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This is filed pursuant to Rule 497(e)
File Nos. 2-70427 and 811-03131.
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[LOGO] ALLIANCE TECHNOLOGY FUND, INC.
____________________________________________________________
c/o Alliance Fund Services, Inc.
P.O. Box 1520, Secaucus, New Jersey 07096-1520
Toll Free (800) 221-5672
For Literature: Toll Free (800) 227-4618
____________________________________________________________
STATEMENT OF ADDITIONAL INFORMATION
February 1, 2000
____________________________________________________________
This Statement of Additional Information is not a
prospectus, but supplements and should be read in
conjunction with the current Prospectus, dated February 1,
2000, for the Alliance Technology Fund, Inc. (the "Fund")
that offers the Class A, Class B and Class C shares of the
Fund and the current Prospectus, dated February 1, 2000, for
the Fund that offers the Advisor Class shares of the Fund
(the "Advisor Class Prospectus" and, together with the
Prospectus for the Fund that offers the Class A, Class B and
Class C shares, the "Prospectus"). Copies of the
Prospectuses may be obtained by contacting Alliance Fund
Services, Inc. at the address or the "For Literature"
telephone number shown above.
TABLE OF CONTENTS
Page
DESCRIPTION OF THE FUND..................................
MANAGEMENT OF THE FUND...................................
EXPENSES OF THE FUND.....................................
PURCHASE OF SHARES.......................................
REDEMPTION AND REPURCHASE OF SHARES......................
BROKERAGE AND SHAREHOLDER SERVICES.......................
NET ASSET VALUE..........................................
DIVIDENDS, DISTRIBUTIONS AND TAXES.......................
PORTFOLIO TRANSACTIONS...................................
GENERAL INFORMATION......................................
REPORT OF INDEPENDENT AUDITORS AND FINANCIAL
STATEMENTS...............................................
APPENDIX A: Certain Employee Benefit Plans............... A-1
___________________
(R) This registered service mark under license from the owner,
Alliance Capital Management L.P.
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________________________________________________________________
DESCRIPTION OF THE FUND
________________________________________________________________
Alliance Technology Fund, Inc. (the "Fund") is a
diversified, open-end investment company. Except as otherwise
indicated, the investment policies of the Fund are not
"fundamental policies" within the meaning of the Investment
Company Act of 1940, as amended, (the "1940 Act"), and may,
therefore, be changed by the 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
"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
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of such option the 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
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Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ"), an
affiliate of the 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.
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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.
The Fund may purchase or write options on securities of
the types in which it is permitted to invest in privately
negotiated (i.e., over-the-counter) transactions. The Fund will
effect such transactions only with investment dealers and other
financial institutions (such as commercial banks or savings and
loan institutions) deemed creditworthy by the Adviser, and the
Adviser has adopted procedures for monitoring the
creditworthiness of such entities.
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
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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,
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. This
limitation does not apply to liquid restricted securities, such
as those eligible for resale under Rule 144A of the Securities
Act of 1933, as amended (the "Securities Act"). 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 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 liquid assets 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 or equivalent securities at any time on
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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
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.
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
("U.S. Government Securities"), or (c) securities of any one
issuer (other than the U.S. Government and its agencies or
instrumentalities) not greater in value than 5% of the Fund's
total assets, and not more than 10% of the outstanding voting
securities of such issuer;
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(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;
(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 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;
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(xiii) make loans of its assets to any other person, which
shall not be considered as including the purchase of a 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
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 (the Fund will not invest more than 10% of its net
assets in aggregate in restricted securities and not readily
marketable securities); or
(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 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.
In connection with the qualification or registration of
the Fund's shares for sale under the securities laws of certain
states, the Fund has agreed, in addition to the foregoing
investment restrictions, that it will not invest in the
securities of any issuer which has a record of less than three
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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
________________________________________________________________
Adviser
Alliance Capital Management L.P. (the "Adviser"), a
Delaware limited partnership 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 of the Fund's Board of Directors (see "Management
of the Fund" in the Prospectus).
The Adviser is a leading international adviser managing
client accounts with assets as of December 31, 1999 totaling more
than $368 billion (of which more than $169 billion represented
assets of investment companies). As of December 31, 1999, the
Adviser managed retirement assets for many of the largest public
and private employee benefit plans (including 31 of the nation's
FORTUNE 100 companies), for public employee retirement funds in
31 states, for investment companies, and for foundations,
endowments, banks and insurance companies worldwide. The 52
registered investment companies managed by the Adviser,
comprising 105 separate investment portfolios, currently have
approximately 5 million shareholder accounts.
Alliance Capital Management Corporation ("ACMC") is the
general partner of the Adviser and a wholly owned subsidiary of
The Equitable Life Assurance Society of the United States
("Equitable"). Equitable, one of the largest life insurance
companies in the United States, is the beneficial owner of an
approximately 55.4% partnership interest in the Adviser.
Alliance Capital Management Holding L.P. ("Alliance Holding")
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owns an approximately 41.9% partnership interest in the Adviser.*
Equity interests in Alliance Holding are traded on the New York
Stock Exchange in the form of units. Approximately 98% of such
interests are owned by the public and management or employees of
the Adviser and approximately 2% are owned by Equitable.
Equitable is a wholly owned subsidiary of AXA Financial, Inc.
("AXA Financial"), a Delaware corporation whose shares are traded
on the New York Stock Exchange. AXA Financial serves as the
holding company for the Adviser, Equitable and Donaldson, Lufkin
& Jenrette, Inc., an integrated investment and merchant bank. As
of June 30, 1999, AXA, a French insurance holding company, owned
approximately 58.2% of the issued and outstanding shares of
common stock of AXA Financial.
The 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
Adviser.
Under its Advisory Agreement, the Fund currently pays a
quarterly fee to the 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. Effective
March 1, 2000, pursuant to approval by the Fund's Board of
Directors, the Fund pays a quarterly fee to the Adviser, payable
for the preceding quarter on the first business day of each
quarter, equal to the following percentages of the value of the
Fund's aggregate net assets at the close of business on the last
business day immediately preceding such payment date: 1/4 of
1.00% of the first $10 billion, 1/4 of .975% of the next $2.5
billion, 1/4 of .95% of the next $2.5 billion, 1/4 of .925% of
the next $2.5 billion, 1/4 of .90% of the next $2.5 billion, 1/4
of .875% of the next $2.5 billion and 1/4 of .85% of such assets
in excess of $22.5 billion.
____________________
* Until October 29, 1999, Alliance Holding served as the
investment adviser to the Fund. On that date, Alliance
Holding reorganized by transferring its business to the
Adviser. Prior thereto, the Adviser had no material
business operations. One result of the organization was
that the Advisory Agreement, then between the Fund and
Alliance Holding, was transferred to the Adviser by means
of a technical assignment, and ownership of Alliance Fund
Distributors, Inc. and Alliance Fund Services, Inc., the
Fund's principal underwriter and transfer agent,
respectively, also was transferred to the Adviser.
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The 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 (the "Commission") and with state
regulatory authorities).
The Fund has, under the Advisory Agreement, assumed the
obligation for payment of all of its other expenses. As to the
obtaining of services other than those specifically provided to
the Fund by the Adviser, the Fund may employ its own personnel.
For such services, it also may utilize personnel employed by the
Adviser or 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.
For the fiscal years ended November 30, 1999, 1998 and
1997, the Adviser received from the Fund advisory fees of
$52,868,775, $24,166,681 and $17,970,061, respectively.
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 1940 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 1940 Act of any such party. The Advisory
Agreement was approved for another annual term 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 party, at their Regular Meeting
held on July 22, 1999.
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 Adviser on 60 days' written notice,
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and will automatically terminate in the event of assignment. The
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 Adviser may have investment
objectives and policies similar to those of the Fund. The
Adviser may, from time to time, make recommendations which result
in the purchase or sale of a particular security by its other
clients simultaneously with the Fund. If transactions on behalf
of more than one client during the same period increase the
demand for securities being purchased or the supply of securities
being sold, there may be an adverse effect on price or quantity.
It is the policy of the Adviser to allocate advisory
recommendations and the placing of orders in a manner which is
deemed equitable by the Adviser to the accounts involved,
including the Fund. When two or more of the clients of the
Adviser (including the Fund) are purchasing or selling the same
security on a given day from the same broker-dealer, such
transactions may be averaged as to price.
The Adviser may act as an investment adviser to other
persons, firms or corporations, including investment companies,
and is investment adviser to AFD Exchange Reserves, Alliance All-
Asia Investment Fund, Inc., Alliance Balanced Shares, Inc.,
Alliance Bond Fund, Inc., Alliance Capital Reserves, Alliance
Disciplined Value Fund, Inc., Alliance Global Dollar Government
Fund, Inc., Alliance Global Environment Fund, Inc., Alliance
Global Small Cap Fund, Inc., Alliance Global Strategic Income
Trust, Inc., Alliance Government Reserves, Alliance Greater China
'97 Fund, Inc., Alliance Growth and Income Fund, Inc., Alliance
Health Care Fund, Inc., Alliance High Yield Fund, Inc., Alliance
Institutional Funds, Inc., Alliance Institutional Reserves, Inc.,
Alliance International Fund, Alliance International Premier
Growth Fund, Inc., Alliance Limited Maturity Government Fund,
Inc., Alliance Money Market Fund, Alliance Mortgage Securities
Income Fund, Inc., Alliance Multi-Market Strategy Trust, Inc.,
Alliance Municipal Income Fund, Inc., Alliance Municipal Income
Fund II, Alliance Municipal Trust, Alliance New Europe Fund,
Inc., Alliance North American Government Income Trust, Inc.,
Alliance Premier Growth Fund, Inc., Alliance Quasar Fund, Inc.,
Alliance Real Estate Investment Fund, Inc., Alliance Select
Investor Series, Inc., Alliance Utility Income Fund, Inc.,
Alliance Variable Products Series Fund, Inc., Alliance Worldwide
Privatization Fund, Inc., The Alliance Fund, Inc. and The
Alliance Portfolios, all registered open-end investment
companies; and to ACM Government Income Fund, Inc., ACM
Government Opportunity Fund, Inc., ACM Government Securities
Fund, Inc., ACM Government Spectrum Fund, Inc., ACM Managed
Dollar Fund, Inc., ACM Managed Income Fund, Inc., ACM Municipal
14
<PAGE>
Securities Income Fund, Inc., Alliance All-Market Advantage Fund,
Inc., Alliance World Dollar Government Fund, Inc., Alliance World
Dollar Government Fund II, Inc., The Austria Fund, Inc., The
Korean Investment Fund, Inc., The Southern Africa Fund, Inc. and
The Spain Fund, Inc., all registered closed-end investment
companies.
Directors and Officers
The business and affairs of the Fund are managed under
the direction of the Board of Directors. The Directors and
officers of the Fund, their ages and their principal occupations
during the past five years are set forth below. Certain of the
Directors and Officers are trustees, directors or officers of
other registered investment companies sponsored by the 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,** 54, Chairman of the Board is the
President, Chief Operating Officer and a Director of ACMC, with
which he has been associated since prior to 1995.
ROBERT C. ALEXANDER, 57, has been President of Alexander
& Associates, Management Consultants, since prior to 1995. His
address is 38 East 29th Street, New York, New York, 10016.
DAVID H. DIEVLER, 70, is an independent consultant. He
was formerly Senior Vice President of ACMC, until December 1993.
His address is P.O. Box 167, Spring Lake, New Jersey 07762.
CHARLES H. FERGUSON, 44, is an Independent Consultant,
and since prior to 1995, Senior Technology Adviser to Tucker
Anthony Incorporated. His address is 30-36 Bay State Road,
Cambridge, Massachusetts 02138.
WILLIAM H. FOULK, JR., 67, is an Investment Adviser and
an independent consultant. He was formerly Senior Manager of
Barrett Associates, Inc., a registered investment adviser, with
which he had been associated since prior to 1995. His address is
2 Greenwich Plaza, Suite 100, Greenwich, Connecticut 06830.
D. JAMES GUZY, 63, is Chairman of the Board, President
and Chief Executive Officer of SRC Computers Inc., with which he
has been associated since June 1997. He is also President of the
____________________
** An "interested person" of the Fund as defined in the 1940
Act.
15
<PAGE>
Arbor Company (private family investments). He is a director of
Intel Corporation (semi-conductors), Cirrus Logic Corporation
(semi-conductors), Novellus Corporation (semi- conductor
equipment), Micro Component Technology (semi-conductor equipment)
and the Davis Selected Advisers Group of Mutual Funds (registered
investment companies). His address is P.O. Box 128, Glenbrook,
Nevada 89413.
MARSHALL C. TURNER, JR., 58, is an Independent
Consultant and technology venture investor. He is General
Partner and co-founder of Taylor & Turner Associates, Ltd.
(venture capital partnerships) since prior to 1995. He is a
director of DuPont Photomasks, Inc. (semiconductor manufacturing
services), the Public Broadcasting Service (public television
network), the George Lucas Educational Foundation and the
Smithsonian Museum of Natural History. His address is 220
Montgomery Street, Penthouse 10, San Francisco, California 94104-
3402.
Officers
PETER ANASTOS, Senior Vice President, 57, is a Senior
Vice President of ACMC, with which he has been associated since
prior to 1995.
KATHLEEN A. CORBET, Senior Vice President, 39, is an
Executive Vice President of ACMC, with which she has been
associated since prior to 1995.
THOMAS J. BARDONG, Vice President, 54, is a Senior Vice
President of ACMC, with which he has been associated since prior
to 1995.
GERALD T. MALONE, Vice President, 45, is a Senior Vice
President of ACMC, with which he has been associated since prior
to 1995.
MARK D. GERSTEN, Treasurer and Chief Financial Officer,
49, is a Senior Vice President of Alliance Fund Services, Inc.
("AFS") and a Vice President of Alliance Fund Distributors, Inc.
("AFD"), with which he has been associated since prior to 1995.
VINCENT S. NOTO, Controller, 35, is a Vice President of
AFS, with which he has been associated since prior to 1995.
EDMUND P. BERGAN, JR., Secretary, 49, is a Senior Vice
President and the General Counsel of AFD and AFS, with which he
has been associated since prior to 1995.
16
<PAGE>
ANDREW L. GANGOLF - Assistant Secretary, 45, is a Vice
President and Assistant General Counsel of AFD, with which he has
been associated since prior to 1995.
DOMENICK PUGLIESE - Assistant Secretary, 38, is a Vice
President and Assistant General Counsel of AFD, with which he has
been associated since May 1995. Prior thereto, he was a Vice
President and Counsel of Concord Holding Corporation since prior
to 1995.
The aggregate compensation paid by the Fund to each of
the Directors during its fiscal year ended November 30, 1999, the
aggregate compensation paid to each of the Directors during
calendar year 1999 by all of the registered investment companies
to which the Adviser provides investment advisory services
(collectively, the "Alliance Fund Complex"), and the total number
of registered investment companies in the Alliance Fund Complex
with respect to which each of the Directors serves as a director
or trustee, are set forth below. Neither the Fund nor any other
registered investment company in the Alliance Fund Complex
provides compensation in the form of pension or retirement
benefits to any of its directors or trustees. Certain of the
Directors are directors or trustees of one or more other
registered investment companies in the Alliance Fund Complex.
Total Number
of Investment Total Number
Companies in of Investment
the Alliance Portfolios
Total Fund Complex, Within the
Compensation Including the Alliance Fund
From the Fund, as to Complex, Including
Alliance Fund which the the Fund, as to
Aggregate Complex, Director is which the Director
Name of Director Compensation Including a Director is a Director or
of the Fund From the Fund the Fund or Trustee Trustee
John D. Carifa $0 $0 50 103
Robert C. Alexander $20,850 $ 20,850 1 1
David H. Dievler $20,368 $210,188 45 87
Charles H. Ferguson $ 7,150 $ 7,150 1 1
William H. Foulk, Jr. $20,371 $246,413 45 98
D. James Guzy $20,850 $ 20,850 1 1
Marshall C.
Turner, Jr. $20,350 $ 20,350 1 1
As of January 5, 2000 the Directors and officers of the
Fund as a group owned less than 1% of the shares of the Fund.
17
<PAGE>
________________________________________________________________
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" or ("AFD")) to permit the Principal Underwriter to
distribute the Fund's shares and to permit the Fund to pay
distribution services fees to defray expenses associated with the
distribution of its Class A, Class B and Class C shares in
accordance with a plan of distribution which is included in the
Agreement and has been duly adopted and approved in accordance
with Rule 12b-1 under the 1940 Act (the "Rule 12b-1 Plan").
During the Fund's fiscal year ended November 30, 1999,
the Fund paid distribution services fees for expenditures under
the Agreement, with respect to Class A shares, in amounts
aggregating $4,273,345 which constituted .30%, annualized, of the
Fund's aggregate average daily net assets attributable to Class A
shares during the period, and the Adviser made payments from its
own resources as described above aggregating $3,020,454. Of the
$7,293,799 paid by the Fund and the Adviser under the Rule 12b-1
Plan with respect to the Class A shares, $159,482 was spent on
advertising, $90,244 on the printing and mailing of prospectuses
for persons other than current shareholders, $4,041,870 for
compensation to broker-dealers and other financial intermediaries
(including, $450,771 to the Fund's Principal Underwriter),
$1,130,533 for compensation to sales personnel, $1,871,670 was
spent on printing of sales literature, travel, entertainment, due
diligence and other promotional expenses.
During the Fund's fiscal year ended November 30, 1999,
the Fund paid distribution services fees for expenditures under
the Agreement, with respect to Class B shares, in amounts
aggregating $25,416,842 which constituted 1.00%, annualized, of
the Fund's aggregate average daily net assets attributable to
Class B shares during the period, and the Adviser made payments
from its own resources as described above aggregating
$32,846,329. Of the $58,263,171paid by the Fund and the Adviser
under the Rule 12b-1 Plan with respect to the Class B shares,
$248,164 was spent on advertising, $140,813 on the printing and
mailing of prospectuses for persons other than current
shareholders, $52,762,104 for compensation to broker-dealers and
other financial intermediaries (including, $710,522 to the Fund's
Principal Underwriter), $759,481 for compensation to sales
personnel, $1,306,460 was spent on printing of sales literature,
18
<PAGE>
travel, entertainment, due diligence and other promotional
expenses, and $3,046,149 was spent on interest on Class B shares
financing.
During the Fund's fiscal year ended November 30, 1999,
the Fund paid distribution services fees for expenditures under
the Agreement, with respect to Class C shares, in amounts
aggregating $5,486,797, which constituted 1.00%, annualized, of
the Fund's Aggregate average daily net assets attributable to
Class C shares during the period, and the Adviser made payments
from its own resources as described above aggregating $2,187,728.
Of the $7,674,525 paid by the Fund and the Adviser under the Rule
12b-1 Plan with respect to the Class C shares, $83,849 was spent
on advertising, $46,732 on the printing and mailing of
prospectuses for persons other than current shareholders,
$6,756,886 for compensation to broker-dealers and other financial
intermediaries (including, $233,835 to the Fund's Principal
Underwriter), $244,444 for compensation to sales personnel,
$428,282 was spent on printing of sales literature, travel,
entertainment, due diligence and other promotional expenses, and
$114,332was spent on interest on Class C shares financing.
Distribution services fees are accrued daily and paid
monthly and are charged as expenses of the Fund as accrued. The
distribution services fees attributable to the Class B shares and
Class C shares are designed to permit an investor to purchase
such shares through broker-dealers without the assessment of an
initial sales charge, and at the same time to permit the
Principal Underwriter to compensate broker-dealers in connection
with the sale of such shares. In this regard, the purpose and
function of the combined contingent deferred sales charge and
distribution services fees on the Class B shares and Class C
shares are the same as those of the initial sales charge and
distribution services fee with respect to the Class A shares in
that in each case the sales charge and distribution services fee
provide for the financing of the distribution of the relevant
class of the Fund's shares.
With respect to Class A shares of the Fund, distribution
expenses accrued by AFD in one fiscal year may not be paid from
distribution services fees received from the Fund in subsequent
fiscal years. AFD's compensation with respect to Class B and
Class C shares for any given year, however, will probably exceed
the distribution services fee payable under the Rule 12b-1 Plan
with respect to the class involved and, in the case of Class B
and Class C shares, payments received from contingent deferred
sales charges ("CDSCs"). The excess will be carried forward by
AFD and reimbursed from distribution services fees payable under
the Rule 12b-1 Plan with respect to the class involved and, in
the case of Class B and Class C shares, payments subsequently
19
<PAGE>
received through CDSCs, so long as the Rule 12b-1 Plan is in
effect.
Unreimbursed distribution expenses incurred as of the
end of the Fund's most recently completed fiscal period, and
carried over for reimbursement in future years in respect of the
Class B and Class C shares for the Fund were, respectively,
$69,446,278 (1.77% of the net assets of Class B) and $4,215,524
(.46% of the net assets of Class C).
The Rule 12b-1 Plan is in compliance with rules of the
National Association of Securities Dealers, Inc. which
effectively limit the annual asset-based sales charges and
service fees that a mutual fund may pay on a class of shares to
.75% and .25%, respectively, of the average annual net assets
attributable to that class. The rules also limit the aggregate
of all front-end, deferred and asset-based sales charges imposed
with respect to a class of shares by a mutual fund that also
charges a service fee to 6.25% of cumulative gross sales of
shares of that class, plus interest at the prime rate plus 1% per
annum.
In approving the 12b-1 Plan, the Directors of the Fund
determined that there was a reasonable likelihood that the Rule
12b-1 Plan would benefit the Fund and its shareholders. The
distribution services fee of a particular class will not be used
to subsidize the provision of distribution services with respect
to any other class.
The Adviser may from time to time and from its own funds
or such other resources as may be permitted by rules of the
Commission make payments for distribution services to the
Principal Underwriter; the latter may in turn pay part or all of
such compensation to brokers or other persons for their
distribution assistance.
The Agreement will continue in effect for successive
twelve-month periods (computed from each October 1), provided,
however, that such continuance is specifically approved at least
annually by the Directors of the Fund or by vote of the holders
of a majority of the outstanding voting securities (as defined in
the 1940 Act) of that class, and in either case, by a majority of
the Directors of the Fund who are not parties to the Agreement or
"interested persons," as defined in the 1940 Act, of any such
party (other than as directors of the Fund) and who have no
direct or indirect financial interest in the operation of the
Rule 12b-1 Plan or any agreement related thereto. The Agreement
was approved for another annual term 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 July 22, 1999.
20
<PAGE>
In the event that the Rule 12b-1 Plan is terminated or
not continued with respect to the Class A shares, Class B shares
or Class C shares, (i) no distribution services fees (other than
current amounts accrued but not yet paid) would be owed by the
Fund to the Principal Underwriter with respect to that class, and
(ii) the Fund would not be obligated to pay the Principal
Underwriter for any amounts expended under the Agreement not
previously recovered by the Principal Underwriter from
distribution services fees in respect of shares of such class or
through deferred sales charges.
Transfer Agency Agreement
Alliance Fund Services, Inc. ("AFS"), an indirect
wholly-owned subsidiary of the Adviser located at 500 Plaza
Drive, Secaucus, New Jersey 07094, receives a transfer agency fee
per account holder of each of the Class A, Class B, Class C and
Advisor Class shares of the Fund, plus reimbursement for out-of-
pocket expenses. The transfer agency fee with respect to the
Class B shares and Class C shares is higher than the transfer
agency fee with respect to the Class A shares and Advisor Class
shares, reflecting the additional costs associated with the
Class B and Class C contingent deferred sales charges. For the
fiscal year ended November 30, 1999, the Fund paid AFS
$10,024,493 pursuant to the Transfer Agency Agreement.
________________________________________________________________
PURCHASE OF SHARES
________________________________________________________________
The following information supplements that set forth in
the Fund's Prospectus under the heading "Purchase and Sale of
Shares -- How to Buy Shares."
General
Shares of the Fund are offered on a continuous basis at
a price equal to their net asset value plus an initial sales
charge at the time of purchase ("Class A shares"), with a
contingent deferred sales charge ("Class B shares"), without any
initial sales charge and, as long as the shares are held for one
year or more, without any contingent deferred sales charge
("Class C shares"), or, to investors eligible to purchase Advisor
Class shares, without any initial, contingent deferred or asset-
based sales charge, in each case as described below. Shares of
the Fund that are offered subject to a sales charge are offered
through (i) investment dealers that are members of the National
Association of Securities Dealers, Inc. and have entered into
selected dealer agreements with the Principal Underwriter
("selected dealers"), (ii) depository institutions and other
21
<PAGE>
financial intermediaries or their affiliates, that have entered
into selected agent agreements with the Principal Underwriter
("selected agents") and (iii) the Principal Underwriter.
Advisor Class shares of the Fund may be purchased and
held solely (i) through accounts established under fee-based
programs, sponsored and maintained by registered broker-dealers
or other financial intermediaries and approved by the Principal
Underwriter, (ii) through self-directed defined contribution
employee benefit plans (e.g., 401(k) plans) that have at least
1,000 participants or $25 million in assets, or (iii) by the
categories of investors described in clauses (i) through (iv)
below under "--Sales at Net Asset Value" (other than officers,
directors and present and full-time employees of selected dealers
or agents, or relatives of such person, or any trust, individual
retirement account or retirement plan account for the benefit of
such relative, none of whom is eligible on the basis solely of
such status to purchase and hold Advisor Class shares), or
(iv) by directors and present or retired full-time employees of
CB Richard Ellis, Inc. Generally, a fee-based program must
charge an asset-based or other similar fee and must invest at
least $250,000 in Advisor Class shares of the Fund in order to be
approved by the Principal Underwriter for investment in Advisor
Class shares.
Investors may purchase shares of the Fund either through
selected broker-dealers, agents, financial intermediaries or
other financial representatives or directly through the Principal
Underwriter. A transaction, service, administrative or other
similar fee may be charged by your broker-dealer, agent,
financial intermediary or other financial representative with
respect to the purchase, sale or exchange of Class A, Class B,
Class C or Advisor Class shares made through such financial
representative. Such financial intermediaries may also impose
requirements with respect to the purchase, sale or exchange of
shares that are different from, or in addition to, those imposed
by the Fund, including requirements as to the minimum initial and
subsequent investment amounts. Sales personnel of selected
dealers and agents distributing the Fund's shares may receive
differing compensation for selling Class A, Class B, Class C or
Advisor Class shares.
The Fund may refuse any order for the purchase of
shares. The Fund reserves the right to suspend the sale of its
shares to the public in response to conditions in the securities
markets or for other reasons.
The public offering price of shares of the Fund is their
net asset value, plus, in the case of Class A shares, a sales
charge which will vary depending on the purchase alternative
chosen by the investor, as shown in the table below under
22
<PAGE>
"Class A Shares." On each Fund business day on which a purchase
or redemption order is received by the Fund and trading in the
types of securities in which the Fund invests might materially
affect the value of Fund shares, the per share net asset value is
computed in accordance with the Fund's Articles of Incorporation
and By-Laws as of the next close of regular trading on the New
York Stock Exchange (the "Exchange") (currently 4:00 p.m. Eastern
time) by dividing the value of the Fund's total assets, less its
liabilities, by the total number of its shares then outstanding.
A Fund business day is any day on which the Exchange is open for
trading.
The respective per share net asset values of the
Class A, Class B, Class C and Advisor Class shares are expected
to be substantially the same. Under certain circumstances,
however, the per share net asset values of the Class B and
Class C shares may be lower than the per share net asset values
of the Class A and Advisor Class shares as a result of the
differential daily expense accruals of the distribution and
transfer agency fees applicable with respect to those classes of
shares. Even under those circumstances, the per share net asset
values of the four classes eventually will tend to converge
immediately after the payment of dividends, which will differ by
approximately the amount of the expense accrual differential
among the classes.
The Fund will accept unconditional orders for its shares
to be executed at the public offering price equal to their net
asset value next determined (plus applicable Class A sales
charges), as described below. Orders received by the Principal
Underwriter prior to the close of regular trading on the Exchange
on each day the Exchange is open for trading are priced at the
net asset value computed as of the close of regular trading on
the Exchange on that day (plus applicable Class A sales charges).
In the case of orders for purchase of shares placed through
selected dealers, agents or financial representatives, as
applicable, the applicable public offering price will be the net
asset value as so determined, but only if the selected dealer,
agent or financial representative receives the order prior to the
close of regular trading on the Exchange and transmits it to the
Principal Underwriter prior to 5:00 p.m. Eastern time. The
selected dealer, agent or financial representative, as
applicable, is responsible for transmitting such orders by
5:00 p.m. Eastern time. (Certain selected dealers, agents or
financial representatives may enter into operating agreements
permitting them to transmit purchase information to the Principal
Underwriter after 5:00 p.m. Eastern time and receive that day's
net asset value). If the selected dealer, agent or financial
representative fails to do so, the investor's right to that day's
closing price must be settled between the investor and the
selected dealer, agent or financial representative, as
23
<PAGE>
applicable. If the selected dealer, agent or financial
representative, as applicable, receives the order after the close
of regular trading on the Exchange, the price will be based on
the net asset value determined as of the close of regular trading
on the Exchange on the next day it is open for trading.
Following the initial purchase of Fund shares, a
shareholder may place orders to purchase additional shares by
telephone if the shareholder has completed the appropriate
portion of the Subscription Application or an "Autobuy"
application obtained by calling the "For Literature" telephone
number shown on the cover of this Statement of Additional
Information. Except with respect to certain omnibus accounts,
telephone purchase orders may not exceed $500,000. Payment for
shares purchased by telephone can be made only by electronic
funds transfer from a bank account maintained by the shareholder
at a bank that is a member of the National Automated Clearing
House Association ("NACHA"). If a shareholder's telephone
purchase request is received before 3:00 p.m. Eastern time on a
Fund business day, the order to purchase shares is automatically
placed the following Fund business day, and the applicable public
offering price will be the public offering price determined as of
the close of business on such following business day.
Full and fractional shares are credited to a
subscriber's account in the amount of his or her subscription.
As a convenience to the subscriber, and to avoid unnecessary
expense to the Fund, stock certificates representing shares of
the Fund are not issued except upon written request to the Fund
by the shareholder or his or her authorized selected dealer or
agent. This facilitates later redemption and relieves the
shareholder of the responsibility for and inconvenience of lost
or stolen certificates. No certificates are issued for
fractional shares, although such shares remain in the
shareholder's account on the books of the Fund.
In addition to the discount or commission paid to
dealers or agents, the Principal Underwriter from time to time
pays additional cash or other incentives to dealers or agents,
including EQ Financial Consultants, Inc., formerly Equico
Securities, Inc., a 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 take the form of payment for attendance at
seminars, meals, sporting events or theater performances, or
payment for travel, lodging and entertainment incurred in
connection with travel taken by persons associated with a dealer
or agent to locations within or outside the United States. Such
24
<PAGE>
dealer or agent may elect to receive cash incentives of
equivalent amount in lieu of such payments.
Class A, Class B, Class C and Advisor Class shares each
represent an interest in the same portfolio of investments of the
Fund, have the same rights and are identical in all respects,
except that (i) Class A shares bear the expense of the initial
sales charge (or contingent deferred sales charge, when
applicable) and Class B and Class C shares bear the expense of
the contingent deferred sales charge, (ii) Class B shares and
Class C shares each bear the expense of a higher distribution
services fee than those borne by Class A shares, and Advisor
Class shares do not bear such a fee, (iii) Class B and Class C
shares bear higher transfer agency costs than that borne by
Class A and Advisor Class shares, (iv) each of Class A, Class B
and Class C shares has exclusive voting rights with respect to
provisions of the Rule 12b-1 Plan pursuant to which its
distribution services fee is paid and other matters for which
separate class voting is appropriate under applicable law,
provided that, if the Fund submits to a vote of the Class A
shareholders, an amendment to the Rule 12b-1 Plan that would
materially increase the amount to be paid thereunder with respect
to the Class A shares, then such amendment will also be submitted
to the Class B shareholders and Advisor Class shareholders and
the Class A, Class B and Advisor Class shareholders will vote
separately by class, and (v) Class B shares and Advisor Class
shares are subject to a conversion feature. Each class has
different exchange privileges and certain different shareholder
service options available.
The Directors of the Fund have determined that currently
no conflict of interest exists between or among the Class A,
Class B, Class C and Advisor Class shares. On an ongoing basis,
the Directors of the Fund, pursuant to their fiduciary duties
under the 1940 Act and state law, will seek to ensure that no
such conflict arises.
Alternative Retail Purchase Arrangements -- Class A, Class B and
Class C Shares***
The alternative purchase arrangements available with
respect to Class A, Class B and Class C shares permit an investor
to choose the method of purchasing shares that is most beneficial
given the amount of the purchase, the length of time the investor
expects to hold the shares, and other circumstances. Investors
should consider whether, during the anticipated life of their
investment in the Fund, the accumulated distribution services fee
____________________
*** Advisor Class shares are sold only to investors described
above in this section under "--General."
25
<PAGE>
and contingent deferred sales charge on Class B shares prior to
conversion, or the accumulated distribution services fee and
contingent deferred sales charge on Class C shares, would be less
than the initial sales charge and accumulated distribution
services fee on Class A shares purchased at the same time, and to
what extent such differential would be offset by the higher
return of Class A shares. Class A shares will normally be more
beneficial than Class B shares to the investor who qualifies for
reduced initial sales charges on Class A shares, as described
below. In this regard, the Principal Underwriter will reject any
order (except orders from certain retirement plans and certain
employee benefit plans) for more than $250,000 for Class B
shares. Class C shares will normally not be suitable for the
investor who qualifies to purchase Class A shares at net asset
value. (See Appendix A for information concerning the
eligibility of certain employee benefit plans to purchase Class B
shares at net asset value without being subject to a contingent
deferred sales charge and the ineligibility of certain such plans
to purchase Class A shares.) For this reason, the Principal
Underwriter will reject any order for more than $1,000,000 for
Class C shares.
Class A shares are subject to a lower distribution
services fee and, accordingly, pay correspondingly higher
dividends per share than Class B shares or Class C shares.
However, because initial sales charges are deducted at the time
of purchase, investors purchasing Class A shares would not have
all their funds invested initially and, therefore, would
initially own fewer shares. Investors not qualifying for reduced
initial sales charges who expect to maintain their investment for
an extended period of time might consider purchasing Class A
shares because the accumulated continuing distribution charges on
Class B shares or Class C shares may exceed the initial sales
charge on Class A shares during the life of the investment.
Again, however, such investors must weigh this consideration
against the fact that, because of such initial sales charges, not
all their funds will be invested initially.
Other investors might determine, however, that it would
be more advantageous to purchase Class B shares or Class C shares
in order to have all their funds invested initially, although
remaining subject to higher continuing distribution charges and,
being subject to a contingent deferred sales charge for a four-
year and one-year period, respectively. For example, based on
current fees and expenses, an investor subject to the 4.25%
initial sales charge on Class A shares would have to hold his or
her investment approximately seven years for the Class C
distribution services fee to exceed the initial sales charge plus
the accumulated distribution services fee of Class A shares. In
this example, an investor intending to maintain his or her
investment for a longer period might consider purchasing Class A
26
<PAGE>
shares. This example does not take into account the time value
of money, which further reduces the impact of the Class C
distribution services fees on the investment, fluctuations in net
asset value or the effect of different performance assumptions.
Those investors who prefer to have all of their funds
invested initially but may not wish to retain Fund shares for the
four-year period during which Class B shares are subject to a
contingent deferred sales charge may find it more advantageous to
purchase Class C shares.
During the Fund's fiscal years ended November 30, 1999,
1998 and 1997, the aggregate amounts of underwriting commission
payable with respect to shares of the Fund were $28,263,335,
$6,712,811 and $10,255,458, respectively. Of that amount, the
Principal Underwriter, received the amounts of $1,410,619,
$288,114 and $356,333, respectively, representing that portion of
the sales charges paid on shares of the Fund sold during the year
which was not reallowed to selected dealers (and was,
accordingly, retained by the Principal Underwriter). During the
Fund's fiscal years ended in 1999, 1998 and 1997, the Principal
Underwriter received contingent deferred sales charges of
$39,709, $44,368 and $21,399, respectively, on Class A Shares,
$3,373,129, $2,709,296 and $1,915,810, respectively, on Class B
Shares and $211,340, $122,105 and $78,448, respectively, on
Class C Shares.
Class A Shares
The public offering price of Class A shares is the net
asset value plus a sales charge, as set forth below.
27
<PAGE>
Sales Charge
Discount or
Commission
As % of to Dealers
As % of the or Agents
Net Public As % of
Amount of Amount Offering Offering
Purchase Invested Price Price
Less than
$100,000 4.44% 4.25% 4.00%
$100,000 but less
than $250,000 3.36 3.25 3.00
$250,000 but less
than $500,000 2.30 2.25 2.00
$500,000 but less
than $1,000,000* 1.78 1.75 1.50
_________________
* There is no initial sales charge on transactions of $1,000,000
or more.
With respect to purchases of $1,000,000 or more, Class A
shares redeemed within one year of purchase will be subject to a
contingent deferred sales charge equal to 1% of the lesser of the
cost of the shares being redeemed or their net asset value at the
time of redemption. Accordingly, no sales charge will be imposed
on increases in net asset value above the initial purchase price.
In addition, no charge will be assessed on shares derived from
reinvestment of dividends or capital gains distributions. The
contingent deferred sales charge on Class A shares will be waived
on certain redemptions, as described below under "--Class B
shares." In determining the contingent deferred sales charge
applicable to a redemption of Class A shares, it will be assumed
that the redemption is, first, of any shares that are not subject
to a contingent deferred sales charge (for example, because an
initial sales charge was paid with respect to the shares, or they
have been held beyond the period during which the charge applies
or were acquired upon the reinvestment of dividends or
distributions) and, second, of shares held longest during the
time they are subject to the sales charge. Proceeds from the
contingent deferred sales charge on Class A shares are paid to
the Principal Underwriter and are used by the Principal
Underwriter to defray the expenses of the Principal Underwriter
related to providing distribution-related services to the Fund in
connection with the sales of Class A shares, such as the payment
of compensation to selected dealers and agents for selling
Class A shares. With respect to purchases of $1,000,000 or more
made through selected dealers or agents, the Adviser may,
pursuant to the Distribution Services Agreement described above,
pay such dealers or agents from its own resources a fee of up to
28
<PAGE>
1% of the amount invested to compensate such dealers or agents
for their distribution assistance in connection with such
purchases.
No initial sales charge is imposed on Class A shares
issued (i) pursuant to the automatic reinvestment of income
dividends or capital gains distributions, (ii) in exchange for
Class A shares of other "Alliance Mutual Funds" (as that term is
defined under "Combined Purchase Privilege" below), except that
an initial sales charge will be imposed on Class A shares issued
in exchange for Class A shares of AFD Exchange Reserves ("AFDER")
that were purchased for cash without the payment of an initial
sales charge and without being subject to a contingent deferred
sales charge or (iii) upon the automatic conversion of Class B
shares or Advisor Class shares as described below under "-
- -Class B Shares-- Conversion Feature" and "--Conversion of
Advisor Class Shares to Class A Shares." The Fund receives the
entire net asset value of its Class A shares sold to investors.
The Principal Underwriter's commission is the sales charge shown
above less any applicable discount or commission "reallowed" to
selected dealers and agents. The Principal Underwriter will
reallow discounts to selected dealers and agents in the amounts
indicated in the table above. In this regard, the Principal
Underwriter may elect to reallow the entire sales charge to
selected dealers and agents for all sales with respect to which
orders are placed with the Principal Underwriter. A selected
dealer who receives reallowance in excess of 90% of such a sales
charge may be deemed to be an "underwriter" under the Securities
Act.
Investors choosing the initial sales charge alternative
may under certain circumstances be entitled to pay (i) no initial
sales charge (but be subject in most such cases to a contingent
deferred sales charge) or (ii) a reduced initial sales charge.
The circumstances under which investors may pay a reduced initial
sales charge are described below.
Combined Purchase Privilege. Certain persons may
qualify for the sales charge reductions indicated in the schedule
of such charges above by combining purchases of shares of the
Fund into a single "purchase," if the resulting "purchase" totals
at least $100,000. The term "purchase" refers to: (i) a single
purchase by an individual, or to concurrent purchases, which in
the aggregate are at least equal to the prescribed amounts, by an
individual, his or her spouse and their children under the age of
21 years purchasing shares of the Fund for his, her or their own
account(s); (ii) a single purchase by a trustee or other
fiduciary purchasing shares for a single trust, estate or single
fiduciary account although more than one beneficiary is involved;
or (iii) a single purchase for the employee benefit plans of a
single employer. The term "purchase" also includes purchases by
29
<PAGE>
any "company," as the term is defined in the 1940 Act, but does
not include purchases by any such company which has not been in
existence for at least six months or which has no purpose other
than the purchase of shares of the Fund or shares of other
registered investment companies at a discount. The term
"purchase" does not include purchases by any group of individuals
whose sole organizational nexus is that the participants therein
are credit card holders of a company, policy holders of an
insurance company, customers of either a bank or broker-dealer or
clients of an investment adviser. A "purchase" may also include
shares, purchased at the same time through a single selected
dealer or agent, of any other "Alliance Mutual Fund." Currently,
the Alliance Mutual Funds include:
AFD Exchange Reserves
Alliance All-Asia Investment Fund, Inc.
Alliance Balanced Shares, Inc.
Alliance Bond Fund, Inc.
-Corporate Bond Portfolio
-Quality Bond Portfolio
-U.S. Government Portfolio
Alliance Disciplined Value Fund, Inc.
Alliance Global Dollar Government Fund, Inc.
Alliance Global Environment Fund, Inc.
Alliance Global Small Cap Fund, Inc.
Alliance Global Strategic Income Trust, Inc.
Alliance Greater China '97 Fund, Inc.
Alliance Growth and Income Fund, Inc.
Alliance Health Care Fund, Inc.
Alliance High Yield Fund, Inc.
Alliance International Fund
Alliance International Premier Growth Fund, Inc.
Alliance Limited Maturity Government Fund, Inc.
Alliance Mortgage Securities Income Fund, Inc.
Alliance Multi-Market Strategy Trust, Inc.
Alliance Municipal Income Fund, Inc.
-California Portfolio
-Insured California Portfolio
-Insured National Portfolio
-National Portfolio
-New York Portfolio
Alliance Municipal Income Fund II
-Arizona Portfolio
-Florida Portfolio
-Massachusetts Portfolio
-Michigan Portfolio
-Minnesota Portfolio
-New Jersey Portfolio
-Ohio Portfolio
-Pennsylvania Portfolio
-Virginia Portfolio
30
<PAGE>
Alliance New Europe Fund, Inc.
Alliance North American Government Income Trust, Inc.
Alliance Premier Growth Fund, Inc.
Alliance Quasar Fund, Inc.
Alliance Real Estate Investment Fund, Inc.
Alliance Technology Fund, Inc.
Alliance Utility Income Fund, Inc.
Alliance Worldwide Privatization Fund, Inc.
The Alliance Fund, Inc.
The Alliance Portfolios
-Alliance Conservative Investors Fund
-Alliance Growth Fund
-Alliance Growth Investors Fund
-Alliance Short-Term U.S. Government Fund
Prospectuses for the Alliance Mutual Funds may be
obtained without charge by contacting AFS at the address or the
"For Literature" telephone number shown on the front cover of
this Statement of Additional Information.
Cumulative Quantity Discount (Right of Accumulation). An
investor's purchase of additional Class A shares of the Fund may
qualify for a Cumulative Quantity Discount. The applicable sales
charge will be based on the total of:
(i) the investor's current purchase;
(ii) the net asset value (at the close of business on
the previous day) of (a) all shares of the Fund held by the
investor and (b) all shares of any other Alliance Mutual Fund
held by the investor; and
(iii) the net asset value of all shares described in
paragraph (ii) owned by another shareholder eligible to combine
his or her purchase with that of the investor into a single
"purchase" (see above).
For example, if an investor owned shares of an Alliance
Mutual Fund worth $200,000 at their then current net asset value
and, subsequently, purchased Class A shares of the Fund worth an
additional $100,000, the 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.
31
<PAGE>
Statement of Intention. Class A investors may also
obtain the reduced sales charges shown in the table above by
means of a written Statement of Intention, which expresses the
investor's intention to invest not less than $100,000 within a
period of 13 months in Class A shares (or Class A, Class B,
Class C and/or Advisor Class shares) of the Fund or any other
Alliance Mutual Fund. Each purchase of shares under a Statement
of Intention will be made at the public offering price or prices
applicable at the time of such purchase to a single transaction
of the dollar amount indicated in the Statement of Intention. At
the investor's option, a Statement of Intention may include
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% sales charge on the total amount being invested (the sales
charge applicable to an investment of $100,000).
The Statement of Intention is not a binding obligation
upon the investor to purchase the full amount indicated. The
minimum initial investment under a Statement of Intention is 5%
of such amount. Shares purchased with the first 5% of such
amount will be held in escrow (while remaining registered in the
name of the investor) to secure payment of the higher sales
charge applicable to the shares actually purchased if the full
amount indicated is not purchased, and such escrowed shares will
be involuntarily redeemed to pay the additional sales charge, if
necessary. Dividends on escrowed shares, whether paid in cash or
reinvested in additional Fund shares, are not subject to escrow.
When the full amount indicated has been purchased, the escrow
will be released. To the extent that an investor purchases more
than the dollar amount indicated on the Statement of Intention
and qualifies for a further reduced sales charge, the sales
charge will be adjusted for the entire amount purchased at the
end of the 13-month period. The difference in the sales charge
will be used to purchase additional shares of the Fund subject to
the rate of the sales charge applicable to the actual amount of
the aggregate purchases.
32
<PAGE>
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 AFS at the address or
telephone numbers shown on the cover of this Statement of
Additional Information.
Certain Retirement Plans. Multiple participant payroll
deduction retirement plans may also purchase shares of the Fund
or any other Alliance Mutual Fund at a reduced sales charge on a
monthly basis during the 13-month period following such a plan's
initial purchase. The sales charge applicable to such initial
purchase of shares of the Fund will be that normally applicable,
under the schedule of the sales charges set forth in this
Statement of Additional Information, to an investment 13 times
larger than such initial purchase. The sales charge applicable
to each succeeding monthly purchase will be that normally
applicable, under such schedule, to an investment equal to the
sum of (i) the total purchase previously made during the 13-month
period and (ii) the current month's purchase multiplied by the
number of months (including the current month) remaining in the
13-month period. Sales charges previously paid during such
period will not be retroactively adjusted on the basis of later
purchases.
Reinstatement Privilege. A shareholder who has caused
any or all of his or her Class A or Class B shares of the Fund to
be redeemed or repurchased may reinvest all or any portion of the
redemption or repurchase proceeds in Class A shares of the Fund
at net asset value without any sales charge, provided that
(i) such reinvestment is made within 120 calendar days after the
redemption or repurchase date and (ii) for Class B shares, a
contingent deferred sales charge has been paid and the Principal
Underwriter has approved, at its discretion, the reinvestment of
such shares. Shares are sold to a reinvesting shareholder at the
net asset value next determined as described above. A
reinstatement pursuant to this privilege will not cancel the
redemption or repurchase transaction; therefore, any gain or loss
so realized will be recognized for federal income tax purposes
except that no loss will be recognized to the extent that the
proceeds are reinvested in shares of the Fund within 30 calendar
days after the redemption or repurchase transaction. Investors
may exercise the reinstatement privilege by written request sent
to the Fund at the address shown on the cover of this Statement
of Additional Information.
Sales at Net Asset Value. The Fund may sell its Class A
shares at net asset value (i.e., without an initial sales charge)
and without a contingent deferred sales charge to certain
33
<PAGE>
categories of investors including: (i) investment management
clients of the Adviser or its affiliates; (ii) officers and
present or former Directors of the Fund; present or former
directors and trustees of other investment companies managed by
the Adviser; present or retired full-time employees of the
Adviser, the Principal Underwriter, AFS and their affiliates;
officers and directors of ACMC, the Principal Underwriter, AFS
and their affiliates; officers, directors and present full-time
employees of selected dealers or agents; or the spouse, sibling,
direct ancestor or direct descendant (collectively, "relatives")
of any such person; or any trust, individual retirement account
or retirement plan account for the benefit of any such person or
relative; or the estate of any such person or relative, if such
shares are purchased for investment purposes (such shares may not
be resold except to the Fund); (iii) the Adviser, the Principal
Underwriter, AFS and their affiliates; and certain employee
benefit plans for employees of the Adviser, the Principal
Underwriter, AFS and their affiliates; (iv) registered investment
advisers or other financial intermediaries who charge a
management, consulting or other fee for their services and who
purchase shares through a broker or agent approved by the
Principal Underwriter and clients of such registered investment
advisers or financial intermediaries whose accounts are linked to
the master account of such investment adviser or financial
intermediary on the books of such approved broker or agent;
(v) persons participating in a fee-based program, sponsored and
maintained by a registered broker-dealer or other financial
intermediary and approved by the Principal Underwriter, pursuant
to which such persons pay an asset-based fee to such broker-
dealer or financial intermediary, or its affiliate or agent, for
service in the nature of investment advisory or administrative
services; (vi) employer- sponsored qualified pension or profit-
sharing plans (including Section 401(k) plans), custodial
accounts maintained pursuant to Section 403(b)(7) retirement
plans and individual retirement accounts (including individual
retirement accounts to which simplified employee pension ("SEP")
contributions are made), if such plans or accounts are
established or administered under programs sponsored by
administrators or other persons that have been approved by the
Principal Underwriter; (vii) a unit investment trust organized
and sponsored by Prudential Securities Incorporated, the
portfolio of which consists of Class A shares of the Fund and
stripped U.S. Treasury issued notes or bonds bearing no current
interest (the "Trust"); and (vii) unit holders of the Trust
investing the proceeds of cash distributions from the Trust under
circumstances described in the prospectus of the Trust, including
distributions upon the termination of the Trust provided that the
proceeds of such termination are invested in the Fund within 30
days of such termination and that the Fund's principal
underwriter is provided with evidence that establishes to the
34
<PAGE>
Fund's satisfaction that the investment in the Fund is being made
exclusively from the proceeds from such distribution.
Class B Shares
Investors may purchase Class B shares at the public
offering price equal to the net asset value per share of the
Class B shares on the date of purchase without the imposition of
a sales charge at the time of purchase. The Class B shares are
sold without an initial sales charge so that the Fund will
receive the full amount of the investor's purchase payment.
Proceeds from the contingent deferred sales charge on
Class B shares are paid to the Principal Underwriter and are used
by the Principal Underwriter to defray the expenses of the
Principal Underwriter related to providing distribution-related
services to the Fund in connection with the sale of the Class B
shares, such as the payment of compensation to selected dealers
and agents for selling Class B shares. The combination of the
contingent deferred sales charge and the distribution services
fee enables the Fund to sell the Class B shares without a sales
charge being deducted at the time of purchase. The higher
distribution services fee incurred by Class B shares will cause
such shares to have a higher expense ratio and to pay lower
dividends than those related to Class A shares.
Contingent Deferred Sales Charge. Class B shares that
are redeemed within four years of purchase will be subject to a
contingent deferred sales charge at the rates set forth below
charged as a percentage of the dollar amount subject thereto. The
charge will be assessed on an amount equal to the lesser of the
cost of the shares being redeemed or their net asset value at the
time of redemption. Accordingly, no sales charge will be imposed
on increases in net asset value above the initial purchase price.
In addition, no charge will be assessed on shares derived from
reinvestment of dividends or capital gains distributions.
To illustrate, assume that an investor purchased 100
Class B shares at $10 per share (at a cost of $1,000) and in the
second year after purchase, the net asset value per share is $12
and, during such time, the investor has acquired 10 additional
Class B shares upon dividend reinvestment. If at such time the
investor makes his or her first redemption of 50 Class B shares
(proceeds of $600), 10 Class B shares will not be subject to the
charge because of dividend reinvestment. With respect to the
remaining 40 Class B shares, the charge is applied only to the
original cost of $10 per share and not to the increase in net
asset value of $2 per share. Therefore, $400 of the $600
redemption proceeds will be charged at a rate of 3.0% (the
applicable rate in the second year after purchase, as set forth
below).
35
<PAGE>
The amount of the contingent deferred sales charge, if
any, will vary depending on the number of years from the time of
payment for the purchase of Class B shares until the time of
redemption of such shares.
Contingent Deferred Sales Charge as a %
of Dollar Amount Subject to Charge
Shares Purchased Shares Purchased
on or before on or after
Year Since Purchase November 19, 1993 November 19, 1993
First 5.5% 4.0%
Second 4.5% 3 0%
Third 3.5% 2.0
Fourth 2.5% 1.0%
Fifth 1.5% 1.0%
Sixth 0.5% None
Seventh and thereafter None None
In determining the contingent deferred sales charge
applicable to a redemption of Class B shares, it will be assumed
that the redemption is, first, of any shares that were acquired
upon the reinvestment of dividends or distributions and, second,
of shares held longest during the time they are subject to the
sales charge. When shares acquired in an exchange are redeemed,
the applicable contingent deferred sales charge and conversion
schedules will be the schedules that applied at the time of the
purchase of shares of the corresponding class of the Alliance
Mutual Fund originally purchased by the shareholder.
The contingent deferred sales charge is waived on
redemptions of shares (i) following the death or disability, as
defined in the Internal Revenue Code of 1986, as amended (the
"Code"), of a shareholder, (ii) to the extent that the redemption
represents a minimum required distribution from an individual
retirement account or other retirement plan to a shareholder who
has attained the age of 70-1/2, (iii) that had been purchased by
present or former Directors of the Fund, by the relative of any
such person, by any trust, individual retirement account or
retirement plan account for the benefit of any such person or
relative or by the estate of any such person or relative, or
(iv) pursuant to a systematic withdrawal plan (see "Shareholder
Services--Systematic Withdrawal Plan" below).
Conversion Feature. Eight years after the end of the
calendar month in which the shareholder's purchase order was
accepted, Class B shares will automatically convert to Class A
shares and will no longer be subject to a higher distribution
services fee. Such conversion will occur on the basis of the
relative net asset values of the two classes, without the
36
<PAGE>
imposition of any sales load, fee or other charge. The purpose
of the conversion feature is to reduce the distribution services
fee paid by holders of Class B shares that have been outstanding
long enough for the Principal Underwriter to have been
compensated for distribution expenses incurred in the sale of
such shares.
For purposes of conversion to Class A, Class B shares
purchased through the reinvestment of dividends and distributions
paid in respect of Class B shares in a shareholder's account will
be considered to be held in a separate sub-account. Each time
any Class B shares in the shareholder's account (other than those
in the sub-account) convert to Class A, an equal pro-rata portion
of the Class B shares in the sub-account will also convert to
Class A.
The conversion of Class B shares to Class A shares is
subject to the continuing availability of an opinion of counsel
to the effect that the conversion of Class B shares to Class A
shares does not constitute a taxable event under federal income
tax law. The conversion of Class B shares to Class A shares may
be suspended if such an opinion is no longer available at the
time such conversion is to occur. In that event, no further
conversions of Class B shares would occur, and shares might
continue to be subject to the higher distribution services fee
for an indefinite period which may extend beyond the period
ending eight years after the end of the calendar month in which
the shareholder's purchase order was accepted.
Class C Shares
Investors may purchase Class C shares at the public
offering price equal to the net asset value per share of the
Class C shares on the date of purchase without the imposition of
a sales charge either at the time of purchase or, as long as the
shares are held for one year or more, upon redemption. Class C
shares are sold without an initial sales charge so that the Fund
will receive the full amount of the investor's purchase payment
and, as long as the shares are held for one year or more, without
a contingent deferred sales charge so that the investor will
receive as proceeds upon redemption the entire net asset value of
his or her Class C shares. The Class C distribution services fee
enables the Fund to sell Class C shares without either an initial
or contingent deferred sales charge, as long as the shares are
held for one year or more. Class C shares do not convert to any
other class of shares of the Fund and incur higher distribution
services fees and transfer agency costs than Class A shares and
Advisor Class shares, and will thus have a higher expense ratio
and pay correspondingly lower dividends than Class A shares and
Advisor Class shares.
37
<PAGE>
Class C shares that are redeemed within one year of
purchase will be subject to a contingent deferred sales charge of
1%, charged as a percentage of the dollar amount subject thereto.
The charge will be assessed on an amount equal to the lesser of
the cost of the shares being redeemed or their net asset value at
the time of redemption. Accordingly, no sales charge will be
imposed on increases in net asset value above the initial
purchase price. In addition, no charge will be assessed on shares
derived from reinvestment of dividends or capital gains
distributions. The contingent deferred sales charge on Class C
shares will be waived on certain redemptions, as described above
under "--Class B shares." In determining the contingent deferred
sales charge applicable to a redemption of Class C shares, it
will be assumed that the redemption is, first, of any shares that
are not subject to a contingent deferred sales charge (for
example, because the shares have been held beyond the period
during which the charge applies or were acquired upon the
reinvestment of dividends or distributions) and, second, of
shares held longest during the time they are subject to the sales
charge.
Proceeds from the contingent deferred sales charge are
paid to the Principal Underwriter and are used by the Principal
Underwriter to defray the expenses of the Principal Underwriter
related to providing distribution-related services to the Fund in
connection with the sale of the Class C shares, such as the
payment of compensation to selected dealers and agents for
selling Class C shares. The combination of the contingent
deferred sales charge and the distribution services fee enables
the Fund to sell the Class C shares without a sales charge being
deducted at the time of purchase. The higher distribution
services fee incurred by Class C shares will cause such shares to
have a higher expense ratio and to pay lower dividends than those
related to Class A shares and Advisor Class shares.
Conversion of Advisor Class Shares to Class A Shares
Advisor Class shares may be held solely through the fee-
based program accounts and employee benefit plans and registered
investment advisory or other financial intermediary relationships
described above under "Purchase of Shares--General," and by
investment advisory clients of, and by certain other persons
associated with, the Adviser and its affiliates or the Fund. If
(i) a holder of Advisor Class shares ceases to participate in the
fee-based program or plan, or to be associated with the
investment adviser or financial intermediary, in each case, that
satisfies the requirements to purchase shares set forth under
"Purchase of Shares--General" or (ii) the holder is otherwise no
longer eligible to purchase Advisor Class shares as described in
the Advisor Class Prospectus and this Statement of Additional
Information (each, a "Conversion Event"), then all Advisor Class
38
<PAGE>
shares held by the shareholder will convert automatically to
Class A shares of the Fund during the calendar month following
the month in which the Fund is informed of the occurrence of the
Conversion Event. The Fund will provide the shareholder with at
least 30 days' notice of the conversion. The failure of a
shareholder or a fee-based program to satisfy the minimum
investment requirements to purchase Advisor Class shares will not
constitute a Conversion Event. The conversion would occur on the
basis of the relative net asset values of the two classes and
without the imposition of any sales load, fee or other charge.
Class A shares currently bear a .30% distribution services fee.
Advisor Class Shares do not have any distribution services fee.
As a result, Class A shares have a higher expense ratio and may
pay correspondingly lower dividends and have a lower net asset
value than Advisor Class shares.
The conversion of Advisor Class shares to Class A shares
is subject to the continuing availability of an opinion of
counsel to the effect that the conversion of Advisor Class shares
to Class A shares does not constitute a taxable event under
federal income tax law. The conversion of Advisor Class shares
to Class A shares may be suspended if such an opinion is no
longer available at the time such conversion is to occur. In
that event, the Advisor Class shareholder would be required to
redeem his or her Advisor Class shares, which would constitute a
taxable event under federal income tax law.
________________________________________________________________
REDEMPTION AND REPURCHASE OF SHARES
________________________________________________________________
The following information supplements that set forth in
the Fund's Prospectus under the heading "Purchase and Sale of
Shares--How to Sell Shares." If you are an Advisor Class
shareholder through an account established under a fee-based
program your fee-based program may impose requirements with
respect to the purchase, sale or exchange of Advisor Class shares
of the Fund that are different from those described herein. A
transaction fee may be charged by your financial representative
with respect to the purchase, sale or exchange of Advisor Class
shares made through such financial representative.
Redemption
Subject only to the limitations described below, the
Fund's Articles of Incorporation require that the Fund redeem the
shares tendered to it, as described below, at a redemption price
equal to their net asset value as next computed following the
receipt of shares tendered for redemption in proper form. Except
for any contingent deferred sales charge which may be applicable
39
<PAGE>
to Class A, Class B or Class C shares, there is no redemption
charge. Payment of the redemption price will be made within seven
days after the Fund's receipt of such tender for redemption. If
a shareholder is in doubt about what documents are required by
his or her fee-based program or employee benefit plan, the
shareholder should contact his or her financial representative.
The right of redemption may not be suspended or the date
of payment upon redemption postponed for more than seven days
after shares are tendered for redemption, except for any period
during which the Exchange is closed (other than customary weekend
and holiday closings) or during which the Commission determines
that trading thereon is restricted, or for any period during
which an emergency (as determined by the Commission) exists as a
result of which disposal by the Fund of securities owned by it is
not reasonably practicable or as a result of which it is not
reasonably practicable for the Fund fairly to determine the value
of its net assets, or for such other periods as the Commission
may by order permit for the protection of security holders of the
Fund.
Payment of the redemption price will be made in cash.
The value of a shareholder's shares on redemption or repurchase
may be more or less than the cost of such shares to the
shareholder, depending upon the market value of the Fund's
portfolio securities at the time of such redemption or
repurchase. Redemption proceeds on Class A, Class B and Class C
shares will reflect the deduction of the contingent deferred
sales charge, if any. Payment received by a shareholder upon
redemption or repurchase of his 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.
To redeem shares of the Fund for which no stock
certificates have been issued, the registered owner or owners
should forward a letter to the Fund containing a request for
redemption. The signature or signatures on the letter must be
guaranteed by an "eligible guarantor institution" as defined in
Rule 17Ad-15 under the Securities Exchange Act of 1934, as
amended.
To redeem shares of the Fund represented by stock
certificates, the investor should forward the appropriate stock
certificate or certificates, endorsed in blank or with blank
stock powers attached, to the Fund with the request that the
shares represented thereby, or a specified portion thereof, be
redeemed. The stock assignment form on the reverse side of each
stock certificate surrendered to the Fund for redemption must be
signed by the registered owner or owners exactly as the
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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.
Telephone Redemption by Electronic Funds Transfer. Each
Fund shareholder is entitled to request redemption by Electronic
Funds Transfer of shares for which no stock certificates have
been issued by telephone at 800-221-5672 by a shareholder who has
completed the appropriate portion of the Subscription Application
or, in the case of an existing shareholder, an "Autosell"
application obtained from AFS. A telephone redemption request by
electronic funds transfer may not exceed $100,000 (except for
certain omnibus accounts), and must be made by 4:00 p.m. Eastern
time on a Fund business day as defined above. Proceeds of
telephone redemptions will be sent by electronic funds transfer
to a shareholder's designated bank account at a bank selected by
the shareholder that is a member of the NACHA.
Telephone Redemption by Check. Each Fund shareholder is
eligible to request redemption by check of Fund shares for which
no stock certificates have been issued by telephone at
800-221-5672 before 4:00 p.m. Eastern time on a Fund business day
in an amount not exceeding $50,000. Proceeds of such redemptions
are remitted by check to the shareholder's address of record. A
shareholder otherwise eligible for telephone redemption by check
may cancel the privilege by written instruction to AFS, or by
checking the appropriate box on the Subscription Application
found in the Prospectus.
Telephone Redemptions -- General. During periods of
drastic economic or market developments, such as the market break
of October 1987, it is possible that shareholders would have
difficulty in reaching Alliance Fund Services, Inc. by telephone
(although no such difficulty was apparent at any time in
connection with the 1987 market break). If a shareholder were to
experience such difficulty, the shareholder should issue written
instructions to Alliance Fund Services, Inc. at the address shown
on the cover of this Statement of Additional Information. The
Fund reserves the right to suspend or terminate its telephone
redemption service at any time without notice. Telephone
redemption is not available with respect to shares (i) for which
certificates have been issued, (ii) held by a shareholder who has
changed his or her address of record within the preceding 30
calendar days or (iv) held in any retirement plan account.
Neither the Fund nor the Adviser, the Principal Underwriter or
Alliance Fund Services, Inc. will be responsible for the
authenticity of telephone requests for redemptions that the Fund
reasonable believes to be genuine. The Fund will employ
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reasonable procedures in order to verify that telephone requests
for redemptions are genuine, including, among others, recording
such telephone instructions and causing written confirmations of
the resulting transactions to be sent to shareholders. If the
Fund did not employ such procedures, it could be liable for
losses arising from unauthorized or fraudulent telephone
instructions. Selected dealers or agents may charge a commission
for handling telephone requests for redemptions.
Repurchase
The Fund may repurchase shares through the Principal
Underwriter, selected financial intermediaries or selected
dealers or agents. The repurchase price will be the net asset
value next determined after the Principal Underwriter receives
the request (less the contingent deferred sales charge, if any,
with respect to the Class A, Class B and Class C shares), except
that requests placed through selected dealers or agents before
the close of regular trading on the Exchange on any day will be
executed at the net asset value determined as of such close of
regular trading on that day if received by the Principal
Underwriter prior to its close of business on that day (normally
5:00 p.m. Eastern time). The financial intermediary or selected
dealer or agent is responsible for transmitting the request to
the Principal Underwriter by 5:00 p.m. Eastern time. (Certain
selected dealers, agents or financial representatives may enter
into operating agreements permitting them to transmit purchase
information to the Principal Underwriter after 5:00 p.m. Eastern
time and receive that day's net asset value). If the financial
intermediary or selected dealer or agent fails to do so, the
shareholder's right to receive that day's closing price must be
settled between the shareholder and the dealer or agent. A
shareholder may offer shares of the Fund to the Principal
Underwriter either directly or through a selected dealer or
agent. Neither the Fund nor the Principal Underwriter charges a
fee or commission in connection with the repurchase of shares
(except for the contingent deferred sales charge, if any, with
respect to Class A, Class B and Class C shares). Normally, if
shares of the Fund are offered through a financial intermediary
or selected dealer or agent, the repurchase is settled by the
shareholder as an ordinary transaction with or through the
selected dealer or agent, who may charge the shareholder for this
service. The repurchase of shares of the Fund as described above
is a voluntary service of the Fund and the Fund may suspend or
terminate this practice at any time.
General
The Fund reserves the right to close out an account that
through redemption has remained below $200 for 90 days.
Shareholders will receive 60 days' written notice to increase the
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account value before the account is closed. No contingent
deferred sales charge will be deducted from the proceeds of this
redemption. In the case of a redemption or repurchase of shares
of the Fund recently purchased by check, redemption proceeds will
not be made available until the Fund is reasonably assured that
the check has cleared, normally up to 15 calendar days following
the purchase date.
________________________________________________________________
SHAREHOLDER SERVICES
________________________________________________________________
The following information supplements that set forth in
the Fund's Prospectus under the heading "Purchase and Sale of
Shares- -Shareholder Services." The shareholder services set
forth below are applicable to Class A, Class B, Class C and
Advisor Class shares unless otherwise indicated. If you are an
Advisor Class shareholder through an account established under a
fee-based program your fee-based program may impose requirements
with respect to the purchase, sale or exchange of Advisor Class
shares of the Fund that are different from those described
herein. A transaction fee may be charged by your financial
representative with respect to the purchase, sale or exchange of
Advisor Class shares made through such financial representative.
Automatic Investment Program
Investors may purchase shares of the Fund through an
automatic investment program utilizing electronic funds transfer
drawn on the investor's own bank account. Under such a program,
pre-authorized monthly drafts for a fixed amount (at least $25)
are used to purchase shares through the selected dealer or
selected agent designated by the investor at the public offering
price next determined after the Principal Underwriter receives
the proceeds from the investor's bank. In electronic form,
drafts can be made on or about a date each month selected by the
shareholder. Investors wishing to establish an automatic
investment program in connection with their initial investment
should complete the appropriate portion of the Subscription
Application found in the Prospectus. Current shareholders should
contact AFS at the address or telephone numbers shown on the
cover of this Statement of Additional Information to establish an
automatic investment program.
Exchange Privilege
You may exchange your investment in the Fund for shares
of the same class of other Alliance Mutual Funds (including AFD
Exchange Reserves, a money market fund managed by the Adviser).
In addition, (i) present officers and full-time employees of the
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Adviser, (ii) present Directors or Trustees of any Alliance
Mutual Fund and (iii) certain employee benefit plans for
employees of the Adviser, the Principal Underwriter, AFS and
their affiliates may, on a tax-free basis, exchange Class A
shares of the Fund for Advisor Class shares of the Fund.
Exchanges of shares are made at the net asset value next
determined and without sales or service charges. Exchanges may be
made by telephone or written request. Telephone exchange
requests must be received by AFS, Inc. by 4:00 p.m. Eastern time
on a Fund business day in order to receive that day's net asset
value.
Shares will continue to age without regard to exchanges
for purpose of determining the CDSC, if any, upon redemption and,
in the case of Class B shares, for the purpose of conversion to
Class A shares. After an exchange, your Class B shares will
automatically convert to Class A shares in accordance with the
conversion schedule applicable to the Class B shares of the
Alliance Mutual Fund you originally purchased for cash ("original
shares"). When redemption occurs, the CDSC applicable to the
original shares is applied.
Please read carefully the prospectus of the mutual fund
into which you are exchanging before submitting the request.
Call AFS at 800-221-5672 to exchange uncertificated shares.
Except with respect to exchanges of Class A shares of the Fund
for Advisor Class shares of the Fund, exchanges of shares as
described above in this section are taxable transactions for
federal income tax purposes. The exchange service may be
changed, suspended, or terminated on 60 days' written notice.
All exchanges are subject to the minimum investment
requirements and any other applicable terms set forth in the
prospectus for the Alliance Mutual Fund whose shares are being
acquired. An exchange is effected through the redemption of the
shares tendered for exchange and the purchase of shares being
acquired at their respective net asset values as next determined
following receipt by the Alliance Mutual Fund whose shares are
being exchanged of (i) proper instructions and all necessary
supporting documents as described in such fund's prospectus, or
(ii) a telephone request for such exchange in accordance with the
procedures set forth in the following paragraph. Exchanges
involving the redemption of shares recently purchased by check
will be permitted only after the Alliance Mutual Fund whose
shares have been tendered for exchange is reasonably assured that
the check has cleared, normally up to 15 calendar days following
the purchase date. Exchanges of shares of Alliance Mutual Funds
will generally result in the realization of a capital gain or
loss for federal income tax purposes.
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Each Fund shareholder, and the shareholder's selected
dealer, agent or financial representative, as applicable, are
authorized to make telephone requests for exchanges unless AFS
receives written instruction to the contrary from the
shareholder, or the shareholder declines the privilege by
checking the appropriate box on the Subscription Application
found in the Prospectus. Such telephone requests cannot be
accepted with respect to shares then represented by stock
certificates. Shares acquired pursuant to a telephone request
for exchange will be held under the same account registration as
the shares redeemed through such exchange.
Eligible shareholders desiring to make an exchange
should telephone AFS with their account number and other details
of the exchange, at (800) 221-5672 before 4:00 p.m. Eastern time
on a Fund business day as defined above. Telephone requests for
exchange received before 4:00 p.m. Eastern time on a Fund
business day will be processed as of the close of business on
that day. During periods of drastic economic or market
developments, such as the market break of October 1987, it is
possible that shareholders would have difficulty in reaching AFS
by telephone (although no such difficulty was apparent at any
time in connection with the 1987 market break). If a shareholder
were to experience such difficulty, the shareholder should issue
written instructions to AFS at the address shown on the cover of
this Statement of Additional Information.
A shareholder may elect to initiate a monthly "Auto
Exchange" whereby a specified dollar amount's worth of his or her
Fund shares (minimum $25) is automatically exchanged for shares
of another Alliance Mutual Fund. Auto Exchange transactions
normally occur on the 12th day of each month, or the Fund
business day prior thereto.
None of the Alliance Mutual Funds, the Adviser, the
Principal Underwriter or AFS will be responsible for the
authenticity of telephone requests for exchanges that the Fund
reasonably believes to be genuine. The Fund will employ
reasonable procedures in order to verify that telephone requests
for exchanges are genuine, including, among others, recording
such telephone instructions and causing written confirmations of
the resulting transactions to be sent to shareholders. If the
Fund did not employ such procedures, it could be liable for
losses arising from unauthorized or fraudulent telephone
instructions. Selected dealers, agents or financial
representatives, as applicable, may charge a commission for
handling telephone requests for exchanges.
The exchange privilege is available only in states where
shares of the Alliance Mutual Fund being acquired may be legally
sold. Each Alliance Mutual Fund reserves the right, at any time
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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 AFS at the "For Literature"
telephone number on the cover of this Statement of Additional
Information, or write to:
Alliance Fund Services, Inc.
Retirement Plans
P.O. Box 1520
Secaucus, New Jersey 07096-1520
Individual Retirement Account ("IRA"). Individuals who
receive compensation, including earnings from self-employment,
are entitled to establish and make contributions to an IRA.
Taxation of the income and gains paid to an IRA by the Fund is
deferred until distribution from the IRA. An individual's
eligible contribution to an IRA will be deductible if neither the
individual nor his or her spouse is an active participant in an
employer-sponsored retirement plan. If the individual or his or
her spouse is an active participant in an employer-sponsored
retirement plan, the individual's contributions to an IRA may be
deductible, in whole or in part, depending on the amount of the
adjusted gross income of the individual and his or her spouse.
Employer-Sponsored Qualified Retirement Plans. Sole
proprietors, partnerships and corporations may sponsor qualified
money purchase pension and profit-sharing plans, including
Section 401(k) plans ("qualified plans"), under which annual tax-
deductible contributions are made within prescribed limits based
on compensation paid to participating individuals. The minimum
initial investment requirement may be waived with respect to
certain of these qualified plans.
If the aggregate net asset value of shares of the
Alliance Mutual Funds held by a qualified plan reaches $1 million
on or before December 15 in any year, all Class B or Class C
shares of the Fund held by the plan can be exchanged, at the
plan's request, without any sales charge, for Class A shares of
the Fund.
Simplified Employee Pension Plan ("SEP"). Sole
proprietors, partnerships and corporations may sponsor a SEP
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under which they make annual tax-deductible contributions to an
IRA established by each eligible employee within prescribed
limits based on employee compensation.
403(b)(7) Retirement Plan. Certain tax-exempt
organizations and public educational institutions may sponsor
retirement plans under which an employee may agree that monies
deducted from his or her compensation (minimum $25 per pay
period) may be contributed by the employer to a custodial account
established for the employee under the plan.
The Alliance Plans Division of Frontier Trust Company, a
subsidiary of Equitable, which serves as custodian or trustee
under the retirement plan prototype forms available from the
Fund, charges certain nominal fees for establishing an account
and for annual maintenance. A portion of these fees is remitted
to AFS 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 AFS.
Dividend Direction Plan
A shareholder who already maintains, in addition to his
or her Class A, Class B, Class C or Advisor Class Fund account, a
Class A, Class B, Class C or Advisor Class account with one or
more other Alliance Mutual Funds may direct that income dividends
and/or capital gains paid on his or her Class A, Class B, Class C
or Advisor Class Fund shares be automatically reinvested, in any
amount, without the payment of any sales or service charges, in
shares of the same class of such other Alliance Mutual Fund(s).
Further information can be obtained by contacting AFS at the
address or the "For Literature" telephone number shown on the
cover of this Statement of Additional Information. Investors
wishing to establish a dividend direction plan in connection with
their initial investment should complete the appropriate section
of the Subscription Application found in the Prospectus. Current
shareholders should contact AFS to establish a dividend direction
plan.
Systematic Withdrawal Plan
General. Any shareholder who owns or purchases shares
of the Fund having a current net asset value of at least $4,000
(for quarterly or less frequent payments), $5,000 (for bi-monthly
payments) or $10,000 (for monthly payments) may establish a
systematic withdrawal plan under which the shareholder will
periodically receive a payment in a stated amount of not less
than $50 on a selected date. Systematic withdrawal plan
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participants must elect to have their dividends and distributions
from the Fund automatically reinvested in additional shares of
the Fund.
Shares of the Fund owned by a participant in the Fund's
systematic withdrawal plan will be redeemed as necessary to meet
withdrawal payments and such payments will be subject to any
taxes applicable to redemptions and, except as discussed below,
any applicable contingent deferred sales charge. Shares acquired
with reinvested dividends and distributions will be liquidated
first to provide such withdrawal payments and thereafter other
shares will be liquidated to the extent necessary, and depending
upon the amount withdrawn, the investor's principal may be
depleted. A systematic withdrawal plan may be terminated at any
time by the shareholder or the Fund.
Withdrawal payments will not automatically end when a
shareholder's account reaches a certain minimum level. Therefore,
redemptions of shares under the plan may reduce or even liquidate
a shareholder's account and may subject the shareholder to the
Fund's involuntary redemption provisions. See "Redemption and
Repurchase of Shares--General." Purchases of additional shares
concurrently with withdrawals are undesirable because of sales
charges when purchases are made. While an occasional lump-sum
investment may be made by a holder of Class A shares who is
maintaining a systematic withdrawal plan, such investment should
normally be an amount equivalent to three times the annual
withdrawal or $5,000, whichever is less.
Payments under a systematic withdrawal plan may be made
by check or electronically via the Automated Clearing House
("ACH") network. Investors wishing to establish a systematic
withdrawal plan in conjunction with their initial investment in
shares of the Fund should complete the appropriate portion of the
Subscription Application found in the Prospectus, while current
Fund shareholders desiring to do so can obtain an application
form by contacting AFS at the address or the "For Literature"
telephone number shown on the cover of this Statement of
Additional Information.
CDSC Waiver for Class B Shares and Class C Shares.
Under a systematic withdrawal plan, up to 1% monthly, 2%
bi-monthly or 3% quarterly of the value at the time of redemption
of the Class B or Class C shares in a shareholder's account may
be redeemed free of any contingent deferred sales charge.
With respect to Class B shares, the waiver applies only
with respect to shares acquired after July 1, 1995. Class B
shares that are not subject to a contingent deferred sales charge
(such as shares acquired with reinvested dividends or
distributions) will be redeemed first and will count toward the
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foregoing limitations. Remaining Class B shares that are held
the longest will be redeemed next. Redemptions of Class B shares
in excess of the foregoing limitations will be subject to any
otherwise applicable contingent deferred sales charge.
With respect to Class C shares, shares held the longest
will be redeemed first and will count toward the foregoing
limitations. Redemptions in excess of those limitations will be
subject to any otherwise applicable contingent deferred sales
charge.
Statements and Reports
Each shareholder of the Fund receives semi-annual and
annual reports which include a portfolio of investments,
financial statements and, in the case of the annual report, the
report of the Fund's independent auditors, Ernst & Young LLP, as
well as a confirmation of each purchase and redemption. By
contacting his or her broker or AFS, a shareholder can arrange
for copies of his or her account statements to be sent to another
person.
________________________________________________________________
NET ASSET VALUE
________________________________________________________________
The per share net asset value is computed in accordance
with the Fund's Articles of Incorporation and By-Laws at the next
close of regular trading on the Exchange (ordinarily 4:00 p.m.
Eastern time) following receipt of a purchase or redemption order
by the Fund on each Fund business day on which such an order is
received and on such other days as the Board of Directors deems
appropriate or necessary in order to comply with Rule 22c-1 under
the 1940 Act. The Fund's per share net asset value is calculated
by dividing the value of the Fund's total assets, less its
liabilities, by the total number of its shares then outstanding.
A Fund business day is any weekday on which the Exchange is open
for trading.
In accordance with applicable rules under the 1940 Act,
portfolio securities are valued at current market value or at
fair value as determined in good faith by the Board of Directors.
The Board of Directors has delegated to the Adviser certain of
the Board's duties with respect to the following procedures.
Readily marketable securities listed on the Exchange or on a
foreign securities exchange (other than foreign securities
exchanges whose operations are similar to those of the United
States over-the-counter market) are valued, except as indicted
below, at the last sale price reflected on the consolidated tape
at the close of the Exchange or, in the case of a foreign
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<PAGE>
securities exchange, at the last quoted sale price, in each case
on the business day as of which such value is being determined.
If there has been no sale on such day, the securities are valued
at the mean of the closing bid and asked prices on such day. If
no bid or asked prices are quoted on such day, then the security
is valued in good faith at fair value by, or in accordance with
procedures established by, the Board of Directors. Readily
marketable securities not listed on the Exchange or on a foreign
securities exchange but listed on other United States national
securities exchanges or traded on The Nasdaq Stock Market, Inc.
are valued in like manner. Portfolio securities traded on the
Exchange and on one or more foreign or other national securities
exchanges, and portfolio securities not traded on the Exchange
but traded on one or more foreign or other national securities
exchanges are valued in accordance with these procedures by
reference to the principal exchange on which the securities are
traded.
Readily marketable securities traded in the over-the-
counter market, securities listed on a foreign securities
exchange whose operations are similar to those of the United
States over-the-counter market, and securities listed on a U.S.
national securities exchange whose primary market is believed to
be over-the-counter (but excluding securities traded on The
Nasdaq Stock Market, Inc.), are valued at the mean of the current
bid and asked prices as reported by Nasdaq or, in the case of
securities not quoted by Nasdaq, the National Quotation Bureau or
another comparable sources.
Listed put or call options purchased by the Fund are
valued at the last sale price. If there has been no sale on that
day, such securities will be valued at the closing bid prices on
that day.
Open futures contracts and options thereon will be
valued using the closing settlement price or, in the absence of
such a price, the most recent quoted bid price, If there are no
quotations available for the day of valuations, the last
available closing settlement price will be used.
U.S. Government Securities and other debt instruments
having 60 days or less remaining until maturity are valued at
amortized cost if their original maturity was 60 days or less, or
by amortizing their fair value as of the 61st day prior to
maturity if their original term to maturity exceeded 60 days
(unless in either case the Board of Directors determines that
this method does not represent fair value).
Fixed-income securities may be valued on the basis of
prices provided by a pricing service when such prices are
believed to reflect the fair market value of such securities.
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The prices provided by pricing service take into account many
factors, including institutional size trading in similar groups
of securities and any developments related to specific
securities.
All other assets of the Fund are valued in good faith at
fair value by, or in accordance with procedures established by,
the Board of Directors.
Trading in securities on Far Eastern and European
securities exchanges and over-the-counter markets is normally
completed well before the close of business of each Fund business
day. In addition, trading in foreign markets may not take place
on all Fund business days. Furthermore, trading may take place
in various foreign markets on days that are not Fund business
days. The Fund's calculation of the net asset value per share,
therefore, does not always take place contemporaneously with the
most recent determination of the prices of portfolio securities
in these markets. Events affecting the values of these portfolio
securities that occur between the time their prices are
determined in accordance with the above procedures and the close
of the Exchange will not be reflected in the Fund's calculation
of net asset value unless it is believed that these prices do not
reflect current market value, in which case the securities will
be valued in good faith by, or in accordance with procedures
established by, the Board of Directors at fair value.
The Board of Directors may suspend the determination of
the Fund's, net asset value (and the offering and sale of
shares), subject to the rules of the Commission and other
governmental rules and regulations, at a time when: (1) the
Exchange is closed, other than customary weekend and holiday
closings, (2) an emergency exists as a result of which it is not
reasonably practicable for the Fund to dispose of securities
owned by it or to determine fairly the value of its net assets,
or (3) for the protection of shareholders, the Commission by
order permits a suspension of the right of redemption or a
postponement of the date of payment on redemption.
For purposes of determining the Fund's net asset value
per share, all assets and liabilities initially expressed in a
foreign currency will be converted into U.S. dollars at the mean
of the current bid and asked prices of such currency against the
U.S. dollar last quoted by a major bank that is a regular
participant in the relevant foreign exchange market or on the
basis of a pricing service that takes into account the quotes
provided by a number of such major banks. If such quotations are
not available as of the close of the Exchange, the rate of
exchange will be determined in good faith by, or under the
direction of, the Board of Directors.
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The assets attributable to the Class A shares, Class B
shares, Class C shares and Advisor Class shares will be invested
together in a single portfolio. The net asset value of each
class will be determined separately by subtracting the
liabilities allocated to that class from the assets belonging to
that class in conformance with the provisions of a plan adopted
by the Fund in accordance with Rule 18f-3 under the 1940 Act.
________________________________________________________________
DIVIDENDS, DISTRIBUTIONS AND TAXES
________________________________________________________________
Dividends paid by the Fund, if any, with respect to
Class A, Class B, Class C and Advisor Class shares will be
calculated in the same manner at the same time on the same day
and will be in the same amount, except that the higher
distribution services applicable to Class B and C shares, and any
incremental transfer agency costs relating to Class B and Class C
shares, will be borne exclusively by the class to which they
relate.
United States Federal Income Taxation of Dividends and
Distributions
General
The Fund intends for each taxable year to qualify to be
taxed as a "regulated investment company" under the 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
capital gains. However, there is no fixed dividend rate and
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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 at least 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 November 30
of such year, 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
qualifying 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 on the ex-
dividend date and for at least 45 other days during the 90-day
period beginning 45 days prior to the ex-dividend date. In
determining the holding period of such shares for this purpose,
any period during which a shareholder's risk of loss is offset by
means of options, short sales or similar transactions is not
counted. 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.
53
<PAGE>
Distributions of net capital gain (i.e., the excess of
net long-term capital gain over net short-term capital loss) are
taxable as long-term capital gain, regardless of how long a
shareholder has held shares in the Fund. 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 of net capital gain, any loss recognized by the
shareholder on the sale of those shares during the six-month
period will be treated as a long-term capital loss to the extent
of the distribution. In determining the holding period of such
shares for this purpose, any period during which a shareholder's
risk of loss is offset by means of options, short sales or
similar transactions is not counted.
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.
A dividend or capital gains distribution with respect to
shares of the Fund held by a tax-deferred or qualified plan, such
as an individual retirement account, 403(b)(7) retirement plan or
corporate pension or profit-sharing plan, generally will not be
taxable to the plan. Distributions from such plans will be
taxable to individual participants under applicable tax rules
without regard to the character of the income earned by the
qualified plan.
The Fund generally will be required to withhold tax at
the rate of 31% with respect to distributions 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.
The foregoing discussion relates only to U.S. federal
income tax law as it affects shareholders who are U.S. citizens
or residents or U.S. corporations. The effects of federal income
tax law on shareholders who are non-resident aliens or foreign
corporations may be substantially different. Foreign investors
should consult their counsel for further information as to the
U.S. tax consequences of receipt of income from the Fund.
54
<PAGE>
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 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
55
<PAGE>
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 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
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 Adviser.
Neither the Fund nor the 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 Adviser for use in rendering
investment advice to the Fund, such information may be supplied
at no cost to the Adviser. While it is impossible to place an
actual dollar value on such investment information, its receipt
by the Adviser probably does not reduce the overall expenses of
the Adviser to any material extent.
The investment information provided to the Adviser is of
the type described in Section 28(e)(3) of the Securities Exchange
Act of 1934 and is designed to augment the 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 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 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
56
<PAGE>
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 extent to which commissions that will be charged by
broker-dealers selected by the Fund may reflect an element of
value for research cannot presently be determined. To the extent
that research services of value are provided by broker-dealers
with or through whom the Fund places portfolio transactions, the
Adviser may be relieved of expenses which it might otherwise
bear. Research services furnished by broker-dealers could be
useful and of value to the Adviser in servicing its other clients
as well as the Fund; but, on the other hand, certain research
services obtained by the Adviser as a result of the placement of
portfolio brokerage of other clients could be useful and of value
to it in serving the Fund. Consistent with the Conduct Rules of
the National Association of Securities Dealers, Inc. and subject
to seeking best execution, the Fund may consider sales of shares
of the Fund or other investment companies managed by the Adviser
as a factor in the selection of brokers to execute portfolio
transactions for the Fund.
The Fund may from time to time place orders for the
purchase or sale of securities (including listed call options)
with Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ"),
an affiliate of the Adviser, and with brokers which may have
their transactions cleared or settled, or both, by the Pershing
Division of DLJ for which DLJ may receive a portion of the
brokerage commissions. In such instances the placement of orders
with such brokers would be consistent with the Fund's objective
of obtaining best execution and would not be dependent upon the
fact that DLJ is an affiliate of the Adviser. 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 1940 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
57
<PAGE>
connection with comparable transactions involving similar
securities during a comparable period of time.
During the fiscal years ended November 30, 1999, 1998
and 1997, the Fund incurred brokerage commissions amounting in
the aggregate of $4,304,433, $1,999,318 and $1,098,027,
respectively. During the fiscal years ended November 30, 1999,
1998and 1997, brokerage commissions amounting in the aggregate of
$0, $-0- and $-0-, respectively, were paid to DLJ and brokerage
commissions amounting in the aggregate of $374,946, $4,800 and
$9,645, respectively, were paid to brokers utilizing the Pershing
Division of DLJ. During the fiscal year ended November 30, 1999,
the brokerage commissions paid to DLJ constituted 0% of the
Fund's aggregate brokerage commissions and the brokerage
commissions paid to brokers utilizing the Pershing Division of
DLJ constituted 8.71 of the Fund's aggregate brokerage
commissions. During the fiscal year ended November 30, 1999,
transactions in portfolio securities of the Fund aggregating
$4,124,925,592, with associated brokerage commissions of
approximately $1,554,381 allocated to persons or firms supplying
research services to the Fund or the Adviser.
________________________________________________________________
GENERAL INFORMATION
________________________________________________________________
Capitalization
The Fund is a Maryland corporation organized in 1980.
The authorized capital stock of the Fund consists of
3,000,000,000 shares of Class A Common Stock, 3,000,000,000
shares of Class B Common Stock, 3,000,000,000 shares of Class C
Common Stock and 3,000,000,000 shares of Advisor Class Common
Stock, each having a par value of $.01 per share. 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 and
classes 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
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
58
<PAGE>
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.
It is anticipated that annual shareholder meetings will
not be held; shareholder meetings will be held only when required
by federal or state law. Shareholders have available certain
procedures for the removal of Directors.
A shareholder will be entitled to share pro rata with
other holders of the same class of shares all dividends and
distributions arising from the Fund's assets and, upon redeeming
shares, will receive the then current net asset value of the Fund
represented by the redeemed shares less any applicable CDSC. The
Fund is empowered to establish, without shareholder approval,
additional portfolios, which may have different investment
objectives and policies than those of the Fund, and additional
classes of shares within the Fund. If an additional portfolio or
class were established in the Fund, each share of the portfolio
or class would normally be entitled to one vote for all purposes.
Generally, shares of each portfolio and class would vote together
as a single class on matters, such as the election of Directors,
that affect each portfolio and class in substantially the same
manner. Class A, B, C and Advisor Class shares have identical
voting, dividend, liquidation and other rights, except that each
class bears its own transfer agency expenses, each of Class A,
Class B and Class C shares of the Fund bears its own distribution
expenses and Class B shares and Advisor Class shares convert to
Class A shares under certain circumstances. Each class of shares
of the Fund votes separately with respect to the Fund's Rule 12b-
1 distribution plan and other matters for which separate class
voting is appropriate under applicable law. Shares are freely
transferable, are entitled to dividends as determined by the
Directors and, in liquidation of the Fund, are entitled to
receive the net assets of the Fund.
At the close of business on January 5, 2000, there were
75,195,748 shares of common stock of the Fund outstanding,
including 21,310,844 Class A shares, 40,877,981 Class B shares,
9,941,421 Class C shares and 3,065,502 Advisor Class shares. To
the knowledge of the Fund the following persons owned of record
or beneficially 5% or more of a class of the outstanding shares
of the Fund as of January 5, 2000.
59
<PAGE>
No. of % of
Name and Address Shares Class
Class A
MLPF&S For the Sole Benefit of 2,112,745 9.99
Its Customers
Attn: Fund Administration (97091)
4800 Deer Lake Drive East
2nd Floor
Jacksonville, FL 32246-6484
Class B
MLPF&S For the Sole Benefit of 7,279,546 17.95
Its Customers
Attn: Fund Administration (97BG6)
4800 Deer Lake Drive East
2nd Floor
Jacksonville, FL 32246-6484
Class C
MLPF&S For the Sole Benefit of 2,797,105 28.59
Its Customers
Attn: Fund Administration (97BF7)
4800 Deer Lake Drive East
2nd Floor
Jacksonville, FL 32246-6484
Advisor Class
Merrill Lynch 2,444,013 79.93
Mutual Fund Operations (97LS9)
4800 Deer Lake Drive East
3rd Floor
Jacksonville, FL 32246-6486
Trust for Profit Sharing Pl 301,476 9.86
for Employees of Alliance
Capital Management L.P. Plan F
Attn: Jill Smith 32nd Floor
1345 Avenue of the Americas
New York, NY 10105-0302
Custodian
State Street Bank and Trust Company, 225 Franklin Street,
Boston, Massachusetts, 02110, will act as the Fund's Custodian for
the assets of the Fund but plays no part in deciding on the
purchase or sale of portfolio securities. Subject to the
60
<PAGE>
supervision of the Fund's Directors, State Street Bank and Trust
Company may enter into sub-custodial agreements for the holding of
the Fund's foreign securities.
Principal Underwriter
Alliance Fund Distributors, Inc., an indirect wholly-
owned subsidiary of Alliance, located at 1345 Avenue of the
Americas, New York, New York 10105, is the principal underwriter
of shares of the Fund. Under the Agreement, 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.
Counsel
Legal matters in connection with the issuance of the
shares of the Fund offered hereby will be passed upon by Seward &
Kissel LLP, New York, New York. Seward & Kissel LLP has relied
upon the opinion of Venable, Baetjer and Howard, LLP, Baltimore,
Maryland, for matters relating to Maryland law.
Independent Auditors
Ernst & Young LLP, New York, New York, has been selected
as independent auditors for the Fund.
Performance Information
From time to time, the Fund advertises its total return,
which is computed separately for Class A, Class B, Class C and
Advisor Class shares. Such advertisements disclose the Fund's
average annual compounded total return for the periods prescribed
by the Commission. The Fund's total return for each such period
is computed by finding, through the use of a formula prescribed by
the Commission, the average annual compounded rate of return over
the period that would equate an assumed initial amount invested to
the value of the investment at the end of the period. For purposes
of computing total return, income dividends and capital gains
distributions paid on shares of the Fund are assumed to have been
reinvested when paid and the maximum sales charges applicable to
purchases and redemptions of the Fund's shares are assumed to have
been paid.
The Fund calculates average annual total return
information in the Performance Table in the Risk/Return Summary
according to the Commission formula as described above. In
accordance with Commission guidelines, total return information is
presented for each class for the same time periods, i.e., the 1, 5
and 10 years (or over the life of the Fund, if the Fund is less
61
<PAGE>
than 10 years old) ending on the last day of the most recent
calendar year. Since different classes may have first been sold
on different dates ("Actual Inception Dates"), in some cases this
can result in return information being presented for a class for
periods prior to its Actual Inception Date. Where return
information is presented for periods prior to the Actual Inception
Date of a Class (a "Younger Class"), such information is
calculated by using the historical performance of the class with
the earliest Actual Inception Date (the "Oldest Class"). For this
purpose, the Fund calculates the difference in total annual fund
operating expenses (as a percentage of average net assets) between
the Younger Class and the Oldest Class, divides the difference by
12, and subtracts the result from the monthly performance at net
asset value (including reinvestment of all dividends and
distributions) of the Oldest Class for each month prior to the
Younger Class's Actual Inception Date for which performance
information is to be shown. The resulting "pro forma" monthly
performance information is used to calculate the Younger Class's
average annual returns for these periods. Any conversion feature
applicable to the Younger Class is assumed to occur in accordance
with the Actual Inception Date for that class, not its
hypothetical inception date.
The average annual total return based on net asset
value for each class of shares for the one-, five- and ten-
year periods ended November 30, 1999 (or since inception
through that date, as noted) was as follows:
12 Months
Ended 5 Years Ended 10 Years Ended
11/30/99 11/30/99 11/30/99
_________ _____________ ______________
Class A 74.67% 35.02% 23.23%
Class B 73.44% 34.08% 33.11%*
Class C 73.40% 34.07% 33.11%*
Advisor Class 75.23% 35.34%* N/A
*Inception Dates: Class B - May 3, 1993
Class C - May 3, 1993
Advisor Class - October 2, 1996
The Fund's total return is computed separately for
Class A, Class B, Class C and Advisor Class shares. The Fund's
total return is not fixed and will fluctuate in response to
prevailing market conditions or as a function of the type and
quality of the securities in the Fund's portfolio and the Fund's
62
<PAGE>
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, 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 or magazines such as The New
York Times, The Wall Street Journal, Barron's, Business Week,
Changing Times, Fortune, Forbes, Money Magazine, 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 AFS at the address or telephone numbers
shown on the front cover of this Statement of Additional
Information. This Statement of Additional Information does not
contain all the information set forth in the Registration
Statement filed by the Fund with the Commission under the
Securities Act. Copies of the Registration Statement may be
obtained at a reasonable charge from the Commission or may be
examined, without charge, at the offices of the Commission in
Washington, D.C.
63
<PAGE>
________________________________________________________________
REPORT OF INDEPENDENT AUDITORS AND FINANCIAL STATEMENTS
_________________________________________________________________
64
<PAGE>
PORTFOLIO OF INVESTMENTS
November 30, 1999 Alliance Technology Fund
================================================================================
Company Shares Value
- --------------------------------------------------------------------------------
COMMON STOCKS-92.3%
TECHNOLOGY-87.3%
COMMUNICATION
EQUIPMENT-7.5%
General Instrument
Corp. (a) ........................... 1,667,000 $ 109,188,500
Motorola, Inc. ......................... 1,363,600 155,791,300
Nokia Corp.
(ADR) (Finland) ..................... 2,043,100 282,330,881
--------------
547,310,681
--------------
COMPUTER
HARDWARE-7.1%
Apex, Inc. (a) ......................... 2,095,350 49,240,725
Cobalt Networks, Inc. (a) .............. 11,200 1,890,700
Compaq Computer Corp. .................. 1,275,000 31,157,813
Dell Computer Corp. (a) ................ 6,766,400 290,955,200
Gateway, Inc. (a) ...................... 1,889,100 144,280,012
--------------
517,524,450
--------------
COMPUTER
PERIPHERALS-3.4%
Lexmark International
Group, Inc. Cl.A (a) ................ 3,034,500 251,863,500
--------------
COMPUTER
SERVICES-10.7%
Computer Sciences
Corp. (a) ........................... 2,380,400 155,321,100
Convergys Corp. (a) .................... 1,208,000 32,993,500
DST Systems, Inc. (a) .................. 1,854,500 116,717,594
First Data Corp. ....................... 4,419,100 191,126,075
Fiserv, Inc. (a) ....................... 2,692,825 95,595,287
Galileo International, Inc. ............ 899,600 28,787,200
Gartner Group, Inc. Cl.A ............... 1,181,600 13,588,400
IXL Enterprises, Inc. (a) .............. 545,500 19,638,000
Sabre Group Holdings
Corp. (a) ........................... 1,235,000 56,192,500
Sapient Corp. (a) ...................... 258,100 20,002,750
USWeb Corp. (a) ........................ 1,332,000 55,194,750
--------------
785,157,156
--------------
COMPUTER
SOFTWARE-12.1%
Amdocs, Ltd. (a) ....................... 7,524,100 264,754,269
BEA Systems, Inc. (a) .................. 1,548,500 125,815,625
I2 Technologies, Inc. (a) .............. 1,246,000 105,910,000
Microsoft Corp. (a) .................... 2,480,700 225,859,983
New Era of Networks,
Inc. (a) ............................ 1,807,400 86,981,125
Rational Software
Corp. (a) ........................... 1,248,900 63,850,012
Vitria Technology, Inc. (a) ............ 118,600 11,837,763
--------------
885,008,777
--------------
CONTRACT
MANUFACTURING-10.0%
DII Group, Inc. (a) .................... 548,900 34,649,312
Flextronics International,
Ltd. (a) ............................ 811,200 67,278,900
Jabil Circuit, Inc. (a) ................ 1,206,100 77,115,019
Sanmina Corp. (a) ...................... 2,600,550 249,977,869
Solectron Corp. (a) .................... 3,666,000 301,986,750
--------------
731,007,850
--------------
INTERNET-10.7%
America Online, Inc. (a) ............... 4,891,800 355,572,712
CacheFlow, Inc. (a) .................... 9,200 1,393,800
DoubleClick, Inc. (a) .................. 1,205,600 192,971,350
eBay, Inc. (a) ......................... 205,500 33,920,344
Inktomi Corp. (a) ...................... 87,400 11,280,063
Yahoo!, Inc. (a) ....................... 876,800 186,539,200
--------------
781,677,469
--------------
NETWORKING
SOFTWARE-5.6%
Cisco Systems, Inc. (a) ................ 4,602,000 410,440,875
--------------
SEMI-CONDUCTOR
CAPITAL EQUIPMENT-7.2%
Amkor Technology, Inc. (a) ............ 1,964,000 53,028,000
Applied Materials, Inc. (a) ............ 2,462,330 239,923,279
KLA-Tencor Corp. (a) ................... 1,235,900 104,510,794
Teradyne, Inc. (a) ..................... 3,092,200 134,703,963
--------------
532,166,036
--------------
6
<PAGE>
Alliance Technology Fund
================================================================================
Company Shares Value
- --------------------------------------------------------------------------------
SEMI-CONDUCTOR
COMPONENTS-13.0%
Altera Corp. (a) ......................... 3,408,300 $ 183,622,162
Intel Corp. .............................. 1,749,000 134,126,438
PMC-Sierra, Inc. (a) ..................... 1,353,000 139,443,562
STMicroelectronics N.V ................... 950,800 118,731,150
Texas Instruments, Inc. .................. 1,676,000 161,000,750
Xilinx, Inc. (a) ......................... 2,455,000 219,722,500
--------------
956,646,562
--------------
6,398,803,356
--------------
UTILITIES-3.6%
TELEPHONE UTILITY-3.6%
Mannesmann AG
(ADR) (Germany) ....................... 779,550 162,007,250
MCI WorldCom, Inc. (a) ................... 1,235,650 102,172,809
--------------
264,180,059
--------------
CONSUMER SERVICES-1.4%
RETAIL - GENERAL
MERCHANDISE-1.4%
Tandy Corp. .............................. 1,312,200 100,547,325
--------------
Total Common Stocks
(cost $3,520,112,653) ................. 6,763,530,740
--------------
PRIVATE PLACEMENT-0.0%
Interactive Light
Holdings, Inc. (a)(b)
(cost $692,548) ....................... 287,572 692,548
--------------
Principal
Amount
Company (000) Value
- --------------------------------------------------------------------------------
SHORT-TERM
INVESTMENTS-11.5%
COMMERCIAL PAPER-5.4%
American Express Co.
5.48%, 12/07/99 ....................... $ 100,000 $ 99,908,667
Ford Motor Credit Co.
5.47%, 12/16/99 ....................... 100,000 99,771,875
Prudential Funding
5.36%, 12/07/99 ....................... 100,000 99,910,667
5.44%, 12/14/99 ....................... 100,000 99,803,555
--------------
399,394,764
--------------
TIME DEPOSIT-6.1%
State Street Euro Dollar
5.00%, 12/01/99 ....................... 444,291 444,291,000
--------------
Total Short-Term
Investments
(amortized cost
$843,685,764) ......................... 843,685,764
--------------
TOTAL INVESTMENTS-103.8%
(cost $4,364,490,965) ................. 7,607,909,052
Other assets
less liabilities-(3.8%) .............. (280,153,888)
--------------
NET ASSETS-100% .......................... $7,327,755,164
==============
- --------------------------------------------------------------------------------
(a) Non-income producing security.
(b) Illiquid security, valued at fair value (see Notes A & F).
Glossary:
ADR - American Depositary Receipt.
See notes to financial statements.
7
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
November 30, 1999 Alliance Technology Fund
================================================================================
<TABLE>
<CAPTION>
<S> <C>
ASSETS
Investments in securities, at value (cost $4,364,490,965) ............ $7,607,909,052
Cash ................................................................. 610
Receivable for capital stock sold .................................... 62,956,793
Receivable for investment securities sold ............................ 32,896,011
Interest and dividends receivable .................................... 114,177
--------------
Total assets ......................................................... 7,703,876,643
LIABILITIES
Payable for investment securities purchased .......................... 314,962,350
Payable for capital stock redeemed ................................... 38,627,193
Advisory fee payable ................................................. 18,319,388
Distribution fee payable ............................................. 1,376,770
Accrued expenses and other liabilities ............................... 2,835,778
--------------
Total liabilities .................................................... 376,121,479
NET ASSETS .............................................................. $7,327,755,164
==============
COMPOSITION OF NET ASSETS
Capital stock, at par ................................................ $ 680,685
Additional paid-in capital ........................................... 3,814,923,032
Accumulated net realized gain on investment and written
option transactions ................................................ 268,733,360
Net unrealized appreciation of investments ........................... 3,243,418,087
--------------
$7,327,755,164
==============
CALCULATION OF MAXIMUM OFFERING PRICE
Class A Shares
Net asset value and redemption price per share
($2,167,059,790 / 19,443,359 shares of capital stock
issued and outstanding) ............................................ $111.46
Sales charge--4.25% of public offering price ......................... 4.95
-------
Maximum offering price ............................................... $116.41
=======
Class B Shares
Net asset value and offering price per share
($3,922,583,822 / 37,101,760 shares of capital stock
issued and outstanding) ............................................ $105.73
=======
Class C Shares
Net asset value and offering price per share
($907,707,569 / 8,588,707 shares of capital
stock issued and outstanding) ...................................... $105.69
=======
Advisor Class Shares
Net asset value, redemption and offering price
per share ($330,403,983 / 2,934,706 shares of
capital stock issued and outstanding) ................................ $112.59
=======
</TABLE>
- --------------------------------------------------------------------------------
See notes to financial statements.
8
<PAGE>
STATEMENT OF OPERATIONS
Year Ended November 30, 1999 Alliance Technology Fund
================================================================================
<TABLE>
<CAPTION>
INVESTMENT INCOME
<S> <C> <C>
Interest ............................................ $ 21,551,153
Dividends (net of foreign taxes withheld of $271,360) 5,045,720 $ 26,596,873
-------------
EXPENSES
Advisory fee ........................................ 52,868,775
Distribution fee - Class A .......................... 4,273,345
Distribution fee - Class B .......................... 25,416,842
Distribution fee - Class C .......................... 5,486,797
Transfer agency ..................................... 10,024,493
Printing ............................................ 1,782,771
Registration ........................................ 850,412
Custodian ........................................... 360,322
Taxes ............................................... 311,175
Audit and legal ..................................... 152,062
Administrative ...................................... 128,000
Directors' fees ..................................... 105,000
Miscellaneous ....................................... 136,592
-------------
Total expenses ...................................... 101,896,586
Less: expense offset arrangement (see Note B) ....... (539,198)
-------------
Net expenses ........................................ 101,357,388
---------------
Net investment loss ................................. (74,760,515)
---------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain on investment transactions ........ 352,452,909
Net realized loss on written option transactions .... (5,449,855)
Net change in unrealized appreciation of:
Investments ....................................... 2,307,327,580
Written options ................................... (576,727)
---------------
Net gain on investments ............................. 2,653,753,907
---------------
NET INCREASE IN NET ASSETS FROM OPERATIONS ............. $ 2,578,993,392
===============
</TABLE>
- --------------------------------------------------------------------------------
See notes to financial statements.
9
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS Alliance Technology Fund
================================================================================
<TABLE>
<CAPTION>
Year Ended Year Ended
November 30, November 30,
1999 1998
--------------- ---------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS
Net investment loss ............................................ $ (74,760,515) $ (36,912,043)
Net realized gain on investments and written option transactions 347,003,054 222,858,575
Net change in unrealized appreciation of investments and options 2,306,750,853 401,258,201
--------------- ---------------
Net increase in net assets from operations ..................... 2,578,993,392 587,204,733
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net realized gain on investments
Class A ...................................................... (62,357,963) (6,722,769)
Class B ...................................................... (117,727,553) (11,607,315)
Class C ...................................................... (21,549,871) (2,036,454)
Advisor Class ................................................ (17,168,091) (1,788,297)
CAPITAL STOCK TRANSACTIONS
Net increase ................................................... 2,150,736,566 222,313,081
--------------- ---------------
Total increase ................................................. 4,510,926,480 787,362,979
NET ASSETS
Beginning of year .............................................. 2,816,828,684 2,029,465,705
--------------- ---------------
End of year .................................................... $ 7,327,755,164 $ 2,816,828,684
=============== ===============
</TABLE>
- --------------------------------------------------------------------------------
See notes to financial statements.
10
<PAGE>
NOTES TO FINANCIAL STATEMENTS
November 30, 1999 Alliance Technology Fund
================================================================================
NOTE A: Significant Accounting Policies
Alliance Technology Fund, Inc. (the "Fund") is regis tered under the Investment
Company Act of 1940 as a diversified, open-end management investment company.
The Fund offers Class A, Class B, Class C and Advisor Class shares. Class A
shares are sold with a front-end sales charge of up to 4.25% for purchases not
exceeding $1,000,000. With respect to purchases of $1,000,000 or more, Class A
shares redeemed within one year of purchase may be subject to a contingent
deferred sales charge of 1%. Class B shares are currently sold with a contingent
deferred sales charge which declines from 4% to zero depending on the period of
time the shares are held. Class B shares will automatically convert to Class A
shares eight years after the end of the calendar month of purchase. Class C
shares are subject to a contingent deferred sales charge of 1% on redemptions
made within the first year after purchase. Advisor Class shares are sold without
an initial or contingent deferred sales charge and are not subject to ongoing
distribution ex penses. Advisor Class shares are offered to investors
participating in fee-based programs and to certain retirement plan accounts. All
four classes of shares have identical voting, dividend, liquidation and other
rights, except that each class bears different distribution ex penses and has
exclusive voting rights with respect to its distribution plan. The financial
statements have been prepared in conformity with generally accepted accounting
principles which require management to make certain estimates and assumptions
that affect the reported amounts of assets and liabilities in the financial
statements and amounts of income and expenses during the reporting period.
Actual results could differ from those estimates. The following is a summary of
significant accounting policies followed by the Fund.
1. Security Valuation
Portfolio securities traded on a national securities ex change or on a foreign
securities exchange (other than foreign securities exchanges whose operations
are similar to those of the United States over-the-counter market) are generally
valued at the last reported sales price or if no sale occurred, at the mean of
the closing bid and asked prices on that day. Readily marketable securities
traded in the over-the-counter market, securities listed on a foreign securities
exchange whose operations are similar to the U.S. over-the-counter market, and
securities listed on a national securities exchange whose primary market is
believed to be over-the-counter, are valued at the mean of the current bid and
asked prices. U.S. government and fixed income securities which mature in 60
days or less are valued at amortized cost, unless this method does not represent
fair value. Securities for which current market quotations are not readily
available are valued at their fair value as determined in good faith by, or in
accordance with procedures adopted by, the Board of Directors. Fixed income
securities may be valued on the basis of prices obtained from a pricing service
when such prices are believed to reflect the fair market value of such
securities.
2. Taxes
It is the Fund's policy to meet the requirements of the Internal Revenue Code
applicable to regulated investment companies and to distribute all of its
investment company taxable income and net realized gains, if any, to
shareholders. Therefore, no provisions for federal income or excise taxes are
required.
3. Investment Income and Investment Transactions
Dividend income is recorded on the ex-dividend date. Interest income is accrued
daily. Investment transactions are accounted for on the date the securities are
purchased or sold. The Fund accretes discounts as adjustments to interest
income. Investment gains and losses are determined on the identified cost basis.
4. Income and Expenses
All income earned and expenses incurred by the Fund are borne on a pro-rata
basis by each outstanding class of shares, based on the proportionate interest
in the Fund represented by the net assets of such class, except that the Fund's
Class B and Class C shares bear higher distribution and transfer agent fees than
Class A shares and the Advisor Class shares have no distribution fees.
5. Dividends and Distributions
Dividends and distributions to shareholders are recorded on the ex-dividend
date. Income dividends and capital gains distributions are determined in
accordance with federal tax regulations and may differ from those determined in
accordance with generally accepted accounting principles. To the extent these
differences are permanent, such amounts are reclassified within the capital
accounts based on their federal tax basis treatment; temporary differences, do
not require such reclassification.
11
<PAGE>
NOTES TO FINANCIAL STATEMENTS (continued) Alliance Technology Fund
================================================================================
During the current fiscal year, permanent differences, primarily due to net
investment losses, resulted in a net decrease in accumulated net investment loss
and a corresponding decrease in accumulated net realized gain on investment and
option transactions. This reclassification had no effect on net assets.
- --------------------------------------------------------------------------------
NOTE B: Advisory Fee and Other Transactions With Affiliates
Under the terms of an investment advisory agreement, the Fund pays Alliance
Capital Management L.P. (the "Adviser"), an advisory fee at a quarterly rate
equal to .25% (approximately 1% on an annual basis) of the net assets of the
Fund valued on the last business day of the previous quarter.
Pursuant to the advisory agreement, the Fund paid $128,000 to the Adviser
representing the cost of certain legal and accounting services provided to the
Fund by the Adviser for the year ended November 30, 1999.
The Fund compensates Alliance Fund Services, Inc., a wholly-owned subsidiary of
the Adviser, under a Transfer Agency Agreement for providing personnel and
facilities to perform transfer agency services for the Fund. Such compensation
amounted to $6,760,075 for the year ended November 30, 1999.
For the year ended November 30, 1999, the Fund's expenses were reduced by
$539,198 under an expense off set arrangement with Alliance Fund Services, Inc.
Alliance Fund Distributors, Inc. (the "Distributor"), a wholly-owned subsidiary
of the Adviser, serves as the Distributor of the Fund's shares. The Distributor
has advised the Fund that it has received front-end sales charges of $1,410,619
from the sales of Class A shares and $39,709, $3,373,129 and $211,340 in
contingent deferred sales charges imposed upon redemptions by shareholders of
Class A, Class B and Class C shares, respectively, for the year ended November
30, 1999.
Brokerage commissions paid on investment transactions for the year ended
November 30, 1999 amounted to $4,304,433, of which $374,946 was paid to brokers
utilizing the services of the Pershing Division of Donaldson, Lufkin & Jenrette
Securities Corp. ("DLJ"), an affiliate of the Adviser, none of which was paid to
DLJ directly.
- --------------------------------------------------------------------------------
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 Agree
ment, the Fund pays distribution and servicing fees to the Distributor at an
annual rate of up to .30% of the Fund's average daily net assets attributable to
Class A shares and 1% of the average daily net assets attributable to both Class
B and Class C shares. There are no distribution and servicing fees on the
Advisor Class shares. The fees are accrued daily and paid monthly. The Agreement
provides that the Distributor will use such payments in their entirety for
distribution assistance and promotional activities. The Distributor has advised
the Fund that it has incurred expenses in excess of the distribution costs
reimbursed by the Fund in the amount of $69,446,278 and $4,215,524 for Class B
and Class 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 un reimbursed distribution
costs incurred by the Distributor beyond the current fiscal year for Class A
shares. The Agreement also provides that the Adviser may use its own resources
to finance the distribution of the Fund's shares.
- --------------------------------------------------------------------------------
NOTE D: Investment Transactions
Purchases and sales of investment securities (excluding short-term investments
and U.S. government securities) aggregated $3,877,665,014 and $2,352,461,552,
respectively, for the year ended November 30, 1999. There were no purchases or
sales of U.S. government and government agency obligations for the year ended
November 30, 1999.
At November 30, 1999, the cost of investments for federal income tax purposes
was $4,368,310,558. Ac-
12
<PAGE>
Alliance Technology Fund
================================================================================
cordingly, gross unrealized appreciation of investments was $3,275,906,373 and
gross unrealized depreciation of in vestments was $36,307,879 resulting in net
unrealized appreciation of $3,239,598,494.
Option Transactions
For hedging and investment purposes, the Fund purchases and writes call options
listed on national securities exchanges and purchases listed put options,
including put options on market indices.
The risk associated with purchasing an option is that the Fund pays a premium
whether or not the option is exercised. Additionally, the Fund bears the risk of
loss of premium and change in market value should the counterparty not perform
under the contract. Put and call options purchased are accounted for in the same
manner as portfolio securities. The cost of securities acquired through the
exercise of call options is increased by premiums paid. The proceeds from
securities sold through the exercise of put options are decreased by the
premiums paid.
When the Fund writes an option, the premium received by the Fund is recorded as
a liability and is subsequently adjusted to the current market value of the
option written. Premiums received from writing options which expire unexercised
are recorded by the Fund on the expiration date as realized gains from option
transactions. The difference between the premium received and the amount paid on
effecting a closing purchase transaction, including brokerage commissions, is
also treated as a realized gain, or if the premium received is less than the
amount paid for the closing purchase transaction, as a realized loss. If a call
option is exercised, the premium received is added to the proceeds from the sale
of the underlying security or currency in determining whether the Fund has
realized a gain or loss. If a put option is exercised, the premium received
reduces the cost basis of the security or currency purchased by the Fund. The
risk involved in writing an option is that, if the option was exercised the
underlying security could then be purchased or sold by the Fund at a
disadvantageous price.
Transactions in options written for the year ended November 30, 1999 were as
follows:
Number of
Contracts Premiums
----------- -----------
Options outstanding at beginning of the year ...... 1,500 $ 670,477
Options written ................................... 14,495 6,548,748
Options terminated in closing purchase transactions (3,500) (1,004,966)
Options expired ................................... (12,495) (6,214,259)
----------- -----------
Options outstanding at November 30, 1999 .......... -0- $ -0-
=========== ===========
13
<PAGE>
NOTES TO FINANCIAL STATEMENTS (continued) Alliance Technology Fund
================================================================================
NOTE E: Capital Stock
There are 12,000,000,000 shares of $0.01 par value capital stock authorized,
divided into four classes, designated Class A, Class B, Class C and Advisor
Class shares. Each class consists of 3,000,000,000 authorized shares.
Transactions in capital stock were as follows:
<TABLE>
<CAPTION>
---------------------------------- -----------------------------------
Shares Amount
---------------------------------- -----------------------------------
Year Ended Year Ended Year Ended Year Ended
November 30, November 30, November 30, November 30,
1999 1998 1999 1998
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Class A
Shares sold .................... 48,158,052 18,339,548 $ 4,282,232,634 $ 1,112,007,521
Shares issued in reinvestment of
distributions ............... 818,921 111,053 56,434,216 5,938,826
Shares converted from Class B .. 179,018 126,597 15,931,334 7,557,381
Shares redeemed ................ (41,734,391) (18,030,124) (3,717,567,978) (1,098,740,276)
--------------- --------------- --------------- ---------------
Net increase ................... 7,421,600 547,074 $ 637,030,206 $ 26,763,452
=============== =============== =============== ===============
Class B
Shares sold .................... 17,813,433 6,726,295 $ 1,500,823,911 $ 384,268,932
Shares issued in reinvestment of
distributions ............... 1,659,877 209,384 109,253,532 10,806,491
Shares converted to Class A .... (188,164) (131,650) (15,931,334) (7,557,381)
Shares redeemed ................ (4,852,485) (4,169,685) (403,812,165) (239,143,056)
--------------- --------------- --------------- ---------------
Net increase ................... 14,432,661 2,634,344 $ 1,190,333,944 $ 148,374,986
=============== =============== =============== ===============
Class C
Shares sold .................... 16,762,551 12,127,622 $ 1,400,120,630 $ 691,867,198
Shares issued in reinvestment of
distributions ............... 306,206 35,117 20,148,985 1,812,439
Shares redeemed ................ (12,607,292) (11,539,122) (1,053,263,050) (662,671,845)
--------------- --------------- --------------- ---------------
Net increase ................... 4,461,465 623,617 $ 367,006,565 $ 31,007,792
=============== =============== =============== ===============
Advisor Class
Shares sold .................... 4,254,845 3,484,871 $ 373,307,248 $ 207,978,384
Shares issued in reinvestment of
distributions ............... 242,885 32,400 16,853,793 1,738,611
Shares redeemed ................ (4,898,671) (3,240,614) (433,795,190) (193,550,144)
--------------- --------------- --------------- ---------------
Net increase (decrease) ........ (400,941) 276,657 $ (43,634,149) $ 16,166,851
=============== =============== =============== ===============
</TABLE>
- --------------------------------------------------------------------------------
NOTE F: Illiquid Security
Date Acquired Cost
------------- ---------------
Interactive Light Holdings, Inc................. 2/08/99 $692,548
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, 1999 was $692,548, representing .01% of net assets.
14
<PAGE>
Alliance Technology Fund
================================================================================
NOTE G: Bank Borrowing
A number of open-end mutual funds managed by the Adviser, including the Fund,
participate in a $750 million revolving credit facility (the "Facility")
intended to provide short-term financing if necessary, subject to certain
restrictions in connection with abnormal redemption activity. Commitment fees
related to the Facility are paid by the participating funds and are included in
miscellaneous expenses in the statement of operations. The Fund did not utilize
the Facility during the year ended November 30, 1999.
15
<PAGE>
FINANCIAL HIGHLIGHTS Alliance Technology Fund
================================================================================
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Year
<TABLE>
<CAPTION>
------------------------------------------------------------------------------
CLASS A
------------------------------------------------------------------------------
Year Ended November 30,
------------------------------------------------------------------------------
1999 1998 1997 1996 1995
------------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year .............. $ 68.60 $ 54.44 $ 51.15 $ 46.64 $ 31.98
------------- ----------- ----------- ----------- -----------
Income From Investment Operations
Net investment loss (a) ......................... (.99) (.68) (.51) (.39) (.30)
Net realized and unrealized gain on
investment and written option transactions .... 49.02 15.42 4.22 7.28 18.13
------------- ----------- ----------- ----------- -----------
Net increase in net asset value from
operations .................................... 48.03 14.74 3.71 6.89 17.83
------------- ----------- ----------- ----------- -----------
Less: Distributions
Distributions from net realized gains ........... (5.17) (.58) (.42) (2.38) (3.17)
------------- ----------- ----------- ----------- -----------
Net asset value, end of year .................... $ 111.46 $ 68.60 $ 54.44 $ 51.15 $ 46.64
============= =========== =========== =========== ===========
Total Return
Total investment return based on net
asset value (b)................................ 74.67% 27.36% 7.32% 16.05% 61.93%
Ratios/Supplemental Data
Net assets, end of year (000's omitted) ......... $ 2,167,060 $ 824,636 $ 624,716 $ 594,861 $ 398,262
Ratio of expenses to average net assets ......... 1.68%(c) 1.66%(c) 1.67%(c) 1.74% 1.75%
Ratio of net investment loss to average
net assets .................................... (1.11)% (1.13)% (.97)% (.87)% (.77)%
Portfolio turnover rate ......................... 54% 67% 51% 30% 55%
</TABLE>
- --------------------------------------------------------------------------------
See footnote summary on page 19.
16
<PAGE>
Alliance Technology Fund
================================================================================
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Year
<TABLE>
<CAPTION>
---------------------------------------------------------------------------
CLASS B
---------------------------------------------------------------------------
Year Ended November 30,
---------------------------------------------------------------------------
1999 1998 1997 1996 1995
---------- ---------- ---------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year ................. $ 65.75 $ 52.58 $ 49.76 $ 45.76 $ 31.61
---------- ---------- ---------- -------- --------
Income From Investment Operations
Net investment loss (a) ............................ (1.54) (1.08) (.88) (.70) (.60)
Net realized and unrealized gain on investment and
written option transactions ..................... 46.69 14.83 4.12 7.08 17.92
---------- ---------- ---------- -------- --------
Net increase in net asset value from operations .... 45.15 13.75 3.24 6.38 17.32
---------- ---------- ---------- -------- --------
Less: Distributions
Distributions from net realized gains .............. (5.17) (.58) (.42) (2.38) (3.17)
---------- ---------- ---------- -------- --------
Net asset value, end of year ....................... $ 105.73 $ 65.75 $ 52.58 $ 49.76 $ 45.76
========== ========== ========== ======== ========
Total Return
Total investment return based on net asset value (b) 73.44% 26.44% 6.57% 15.20% 60.95%
Ratios/Supplemental Data
Net assets, end of year (000's omitted) ............ $3,922,584 $1,490,578 $1,053,436 $660,921 $277,111
Ratio of expenses to average net assets ............ 2.39%(c) 2.39%(c) 2.38%(c) 2.44% 2.48%
Ratio of net investment loss to average net assets . (1.83)% (1.86)% (1.70)% (1.61)% (1.47)%
Portfolio turnover rate ............................ 54% 67% 51% 30% 55%
</TABLE>
- --------------------------------------------------------------------------------
See footnote summary on page 19.
17
<PAGE>
FINANCIAL HIGHLIGHTS (continued) Alliance Technology Fund
================================================================================
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Year
<TABLE>
<CAPTION>
--------------------------------------------------------------------------
CLASS C
--------------------------------------------------------------------------
Year Ended November 30,
--------------------------------------------------------------------------
1999 1998 1997 1996 1995
-------- -------- -------- -------- -------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year ................. $ 65.74 $ 52.57 $ 49.76 $ 45.77 $ 31.61
-------- -------- -------- -------- -------
Income From Investment Operations
Net investment loss (a) ............................ (1.57) (1.08) (.88) (.70) (.58)
Net realized and unrealized gain on investment and
written option transactions ..................... 46.69 14.83 4.11 7.07 17.91
-------- -------- -------- -------- -------
Net increase in net asset value from operations .... 45.12 13.75 3.23 6.37 17.33
-------- -------- -------- -------- -------
Less: Distributions
Distributions from net realized gains .............. (5.17) (.58) (.42) (2.38) (3.17)
-------- -------- -------- -------- -------
Net asset value, end of year ....................... $ 105.69 $ 65.74 $ 52.57 $ 49.76 $ 45.77
======== ======== ======== ======== =======
Total Return
Total investment return based on net asset value (b) 73.40% 26.44% 6.55% 15.17% 60.98%
Ratios/Supplemental Data
Net assets, end of year (000's omitted) ............ $907,707 $271,320 $184,194 $108,488 $43,161
Ratio of expenses to average net assets ............ 2.41%(c) 2.40%(c) 2.38%(c) 2.44% 2.48%
Ratio of net investment loss to average net assets . (1.85)% (1.87)% (1.70)% (1.60)% (1.47)%
Portfolio turnover rate ............................ 54% 67% 51% 30% 55%
</TABLE>
- --------------------------------------------------------------------------------
See footnote summary on page 19.
18
<PAGE>
Alliance Technology Fund
================================================================================
Selected Data For A Share Of Capital Stock Outstanding Throughout Each Period
<TABLE>
<CAPTION>
----------------------------------------------------------------
ADVISOR CLASS
----------------------------------------------------------------
October 2,
1996(d)
Year Ended November 30, to
---------------------------------------------- November 30,
1999 1998 1997 1996
-------- -------- -------- ------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period ............... $ 69.04 $ 54.63 $ 51.17 $ 47.32
-------- -------- -------- --------
Income From Investment Operations
Net investment loss (a) ............................ (.68) (.50) (.45) (.05)
Net realized and unrealized gain on investment and
written option transactions ..................... 49.40 15.49 4.33 3.90
-------- -------- -------- --------
Net increase in net asset value from operations .... 48.72 14.99 3.88 3.85
-------- -------- -------- --------
Less: Distributions
Distributions from net realized gains .............. (5.17) (.58) (.42) -0-
-------- -------- -------- --------
Net asset value, end of period ..................... $ 112.59 $ 69.04 $ 54.63 $ 51.17
======== ======== ======== ========
Total Return
Total investment return based on net asset value (b) 75.22% 27.73% 7.65% 8.14%
Ratios/Supplemental Data
Net assets, end of period (000's omitted) .......... $330,404 $230,295 $167,120 $ 566
Ratio of expenses to average net assets ............ 1.35%(c) 1.37%(c) 1.39%(c) 1.75%(e)
Ratio of net investment loss to average net assets . (.78)% (.84)% (.81)% (1.21)%(e)
Portfolio turnover rate ............................ 54% 67% 51% 30%
</TABLE>
- --------------------------------------------------------------------------------
(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 charges or
contingent deferred sales charges are not reflected in the calculation of
total investment return. Total investment return calculated for a period
of less than one year is not annualized.
(c) Ratio reflects expenses grossed up for expense offset arrangement with the
Transfer Agent. For the periods shown below, the net expense ratios were
as follows:
Year Ended November 30,
1999 1998 1997
------ ------ ------
Class A .................. 1.66% 1.65% 1.66%
Class B .................. 2.38% 2.38% 2.36%
Class C .................. 2.40% 2.38% 2.37%
Advisor Class ............ 1.34% 1.36% 1.38%
(d) Commencement of distribution.
(e) Annualized.
19
<PAGE>
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. (the "Fund"), including the portfolio of investments, as
of November 30, 1999, and the related statement of operations for the year then
ended, the statement of changes in net assets for each of the two years in the
period then ended, 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 auditing standards generally accepted
in the United States. 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 and financial highlights. Our procedures included
confirmation of securities owned as of November 30, 1999, by correspondence with
the custodian and others. 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, 1999, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended, and the financial highlights for each of
the indicated periods, in conformity with accounting principles generally
accepted in the United States.
/s/ Ernst & Young LLP
New York, New York
January 6, 2000
FEDERAL INCOME TAX INFORMATION (unaudited)
- --------------------------------------------------------------------------------
In order to meet certain requirements of the Internal Revenue Code we are
advising you that $218,803,478 of the capital gain distributions paid by the
Fund during the fiscal year November 30, 1999 are subject to a maximum tax rate
of 20%. Shareholders should not use the above information to prepare their tax
returns. The information necessary to complete your income tax returns will be
included with your Form 1099 DIV which will be sent to you separately in January
2000.
20
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____________________________________________________________
APPENDIX A:
CERTAIN EMPLOYEE BENEFIT PLANS
____________________________________________________________
Employee benefit plans described below which are intended to
be tax-qualified under section 401(a) of the Internal Revenue
Code of 1986, as amended ("Tax Qualified Plans"), for which
Merrill Lynch, Pierce, Fenner & Smith Incorporated or an
affiliate thereof ("Merrill Lynch") is recordkeeper (or with
respect to which recordkeeping services are provided pursuant to
certain arrangements as described in paragraph (ii) below)
("Merrill Lynch Plans") are subject to specific requirements as
to the Fund shares which they may purchase. Notwithstanding
anything to the contrary contained elsewhere in this Statement of
Additional Information, the following Merrill Lynch Plans are not
eligible to purchase Class A shares and are eligible to purchase
Class B shares of the Fund at net asset value without being
subject to a contingent deferred sales charge:
(i) Plans for which Merrill Lynch is the recordkeeper on a
daily valuation basis, if when the plan is established
as an active plan on Merrill Lynch's recordkeeping
system:
(a) the plan is one which is not already investing in shares
of mutual funds or interests in other commingled
investment vehicles of which Merrill Lynch Asset
Management, L.P. is investment adviser or manager ("MLAM
Funds"), and either (A) the aggregate assets of the plan
are less than $3 million or (B) the total of the sum of
(x) the employees eligible to participate in the plan
and (y) those persons, not including any such employees,
for whom a plan account having a balance therein is
maintained, is less than 500, each of (A) and (B) to be
determined by Merrill Lynch in the normal course prior
to the date the plan is established as an active plan on
Merrill Lynch's recordkeeping system (an "Active Plan");
or
(b) the plan is one which is already investing in shares of
or interests in MLAM Funds and the assets of the plan
have an aggregate value of less than $5 million, as
determined by Merrill Lynch as of the date the plan
becomes an Active Plan.
For purposes of applying (a) and (b), there are to be
aggregated all assets of any Tax-Qualified Plan
maintained by the sponsor of the Merrill Lynch Plan (or
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<PAGE>
any of the sponsor's affiliates) (determined to be such
by Merrill Lynch) which are being invested in shares of
or interests in MLAM Funds, Alliance Mutual Funds or
other mutual funds made available pursuant to an
agreement between Merrill Lynch and the principal
underwriter thereof (or one of its affiliates) and which
are being held in a Merrill Lynch account.
(ii) Plans for which the recordkeeper is not Merrill Lynch,
but which are recordkept on a daily valuation basis by
a recordkeeper with which Merrill Lynch has a
subcontracting or other alliance arrangement for the
performance of recordkeeping services, if the plan is
determined by Merrill Lynch to be so eligible and the
assets of the plan are less than $3 million.
Class B shares of the Fund held by any of the above-
described Merrill Lynch Plans are to be replaced at Merrill
Lynch's direction through conversion, exchange or otherwise by
Class A shares of the Fund on the earlier of the date that the
value of the plan's aggregate assets first equals or exceeds $5
million or the date on which any Class B share of the Fund held
by the plan would convert to a Class A share of the Fund as
described under "Purchase of Shares" and "Redemption and
Repurchase of Shares."
Any Tax Qualified Plan, including any Merrill Lynch
Plan, which does not purchase Class B shares of the Fund without
being subject to a contingent deferred sales charge under the
above criteria is eligible to purchase Class B shares subject to
a contingent deferred sales charge as well as other classes of
shares of the Fund as set forth above under "Purchase of Shares"
and "Redemption and Repurchase of Shares."
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00250200.AV0
