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This is filed pursuant to Rule 497(c). File Nos. 2-70427 and
811-03131.
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[LOGO](R)
ALLIANCE TECHNOLOGY FUND, 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 1, 1995
(as amended as of July 24, 1995)
________________________________________________________________
This Statement of Additional Information is not a prospectus and
should be read in conjunction with the current Prospectus for the
Fund. Copies of such Prospectus may be obtained by contacting
Alliance Fund Services, Inc. at the address or telephone numbers
listed above.
TABLE OF CONTENTS
Page
Description of the Fund............................ 2
Management of the Fund ............................ 11
Expenses of the Fund .............................. 19
Purchase of Shares ................................ 22
Redemption and Repurchase of Shares ............... 37
Shareholder Services .............................. 41
Net Asset Value ................................... 47
Dividends, Distributions and Taxes ................ 48
Portfolio Transactions ............................ 51
General Information ............................... 53
Financial Statements and Auditor's Report ......... 58
(R): This registered service mark used under license from the
owner, Alliance Capital Management L.P.
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________________________________________________________________
DESCRIPTION OF THE FUND
________________________________________________________________
Except as otherwise indicated, the investment policies of
Alliance Technology Fund, Inc. (the "Fund") are not "fundamental
policies" and may, therefore, be changed by the Board of
Directors without a shareholder vote. However, the Fund will not
change its investment policies without contemporaneous written
notice to its shareholders. The Fund's investment objective, as
well as the Fund's 80% investment policy described below, may not
be changed without shareholder approval. There can be, of
course, no assurance that the Fund will achieve its investment
objective.
Investment Objective and Policies
The investment objective of the Fund is to emphasize growth
of capital, and investments will be made based upon their
potential for capital appreciation. Therefore, current income
will be incidental to the objective of capital growth. However,
subject to the limitations referred to under "Options" below, the
Fund may seek to earn income through the writing of listed call
options. In seeking to achieve its objective, the Fund will
invest primarily in securities of companies which are expected to
benefit from technological advances and improvements (i.e.,
companies which use technology extensively in the development of
new or improved products or processes). The Fund will have at
least 80% of its assets invested in the securities of such
companies except when the Fund assumes a temporary defensive
position. There obviously can be no assurance that the Fund's
investment objective will be achieved, and the nature of the
Fund's investment objective and policies may involve a somewhat
greater degree of risk than would be present in a more
conservative investment approach.
How the Fund Pursues Its Objective
The Fund expects under normal circumstances to have
substantially all of its assets invested in equity securities
(common stocks or securities convertible into common stocks or
rights or warrants to subscribe for or purchase common stocks).
When business or financial conditions warrant, the Fund may take
a defensive position and invest without limit in investment grade
debt securities or preferred stocks or hold its assets in cash.
The Fund at times may also invest in debt securities and
preferred stocks offering an opportunity for price appreciation
(e.g., convertible debt securities).
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Critical factors which will be considered in the selection of
securities will include the economic and political outlook, the
value of individual securities relative to other investment
alternatives, trends in the determinants of corporate profits,
and management capability and practices. Generally speaking,
disposal of a security will be based upon factors such as (i)
actual or potential deterioration of the issuer's earning power
which the Fund believes may adversely affect the price of its
securities, (ii) increases in the price level of the security or
of securities generally which the Fund believes are not fully
warranted by the issuer's earning power, and (iii) changes in the
relative opportunities offered by various securities.
Companies in which the Fund will invest include those whose
processes, products or services are anticipated by Alliance
Capital Management L.P., the Fund's investment adviser (the
"Investment Adviser"), to be significantly benefited by the
utilization or commercial application of scientific discoveries
or developments in such fields as, for example, aerospace,
aerodynamics, astrophysics, biochemistry, chemistry,
communications, computers, conservation, electricity, electronics
(including radio, television and other media), energy (including
development, production and service activities), geology, health
care, mechanical engineering, medicine, metallurgy, nuclear
physics, oceanography and plant physiology.
The Fund will endeavor to invest in companies where the
expected benefits to be derived from the utilization of
technology will significantly enhance the prospects of the
company as a whole (including, in the case of a conglomerate,
affiliated companies). The Fund's investment objective permits
the Fund to seek securities having potential for capital
appreciation in a variety of industries.
Certain of the companies in which the Fund invests may
allocate greater than usual amounts to research and product
development. The securities of such companies may experience
above-average price movements associated with the perceived
prospects of success of the research and development programs. In
addition, companies in which the Fund invests could be adversely
affected by lack of commercial acceptance of a new product or
products or by technological change and obsolescence.
Additional Investment Policies and Practices
Options. In seeking to attain its investment goal of capital
appreciation, the Fund may supplement customary investment
practices by writing and purchasing call options listed on one or
more national securities exchanges and purchasing listed put
options, including put options on market indices. Upon payment
of a premium, a put option gives the buyer of such option the
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right to deliver a specified number of shares of a stock to the
writer of the option on or before a fixed date, at a
predetermined price. A call option gives the purchaser of the
option, upon payment of a premium, the right to call upon the
writer to deliver a specified number of shares of a specified
stock on or before a fixed date, at a predetermined price,
usually the market price at the time the contract is negotiated.
The writing of call options will involve a potential loss of
opportunity to sell securities at higher prices. In exchange for
the premium received, the writer of a fully collateralized call
option assumes the full downside risk of the securities subject
to such option. In addition, the writer of the call gives up the
gain possibility of the stock protecting the call. Generally the
opportunity for profit from the writing of options is higher, and
consequently the risks are greater, when the stocks involved are
lower priced or volatile, or both. While an option that has been
written is in force, the maximum profit that may be derived from
the optioned stock is the premium less brokerage commissions and
fees. The actual return earned by the Fund from writing a call
option depends on factors such as the amount of the transaction
costs and whether or not the option is exercised. Option
premiums vary widely depending primarily on supply and demand.
Writing and purchasing options are highly specialized
activities and entail greater than ordinary investment risks. If
an option purchased by the Fund is not sold and is permitted to
expire without being exercised, its premium would be lost by the
Fund. When calls written by the Fund are exercised, the Fund
will be obligated to sell stocks below the current market price.
The Fund will not write a call unless the Fund at all times
during the option period owns either (a) the optioned securities,
or securities convertible into or carrying rights to acquire the
optioned securities, or (b) an offsetting call option on the same
securities. It is the Fund's policy not to write a call option
if the premium to be received by the Fund in connection with such
option would not produce an annualized return of at least 15% of
the then current market value of the securities subject to option
(without giving effect to commissions, stock transfer taxes and
other expenses of the Fund which are deducted from premium
receipts). The actual return earned by the Fund from writing a
call depends on factors such as the amount of the transaction
costs and whether or not the option is exercised. Calls written
by the Fund will ordinarily be sold either on a national
securities exchange or through put and call dealers, most, if not
all, of whom are members of a national securities exchange on
which options are traded, and will in such cases be endorsed or
guaranteed by a member of a national securities exchange or
qualified broker-dealer, which may be Donaldson, Lufkin &
Jenrette Securities Corporation, an affiliate of the Investment
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Adviser. The endorsing or guaranteeing firm requires that the
option writer (in this case the Fund) maintain a margin account
containing either corresponding stock or other equity as required
by the endorsing or guaranteeing firm.
In purchasing a call option, the Fund would be in a position
to realize a gain if, during the option period, the price of the
security increased over the strike price by an amount in excess
of the premium paid and commissions payable on exercise. It
would realize a loss if the price of the security declined or
remained the same or did not increase over the strike price
during the period by more than the amount of the premium and
commissions payable on exercise. By purchasing a put option, the
Fund would be in a position to realize a gain if, during the
option period, the price of the security declined below the
strike price by an amount in excess of the premium paid and
commissions payable on exercise. It would realize a loss if the
price of the security increased or remained the same or did not
decrease below the strike price during that period by more than
the amount of the premium and commissions payable on exercise. If
a put or call option purchased by the Fund were permitted to
expire without being sold or exercised, its premium would
represent a realized loss to the Fund.
If the Fund desires to sell a particular security from its
portfolio on which it has written an option, the Fund seeks to
effect a "closing purchase transaction" prior to, or concurrently
with, the sale of the security. A closing purchase transaction
is a transaction in which an investor who is obligated as a
writer of an option terminates his obligation by purchasing an
option of the same series as the option previously written. (Such
a purchase does not result in the ownership of an option.) The
Fund may enter into a closing purchase transaction to realize a
profit on a previously written option or to enable the Fund to
write another option on the underlying security with either a
different exercise price or expiration date or both. The Fund
realizes a profit or loss from a closing purchase transaction if
the cost of the transaction is less or more than the premium
received from the writing of the option. The Fund may not,
however, effect a closing purchase transaction with respect to an
option after it has been notified of the exercise of such option.
The Fund may dispose of an option which it has purchased by
entering into a "closing sale transaction" with the writer of the
option. A closing sale transaction terminates the obligation of
the writer of the option and does not result in the ownership of
an option. The Fund realizes a profit or loss from a closing
sale transaction if the premium received from the transaction is
more than or less than the cost of the option.
5
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The 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. The Fund will not sell any call option if
such sale would result in more than 10% of the Fund's assets
being committed to call options written by the Fund which, at the
time of sale by the Fund, have a remaining term of more than 100
days. The aggregate cost of all outstanding options purchased
and held by the Fund will at no time exceed 10% of the Fund's
total assets.
Options on Market Indices. Options on securities indices are
similar to options 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.
Through the purchase of listed index options, the Fund could
achieve many of the same objectives as through the use of options
on individual securities. Price movements in the Fund's
portfolio securities probably will not correlate perfectly with
movements in the level of the index and, therefore, the Fund
would bear a risk of loss on index options purchased by it if
favorable price movements of the hedged portfolio securities do
not equal or exceed losses on the options or if adverse price
movements of the hedged portfolio securities are greater than
gains realized from the options.
Warrants. The Fund may invest up to 10% of its total assets
in warrants which entitle the holder to buy equity securities at
a specific price for a specific period of time. 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 securities which may be
purchased nor do they represent any rights in the assets of the
issuing company. Also, the value of a warrant does not
necessarily change with the value of the underlying securities
and a warrant ceases to have value if it is not exercised prior
to the expiration date.
Foreign Securities. Investing in securities of non-United
States companies which are generally denominated in foreign
currencies involves certain considerations comprising both risk
and opportunity not typically associated with investing in United
States companies. These considerations include changes in
exchange rates and exchange control regulation, political and
social instability, expropriation, imposition of foreign taxes,
6
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less liquid markets and less available information than are
generally the case in the United States, higher transaction
costs, less government supervision of exchanges and brokers and
issuers, difficulty in enforcing contractual obligations, lack of
uniform accounting and auditing standards and greater price
volatility. Additional risks may be incurred in investing in
particular countries. The Fund will not purchase a foreign
security if such purchase at the time thereof would cause 10% or
more of the value of the Fund's total assets to be invested in
foreign securities.
Restricted Securities. The Fund may invest in restricted
securities and in other assets having no ready market if such
purchases at the time thereof would not cause more than 10% of
the value of the Fund's net assets to be invested in all such
restricted or not readily marketable assets. Restricted
securities may be sold only in privately negotiated transactions,
in a public offering with respect to which a registration
statement is in effect under the Securities Act of 1933 (the
"1933 Act") or pursuant to Rules 144 or 144A promulgated under
such Act. Where registration is required, the Fund may be
obligated to pay all or part of the registration expense, and a
considerable period may elapse between the time of the decision
to sell and the time the Fund may be permitted to sell a security
under an effective registration statement. If during such a
period adverse market conditions were to develop, the Fund might
obtain a less favorable price than prevailed when it decided to
sell. Restricted securities will be valued in such manner as the
Board of Directors of the Fund, in good faith, deems appropriate
to reflect their fair market value.
Lending of Portfolio Securities. The Fund may seek to
increase income by lending portfolio securities. Under present
regulatory policies, such loans are required to be secured
continuously by collateral consisting of cash, cash equivalents
or United States Treasury Bills maintained in an amount at least
equal to the market value of the securities loaned. The Fund has
the right to call such a loan and obtain the securities loaned at
any time on five days' notice. During the existence of a loan,
the Fund will receive the income earned on investment of the
collateral. The aggregate value of the securities loaned by the
Fund may not exceed 30% of the value of the Fund's total assets.
Portfolio Turnover. The investment activities described
above are likely to result in the Fund engaging in a considerable
amount of trading of securities held for less than one year.
Accordingly, it can be expected that the Fund will have a higher
turnover rate than might be expected from investment companies
which invest substantially all of their funds on a long-term
basis. Correspondingly heavier brokerage commission expenses can
be expected to be borne by the Fund. Management anticipates that
7
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the Fund's annual rate of portfolio turnover will not be in
excess of 100% in future years. A 100% annual turnover rate
would occur, for example, if all the stocks in the Fund's
portfolio were replaced once in a period of one year. The annual
portfolio turnover rates of securities of the Fund for the fiscal
period ended November 30, 1994 and for the fiscal year ended
December 31, 1993 were 55% and 64%, respectively.
Within this basic framework, the policy of the Fund is to
invest in any company and industry and in any type of security
which are believed to offer possibilities for capital
appreciation. Investments may be made in well-known and
established companies as well as in new and unseasoned companies.
Since securities fluctuate in value due to general economic
conditions, corporate earnings and many other factors, the shares
of the Fund will increase or decrease in value accordingly, and
there can be no assurance that the Fund will achieve its
investment goal or be successful.
Fundamental Investment Policies
The following restrictions may not be changed without
approval of a majority of the outstanding voting securities of
the Fund, which means the vote of (i) 67% or more of the shares
represented at a meeting at which more than 50% of the
outstanding shares are represented or (ii) more than 50% of the
outstanding shares, whichever is less.
To maintain portfolio diversification and reduce investment
risk, as a matter of fundamental policy, the 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) securities issued or guaranteed as to
principal or interest by the U.S. Government or its
agencies or instrumentalities, 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 immediately after and as a result
of such purchase (a) the value of the holdings of the
Fund in the securities of such issuer exceeds 25% of the
value of the Fund's total assets, or (b) the Fund owns
more than 25% of the outstanding securities of any one
class of securities of such issuer;
8
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(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;
(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 at the time thereof would cause 10% or
more of the value of the total assets of the Fund to be
invested in the securities of such issuer or issuers;
(v) make short sales of securities or maintain a
short position or write put options;
(vi) mortgage, pledge or hypothecate or otherwise
encumber its assets, except as may be necessary in
connection with permissible borrowings mentioned in
investment restriction (xiv) listed below;
(vii) purchase the securities of any other
investment company or investment trust, except when such
purchase is part of a merger, consolidation or
acquisition of assets;
(viii) purchase or sell real property (including
limited partnership interests but excluding readily
marketable interests in real estate investment trusts or
readily marketable securities of companies which invest
in real estate) commodities or commodity contracts;
(ix) purchase participations or other direct
interests in oil, gas, or other mineral exploration or
development programs;
(x) participate on a joint or joint and several
basis in any securities trading account;
(xi) invest in companies for the purpose of
exercising control;
(xii) purchase securities on margin, but it may
obtain such short-term credits from banks as may be
necessary for the clearance of purchases and sales of
securities;
(xiii) make loans of its assets to any other person,
which shall not be considered as including the purchase
of portion of an issue of publicly-distributed debt
securities; except that the Fund may purchase non-
publicly distributed securities subject to the
limitations applicable to restricted or not readily
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marketable securities and except for the lending of
portfolio securities as discussed under "Description of
The Funds" in the Prospectus;
(xiv) borrow money except for the short-term credits
from banks referred to in paragraph (xii) above and
except for temporary or emergency purposes and then only
from banks and in an aggregate amount not exceeding 5%
of the value of its total assets at the time any
borrowing is made. Money borrowed by the Fund will be
repaid before the Fund makes any additional investments;
(xv) act as an underwriter of securities of other
issuers, except that the Fund may acquire restricted or
not readily marketable securities under circumstances
where, if sold, the Fund might be deemed to be an
underwriter for purposes of the Securities Act of 1933
(the Fund will not invest more than 10% of its net
assets in aggregate in restricted securities and not
readily marketable securities); and
(xvi) purchase or retain the securities of any
issuer if, to the knowledge of the Fund's management,
those officers and directors of the Fund, and those
employees of the Investment Adviser, who each owns
beneficially more than one-half of 1% of the outstanding
securities of such issuer together own more than 5% of
the securities of such issuer.
Whenever any investment policy or restriction states a
minimum or maximum percentage of the Fund's assets which may be
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 this percentage limitation. In the event that the
aggregate of restricted and not readily marketable securities
exceeds 10% of the Fund's net assets, the management of the Fund
will consider whether action should be taken to reduce the
percentage of such securities.
The Fund is also subject to other restrictions under the
Investment Company Act of 1940, as amended (the "Act"), including
restrictions on transactions with affiliated persons. The
registration of the Fund under the Act, however, does not involve
any supervision by any Federal or other agency of the Fund's
management or investment practices or policies. In connection
with the qualification or registration of the Fund's shares for
sale under the securities laws of certain states, the Fund has
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agreed, in addition to the foregoing investment restrictions,
that it will not 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 at
the time thereof would cause more than 5% of the value of the
Fund's total assets to be invested in the securities of such
issuer or issuers. The Fund may not purchase or sell real
property (including limited partnership interests but excluding
readily marketable interests in real estate investment trusts, or
readily marketable securities of companies which invest in real
estate) commodities or commodity contracts. In addition, the
Fund may not invest in mineral leases.
________________________________________________________________
MANAGEMENT OF THE FUND
________________________________________________________________
Investment Adviser
Alliance Capital Management L.P., a New York Stock Exchange
listed company with principal offices at 1345 Avenue of the
Americas, New York, New York 10105, has been retained under an
investment advisory agreement (the "Advisory Agreement") to
provide investment advice and, in general, to conduct the
management and investment program of the Fund under the
supervision and control of the Fund's Board of Directors.
The Investment Adviser is a leading international investment
manager supervising client accounts with assets as of December
31, 1994 of over $121 billion (of which more than $37 billion
represented the assets of investment companies). The Investment
Adviser's clients are primarily major corporate employee benefit
funds, public employee retirement systems, investment companies,
foundations and endowment funds. The Investment Adviser and its
subsidiaries employ approximately 1,450 employees who operate out
of domestic offices and the overseas offices of subsidiaries in
Bombay, Istanbul, London, Sydney, Tokyo, Toronto, Bahrain,
Luxembourg and Singapore. The 50 registered investment companies
comprising 102 separate investment portfolios managed by the
Investment Adviser currently have more than one million
shareholders. As of December 31, 1994, the Investment Adviser
was retained as an investment manager by 29 of the FORTUNE 100
Companies.
Alliance Capital Management Corporation, the sole general
partner of, and the owner of a 1% general partnership interest
in, the Investment Adviser, is an indirect wholly-owned
subsidiary of The Equitable Life Assurance Society of the United
States ("Equitable"), one of the largest life insurance companies
in the United States and a wholly-owned subsidiary of The
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Equitable Companies Incorporated ("ECI"), a holding company
controlled by AXA, a French insurance holding company. As of
June 30, 1994, ACMC, Inc. and Equitable Capital Management
Corporation, each a wholly-owned direct or indirect subsidiary of
Equitable, owned in the aggregate approximately 62% of the issued
and outstanding units representing assignments of beneficial
ownership of limited partnership interests in the Investment
Adviser ("Units"). As of June 30, 1994, approximately 28% and
10% of the Units were owned by the public and employees of the
Investment Adviser and its subsidiaries, respectively, including
employees of the Investment Adviser who serve as Directors of the
Fund, calculated including as outstanding Units subject to
options exercisable by employees within 60 days of June 30, 1994.
AXA owns 49% of the outstanding voting shares of common stock
of ECI. AXA is part of a group of companies (the "AXA Group")
that is the second largest insurance group in France (measured by
gross premiums written worldwide) and one of the largest
insurance groups in Europe. Principally engaged in property and
casualty insurance and life insurance in Europe and elsewhere in
the world, the AXA Group is also involved in real estate
operations and certain other financial services, including mutual
fund management, lease financing services and brokerage services.
Based on information provided by AXA, as of June 30, 1994, 42.7%
of the voting shares (representing 54.7% of the voting power) of
AXA were owned by Midi Participations, a French corporation that
is a holding company. The voting shares of Midi Participations
are in turn owned 60% by Finaxa, a French corporation that is a
holding company, and 40% by subsidiaries of Assicurazioni
Generali S.p.A., an Italian corporation ("Generali") (one of
which, Belgica Insurance Holding S.A., a Belgian corporation,
owned 34.2%). As of June 30, 1994, 61.5% of the voting shares
(representing 70.4% of the voting power) of Finaxa were owned by
five French mutual insurance companies (the "Mutuelles AXA") (one
of which, AXA Assurances I.A.R.D. Mutuelle, owned 31.1% of the
voting shares (representing 44.7% of the voting power)), and
26.3% of the voting shares (representing 19.1% of the voting
power) of Finaxa were owned by Compagnie Financiere de Paribas, a
French financial institution engaged in banking and related
activities. Including the shares owned by Midi Participations, as
of June 30, 1994, the Mutuelles AXA directly or indirectly owned
51.7% of the voting shares (representing 65.4% of the voting
power) of AXA. Acting as a group, the Mutuelles AXA control AXA,
Midi Participations and Finaxa. The Mutuelles AXA have
approximately 1.5 million policyholders.
The Investment Adviser provides office space, investment
advisory, administrative and clerical services, and order
placement facilities for the Fund and pays all compensation of
Directors and officers of the Fund who are affiliated persons of
the Investment Adviser.
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Under its Advisory Agreement, the Fund pays a quarterly fee
to the Investment Adviser on the first business day of January,
April, July and October equal to 1/4 of 1% (approximately 1% on
an annual basis) of the aggregate net asset value of the Fund at
the end of the previous quarter. Such advisory fee is higher
than that paid by most other investment companies, although the
Investment Adviser believes the fee is comparable to those paid
by other open-end investment companies of similar size and
investment orientation.
The Investment Adviser is, under the Advisory Agreement,
responsible for any expenses incurred by the Fund in promoting
the sale of Fund shares (other than the portion of the
promotional expenses borne by the Fund in accordance with an
effective plan pursuant to Rule 12b-1 under the 1940 Act, and the
costs of printing and mailing Fund prospectuses and other reports
to shareholders and all expenses and fees related to proxy
solicitations and registrations and filings with the Securities
and Exchange Commission and with state regulatory authorities).
The Fund has, under the Advisory Agreement, assumed the
obligation for payment of all of its other expenses. As to the
obtaining of services other than those specifically provided to
the Fund by the Investment Adviser, the Fund may employ its own
personnel. For such services, it also may utilize personnel
employed by the Investment Adviser or its affiliates and, in such
event, the services will be provided to the Fund at cost and the
payments therefor must be specifically approved by the Fund's
Board of Directors. The Fund paid to the Investment Adviser a
total of $143,023 in respect of such services during the fiscal
period ended November 30, 1994.
The Advisory Agreement provides that the Investment Adviser
will reimburse the Fund for its expenses (exclusive of interest,
taxes, brokerage, distribution services fees pursuant to a Rule
12b-1 plan and other expenditures which are capitalized in
accordance with generally accepted accounting principles, and
extraordinary expenses) which in any year exceed the limits
prescribed by any state in which the Fund's shares are qualified
for sale. The Fund may not qualify its shares for sale in every
state. The Fund believes that presently the most restrictive
expense ratio limitations imposed by any state in which the Fund
has qualified its shares for sale is 2.5% of the first $30
million of the Fund's average net assets, 2.0% of the next $70
million of its average net assets and 1.5% of its average net
assets in excess of $100 million. To determine whether payment
is due the Fund, the expenses of the Fund are annualized on a
monthly basis. Payment of the advisory fee will be reduced or
postponed, if necessary, with any adjustments made after the end
of the year. The expense ratios for the Fund's Class B and Class
C shares are higher than the expense ratios of most other mutual
13
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funds but are comparable to the expense ratios of mutual funds
whose shares are similarly priced.
For the fiscal period ended November 30, 1994 and for the
fiscal years ended December 31, 1993 and 1992 the Investment
Adviser received from the Fund advisory fees of $1,794,378,
$1,746,156 and $1,594,876, respectively. For the fiscal period
ended November 30, 1994 and for the fiscal years ended December
31, 1993 and 1992 no reimbursements were required.
The Advisory Agreement became effective on July 22, 1992. The
Advisory Agreement was approved by the unanimous vote, cast in
person, of the Fund's Directors, including the Directors who are
not parties to the Advisory Agreement or interested persons as
defined in the Act of any such party, at a meeting called for
that purpose and held on October 22, 1991. At a meeting held on
June 11, 1992, a majority of the outstanding voting securities of
the Fund approved the Advisory Agreement.
The Advisory Agreement continues in effect for successive
twelve month periods (computed from each January 1), provided
that such continuance is specifically approved at least annually
by the Directors of the Fund 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
Advisory Agreement or interested persons as defined in the Act of
any such party. Most recently, the continuance of the Advisory
Agreement until December 31, 1995 was approved by a vote, cast in
person, of the Board of Directors, including a majority of the
Directors who are not parties to the Advisory Agreement or
interested persons of any such part, at their Regular Meeting
held on October 13, 1994.
The Advisory Agreement is terminable without penalty on 60
days' written notice by a vote of the majority of the Fund's
outstanding voting securities or by a vote of a majority of the
Fund's Directors, or by the Investment Adviser on 60 days'
written notice, and will automatically terminate in the event of
assignment. The Investment Adviser is not liable for any action
or inaction in regard to its obligations under the Advisory
Agreement as long as it does not exhibit willful misfeasance, bad
faith, gross negligence, or reckless disregard of its
obligations.
Certain other clients of the Investment Adviser may have
investment objectives and policies similar to those of the Fund.
The Investment Adviser 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
14
<PAGE>
purchased or the supply of securities being sold, there may be an
adverse effect on price or quantity. It is the policy of the
Investment Adviser to allocate advisory recommendations and the
placing of orders in a manner which is deemed equitable by the
Investment Adviser to the accounts involved, including the Fund.
When two or more of the clients of the Investment Adviser
(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, The Alliance Fund, Inc., 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 Government Reserves, Alliance Growth and Income Fund,
Inc., Alliance Income Builder Fund, Inc., Alliance International
Fund, Alliance Mortgage Securities Income Fund, Inc., Alliance
Mortgage Strategy Trust, 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 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., The Alliance Portfolios, Fiduciary Management Associates
and The Hudson River Trust, all registered open-end investment
companies; ACM Government Income Fund, Inc., ACM Government
Securities Fund, Inc., ACM Government Spectrum Fund, Inc., ACM
Government Opportunity Fund, Inc., ACM Managed Income Fund, Inc.,
ACM Managed Multi-Market Trust, Inc., ACM Managed Dollar Income
Fund, Inc., ACM Municipal Securities Income Fund, Inc., Alliance
All-Market Advantage Fund, Inc., Alliance Global Environment
Fund, Inc., Alliance World Dollar Government Fund, Inc., Alliance
World Dollar Government Fund II, Inc., Alliance Worldwide
Privatization Fund, Inc., The Austria Fund, Inc., The Korean
Investment Fund, Inc., The Southern African Fund and The Spain
Fund, Inc., all registered closed-end investment companies; and
Alliance Global Bond Fund, SICAV, Alliance Global Investments-
Global Growth Trends Portfolio, American Income Portfolio,
Developing Regional Markets Portfolio, Alliance Global Leisure
Fund, American Income Portfolio, Short Maturity Dollar Portfolio,
Alliance International Health Care Fund, SICAV, Alliance
International Technology Fund, SICAV, Alliance Worldwide Income
Fund, Alliance Australia Short Duration Mortgage Trust; Alliance
Short Duration Mortgage Fund, India Liberalisation Fund, SICAV,
Alliance New Zealand Short Duration Mortgage Trust, Bancomer
15
<PAGE>
Alliance Mexican Peso Trust, Alliance American Fund, the Turkish
Growth Fund and The Spanish Smaller Companies Fund, all foreign
investment companies.
Directors and Officers
The Directors and officers of the Fund, their ages and their
principal occupations during the past five years are set forth
below. Certain of the Directors and Officers are trustees,
directors or officers of other registered investment companies
sponsored by the Investment Adviser. 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*, 49, Chairman of the Board and President of
the Fund, is the President and the Chief Operating Officer and a
Director of Alliance Capital Management Corporation ("ACMC")**
with which he has been associated since prior to 1990.
ROBERT C. ALEXANDER, 52, is President of Alexander &
Associates, Management Consultants, since prior to 1990. His
address is 38 East 29th Street, New York, New York, 10016.
DAVID H. DIEVLER, 65, was formerly a Senior Vice President of
ACMC with which he had been associated since prior to 1990. He is
currently an independent consultant. His address is P.O. Box
167, Spring Lake, New Jersey 07762.
CHARLES H. FERGUSON, 39, is an Independent Consultant, and
since 1990, Senior Technology Adviser to Tucker Anthony
Incorporated. Until June 1992, he was a Postdoctoral Research
Associate for the M.I.T. Center for Technology, Policy and
Industrial Development. His address is 30-36 Bay State Road,
Cambridge, Massachusetts, 02138.
WILLIAM H. FOULK, JR., 62, was formerly Senior Manager of
Barrett Associates, Inc., a registered investment adviser, with
which he had been associated since prior to 1990. His address is
2 Hekma Road, Greenwich, CT 06831.
_________________________
* "Interested person" of the Fund as defined in the Act.
** For purposes of this Statement of Additional Information,
ACMC refers to Alliance Capital Management Corporation, the sole
general partner of the Investment Adviser, and to the predecessor
general partner of the Investment Adviser of the same name.
16
<PAGE>
D. JAMES GUZY, 58, is Chairman of the Board of NTX
Communications Corporation (communications systems) with which he
has been associated since prior to 1990. He is also a director
of Intel Corporation (semi-conductors), Cirrus Logic Corporation
(semi-conductors), Novellus Corporation (semi-conductor
equipment) and the New York Venture Fund, Venture Income Plus,
Venture MUNI Plus and the Retirement Planning Funds of America
(registered investment companies). His address is 1340 Arbor
Road, Menlo Park, California, 94025.
RICHARD HERMON-TAYLOR, 53, is Vice President of Symmetrix,
Inc. (business consulting) since 1994. Prior to 1994, he was
Chairman and Chief Executive Officer of Tonometrics, Inc.
(medical device manufacturer). Prior to February 1990, he was
President and co-founder of BioScience International, Inc.
(biotechnology). He is also a director of Harley-Davidson, Inc.
(manufacturer of motorcycles and commercial and recreational
vehicles) since 1986, Marine Optical, Inc. (manufacturer and
distributor of eyeglass frames) since 1990 and Galileo Electro-
Optics Corporation, Inc. (manufacturer of fiber-optic and
electro-optic components and systems) since 1993. His address is
33 River Ridge, Sudbury, Massachusetts, 01776.
ELLIOT STEIN, JR., 44, is Chairman of the Board of Caribbean
International News Corporation (newspaper publishing), Chairman
of the Board of Hunter Publishing Limited Partnership (trade
magazines), and General Partner of Television Station Partners
(network television affiliates), each of which he has been
associated with since prior to 1990. He is a member of the Board
of Directors of ACX Trading, Inc. (hay exporting) since 1989,
Horizon Music, Inc. (music equipment manufacturing) since 1992
and Miracle Recreation Corporation (playground equipment
manufacturing) since 1993. He is also Managing Director of
Commonwealth Capital Partners, L.P. (equity fund) since 1989. His
address is 245 Park Avenue, New York, New York, 10167.
MARSHALL C. TURNER, JR., 53, is general partner and co-
founder of Taylor & Turner Associates, Ltd. (venture capital
partnerships). He is also a director of CogniSeis Development
Corporation, Image Data Corporation and Romanco International,
Inc. His address is 270 Madrona Avenue, Belvedere, California,
94920.
Officers
PETER ANASTOS, Senior Vice President, 52, is a Senior Vice
President of ACMC with which he has been associated since prior
to 1990.
17
<PAGE>
DANIEL V. PANKER, Vice President, 55, is a Senior Vice
President of ACMC with which he has been associated since prior
to 1990.
GERALD T. MALONE, Vice President, 40, is a Vice President of
ACMC with which he has been associated since 1992. Prior thereto
he was a technology research analyst at College Retirement
Equities Fund.
MARK D. GERSTEN, Treasurer and Chief Financial Officer, 44,
is a Senior Vice President of Alliance Fund Services, Inc. with
which he has been associated since prior to 1990.
PATRICK J. FARRELL, Controller, 35, is a Vice President of
Alliance Fund Services, Inc. with which he has been associated
since prior to 1990.
JOSEPH J. MANTINEO, Assistant Controller, 35, is a Vice
President of Alliance Fund Services, Inc. with which he has been
associated since prior to 1990.
EDMUND P. BERGAN, JR., Secretary, 44, is a Senior Vice
President and General Counsel of Alliance Fund Distributors, Inc.
with which he has been associated since prior to 1990.
EMILIE D. WRAPP, Assistant Secretary, 39, is Special Counsel
of ACMC with which she has been associated since prior to 1990.
The Fund does not pay any fees to, or reimburse expenses of,
its Directors who are considered "interested persons" of the
Fund. The aggregate compensation paid by the Fund to each of the
Directors during its fiscal period ended November 30, 1994, and
the aggregate compensation paid to each of the Directors during
calendar year 1994 by all of the registered investment companies
to which the Adviser provides investment advisory services
(collectively, the "Alliance Fund Complex"), are set forth below.
John D. Carifa, David H. Dievler and William H. Foulk, Jr. are
directors or trustees of one or more other registered investment
companies in the Alliance Fund Complex.
18
<PAGE>
<TABLE>
<CAPTION>
Total
Pension or Compensation
Retirement Estimated from the
Benefits Annual Alliance
Name of Aggregate Accrued As Benefits Fund Complex,
Director Compensation Part of Fund upon Including
of the Fund from the Fund Expenses Retirement the Fund
___________ _____________ ____________ __________ _____________
<S> <C> <C> <C> <C>
David H. Dievler $0 $-0- $-0- $0
Robert C. Alexander $11,250 $-0- $-0- $ 11,250
John D. Carifa $0 $-0- $-0- $0
Charles H. Ferguson $ 7,500 $-0- $-0- $ 7,500
William H. Foulk, Jr. $11,400 $-0- $-0- $141,500
D. James Guzy $11,250 $-0- $-0- $ 11,250
Richard Hermon-Taylor $11,250 $-0- $-0- $ 11,250
Elliot Stein, Jr. $ 5,000 $-0- $-0- $ 5,000
Marshall C. Turner, Jr. $11,250 $-0- $-0- $ 11,250
</TABLE>
As of January 3, 1995, the Directors and officers of the Fund
as a group owned less than 1% of the 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 Fund to directly or indirectly pay expenses associated
with the distribution of its 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 under the Act (the "Rule 12b-1
Plan").
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, in the case of Class C shares, without
the assessment of a contingent deferred sales charge, and at the
same time to permit the Principal Underwriter to compensate
19
<PAGE>
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 the distribution services fee on the Class C
shares, are the same as those of the initial sales charge (or
contingent deferred sales charge, when applicable) and
distribution services fee with respect to the Class A shares in
that in each case the sales charge and/or distribution services
fee provide for the financing of the distribution 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 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 Act) are committed to the
discretion of such disinterested Directors then in office.
The Agreement became effective on July 22, 1992 and was
amended as of April 30, 1993 to permit the distribution of two
additional classes of shares, Class B shares and Class C shares.
The amendment to the Agreement was approved by the unanimous
vote, cast in person, of the disinterested Directors, at a
meeting called for that purpose held on February 23, 1993, and by
the initial holder of each of the Class B and Class C shares of
the Fund on February 23, 1993.
The Investment Adviser may from time to time and from its own
funds or such other resources as may be permitted by rules of the
Securities and Exchange Commission make payments for distribution
services to the Principal Underwriter; the later may in turn pay
part or all of such compensation to brokers or other persons for
their distribution assistance.
During the Fund's fiscal period ended November 30, 1994, the
Fund paid distribution services fees for expenditures under the
Agreement to the Principal Underwriter with respect to Class A in
amounts aggregating $408,075, which constituted .30 of 1% of the
Fund's Class A shares average daily net assets during the period.
Of the $408,075 paid by the Fund and the Investment Adviser under
the Agreement, $27,079 was spent on advertising, $22,906 on the
printing and mailing of prospectuses for persons other than
current shareholders, $244,270 for compensation to broker-dealers
(including $77,982 to the Fund's Principal Underwriter), $17,293
for compensation to sales personnel and $96,527 was spent on due
diligence, travel, entertainment, occupancy, communications,
taxes, depreciation and other promotional expenses.
During the period May 3, 1993 (commencement of distribution)
through November 30, 1994 distribution services fees for
20
<PAGE>
expenditures payable to the Principal Underwriter amounted to,
with respect to Class B shares, $69,839 which constituted 1.00%
of the Fund's Class B shares average daily net assets during such
fiscal period, and the Investment Adviser made payments from its
own resources as described above aggregating $587,618. Of the
$657,457 paid by the Fund and the Investment Adviser under the
Plan with respect to Class B shares, $35,565 was spent on
advertising, $13,611 was spent on the printing and mailing of
prospectuses for persons other than current shareholders,
$491,859 for compensation to broker-dealers, $14,359 for
compensation paid to wholesalers of the Principal Underwriter in
respect of sales of shares of the Fund and $102,063 was spent on
the printing of sales literature, travel, entertainment, due
diligence and other promotional expenses.
During the period May 3, 1993 (commencement of distribution)
through November 30, 1994, distribution services fees for
expenditures payable to the Principal Underwriter amounted to,
with respect to Class C shares, $29,582 which constituted 1.00%
of the Fund's Class C shares average daily net assets during such
fiscal period, and the Investment Adviser made payments from its
own resources aggregating $158,372. Of the $187,954 paid by the
Fund and the Investment Adviser under the Plan with respect to
Class C shares, $21,747 was spent on advertising, $6,917 was
spent on the printing and mailing of prospectuses for persons
other than current shareholders, $84,699 for compensation to
broker-dealers, $11,212 for compensation paid to wholesalers of
the Principal Underwriter in respect of sales of shares of the
Fund and $63,379 was spent on the printing of sales literature,
travel, entertainment, due diligence and other promotional
expenses.
The Agreement will continue in effect for successive twelve-
month periods (computed from each October 1) with respect to each
class, 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 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
December 31, 1995 was approved by a vote, cast in person, of the
Board of Directors, including a majority of the Directors who are
not "interested persons", as defined in the 1940 Act, at their
Regular Meeting held on October 13, 1994.
In the event that the Agreement is terminated or not
continued with respect to the Class A shares, Class B shares or
21
<PAGE>
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 vote of the Board of 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. The Agreement may not be amended in order to increase
materially the costs that a particular class may bear pursuant to
the Agreement without the approval of a majority of the holders
of the outstanding voting shares of the class 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 disinterested Directors, or (b) by the
Principal Underwriter. To terminate the Agreement, any party
must give the other parties 60 days' written notice; to terminate
the Agreement only, the Fund need not give 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 Investment Adviser, receives a transfer agency
fee per account holder of each of the Class A, Class B and Class
C shares, plus reimbursement for out-of-pocket expenses. The
transfer agency fee with respect to the Class B shares is higher
than the transfer agency fee with respect to the Class A shares
or the Class C shares reflecting the additional costs associated
with the Class B contingent deferred sales charge. For the
fiscal period ended November 30, 1994, the Fund paid Alliance
Fund Services, Inc. $138,081 for transfer agency services.
________________________________________________________________
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."
22
<PAGE>
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 (the "initial sales charge alternative"),
with a contingent deferred sales charge (the "deferred sales
charge alternative"), or without any initial or contingent
deferred sales charge (the "asset-based sales charge
alternative"), as described below. Shares of the Fund are
offered on a continuous basis 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"), or (iii) the
Principal Underwriter. The minimum for initial investments is
$250; subsequent investments (other than reinvestments of
dividends and capital gains distributions in shares) must be in
the minimum amount of $50. As described under "Shareholder
Services," the Fund offers an automatic investment program and a
403(b)(7) retirement plan which permit investments of $25 or
more. The subscriber may use the Subscription Application found
in the Prospectus for his or her initial investment. Sales
personnel of selected dealers and agents distributing the Fund's
shares may receive differing compensation for selling Class A,
Class B or Class C shares.
Investors may purchase shares of the Fund in the United
States either through selected dealers or agents or directly
through the Principal Underwriter. Shares may also be sold in
foreign countries where permissible. 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 most purchases of Class A
shares, a sales charge which will vary depending on the purchase
alternative chosen by the investor and the amount of the
purchase, as shown in the table below under "Initial Sales Charge
Alternative--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. New York time) by dividing the value of the
Fund's total assets, less its liabilities, by the total number of
its shares then outstanding. The respective per share net asset
23
<PAGE>
values of the Class A, Class B and Class C 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 value of the Class A
shares as a result of the daily expense accruals of the
distribution and transfer agency fees applicable with respect to
the Class B and Class C shares. Even under those circumstances,
the per share net asset values of the three classes eventually
will tend to converge immediately after the payment of dividends,
which will differ by approximately the amount of the expense
accrual differential among the classes. A Fund business day is
any weekday, exclusive of national holidays on which the Exchange
is closed and Good Friday. For purposes of this computation, the
securities in the Fund's portfolio 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 Directors believe would accurately reflect fair market value.
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
or agents, the applicable public offering price will be the net
asset value as so determined, but only if the selected dealer
oragent 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.
New York time). The selected dealer or agent is responsible for
transmitting such orders by 5:00 p.m. If the selected dealer or
agent fails to do so, the investor's right to that day's closing
price must be settled between the investor and the selected
dealer or agent. If the selected dealer or agent 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 "Literature" telephone number shown on the cover of
this Statement of Additional Information. 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
24
<PAGE>
Association ("NACHA"). If a shareholder's telephone purchase
request is received before 3:00 p.m. New York time on a Fund
business day, the order to purchase shares is automatically
placed the following Fund business day, and the applicable public
offering price will be the public offering price determined as of
the close of business on such following business day. Full and
fractional shares are credited to a subscriber's account in the
amount of his or her subscription. As a convenience to the
subscriber, and to avoid unnecessary expense to the Fund, stock
certificates representing shares of the Fund are not issued
except upon written request to the Fund by the shareholder or his
or her authorized selected dealer or agent. This facilitates
later redemption and relieves the shareholder of the
responsibility for and inconvenience of lost or stolen
certificates. No stock 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 amount paid to
dealers or agents, the Principal Underwriter from time to time
pays additional cash bonuses or other incentives to dealers or
agents, including 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,
such cash or other incentives may 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
otherincentives 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.
Alternative Purchase Arrangements
The Fund issues three classes of shares: Class A shares are
sold to investors choosing the initial sales charge alternative,
Class B shares are sold to investors choosing the deferred sales
charge alternative and Class C shares are sold to investors
choosing the asset-based sales charge alternative. The three
classes of 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 shares bear
25
<PAGE>
the expense of the deferred contingent sales charge, (ii) Class B
shares and Class C shares each bear the expenses of a higher
distribution services fee and in the case of Class B shares,
higher transfer agency costs, (iii) each class has exclusive
voting rights with respect to provisions of the Rule 12b-1 Plan
pursuant to which its distribution services fee is paid which
relates to a specific class and other matters for which separate
class voting is appropriate under applicable law, provided that,
if the Fund submits to a vote of both the Class A shareholders
and the Class B shareholders an amendment to the Rule 12b-1 Plan
that would materially increase the amount to be paid thereunder
with respect to the Class A shares, the Class A shareholders and
the Class B shareholders will vote separately by Class and (iv)
only the Class B shares are subject to a conversion feature. Each
class has different exchange privileges and certain different
shareholder service options available.
The alternative purchase arrangements 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 charges on Class B shares prior to
conversion, or the accumulated distribution services fee 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
ClassA 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. In
addition, the Principal Underwriter will reject any order for
more than $5,000,000 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, most
investors purchasing Class A shares would not have all their
funds invested initially and, therefore, would initially own
fewer shares. Investors not qualifying for reduced initial sales
charges who expect to maintain their investment for an extended
period of time might consider purchasing Class A shares because
the accumulated continuing distribution charges on Class B shares
or Class C shares may exceed the initial sales charge on Class A
shares during the life of the investment. Again, however, such
26
<PAGE>
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,
in the case of Class B shares, being subject to a contingent
deferred sales charge for a four-year period. For example, based
on current fees and expenses, an investor subject to the 4.25%
initial sales charge 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.
The Directors of the Fund have determined that currently no
conflict of interest exists between or among the Class A, Class B
and Class C shares. On an ongoing basis, the Directors of
theFund, pursuant to their fiduciary duties under the 1940 Act
and state laws, will seek to ensure that no such conflict arises.
During the Fund's fiscal period ended November 30, 1994 and
for the fiscal years ended December 31, 1993 and 1992, the
aggregate amount of underwriting commission payable with respect
to shares of the Fund were $483,141, $326,720 and $279,201,
respectively. Of that amount, the Principal Underwriter,
received the amounts of $20,381, $48,167 and $26,492,
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 fiscal period ended
November 30, 1994 and during the fiscal period from May 3, 1993
(commencement of distribution) through December 31, 1993 the
Principal Underwriter received $27,593 and $2,613 in contingent
deferred sales charges with respect to Class B shares.
27
<PAGE>
Initial Sales Charge Alternative--Class A Shares
The public offering price of Class A shares for purchasers
choosing the initial sales charge alternative is the net asset
value plus a sales charge, as set forth below.
Initial Sales Charge
Discount or
Commission
As % of to Dealers
As % of the or Agents
Net Public As % of
Amount of Amount Offering Offering
Purchase Invested Price Price
_________ ________ ________ __________
Less than
$100,000 . . . . 4.44% 4.25% 4.00%
$100,000 but
less than
250,000 . . . . 3.36 3.25 3.00
250,000 but
less than
500,000 . . . . 2.30 2.25 2.00
500,000 but
less than
1,000,000*. . . 1.78 1.75 1.50
____________________
*There is no initial sales charge on transactions of $1,000,000
or more.
With respect to purchases of $1,000,000 or more, Class A
shares redeemed within one year of purchase will be subject to a
contingent deferred sales charge equal to 1% of the lesser of the
cost of the shares being redeemed or their net asset value at the
time of redemption. Accordingly, no sales charge will be
imposedon 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, and such charge will be applied to
redemptions of shares by shareholders who hold both Class A and
Class B shares, as described below under "Deferred Sales Charge
Alternative--Class B Shares." 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
28
<PAGE>
sales of Class A shares, such as the payment 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 or agents, the Investment Adviser may, pursuant to the
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.
Shares issued pursuant to the automatic reinvestment of
income dividends or capital gains distributions are not subject
to any sales charges. 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. The Principal Underwriter may, however, 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 of 1933, as amended.
Set forth below is an example of the method of computing the
offering price of the Class A shares. The example assumes a
purchase of Class A shares of the Fund aggregating less than
$100,000 subject to the schedule of sales charges set forth above
at a price based upon the net asset value of Class A shares of
the Fund on November 30, 1994.
Net Asset Value per Class A
Share at November 30, 1994 $31.98
Per Share Sales Charge - 4.25%
of offering price (4.44% of
net asset value per share) $ 1.42
______
Class A Per Share Offering Price
to the Public $33.40
======
An investor choosing the initial sales charge alternative may
under certain circumstances be entitled to pay a reduced initial
sales charge or no initial sales charge but remain subject in
most cases to a contingent deferred sales charge. The
circumstances under which an investor may pay a reduced initial
sales charge or no initial sales charge are described below.
29
<PAGE>
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.
Alliance Bond Fund, Inc.
-Corporate Bond Portfolio
-U.S. Government Portfolio
Alliance Counterpoint Fund
Alliance Developing Markets Fund, Inc.
Alliance Global Dollar Government Fund, Inc.
Alliance Global Small Cap Fund, Inc.
Alliance Growth and Income Fund, Inc.
Alliance Income Builder Fund, Inc.
Alliance International Fund
Alliance Mortgage Securities Income Fund, Inc.
Alliance Mortgage Strategy Trust, 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
30
<PAGE>
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 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
Prospectuses for the Alliance Mutual Funds may be obtained
without charge by contacting Alliance Fund Services, Inc. at the
address or the "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 Class A, Class B and Class C
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
31
<PAGE>
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 initial 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 and/or
Class C 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 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 be necessary to invest
only 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% initial sales charge on the total amount being invested
(the initial 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
minimuminitial 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 initial sales
charge applicable to the shares actually purchased if the full
amount indicated is not purchased, and such escrowed shares will
32
<PAGE>
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 initial
sales charge will be adjusted for the entire amount purchased at
the end of the 13-month period. The difference in the initial
sales charge will be used to purchase additional shares of the
Fund subject to the rate of 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 initial sales
charge on a monthly basis during the 13-month period following
such a plan's initial purchase. The initial sales charge
applicable to such initial purchase of shares of the Fund will be
that normally applicable, under the schedule of the initial 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 current month's purchase
multiplied by the number of months (including the current month)
remaining in the 13-month period, and (ii) the total purchases
previously made during 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 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 such reinvestment
is made within 120 calendar days after the redemption
orrepurchase date. 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 tax purposes except
33
<PAGE>
that no loss will be recognized to the extent that the proceeds
are reinvested in shares of the Fund. The reinstatement
privilege may be used by the shareholder only once, irrespective
of the number of shares redeemed or repurchased, except that the
privilege may be used without limit in connection with
transactions whose sole purpose is to transfer a shareholder's
interest in the Fund to his or her individual retirement account
or other qualified retirement plan account. 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 any sales charge) and
without any contingent deferred sales charge to certain
categories of investors including: (i) investment advisory
clients of the Investment Adviser or its affiliates; (ii)
officers and present or former Directors of the Fund; present or
former directors and trustees of other investment companies
managed by the Investment Adviser; present or retired full-time
employees of the Investment Adviser; officers, directors and
present or retired full-time employees of ACMC, the Principal
Underwriter, Alliance Fund Services, Inc. and their affiliates;
officers, directors and present and full-time employees of
selected dealers or agents; or the spouse, sibling, direct
ancestor or direct descendant (collectively "relatives") of any
such person; or any trust, individual retirement account or
retirement plan account for the benefit of any such person or
relative; or the estate of any such person or relative, if such
shares are purchased for investment purposes (such shares may not
be resold except to the Fund); (iii) certain employee benefit
plans for employees of the Investment Adviser, the Principal
Underwriter, Alliance Fund Services, Inc. and their affiliates;
(iv) persons participating in a fee-based program, sponsored and
maintained by a registered broker-dealer and approved by the
Principal Underwriter, pursuant to which such persons pay an
asset-based fee to such broker-dealer, or its affiliate or agent,
for service in the nature of investment advisory or
administrative services; and (v) persons who establish to the
Principal Underwriter's satisfaction that they are investing in
the Fund, within such time period as may be designated by the
Principal Underwriter, proceeds of their redemption of shares of
such other registered investment companies as may be designated
from time to time by the Principal Underwriter.
Deferred Sales Charge Alternative--Class B Shares
Investors choosing the deferred sales charge alternative
purchase Class B shares at the public offering price equal to the
net asset value of the Class B shares on the date of purchase
without the imposition of a sales charge at the time of purchase.
34
<PAGE>
The Class B shares are sold without an initial sales charge so
that the Fund will receive the full amount of the investor's
purchase payment.
Proceeds from the contingent deferred sales charge on the
Class B shares are paid to the Principal Underwriter and are used
by the Principal Underwriter to defray the expenses of the
Principal Underwriter related to providing distribution-related
services to the Fund in connection with the sale of the Class B
shares, such as the payment of compensation to selected dealers
and agents for selling Class B shares. The combination of the
contingent deferred sales charge and the distribution services
fee enables the Fund to sell the Class B shares without a sales
charge being deducted at the time of purchase. The higher
distribution services fee incurred by Class B shares will cause
such shares to have a higher expense ratio and to pay lower
dividends than those related to Class A shares.
Contingent Deferred Sales Charge. Class B shares which 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 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.
35
<PAGE>
Contingent Deferred Sales Charge as a %
of Dollar Amount Subject to Charge
Shares purchased Shares purchased
before on or after
Year Since Purchase November 19, 1993 November 19, 1993
First 5.50% 4.00%
Second 4.50% 3.00%
Third 3.50% 2.00%
Fourth 2.50% 1.00%
Fifth 1.50% None
Sixth 0.50% None
In determining the contingent deferred sales charge
applicable to a redemption, it will be assumed, in the case of
Class B shares purchased on or after November 19, 1993, that the
redemption is first of any shares in the shareholder's Fund
account that are not subject to a contingent deferred sales
charge, second of Class B shares held for over three years and
third of Class B shares that are subject to a contingent deferred
sales charge held shortest during the one-year period during
which such shares are subject to the sales charge. When Class B
shares acquired in an exchange are redeemed, the applicable
contingent deferred sales charge and conversion schedules will be
the schedules that applied to Class B shares of the Alliance
Mutual Fund originally purchased by the shareholder at the time
of their purchase.
The contingent deferred sales charges on Class A and Class B
shares are 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 or (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.
Conversion Feature. At the end of the period ending eight
years after the end of the calendar month in which the
shareholder's purchase order was accepted, Class B shares will
automatically convert to Class A shares and will no longer be
subject to a higher distribution services fee. Such conversion
will be on the basis of the relative net asset values of the two
classes, without the imposition of any sales load, fee or
othercharge. The purpose of the conversion feature is to reduce
the distribution services fee paid by holders of Class B shares
36
<PAGE>
that have been outstanding long enough for the Principal
Underwriter to have been compensated for distribution expenses
incurred in the sale of such shares.
For purposes of conversion to Class A, Class B shares
purchased through the reinvestment of dividends and distributions
paid in respect of Class B shares in a shareholder's account will
be considered to be held in a separate sub-account. Each time
any Class B shares in the shareholder's account (other than those
in the sub-account) convert to Class A, an equal pro-rata portion
of the Class B shares in the sub-account will also convert to
Class A.
The conversion of Class B shares to Class A shares is subject
to the continuing availability of an opinion of counsel to the
effect that (i) the assessment of the higher distribution
services fee and transfer agency costs with respect to Class B
shares does not result in the Fund's dividends or distributions
constituting "preferential dividends" under the Code, and (ii)
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.
Asset-Based Sales Charge Alternative --Class C Shares
Investors choosing the asset-based sales charge alternative
purchase Class C shares at the public offering price equal to the
net asset value of the Class C shares on the date of purchase
without the imposition of a sales charge either at the time of
purchase or 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 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. Class C shares do not
convert to any other class of shares of the Fund and incur higher
distribution services fees than Class A shares, and will thus
have a higher expense ratio and pay correspondingly lower
dividends than Class A shares.
37
<PAGE>
________________________________________________________________
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."
Redemption
Subject only to the limitations described below, the Fund's
Articles of Incorporation require that the Fund redeem the shares
tendered to it, as described below, at a redemption price equal
to their net asset value as next computed following the receipt
of shares tendered for redemption in proper form. Except for any
contingent deferred sales charge which may be applicable to Class
A shares or Class B 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.
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 Securities and Exchange
Commission determines that trading thereon is restricted, or for
any period during which an emergency (as determined by the
Securities and Exchange 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 Securities and Exchange
Commission may by order permit for the protection of security
holders of the Fund.
Payment of the redemption price may 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 shares and Class B shares will
reflect the deduction of the contingent deferred sales charge, if
any. Payment (either in cash or in portfolio securities)
received by a shareholder upon redemption or repurchase of his or
her shares, assuming the shares constitute capital assets in his
or her hands, will result in long-term or short-term capital gain
(or loss) depending upon the shareholder's holding period and
basis in respect of the shares redeemed.
38
<PAGE>
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
institution that is an "eligible guarantor" as defined in Rule
17Ad-15 under the Securities Exchange Act of 1934, as amended.
Telephone Redemption By Electronic Funds Transfer. Requests
for redemption of shares for which no stock certificates have
been issued can also be made by telephone at (800) 221-5672 by a
shareholder who has completed the appropriate portion of the
Subscription Application or, in the case of an existing
shareholder, an "Autosell" application obtained from Alliance
Fund Services, Inc. A telephone redemption request must be for
at least $500 and may not exceed $100,000, and must be made
between 9:00 a.m. and 4:00 p.m. New York 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. Except as noted below, each
Fund shareholder is eligible to request redemption, once in any
30-day period, of Fund shares by telephone at (800) 221-5672
before 4:00 p.m. New York time on a Fund business day in an
amount not exceeding $25,000. Proceeds of such redemptions are
remitted by check to the shareholder's address of record.
Telephone redemption by check is not available with respect to
shares (i) for which certificates have been issued, (ii) held in
nominee or "street name" accounts, (iii) purchased within 15
calendar days prior to the redemption request, (iv) held by a
shareholder who has changed his or her address of record within
the preceding 30 calendar days or (v) held in any retirement plan
account. 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.
General. During periods of drastic economic or market
developments, such as the market break of October 1987, it is
possible that shareholders would have difficulty in reaching
Alliance Fund Services, Inc. by telephone (although no such
difficulty was apparent at any time in connection with the 1987
market break). If a shareholder were to experience such
difficulty, the shareholder should issue written instructions to
Alliance Fund Services, Inc. at the address shown on the cover of
this Statement of Additional Information. The Fund reserves the
right to suspend or terminate its telephone redemption service at
any time without notice. Neither the Fund nor the Investment
Adviser, the Principal Underwriter or Alliance Fund Services,
39
<PAGE>
Inc. will be responsible for the authenticity of
telephonerequests 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.
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
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.
Repurchase
The Fund may repurchase shares through the Principal
Underwriter 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 shares and
Class B 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. New York time). The
selected dealer or agent is responsible for transmitting the
request to the Principal Underwriter by 5:00 p.m. If the
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 shares and Class B
shares). Normally, if shares of the Fund are offered through a
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selected dealer or agent, the repurchase is settled by the
shareholder as an ordinary transaction with or through
theselected 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 at least 60 days
after at least 30 days' written notice to the shareholder
subsequent to such period. No contingent deferred sales charge
will be deducted from the proceeds of this redemption. In the
case of a redemption or repurchase of shares of 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 all three classes of shares of the Fund.
Automatic Investment Program
Investors may purchase shares of the Fund through an
automatic investment program utilizing "pre-authorized check"
drafts 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. Drafts may be
made in paper form or, if the investor's bank is a member of the
NACHA, in electronic form. If made in paper form, the draft is
normally made on the 20th day of each month, or the next business
day thereafter. If made 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
41
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cover of this Statement of Additional Information to establish an
automatic investment program.
Exchange Privilege
Class A shareholders of the Fund can exchange their Class A
shares for Class A shares of any other Alliance Mutual Fund that
offers Class A shares and for shares of Alliance World Income
Trust, Inc. without the payment of any sales or service charges.
For purposes of applying any applicable contingent deferred sales
charge upon the newly acquired Class A shares, the period of time
the Class A shares surrendered in the exchange have been held is
added to the period of time the newly acquired shares have been
held. Prospectuses for each Alliance Mutual Fund may be obtained
by contacting Alliance Fund Services, Inc. at the address shown
on the cover of this Statement of Additional Information or by
telephone at (800) 227-4618 or, in Illinois, (800) 227-4170.
Class B shareholders of the Fund can exchange their Class B
shares ("original Class B shares") for Class B shares of any
other Alliance Mutual Fund that offers Class B shares ("new Class
B shares") without the payment of any contingent deferred sales
or service charges. For purposes of computing both the time
remaining before the new Class B shares convert to Class A shares
of that fund and the contingent deferred sales charge payable
upon disposition of the new Class B shares, the period of time
for which the original Class B shares have been held is added to
the period of time for which the new Class B shares have been
held. After an exchange, new Class B shares will automatically
convert into Class A shares in accordance with the conversion
schedule applicable to the Alliance Mutual Fund Class B shares
originally purchased for cash, and when redemption occurs, the
contingent deferred sales charge schedule applicable to the Class
B shares originally purchased for cash is applied.
Class C shareholders of the Fund can exchange their Class C
shares for Class C shares of any other Alliance Mutual Funds that
offers Class C shares.
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
42
<PAGE>
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. Exchanges of shares of Alliance Mutual
Fundswill generally result in the realization of a capital gain
or loss for Federal income tax purposes.
Each Fund shareholder, and the shareholder's selected dealer
or agent, are authorized to make telephone requests for exchanges
unless Alliance Fund Services, Inc., receives written instruction
to the contrary from the shareholder, or the shareholder declines
the privilege by checking the appropriate box on the Subscription
Application found in the Prospectus. Such telephone requests
cannot be accepted with respect to shares then represented by
share 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 between 9:00
a.m. and 4:00 p.m., New York time, on a Fund business day as
defined above. Telephone requests for exchange received before
4:00 p.m. New York 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.
Neither the Alliance Mutual Funds nor the Investment Adviser,
the Principal Underwriter or Alliance Fund Services, Inc. will be
responsible for the authenticity of telephone requests for
exchanges that the Fund reasonably believes to be genuine. The
Fund will employ reasonable procedures in order to verify that
telephone requests for exchanges are genuine, including, among
others, recording such telephone instructions and causing written
confirmations of the resulting transactions to be sent to
shareholders. If the Fund did not employ such procedures, it
could be liable for losses arising from unauthorized or
43
<PAGE>
fraudulent telephone instructions. Selected dealers or agents
may charge a commission for handling telephone requests for
exchanges.
The exchange privilege is available only in states where
shares of the Alliance Mutual Funds being acquired may be legally
sold. Each Alliance Mutual Fund reserves the right, at any time
on 60 days' notice to its shareholders, to reject any order to
acquire its shares through exchange or otherwise to modify,
restrict or terminate the exchange privilege.
Retirement Plans
The 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
"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.
If the aggregate net asset value of shares of the Alliance
Mutual Funds held by a qualified plan investing through the
Alliance Premier Retirement Program reaches [$5] million on or
before December 15 in any year, all Class B or C shares of the
44
<PAGE>
Fund held by such plan can be exchanged, without any sales
charge, for Class A shares of such Fund.
Simplified Employee Pension Plan ("SEP"). Sole proprietors,
partnerships and corporations may sponsor a SEP under which they
make annual tax-deductible contributions to an IRA established by
each eligible employee within prescribed limits based on employee
compensation.
403(b)(7) Retirement Plan. Certain tax-exempt organizations
and public educational institutions may sponsor retirements 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 The Equitable Life Assurance Society of the United
States, 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 or Class C Fund account, a Class A, Class B
or Class C account(s) with one or more other Alliance Mutual
Funds may direct that income dividends and/or capital gains paid
on his or her Class A, Class B or Class C 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 "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.
45
<PAGE>
Systematic Withdrawal Plan
Any shareholder who owns or purchases shares of the Fund
having a current net asset value of at least $4,000 (for
quarterly or less frequent payments), $5,000 (for bi-monthly
payments) or $10,000 (for monthly payments) may establish a
systematic withdrawal plan under which the shareholder will
periodically receive a payment in a stated amount of not less
than $50 on a selected date. Systematic withdrawal plan
participants must elect to have their dividends and distributions
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 withdrawal payments will be subject
to any taxes applicable to redemptions. 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 shareholder 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.
For Class A shareholders, Class B shareholders that purchased
their Class B shares under a retirement plan and Class C
shareholders, 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 "Literature" telephone number shown on the cover of this
Statement of Additional Information.
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<PAGE>
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 auditors, Ernst & Young LLP, as well as a
monthly cumulative dividend statement and 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
________________________________________________________________
As previously discussed, for purposes of the net asset value
computation, readily marketable portfolio securities listed on
the Exchange are valued at the last sale price reflected on the
consolidated tape at the close of regular trading on the Exchange
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 by such method as the Board of Directors of the Fund
shall determine in good faith to reflect its fair market value.
Readily marketable securities not listed on the Exchange but
listed on other national securities exchanges or admitted to
trading on the National Association of Securities Dealers
Automated Quotations, Inc. ("NASDAQ") and National List ("List")
are valued in like manner. Portfolio securities traded on more
than one national securities exchange are valued at the last sale
price on the business day as of which such value is being
determined as reflected on the tape at the close of the exchange
representing the principal market for such securities.
Readily marketable securities traded only in the over-the-
counter market, excluding those admitted to trading on the List,
are valued at the mean of the current bid and asked prices as
reported by NASDAQ or, in the case of securities not quoted on
NASDAQ, the National Quotation Bureau or such other comparable
sources as the Board of Directors of the Fund deems appropriate
to reflect their fair market value.
United States Government obligations and other debt
instruments having 60 days or less remaining until maturity are
stated at amortized cost if their original maturity was 60 days
or less, or by amortizing their fair value as of the 61st day
47
<PAGE>
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). All other
assets of the Fund, including restricted and not readily
marketable securities, are valued in such manner as the Board of
Directors of the Fund in good faith deems appropriate to reflect
their fair market value.
The assets belonging to the Class A shares, the Class B
shares and the Class C shares will be invested together in a
single portfolio. The net asset value of each class will be
determined separately by subtracting the expenses and liabilities
allocated to that class from the assets belonging to that class
pursuant to an order issued by the Securities and Exchange
Commission.
________________________________________________________________
DIVIDENDS, DISTRIBUTIONS AND TAXES
________________________________________________________________
United States Federal Income Taxation of Dividends and
Distributions
General
The Fund intends for each taxable year to qualify to be taxed
as a "regulated investment company" under the Internal Revenue
Code of 1986, as amended (the "Code"). Such qualification
relieves the Fund of Federal income tax liability on the part of
its investment company taxable income and net realized capital
gains which it timely distributes to its shareholders. Such
qualification does not, of course, involve governmental
supervision of management or investment practices or policies.
Investors should consult their own counsel for a complete
understanding of the requirements the Fund must meet to qualify
to be taxed as a "regulated investment company."
The information set forth in the Prospectus and the following
discussion relate solely to the significant United States Federal
income taxes on dividends and distributions by the Fund and
assumes that the Fund qualifies to be taxed as a regulated
investment company. Investors should consult their own tax
counsel with respect to the specific tax consequences of their
being shareholders of the Fund, including the effect and
applicability of Federal, state and local tax laws to their own
particular situation and the possible effects of changes therein.
It is the present policy of the Fund to distribute to
shareholders all net investment income and to distribute realized
48
<PAGE>
capital gains. However, there is no fixed dividend rate and
there can be no assurance that the Fund will pay any dividends or
realize any capital gains. The amount of any dividend or
distribution paid on shares of the Fund must necessarily depend
upon the realization of income and capital gains from the Fund's
investments.
The Fund 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. The Fund will be required to
pay the 4% excise tax to the extent it does not distribute to its
shareholders during any calendar year an amount equal to the sum
of (i) 98% of its ordinary income for the calendar year, (ii) 98%
of its capital gain net income and foreign currency gains for the
twelve months ended October 31 of such year, (or December 31 if
elected by the Fund), and (iii) any ordinary income or capital
gains from the preceding calendar year that was not distributed
during such year. For this purpose, income or gain retained by
the Fund that is subject to corporate income tax will be
considered to have been distributed by the Fund by year-end. For
Federal income and excise tax purposes, dividends declared and
payable to shareholders of record as of a date in October,
November or December but actually paid during the following
January will be taxable to these shareholders for the year
declared, and not for the subsequent calendar year in which the
shareholders actually receive the dividend.
Dividends of the Fund's net ordinary income and distributions
of any net realized short-term capital gain are taxable to
shareholders as ordinary income. In view of the Fund's
investment policies, it is expected that dividends from domestic
corporations will be a significant part of the Fund's gross
income and, accordingly, that a significant part of the Fund's
dividends will be eligible for the dividends-received deduction;
however, this is largely dependent on the Fund's investment
activities, and accordingly cannot be predicted with certainty.
The amount of such dividends eligible for the dividends-received
deduction is limited to the amount of dividends from domestic
corporations received by the Fund during the fiscal year. Under
provisions of the tax law a corporation's dividends-received
deduction will be disallowed unless the corporation holds shares
in the Fund at least 46 days. Furthermore, provisions of the tax
law disallow the dividends- received deduction to the extent a
corporation's investment in shares of the Fund is financed with
indebtedness.
The excess of net long-term capital gains over the net short-
term capital losses realized and distributed by the Fund to its
shareholders will be taxable to the shareholders as long-term
capital gains, irrespective of the length of time a shareholder
49
<PAGE>
may have held his Fund shares. Any dividend or distribution
received by a shareholder on shares of the Fund will have the
effect of reducing the net asset value of such shares by the
amount of such dividend or distribution. Furthermore, a dividend
or distribution made shortly after the purchase of such shares by
a shareholder, although in effect a return of capital to that
particular shareholder, would be taxable to him as described
above. If a shareholder has held shares in the Fund for six
months or less and during that period has received a distribution
taxable to the shareholder as a long-term capital gain, any loss
recognized by the shareholder on the sale of those shares during
the six-month period will be treated as a long-term capital loss
to the extent of the distribution.
Dividends are taxable in the manner discussed regardless of
whether they are paid to the shareholder in cash or are
reinvested in additional shares of the Fund or another Alliance
Mutual Fund.
The Fund generally will be required to withhold tax at the
rate of 31% with respect to dividends of net ordinary income and
net distributions of realized capital gains payable to a non-
corporate shareholder unless the shareholder certifies on his
subscription application that the social security or taxpayer
identification number provided is correct and that the
shareholder has not been notified by the Internal Revenue Service
that he is subject to backup withholding.
United States Federal Income Taxation of the Fund
The following discussion relates to certain significant
United States Federal income tax consequences to the Fund with
respect to the determination of its "investment company taxable
income" each year. This discussion assumes that the Fund will be
taxed as a regulated investment company for each of its taxable
years.
Options. Certain listed nonequity options are considered
"section 1256 contracts" for Federal income tax purposes. Section
1256 contracts held by the Fund at the end of each taxable year
will be "marked to market" and treated for Federal income tax
purposes as though sold for fair market value on the last
business day of such taxable year. Gain or loss realized by the
Fund on section 1256 contracts generally will be considered 60%
long-term and 40% short-term capital gain or loss. The Fund can
elect to exempt its section 1256 contracts which are part of a
"mixed straddle" (as described below) from the application of
section 1256.
With respect to equity options, gain or loss realized by the
Fund upon the lapse or sale of such options held by the Fund will
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<PAGE>
be either long-term or short-term capital gain or loss depending
upon the Fund's holding period with respect to such options.
However, gain or loss realized upon the lapse or closing out of
such options that are written by the Fund will be treated as
short-term capital gain or loss. In general, if the Fund
exercises an option, or if an option that the Fund has written is
exercised, gain or loss on the option will not be separately
recognized but the premium received or paid will be included in
the calculation of gain or loss upon disposition of the property
underlying the option.
Tax Straddles. Any option or other position entered into or
held by the Fund in conjunction with any other position held by
the Fund may constitute a "straddle" for Federal income tax
purposes. A straddle of which at least one, but not all, the
positions are section 1256 contracts may constitute a "mixed
straddle". In general, straddles are subject to certain rules
that may affect the character and timing of the Fund's gains and
losses with respect to straddle positions by requiring, among
other things, that (i) loss realized on disposition of one
position of a straddle not be recognized to the extent that the
Fund has unrealized gains with respect to the other position in
such straddle; (ii) the Fund's holding period in straddle
positions be suspended while the straddle exists (possibly
resulting in gain being treated as short-term capital gain rather
than long-term capital gain); (iii) losses recognized with
respect to certain straddle positions which are part of a mixed
straddle and which are non-section 1256 positions be treated as
60% long-term and 40% short-term capital loss; (iv) losses
recognized with respect to certain straddle positions which would
otherwise constitute short-term capital losses be treated as
long-term capital losses; and (v) the deduction of interest and
carrying charges attributable to certain straddle positions may
be deferred. Various elections are available to the Fund which
may mitigate the effects of the straddle rules, particularly with
respect to mixed straddles. In general, the straddle rules
described above do not apply to any straddles held by the Fund
all of the offsetting positions of which consist of section 1256
contracts.
________________________________________________________________
PORTFOLIO TRANSACTIONS
________________________________________________________________
Subject to the general supervision of the Board of Directors
of the Fund, the Investment Adviser makes the Fund's portfolio
decisions and determines the broker to be used in specific
transactions with the objective of negotiating a combination of
the most favorable commission and the best price obtainable on
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<PAGE>
each transaction (generally defined as best execution).
Consistent with the objective of obtaining best execution, the
Fund may use brokers and dealers who supply investment
information to the Investment Adviser.
Neither the Fund nor the Investment Adviser entered into
agreements or understandings with any brokers regarding the
placement of securities transactions because of research or
statistical services they provide. To the extent that such
persons or firms supply investment information to the Investment
Adviser for use in rendering investment advice to the Fund, such
information may be supplied at no cost to the Investment Adviser.
While it is impossible to place an actual dollar value on such
investment information, its receipt by the Investment Adviser
probably does not reduce the overall expenses of the Investment
Adviser to any material extent.
The investment information provided to the Investment Adviser
is of the type described in Section 28(e)(3) of the Securities
Exchange Act of 1934 and is designed to augment the Investment
Adviser's own internal research and investment strategy
capabilities. Research and statistical services furnished by
brokers through which the Fund effects securities transactions
are used by the Investment Adviser in carrying out its investment
management responsibilities with respect to all its client
accounts but not all such services may be used by the Investment
Adviser in connection with the Fund. There may be occasions
where the transaction cost charged by a broker may be greater
than that which another broker may charge if the Fund determines
in good faith that the amount of such transaction cost is
reasonable in relation to the value of the brokerage, research
and statistical services provided by the executing broker.
The Fund may deal in some instances in securities which are
not listed on a national stock exchange but are traded in the
over-the-counter market. The Fund may also purchase listed
securities through the third market, from a dealer which is not a
member of the Exchange on which a security is listed. Where
transactions are executed in the over-the-counter market or third
market, the Fund will seek to deal with the primary market
makers; but when necessary in order to obtain the best price and
execution, it will utilize the services of others. In all cases,
the Fund will attempt to negotiate best execution.
The Fund may from time to time place orders for the purchase
or sale of securities (including listed call options) with
Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ"), an
affiliate of the Investment Adviser, and with brokers which may
have their transactions cleared or settled, or both, by the
Pershing Division of DLJ for which DLJ may receive a portion of
the brokerage commission. In such instances the placement of
52
<PAGE>
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 Investment Adviser.
With respect to orders placed with DLJ for execution on a
national securities exchange, commissions received must conform
to Section 17(e)(2)(A) of the Act and Rule 17e-1 thereunder,
which permit an affiliated person of a registered investment
company (such as the Fund), or any affiliated person of such
person, to receive a brokerage commission from such registered
investment company provided that such commission is reasonable
and fair compared to the commissions received by other brokers in
connection with comparable transactions involving similar
securities during a comparable period of time.
For the fiscal period ended November 30, 1994 and for the
fiscal year ended December 31, 1993, the Fund incurred brokerage
commissions of $90,407 and $254,180, respectively, of which $-0-
(0% of the total) and $-0- (0% of the total), respectively, was
paid directly to DLJ and $-0- (0% of the total) and $-0- (0% of
the total), respectively, was paid to brokers using the services
of the Pershing Division of DLJ. Securities transactions for the
Fund during the fiscal period ended November 30, 1994 and for the
fiscal year ended December 31, 1993 aggregated $207,909,853 and
$233,963,430, respectively, of which 0% and 0%, respectively,
were effected through DLJ and 0% were effected through the
Pershing Division of DLJ.
________________________________________________________________
GENERAL INFORMATION
________________________________________________________________
Capitalization
The authorized capital stock of the Fund consists of
$100,000,000 shares of Class A Common Stock, $.01 par value,
50,000,000 shares of Class B Common Stock, $.01 par value and
50,000,000 shares of Class C Common Stock, $.01 par value. All
shares of the Fund when duly issued will be fully paid and non-
assessable.
The Board of Directors is authorized to reclassify and issue
any unissued shares to any number of additional series without
shareholder approval. Accordingly, the Board may create
additional series of shares 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. Any issuance of shares of another series would be
governed by the 1940 Act and the laws of the State of Maryland.
If shares of another series were issued in connection with the
53
<PAGE>
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 Advisory Agreement and changes in investment policy, shares
of each portfolio would vote as separate series.
An order from the Securities and Exchange Commission has been
received permitting the issuance and sale of multiple classes of
shares representing interests in the Fund's existing portfolio.
As of the close of business of January 3, 1995, there were
8,215,365 shares of common stock of the Fund outstanding. Of
this amount, 7,093,090 shares were Class A shares, 869,047 shares
were Class B shares and 253,228 shares were Class C shares. Set
forth below is certain information as to all persons who, of
record or beneficially, held 5% or more of either class of the
Fund's shares outstanding at January 3, 1995:
No. of % of
Name and Address Shares Class
Class A Shares
Orth & Company Trust Dept 1,785,340 25%
Ford General Ret Plan #112
c/o Comerica Bank Mutual Funds
P.O. Box 75000
Detroit, MI 48275-0001
Municipal Employees Annuity 369,706 5%
& Benefit Fund of Chicago
221 North LaSalle Street
Chicago, IL 60601-1206
Kane & Co. 491,646 6%
Chase Manhattan Bank
Boeing Vol Invt A/C c P90291
Att: Donald Adolff 33rd Flr
1211 Avenue of the Americas
New York, NY 10036-8701
54
<PAGE>
Class B Shares
Merrill Lynch 170,212 19%
Mutual Fund Operations
4800 Deer Lake Dr. East 3rd Flr
Jacksonville, FL 32246-6484
Class C Shares
Merrill Lynch 94,497 37%
Mutual Fund Operations
4800 Deer Lake Dr. East 3rd Flr
Jacksonville, Fl 32246-6484
Donaldson, Lufkin, Jenrette 26,870 10%
Sec. Corp.
P.O. Box 2052
Jersey City, NJ 07303-2052
The above-mentioned stockholders as well as certain
additional stockholders of the Fund are discretionary managed
accounts of the Fund's Investment Adviser, which thereby
exercised investment discretion at February 10, 1995 with respect
to an aggregate of 3,232,161 shares, representing 45% of all
outstanding shares as of that date.
Custodian
State Street Bank and Trust Company, 225 Franklin Street,
Boston, Massachusetts, 02110, acts as Custodian for the
securities and cash of the Fund, but plays no part in deciding on
the purchase or sale of portfolio securities.
Principal Underwriter
Alliance Fund Distributors, Inc., 1345 Avenue of the
Americas, New York, New York 10105, serves as the Fund's
Principal Underwriter, and as such may solicit orders from the
public to purchase shares of the Fund. Alliance Fund
Distributors, Inc. is not obligated to sell any specific amount
of shares and will purchase shares for resale only against orders
for shares. Under the Agreement between the Fund and the
Principal Underwriter, the Fund has agreed to indemnify the
distributors, 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 of 1933, as amended.
55
<PAGE>
Counsel
Legal matters in connection with the issuance of the shares
of the Fund offered hereby will be passed upon by Messrs. Seward
& Kissel, One Battery Park Plaza, New York, New York 10004.
Seward & Kissel has relied upon the opinion of Venable, Baetjer
and Howard, 1800 Mercantile Bank & Trust Building, 2 Hopkins
Plaza, Baltimore, Maryland 21201, for matters relating to
Maryland law.
Independent Auditors
Ernst & Young LLP, 787 Seventh Avenue, New York, New York
10019, have been selected as independent auditors for the Fund.
Total Return Quotations
From time to time the Fund advertises its "total return."
Computed separately for each class, the Fund's "total return" is
its average annual compounded total return for recent one, five
and ten year periods (or the period since the Fund's inception).
The Fund's total return for such a period is computed by finding,
through the use of a formula prescribed by the Securities and
Exchange Commission, the average annual compounded rates 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 may include performance data for
Class A, Class B and Class C shares in any advertisement or
information including performance data of the Fund.
The Fund reclassified its shares outstanding prior to May 3,
1993 as Class A shares. The Fund's average annual compounded
total return for Class A shares was 22.43% for the one year ended
November 30, 1994; 20.89% for the five year period ended November
30, 1993 and 18.89% for the period March 1, 1982 (commencement of
distribution) through November 30, 1993. The Fund's average
annual compounded total return for Class B shares for the one
year period ended November 30, 1994 was 25.91%; for the period
May 3, 1993 (commencement of distribution) through November 30,
1993 was 29.84%. The Fund's average annual compounded total
return for Class C shares for the one year period ended November
30, 1994 was 25.87%; for the period May 3, 1993 (commencement of
distribution) through November 30, 1993 was 29.84%.
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
56
<PAGE>
its expenses. Total return information is useful in reviewing
the Fund's performance but such information may not provide a
basis for comparison with bank deposits or other investments
which pay a fixed 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 by independent
organizations such as Lipper Analytical Services, Inc. ("Lipper")
and Morningstar, Inc., and advertisements presenting the
historical record of payments of income dividends may from time
to time be sent to investors or placed in newspapers, magazines
such as Barron's, Business Week, Changing Times, Fortune, Forbes,
Money Magazine, The New York Times, The Wall Street Journal or
other media on behalf of the Fund. The Fund is included in
Lipper rankings under the category science and technology.
Additional Information
Shareholder inquiries may be directed to the shareholder's
broker or to Alliance Fund Services, Inc. at the address or
telephone numbers shown on the front cover of this Statement of
Additional Information. This Statement of Additional Information
does not contain all the information set forth in the
Registration Statement filed by the Fund with the Securities and
Exchange Commission under the Securities Act of 1933. 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 Securities and Exchange Commission in Washington,
D.C.
00250200.AC6
57
<PAGE>
<PAGE>
-59-
PORTFOLIO OF INVESTMENTS
NOVEMBER 30, 1994 ALLIANCE TECHNOLOGY FUND
================================================================================
<TABLE>
<CAPTION>
COMPANY SHARES VALUE
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS-85.4%
SOFTWARE-26.0%
Broadway & Seymour, Inc.*(b)........... 510,000 $9,945,000
Broderbund Software, Inc.*............. 90,000 3,217,500
Computer Associates
International, Inc.................... 70,000 3,185,000
Computer Sciences Corp.*............... 81,000 3,736,125
General Computer Corp., Inc.*.......... 41,600 260,000
General Motors Corp.
Cl. E ................................ 200,000 7,350,000
Informix Corp.*........................ 200,000 5,750,000
Microsoft Corp.*....................... 85,000 5,344,375
Novell, Inc.*.......................... 105,000 2,086,875
Oracle Systems Corp.*.................. 205,000 8,456,250
Sierra On-Line, Inc.*.................. 175,000 5,009,375
Spectrum Holobyte ..................... 123,200 1,632,400
Sybase, Inc.*.......................... 75,000 3,637,500
-----------
59,610,400
-----------
COMPUTER
NETWORKING-20.5%
Bolt Beranek & Newman, Inc.*........... 60,440 1,201,245
Cabletron Systems, Inc.*............... 105,000 4,987,500
cisco Systems, Inc.*................... 310,000 9,997,500
EIS International, Inc.*............... 80,000 1,070,000
Ericsson (L.M.) Telephone
Co. Cl.B (ADR)........................ 78,000 4,329,000
General Instrument Corp.*.............. 50,000 1,500,000
Inter-Tel, Inc.*....................... 77,800 544,600
Motorola, Inc.......................... 74,000 4,171,750
Nokia Corp. (ADR)...................... 90,000 6,288,750
Scientific-Atlanta, Inc................ 213,200 4,210,700
3Com Corp.*............................ 200,000 8,700,000
-----------
47,001,045
-----------
SEMI-CONDUCTOR-17.2%
Advanced Micro Devices*................ 120,000 3,030,000
Alliance Semiconductor
Corp.*................................ 85,000 2,783,750
Altera Corp.*.......................... 200,000 7,700,000
</TABLE>
<TABLE>
<CAPTION>
PORTFOLIO OF INVESTMENTS
November 30, 1994
===============================================================================
SHARES OR
PRINCIPAL
AMOUNT
COMPANY (000) VALUE
- --------------------------------------------------------------------------------
<S> <C> <C>
Atmel Corp.*........................... 200,000 $6,800,000
Cirrus Logic, Inc.*.................... 90,000 2,272,500
Intel Corp............................. 102,500 6,470,313
Lam Research Corp.*.................... 60,000 2,535,000
Micron Technology, Inc................. 50,000 2,075,000
Standard Microsystems, Inc.*........... 235,000 5,610,625
-----------
39,277,188
-----------
COMPUTER SYSTEMS-10.8%
COMPAQ Computer Corp.*................. 210,000 8,216,250
Dell Computer Corp.*................... 100,000 4,306,250
Radius, Inc.*.......................... 162,500 1,543,750
Silicon Graphics, Inc.*................ 110,000 3,382,500
Sun Microsystems, Inc.*................ 219,000 7,336,500
-----------
24,785,250
-----------
SPECIALIZED ELECTRONICS
MANUFACTURING-4.7%
Sanmina Holdings Corp.*................ 100,000 2,612,500
Solectron Corp.*....................... 298,000 8,083,250
-----------
10,695,750
-----------
SEMI-CONDUCTOR
EQUIPMENT-3.3%
Applied Materials, Inc.*............... 160,000 7,660,000
-----------
COMPUTER
PERIPHERALS-1.2%
Exabyte Corp.*......................... 125,000 2,640,625
-----------
OTHER-1.7%
Viacom, Inc. Cl.B*..................... 100,000 3,850,000
-----------
Total Common Stocks
(cost $123,717,434)................... 195,520,258
-----------
CORPORATE BOND-0.2%
Interactive Light
Holdings, Inc.
8.00%, 2/07/99 (a)
(cost $500,000)....................... $500 500,000
-----------
</TABLE>
<PAGE>
-60-
ALLIANCE TECHNOLOGY FUND
================================================================================
<TABLE>
PRINCIPAL
AMOUNT
COMPANY (000) VALUE
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMERCIAL PAPER-11.4%
American Express
Credit Corp.
5.50%, 12/05/94 ...................... $10,770 $10,763,418
5.65%, 12/01/94 ...................... 5,245 5,245,000
Prudential Funding
5.45%, 12/08/94 ...................... 10,000 9,989,403
----------
</TABLE>
VALUE
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
Total Commercial Paper
(amortized cost $25,997,821).......... $ 25,997,821
------------
TOTAL INVESTMENTS-97.0%
(cost $150,215,255).................... 222,018,079
Other assets less liabilities-3.0%..... 6,777,719
------------
NET ASSETS-100%........................ $228,795,798
============
</TABLE>
- --------------------------------------------------------------------------------
* Non-income producing security.
(a) Illiquid security, valued at fair value (see notes A & F).
(b) Investment in non-controlled affiliates (see Note A(6)).
See notes to financial statements.
<PAGE>
-61-
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
NOVEMBER 30, 1994 ALLIANCE TECHNOLOGY FUND
===============================================================================================
<S> <C>
ASSETS
Investments in securities, at value (cost $150,215,255)................... $ 222,018,079
Cash...................................................................... 13,389
Receivable for investment securities sold................................. 10,265,781
Receivable for capital stock sold......................................... 1,360,740
Dividends and interest receivable......................................... 64,866
Other assets.............................................................. 6,572
--------------
Total assets.............................................................. 233,729,427
--------------
LIABILITIES
Payable for capital stock redeemed....................................... 2,357,149
Payable for investment securities purchased.............................. 2,058,937
Advisory fee payable..................................................... 381,959
Distribution fee payable................................................. 19,082
Accrued expenses......................................................... 116,502
--------------
Total liabilities........................................................ 4,933,629
--------------
NET ASSETS................................................................. $ 228,795,798
==============
COMPOSITION OF NET ASSETS
Capital stock, at par.................................................... $ 71,648
Additional paid-in capital............................................... 131,726,763
Accumulated net realized gain............................................ 25,194,563
Net unrealized appreciation of investments............................... 71,802,824
--------------
$ 228,795,798
==============
CALCULATION OF MAXIMUM OFFERING PRICE
CLASS A SHARES
Net asset value and redemption price per share
($202,928,995/6,346,460 shares of capital stock issued and outstanding) $31.98
Sales charge-4.25% of public offering price............................... 1.42
------
Maximum offering price.................................................... $33.40
======
CLASS B SHARES
Net asset value and offering price per share
($18,396,429/581,958 shares of capital stock issued and outstanding)..... $31.61
======
CLASS C SHARES
Net asset value, redemption and offering price per share
($7,470,374/236,321 shares of capital stock issued and outstanding)...... $31.61
======
</TABLE>
See notes to financial statements.
<PAGE>
-62-
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
ELEVEN MONTHS ENDED NOVEMBER 30, 1994* ALLIANCE TECHNOLOGY FUND
===============================================================================================================
<S> <C> <C>
INVESTMENT INCOME
Interest.............................................. $576,992
Dividends (net of foreign taxes withheld of $591)..... 195,370 $ 772,362
----------
EXPENSES
Advisory fee.......................................... 1,794,378
Distribution fee-Class A.............................. 408,075
Distribution fee-Class B.............................. 69,839
Distribution fee-Class C.............................. 29,582
Transfer agency....................................... 196,868
Administrative........................................ 143,023
Audit and legal....................................... 73,496
Registration.......................................... 69,721
Directors' fees....................................... 65,105
Printing.............................................. 53,575
Custodian............................................. 36,573
Taxes................................................. 13,704
Miscellaneous......................................... 30,842
---------
Total expenses........................................ 2,984,781
------------
Net investment loss................................... (2,212,419)
------------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain on securities transactions.......... 24,742,194
Net change in unrealized appreciation of investments.. 18,337,186
------------
Net gain on investments............................... 43,079,380
------------
NET INCREASE IN NET ASSETS FROM OPERATIONS.............. $ 40,866,961
============
</TABLE>
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
===============================================================================================================
JANUARY 1, 1994 YEAR ENDED
TO DECEMBER 31,
NOVEMBER 30, 1994* 1993
------------------ --------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS
Net investment loss................................................. $ (2,212,419) $ (2,289,465)
Net realized gain on investments.................................... 24,742,194 45,709,608
Net change in unrealized appreciation (depreciation) of investments. 18,337,186 (8,883,836)
------------ ------------
Net increase in net assets from operations.......................... 40,866,961 34,536,307
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net realized gain on investments
Class A............................................................ -0- (42,363,529)
Class B............................................................ -0- (401,368)
Class C............................................................ -0- (279,922)
CAPITAL STOCK TRANSACTIONS
Net increase........................................................ 11,456,294 11,414,815
------------ ------------
Total increase...................................................... 52,323,255 2,906,303
NET ASSETS
Beginning of year................................................... 176,472,543 173,566,240
------------ -----------
End of period....................................................... $228,795,798 $176,472,543
============ ============
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
*The Fund changed its fiscal year end from December 31 to November 30.
See notes to financial statements.
<PAGE>
-63-
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 1994 ALLIANCE TECHNOLOGY FUND
================================================================================
NOTE A: SIGNIFICANT ACCOUNTING POLICIES
Alliance Technology Fund, Inc. (the "Fund") is registered under the Investment
Company Act of 1940 ("Act") as a diversified, open-end management investment
company. The Fund offers Class A, Class B and Class C shares. Class A shares are
sold with a front-end sales charge of up to 4.25%. Class B shares are sold with
a contingent deferred sales charge which declines from 4% to zero depending on
the period of time the shares are held. Class B shares will automatically
convert to Class A shares eight years after the end of the calendar month of
purchase. Class C shares are sold without an initial or contingent deferred
sales charge. All three classes of shares have identical voting, dividend,
liquidation and other rights, except that each class bears different
distribution expenses and has exclusive voting rights with respect to its
distribution plan. Distribution of Class B and Class C shares commenced on May
3, 1993. The following is a summary of significant accounting policies followed
by the Fund.
1. SECURITY VALUATION
Portfolio securities traded on a national securities exchange and over-the-
counter securities listed on the NASDAQ National Market System are valued at the
last reported sales price at the regular close of the New York Stock Exchange.
Over-the-counter securities not listed on the NASDAQ National Market System are
valued at the mean of the closing bid and asked price. Securities for which
current market quotations are not readily available (including investments which
are subject to limitations as to their resale) are valued at their fair value as
determined in good faith by the Board of Directors. Securities which mature in
60 days or less are valued at amortized cost, which approximates market value.
2. OPTION WRITING
When the Fund writes an option, an amount equal to 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 from the sale of securities. The difference between the premium
and the amount paid on effecting 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. As a writer of
options, the Fund bears the risk of unfavorable changes in the price of the
financial instruments underlying the options.
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 applicable, to
shareholders. Therefore, no provisions for federal income or excise taxes are
required.
4. INVESTMENT INCOME AND SECURITY TRANSACTIONS
Dividend income is recorded on the ex-dividend date. Interest income is accrued
daily. Security transactions are accounted for on the date the securities are
purchased or sold. Security gains and losses are determined on the identified
cost basis. The Fund accretes discounts as adjustments to interest income.
5. DIVIDENDS AND DISTRIBUTIONS
Dividends and distributions to shareholders are recorded on the ex-dividend
date. Income dividends and capital gain distributions are determined in
accordance with income tax regulations, which may differ from generally accepted
accounting principles.
6. AFFILIATED ISSUERS
Issuers in which the fund held 5.0% of the outstanding voting securities are
defined as "affiliated" in the Act. As of November 30, 1994, the Fund owned 6.2%
of the outstanding voting shares of Broadway & Seymour, Inc. which had
unrealized appreciation of $3,986,593. During the eleven months ended November
30, 1994, the Fund purchased 160,500 shares of Broadway & Seymour, Inc. at a
cost of $1,692,363.
7. CHANGE OF YEAR END
The Fund changed its fiscal year end from December 31, to November 30.
Accordingly, the statement of operations and changes in net assets, and
financial highlights reflect the period from January 1 to November 30, 1994.
<PAGE>
-64-
ALLIANCE TECHNOLOGY FUND
================================================================================
8. RECLASSIFICATION OF COMPONENTS OF NET ASSETS
Effective November 1, 1993, the Fund adopted Statement of Position 93-2:
Determination, Disclosure, and Financial Statement Presentation of Income,
Capital Gain, and Return of Capital Distributions by Investment Companies. In
accordance with Federal Income Tax Regulations certain short-term realized gains
were offset against the Fund's accumulated net investment loss for the period
ended November 30, 1994. Accordingly, $2,212,419 was reclassified from
accumulated net investment loss to accumulated net realized gains. Net increase
in net assets from operations and net assets were not affected by this change.
- --------------------------------------------------------------------------------
NOTE B: ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Under the terms of an investment advisory agreement, the Fund pays its Adviser,
Alliance Capital Management L.P., an advisory fee at a quarterly rate equal to
1/4 of 1% (approximately 1% on an annual basis) of the net assets of the Fund
valued on the last business day of the previous quarter. The Adviser has agreed,
under the terms of the investment advisory agreement, to reimburse the Fund to
the extent that its aggregate expenses (exclusive of interest, taxes, brokerage,
distribution fee, and extraordinary expenses) exceed the limits prescribed by
any state in which the Fund's shares are qualified for sale. The Fund believes
that the most restrictive expense ratio limitation imposed by any state is 2.5%
of the first $30 million of its average daily net assets, 2.0% of the next $70
million of its average daily net assets and 1.5% of its average daily net assets
in excess of $100 million. No reimbursement was required for the period ended
November 30, 1994.
Pursuant to the advisory agreement, the Fund paid $143,023 to the Adviser
representing the cost of certain legal and accounting services provided to the
Fund by the Adviser for the period ended November 30, 1994.
The Fund compensates Alliance Fund Services, Inc. (a wholly-owned subsidiary of
the Adviser) under a Transfer Agency Agreement for providing personnel and
facilities to perform transfer agency services for the Fund. Such compensation
amounted to $138,081 for the period ended November 30, 1994.
Alliance Fund Distributors, Inc. (a wholly-owned subsidiary of the Adviser)
serves as the Distributor of the Fund's shares. The Distributor received front-
end sales charges of $20,381 from the sale of Class A shares and $27,593 in
contingent deferred sales charges imposed upon redemption by shareholders of
Class B shares for the period ended November 30, 1994.
Brokerage commissions paid for the period ended November 30, 1994 on securities
transactions amounted to $96,154 none of which was paid to brokers utilizing the
services of the Pershing Division of Donaldson, Lufkin & Jenrette Securities
Corp. ("DLJ") nor to DLJ directly, an affiliate of the Adviser.
- --------------------------------------------------------------------------------
NOTE C: DISTRIBUTION SERVICES AGREEMENT
The Fund has adopted a Distribution Services Agreement (the "Agreement")
pursuant to Rule 12b-1 under the Investment Company Act of 1940. Under the
Agreement, the Fund pays a distribution fee to the Distributor at an annual rate
of up to .30 of 1% of the Fund's average daily net assets attributable to Class
A shares and 1% of the average daily net assets attributable to both Class B and
Class C shares. Such fee is accrued daily and paid monthly. The Agreement
provides that the Distributor will use such payments in their entirety for
distribution assistance and promotional activities. The Distributor has incurred
expenses in excess of the distribution costs reimbursed by the Fund in the
amount of $698,886 and $221,888 for Class B and C shares, respectively; such
costs may be recovered from the Fund in future periods so long as the Agreement
is in effect. In accordance with the Agreement, there is no provision for
recovery of unreimbursed distribution costs, incurred by the Distributor, beyond
the current fiscal year for Class A shares. The Agreement also provides that the
Adviser may use its own resources to finance the distribution of the Fund's
shares.
<PAGE>
-65-
NOTES TO FINANCIAL STATEMENTS (CONTINUED) ALLIANCE TECHNOLOGY FUND
================================================================================
NOTE D: INVESTMENT TRANSACTIONS
Total purchases and sales of investment securities, (excluding short-term
investments and options) aggregated $97,629,363 and $110,280,490, respectively,
for the period ended November 30, 1994. At November 30, 1994, the cost of
securities for federal income tax purposes was the same as the cost for
financial reporting purposes. Accordingly, gross unrealized appreciation on
investments was $73,745,711 and gross unrealized depreciation on investments was
$1,942,887 resulting in net unrealized appreciation of $71,802,824.
- --------------------------------------------------------------------------------
NOTE E: CAPITAL STOCK
There are 200,000,000 shares of $0.01 par value capital stock authorized,
divided into three classes, designated Class A, Class B and Class C shares.
Class A shares consist of 100,000,000 authorized shares, Class B and Class C
each consist of 50,000,000 authorized shares. Transactions in capital stock were
as follows:
<TABLE>
<CAPTION>
SHARES AMOUNT
JANUARY 1, 1994 YEAR ENDED JANUARY 1, 1994 YEAR ENDED
TO DECEMBER 31, TO DECEMBER 31,
NOVEMBER 30, 1994* 1993 NOVEMBER 30, 1994* 1993
------------------ ------------ ------------------ -------------
<S> <C> <C> <C> <C>
CLASS A
Shares sold......................................... 3,842,268 3,519,278 $ 106,665,695 $ 108,549,106
Shares issued in reinvestment
of distributions.................................. -0- 1,489,907 -0- 38,916,363
Shares redeemed..................................... (4,147,118) (4,512,673) (115,921,055) (139,323,306)
---------- ---------- ------------- -------------
Net increase (decrease)............................. (304,850) 496,512 $ (9,255,360) $ 8,142,163
========== ========== ============= =============
<CAPTION>
JANUARY 1, 1994 MAY 3, 1993** JANUARY 1, 1994 MAY 3, 1993**
TO TO TO TO
NOVEMBER 30, 1994* DECEMBER 31, 1993 NOVEMBER 30, 1994* DECEMBER 31, 1993
------------------ ----------------- ------------------ -----------------
<S> <C> <C> <C> <C>
CLASS B
Shares sold.......................................... 749,801 57,841 $21,356,069 $1,884,262
Shares issued in reinvestment
of distributions................................... -0- 14,256 -0- 370,370
Shares redeemed...................................... (231,166) (8,774) (6,446,377) (282,226)
-------- ------ ----------- ----------
Net increase......................................... 518,635 63,323 $14,909,692 $1,972,406
======== ====== =========== ==========
CLASS C
Shares sold.......................................... 514,554 39,078 $14,650,671 $1,253,594
Shares issued in reinvestment
of distributions................................... -0- 7,960 -0- 206,807
Shares redeemed...................................... (320,413) (4,858) (8,848,709) (160,155)
-------- ------ ----------- ----------
Net increase......................................... 194,141 42,180 $ 5,801,962 $1,300,246
======== ====== =========== ==========
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* The Fund changed its fiscal year end from December 31 to November 30.
** Commencement of distribution.
<PAGE>
-66-
ALLIANCE TECHNOLOGY FUND
================================================================================
NOTE F: ILLIQUID SECURITY
<TABLE>
<CAPTION>
DATE
ACQUIRED COST
---------- --------
<S> <C> <C>
Interactive Light Holding, Inc.
8.00%, 2/07/99................................. 1/27/94 $500,000
</TABLE>
The security shown above is illiquid and has been valued at fair value in
accordance with the procedures described in Note A. The value of this security
at November 30, 1994 was $500,000, representing 0.2% of net assets.
<PAGE>
-67-
FINANCIAL HIGHLIGHTS ALLIANCE TECHNOLOGY FUND
================================================================================
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
CLASS
JANUARY 1, 1994 YEAR ENDED DECEMBER 31,
TO --------------------------------------
NOVEMBER 30, 1994* 1993 1992 1991 1990
------------------ ------ ----- ------ ------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period.................... $26.12 $28.20 $26.38 $19.44 $21.57
------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS
Net investment loss..................................... (.32) (.29) (.22)(a) (.02) (.03)
Net realized and unrealized gain (loss) on investments.. 6.18 6.39 4.31 10.57 (.56)
------ ------ ------ ------ ------
Net increase (decrease) in net asset value
from operations....................................... 5.86 6.10 4.09 10.55 (.59)
------ ------ ------ ------ ------
LESS: DISTRIBUTIONS
Distributions from net realized gains................... -0- (8.18) (2.27) (3.01) (1.54)
------ ------ ------ ------ ------
Net asset value, end of period.......................... $31.98 $26.12 $28.20 $26.38 $19.44
------ ------ ------ ------ ------
TOTAL RETURN
Total investment return based on net asset value (b).... 22.43% 21.63% 15.50% 54.24% (3.08)%
====== ====== ====== ====== ======
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted)............... $202,929 $173,732 $173,566 $191,693 $131,843
Ratio of expenses to average net assets................. 1.66%(d) 1.73% 1.61% 1.71% 1.77%
Ratio of net investment loss to average net assets...... (1.22)%(d) (1.32)% (.90)% (.20)% (.18)%
Portfolio turnover rate................................. 55% 64% 73% 134% 147%
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See footnote summary on page 15.
<PAGE>
-68-
<TABLE>
<CAPTION>
ALLIANCE TECHNOLOGY FUND
==================================================================================================================================
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
CLASS B CLASS C
JANUARY 1, 1994 MAY 3, 1993(C) JANUARY 1, 1994 MAY 3, 1993(C)
TO TO TO TO
NOVEMBER 30,1994* DECEMBER 31, 1993 NOVEMBER 30, 1994* DECEMBER 31,1993
---------------- ----------------- ------------------ ----------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period............ $25.98 $27.44 $25.98 $27.44
----- ----- ----- ------
INCOME FROM INVESTMENT OPERATIONS
- ---------------------------------
Net investment loss............................. (.23) (.12) (.24) (.13)
Net realized and unrealized gain on investments. 5.86 6.84 5.87 6.85
----- ----- ----- -----
Net increase in net asset value
from operations............................... 5.63 6.72 5.63 6.72
----- ----- ----- -----
LESS: DISTRIBUTIONS
- -------------------
Distributions from net realized gains........... -0- (8.18) -0- (8.18)
----- ----- ----- -----
Net asset value, end of period.................. $31.61 $25.98 $31.61 $25.98
===== ===== ===== =====
TOTAL RETURN
Total investment return based on net asset
value (b)..................................... 21.67% 24.49% 21.67% 24.49%
RATIOS/SUPPLEMENTAL DATA
- ------------------------
Net assets, end of period (000's omitted)....... $18,397 $1,645 $7,470 $1,096
Ratio of expenses to average net assets......... 2.43%(d) 2.57%(d) 2.41%(d) 2.52%(d)
Ratio of net investment loss to average
net assets.................................... (1.95)%(d) (2.30)%(d) (1.94)%(d) (2.25)%(d)
Portfolio turnover rate......................... 55% 64% 55% 64%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* The Fund changed its fiscal year end from December 31 to November 30.
(a) Based on average shares outstanding.
(b) Total investment return is calculated assuming an initial investment made
at the net asset value at the beginning of the period, reinvestment of all
dividends and distributions at net asset value during the period, and
redemption on the last day of the period. Initial sales charge or
contingent deferred sales charge is not reflected in the calculation of
total investment return. Total investment return calculated for a period
of less than one year is not annualized.
(c) Commencement of distribution.
(d) Annualized.
<PAGE>
-69-
REPORT OF ERNST & YOUNG LLP
INDEPENDENT AUDITORS ALLIANCE TECHNOLOGY FUND
================================================================================
TO THE SHAREHOLDERS AND BOARD OF DIRECTORS
ALLIANCE TECHNOLOGY FUND, INC.
We have audited the accompanying statement of assets and liabilities of Alliance
Technology Fund, Inc., including the portfolio of investments, as of November
30, 1994, and the related statement of operations for the eleven months then
ended, and the statement of changes in net assets and the financial highlights
for each of the periods indicated therein. These financial statements and
financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
November 30, 1994, by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Alliance Technology Fund, Inc. at November 30, 1994, the results of its
operations for the eleven months then ended, and the changes in its net assets
and the financial highlights for each of the indicated periods, in conformity
with generally accepted accounting principles.
/s/ ERNST & YOUNG LLP
ERNST & YOUNG LLP
New York, New York
January 9, 1995
