANCE FUND, INC., a Maryland corporation and an open-
end investment company registered with the Securities and
Exchange Commission (the "SEC") under the Investment Company
Act of 1940 (the "Investment Company Act"), having its
principal place of business at 1345 Avenue of Americas, New
York, New York 10105 (the "Fund"), and ALLIANCE FUND
SERVICES, INC., a Delaware corporation registered with the
SEC as a transfer agent under the Securities Exchange Act of
1934, having its principal place of business at 500 Plaza
Drive, Secaucus, New Jersey 07094 ("Fund Services"),
provides as follows:
WHEREAS, Fund Services has agreed to act as
transfer agent to the Fund for the purpose of recording the
transfer, issuance and redemption of shares of each series
of the common stock or shares of beneficial interest, as
applicable, of the Fund ("Shares" or "Shares of a Series"),
transferring the Shares, disbursing dividends and other
distributions to shareholders of the Fund, and performing
such other services as may be agreed to pursuant hereto;
NOW THEREFORE, for and in consideration of the
mutual covenants and agreements contained herein, the
parties do hereby agree as follows:
<PAGE>
SECTION 1. The Fund hereby appoints Fund Services
as its transfer agent, dividend disbursing agent and
shareholder servicing agent for the Shares, and Fund
Services agrees to act in such capacities upon the terms set
forth in this Agreement. Capitalized terms used in this
Agreement and not otherwise defined shall have the meanings
assigned to them in SECTION 30.
SECTION 2.
(a) The Fund shall provide Fund Services with
copies of the following documents:
(1) Specimens of all forms of certificates
for Shares;
(2) Specimens of all account application
forms and other documents relating to Shareholders'
accounts;
(3) Copies of each Prospectus;
(4) Specimens of all documents relating to
withdrawal plans instituted by the Fund, as described in
SECTION 16; and
(5) Specimens of all amendments to any of the
foregoing documents.
(b) The Fund shall furnish to Fund Services a
supply of blank Share Certificates for the Shares and, from
time to time, will renew such supply upon Fund Services'
request. Blank Share Certificates shall be signed manually
2
<PAGE>
or by facsimile signatures of officers of the Fund
authorized to sign by law or pursuant to the by-laws of the
Fund and, if required by Fund Services, shall bear the
Fund's seal or a facsimile thereof.
SECTION 3. Fund Services shall make original
issues of Shares in accordance with SECTIONS 13 and 14 and
the Prospectus upon receipt of (i) Written Instructions
requesting the issuance, (ii) a certified copy of a
resolution of the Fund's Board of Directors or Trustees
authorizing the issuance, (iii) necessary funds for the
payment of any original issue tax applicable to such Shares,
and (iv) an opinion of the Fund's counsel as to the legality
and validity of the issuance, which opinion may provide that
it is contingent upon the filing by the Fund of an
appropriate notice with the SEC, as required by Rule 24f-2
of the Investment Company Act, as amended from time to time.
SECTION 4. Transfers of Shares shall be registered
and, subject to the provisions of SECTION 10 in the case of
Shares evidenced by Share Certificates, new Share
Certificates shall be issued by Fund Services upon surrender
of outstanding Share Certificates in the form deemed by Fund
Services to be properly endorsed for transfer, which form
shall include (i) all necessary endorsers' signatures
guaranteed by a member firm of a national securities
exchange or a domestic commercial bank or through other
3
<PAGE>
procedures mutually agreed to between the Fund and Fund
Services, (ii) such assurances as Fund Services may deem
necessary to evidence the genuineness and effectiveness of
each endorsement and (iii) satisfactory evidence of
compliance with all applicable laws relating to the payment
or collection of taxes.
SECTION 5. Fund Services shall forward Share
Certificates in "non-negotiable" form by first-class or
registered mail, or by whatever means Fund Services deems
equally reliable and expeditious. While in transit to the
addressee, all deliveries of Share Certificates shall be
insured by Fund Services as it deems appropriate. Fund
Services shall not mail Share Certificates in "negotiable"
form, unless requested in writing by the Fund and fully
indemnified by the Fund to Fund Services' satisfaction.
SECTION 6. In registering transfers of Shares,
Fund Services may rely upon the Uniform Commercial Code as
in effect from time to time in the State in which the Fund
is incorporated or organized or, if appropriate, in the
State of New Jersey; provided, that Fund Services may rely
in addition or alternatively on any other statutes in effect
in the State of New Jersey or in the state under the laws of
which the Fund is incorporated or organized that, in the
opinion of Fund Services' counsel, protect Fund Services and
the Fund from liability arising from (i) not requiring
4
<PAGE>
complete documentation in connection with an issuance or
transfer, (ii) registering a transfer without an adverse
claim inquiry, (iii) delaying registration for purposes of
an adverse claim inquiry or (iv) refusing registration in
connection with an adverse claim.
SECTION 7. Fund Services may issue new Share
Certificates in place of those lost, destroyed or stolen,
upon receiving indemnity satisfactory to Fund Services; and
may issue new Share Certificates in exchange for, and upon
surrender of, mutilated Share Certificates as Fund Services
deems appropriate.
SECTION 8. Unless otherwise directed by the Fund,
Fund Services may issue or register Share Certificates
reflecting the signature, or facsimile thereof, of an
officer who has died, resigned or been removed by the Fund.
The Fund shall file promptly with Fund Services' approval,
adoption or ratification of such action as may be required
by law or by Fund Services.
SECTION 9. Fund Services shall maintain customary
stock registry records for Shares of each Series noting the
issuance, transfer or redemption of Shares and the issuance
and transfer of Share Certificates. Fund Services may also
maintain for Shares of each Series an account entitled
"Unissued Certificate Account," in which Fund Services will
record the Shares, and fractions thereof, issued and
5
<PAGE>
outstanding from time to time for which issuance of Share
Certificates has not been requested. Fund Services is
authorized to keep records for Shares of each Series
containing the names and addresses of record of
Shareholders, and the number of Shares, and fractions
thereof, from time to time owned by them for which no Share
Certificates are outstanding. Each Shareholder will be
assigned a single account number for Shares of each Series,
even though Shares for which Certificates have been issued
will be accounted for separately.
SECTION 10. Fund Services shall issue Share
Certificates for Shares only upon receipt of a written
request from a Shareholder and as authorized by the Fund.
If Shares are purchased or transferred without a request for
the issuance of a Share Certificate, Fund Services shall
merely note on its stock registry records the issuance or
transfer of the Shares and fractions thereof and credit or
debit, as appropriate, the Unissued Certificate Account and
the respective Shareholders' accounts with the Shares.
Whenever Shares, and fractions thereof, owned by
Shareholders are surrendered for redemption, Fund Services
may process the transactions by making appropriate entries
in the stock transfer records, and debiting the Unissued
Certificate Account and the record of issued Shares
6
<PAGE>
outstanding; it shall be unnecessary for Fund Services to
reissue Share Certificates in the name of the Fund.
SECTION 11. Fund Services shall also perform the
usual duties and function required of a stock transfer agent
for a corporation, including but not limited to (i) issuing
Share Certificates as treasury Shares, as directed by
Written Instructions, and (ii) transferring Share
Certificates from one Shareholder to another in the usual
manner. Fund Services may rely conclusively and act without
further investigation upon any list, instruction,
certification, authorization, Share Certificate or other
instrument or paper reasonably believed by it in good faith
to be genuine and unaltered, and to have been signed,
countersigned or executed or authorized by a duly-authorized
person or persons, or by the Fund, or upon the advice of
counsel for the Fund or for Fund Services. Fund Services
may record any transfer of Share Certificates which it
reasonably believes in good faith to have been duly
authorized, or may refuse to record any transfer of Share
Certificates if, in good faith, it reasonably deems such
refusal necessary in order to avoid any liability on the
part of either the Fund or Fund Services.
SECTION 12. Fund Services shall notify the Fund of
any request or demand for the inspection of the Fund's share
records. Fund Services shall abide by the Fund's
7
<PAGE>
instructions for granting or denying the inspection;
provided, however, Fund Services may grant the inspection
without such instructions if it is advised by its counsel
that failure to do so will result in liability to Fund
Services.
SECTION 13. Fund Services shall observe the
following procedures in handling funds received:
(a) Upon receipt at the office designated by the
Fund of any check or other order drawn or endorsed to the
Fund or otherwise identified as being for the account of the
Fund, and, in the case of a new account, accompanied by a
new account application or sufficient information to
establish an account as provided in the Prospectus, Fund
Services shall stamp the transmittal document accompanying
such check or other order with the name of the Fund and the
time and date of receipt and shall forthwith deposit the
proceeds thereof in the custodial account of the Fund.
(b) In the event that any check or other order for
the purchase of Shares is returned unpaid for any reason,
Fund Services shall, in the absence of other instructions
from the Fund, advise the Fund of the returned check and
prepare such documents and information as may be necessary
to cancel promptly any Shares purchased on the basis of such
returned check and any accumulated income dividends and
capital gains distributions paid on such Shares.
8
<PAGE>
(c) As soon as possible after 4:00 p.m., Eastern
time or at such other times as the Fund may specify in
Written or Oral Instructions for any Series (the "Valuation
Time") on each Business Day Fund Services shall obtain from
the Fund's Adviser a quotation (on which it may conclusively
rely) of the net asset value, determined as of the Valuation
Time on that day. On each Business Day Fund Services shall
use the net asset value(s) determined by the Fund's Adviser
to compute the number of Shares and fractional Shares to be
purchased and the aggregate purchase proceeds to be
deposited with the Custodian. As necessary but no more
frequently than daily (unless a more frequent basis is
agreed to by Fund Services), Fund Services shall place a
purchase order with the Custodian for the proper number of
Shares and fractional Shares to be purchased and promptly
thereafter shall send written confirmation of such purchase
to the Custodian and the Fund.
SECTION 14. Having made the calculations required
by SECTION 13, Fund Services shall thereupon pay the
Custodian the aggregate net asset value of the Shares
purchased. The aggregate number of Shares and fractional
Shares purchased shall then be issued daily and credited by
Fund Services to the Unissued Certificate Account. Fund
Services shall also credit each Shareholder's separate
account with the number of Shares purchased by such
9
<PAGE>
Shareholder. Fund Services shall mail written confirmation
of the purchase to each Shareholder or the Shareholder's
representative and to the Fund if requested. Each
confirmation shall indicate the prior Share balance, the new
Share balance, the Shares for which Stock Certificates are
outstanding (if any), the amount invested and the price paid
for the newly-purchased Shares.
SECTION 15. Prior to the Valuation Time on each
Business Day, as specified in accordance with SECTION 13,
Fund Services shall process all requests to redeem Shares
and, with respect to each Series, shall advise the Custodian
of (i) the total number of Shares available for redemption
and (ii) the number of Shares and fractional Shares
requested to be redeemed. Upon confirmation of the net
asset value by the Fund's Adviser, Fund Services shall
notify the Fund and the Custodian of the redemption, apply
the redemption proceeds in accordance with SECTION 16 and
the Prospectus, record the redemption in the stock registry
books, and debit the redeemed Shares from the Unissued
Certificates Account and the individual account of the
Shareholder.
In lieu of carrying out the redemption procedures
described in the preceding paragraph, Fund Services may, at
the request of the Fund, sell Shares to the Fund as
repurchases from Shareholders, provided that the sale price
10
<PAGE>
is not less than the applicable redemption price. The
redemption procedures shall then be appropriately modified.
SECTION 16. Fund Services will carry out the
following procedures with respect to Share redemptions:
(a) As to each request received by the Fund from
or on behalf of a Shareholder for the redemption of Shares,
and unless the right of redemption has been suspended as
contemplated by the Prospectus, Fund Services shall, within
seven days after receipt of such redemption request, either
(i) mail a check in the amount of the proceeds of such
redemption to the person designated by the Shareholder or
other person to receive such proceeds or, (ii) in the event
redemption proceeds are to be wired through the Federal
Reserve Wire System or by bank wire pursuant to procedures
described in the Prospectus, cause such proceeds to be wired
in Federal funds to the bank or trust company account
designated by the Shareholder to receive such proceeds.
Funds Services shall also prepare and send a confirmation of
such redemption to the Shareholder. Redemptions in kind
shall be made only in accordance with such Written
Instructions as Fund Services may receive from the Fund.
The requirements as to instruments of transfer and other
documentation, the determination of the appropriate
redemption price and the time of payment shall be as
provided in the Prospectus, subject to such additional
11
<PAGE>
requirements consistent therewith as may be established by
mutual agreement between the Fund and Fund Services. In the
case of a request for redemption that does not comply in all
respects with the requirements for redemption, Fund Services
shall promptly so notify the Shareholder and shall effect
such redemption at the price in effect at the time of
receipt of documents complying with such requirements. Fund
Services shall notify the Fund's Custodian and the Fund on
each Business Day of the amount of cash required to meet
payments made pursuant to the provisions of this paragraph
and thereupon the Fund shall instruct the Custodian to make
available to Fund Services in timely fashion sufficient
funds therefor.
(b) Procedures and standards for effecting and
accepting redemption orders from Shareholders by telephone
or by such check writing service as the Fund may institute
may be established by mutual agreement between Fund Services
and the Fund consistent with the Prospectus.
(c) For purposes of redemption of Shares that have
been purchased by check within fifteen (15) days prior to
receipt of the redemption request, the Fund shall provide
Fund Services with Written Instructions concerning the time
within which such requests may be honored.
(d) Fund Services shall process withdrawal orders
duly executed by Shareholders in accordance with the terms
12
<PAGE>
of any withdrawal plan instituted by the Fund and described
in the Prospectus. Payments upon such withdrawal orders and
redemptions of Shares held in withdrawal plan accounts in
connection with such payments shall be made at such times as
the Fund may determine in accordance with the Prospectus.
(e) The authority of Fund Services to perform its
responsibilities under SECTIONS 15 and 16 with respect to
the Shares of any Series shall be suspended if Fund Services
receives notice of the suspension of the determination of
the net asset value of the Series.
SECTION 17. Upon the declaration of each dividend
and each capital gains distribution by the Fund's Board of
Directors or Trustees, the Fund shall notify Fund Services
of the date of such declaration, the amount payable per
Share, the record date for determining the Shareholders
entitled to payment, the payment and the reinvestment date
price.
SECTION 18. Upon being advised by the Fund of the
declaration of any income dividend or capital gains
distribution on account of its Shares, Fund Services shall
compute and prepare for the Fund records crediting such
distributions to Shareholders. Fund Services shall, on or
before the payment date of any dividend or distribution,
notify the Fund and the Custodian of the estimated amount
required to pay any portion of a dividend or distribution
13
<PAGE>
which is payable in cash, and thereupon the Fund shall, on
or before the payment date of such dividend or distribution,
instruct the Custodian to make available to Fund Services
sufficient funds for the payment of such cash amount. Fund
Services will, on the designated payment date, reinvest all
dividends in additional shares and promptly mail to each
Shareholder at his address of record a statement showing the
number of full and fractional Shares (rounded to three
decimal places) then owned by the Shareholder and the net
asset value of such Shares; provided, however, that if a
Shareholder elects to receive dividends in cash, Fund
Services shall prepare a check in the appropriate amount and
mail it to the Shareholder at his address of record within
five (5) business days after the designated payment date, or
transmit the appropriate amount in Federal funds in
accordance with the Shareholder's agreement with the Fund.
SECTION 19. Fund Services shall prepare and
maintain for the Fund records showing for each Shareholder's
account the following:
A. The name, address and tax identification
number of the Shareholder;
B. The number of Shares of each Series held by
the Shareholder;
C. Historical information including dividends
paid and date and price for all transactions;
14
<PAGE>
D. Any stop or restraining order placed against
such account;
E. Information with respect to the withholding of
any portion of income dividends or capital gains
distributions as are required to be withheld under
applicable law;
F. Any dividend or distribution reinvestment
election, withdrawal plan application, and correspondence
relating to the current maintenance of the account;
G. The certificate numbers and denominations of
any Share Certificates issued to the Shareholder; and
H. Any additional information required by Fund
Services to perform the services contemplated by this
Agreement.
Fund Services agrees to make available upon request
by the Fund or the Fund's Adviser and to preserve for the
periods prescribed in Rule 31a-2 of the Investment Company
Act any records related to services provided under this
Agreement and required to be maintained by Rule 31a-1 of
that Act, including:
(i) Copies of the daily transaction register for each
Business Day of the Fund;
(ii) Copies of all dividend, distribution and
reinvestment blotters;
15
<PAGE>
(iii) Schedules of the quantities of Shares of each
Series distributed in each state for purposes of
any state's laws or regulations as specified in
Oral or Written Instructions given to Fund
Services from time to time by the Fund or its
agents; and
(iv) Such other information, including Shareholder
lists, and statistical information as may be
agreed upon from time to time by the Fund and Fund
Services.
SECTION 20. Fund Services shall maintain those
records necessary to enable the Fund to file, in a timely
manner, form N-SAR (Semi-Annual Report) or any successor
report required by the Investment Company Act or rules and
regulations thereunder.
SECTION 21. Fund Services shall cooperate with the
Fund's independent public accountants and shall take
reasonable action to make all necessary information
available to such accountants for the performance of their
duties.
SECTION 22. In addition to the services described
above, Fund Services will perform other services for the
Fund as may be mutually agreed upon in writing from time to
time, which may include preparing and filing Federal tax
forms with the Internal Revenue Service, and, subject to
16
<PAGE>
supervisory oversight by the Fund's Adviser, mailing Federal
tax information to Shareholders, mailing semi-annual
Shareholder reports, preparing the annual list of
Shareholders, mailing notices of Shareholders' meetings,
proxies and proxy statements and tabulating proxies. Fund
Services shall answer the inquiries of certain Shareholders
related to their share accounts and other correspondence
requiring an answer from the Fund. Fund Services shall
maintain dated copies of written communications from
Shareholders, and replies thereto.
SECTION 23. Nothing contained in this Agreement is
intended to or shall require Fund Services, in any capacity
hereunder, to perform any functions or duties on any day
other than a Business Day. Functions or duties normally
scheduled to be performed on any day which is not a Business
Day shall be performed on, and as of, the next Business Day,
unless otherwise required by law.
SECTION 24. For the services rendered by Fund
Services as described above, the Fund shall pay to Fund
Services an annualized fee at a rate to be mutually agreed
upon from time to time. Such fee shall be prorated for the
months in which this Agreement becomes effective or is
terminated. In addition, the Fund shall pay, or Fund
Services shall be reimbursed for, all out-of-pocket expenses
incurred in the performance of this Agreement, including but
17
<PAGE>
not limited to the cost of stationery, forms, supplies,
blank checks, stock certificates, proxies and proxy
solicitation and tabulation costs, all forms and statements
used by Fund Services in communicating with Shareholders of
the Fund or especially prepared for use in connection with
its services hereunder, specific software enhancements as
requested by the Fund, costs associated with maintaining
withholding accounts (including non-resident alien, Federal
government and state), postage, telephone, telegraph (or
similar electronic media) used in communicating with
Shareholders or their representatives, outside mailing
services, microfiche/microfilm, freight charges and off-site
record storage. It is agreed in this regard that Fund
Services, prior to ordering any form in such supply as it
estimates will be adequate for more than two years' use,
shall obtain the written consent of the Fund. All forms for
which Fund Services has received reimbursement from the Fund
shall be the property of the Fund.
SECTION 25. Fund Services shall not be liable for
any taxes, assessments or governmental charges that may be
levied or assessed on any basis whatsoever in connection
with the Fund or any Shareholder, excluding taxes assessed
against Fund Services for compensation received by it
hereunder.
18
<PAGE>
SECTION 26.
(a) Fund Services shall at all times act in good
faith and with reasonable care in performing the services to
be provided by it under this Agreement, but shall not be
liable for any loss or damage unless such loss or damage is
caused by the negligence, bad faith or willful misconduct of
Fund Services or its employees or agents.
(b) The Fund shall indemnify and hold Fund
Services harmless from all loss, cost, damage and expense,
including reasonable expenses for counsel, incurred by it
resulting from any claim, demand, action or suit in
connection with the performance of its duties hereunder, or
as a result of acting upon any instruction reasonably
believed by it to have been properly given by a duly
authorized officer of the Fund, or upon any information,
data, records or documents provided to Fund Services or its
agents by computer tape, telex, CRT data entry or other
similar means authorized by the Fund; provided that this
indemnification shall not apply to actions or omissions of
Fund Services in cases of its own bad faith, willful
misconduct or negligence, and provided further that if in
any case the Fund may be asked to indemnify or hold Fund
Services harmless pursuant to this Section, the Fund shall
have been fully and promptly advised by Fund Services of all
material facts concerning the situation in question. The
19
<PAGE>
Fund shall have the option to defend Fund Services against
any claim which may be the subject of this indemnification,
and in the event that the Fund so elects it will so notify
Fund Services, and thereupon the Fund shall retain competent
counsel to undertake defense of the claim, and Fund Services
shall in such situations incur no further legal or other
expenses for which it may seek indemnification under this
paragraph. Fund Services shall in no case confess any claim
or make any compromise in any case in which the Fund may be
asked to indemnify Fund Services except with the Fund's
prior written consent.
Without limiting the foregoing:
(i) Fund Services may rely upon the advice of the Fund
or counsel to the Fund or Fund Services, and upon statements of
accountants, brokers and other persons believed by Fund Services
in good faith to be expert in the matters upon which they are
consulted. Fund Services shall not be liable for any action
taken in good faith reliance upon such advice or statements;
(ii) Fund Services shall not be liable for any action
reasonably taken in good faith reliance upon any Written
Instructions or certified copy of any resolution of the Fund's
Board of Directors or Trustees, including a Written Instruction
authorizing Fund Services to make payment upon redemption of
Shares without a signature guarantee; provided, however, that
upon receipt of a Written Instruction countermanding a prior
20
<PAGE>
Instruction that has not been fully executed by Fund Services,
Fund Services shall verify the content of the second Instruction
and honor it, to the extent possible. Fund Services may rely
upon the genuineness of any such document, or copy thereof,
reasonably believed by Fund Services in good faith to have been
validly executed;
(iii) Fund Services may rely, and shall be protected by
the Fund in acting, upon any signature, instruction, request,
letter of transmittal, certificate, opinion of counsel,
statement, instrument, report, notice, consent, order, or other
paper or document reasonably believed by it in good faith to be
genuine and to have been signed or presented by the purchaser,
the Fund or other proper party or parties; and
(d) Fund Services may, with the consent of the
Fund, subcontract the performance of any portion of any
service to be provided hereunder, including with respect to
any Shareholder or group of Shareholders, to any agent of
Fund Services and may reimburse the agent for the services
it performs at such rates as Fund Services may determine;
provided that no such reimbursement will increase the amount
payable by the Fund pursuant to this Agreement; and provided
further, that Fund Services shall remain ultimately
responsible as transfer agent to the Fund.
SECTION 27. The Fund shall deliver or cause to be
delivered over to Fund Services (i) an accurate list of
21
<PAGE>
Shareholders, showing each Shareholder's address of record,
number of Shares of each Series owned and whether such
Shares are represented by outstanding Share Certificates or
by non-certificated Share accounts and (ii) all Shareholder
records, files, and other materials necessary or appropriate
for proper performance of the functions assumed by the under
this Agreement (collectively referred to as the
"Materials"). The Fund shall indemnify Fund Services and
hold it harmless from any and all expenses, damages, claims,
suits, liabilities, actions, demands and losses arising out
of or in connection with any error, omission, inaccuracy or
other deficiency of such Materials, or out of the failure of
the Fund to provide any portion of the Materials or to
provide any information in the Fund's possession needed by
Fund Services to knowledgeably perform its functions;
provided the Fund shall have no obligation to indemnify Fund
Services or hold it harmless with respect to any expenses,
damages, claims, suits, liabilities, actions, demands or
losses caused directly or indirectly by acts or omissions of
Fund Services or the Fund's Adviser.
SECTION 28. This Agreement may be amended from
time to time by a written supplemental agreement executed by
the Fund and Fund Services and without notice to or approval
of the Shareholders; provided this Agreement may not be
amended in any manner which would substantially increase the
22
<PAGE>
Fund's obligations hereunder unless the amendment is first
approved by the Fund's Board of Directors or Trustees,
including a majority of the Directors or Trustees who are
not a party to this Agreement or interested persons of any
such party, at a meeting called for such purpose, and
thereafter is approved by the Fund's Shareholders if such
approval is required under the Investment Company Act or the
rules and regulations thereunder. The parties hereto may
adopt procedures as may be appropriate or practical under
the circumstances, and Fund Services may conclusively rely
on the determination of the Fund that any procedure that has
been approved by the Fund does not conflict with or violate
any requirement of its Articles of Incorporation or
Declaration of Trust, By-Laws or Prospectus, or any rule,
regulation or requirement of any regulatory body.
SECTION 29. The Fund shall file with Fund Services
a certified copy of each operative resolution of its Board
of Directors or Trustees authorizing the execution of
Written Instructions or the transmittal of Oral Instructions
and setting forth authentic signatures of all signatories
authorized to sign on behalf of the Fund and specifying the
person or persons authorized to give Oral Instructions on
behalf of the Fund. Such resolution shall constitute
conclusive evidence of the authority of the person or
persons designated therein to act and shall be considered in
23
<PAGE>
full force and effect, with Fund Services fully protected in
acting in reliance therein, until Fund Services receives a
certified copy of a replacement resolution adding or
deleting a person or persons authorized to give Written or
Oral Instructions. If the officer certifying the resolution
is authorized to give Oral Instructions, the certification
shall also be signed by a second officer of the Fund.
SECTION 30. The terms, as defined in this Section,
whenever used in this Agreement or in any amendment or
supplement hereto, shall have the meanings specified below,
insofar as the context will allow.
(a) Business Day: Any day on which the Fund is
open for business as described in the Prospectus.
(b) Custodian: The term Custodian shall mean the
Fund's current custodian or any successor custodian acting
as such for the Fund.
(c) Fund's Adviser: The term Fund's Adviser shall
mean Alliance Capital Management L.P. or any successor
thereto who acts as the investment adviser or manager of the
Fund.
(d) Oral Instructions: The term Oral Instructions
shall mean an authorization, instruction, approval, item or
set of data, or information of any kind transmitted to Fund
Services in person or by telephone, vocal telegram or other
electronic means, by a person or persons reasonably believed
24
<PAGE>
in good faith by Fund Services to be a person or persons
authorized by a resolution of the Board of Directors or
Trustees of the Fund to give Oral Instructions on behalf of
the Fund. Each Oral Instruction shall specify whether it is
applicable to the entire Fund or a specific Series of the
Fund.
(e) Prospectus: The term Prospectus shall mean a
prospectus and related statement of additional information
forming part of a currently effective registration statement
under the Investment Company Act and, as used with the
respect to Shares or Shares of a Series, shall mean the
prospectuses and related statements of additional
information covering the Shares or Shares of the Series.
(f) Securities: The term Securities shall mean
bonds, debentures, notes, stocks, shares, evidences of
indebtedness, and other securities and investments from time
to time owned by the Fund.
(g) Series: The term Series shall mean any series
of Shares of the common stock of the Fund that the Fund may
establish from time to time.
(h) Share Certificates: The term Share
Certificates shall mean the stock certificates or
certificates representing shares of beneficial interest for
the Shares.
25
<PAGE>
(i) Shareholders: The term Shareholders shall
mean the registered owners from time to time of the Shares,
as reflected on the stock registry records of the Fund.
(j) Written Instructions: The term Written
Instructions shall mean an authorization, instruction,
approval, item or set of data, or information of any kind
transmitted to Fund Services in original writing containing
original signatures, or a copy of such document transmitted
by telecopy, including transmission of such signature, or
other mechanical or documentary means, at the request of a
person or persons reasonably believed in good faith by Fund
Services to be a person or persons authorized by a
resolution of the Board of Directors or Trustees of the Fund
to give Written Instruction shall specify whether it is
applicable to the entire Fund or a specific Series of the
Fund.
SECTION 31. Fund Services shall not be liable for
the loss of all or part of any record maintained or
preserved by it pursuant to this Agreement or for any delays
or errors occurring by reason of circumstances beyond its
control, including but not limited to acts of civil or
military authorities, national emergencies, fire, flood or
catastrophe, acts of God, insurrection, war, riot, or
failure of transportation, communication or power supply,
except to the extent that Fund Services shall have failed to
26
<PAGE>
use its best efforts to minimize the likelihood of
occurrence of such circumstances or to mitigate any loss or
damage to the Fund caused by such circumstances.
SECTION 32. The Fund may give Fund Services sixty
(60) days and Fund Services may give the Fund (90) days
written notice of the termination of this Agreement, such
termination to take effect at the time specified in the
notice. Upon notice of termination, the Fund shall use its
best efforts to obtain a successor transfer agent. If a
successor transfer agent is not appointed within ninety (90)
days after the date of the notice of termination, the Board
of Directors or Trustees of the Fund shall, by resolution,
designate the Fund as its own transfer agent. Upon receipt
of written notice from the Fund of the appointment of the
successor transfer agent and upon receipt of Oral or Written
Instructions Fund Services shall, upon request of the Fund
and the successor transfer agent and upon payment of Fund
Services reasonable charges and disbursements, promptly
transfer to the successor transfer agent the original or
copies of all books and records maintained by Fund Services
hereunder and cooperate with, and provide reasonable
assistance to, the successor transfer agent in the
establishment of the books and records necessary to carry
out its responsibilities hereunder.
27
<PAGE>
SECTION 33. Any notice or other communication
required by or permitted to be given in connection with this
Agreement shall be in writing, and shall be delivered in
person or sent by first-class mail, postage prepaid, to the
respective parties.
Notice to the Fund shall be given as follows until
further notice:
1345 Avenue of the Americas
New York, New York 10105
Attention: Secretary
Notice to Fund Services shall be given as follows
until further notice:
Alliance Fund Services, Inc.
500 Plaza Drive
Secaucus, New Jersey 07094
SECTION 34. The Fund represents and warrants to
Fund Services that the execution and delivery of this
Agreement by the undersigned officer of the Fund has been
duly and validly authorized by resolution of the Fund's
Board of Directors or Trustees. Fund Services represents
and warrants to the Fund that the execution and delivery of
this Agreement by the undersigned officer of Fund Services
has also been duly and validly authorized.
SECTION 35. This Agreement may be executed in more
than one counterpart, each of which shall be deemed to be an
original, and shall become effective on the last date of
signature below unless otherwise agreed by the parties.
28
<PAGE>
Unless sooner terminated pursuant to SECTION 32, this
Agreement will continue until and will continue
in effect thereafter for successive 12 month periods only if
such continuance is specifically approved at least annually
by the Board of Directors or Trustees or by a vote of the
stockholders of the Fund and in either case by a majority of
the Directors or Trustees who are not parties to this
Agreement or interested persons of any such party, at a
meeting called for the purpose of voting on this Agreement.
SECTION 36. This Agreement shall extend to and
shall bind the parties hereto and their respective
successors and assigns; provided, however, that this
Agreement shall not be assignable by the Fund without the
written consent of Fund Services or by Fund Services without
the written consent of the Fund, authorized or approved by a
resolution of the Fund's Board of Directors or Trustees.
Notwithstanding the foregoing, either party may assign this
Agreement without the consent of the other party so long as
the assignee is an affiliate, parent or subsidiary of the
assigning party and is qualified to act under the Investment
Company Act, as amended from time to time.
SECTION 38. This Agreement shall be governed by
the laws of the State of New Jersey.
29
<PAGE>
WITNESS the following signatures:
THE ALLIANCE FUND, INC.
By: /s/ David H. Dievler
______________________________
/s/ David H. Dievler
Title: Vice President
ALLIANCE FUND SERVICES, INC.
By: /s/ Robert H. Joseph, Jr.
______________________________
Robert H. Joseph Jr.
Title: Vice President
30
00250430.AO0
<PAGE>
Consent of Independent Accountants
We hereby consent to the use in the Statement of
Additional Information constituting part of this Post-Effective
Amendment No. 121 to the registration statement on Form N-1A (the
"Registration Statement") of our report dated January 9, 1998,
relating to the financial statements and financial highlights of
The Alliance Fund, Inc. (the "Fund"), which appears in such
Statement of Additional Information, and to the incorporation by
reference of our report into the Prospectus relating to Class A,
Class B and Class C shares of the Fund (the "Retail Prospectus")
and the Prospectus relating to the Advisor Class shares of the
Fund (the "Advisor Class Prospectus") which constitute part of
this Registration Statement. We also consent to the references
to us under the headings "Shareholder Services-Statements and
Reports" and "General Information-Independent Accountants" in
such Statement of Additional Information and to the references to
us under the headings "Financial Highlights" in the Retail
Prospectus and "Conversion Feature- Description of Class A
Shares" in the Advisor Class Prospectus.
/s/ Price Waterhouse LLP
PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, New York 10036
January 23, 1998
00250430.AO1
<PAGE>
[ARTICLE] 6
[CIK] 0000019614
[NAME] THE ALLIANCE FUND, INC.
[SERIES]
[NUMBER] 001
[NAME] THE ALLIANCE FUND, INC.
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] NOV-30-1997
[PERIOD-START] DEC-01-1996
[PERIOD-END] NOV-30-1997
[INVESTMENTS-AT-COST] 1,074,272,294
[INVESTMENTS-AT-VALUE] 1,306,036,559
[RECEIVABLES] 13,001,622
[ASSETS-OTHER] 9,991
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 1,319,048,172
[PAYABLE-FOR-SECURITIES] 14,953,142
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 3,053,028
[TOTAL-LIABILITIES] 18,006,170
[SENIOR-EQUITY] 1,501,821
[PAID-IN-CAPITAL-COMMON] 761,648,965
[SHARES-COMMON-STOCK] 138,170,619
[SHARES-COMMON-PRIOR] 129,564,086
[ACCUMULATED-NII-CURRENT] 0
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] 306,126,951
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 231,764,265
[NET-ASSETS] 1,301,042,002
[DIVIDEND-INCOME] 7,821,041
[INTEREST-INCOME] 677,101
[OTHER-INCOME] 0
[EXPENSES-NET] (12,436,416)
[NET-INVESTMENT-INCOME] (3,938,274)
[REALIZED-GAINS-CURRENT] 312,544,907
[APPREC-INCREASE-CURRENT] 4,067,927
[NET-CHANGE-FROM-OPS] 312,674,560
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] (2,584,179)
[DISTRIBUTIONS-OF-GAINS] (136,315,610)
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 7,200,343
[NUMBER-OF-SHARES-REDEEMED] (15,229,370)
[SHARES-REINVESTED] 16,635,560
[NET-CHANGE-IN-ASSETS] 242,542,551
<ACCUUMULATED-NII-PRIOR> 2,417,164
[ACCUMULATED-GAINS-PRIOR] 142,481,734
[OVERDISTRIB-NII-PRIOR] 0
<PAGE>
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 7,856,000
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 12,436,000
[AVERAGE-NET-ASSETS] 1,077,865,553
[PER-SHARE-NAV-BEGIN] 7.71
[PER-SHARE-NII] (0.02)
[PER-SHARE-GAIN-APPREC] 2.09
[PER-SHARE-DIVIDEND] (0.02)
[PER-SHARE-DISTRIBUTIONS] (1.06)
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 8.70
[EXPENSE-RATIO] 1.03
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
00250430.A05
<PAGE>
[ARTICLE] 6
[CIK] 0000019614
[NAME] THE ALLIANCE FUND, INC.
[SERIES]
<NUM13ER> 002
[NAME] THE ALLIANCE FUND, INC.
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] NOV-30-1997
[PERIOD-START] DEC-01-1996
[PERIOD-END] NOV-30-1997
[INVESTMENTS-AT-COST] 1,074,272,294
[INVESTMENTS-AT-VALUE] 1,306,036,559
[RECEIVABLES] 13,001,G22
[ASSETS-OTHER] 9,991
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 1,319,048,172
[PAYABLE-FOR-SECURITIES] 14,953,142
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 3,053,028
[TOTAL-LIABILITIES] 18,006,170
[SENIOR-EQUITY] 1,501,821
[PAID-IN-CAPITAL-COMMON] 761,648,965
[SHARES-COMMON-STOCK] 8,543,581
[SHARES-COMMON-PRIOR] 6,003,649
[ACCUMULATED-NII-CURRENT] 0
<OVERDISTRIBUTTON-NII> 0
[ACCUMULATED-NET-GAINS] 306,126,951
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 231,764,265
[NET-ASSETS] 1,301,042,002
[DIVIDEND-INCOME] 7,821,041
[INTEREST-INCOME] 677,101
[OTHER-INCOME] 0
[EXPENSES-NET] (12,436,416)
[NET-INVESTMENT-INCOME] (3,938,274)
[REALIZED-GAINS-CURRENT] 312,544,907
[APPREC-INCREASE-CURRENT] 4,067,927
[NET-CHANGE-FROM-OPS] 312,674,560
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 0
[DISTRIBUTIONS-OF-GAINS] (6,355,169)
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 4,424,115
[NUMBER-OF-SHARES-REDEEMED] (2,749,475)
[SHARES-REINVESTED] 865,292
[NET-CHANGE-IN-ASSETS] 242,542,551
[ACCUMULATED-NII-PRIOR] 2,417,164
[ACCUMULATED-GAINS-PRIOR] 142,481,734
[OVERDISTRIB-NII-PRIOR] 0
<PAGE>
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 7,856,000
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 12,436,000
[AVERAGE-NET-ASSETS] 54,230,236
[PER-SHARE-NAV-BEGIN] 7.40
[PER-SHARE-NII] (0.08)
[PER-SHARE-GAIN-APPREC] 1.99
[PER-SHARE-DIVIDEND] 0
[PER-SHARE-DISTRIBUTIONS] (1.06)
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 8.25
[EXPENSE-RATIO] 1.85
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
00250430.AO6
<PAGE>
[ARTICLE] 6
[CIK] 0000019614
[NAME] THE ALLIANCE FUND, INC.
[SERIES]
[NUMBER] 003
[NAME] THE ALLIANCE FUND, INC.
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] NOV-30-1997
[PERIOD-START] DEC-01-1996
[PERIOD-END] NOV-30-1997
[INVESTMENTS-AT-COST] 1,074,272,294
[INVESTMENTS-AT-VALUE] 1,306,036,559
[RECEIVABLES] 13,001,G22
[ASSETS-OTHER] 9,991
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 1,319,048,172
[PAYABLE-FOR-SECURITIES] 14,953,142
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 3,053,028
[TOTAL-LIABILITIES] 18,006,170
[SENIOR-EQUITY] 1,501,821
[PAID-IN-CAPITAL-COMMON] 761,648,965
[SHARES-COMMON-STOCK] 2,286,041
[SHARES-COMMON-PRIOR] 1,876,023
[ACCUMULATED-NII-CURRENT] 0
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] 306,126,951
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 231,764,265
[NET-ASSETS] 1,301,042,002
[DIVIDEND-INCOME] 7,821,041
[INTEREST-INCOME] 677,101
[OTHER-INCOME] 0
[EXPENSES-NET] (12,436,416)
[NET-INVESTMENT-INCOME] (3,938,274)
[REALIZED-GAINS-CURRENT] 312,544,907
[APPREC-INCREASE-CURRENT] 4,067,927
[NET-CHANGE-FROM-OPS] 312,674,560
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 0
[DISTRIBUTIONS-OF-GAINS] (1,970,589)
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 2,634,424
[NUMBER-OF-SHARES-REDEEMED] (2,472,942)
[SHARES-REINVESTED] 248,536
[NET-CHANGE-IN-ASSETS] 242,542,551
[ACCUMULATED-NII-PRIOR] 2,417,164
[ACCUMULATED-GAINS-PRIOR] 142,481,734
[OVERDISTRIB-NII-PRIOR] 0
<PAGE>
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 7,856,000
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 12,436,000
[AVERAGE-NET-ASSETS] 16,226,584
[PER-SHARE-NAV-BEGIN] 7.41
[PER-SHARE-NII] (0.08)
[PER-SHARE-GAIN-APPREC] 1.99
[PER-SHARE-DIVIDEND] 0
[PER-SHARE-DISTRIBUTIONS] (1.06)
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 8.26
[EXPENSE-RATIO] 1.83
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
00250430.AO7
<PAGE>
[ARTICLE] 6
[CIK] 0000019614
[NAME] THE ALLIANCE FUND, INC.
[SERIES]
[NUMBER] 004
[NAME] THE ALLIANCE FUND, INC.
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] NOV-30-1997
[PERIOD-START] DEC-01-1996
[PERIOD-END] NOV-30-1997
[INVESTMENTS-AT-COST] 1,074,272,294
[INVESTMENTS-AT-VALUE] 1,306,036,559
[RECEIVABLES] 13,001,622
[ASSETS-OTHER] 9,991
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 1,319,048,172
[PAYABLE-FOR-SECURITIES] 14,953,142
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 3,053,028
[TOTAL-LIABILITIES] 18,006,170
[SENIOR-EQUITY] 1,501,821
[PAID-IN-CAPITAL-COMMON] 761,648,965
[SHARES-COMMON-STOCK] 1,181,832
[SHARES-COMMON-PRIOR] 140,391
[ACCUMULATED-NII-CURRENT] 0
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] 306,126,951
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 231,764,265
[NET-ASSETS] 1,301,042,002
[DIVIDEND-INCOME] 7,821,041
[INTEREST-INCOME] 677,101
[OTHER-INCOME] 0
[EXPENSES-NET] (12,436,416)
[NET-INVESTMENT-INCOME] (3,938,274)
[REALIZED-GAINS-CURRENT] 312,544,907
[APPREC-INCREASE-CURRENT] 4,067,927
[NET-CHANGE-FROM-OPS] 312,674,560
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] (4,914)
[DISTRIBUTIONS-OF-GAINS] (148,119)
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 2,621,487
[NUMBER-OF-SHARES-REDEEMED] (1,602,903)
[SHARES-REINVESTED] 22,857
[NET-CHANGE-IN-ASSETS] 242,542,551
[ACCUMULATED-NII-PRIOR] 2,417,164
[ACCUMULATED-GAINS-PRIOR] 142,481,734
[OVERDISTRIB-NII-PRIOR] 0
<PAGE>
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 7,856,000
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 12,436,000
[AVERAGE-NET-ASSETS] 7,278,903
[PER-SHARE-NAV-BEGIN] 7.71
[PER-SHARE-NII] (0.02)
[PER-SHARE-GAIN-APPREC] 2.10
[PER-SHARE-DIVIDEND] (0.04)
[PER-SHARE-DISTRIBUTIONS] (1.06)
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 8.69
[EXPENSE-RATIO] .83
<AVG-DEBT-OUTSTANDING 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
00250430.AO8
