<PAGE>
As filed with the Securities and Exchange
Commission on October 30, 1998
File No. 2-70428
811-3130
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No. __
Post-Effective Amendment No. 30 X
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 25 X
Alliance International Fund
(Exact Name of Registrant as Specified in Charter)
1345 Avenue of the Americas, New York, New York l0105
(Address of Principal Executive Office) (Zip Code)
Registrant's Telephone Number, including Area Code: (800)221-5672
EDMUND P. BERGAN, JR.
Alliance Capital Management L.P.
1345 Avenue of the Americas
New York, New York 10105
(Name and address of agent for service)
It is proposed that this filing will become effective (check
appropriate box)
X immediately upon filing pursuant to paragraph (b)
on (date) pursuant to paragraph (b)
60 days after filing pursuant to paragraph (a)(1)
on (date) pursuant to paragraph (a)(1)
75 days after filing pursuant to paragraph (a)(2)
on (date) pursuant to paragraph (a)(2) of rule 485.
<PAGE>
If appropriate, check the following box:
this post-effective amendment designates a new
effective date for a previously filed post-
effective amendment.
Registrant has registered an indefinite number of shares of
beneficial interest pursuant to Rule 24f-2 under the Investment
Company Act of 1940. Registrant filed a notice pursuant to such
Rule for its fiscal year ended June 30, 1998 on August 31,
1998.
<PAGE>
CROSS REFERENCE SHEET
(as required by Rule 404(c))
Location in
N-1A Item No. Prospectus
PART A
Item 1. Cover Page Cover Page
Item 2. Synopsis Alliance at a Glance
Item 3. Condensed Financial Information Financial Highlights
Item 4. General Description of Registrant Description of the
Fund; General
Information
Item 5. Management of the Fund Management of the
Fund; General
Information
Item 5(a) Management Discussion of Fund Not Applicable
Performance
Item 6. Capital Stock and Other General Information;
Securities Dividends, Distribu-
tions and Taxes
Item 7. Purchase of Securities Being Purchase and Sale of
Offered Shares; General
Information
Item 8. Redemption or Repurchase Purchase and Sale of
Shares
Item 9. Pending Legal Proceedings Not Applicable
<PAGE>
Location in
Statement of
Additional
Information
PART B (Caption)
Item 10. Cover Page Cover Page
Item 11. Table of Contents Cover Page
Item 12. General Information and History Management of the
Fund; General
Information
Item 13. Investment Objectives and Investment Policies
Policies and Restrictions
Item 14. Management of the Registrant Management of the
Fund
Item 15. Control Persons and Principal Management of the
Holders of Securities Fund
Item 16. Investment Advisory and Other Management of the
Services Fund
Item 17. Brokerage Allocation and Other Brokerage and
Practices Portfolio
Transactions
Item 18. Capital Stock and Other Securities General Information
Item 19. Purchase, Redemption and Pricing Purchase of Shares,
of Securities Being Offered Redemption and
Repurchase of
Shares; Net Asset
Value
Item 20. Tax Status Dividends, Distribu-
tions and Taxes
Item 21. Underwriters General Information
Item 22. Calculation of Performance Data General Information
Item 23. Financial Statements Report of Inde-
pendent Auditors and
Financial Statements
<PAGE>
<PAGE>
THE ALLIANCE
- --------------------------------------------------------------------------------
STOCK FUNDS
- --------------------------------------------------------------------------------
c/o Alliance Fund Services, Inc.
P.O. Box 1520, Secaucus, New Jersey 07096-1520
Toll Free (800) 221-5672
For Literature: Toll Free (800) 227-4618
Prospectus and Application
November 2, 1998
Domestic Stock Funds Global Stock Funds
- -The Alliance Fund -Alliance International Fund
-Alliance International
Premier Growth Fund
- -Alliance Growth Fund -Alliance Worldwide Privatization Fund
- -Alliance Premier Growth Fund -Alliance New Europe Fund
- -Alliance Technology Fund -Alliance All-Asia Investment Fund
-Alliance Greater China '97
Fund
- -Alliance Quasar Fund -Alliance Global Small Cap Fund
-Alliance Global Environment Fund
Total Return Funds
-Alliance Balanced Shares
-Alliance Utility Income Fund
-Alliance Growth and Income Fund
-Alliance Real Estate Investment Fund
<TABLE>
<CAPTION>
Table of Contents Page
<S> <C>
The Funds at a Glance ..................................................... 2
Expense Information ....................................................... 4
Financial Highlights ...................................................... 7
Glossary .................................................................. 19
Description of the Funds .................................................. 20
Investment Objectives and Policies ..................................... 20
Additional Investment Practices ........................................ 32
Certain Fundamental Investment Policies ................................ 40
Risk Considerations .................................................... 42
Purchase and Sale of Shares ............................................... 49
Management of the Funds ................................................... 52
Dividends, Distributions and Taxes ........................................ 57
General Information ....................................................... 58
</TABLE>
Adviser
Alliance Capital Management L.P.
1345 Avenue Of The Americas
New York, New York 10105
The Alliance Stock Funds provide a broad selection of investment alternatives to
investors seeking capital growth or high total return. The Domestic Stock Funds
invest mainly in the United States equity markets and the Global Stock Funds
diversify their investments among equity markets around the world, while the
Total Return Funds invest in both equity and fixed-income securities.
Each fund or portfolio (each a "Fund") is, or is a series of, an open-end
management investment company. This Prospectus sets forth concisely the
information which a prospective investor should know about each Fund before
investing. A "Statement of Additional Information" for each Fund which provides
further information regarding certain matters discussed in this Prospectus and
other matters which may be of interest to some investors has been filed with the
Securities and Exchange Commission and is incorporated herein by reference. For
a free copy, call or write Alliance Fund Services, Inc. at the indicated address
or call the "For Literature" telephone number shown above.
Each Fund offers three classes of shares through this Prospectus. These shares
may be purchased, at the investor's choice, at a price equal to their net asset
value (i) plus an initial sales charge imposed at the time of purchase (the
"Class A shares"), (ii) with a contingent deferred sales charge imposed on most
redemptions made within four years of purchase (the "Class B shares"), or (iii)
without any initial or contingent deferred sales charge, as long as the shares
are held for one year or more (the "Class C shares"). See "Purchase and Sale of
Shares."
An investment in these securities is not a deposit or obligation of, or
guaranteed or endorsed by, any bank and is not federally insured by the Federal
Deposit Insurance Corporation, the Federal Reserve Board or any other agency.
Investors are advised to read this Prospectus carefully and to retain it for
future reference.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
[LOGO]Alliance(R)
Investing without the Mystery.(SM)
(R)/SM These are registered marks used under licenses from the owner, Alliance
Capital Management L.P.
<PAGE>
The Funds At A Glance
The following summary is qualified in its entirety by the more detailed
information contained in this Prospectus.
The Funds' Investment Adviser Is . . .
Alliance Capital Management L.P. ("Alliance"), a global investment manager
providing diversified services to institutions and individuals through a broad
line of investments including more than 120 mutual funds. Since 1971, Alliance
has earned a reputation as a leader in the investment world with over $262
billion in assets under management as of June 30, 1998. Alliance provides
investment management services to employee benefit plans for 32 of the FORTUNE
100 companies.
Domestic Stock Funds
Alliance Fund
Seeks . . . Long-term growth of capital and income primarily through investment
in common stocks.
Invests Principally in . . . A diversified portfolio of equity securities that,
in the judgment of Alliance, have the potential to achieve capital appreciation.
Growth Fund
Seeks . . . Long-term growth of capital by investing primarily in common stocks
and other equity securities.
Invests Principally in . . . A diversified portfolio of equity securities of
companies with a favorable outlook for earnings and whose rate of growth is
expected to exceed that of the United States economy over time.
Premier Growth Fund
Seeks . . . Long-term growth of capital by investing in the equity securities of
a limited number of large, carefully selected, high-quality American companies
from a relatively small universe of intensively researched companies.
Invests Principally in . . . A diversified portfolio of equity securities that,
in the judgment of Alliance, are likely to achieve superior earnings growth.
Normally, approximately 40-50 companies will be represented in the Fund's
investment portfolio. The Fund's investments in 25 of these companies most
highly regarded at any point in time by Alliance will usually constitute
approximately 70% of the Fund's net assets.
Technology Fund
Seeks . . . Growth of capital through investment in companies expected to
benefit from advances in technology.
Invests Principally in . . . A diversified portfolio of securities of companies
which use technology extensively in the development of new or improved products
or processes.
Quasar Fund
Seeks . . . Growth of capital by pursuing aggressive investment policies.
Invests Principally in . . . A diversified portfolio of equity securities of any
company and industry and in any type of security which is believed to offer
possibilities for capital appreciation.
Global Stock Funds
International Fund
Seeks . . . A total return on its assets from long-term growth of capital and
from income.
Invests Principally in . . . A diversified portfolio of marketable securities of
established non-United States companies, companies participating in foreign
economies with prospects for growth, and foreign government securities.
International Premier Growth Fund
Seeks . . . Long-term capital appreciation.
Invests Principally in . . . A diversified portfolio of equity securities of a
limited number of large, carefully selected, high-quality non-U.S. companies
that are judged likely to achieve superior earnings growth.
Worldwide Privatization Fund
Seeks . . . Long-term capital appreciation.
Invests Principally in . . . A non-diversified portfolio of equity securities
issued by enterprises that are undergoing, or have undergone, privatization. The
balance of the Fund's investment portfolio will include securities of companies
that are believed by Alliance to be beneficiaries of the privatization process.
New Europe Fund
Seeks . . . Long-term capital appreciation through investment primarily in the
equity securities of companies based in Europe.
Invests Principally in . . . A non-diversified portfolio of equity securities of
European companies.
All-Asia Investment Fund
Seeks . . . Long-term capital appreciation.
Invests Principally in . . . A non-diversified portfolio of equity securities of
Asian/Pacific companies.
Greater China '97 Fund
Seeks . . . Long-term capital appreciation.
Invests Prinicpally in . . . A non-diversified portfolio of equity securities of
Greater China companies.
Global Small Cap Fund
Seeks . . . Long-term growth of capital.
Invests Principally in . . . A diversified global portfolio of the equity
securities of small capitalization companies.
Global Environment Fund
Seeks . . . Long-term capital appreciation.
2
<PAGE>
Invests Principally in . . . A non-diversified portfolio of equity securities of
companies expected to benefit from advances or improvements in products,
processes or services intended to foster the protection of the environment.
Total Return Funds
Balanced Shares
Seeks . . . A high return through a combination of current income and capital
appreciation.
Invests Principally in . . . A diversified portfolio of equity and fixed-income
securities such as common and preferred stocks, U.S. Government and agency
obligations, bonds and senior debt securities.
Utility Income Fund
Seeks . . . Current income and capital appreciation through investment in the
utilities industry.
Invests Principally in . . . A diversified portfolio of equity securities, such
as common stocks, securities convertible into common stocks and rights and
warrants to subscribe for purchase of common stocks, and in fixed-income
securities such as bonds and preferred stocks.
Growth and Income Fund
Seeks . . . Income and appreciation through investment in dividend-paying common
stocks of quality companies.
Invests Principally in . . . A diversified portfolio of dividend-paying common
stocks of good quality, and, under certain market conditions, other types of
securities, including bonds, convertible bonds and preferred stocks.
Real Estate Investment Fund
Seeks . . . Total return on its assets from long-term growth of capital and from
income.
Invests Principally in . . . A diversified portfolio of equity securities of
issuers that are primarily engaged in or related to the real estate industry.
Distributions . . .
Balanced Shares, Utility Income Fund, Growth and Income Fund and Real Estate
Investment Fund intend to make distributions quarterly to shareholders. These
distributions may include ordinary income and capital gain (each of which is
taxable) and a return of capital (which is generally non-taxable). See
"Dividends, Distributions and Taxes."
A Word About Risk . . .
The price of the shares of the Alliance Stock Funds will fluctuate as the daily
prices of the individual securities in which they invest fluctuate, so that your
shares, when redeemed, may be worth more or less than their original cost. With
respect to those Funds permitted to invest in foreign currency denominated
securities, these fluctuations may be magnified by changes in foreign exchange
rates. Investment in the Global Stock Funds involves risks not associated with
funds that invest primarily in securities of U.S. issuers. While the Funds
invest principally in common stocks and other equity securities, in order to
achieve their investment objectives the Funds may at times use certain types of
investment derivatives such as options, futures, forwards and swaps. These
involve risks different from, and, in certain cases, greater than, the risks
presented by more traditional investments. An investment in the Real Estate
Investment Fund is subject to certain risks associated with the direct ownership
of real estate in general, including possible declines in the value of real
estate, general and local economic conditions, environmental problems and
changes in interest rates. Investments by Greater China '97 Fund in Greater
China companies entail certain risks which are different from, and in certain
cases, greater than, risks associated with investments in other international
markets. These risks are fully discussed in this Prospectus.
Getting Started . . .
Shares of the Funds are available through your financial representative and most
banks, insurance companies and brokerage firms nationwide. Shares can be
purchased for a minimum initial investment of $250, and subsequent investments
can be made for as little as $50. For detailed information about purchasing and
selling shares, see "Purchase and Sale of Shares." In addition, the Funds offer
several time and money saving services to investors. Be sure to ask your
financial representative about:
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AUTOMATIC REINVESTMENT
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AUTOMATIC INVESTMENT PROGRAM
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RETIREMENT PLANS
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SHAREHOLDER COMMUNICATIONS
- --------------------------------------------------------------------------------
DIVIDEND DIRECTION PLANS
- --------------------------------------------------------------------------------
AUTO EXCHANGE
- --------------------------------------------------------------------------------
SYSTEMATIC WITHDRAWALS
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A CHOICE OF PURCHASE PLANS
- --------------------------------------------------------------------------------
TELEPHONE TRANSACTIONS
- --------------------------------------------------------------------------------
24-HOUR INFORMATION
- --------------------------------------------------------------------------------
[LOGO]Alliance(R)
Investing without the Mystery.(SM)
(R)/SM These are registered marks used under licenses from the owner, Alliance
Capital Management L.P.
3
<PAGE>
- --------------------------------------------------------------------------------
EXPENSE INFORMATION
- --------------------------------------------------------------------------------
Shareholder Transaction Expenses are one of several factors to consider when you
invest in a Fund. The following table summarizes your maximum transaction costs
from investing in a Fund and annual expenses for each class of shares of each
Fund. For each Fund, the "Examples" to the right of the table below show the
cumulative expenses attributable to a hypothetical $1,000 investment in each
class for the periods specified.
<TABLE>
<CAPTION>
Class A Shares Class B Shares Class C Shares
-------------- -------------- --------------
<S> <C> <C> <C>
Maximum sales charge imposed on purchases (as a percentage of
offering price) ................................................. 4.25%(a) None None
Sales charge imposed on dividend reinvestments .................. None None None
Deferred sales charge (as a
percentage of original purchase
price or redemption proceeds,
whichever is lower) ............................................. None(a) 4.0% 1.0%
during the during the
first year, first year,
decreasing 1.0% 0% thereafter
annually to 0%
after the
fourth year (b)
Exchange fee .................................................... None None None
</TABLE>
- --------------------------------------------------------------------------------
(a) Reduced for larger purchases. Purchases of $1,000,000 or more are not
subject to an initial sales charge but may be subject to a 1% deferred
sales charge on redemptions within one year of purchase. See "Purchase and
Sale of Shares-How to Buy Shares".
(b) Class B shares of each Fund automatically convert to Class A after eight
years. See "Purchase and Sale of Shares-How to Buy Shares."
<TABLE>
<CAPTION>
Operating Expenses Examples
- --------------------------------------------------------- -------------------------------------------------------------
Alliance Fund Class A Class B Class C Class A Class B+ Class B++ Class C+ Class C++
------- ------- ------- ---------------- ------------------ ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Management fees .68% .68% .68% After 1 year $ 53 $ 59 $ 19 $ 29 $ 19
12b-1 fees .20% 1.00% 1.00% After 3 years $ 74 $ 78 $ 58 $ 58 $ 58
Other expenses (a) .15% .17% .15% After 5 years $ 97 $100 $100 $ 99 $ 99
---- ---- ---- After 10 years $163 $195(b) $195(b) $215 $215
Total fund
operating expenses 1.03% 1.85% 1.83%
==== ==== ====
<CAPTION>
Growth Fund Class A Class B Class C Class A Class B+ Class B++ Class C+ Class C++
------- ------- ------- ---------------- ------------------ ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Management fees .74% .74% .74% After 1 year $ 55 $ 60 $ 20 $ 30 $ 20
12b-1 fees .30% 1.00% 1.00% After 3 years $ 81 $ 82 $ 62 $ 62 $ 62
Other expenses (a) .22% .22% .23% After 5 years $109 $106 $106 $106 $106
---- ---- ---- After 10 years $188 $210(b) $210(b) $230 $230
Total fund
operating expenses 1.26% 1.96% 1.97%
==== ==== ====
<CAPTION>
Premier Growth Fund Class A Class B Class C Class A Class B+ Class B++ Class C+ Class C++
------- ------- ------- ---------------- ------------------ ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Management fees 1.00% 1.00% 1.00% After 1 year $ 58 $ 63 $ 23 $ 33 $ 23
12b-1 fees .33% 1.00% 1.00% After 3 years $ 90 $ 90 $ 70 $ 70 $ 70
Other expenses (a) .24% .25% .24% After 5 years $124 $120 $120 $120 $120
---- ---- ---- After 10 years $221 $241(b) $241(b) $257 $257
Total fund
operating expenses 1.57% 2.25% 2.24%
==== ==== ====
<CAPTION>
Technology Fund Class A Class B Class C Class A Class B+ Class B++ Class C+ Class C++
------- ------- ------- ---------------- ------------------ ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Management fees (f) 1.04% 1.04% 1.04% After 1 year $ 59 $ 64 $ 24 $ 34 $ 24
12b-1 fees .30% 1.00% 1.00% After 3 years $ 93 $ 94 $ 74 $ 74 $ 74
Other expenses (a) .33% .34% .34% After 5 years $129 $127 $127 $127 $127
---- ---- ---- After 10 years $232 $254(b) $254(b) $272 $272
Total fund
operating expenses 1.67% 2.38% 2.38%
==== ==== ====
</TABLE>
- --------------------------------------------------------------------------------
Please refer to the footnotes on page 6.
4
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
Operating Expenses Examples
- --------------------------------------------------------- -------------------------------------------------------------
Quasar Fund Class A Class B Class C Class A Class B+ Class B++ Class C+ Class C++
------- ------- ------- ------- -------- --------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Management fees (f) 1.16% 1.16% 1.16% After 1 year $ 59 $ 65 $ 25 $ 35 $ 25
12b-1 fees .22% 1.00% 1.00% After 3 years $ 93 $ 98 $ 78 $ 78 $ 78
Other expenses (a) .29% .35% .34% After 5 years $129 $134 $134 $133 $133
---- ---- ---- After 10 years $232 $264(b) $264(b) $284 $284
Total fund
operating expenses 1.67% 2.51% 2.50%
==== ==== ====
<CAPTION>
International Fund Class A Class B Class C Class A Class B+ Class B++ Class C+ Class C++
------- ------- ------- ------- -------- --------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Management fees
(after waiver) (c)(f) .85% .85% .85% After 1 year $ 59 $ 65 $ 25 $ 35 $ 25
12b-1 fees .21% 1.00% 1.00% After 3 years $ 92 $ 98 $ 78 $ 77 $ 77
Other expenses (a) .59% .64% .63% After 5 years $128 $133 $133 $132 $132
---- ---- ---- After 10 years $230 $262(b) $262(b) $282 $282
Total fund
operating expenses (d) 1.65% 2.49% 2.48%
==== ==== ====
<CAPTION>
International Premier
Growth Fund Class A Class B Class C Class A Class B+ Class B++ Class C+ Class C++
------- ------- ------- ------- -------- --------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Management fees 1.00% 1.00% 1.00% After 1 year $ 67 $ 72 $ 32 $ 42 $ 32
12b-1 fees .30% 1.00% 1.00% After 3 years $117 $119 $ 99 $ 99 $ 99
Other expenses (a) 1.20% 1.20% 1.20% After 5 years $170 $167 $167 $167 $167
---- ---- ---- After 10 years $314 $334(b) $334(b) $350 $350
Total fund
operating expenses (d) 2.50% 3.20% 3.20%
==== ==== ====
<CAPTION>
Worldwide Privatization Fund Class A Class B Class C Class A Class B+ Class B++ Class C+ Class C++
------- ------- ------- ------- -------- --------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Management fees 1.00% 1.00% 1.00% After 1 year $ 59 $ 65 $ 25 $ 35 $ 25
12b-1 fees .30% 1.00% 1.00% After 3 years $ 95 $ 96 $ 76 $ 76 $ 76
Other expenses (a) .43% .45% .44% After 5 years $132 $131 $131 $130 $130
---- ---- ---- After 10 years $238 $261(b) $261(b) $278 $278
Total fund
operating expenses 1.73% 2.45% 2.44%
==== ==== ====
<CAPTION>
New Europe Fund Class A Class B Class C Class A Class B+ Class B++ Class C+ Class C++
------- ------- ------- ------- -------- --------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Management fees 1.02% 1.02% 1.02% After 1 year $ 60 $ 66 $ 26 $ 36 $ 26
12b-1 fees .30% 1.00% 1.00% After 3 years $ 98 $ 99 $ 79 $ 79 $ 79
Other expenses (a) .52% .52% .52% After 5 years $138 $135 $135 $135 $135
---- ---- ---- After 10 years $249 $270(b) $270(b) $288 $288
Total fund
operating expenses 1.84% 2.54% 2.54%
==== ==== ====
<CAPTION>
All-Asia Investment Fund Class A Class B Class C Class A Class B+ Class B++ Class C+ Class C++
------- ------- ------- ------- -------- --------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Management fees After 1 year $ 63 $ 68 $ 28 $ 38 $ 28
(after waiver) (c) .65% .65% .65% After 3 years $104 $106 $ 86 $ 86 $ 86
12b-1 fees .30% 1.00% 1.00% After 5 years $149 $146 $146 $146 $146
Other expenses After 10 years $271 $293(b) $293(b) $310 $310
Administration fees
(after waiver) (e) .00% .00% .00%
Other operating
expenses (a) 1.11% 1.12% 1.12%
---- ---- ----
Total fund
operating expenses (d) 2.06% 2.77% 2.77%
==== ==== ====
<CAPTION>
Greater China '97 Fund Class A Class B Class C Class A Class B+ Class B++ Class C+ Class C++
------- ------- ------- ------- -------- --------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Management fees 1.00% 1.00% 1.00% After 1 year $ 67 $ 72 $ 32 $ 42 $ 32
12b-1 fees .30% 1.00% 1.00% After 3 years $117 $119 $ 99 $ 99 $ 99
Other expenses (a) 1.20% 1.20% 1.20% After 5 years $170 $167 $167 $167 $167
---- ---- ---- After 10 years $314 $334(b) $334(b) $350 $350
Total fund
operating expenses 2.50% 3.20% 3.20%
==== ==== ====
</TABLE>
- --------------------------------------------------------------------------------
Please refer to the footnotes on page 6.
5
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
Operating Expenses Examples
- -------------------------------------------------------- -------------------------------------------------------------
Global Small Cap Fund Class A Class B Class C Class A Class B+ Class B++ Class C+ Class C++
------- ------- ------- ---------------- ------------------ ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Management fees 1.00% 1.00% 1.00% After 1 year $ 63 $ 69 $ 29 $ 39 $ 29
12b-1 fees .30% 1.00% 1.00% After 3 years $107 $109 $ 89 $ 88 $ 88
Other expenses (a) .84% .86% .85% After 5 years $153 $151 $151 $150 $150
---- ---- ---- After 10 years $279 $301(b) $301(b) $318 $318
Total fund
operating expenses 2.14% 2.86% 2.85%
==== ==== ====
<CAPTION>
Global Environment Fund Class A Class B Class C Class A Class B+ Class B++ Class C+ Class C++
------- ------- ------- ---------------- ------------------ ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Management fees 1.10% 1.10% 1.10% After 1 year $ 69 $ 74 $ 34 $ 44 $ 34
12b-1 fees .30% 1.00% 1.00% After 3 years $122 $123 $103 $104 $104
Other expenses (a) 1.29% 1.26% 1.29% After 5 years $179 $175 $175 $176 $176
---- ---- ---- After 10 years $332 $350(b) $350(b) $368 $368
Total fund
operating expenses 2.69% 3.36% 3.39%
==== ==== ====
<CAPTION>
Balanced Shares Class A Class B Class C Class A Class B+ Class B++ Class C+ Class C++
------- ------- ------- ---------------- ------------------ ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Management fees .63% .63% .63% After 1 year $ 55 $ 61 $ 21 $ 31 $ 21
12b-1 fees .24% 1.00% 1.00% After 3 years $ 82 $ 84 $ 64 $ 64 $ 64
Other expenses (a) .42% .42% .41% After 5 years $110 $110 $110 $110 $110
---- ---- ---- After 10 years $192 $218(b) $218(b) $237 $237
Total fund
operating expenses 1.29% 2.05% 2.04%
==== ==== ====
<CAPTION>
Utility Income Fund Class A Class B Class C Class A Class B+ Class B++ Class C+ Class C++
------- ------- ------- ---------------- ------------------ ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Management fees 0.00% 0.00% 0.00% After 1 year $ 57 $ 62 $ 22 $ 32 $ 22
(after waiver) (c) After 3 years $ 88 $ 89 $ 69 $ 69 $ 69
12b-1 fees .30% 1.00% 1.00% After 5 years $121 $118 $118 $118 $118
Other expenses (a) 1.20% 1.20% 1.20% After 10 years $214 $236(b) $236(b) $253 $253
---- ---- ----
Total fund
operating expenses (d) 1.50% 2.20% 2.20%
==== ==== ====
<CAPTION>
Growth and Income Fund Class A Class B Class C Class A Class B+ Class B++ Class C+ Class C++
------- ------- ------- ---------------- ------------------ ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Management fees .49% .49% .49% After 1 year $ 51 $ 57 $ 17 $ 27 $ 17
12b-1 fees .22% 1.00% 1.00% After 3 years $ 71 $ 74 $ 54 $ 54 $ 54
Other expenses (a) .21% .23% .22% After 5 years $ 91 $ 93 $ 93 $ 93 $ 93
---- ---- ---- After 10 years $151 $182(b) $182(b) $202 $202
Total fund
operating expenses .92% 1.72% 1.71%
==== ==== ====
<CAPTION>
Real Estate Investment Fund Class A Class B Class C Class A Class B+ Class B++ Class C+ Class C++
------- ------- ------- ---------------- ------------------ ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Management fees .90% .90% .90% After 1 year $ 58 $ 63 $ 23 $ 33 $ 23
12b-1 fees .30% 1.00% 1.00% After 3 years $ 89 $ 91 $ 71 $ 71 $ 71
Other expenses (a) .35% .36% .36% After 5 years $123 $121 $121 $121 $121
---- ---- ---- After 10 years $219 $242(b) $242(b) $260 $260
Total fund
operating expenses 1.55% 2.26% 2.26%
==== ==== ====
</TABLE>
- --------------------------------------------------------------------------------
+ Assumes redemption at end of period.
++ Assumes no redemption at end of period.
(a) These expenses include a transfer agency fee payable to Alliance Fund
Services, Inc., an affiliate of Alliance. The expenses shown reflect the
application of credits that reduce Fund expenses.
(b) Assumes Class B shares converted to Class A shares after eight years.
(c) Net of voluntary fee waiver. In the absence of such waiver, management fees
would be .75% for Utility Income Fund, 1.00% for All-Asia Investment Fund
and 1.00% for International Fund.
(d) Net of voluntary fee waivers and expense reimbursements. Absent such
waivers and/or reimbursements, total fund annualized operating expenses
would have been as follows:
All-Asia Investment Fund Greater China '97 Fund
Class A 2.56% Class A 18.27%
Class B 3.27% Class B 19.18%
Class C 3.27% Class C 19.37%
International Fund International Premier Growth Fund
Class A 1.80% Class A 6.40%
Class B 2.64% Class B 7.05%
Class C 2.63% Class C 6.70%
Utility Income Fund
Class A 3.55%
Class B 4.28%
Class C 4.28%
(e) Net of voluntary fee waiver. Absent such fee waiver, administration fees
would have been .15% for the Fund's Class A, Class B and Class C shares.
Reflects the fees payable by All-Asia Investment Fund to Alliance pursuant
to an administration agreement.
(f) Calculated based on average daily net assets. Maximum contractual rate,
based on quarter-end net assets, is 1.00% for each of International Fund,
Quasar Fund and Technology Fund.
6
<PAGE>
The purpose of the foregoing table is to assist the investor in understanding
the various costs and expenses that an investor in a Fund will bear directly or
indirectly. Long-term shareholders of a Fund may pay aggregate sales charges
totaling more than the economic equivalent of the maximum initial sales charges
permitted by the Conduct Rules of the National Association of Securities
Dealers, Inc. See "Management of the Funds--Distribution Services Agreements."
The Rule 12b-1 fee for each class comprises a service fee not exceeding .25% of
the aggregate average daily net assets of the Fund attributable to the class and
an asset-based sales charge equal to the remaining portion of the Rule 12b-1
fee. "Management fees" for All-Asia Investment Fund and "Administration fees"
for All-Asia Investment Fund have been restated to reflect current voluntary fee
waivers. "Other Expenses" for Global Environment Fund and International Premier
Growth are based on estimated amounts for its current fiscal year. The Examples
set forth above assume reinvestment of all dividends and distributions and
utilize a 5% annual rate of return as mandated by Commission regulations. The
Examples should not be considered representative of past or future expenses;
actual expenses may be greater or less than those shown.
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The tables on the following pages present, for each Fund, per share income and
capital changes for a share outstanding throughout each period indicated. Except
as otherwise indicated, the information in the tables for Alliance Fund, Growth
Fund, Premier Growth Fund, Balanced Shares, Utility Income Fund, Worldwide
Privatization Fund International Premier Growth Fund and Growth and Income Fund
has been audited by PricewaterhouseCooper LLP, the independent accountants for
each Fund, and for All-Asia Investment Fund, Technology Fund, Quasar Fund,
International Fund, New Europe Fund, Greater China '97 Fund, Global Small Cap
Fund, Global Environment Fund and Real Estate Investment Fund by Ernst & Young
LLP, the independent auditors for each Fund. A report of PricewaterhouseCooper
LLP or Ernst & Young LLP, as the case may be, on the information with respect to
each Fund, appears in the Fund's Statement of Additional Information. The
following information for each Fund should be read in conjunction with the
financial statements and related notes which are included in the Fund's
Statement of Additional Information.
Further information about a Fund's performance is contained in the Fund's annual
report to shareholders, which may be obtained without charge by contacting
Alliance Fund Services, Inc. at the address or the "For Literature" telephone
number shown on the cover of this Prospectus.
7
<PAGE>
<TABLE>
<CAPTION>
Net Net Net
Asset Realized and Increase
Value Unrealized (Decrease) In Dividends From
Beginning Of Net Investment Gain (Loss) On Net Asset Value Net Investment
Fiscal Year or Period Period Income (Loss) Investments From Operations Income
------------------- ------------ -------------- -------------- --------------- --------------
<S> <C> <C> <C> <C> <C>
Alliance Fund
Class A
12/1/97 to 5/31/98+++........... $8.70 $(.01)(b) $ .48 $. 47 $0.00
Year ended 11/30/97 ............ 7.71 (.02)(b) 2.09 2.07 (.02)
Year ended 11/30/96 ............ 7.72 .02 1.06 1.08 (.02)
Year ended 11/30/95 ............ 6.63 .02 2.08 2.10 (.01)
1/1/94 to 11/30/94** ........... 6.85 .01 (.23) (.22) 0.00
Year ended 12/31/93 ............ 6.68 .02 .93 .95 (.02)
Year ended 12/31/92 ............ 6.29 .05 .87 .92 (.05)
Year ended 12/31/91 ............ 5.22 .07 1.70 1.77 (.07)
Year ended 12/31/90 ............ 6.87 .09 (.32) (.23) (.18)
Year ended 12/31/89 ............ 5.60 .12 1.19 1.31 (.04)
Year ended 12/31/88 ............ 5.15 .08 .80 .88 (.08)
Class B
12/1/97 to 5/31/98+++........... $8.25 $(.04)(b) $ .45 $. 41 $0.00
Year ended 11/30/97 ............ 7.40 (.08)(b) 1.99 1.91 0.00
Year ended 11/30/96 ............ 7.49 (.01) .99 .98 0.00
Year ended 11/30/95 ............ 6.50 (.03) 2.02 1.99 0.00
1/1/94 to 11/30/94** ........... 6.76 (.03) (.23) (.26) 0.00
Year ended 12/31/93 ............ 6.64 (.03) .91 .88 0.00
Year ended 12/31/92 ............ 6.27 (.01)(b) .87 .86 (.01)
3/4/91++ to 12/31/91 ........... 6.14 .01 (b) .79 .80 (.04)
Class C
12/1/97 to 5/31/98+++........... $8.26 $(.04)(b) $ .45 $. 41 $0.00
Year ended 11/30/97 ............ 7.41 (.08)(b) 1.99 1.91 0.00
Year ended 11/30/96 ............ 7.50 (.02) 1.00 .98 0.00
Year ended 11/30/95 ............ 6.50 (.03) 2.03 2.00 0.00
1/1/94 to 11/30/94** ........... 6.77 (.03) (.24) (.27) 0.00
5/3/93++ to 12/31/93 ........... 6.67 (.02) .88 .86 0.00
Growth Fund (g)
Class A
11/1/97 to 4/30/98+++........... $43.95 $(.06)(b) $ 7.47 $ 7.53 $0.00
Year ended 10/31/97 ............ 34.91 (.10)(b) 10.17 10.07 0.00
Year ended 10/31/96 ............ 29.48 .05 6.20 6.25 (.19)
Year ended 10/31/95 ............ 25.08 .12 4.80 4.92 (.11)
5/1/94 to 10/31/94** ........... 23.89 .09 1.10 1.19 0.00
Year ended 4/30/94 ............. 22.67 (.01)(c) 3.55 3.54 0.00
Year ended 4/30/93 ............. 20.31 .05 (c) 3.68 3.73 (.14)
Year ended 4/30/92 ............. 17.94 .29 (c) 3.95 4.24 (.26)
9/4/90++ to 4/30/91 ............ 13.61 .17 (c) 4.22 4.39 (.06)
Class B
11/1/97 to 4/30/98+++........... $36.31 $(.09)(b) $ 6.11 $ 6.02 $0.00
Year ended 10/31/97 ............ 29.21 (.31)(b) 8.44 8.13 0.00
Year ended 10/31/96 ............ 24.78 (.12) 5.18 5.06 0.00
Year ended 10/31/95 ............ 21.21 (.02) 4.01 3.99 (.01)
5/1/94 to 10/31/94** ........... 20.27 .01 .93 .94 0.00
Year ended 4/30/94 ............. 19.68 (.07)(c) 2.98 2.91 0.00
Year ended 4/30/93 ............. 18.16 (.06)(c) 3.23 3.17 (.03)
Year ended 4/30/92 ............. 16.88 .17 (c) 3.67 3.84 (.21)
Year ended 4/30/91 ............. 14.38 .08 (c) 3.22 3.30 (.09)
Year ended 4/30/90 ............. 14.13 .01 (b)(c) 1.26 1.27 0.00
Year ended 4/30/89 ............. 12.76 (.01)(c) 2.44 2.43 0.00
10/23/87+ to 4/30/88 ........... 10.00 (.02)(c) 2.78 2.76 0.00
Class C
11/1/97 to 4/30/98+++........... $36.33 $(.09)(b) $ 6.11 $ 6.02 $0.00
Year ended 10/31/97 ............ 29.22 (.31)(b) 8.45 8.14 0.00
Year ended 10/31/96 ............ 24.79 (.12) 5.18 5.06 0.00
Year ended 10/31/95 ............ 21.22 (.03) 4.02 3.99 (.01)
5/1/94 to 10/31/94** ........... 20.28 .01 .93 .94 0.00
8/2/93++ to 4/30/94 ............ 21.47 (.02)(c) 1.15 1.13 0.00
Premier Growth Fund
Class A
12/1/97 to 5/31/98+++........... $22.00 $(.05)(b) $ 4.71 $ 4.66 $0.00
Year ended 11/30/97 ............ 17.98 (.10)(b) 5.20 5.10 0.00
Year ended 11/30/96 ............ 16.09 (.04)(b) 3.20 3.16 0.00
Year ended 11/30/95 ............ 11.41 (.03) 5.38 5.35 0.00
Year ended 11/30/94 ............ 11.78 (.09) (.28) (.37) 0.00
Year ended 11/30/93 ............ 10.79 (.05) 1.05 1.00 (.01)
9/28/92+ to 11/30/92 ........... 10.00 .01 .78 .79 0.00
Class B
12/1/97 to 5/31/98+++........... $21.26 $(.12)(b) $ 4.53 $ 4.41 $0.00
Year ended 11/30/97 ............ 17.52 (.23)(b) 5.05 4.82 0.00
Year ended 11/30/96 ............ 15.81 (.14)(b) 3.12 2.98 0.00
Year ended 11/30/95 ............ 11.29 (.11) 5.30 5.19 0.00
Year ended 11/30/94 ............ 11.72 (.15) (.28) (.43) 0.00
Year ended 11/30/93 ............ 10.79 (.10) 1.03 .93 0.00
9/28/92+ to 11/30/92 ........... 10.00 0.00 .79 .79 0.00
</TABLE>
- --------------------------------------------------------------------------------
Please refer to the footnotes on page 18.
8
<PAGE>
<TABLE>
<CAPTION>
Total
Total Net Asset Investment
Distributions Dividends Value Return Based
From Net And End Of on Net Asset
Fiscal Year or Period Realized Gains Distributions Period Value (a)
------------------- -------------- -------------- ---------- ------------
<S> <C> <C> <C> <C>
Alliance Fund
Class A $(2.17) $(2.17) $7.00 7.31%
Year ended 11/30/97 ............ (1.06) (1.08) 8.70 31.82
Year ended 11/30/96 ............ (1.07) (1.09) 7.71 16.49
Year ended 11/30/95 ............ (1.00) (1.01) 7.72 37.87
1/1/94 to 11/30/94** ........... 0.00 0.00 6.63 (3.21)
Year ended 12/31/93 ............ (.76) (.78) 6.85 14.26
Year ended 12/31/92 ............ (.48) (.53) 6.68 14.70
Year ended 12/31/91 ............ (.63) (.70) 6.29 33.91
Year ended 12/31/90 ............ (1.24) (1.42) 5.22 (4.36)
Year ended 12/31/89 ............ 0.00 (.04) 6.87 23.42
Year ended 12/31/88 ............ (.35) (.43) 5.60 17.10
Class B
$(2.17) $(2.17) $6.49 6.87%
Year ended 11/30/97 ............ (1.06) (1.06) 8.25 30.74
Year ended 11/30/96 ............ (1.07) (1.07) 7.40 15.47
Year ended 11/30/95 ............ (1.00) (1.00) 7.49 36.61
1/1/94 to 11/30/94** ........... 0.00 0.00 6.50 (3.85)
Year ended 12/31/93 ............ (.76) (.76) 6.76 13.28
Year ended 12/31/92 ............ (.48) (.49) 6.64 13.75
3/4/91++ to 12/31/91 ........... (.63) (.67) 6.27 13.10
Class C
$(2.17) $(2.17) $6.50 6.86%
Year ended 11/30/97 ............ (1.06) (1.06) 8.26 30.72
Year ended 11/30/96 ............ (1.07) (1.07) 7.41 15.48
Year ended 11/30/95 ............ (1.00) (1.00) 7.50 36.79
1/1/94 to 11/30/94** ........... 0.00 0.00 6.50 (3.99)
5/3/93++ to 12/31/93 ........... (.76) (.76) 6.77 13.95
Growth Fund (i)
Class A
$(2.91) $(2.91) $48.57 17.96%
Year ended 10/31/97 ............ (1.03) (1.03) 43.95 29.54
Year ended 10/31/96 ............ (.63) (.82) 34.91 21.65
Year ended 10/31/95 ............ (.41) (.52) 29.48 20.18
5/1/94 to 10/31/94** ........... 0.00 0.00 25.08 4.98
Year ended 4/30/94 ............. (2.32) (2.32) 23.89 15.66
Year ended 4/30/93 ............. (1.23) (1.37) 22.67 18.89
Year ended 4/30/92 ............. (1.61) (1.87) 20.31 23.61
9/4/90++ to 4/30/91 ............ 0.00 (.06) 17.94 32.40
Class B
$(2.91) $(2.91) $39.42 17.56%
Year ended 10/31/97 ............ (1.03) (1.03) 36.31 28.64
Year ended 10/31/96 ............ (.63) (.63) 29.21 20.82
Year ended 10/31/95 ............ (.41) (.42) 24.78 19.33
5/1/94 to 10/31/94** ........... 0.00 0.00 21.21 4.64
Year ended 4/30/94 ............. (2.32) (2.32) 20.27 14.79
Year ended 4/30/93 ............. (1.62) (1.65) 19.68 18.16
Year ended 4/30/92 ............. (2.35) (2.56) 18.16 22.75
Year ended 4/30/91 ............. (.71) (.80) 16.88 24.72
Year ended 4/30/90 ............. (1.02) (1.02) 14.38 8.81
Year ended 4/30/89 ............. (1.06) (1.06) 14.13 20.31
10/23/87+ to 4/30/88 ........... 0.00 0.00 12.76 27.60
Class C
$(2.91) $(2.91) $39.44 17.55%
Year ended 10/31/97 ............ (1.03) (1.03) 36.33 28.66
Year ended 10/31/96 ............ (.63) (.63) 29.22 20.81
Year ended 10/31/95 ............ (.41) (.42) 24.79 19.32
5/1/94 to 10/31/94** ........... 0.00 0.00 21.22 4.64
8/2/93++ to 4/30/94 ............ (2.32) (2.32) 20.28 5.27
Premier Growth Fund
Class A
$(1.44) $(1.44) $25.22 22.74%
Year ended 11/30/97 ............ (1.08) (1.08) 22.00 30.46
Year ended 11/30/96 ............ (1.27) (1.27) 17.98 21.52
Year ended 11/30/95 ............ (.67) (.67) 16.09 49.95
Year ended 11/30/94 ............ 0.00 0.00 11.41 (3.14)
Year ended 11/30/93 ............ 0.00 (.01) 11.78 9.26
9/28/92+ to 11/30/92 ........... 0.00 0.00 10.79 7.90
Class B
$(1.44) $(1.44) $24.23 22.33%
Year ended 11/30/97 ............ (1.08) (1.08) 21.26 29.62
Year ended 11/30/96 ............ (1.27) (1.27) 17.52 20.70
Year ended 11/30/95 ............ (.67) (.67) 15.81 49.01
Year ended 11/30/94 ............ 0.00 0.00 11.29 (3.67)
Year ended 11/30/93 ............ 0.00 0.00 11.72 8.64
9/28/92+ to 11/30/92 ........... 0.00 0.00 10.79 7.90
<CAPTION>
Net Assets Ratio Of Net
At End Of Ratio Of Investment
Period Expenses Income (Loss)
(000's To Average To Average Portfolio
Fiscal Year or Period omitted) Net Assets Net Assets Turnover Rate
------------------- ------------ ----------- ------------- -------------
<S> <C> <C> <C> <C>
Alliance Fund
Class A $1,188,742 98%* (.29)%* 53%
Year ended 11/30/97 ........... 1,201,435 1.03 (.29) 158
Year ended 11/30/96 ........... 999,067 1.04 .30 80
Year ended 11/30/95 ........... 945,309 1.08 .31 81
1/1/94 to 11/30/94** .......... 760,679 1.05* .21* 63
Year ended 12/31/93 ........... 831,814 1.01 .27 66
Year ended 12/31/92 ........... 794,733 .81 .79 58
Year ended 12/31/91 ........... 748,226 .83 1.03 74
Year ended 12/31/90 ........... 620,374 .81 1.56 71
Year ended 12/31/89 ........... 837,429 .75 1.79 81
Year ended 12/31/88 ........... 760,619 .82 1.38 65
Class B
$ 99,866 1.80%* 1.09%* 53%
Year ended 11/30/97 ........... 70,461 1.85 (1.12) 158
Year ended 11/30/96 ........... 44,450 1.87 (.53) 80
Year ended 11/30/95 ........... 31,738 1.90 (.53) 81
1/1/94 to 11/30/94** .......... 18,138 1.89* (.60)* 63
Year ended 12/31/93 ........... 12,402 1.90 (.64) 66
Year ended 12/31/92 ........... 3,825 1.64 (.04) 58
3/4/91++ to 12/31/91 .......... 852 1.64* .10* 74
Class C
$ 30,980 1.79%* 1.09%* 53%
Year ended 11/30/97 ........... 18,871 1.83 (1.10) 158
Year ended 11/30/96 ........... 13,899 1.86 (.51) 80
Year ended 11/30/95 ........... 10,078 1.89 (.51) 81
1/1/94 to 11/30/94** .......... 6,230 1.87* (.59)* 63
5/3/93++ to 12/31/93 .......... 4,006 1.94* (.74)* 66
Growth Fund (i)
Class A
$ 982,831 1.17%* .24%* 27%
ear ended 10/31/97 ........... 783,110 1.26 (i) (.25) 48
Year ended 10/31/96 ........... 499,459 1.30 .15 46
Year ended 10/31/95 ........... 285,161 1.35 .56 61
5/1/94 to 10/31/94** .......... 167,800 1.35* .86* 24
Year ended 4/30/94 ............ 102,406 1.40 (f) .32 87
Year ended 4/30/93 ............ 13,889 1.40 (f) .20 124
Year ended 4/30/92 ............ 8,228 1.40 1.44 137
9/4/90++ to 4/30/91 ........... 713 1.40* 1.99* 130
Class B
$4,352,301 1.88%* (.47)% 27%
Year ended 10/31/97 ........... 3,578,806 1.96 (i) (.94) 48
Year ended 10/31/96 ........... 2,498,097 1.99 (.54) 46
Year ended 10/31/95 ........... 1,052,020 2.05 (.15) 61
5/1/94 to 10/31/94** .......... 751,521 2.05* .16* 24
Year ended 4/30/94 ............ 394,227 2.10 (f) (.36) 87
Year ended 4/30/93 ............ 56,704 2.15 (f) (.53) 124
Year ended 4/30/92 ............ 37,845 2.15 .78 137
Year ended 4/30/91 ............ 22,710 2.10 .56 130
Year ended 4/30/90 ............ 15,800 2.00 .07 165
Year ended 4/30/89 ............ 7,672 2.00 (.03) 139
10/23/87+ to 4/30/88 .......... 1,938 2.00* (.40)* 52
Class C
$ 730,631 1.88% (.47)%* 27%
Year ended 10/31/97 ........... 599,449 1.97 (i) (.95)% 48
Year ended 10/31/96 ........... 403,478 2.00 (.55) 46
Year ended 10/31/95 ........... 226,662 2.05 (.15) 61
5/1/94 to 10/31/94** .......... 114,455 2.05* .16* 24
8/2/93++ to 4/30/94 ........... 64,030 2.10*(f) (.31)* 87
Premier Growth Fund
Class A
$ 796,794 1.51%* (.40)% 30%
Year ended 11/30/97 ........... 373,099 1.57 (.52) 76
Year ended 11/30/96 ........... 172,870 1.65 (.27) 95
Year ended 11/30/95 ........... 72,366 1.75 (.28) 114
Year ended 11/30/94 ........... 35,146 1.96 (.67) 98
Year ended 11/30/93 ........... 40,415 2.18 (.61) 68
9/28/92+ to 11/30/92 .......... 4,893 2.17* .91* 0
Class B
$1,633,922 2.20% (1.10)%* 30%
Year ended 11/30/97 ........... 858,449 2.25 (1.20)% 76
Year ended 11/30/96 ........... 404,137 2.32 (.94) 95
Year ended 11/30/95 ........... 238,088 2.43 (.95) 114
Year ended 11/30/94 ........... 139,988 2.47 (1.19) 98
Year ended 11/30/93 ........... 151,600 2.70 (1.14) 68
9/28/92+ to 11/30/92 .......... 19,941 2.68* .35* 0
</TABLE>
- --------------------------------------------------------------------------------
9
<PAGE>
<TABLE>
<CAPTION>
Net Net Net
Asset Realized and Increase
Value Unrealized (Decrease) In Dividends From
Beginning Of Net Investment Gain (Loss) On Net Asset Value Net Investment
Fiscal Year or Period Period Income (Loss) Investments From Operations Income
------------------- ------------ -------------- -------------- --------------- --------------
<S> <C> <C> <C> <C> <C>
Premier Growth Fund (continued)
Class C
12/1/97 to 5/31/98+++........... $21.29 $(.12)(b) $4.54 $4.42 $0.00
Year ended 11/30/97 ............ 17.54 (.24)(b) 5.07 4.83 0.00
Year ended 11/30/96 ............ 15.82 (.14)(b) 3.13 2.99 0.00
Year ended 11/30/95 ............ 11.30 (.08) 5.27 5.19 0.00
Year ended 11/30/94 ............ 11.72 (.09) (.33) (.42) 0.00
5/3/93++ to 11/30/93 ........... 10.48 (.05) 1.29 1.24 0.00
Technology Fund
Class A
12/1/97 to 5/31/98+++........... $54.44 $(.30)(b) $6.90 $6.60 $0.00
Year ended 11/30/97 ............ 51.15 (.51)(b) 4.22 3.71 0.00
Year ended 11/30/96 ............ 46.64 (.39)(b) 7.28 6.89 0.00
Year ended 11/30/95 ............ 31.98 (.30) 18.13 17.83 0.00
1/1/94 to 11/30/94** ........... 26.12 (.32) 6.18 5.86 0.00
Year ended 12/31/93 ............ 28.20 (.29) 6.39 6.10 0.00
Year ended 12/31/92 ............ 26.38 (.22)(b) 4.31 4.09 0.00
Year ended 12/31/91 ............ 19.44 (.02) 10.57 10.55 0.00
Year ended 12/31/90 ............ 21.57 (.03) (.56) (.59) 0.00
Year ended 12/31/89 ............ 20.35 0.00 1.22 1.22 0.00
Year ended 12/31/88 ............ 20.22 (.03)(c) .16 .13 0.00
Class B
12/1/97 to 5/31/98+++........... $52.58 $(.49)(b) $6.66 $6.17 $0.00
Year ended 11/30/97 ............ 49.76 (.88)(b) 4.12 3.24 0.00
Year ended 11/30/96 ............ 45.76 (.70)(b) 7.08 6.38 0.00
Year ended 11/30/95 ............ 31.61 (.60)(b) 17.92 17.32 0.00
1/1/94 to 11/30/94** ........... 25.98 (.23) 5.86 5.63 0.00
5/3/93++ to 12/31/93 ........... 27.44 (.12) 6.84 6.72 0.00
Class C
12/1/97 to 5/31/98+++........... $52.57 $(.48)(b) $6.65 $6.17 $0.00
Year ended 11/30/97 ............ 49.76 (.88)(b) 4.11 3.23 0.00
Year ended 11/30/96 ............ 45.77 (.70)(b) 7.07 6.37 0.00
Year ended 11/30/95 ............ 31.61 (.58)(b) 17.91 17.33 0.00
1/1/94 to 11/30/94** ........... 25.98 (.24) 5.87 5.63 0.00
5/3/93++ to 12/31/93 ........... 27.44 (.13) 6.85 6.72 0.00
Quasar Fund
Class A
10/1/97 to 3/31/98+++........... $30.37 $(.09)(b) $2.36 $2.27 $0.00
Year ended 9/30/97 ............. 27.92 (.24)(b) 6.80 6.56 0.00
Year ended 9/30/96 ............. 24.16 (.25) 8.82 8.57 0.00
Year ended 9/30/95 ............. 22.65 (.22)(b) 5.59 5.37 0.00
Year ended 9/30/94 ............. 24.43 (.60) (.36) (.96) 0.00
Year ended 9/30/93 ............. 19.34 (.41) 6.38 5.97 0.00
Year ended 9/30/92 ............. 21.27 (.24) (1.53) (1.77) 0.00
Year ended 9/30/91 ............. 15.67 (.05) 5.71 5.66 (.06)
Year ended 9/30/90 ............. 24.84 .03(b) (7.18) (7.15) 0.00
Year ended 9/30/89 ............. 17.60 .02(b) 7.40 7.42 0.00
Year ended 9/30/88 ............. 24.47 (.08)(c) (2.08) (2.16) 0.00
Class B
10/1/97 to 3/31/98+++........... $27.83 $(.19)(b) $2.15 $1.96 $0.00
Year ended 9/30/97 ............. 26.13 (.42)(b) (6.23) 5.81 0.00
Year ended 9/30/96 ............. 23.03 (.20) 8.11 7.91 0.00
Year ended 9/30/95 ............. 21.92 (.37)(b) 5.34 4.97 0.00
Year ended 9/30/94 ............. 23.88 (.53) (.61) (1.14) 0.00
Year ended 9/30/93 ............. 19.07 (.18) 5.87 5.69 0.00
Year ended 9/30/92 ............. 21.14 (.39) (1.52) (1.91) 0.00
Year ended 9/30/91 ............. 15.66 (.13) 5.67 5.54 (.06)
9/17/90++ to 9/30/90 ........... 17.17 (.01) (1.50) (1.51) 0.00
Class C
10/1/97 to 3/31/98+++........... $27.85 $(.19)(b) $2.14 $1.95 $0.00
Year ended 9/30/97 ............. 26.14 (.42)(b) 6.24 5.82 0.00
Year ended 9/30/96 ............. 23.05 (.20) 8.10 7.90 0.00
Year ended 9/30/95 ............. 21.92 (.37)(b) 5.36 4.99 0.00
Year ended 9/30/94 ............. 23.88 (.36) (.78) (1.14) 0.00
5/3/93++ to 9/30/93 ............ 20.33 (.10) 3.65 3.55 0.00
International Fund
Class A
Year ended 6/30/98+++........... $18.69 $(.01)(b)(c) $1.13 $1.12 $(.05)
Year ended 6/30/97 ............. 18.32 .06(b) 1.51 1.57 (.12)
Year ended 6/30/96 ............. 16.81 .05(b) 2.51 2.56 0.00
Year ended 6/30/95 ............. 18.38 .04 .01 .05 0.00
Year ended 6/30/94 ............. 16.01 (.09) 3.02 2.93 0.00
Year ended 6/30/93 ............. 14.98 (.01) 1.17 1.16 (.04)
Year ended 6/30/92 ............. 14.00 .01(b) 1.04 1.05 (.07)
Year ended 6/30/91 ............. 17.99 .05 (3.54) (3.49) (.03)
Year ended 6/30/90 ............. 17.24 .03 2.87 2.90 (.04)
Year ended 6/30/89 ............. 16.09 .05 3.73 3.78 (.13)
</TABLE>
- --------------------------------------------------------------------------------
Please refer to the footnotes on page 18.
10
<PAGE>
<TABLE>
<CAPTION>
Total Net Assets
Total Net Asset Investment At End Of
Distributions Dividends Value Return Based Period
From Net And End of on Net Asset (000's
Fiscal Year or Period Realized Gains Distributions Period Value (a) omitted)
--------------------- -------------- ------------- ------ --------- ----------
<S> <C> <C> <C> <C> <C>
Premier Growth Fund (continued)
Class C
12/1/97 to 5/31/98+++............. $(1.44) $(1.44) $24.27 22.35% $ 422,016
Year ended 11/30/97............... (1.08) (1.08) 21.29 29.64 177,923
Year ended 11/30/96............... (1.27) (1.27) 17.54 20.76 60,194
Year ended 11/30/95............... (.67) (.67) 15.82 48.96 20,679
Year ended 11/30/94............... 0.00 0.00 11.30 (3.58) 7,332
5/3/93++ to 11/30/93.............. 0.00 0.00 11.72 11.83 3,899
Technology Fund
Class A
12/1/97 to 5/31/98+++............. $(.58) $ (.58) $60.46 12.25% $ 720,675
Year ended 11/30/97............... (.42) (.42) 54.44 7.32 624,716
Year ended 11/30/96............... (2.38) (2.38) 51.15 16.05 594,861
Year ended 11/30/95............... (3.17) (3.17) 46.64 61.93 398,262
1/1/94 to 11/30/94/**/............ 0.00 0.00 31.98 22.43 202,929
Year ended 12/31/93............... (8.18) (8.18) 26.12 21.63 173,732
Year ended 12/31/92............... (2.27) (2.27) 28.20 15.50 173,566
Year ended 12/31/91............... (3.61) (3.61) 26.38 54.24 191,693
Year ended 12/31/90............... (1.54) (1.54) 19.44 (3.08) 131,843
Year ended 12/31/89............... 0.00 0.00 21.57 6.00 141,730
Year ended 12/31/88............... 0.00 0.00 20.35 0.64 169,856
Class B
12/1/97 to 5/31/98+++............. $ (.58) $ (.58) $58.17 11.87% $1,248,323
Year ended 11/30/97............... (.42) (.42) 52.58 6.57 1,053,436
Year ended 11/30/96............... (2.38) (2.38) 49.76 15.20 660,921
Year ended 11/30/95............... (3.17) (3.17) 45.76 60.95 277,111
1/1/94 to 11/30/94/**/............ 0.00 0.00 31.61 21.67 18,397
5/3/93++ to 12/31/93.............. (8.18) (8.18) 25.98 24.49 1,645
Class C
12/1/97 to 5/31/98+++............. $ (.58) $ (.58) $58.16 11.86% $ 219,120
Year ended 11/30/97............... (.42) (.42) 52.57 6.55 184,194
Year ended 11/30/96............... (2.38) (2.38) 49.76 15.17 108,488
Year ended 11/30/95............... (3.17) (3.17) 45.77 60.98 43,161
1/1/94 to 11/30/94/**/............ 0.00 0.00 31.61 21.67 7,470
5/3/93++ to 12/31/93.............. (8.18) (8.18) 25.98 24.49 1,096
Quasar Fund
Class A
10/1/97 to 3/31/98+++............. $(1.23) $(1.23) $31.41 7.97% $ 562,517
Year ended 9/30/97................ (4.11) (4.11) 30.37 27.81 402,081
Year ended 9/30/96................ (4.81) (4.81) 27.92 42.42 229,798
Year ended 9/30/95................ (3.86) (3.86) 24.16 30.73 146,663
Year ended 9/30/94................ (.82) (.82) 22.65 (4.05) 155,470
Year ended 9/30/93................ (.88) (.88) 24.43 31.58 228,874
Year ended 9/30/92................ (.16) (.16) 19.34 (8.34) 252,140
Year ended 9/30/91................ 0.00 (.06) 21.27 36.28 333,806
Year ended 9/30/90................ (2.02) (2.02) 15.67 (30.81) 251,102
Year ended 9/30/89................ (.18) (.18) 24.84 42.68 263,099
Year ended 9/30/88................ (4.71) (4.71) 17.60 (8.61) 90,713
Class B
10/1/97 to 3/31/98+++............. $(1.23) $(1.23) $28.56 7.57% $ 716,818
Year ended 9/30/97................ (4.11) (4.11) 27.83 26.70 503,037
Year ended 9/30/96................ (4.81) (4.81) 26.13 41.48 112,490
Year ended 9/30/95................ (3.86) (3.86) 23.03 29.78 16,604
Year ended 9/30/94................ (.82) (.82) 21.92 (4.92) 13,901
Year ended 9/30/93................ (.88) (.88) 23.88 30.53 16,779
Year ended 9/30/92................ (.16) (.16) 19.07 (9.05) 9,454
Year ended 9/30/91................ 0.00 (.06) 21.14 35.54 7,346
9/17/90++ to 9/30/90.............. 0.00 0.00 15.66 (8.79) 71
Class C
10/1/97 to 3/31/98+++............. $(1.23) $(1.23) $28.57 7.53% $ 206,104
Year ended 9/30/97................ (4.11) (4.11) 27.85 26.74 145,494
Year ended 9/30/96................ (4.81) (4.81) 26.14 41.46 28,541
Year ended 9/30/95................ (3.86) (3.86) 23.05 29.87 1,611
Year ended 9/30/94................ (.82) (.82) 21.92 (4.92) 1,220
5/3/93++ to 9/30/93............... 0.00 0.00 23.88 17.46 118
International Fund
Class A
Year ended 6/30/98................ $(1.21) $(1.26) $18.55 6.79% $ 131,565
Year ended 6/30/97................ (1.08) (1.20) 18.69 9.30 190,173
Year ended 6/30/96................ (1.05) (1.05) 18.32 15.83 196,261
Year ended 6/30/95................ (1.62) (1.62) 16.81 .59 165,584
Year ended 6/30/94................ (.56) (.56) 18.38 18.68 201,916
Year ended 6/30/93................ (.09) (.13) 16.01 7.86 161,048
Year ended 6/30/92................ 0.00 (.07) 14.98 7.52 179,807
Year ended 6/30/91................ (.47) (.50) 14.00 (19.34) 214,442
Year ended 6/30/90................ (2.11) (2.15) 17.99 16.98 265,999
Year ended 6/30/89................ (2.50) (2.63) 17.24 27.65 166,003
- -------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Ratio Of Net
Ratio Of Investment
Expenses Income (Loss)
To Average To Average Portfolio
Fiscal Year or Period Net Assets Net Assets Turnover Rate
--------------------- ---------- ---------- -------------
<S> <C> <C> <C>
Premier Growth Fund (continued)
Class C
12/1/97 to 5/31/98+++............. 2.19%* (1.10)%* 30%
Year ended 11/30/97............... 2.24 (1.22) 76
Year ended 11/30/96............... 2.32 (.94) 95
Year ended 11/30/95............... 2.42 (.97) 114
Year ended 11/30/94............... 2.47 (1.16) 98
5/3/93++ to 11/30/93.............. 2.79* (1.35)* 68
Technology Fund
Class A
12/1/97 to 5/31/98+++............. 1.63%* (1.04)%* 31%
Year ended 11/30/97............... 1.67(i) (.97) 51
Year ended 11/30/96............... 1.74 (.87) 30
Year ended 11/30/95............... 1.75 (.77) 55
1/1/94 to 11/30/94/**/............ 1.66* (1.22)* 55
Year ended 12/31/93............... 1.73 (1.32) 64
Year ended 12/31/92............... 1.61 (.90) 73
Year ended 12/31/91............... 1.71 (.20) 134
Year ended 12/31/90............... 1.77 (.18) 147
Year ended 12/31/89............... 1.66 .02 139
Year ended 12/31/88............... 1.42 (.16) 139
Class B
12/1/97 to 5/31/98+++............. 2.35%(i)* (1.76)%* 31%
Year ended 11/30/97............... 2.38(i) (1.70) 51
Year ended 11/30/96............... 2.44 (1.61) 30
Year ended 11/30/95............... 2.48 (1.47) 55
1/1/94 to 11/30/94/**/............ 2.43* (1.95)* 55
5/3/93++ to 12/31/93.............. 2.57* (2.30)* 64
Class C
12/1/97 to 5/31/98+++............. 2.35%(i)* (1.77)%* 31%
Year ended 11/30/97............... 2.38(i) (1.70) 51
Year ended 11/30/96............... 2.44 (1.60) 30
Year ended 11/30/95............... 2.48 (1.47) 55
1/1/94 to 11/30/94/**/............ 2.41* (1.94)* 55
5/3/93++ to 12/31/93.............. 2.52* (2.25)* 64
Quasar Fund
Class A
10/1/97 to 3/31/98+++............. 1.56%* (.66)%* 63%
Year ended 9/30/97................ 1.67 (.91) 135
Year ended 9/30/96................ 1.79 (1.11) 168
Year ended 9/30/95................ 1.83 (1.06) 160
Year ended 9/30/94................ 1.67 (1.15) 110
Year ended 9/30/93................ 1.65 (1.00) 102
Year ended 9/30/92................ 1.62 (.89) 128
Year ended 9/30/91................ 1.64 (.22) 118
Year ended 9/30/90................ 1.66 .16 90
Year ended 9/30/89................ 1.73 .10 90
Year ended 9/30/88................ 1.28 (.40) 58
Class B
10/1/97 to 3/31/98+++............. 2.34%* (1.44)%* 63%
Year ended 9/30/97................ 2.51 (1.73) 135
Year ended 9/30/96................ 2.62 (1.96) 168
Year ended 9/30/95................ 2.65 (1.88) 160
Year ended 9/30/94................ 2.50 (1.98) 110
Year ended 9/30/93................ 2.46 (1.81) 102
Year ended 9/30/92................ 2.42 (1.67) 128
Year ended 9/30/91................ 2.41 (1.28) 118
9/17/90++ to 9/30/90.............. 2.09* (.26)* 90
Class C
10/1/97 to 3/31/98+++............. 2.33%* (1.44)%* 63%
Year ended 9/30/97................ 2.50 (1.72) 135
Year ended 9/30/96................ 2.61 (1.94) 168
Year ended 9/30/95................ 2.64* (1.76)* 160
Year ended 9/30/94................ 2.48 (1.96) 110
5/3/93++ to 9/30/93............... 2.49* (1.90)* 102
International Fund
Class A
Year ended 6/30/98................ 1.65%(f) (.05)% 121%
Year ended 6/30/97................ 1.74(i) .31 94
Year ended 6/30/96................ 1.72 .31 78
Year ended 6/30/95................ 1.73 .26 119
Year ended 6/30/94................ 1.90 (.50) 97
Year ended 6/30/93................ 1.88 (.14) 94
Year ended 6/30/92................ 1.82 .07 72
Year ended 6/30/91................ 1.73 .37 71
Year ended 6/30/90................ 1.45 .33 37
Year ended 6/30/89................ 1.41 .39 87
- ------------------------------------------------------------------------------------
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
Net Net Net
Asset Realized and Increase Distributions
Value Unrealized (Decrease) In Dividends From In Excess Of
Beginning Of Net Investment Gain (Loss) On Net Asset Value Net Investment Net Investment
Fiscal Year or Period Period Income (Loss) Investments From Operations Income Income
------------------- ------------ -------------- -------------- --------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
International Fund (continued)
Class B
Year ended 6/30/98 ............. $17.71 $(.16)(b)(c) $ 1.07 $ .91 $0.00 $0.00
Year ended 6/30/97 ............. 17.45 (.09)(b) 1.43 1.34 0.00 0.00
Year ended 6/30/96 ............. 16.19 (.07)(b) 1.38) 2.31 0.00 0.00
Year ended 6/30/95 ............. 17.90 (.01) (0.08) (.09) 0.00 0.00
Year ended 6/30/94 ............. 15.74 (.19)(b) 2.91 2.72 0.00 0.00
Year ended 6/30/93 ............. 14.81 (.12) 1.14 1.02 0.00 0.00
Year ended 6/30/92 13.93 (.11)(b) 1.02 .91) (.03) 0.00
9/17/90++ to 6/30/91 ........... 15.52 .03 (1.12) (1.09) (.03) 0.00
Class C
Year ended 6/30/98 ............. $17.73 $(.15)(b)(c) $ 1.05 $ .90 $0.00 $0.00
Year ended 6/30/97 ............. 17.46 (.09)(b) 1.44 1.35 0.00 0.00
Year ended 6/30/96 ............. 16.20 (.07)(b) 2.38 2.31 0.00 0.00
Year ended 6/30/95 ............. 17.91 (.14) .05 (.09) 0.00 0.00
Year ended 6/30/94 ............. 15.74 (.11) 2.84 2.73 0.00 0.00
5/3/93++ to 6/30/93 ............ 15.93 0.00 (.19) (.19) 0.00 0.00
International Premier Growth fund
Class A
-------
3/3/98+ to 5/31/98+++ .......... $10.00 $ .04(b)(c) $ .30 $ .34 $0.00 $0.00
Class B
-------
3/3/98+ to 5/31/98+++ .......... $10.00 $ .03(b)(c) $ .30 $ .33 $0.00 $0.00
Class C
-------
3/3/98+ to 5/31/98+++ .......... $10.00 $ .02(b)(c) $ .30 $ .32 $0.00 $0.00
Worldwide Privatization Fund
Class A
Year ended 6/30/98 ............. $13.26 $ .10(b) $ .85 $ .95 $(.18) $0.00
Year ended 6/30/97 ............. 12.13 .15(b) 2.55 2.70 (.15) 0.00
Year ended 6/30/96 ............. 10.18 .10(b) 1.85 1.95 0.00 0.00
Year ended 6/30/95 ............. 9.75 .06 .37 .43 0.00 0.00
6/2/94+ to 6/30/94 ............. 10.00 .01 (.26) (.25) 0.00 0.00
Class B
Year ended 6/30/98 ............. $13.04 $ .02(b) $ .82 $ .84 $(.15) $0.00
Year ended 6/30/97 ............. 11.96 .08(b) 2.50 2.58 (.08) 0.00
Year ended 6/30/96 ............. 10.10 (.02) 1.88 1.86 0.00 0.00
Year ended 6/30/95 ............. 9.74 .02 .34 .36 0.00 0.00
6/2/94+ to 6/30/94 ............. 10.00 .00 (.26) (.26) 0.00 0.00
Class C
Year ended 6/30/98 ............. $13.04 $ .05(b) $ .79 $ .84 $(.15) $0.00
Year ended 6/30/97 ............. 11.96 .12(b) 2.46 2.58 (.08) 0.00
Year ended 6/30/96 ............. 10.10 .03 1.83 1.86 0.00 0.00
2/8/95++ to 6/30/9 ............. 9.53 .05 .52 .57 0.00 0.00
New Europe Fund
Class A
Year ended 7/31/98 ............. $18.61 $ .05(b) $ 5.28 $ 5.33 $0.00 $(.04)
Year ended 7/31/97 ............. 15.84 .07(b) 4.20 4.27 (.15) (.03)
Year ended 7/31/96 ............. 15.11 .18 1.02 1.20 0.00 0.00
Year ended 7/31/95 ............. 12.66 .04 2.50 2.54 (.09) 0.00
Period ended 7/31/94**.......... 12.53 .09 .04 .13 0.00 0.00
Year ended 2/28/94 ............. 9.37 .02(b) 3.14 3.16 0.00 0.00
Year ended 2/28/93 ............. 9.81 .04 (.33) (.29) (.15) 0.00
Year ended 2/29/92 ............. 9.76 .02(b) .05 .07 (.02) 0.00
4/2/90+ to 2/28/91 ............. 11.11(e) .26 (.91) (.65) (.26) 0.00
Class B
Year ended 7/31/98 ............. $17.87 $(.08)(b) $ 5.02 $ 4.94 $0.00 $0.00
Year ended 7/31/97 ............. 15.31 (.04)(b) 4.02 3.98 0.00 (.10)
Year ended 7/31/96 ............. 14.71 .08 .99 1.07 0.00 0.00
Year ended 7/31/95 ............. 12.41 (.05) 2.44 2.39 (.09) 0.00
Period ended 7/31/94**.......... 12.32 .07 .02 .09 0.00 0.00
Year ended 2/28/94 ............. 9.28 (.05)(b) 3.09 3.04 0.00 0.00
Year ended 2/28/93 ............. 9.74 (.02) (.33) (.35) (.11) 0.00
3/5/91++ to 2/29/92 ............ 9.84 (.04)(b) (.04) (.08) (.02) 0.00
Class C
Year ended 7/31/98 ............. $17.89 $(.08)(b) $ 5.01 $ 4.93 $0.00 $0.00
Year ended 7/31/97 ............. 15.33 (.04)(b) 4.02 3.98 0.00 (.10)
Year ended 7/31/96 ............. 14.72 .08 1.00 1.08 0.00 0.00
Year ended 7/31/95 ............. 12.42 (.07) 2.46 2.39 (.09) 0.00
Period ended 7/31/94**.......... 12.33 .06 .03 .09 0.00 0.00
5/3/93++ to 2/28/94 ............. 10.21 (.04)(b) 2.16 2.12 0.00 0.00
All-Asia Investment Fund
Class A
11/1/97 to 4/30/98+++........... $ 7.54 $(.07)(b)(c) $ (.26) $ (.33) $0.00 $0.00
Year ended 10/31/97 ............. 11.04 (.21)(b)(c) (2.95) (3.16) 0.00 0.00
Year ended 10/31/96 ............. 10.45 (.21)(b)(c) .88 .67 0.00 0.00
11/28/94+ to 10/31/9 ............ 10.00 (.19)(c) .64 .45 0.00 0.00
</TABLE>
- --------------------------------------------------------------------------------
Please refer to the footnotes on page 18.
12
<PAGE>
<TABLE>
<CAPTION>
Total Net Assets
Total Net Asset Investment At End of
Distributions Dividends Value Return Based Period
From Net And End of On Net Asset (000's
Fiscal Year or Period Realized Gains Distributions Period Value (a) omitted)
------------------- -------------- -------------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C>
International Fund (continued)
Class B
Year ended 6/30/98 ............. $(1.21) $(1.21) $17.41 5.92% $ 71,370
Year ended 6/30/97 ............. (1.08) (1.08) 17.71 8.37 77,725
Year ended 6/30/96 ............. (1.05) (1.05) 17.45 14.87 72,470
Year ended 6/30/95 ............. (1.62) (1.62) 16.19 (.22) 48,998
Year ended 6/30/94 ............. (.56) (.56) 17.90 17.65 29,943
Year ended 6/30/93 ............. (.09) (.09) 14.74 6.98 6,363
Year ended 6/30/92 ............. 0.00 (.03) 14.81 6.54 5,585
9/17/90++ to 6/30/91 ........... (.47) (.50) 13.93 (6.97) 3,515
Class C
Year ended 6/30/98 ............. $(1.21) $(1.21) $17.42 5.85% $ 20,428
Year ended 6/30/97 ............. (1.08) (1.08) 17.73 8.42 23,268
Year ended 6/30/96 ............. (1.05) (1.05) 17.46 14.85 26.965
Year ended 6/30/95 ............. (1.62) (1.62) 16.20 (.22) 19,395
Year ended 6/30/94 ............. (.56) (.56) 17.91 17.72 13,503
5/3/93++ to 6/30/93 ............ 0.00 0.00 15.74 (1.19) 229
International Premier Growth fund
Class A
3/3/98+ to 5/31/98+++ .......... 0.00 0.00 10.34 3.40 2,764
Class B
3/3/98+ to 5/31/98+++ .......... 0.00 0.00 10.33 3.30 7,042
Class C
3/3/98+ to 5/31/98+++ .......... 0.00 0.00 10.32 3.20 1,017
Worldwide Privatization Fund
Class A
Year ended 6/30/98 ............. $(1.36) $(1.54) $12.67 9.11% $ 467,960
Year ended 6/30/97 ............. (1.42) (1.57) 13.26 25.16 561,793
Year ended 6/30/96 ............. 0.00 0.00 12.13 19.16 672,732
Year ended 6/30/95 ............. 0.00 0.00 10.18 4.41 13,535
6/2/94+ to 6/30/94 ............. 0.00 0.00 9.75 (2.50) 4,990
Class B
Year ended 6/30/98 ............. $(1.36) $(1.51) $12.37 8.34% $ 156,348
Year ended 6/30/97 ............. (1.42) (1.50) 13.04 24.34 121,173
Year ended 6/30/96 ............. 0.00 0.00 11.96 18.42 83,050
Year ended 6/30/95 ............. 0.00 0.00 10.10 3.70 79,359
6/2/94+ to 6/30/94 ............. 0.00 0.00 9.74 (2.60) 22,859
Class C
Year ended 6/30/98 ............. $(1.36) $(1.51) $12.37 8.34% $ 26,635
Year ended 6/30/97 ............. (1.42) (1.50) 13.04 24.33 12,929
Year ended 6/30/96 ............. 0.00 0.00 11.96 18.42 2,383
2/8/95++ to 6/30/9 ............. 0.00 0.00 10.10 5.98 338
New Europe Fund
Class A
Year ended 7/31/98 ............. $(2.05) $(2.09) $21.85 32.21% $ 130,777
Year ended 7/31/97 ............. (1.32) (1.50) 18.61 28.78 78,578
Year ended 7/31/96 ............. (.47) (.47) 15.84 8.20 74,026
Year ended 7/31/95 ............. 0.00 (.09) 15.11 20.22 86,112
Period ended 7/31/94**.......... 0.00 0.00 12.66 1.04 86,739
Year ended 2/28/94 ............. 0.00 0.00 12.53 33.73 90,372
Year ended 2/28/93 ............. 0.00 (.15) 9.37 (2.82) 79,285
Year ended 2/29/92 ............. 0.00 (.02) 9.81 .74 108,510
4/2/90+ to 2/28/91 ............. (.44) (.70) 9.76 (5.63) 188,016
Class B
Year ended 7/31/98 ............. $(2.05) $(2.05) $20.76 31.22% $ 137,425
Year ended 7/31/97 ............. (1.32) (1.42) 17.87 27.76 77,032
Year ended 7/31/96 ............. (.47) (.47) 15.31 7.53 42,662
Year ended 7/31/95 ............. 0.00 (.09) 14.71 19.42 34,527
Period ended 7/31/94**.......... 0.00 0.00 12.41 .73 31,404
Year ended 2/28/94 ............. 0.00 0.00 12.32 32.76 20,729
Year ended 2/28/93 ............. 0.00 (.11) 9.28 (3.49) 1,732
3/5/91++ to 2/29/92............. 0.00 (.02) 9.74 .03 1,423
Class C
Year ended 7/31/98 ............. $(2.05) $(2.05) $20.77 31.19% $ 39,618
Year ended 7/31/97 ............. (1.32) (1.42) 17.89 27.73 16,907
Year ended 7/31/96 ............. (.47) (.47) 15.33 7.59 10,141
Year ended 7/31/95 ............. 0.00 (.09) 14.72 19.40 7,802
Period ended 7/31/94**.......... 0.00 0.00 12.42 .73 11,875
5/3/93++ to 2/28/94............. 0.00 0.00 12.33 20.77 10,886
All-Asia Investment Fund
Class A
11/1/97 to 4/30/98 ............ $ 0.00 $(0.00) $ 7.21 (4.38)% $ 4,816
Year ended 10/31/97 ............ .34 .34 7.54 (29.61) 5,916
Year ended 10/31/96 ............ (.08) (.08) 11.04 6.43 12,284
11/28/94+ to 10/31/95........... 0.00 0.00) 10.45 4.50 2,870
Ratio of Net
Ratio of Investment
Expenses Income (Loss)
To Average To Average Portfolio
Net Assets Net Assets Turnover Rate
------------ ------------- ---------------
Class B
Year ended 6/30/98 ............. 2.49%(f) (.90)% 121%
Year ended 6/30/97 ............. 2.59 (i) (.51) 94
Year ended 6/30/96 ............. 2.55 (.46) 78
Year ended 6/30/95 ............. 2.57 (.62) 119
Year ended 6/30/94 ............. 2.78 (1.15) 97
Year ended 6/30/93 ............. 2.70 (.96) 94
Year ended 6/30/92 ............. 2.68 (.70) 72
9/17/90++ to 6/30/91 ........... 3.39* .84* 71
Class C
Year ended 6/30/98 ............. 2.48%(f) (.90)% 121%
Year ended 6/30/97 ............. 2.58 (.51) 94
Year ended 6/30/96 ............. 2.53 (.47) 78
Year ended 6/30/95 ............. 2.54 (.88) 119
Year ended 6/30/94 ............. 2.78 (1.12) 97
5/3/93++ to 6/30/93 ............ 2.57* .08* 94
International Premier Growth fund
Class A
3/3/98+ to 5/31/98+++ .......... 2.50%* 2.08%* 26%
Class B
3/3/98+ to 5/31/98+++ .......... 3.20% 1.59%* 26%
Class C
3/3/98+ to 5/31/98+++ .......... 3.20% 1.42%* 26%
Worldwide Privatization Fund
Class A
Year ended 6/30/98 ............. 1.73% .80% 53%
Year ended 6/30/97 ............. 1.72 1.27 48
Year ended 6/30/96 ............. 1.87 .95 28
Year ended 6/30/95 ............. 2.56 .66 36
6/2/94+ to 6/30/94 ............. 2.75* 1.03* 0
Class B
Year ended 6/30/98 ............. 2.45% .20% 53%
Year ended 6/30/97 ............. 2.43 .66 48
Year ended 6/30/96 ............. 2.83 (.20) 28
Year ended 6/30/95 ............. 3.27 .01 36
6/2/94+ to 6/30/94 ............. 3.45* .33* 0
Class C
Year ended 6/30/98 ............. 2.44% .38% 53%
Year ended 6/30/97 ............. 2.42 1.06 48
Year ended 6/30/96 ............. 2.57 .63 28
2/8/95++ to 6/30/9 ............. 3.27* 2.65* 36
New Europe Fund
Class A
Year ended 7/31/98 ............. 1.85%(i) .25% 99%
Year ended 7/31/97 ............. 2.05 (i) .40 89
Year ended 7/31/96 ............. 2.14 1.10 69
Year ended 7/31/95 ............. 2.09 .37 74
Period ended 7/31/94**.......... 2.06* 1.85* 35
Year ended 2/28/94 ............. 2.30 .17 94
Year ended 2/28/93 ............. 2.25 .47 125
Year ended 2/29/92 ............. 2.24 .16 34
4/2/90+ to 2/28/91 ............. 1.52* 2.71* 48
Class B
Year ended 7/31/98 ............. 2.56%(i) (.40)% 99%
Year ended 7/31/97 ............. 2.75 (i) (.23) 89
Year ended 7/31/96 ............. 2.86 .59 69
Year ended 7/31/95 ............. 2.79 (.33) 74
Period ended 7/31/94**.......... 2.76 1.15* 35
Year ended 2/28/94 ............. 3.02 (.52) 94
Year ended 2/28/93 ............. 3.00 (.50) 125
3/5/91++ to 2/29/92............. 3.02* (.71)* 34
Class C
Year ended 7/31/98 ............. 2.56%(i) (.41)% 99%
Year ended 7/31/97 ............. 2.74 (i) (.23) 89
Year ended 7/31/96 ............. 2.87 .58 69
Year ended 7/31/95 ............. 2.78 (.33) 74
Period ended 7/31/94**.......... 2.76* 1.15* 35
5/3/93++ to 2/28/94............. 3.00* (.52)* 94
All-Asia Investment Fund
Class A
11/1/97 to 4/30/98 ............ 3.74%* (1.86)%* 87%
Year ended 10/31/97 ............ 3.45 (f) (1.97) 70
Year ended 10/31/96 ............ 3.37*(f) (1.75) 66
11/28/94+ to 10/31/95........... 4.42*(f) (1.87)* 90
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Net Net Net
Asset Realized and Increase
Value Unrealized (Decrease) In Dividends From
Beginning Of Net Investment Gain (Loss) On Net Asset Value Net Investment
Fiscal Year or Period Period Income (Loss) Investments From Operations Income
------------------- ------------ -------------- -------------- --------------- --------------
<S> <C> <C> <C> <C> <C>
All-Asia Investment Fund (continued)
Class B
11/1/97 to 4/30/98+++..... $ 7.39 $(.09)(b)(c) $ (.25) $ (.34) $0.00
Year ended 10/31/97....... 10.90 (.28)(b)(c) (2.89) (3.17) 0.00
Year ended 10/31/96....... 10.41 (.28)(b)(c) .85 .57 0.00
11/28/94+ to 10/31/95..... 10.00 (.25)(c) .66 .41 0.00
Class C
11/1/97 to 4/30/98+++..... $ 7.40 $(.09)(b)(c) $ (.25) $ (.34) $0.00
Year ended 10/31/97....... $10.91 $(.27)(b)(c) $(2.90) $(3.17) $0.00
Year ended 10/31/96....... 10.41 (.28)(b)(c) .86 .58 0.00
11/28/94+ to 10/31/95..... 10.00 (.35)(c) .76 .41 0.00
Greater China '97 Fund
Class A
September 3, 1997 to 7/31/98..... $10.00 $ .08(b)(c) $(5.18) $(5.10) $(.06)
Class B
September 3, 1997 to 7/31/98..... $10.00 $ .03(b)(c) $(5.17) $(5.14) $(.03)
Class c
September 3, 1997 to 7/31/98..... $10.00 $ .03(b)(c) $(5.17) $(5.14) $(.03)
Global Small Cap Fund
Class A
Year ended 7/31/98........ $12.87 $(.11)(b) $ .37 $ .26 $0.00
Year ended 7/31/97........ 11.61 (.15)(b) 2.97 2.82 0.00
Year ended 7/31/96........ 10.38 (.14)(b) 1.90 1.76 0.00
Year ended 7/31/95........ 11.08 (.09) 1.50 1.41 0.00
Period ended 7/31/94**.... 11.24 (.15)(b) (.01) (.16) 0.00
Year ended 9/30/93........ 9.33 (.15) 2.49 2.34 0.00
Year ended 9/30/92........ 10.55 (.16) (1.03) (1.19) 0.00
Year ended 9/30/91........ 8.26 (.06) 2.35 2.29 0.00
Year ended 9/30/90........ 15.54 (.05)(b) (4.12) (4.17) 0.00
Year ended 9/30/89........ 11.41 (.03) 4.25 4.22 0.00
Class B
Year ended 7/31/98........ $12.03 $(.18)(b) $ .34 $ .16 $0.00
Year ended 7/31/97........ 11.03 (.21)(b) 2.77 2.56 0.00
Year ended 7/31/96........ 9.95 (.20)(b) 1.81 1.61 0.00
Year ended 7/31/95........ 10.78 (.12) 1.40 1.28 0.00
Period ended 7/31/94**.... 11.00 (.17)(b) (.05) (.22) 0.00
Year ended 9/30/93........ 9.20 (.15) 2.38 2.23 0.00
Year ended 9/30/92........ 10.49 (.20) (1.06) (1.26) 0.00
Year ended 9/30/91........ 8.26 (.07) 2.30 2.23 0.00
9/17/90++ to 9/30/90...... 9.12 (.01) (.85) (.86) 0.00
Class C
Year ended 7/31/98........ $12.05 $(.19)(b) $ .35 $ .16 $0.00
Year ended 7/31/97........ 11.05 (.22)(b) 2.78 2.56 0.00
Year ended 7/31/96........ 9.96 (.20)(b) 1.82 1.62 0.00
Year ended 7/31/95........ 10.79 (.17) 1.45 1.28 0.00
Period ended 7/31/94**.... 11.00 (.17)(b) (.04) (.21) 0.00
5/3/93++ to 9/30/93....... 9.86 (.05) 1.19 1.14 0.00
Global Environment Fund (k)
Class A
11/1/97 to 4/30/98++...... $18.77 $(.14)(b) $ 1.30 $ 1.16 $0.00
Year ended 10/31/97 ...... 16.48 (.23)(b) 3.65 3.42 0.00
Year ended 10/31/96 ...... 12.37 (.13)(b) 4.26 4.13 (.02)
Year ended 10/31/95 ...... 11.74 .03 .60 .63 0.00
Year ended 10/31/94 ...... 10.97 0.00 .77 .77 0.00
Year ended 10/31/93 ...... 10.78 .01 .18 .19 0.00
Year ended 10/31/92 ...... 13.12 .01 (2.17) (2.16) (.10)
Year ended 10/31/91 ...... 12.46 .13 .87 1.00 (.25)
6/1/90+ to 10/31/90 ...... 13.83 .20 (1.57) (1.37) 0.00
Class B
11/1/97 to 4/30/98++...... $18.76 $(.15)(b) $ 1.30 $ 1.15 $0.00
10/3/97++to 10/31/97...... 19.92 (.20)(b) (.96) (1.16) 0.00
Class C
11/1/97 to 4/30/98++...... $19.15 $(.16)(b) $ 0.88 $ .72 $0.00
Balanced Shares
Class A
Year ended 7/31/98 ....... $16.17 $ .33 (b) $ 1.86 $ 2.19 $(.32)
Year ended 7/31/97 ....... 14.01 .31(b) 3.97 4.28 (.32)
Year ended 7/31/96 ....... 15.08 .37 .45 .82 (.41)
Year ended 7/31/95 ....... 13.38 .46 1.62 2.08 (.36)
Period ended 7/31/94** ... 14.40 .29 (.74) (.45) (.28)
Year ended 9/30/93 ....... 13.20 .34 1.29 1.63 (.43)
Year ended 9/30/92 ....... 12.64 .44 .57 1.01 (.45)
Year ended 9/30/91 ....... 10.41 .46 2.17 2.63 (.40)
Year ended 9/30/90 ....... 14.13 .45 (2.14) (1.69) (.40)
Year ended 9/30/89 ....... 12.53 .42 2.18 2.60 (.46)
Class B
Year ended 7/31/98 ....... $15.83 $ .21(b) $ 1.81 $ 2.02 $(.24)
Year ended 7/31/97 ....... 13.79 .19(b) 3.89 4.08 (.24)
Year ended 7/31/96 ....... 14.88 .28 .42 .70 (.31)
Year ended 7/31/95 ....... 13.23 .30 1.65 1.95 (.28)
Period ended 7/31/94** ... 14.27 .22 (.75) (.53) (.22)
Year ended 9/30/93 ....... 13.13 .29 1.22 1.51 (.37)
Year ended 9/30/92 ....... 12.61 .37 .54 .91 (.39)
2/4/91++ to 9/30/91 ...... 11.84 .25 .80 1.05 (.28)
2/4/91++ to 9/30/91 ...... 11.84 .25 .80 1.05 (.28)
<CAPTION>
Distributions
In Excess Of
Net Investment
Fiscal Year or Period Income
------------------- --------------
<S> <C>
All-Asia Investment Fund (continued)
Class B
11/1/97 to 4/30/98+++..... $0.00
Year ended 10/31/97....... 0.00
Year ended 10/31/96....... 0.00
11/28/94+ to 10/31/95..... 0.00
Class C
11/1/97 to 4/30/98+++..... $0.00
Year ended 10/31/97....... 0.00
Year ended 10/31/96....... 0.00
11/28/94+ to 10/31/95..... 0.00
Greater China '97 Fund
Class A
September 3, 1997 to 7/31/98..... $0.00
Class B
September 3, 1997 to 7/31/98..... $(.01)
Class c
September 3, 1997 to 7/31/98..... $(.01)
Global Small Cap Fund
Class A
Year ended 7/31/97........ $0.00
Year ended 7/31/97........ 0.00
Year ended 7/31/96........ 0.00
Year ended 7/31/95........ 0.00
Period ended 7/31/94**.... 0.00
Year ended 9/30/93........ 0.00
Year ended 9/30/92........ 0.00
Year ended 9/30/91........ 0.00
Year ended 9/30/90........ 0.00
Year ended 9/30/89........ 0.00
Year ended 9/30/88........ 0.00
Class B
Year ended 7/31/97........ $0.00
Year ended 7/31/97........ 0.00
Year ended 7/31/96........ 0.00
Year ended 7/31/95........ 0.00
Period ended 7/31/94**.... 0.00
Year ended 9/30/93........ 0.00
Year ended 9/30/92........ 0.00
Year ended 9/30/91........ 0.00
9/17/90++ to 9/30/90...... 0.00
Class C
Year ended 7/31/98........ $0.00
Year ended 7/31/97........ 0.00
Year ended 7/31/97........ 0.00
Year ended 7/31/96........ 0.00
Year ended 7/31/95........ 0.00
Period ended 7/31/94**.... 0.00
5/3/93++ to 9/30/93....... 0.00
Global Environment Fund (k)
Class A
11/1/97 to 4/30/98++...... $0.00
Year ended 10/31/97 ...... 0.00
Year ended 10/31/96 ...... 0.00
Year ended 10/31/95 ...... 0.00
Year ended 10/31/94 ...... 0.00
Year ended 10/31/93 ...... 0.00
Year ended 10/31/92 ...... 0.00
Year ended 10/31/91 ...... 0.00
6/1/90+ to 10/31/90 ...... 0.00
Class B
11/1/97 to 4/30/98++...... $0.00
10/3/97++to 10/31/97...... 0.00
Class C
11/1/97 to 4/30/98++...... $0.00
Balanced Shares
Class A
Year ended 7/31/98 ....... $0.00
Year ended 7/31/97 ....... 0.00
Year ended 7/31/96 ....... 0.00
Year ended 7/31/95 ....... 0.00
Period ended 7/31/94** ... 0.00
Year ended 9/30/93 ....... 0.00
Year ended 9/30/92 ....... 0.00
Year ended 9/30/91 ....... 0.00
Year ended 9/30/90 ....... 0.00
Year ended 9/30/89 ....... 0.00
Class B
Year ended 7/31/98 ....... $0.00
Year ended 7/31/97 ....... 0.00
Year ended 7/31/96 ....... 0.00
Year ended 7/31/95 ....... 0.00
Period ended 7/31/94** ... 0.00
Year ended 9/30/93 ....... 0.00
Year ended 9/30/92 ....... 0.00
2/4/91++ to 9/30/91 ...... 0.00
2/4/91++ to 9/30/91 ...... 0.00
</TABLE>
- --------------------------------------------------------------------------------
Please refer to footnotes on page 18.
14
<PAGE>
<TABLE>
<CAPTION>
Total Net Assets
Total Net Asset Investment At End Of
Distributions Dividends Value Return Based Period
From Net And End Of on Net Asset (000's
Fiscal Year or Period Realized Gains Distributions Period Value (a) omitted)
------------------- -------------- ------------- --------- ------------ ----------
<S> <C> <C> <C> <C> <C>
All-Asia Investment Fund (continued)
Class B
11/1/97 to 4/30/98+++..... $ (0.00) $ (.00) $ 7.05 (4.60)% $ 11,139
Year ended 10/31/97....... (.34) (.34) 7.39 (30.09) 11,439
Year ended 10/31/96....... (.08) (.08) 10.90 5.49 23,784
11/28/94+ to 10/31/95..... 0.00 0.00 10.41 4.10 5,170
Class C
11/1/97 to 4/30/98+++..... $ (0.00) $(0.00) $ 7.06 (4.60)% $ 1,981
Year ended 10/31/97....... (.34) (.34) 7.40 (30.06) 1,859
Year ended 10/31/96....... (.08) (.08) 10.91 5.59 4,228
11/28/94+ to 10/31/95..... 0.00 0.00 10.41 4.10 597
Greater China '97 Fund
Class A
September 3, 1997 to 7/31/98..... $ 0.00 $ (.06) $ 4.84 (51.20)% $ 445
Class B
September 3, 1997 to 7/31/98..... $ 0.00 (.04) $ 4.82 (51.53)% $ 1,551
Class C
September 3, 1997 to 7/31/98..... $ 0.00 (.04) $ 4.82 (51.53)% $ 102
Global Small Cap Fund
Class A
Year ended 7/31/98........ $ ( .99) $( .99) $12.14 2.49% $ 82,843
Year ended 7/31/97........ (1.56) (1.56) 12.87 26.47 85,217
Year ended 7/31/96........ (.53) (.53) 11.61 17.46 68,623
Year ended 7/31/95........ (2.11)(h) (2.11) 10.38 16.62 60,057
Period ended 7/31/94**.... 0.00 0.00 11.08 (1.42) 61,372
Year ended 9/30/93........ (.43) (.43) 11.24 25.83 65,713
Year ended 9/30/92........ (.03) (.03) 9.33 (11.30) 58,491
Year ended 9/30/91........ 0.00 0.00 10.55 27.72 84,370
Year ended 9/30/90........ (3.11) (3.11) 8.26 (31.90) 68,316
Year ended 9/30/89........ (.09) (.09) 15.54 37.34 113,583
Class B
Year ended 7/31/98........ $ ( .99) $( .99) $11.20 1.80% $ 38,827
Year ended 7/31/97........ (1.56) (1.56) 12.03 25.42 31,946
Year ended 7/31/96........ (.53) (.53) 11.03 16.69 14,247
Year ended 7/31/95........ (2.11)(h) (2.11) 9.95 15.77 5,164
Period ended 7/31/94**.... 0.00 0.00 10.78 (2.00) 3,889
Year ended 9/30/93........ (.43) (.43) 11.00 24.97 1,150
Year ended 9/30/92........ (.03) (.03) 9.20 (12.03) 819
Year ended 9/30/91........ 0.00 0.00 10.49 27.00 121
9/17/90++ to 9/30/90...... 0.00 0.00 8.26 (9.43) 183
Class C
Year ended 7/31/98........ $ ( .99) $( .99) $11.22 1.79% $ 9,471
Year ended 7/31/97........ (1.56) (1.56) 12.05 25.37 8,718
Year ended 7/31/96........ (.53) (.53) 11.05 16.77 4,119
Year ended 7/31/95........ (2.11)(h) (2.11) 9.96 15.75 1,407
Period ended 7/31/94**.... 0.00 0.00 10.79 (1.91) 1,330
5/3/93++ to 9/30/93....... 0.00 0.00 11.00 11.56 261
Global Environment Fund (k)
Class A
11/1/97 to 4/30/98++...... $(9.07) $(9.07) $10.86 16.53% $ 29,087
Year ended 10/31/97 ...... (1.13) (1.13) 18.77 23.51 52,378
Year ended 10/31/96 ...... 0.00 (.02) 16.48 33.48 100,271
Year ended 10/31/95 ...... 0.00 0.00 12.37 5.37 85,416
Year ended 10/31/94 ...... 0.00 0.00 11.74 7.02 81,102
Year ended 10/31/93 ...... 0.00 0.00 10.97 1.76 75,805
Year ended 10/31/92 ...... (.08) (.18) 10.78 (16.59) 74,442
Year ended 10/31/91 ...... (.09) (.34) 13.12 8.66 90,612
6/1/90+ to 10/31/90 ...... 0.00 0.00 12.46 (10.68) 86,041
Class B
11/1/97 to 4/30/98++...... $(9.07) $(9.07) $10.84 16.50% $ 114
10/3/97++to 10/31/97...... 0.00 $0.00 $18.76 (5.82) 235
Class C
11/1/97 to 4/30/98++...... $(9.07) $(9.07) $10.80 13.78% $ 4
Balanced Shares
Class A
Year ended 7/31/98 ....... $ 2.07 $(2.39) $15.97 14.99% $123,623
Year ended 7/31/97 ....... 1.80 (2.12) 16.17 33.46 115,500
Year ended 7/31/96 ....... (1.48) (1.89) 14.01 5.23 102,567
Year ended 7/31/95 ....... (.02) (.38) 15.08 15.99 122,033
Period ended 7/31/94** ... (.29) (.57) 13.38 (3.21) 157,637
Year ended 9/30/93 ....... 0.00 (.43) 14.40 12.52 172,484
Year ended 9/30/92 ....... 0.00 (.45) 13.20 8.14 143,883
Year ended 9/30/91 ....... 0.00 (.40) 12.64 25.52 154,230
Year ended 9/30/90 ....... (1.63) (2.03) 10.41 (13.12) 140,913
Year ended 9/30/89 ....... (.54) (1.00) 14.13 22.27 159,290
Class B
Year ended 7/31/98 ....... $ 2.07 $(2.31) $15.54 14.13% $ 47,728
Year ended 7/31/97 ....... 1.80 (2.04) 15.83 32.34 24,192
Year ended 7/31/96 ....... (1.48) (1.79) 13.79 4.45 18,393
Year ended 7/31/95 ....... (.02) (.30) 14.88 15.07 15,080
Period ended 7/31/94** ... (.29) (.51) 13.23 (3.80) 14,347
Year ended 9/30/93 ....... 0.00 (.37) 14.27 11.65 12,789
Year ended 9/30/92 ....... 0.00 (.39) 13.13 7.32 6,499
2/4/91++ to 9/30/91 ...... 0.00 (.28) 12.61 8.96 1,830
2/4/91++ to 9/30/91 ...... 0.00
<CAPTION>
Ratio Of Net
Ratio Of Investment
Expenses Income (Loss)
To Average To Average Portfolio
Fiscal Year or Period Net Assets Net Assets Turnover Rate
--------------------- ---------- ---------- -------------
<S> <C> <C> <C>
All-Asia Investment Fund (continued)
Class B
11/1/97 to 4/30/98+++..... 4.46%* (2.56)%* 87%
Year ended 10/31/97....... 4.15(f) (2.67) 70
Year ended 10/31/96....... 4.07(f) (2.44) 66
11/28/94+ to 10/31/95..... 5.20*(f) (2.64)* 90
Class C
11/1/97 to 4/30/98+++..... 4.47%* (2.56)%* 87%
Year ended 10/31/97....... 4.15(f) (2.66) 70
Year ended 10/31/96....... 4.07(f) (2.42) 66
11/28/94+ to 10/31/95..... 5.84*(f) (3.41) 90
Greater China '97 Fund
Class A
September 3, 1997 to 7/31/98..... 2.52%(f)(i) 1.20% 58%
Class B
September 3, 1997 to 7/31/98..... 3.22%(f)(i) .53%* 58%
Class C
September 3, 1997 to 7/31/98..... 3.22%(f)(i) .50% 58%
Global Small Cap Fund
Class A
Year ended 7/31/98........ 2.16%(i) (.88)% 113%
Year ended 7/31/97........ 2.41(i) (1.25) 129
Year ended 7/31/96........ 2.51 (1.22) 139
Year ended 7/31/95........ 2.54(f) (1.17) 128
Period ended 7/31/94**.... 2.42* (1.26)* 78
Year ended 9/30/93........ 2.53 (1.13) 97
Year ended 9/30/92........ 2.34 (.85) 108
Year ended 9/30/91........ 2.29 (.55) 104
Year ended 9/30/90........ 1.73 (.46) 89
Year ended 9/30/89........ 1.56 (.17) 106
Class B
Year ended 7/31/98........ 2.88%(i) (1.58)% 113%
Year ended 7/31/97........ 3.11(i) (1.92) 129
Year ended 7/31/96........ 3.21 (1.88) 139
Year ended 7/31/95........ 3.20(f) (1.92) 128
Period ended 7/31/94**.... 3.15* (1.93)* 78
Year ended 9/30/93........ 3.26 (1.85) 97
Year ended 9/30/92........ 3.11 (1.31) 108
Year ended 9/30/91........ 2.98 (1.39) 104
9/17/90++ to 9/30/90...... 2.61* (1.30)* 89
Class C
Year ended 7/31/98........ 2.88%(i) (1.59)% 113%
Year ended 7/31/97........ 3.10(i) (1.93) 129
Year ended 7/31/96........ 3.19 (1.85) 139
Year ended 7/31/95........ 3.25(f) (2.10) 128
Period ended 7/31/94**.... 3.13* (1.92)* 78
5/3/93++ to 9/30/93....... 3.75* (2.51)* 97
Global Environment Fund (k)
Class A
11/1/97 to 4/30/98++............ 2.75%* (2.31)%* 199%
Year ended 10/31/97 ............ 2.39 (1.35) 145
Year ended 10/31/96 ............ 1.60 (.85) 268
Year ended 10/31/95 ............ 1.57 .21 109
Year ended 10/31/94 ............ 1.67 (.04) 42
Year ended 10/31/93 ............ 1.62 .15 25
Year ended 10/31/92 ............ 1.63 .10 41
Year ended 10/31/91 ............ 1.49 .95 32
6/1/90+ to 10/31/90 ............ 1.72* 3.95* 4
Class B
11/1/97++ to 4/30/98++.......... 3.55% (3.08)%* 199%
10/3/97++ to 10/31/97 .......... 20.84 (1.03) 145
Class C
11/1/97++ to 4/30/98++.......... 3.32%* (2.71)% 199%
Balanced Shares
Class A
Year ended 7/31/98 ............. 1.30%(i) 2.07% 145%
Year ended 7/31/97 ............. 1.47(i) 2.11 207
Year ended 7/31/96 ............. 1.38 2.41 227
Year ended 7/31/95 ............. 1.32 3.12 179
Period ended 7/31/94** ......... 1.27* 2.50* 116
Year ended 9/30/93 ............. 1.35 2.50 188
Year ended 9/30/92 ............. 1.40 3.26 204
Year ended 9/30/91 ............. 1.44 3.75 70
Year ended 9/30/90 ............. 1.36 4.01 169
Year ended 9/30/89 ............. 1.42 3.29 132
Class B
Year ended 7/31/98 ............. 2.06%(i) 1.34% 145%
Year ended 7/31/97 ............. 2.25(i) 1.32 207
Year ended 7/31/96 ............. 2.16 1.61 227
Year ended 7/31/95 ............. 2.11 2.30 179
Period ended 7/31/94** ......... 2.05* 1.73* 116
Year ended 9/30/93 ............. 2.13 1.72 188
Year ended 9/30/92 ............. 2.16 2.46 204
2/4/91++ to 9/30/91 ............ 2.13* 3.19* 70
</TABLE>
- --------------------------------------------------------------------------------
15
<PAGE>
<TABLE>
<CAPTION>
Net Net Net
Asset Realized and Increase
Value Unrealized (Decrease) In Dividends From Distributions
Beginning Of Net Investment Gain (Loss) On Net Asset Value Net Investment From Net
Fiscal Year or Period Period Income (Loss) Investments From Operations Income Realized Gains
___________________ ______________ _____________ _______________ ______________ ______________ ______________
<S> <C> <C> <C> <C> <C> <C>
Balanced Shares (continued)
Class C
Year ended 7/31/98 ............. $15.86 $ .21(b) $1.81 $ 2.02 $ (.24) $(2.07)
Year ended 7/31/97 ............. 13.81 .20(b) 3.89 4.09 (.24) (1.80)
Year ended 7/31/96 ............. 14.89 .26 .45 .71 (.31) (1.48)
Year ended 7/31/95 ............. 13.24 .30 1.65 1.95 (.28) (.02)
Period ended 7/31/94** ......... 14.28 .24 (.77) (.53) (.22) (.29)
5/3/93++ to 9/30/93............. 13.63 .11 .71 .82 (.17) 0.00
Utility Income Fund
Class A
12/1/97 to 5/31/98+++............ $12.48 $ .15(b)(c) $1.41 $ 1.56 $ (.16) $ (.47)
Year ended 11/30/97 ............. 10.59 .32(b)(c) 2.04 2.36 (.34) (.13)
Year ended 11/30/96 ............. 10.22 .18(b)(c) .65 .83 (.46) 0.00
Year ended 11/30/95 ............. 8.97 .27(c) 1.43 1.70 (.45) 0.00
Year ended 11/30/94 ............. 9.92 .42(c) (.89) (.47) (.48) 0.00
10/18/93+ to 11/30/93............ 10.00 .02(c) (.10) (.08) 0.00 0.00
Class B
12/1/97 to 5/31/98+++............ $12.46 $ .11(b)(c) $1.38 $ 1.49 $ (.12) $ (.47)
Year ended 11/30/97 ............. 10.57 .25(b)(c) 2.04 2.29 (.27) (.13)
Year ended 11/30/96 ............. 10.20 .10(b)(c) .67 .77 (.40) 0.00
Year ended 11/30/95 ............. 8.96 .18(c) 1.45 1.63 (.39) 0.00
Year ended 11/30/94 ............. 9.91 .37(c) (.91) (.54) (.41) 0.00
10/18/93+ 11/30/93............... 10.00 .01(c) (.10) (.09) 0.00 0.00
Class C
12/1/97 to 5/31/98+++............ $12.47 $ .10(b)(c) $1.41 $ 1.51 $ (.12) $ (.47)
Year ended 11/30/97 ............. 10.59 .25(b)(c) 2.03 2.28 (.27) (.13)
Year ended 11/30/96 ............. 10.22 .11(b)(c) .66 .77 (.40) 0.00
Year ended 11/30/95 ............. 8.97 .18(c) 1.46 1.64 (.39) 0.00
Year ended 11/30/94 ............. 9.92 .39(c) (.93) (.54) (.41) 0.00
10/27/93+ to 11/30/93............ 10.00 .01(c) (.09) (.08) 0.00 0.00
Growth and Income Fund
Class A
11/1/97 to 4/30/98+++............ $ 3.48 $ .02(b) $ .58 $ .60 $ (.02) $ (.46)
Year ended 10/31/97 ............. 3.00 .04(b) .87 .91 (.05) (.38)
Year ended 10/31/96 ............. 2.71 .05 .50 .55 (.05) (.21)
Year ended 10/31/95 ............. 2.35 .02 .52 .54 (.06) (.12)
Year ended 10/31/94 ............. 2.61 .06 (.08) (.02) (.06) (.18)
Year ended 10/31/93 ............. 2.48 .06 .29 .35 (.06) (.16)
Year ended 10/31/92 ............. 2.52 .06 .11 .17 (.06) (.15)
Year ended 10/31/91 ............. 2.28 .07 .56 .63 (.09) (.30)
Year ended 10/31/90 ............. 3.02 .09 (.30) (.21) (.10) (.43)
Year ended 10/31/89 ............. 3.05 .10 .43 .53 (.08) (.48)
Year ended 10/31/88 ............. 3.48 .10 .33 .43 (.08) (.78)
Class B
11/1/97 to 4/30/98+++............ $ 3.45 $0.00(b) $ .59 $ .59 $ (.01) $ (.46)
Year ended 10/31/97 ............. 2.99 .02(b) .85 .87 (.03) (.38)
Year ended 10/31/96 ............. 2.69 .03 .51 .54 (.03) (.21)
Year ended 10/31/95 ............. 2.34 .01 .49 .50 (.03) (.12)
Year ended 10/31/94 ............. 2.60 .04 (.08) (.04) (.04) (.18)
Year ended 10/31/93 ............. 2.47 .05 .28 .33 (.04) (.16)
Year ended 10/31/92 ............. 2.52 .04 .11 .15 (.05) (.15)
2/8/91++ to 10/31/91 2.40 .04 .12 .16 (.04) 0.00
Class C
11/1/97 to 4/30/98+++............ $ 3.45 $0.00(b) $ .59 $ .59 $ (.01) $ (.46)
Year ended 10/31/97 ............. 2.99 .02(b) .85 .87 (.03) (.38)
Year ended 10/31/96 ............. 2.70 .03 .50 .53 (.03) (.21)
Year ended 10/31/95 ............. 2.34 .01 .50 .51 (.03) (.12)
Year ended 10/31/94 ............. 2.60 .04 (.08) (.04) (.04) (.18)
5/3/93 ++ to 10/31/93............ 2.43 .02 .17 .19 (.02) 0.00
Real Estate Investment Fund
Class A
Year ended 8/31/98 .............. $12.80 $ .52(b) $(2.33) $(1.81) $ (.51) $ (.01)
10/1/96+ to 8/31/97.............. 10.00 .30(b) 2.88 3.18 (.38)(j) 0.00
Class B
Year ended 8/31/98 .............. $12.79 $ .42(b) $(2.33) $(1.91) $ (.43) $ (.01)
10/1/96+ to 8/31/97.............. 10.00 .23(b) 2.89 3.12 (.33)(j) 0.00
Class C
Year ended 8/31/98 .............. $12.79 $ .42(b) $(2.33) $(1.91) $ (.43) $ (.01)
10/1/96+ to 8/31/97.............. 10.00 .23(b) 2.89 3.12 (.33)(j) 0.00
</TABLE>
Please refer to the footnotes on page 18.
<PAGE>
<TABLE>
<CAPTION>
Total Net Assets
Total Net Asset Investment At End Of
Dividends Value Return Based Period
And End Of on Net Asset (000's
Fiscal Year or Period Distributions Period Value (a) omitted)
------------------- -------------- ---------- ------------ ------------
<S> <C> <C> <C> <C>
Balanced Shares (continued)
Class C
Year ended 7/31/98 ............. $(2.31) $15.57 14.09% $ 10,855
Year ended 7/31/97 ............. (2.04) 15.86 32.37 5,510
Year ended 7/31/96 ............. (1.79) 13.81 4.52 6,096
Year ended 7/31/95 ............. (.30) 14.89 15.06 5,108
Period ended 7/31/94** ......... (.51) 13.24 (3.80) 6,254
5/3/93++ to 9/30/93 ............ (.17) 14.28 6.01 1,487
Utility Income Fund
Class A
12/1/97 to 5/31/98+++........... $(.63) $13.41 12.83% $ 6,196
Year ended 11/30/97 ............ (.47) 12.48 23.10% 4,117
Year ended 11/30/96 ............ (.46) 10.59 8.47 3,294
Year ended 11/30/95 ............ (.45) 10.22 19.58 2,748
Year ended 11/30/94 ............ (.48) 8.97 (4.86) 1,068
10/18/93+ to 11/30/93 .......... 0.00 9.92 (.80) 229
Class B
12/1/97 to 5/31/98+++........... $(.59) $13.36 12.29% $ 19,744
Year ended 11/30/97 ............ (.40) 12.46 22.35 14,782
Year ended 11/30/96 ............ (.40) 10.57 7.82 13,561
Year ended 11/30/95 ............ (.39) 10.20 18.66 10,988
Year ended 11/30/94 ............ (.41) 8.96 (5.59) 2,353
10/18/93+ 11/30/93 ............. 0.00 9.91 (.90) 244
Class C
12/1/97 to 5/31/98+++........... $(.59) $13.39 12.44% $ 4,259
Year ended 11/30/97 ............ (.40) 12.47 22.21 3,413
Year ended 11/30/96 ............ (.40) 10.59 7.81 3,376
Year ended 11/30/95 ............ (.39) 10.22 18.76 3,500
Year ended 11/30/94 ............ (.41) 8.97 (5.58) 2,651
10/27/93+ to 11/30/93 .......... 0.00 9.92 (.80) 18
Growth and Income Fund
Class A
11/1/97 to 4/30/98+++........... $(.48) $3.60 19.32% $ 966,167
Year ended 10/31/97 ............ (.43) 3.48 33.28 787,566
Year ended 10/31/96 ............ (.26) 3.00 21.51 553,151
Year ended 10/31/95 ............ (.18) 2.71 24.21 458,158
Year ended 10/31/94 ............ (.24) 2.35 (.67) 414,386
Year ended 10/31/93 ............ (.22) 2.61 14.98 459,372
Year ended 10/31/92 ............ (.21) 2.48 7.23 417,018
Year ended 10/31/91 ............ (.39) 2.52 31.03 409,597
Year ended 10/31/90 ............ (.53) 2.28 (8.55) 314,670
Year ended 10/31/89 ............ (.56) 3.02 21.59 377,168
Year ended 10/31/88 ............ (.86) 3.05 16.45 350,510
Class B
11/1/97 to 4/30/98+++........... $(.47) $3.57 19.14% $ 666,923
Year ended 10/31/97 ............ (.41) 3.45 31.83 456,399
Year ended 10/31/96 ............ (.24) 2.99 21.20 235,263
Year ended 10/31/95 ............ (.15) 2.69 22.84 136,758
Year ended 10/31/94 ............ (.22) 2.34 (1.50) 102,546
Year ended 10/31/93 ............ (.20) 2.60 14.22 76,633
Year ended 10/31/92 ............ (.20) 2.47 6.22 29,656
2/8/91++ to 10/31/91 ........... (.04) 2.52 6.83 10,221
Class C
11/1/97 to 4/30/98+++........... $(.47) $3.57 19.14% $ 150,335
Year ended 10/31/97 ............ (.41) 3.45 31.83 106,526
Year ended 10/31/96 ............ (.24) 2.99 20.72 61,356
Year ended 10/31/95 ............ (.15) 2.70 23.30 35,835
Year ended 10/31/94 ............ (.22) 2.34 (1.50) 19,395
5/3/93 ++ to 10/31/93 .......... (.02) 2.60 7.85 7,774
Real Estate Investment Fund
Class A
Year ended 8/31/98 ............. $(.52) $10.47 (14.90)% $ 51,214
10/1/96+ to 8/31/97 ............ (.38) 12.80 32.24 37,638
Class B
Year ended 8/31/98 ............. $(.44) $10.44 (15.56)% $ 268,856
10/1/96+ to 8/31/97 ............ (.33) 12.79 31.49 186,802
Class C
Year ended 8/31/98 ............. $(.44) $10.44 (15.56)% $ 69,575
10/1/96+ to 8/31/97 ............ (.33) 12.79 31.49 42,719
Ratio Of Net
Ratio Of Investment
Expenses Income (Loss)
To Average To Average Portfolio
Fiscal Year or Period Net Assets Net Assets Turnover Rate
------------------- ----------- ------------- -------------
<S> <C> <C> <C>
Balanced Shares (continued)
Class C
Year ended 7/31/98 ............. 2.05%(i) 1.36% 145%
Year ended 7/31/97 ............. 2.23(l) 1.37 207
Year ended 7/31/96 ............. 2.15 1.63 227
Year ended 7/31/95 ............. 2.09 2.32 179
Period ended 7/31/94** ......... 2.03* 1.81* 116
5/3/93++ to 9/30/93 ............ 2.29* 1.47* 188
Utility Income Fund
Class A
12/1/97/ to 5/31/98+++.......... 1.51%(i) 2.30% 9%
Year ended 11/30/97 ............ 1.50(i) 2.89 37
Year ended 11/30/96 ............ 1.50(f) 1.67 98
Year ended 11/30/95 ............ 1.50(f) 2.48 162
Year ended 11/30/94 ............ 1.50(f) 4.13 30
10/18/93+ to 11/30/93 .......... 1.50*(f) 2.35* 11
Class B
12/1/97/ to 5/31/98+++.......... 2.21%(i) 1.60% 9%
Year ended 11/30/97 ............ 2.20(f) 2.27 37
Year ended 11/30/96 ............ 2.20(f) .95 98
Year ended 11/30/95 ............ 2.20(f) 1.60 162
Year ended 11/30/94 ............ 2.20(f) 3.53 30
10/18/93+ 11/30/93 ............. 2.20*(f) 2.84* 11
Class C
12/1/97/ to 5/31/98+++.......... 2.21%(i) 1.59% 9%
Year ended 11/30/97 ............ 2.20(f) 2.27 37
Year ended 11/30/96 ............ 2.20(f) .94 98
Year ended 11/30/95 ............ 2.20(f) 1.88 162
Year ended 11/30/94 ............ 2.20(f) 3.60 30
10/27/93+ to 11/30/93 .......... 2.20*(f) 3.08* 11
Growth and Income Fund
Class A
11/1/97/ to 4/30/98+++.......... .88% .97% 41%
Year ended 10/31/97 ............ .92(i) 1.39* 88
Year ended 10/31/96 ............ .97 1.73 88
Year ended 10/31/95 ............ 1.05 1.88 142
Year ended 10/31/94 ............ 1.03 2.36 68
Year ended 10/31/93 ............ 1.07 2.38 91
Year ended 10/31/92 ............ 1.09 2.63 104
Year ended 10/31/91 ............ 1.14 2.74 84
Year ended 10/31/90 ............ 1.09 3.40 76
Year ended 10/31/89 ............ 1.08 3.49 79
Year ended 10/31/88 ............ 1.09 3.09 66
Class B
11/1/97/ to 4/30/98+++.......... 1.66% .18% 41%
Year ended 10/31/97 ............ 1.72(i) .56 88
Year ended 10/31/96 ............ 1.78 .91 88
Year ended 10/31/95 ............ 1.86 1.05 142
Year ended 10/31/94 ............ 1.85 1.56 68
Year ended 10/31/93 ............ 1.90 1.58 91
Year ended 10/31/92 ............ 1.90 1.69 104
2/8/91++ to 10/31/91 ........... 1.99* 1.67* 84
Class C
11/1/97/ to 4/30/98+++.......... 1.66% .18% 41%
Year ended 10/31/97 ............ 1.71(i) .58 88
Year ended 10/31/96 ............ 1.76 .93 88
Year ended 10/31/95 ............ 1.84 1.04 142
Year ended 10/31/94 ............ 1.84 1.61 68
5/3/93 ++ to 10/31/93 .......... 1.96* 1.45* 91
Real Estate Investment Fund
Class A
Year ended 8/31/98 ............ 1.55% 3.87% 23%
10/1/96+ to 8/31/97 ............ 1.77*(l) 2.73* 20
Class B
Year ended 8/31/98 ............ 2.26% 3.16% 23%
10/1/96+ to 8/31/97 ............ 2.44*(i) 2.08* 20
Class C
Year ended 8/31/98 ............ 2.26% 3.15% 23%
10/1/96+ to 8/31/97 ............ 2.43*(i) 2.06* 20
</TABLE>
- --------------------------------------------------------------------------------
17
<PAGE>
- ----------
+ Commencement of operations.
++ Commencement of distribution.
+++ Unaudited
* Annualized.
** Reflects a change in fiscal year end.
(a) Total investment return is calculated assuming an initial investment made
at the net asset value at the beginning of the period, reinvestment of all
dividends and distributions at the net asset value during the period, and a
redemption on the last day of the period. Initial sales charges or
contingent deferred sales charges are not reflected in the calculation of
total investment return. Total investment returns calculated for periods of
less than one year are not annualized.
(b) Based on average shares outstanding.
(c) Net of fee waiver and expense reimbursement.
(d) Not Applicable.
(e) Net of offering costs of ($.05).
(f) Net of expenses assumed and/or waived/reimbursed. If the following Funds
had borne all expenses in their most recent five fiscal years, their
expense ratios, without giving effect to the expense offset arrangement
described in (l) below, would have been as follows:
<TABLE>
<CAPTION>
1993 1994 1995 1996 1997 1998
All-Asia Investment Fund
<S> <C> <C> <C> <C> <C> <C>
Class A -- -- 10.57%* 3.61% 3.57% --
Class B -- -- 11.32%* 4.33% 4.27% --
Class C -- -- 11.38%* 4.30% 4.27% --
Growth Fund
Class A 1.84% 1.46% -- -- -- --
Class B 2.52% 2.13% -- -- -- --
Class C -- 2.13%* -- -- -- --
Global Small Cap Fund
Class A -- -- 2.61% -- -- --
Class B -- -- 3.27% -- -- --
Class C -- -- 3.31% -- -- --
Utility Income Fund
Class A 145.63%* 13.72% 4.86%* 3.38% 3.55% --
Class B 133.62%* 14.42% 5.34%* 4.08% 4.28% --
Class C 148.03%* 14.42% 5.99%* 4.07% 4.28% --
International Fund
Class A -- -- -- -- -- 1.80%
Class B -- -- -- -- -- 2.64%
Class C -- -- -- -- -- 2.63%
Greater China '97 Fund
Class A -- -- -- -- -- 18.27%*
Class B -- -- -- -- -- 19.18%*
Class C -- -- -- -- -- 19.37%*
</TABLE>
- ----------
For the expense ratios of the Funds in years prior to fiscal year 1993, assuming
the Funds had borne all expenses, please see the Financial Statements in each
Fund's Statement of Additional Information.
(g) Prior to July 22, 1993, Equitable Capital Management Corporation
("Equitable Capital") served as the investment adviser to the predecessor
to The Alliance Portfolios, of which Growth Fund is a series. On July 22,
1993, Alliance acquired the business and substantially all assets of
Equitable Capital and became investment adviser to the Fund.
(h) "Distributions from Net Realized Gains" includes a return of capital of
$(.12).
(i) Amounts do not reflect the impact of expense offset arrangements with the
transfer agent. Taking into account such expense offset arrangements, the
ratio of expenses to average net assets, assuming the assumption and/or
waiver/reimbursement of expenses described in (f) above, would have been as
follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Balanced Shares 1997 1998 Technology Fund 1997 1998
Class A 1.46% 1.29% Class A 1.66% --
Class B 2.24% 2.05% Class B 2.36% --
Class C 2.22% 2.04% Class C 2.37% --
Real Estate Greater China
Investment Fund 1997 1998 '97 Fund 1997 1998
Class A 1.77% -- Class A -- 2.50%
Class B 2.43% -- Class B -- 3.20%
Class C 2.42% -- Class C -- 3.20%
Growth Fund 1997 1998 New Europe Fund 1997 1998
Class A 1.25% -- Class A 2.04% 1.84%
Class B 1.95% -- Class B 2.74% 2.54%
Class C 1.95% -- Class C 2.73% 2.54%
International Fund 1997 1998 Growth and Income Fund 1997 1998
Class A 1.73% -- Class A .91% --
Class B 2.58% -- Class B 1.71% --
Class C 2.56% -- Class C 1.70% --
Global Small Cap Fund 1997 1998
Class A 2.38% 2.14%
Class B 3.08% 2.86%
Class C 3.08% 2.85%
</TABLE>
(j) Distributions from net investment income include a tax return of capital of
$.08, $.09 and $.08 for Class A, B and C shares, respectively.
(k) Global Environment Fund operated as a closed-end investment company
through October 3, 1997, when it converted to an open-end investment
company and all shares of its common stock then outstanding were
reclassified as Class A shares.
18
<PAGE>
- --------------------------------------------------------------------------------
GLOSSARY
- --------------------------------------------------------------------------------
The following terms are frequently used in this Prospectus.
Equity securities, except as noted otherwise, are (i) common stocks, partnership
interests, business trust shares and other equity or ownership interests in
business enterprises, and (ii) securities convertible into, and rights and
warrants to subscribe for the purchase of, such stocks, shares and
interests.
Debt securities are bonds, debentures, notes, bills, repurchase agreements,
loans, other direct debt instruments and other fixed, floating and variable rate
debt obligations, but do not include convertible securities.
Fixed-income securities are debt securities and dividend-paying preferred stocks
and include floating rate and variable rate instruments.
Convertible securities are fixed-income securities that are convertible into
common stock.
U.S. Government securities are securities issued or guaranteed by the United
States Government, its agencies or instrumentalities.
Foreign government securities are securities issued or guaranteed, as to payment
of principal and interest, by governments, quasi-governmental entities,
governmental agencies or other governmental entities.
Asian company is an entity that (i) is organized under the laws of an Asian
country and conducts business in an Asian country, (ii) derives 50% or more of
its total revenues from business in Asian countries, or (iii) issues equity or
debt securities that are traded principally on a stock exchange in an Asian
country.
Asian countries are Australia, the Democratic Socialist Republic of Sri Lanka,
the Hong Kong Special Administrative Region of the People's Republic of China
(Hong Kong), the Islamic Republic of Pakistan, Japan, the Kingdom of Thailand,
Malaysia, Negara Brunei Darussalam (Brunei), New Zealand, the People's Republic
of China, the People's Republic of Kampuchea (Cambodia), the Republic of China
(Taiwan), the Republic of India, the Republic of Indonesia, the Republic of
Korea (South Korea), the Republic of the Philippines, the Republic of Singapore,
the Socialist Republic of Vietnam and the Union of Myanmar.
Greater China company is an entity that (i) is organized under the laws of a
Greater China country and conducts business in a Greater China country, (ii)
derives 50% or more of its total revenues from businesses in Greater China
countries, or (iii) issues equity or debt securities that are trade principally
on a stock exchange in a Greater China country. A company of a particular
Greater China country is a company that meets any of these criteria with respect
to that country.
Greater China countries are the People's Republic of China ("China"), the Hong
Kong Special Administrative Region of the People's Republic of China ("Hong
Kong") and the Republic of China ("Taiwan").
Non-U.S. company is an entity that (i) is organized under the laws of a foreign
country and conducts business in a foreign country, (ii) derives 50% or more of
its total revenues from business in foreign countries, or (iii) issues equity or
debt securities that are traded principally on a stock exchange in a foreign
country.
Eligible Companies are companies expected to benefit from advances or
improvements in products, processes or services intended to foster the
protection of the environment.
Environmental Companies are Eligible Companies that have a principal business
involving the sale of systems or services intended to foster environmental
protection, such as waste treatment and disposal, remediation, air pollution
control and recycling.
Beneficiary Companies are Eligible Companies whose principal businesses lie
outside the environmental sector but nevertheless anticipate environmental
regulations or consumer preferences through the development of new products,
processes or services that are intended to contribute to a cleaner and healthier
environment, such as companies that anticipate the demand for plastic
substitutes, aerosol substitutes, alternative fuels and processes that generate
less hazardous waste.
Moody's is Moody's Investors Service, Inc.
S&P is Standard & Poor's Ratings Services.
Duff & Phelps is Duff & Phelps Credit Rating Co.
Fitch is Fitch IBCA, Inc
Investment grade securities are fixed-income securities rated Baa and above by
Moody's or BBB and above by S&P, Duff & Phelps or Fitch, or determined by
Alliance to be of equivalent quality.
Lower-rated securities are fixed-income securities rated Ba or below by Moody's
or BB or below by S&P, Duff & Phelps or Fitch, or determined by Alliance to be
of equivalent quality, and are commonly referred to as "junk bonds."
Prime commercial paper is commercial paper rated Prime 1 by Moody's or A-1 or
higher by S&P or, if not rated, issued by companies that have an outstanding
debt issue rated Aa or higher by Moody's or AA or higher by S&P.
Qualifying bank deposits are certificates of deposit, bankers' acceptances and
interest-bearing savings deposits of banks having total assets of more than $1
billion and which are members of the Federal Deposit Insurance Corporation.
Rule 144A securities are securities that may be resold pursuant to Rule 144A
under the Securities Act of 1933, as amended (the "Securities Act").
Depositary receipts include American Depositary Receipts ("ADRs"), Global
Depositary Receipts ("GDRs") and other types of depositary receipts.
Commission is the Securities and Exchange Commission.
1940 Act is the Investment Company Act of 1940, as amended.
Code is the Internal Revenue Code of 1986, as amended.
Exchange is the New York Stock Exchange.
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DESCRIPTION OF THE FUNDS
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Except as noted, (i) the Funds' investment objectives are "fundamental" and
cannot be changed without shareholder vote, and (ii) the Funds' investment
policies are not fundamental and thus can be changed without a shareholder vote.
No Fund will change a non-fundamental objective or policy without notifying its
shareholders. There is no guarantee that any Fund will achieve its investment
objective.
INVESTMENT OBJECTIVES AND POLICIES
DOMESTIC STOCK FUNDS
The Domestic Stock Funds have been designed to offer investors seeking capital
appreciation a range of alternative approaches to investing in the U.S. equity
markets.
The Alliance Fund
The Alliance Fund, Inc. ("Alliance Fund") is a diversified investment company
that seeks long-term growth of capital and income primarily through investment
in common stocks. The Fund normally invests substantially all of its assets in
common stocks that Alliance believes will appreciate in value, but it may invest
in other types of securities such as convertible securities, high grade
instruments, U.S. Government securities and high quality, short-term obligations
such as repurchase agreements, bankers' acceptances and domestic certificates of
deposit, and may invest without limit in foreign securities. While the
diversification and generally high quality of the Fund's investments cannot
prevent fluctuations in market values, they tend to limit investment risk and
contribute to achieving the Fund's objective. The Fund generally does not effect
portfolio transactions in order to realize short-term trading profits or
exercise control.
The Fund may also: (i) make secured loans of its portfolio securities equal in
value up to 25% of its total assets to brokers, dealers and financial
institutions; (ii) enter into repurchase agreements of up to one week in
duration with commercial banks, but only if those agreements together with any
restricted securities and any securities which do not have readily available
market quotations do not exceed 10% of its net assets; and (iii) write
exchange-traded covered call options with respect to up to 25% of its total
assets. For additional information on the use, risks and costs of these policies
and practices see "Additional Investment Practices."
Alliance Growth Fund
Alliance Growth Fund ("Growth Fund") is a diversified investment company that
seeks long-term growth of capital. Current income is only an incidental
consideration. The Fund seeks to achieve its objective by investing primarily in
equity securities of companies with favorable earnings outlooks and whose
long-term growth rates are expected to exceed that of the U.S. economy over
time. The Fund's investment objective is not fundamental.
The Fund may also invest up to 25% of its total assets in lower-rated
fixed-income and convertible bonds. See "Risk Considerations--Securities
Ratings" and "--Investment in Lower-Rated Fixed-Income Securities." The Fund
generally will not invest in securities rated at the time of purchase below Caa-
by Moody's and CCC- by S&P, Duff & Phelps or Fitch or in securities judged by
Alliance to be of comparable investment quality. However, from time to time, the
Fund may invest in securities rated in the lowest grades (i.e., C by Moody's or
D or equivalent by S&P, Duff & Phelps or Fitch), or securities Alliance judges
to be of comparable investment quality, if there are prospects for an upgrade or
a favorable conversion into equity securities. If the credit rating of a
security held by the Fund falls below its rating at the time of purchase (or
Alliance determines that the quality of such security has so deteriorated), the
Fund may continue to hold the security if such investment is considered
appropriate under the circumstances.
The Fund may also: (i) invest in "zero-coupon" bonds and "payment-in-kind"
bonds; (ii) invest in foreign securities, although the Fund will not generally
invest more than 15% of its total assets in foreign securities; (iii) invest in
securities that are not publicly traded, including Rule 144A securities; (iv)
buy or sell foreign currencies, options on foreign currencies, foreign currency
futures contracts (and related options) and deal in forward foreign exchange
contracts; (v) lend portfolio securities amounting to not more than 25% of its
total assets; (vi) enter into repurchase agreements of up to 25% of its total
assets and purchase and sell securities on a forward commitment basis; (vii) buy
and sell stock index futures contracts and buy and sell options on those
contracts and on stock indices; (viii) purchase and sell futures contracts,
options thereon and options with respect to U.S. Treasury securities; (ix) write
covered call and put options on securities it owns or in which it may invest;
and (x) purchase and sell put and call options. For additional information on
the use, risks and costs of these policies and practices see "Additional
Investment Practices."
Alliance Premier Growth Fund
Alliance Premier Growth Fund, Inc. ("Premier Growth Fund") is a diversified
investment company that seeks long-term growth of capital by investing
predominantly in the equity securities of a limited number of large, carefully
selected, high-quality U.S. companies that are judged likely to achieve superior
earnings growth. Normally, about 40-50 companies will be represented in the
Fund's portfolio, with the 25 most highly regarded of these companies usually
constituting approximately 70% of the Fund's net assets. The Fund is thus
atypical from most equity mutual funds in its focus on a relatively small number
of intensively researched companies and is designed for those seeking to
accumulate capital over time with less volatility than that associated with
investment in smaller companies.
As a matter of fundamental policy, the Fund normally invests at least 85% of its
total assets in the equity securities of U.S. companies. These are companies (i)
organized under U.S. law that have their principal office in the U.S., and (ii)
the equity securities of which are traded principally in the U.S.
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Alliance's investment strategy for the Fund emphasizes stock selection and
investment in the securities of a limited number of issuers. Alliance relies
heavily upon the fundamental analysis and research of its large internal
research staff, which generally follows a primary research universe of more than
600 companies that have strong management, superior industry positions,
excellent balance sheets and superior earnings growth prospects. An emphasis is
placed on identifying companies whose substantially above average prospective
earnings growth is not fully reflected in current market valuations.
In managing the Fund, Alliance seeks to utilize market volatility judiciously
(assuming no change in company fundamentals), striving to capitalize on
apparently unwarranted price fluctuations, both to purchase or increase
positions on weakness and to sell or reduce overpriced holdings. The Fund
normally remains nearly fully invested and does not take significant cash
positions for market timing purposes. During market declines, while adding to
positions in favored stocks, the Fund becomes somewhat more aggressive,
gradually reducing the number of companies represented in its portfolio.
Conversely, in rising markets, while reducing or eliminating fully valued
positions, the Fund becomes somewhat more conservative, gradually increasing the
number of companies represented in its portfolio. Alliance thus seeks to gain
positive returns in good markets while providing some measure of protection in
poor markets.
Alliance expects the average market capitalization of companies represented in
the Fund's portfolio normally to be in the range, or in excess, of the average
market capitalization of companies comprising the "S&P 500" (the Standard &
Poor's 500 Composite Stock Price Index, a widely recognized unmanaged index of
market activity).
The Fund may also: (i) invest up to 20% of its net assets in convertible
securities of companies whose common stocks are eligible for purchase by it;
(ii) invest up to 5% of its net assets in rights or warrants; (iii) invest up to
15% of its total assets in securities of foreign issuers whose common stocks are
eligible for purchase by it; (iv) purchase and sell exchange-traded index
options and stock index futures contracts; and (v) write covered exchange-traded
call options on common stocks, unless as a result, the amount of its securities
subject to call options would exceed 15% of its total assets, and purchase and
sell exchange-traded call and put options on common stocks written by others,
but the total cost of all options held by the Fund (including exchange-traded
index options) may not exceed 10% of its total assets. For additional
information on the use, risks and costs of these policies and practices see
"Additional Investment Practices." The Fund will not write put options.
Alliance Technology Fund
Alliance Technology Fund, Inc. ("Technology Fund") is a diversified investment
company that emphasizes growth of capital and invests for capital appreciation,
and only incidentally for current income. The Fund may seek income by writing
listed call options. The Fund invests primarily in securities of companies
expected to benefit from technological advances and improvements (i.e.,
companies that use technology extensively in the development of new or improved
products or processes). The Fund will normally have at least 80% of its assets
invested in the securities of these companies. The Fund normally will have
substantially all its assets invested in equity securities, but it also invests
in debt securities offering an opportunity for price appreciation. The Fund will
invest in listed and unlisted securities and U.S. and foreign securities, but it
will not purchase a foreign security if as a result 10% or more of the Fund's
total assets would be invested in foreign securities.
The Fund's policy is to invest in any company and industry and in any type of
security with potential for capital appreciation. It invests in well-known and
established companies and in new and unseasoned companies.
The Fund may also: (i) write and purchase exchange-listed call options and
purchase listed put options, including exchange-traded index put options; (ii)
invest up to 10% of its total assets in warrants; (iii) invest in restricted
securities and in other assets having no ready market if as a result no more
than 10% of the Fund's net assets are invested in such securities and assets;
(iv) lend portfolio securities equal in value to not more than 30% of the Fund's
total assets; and (v) invest up to 10% of its total assets in foreign
securities. For additional information on the use, risks and costs of the
policies and practices see "Additional Investment Practices."
Alliance Quasar Fund
Alliance Quasar Fund, Inc. ("Quasar Fund") is a diversified investment company
that seeks growth of capital by pursuing aggressive investment policies. It
invests for capital appreciation and only incidentally for current income. The
selection of securities based on the possibility of appreciation cannot prevent
loss in value. Moreover, because the Fund's investment policies are aggressive,
an investment in the Fund is risky and investors who want assured income or
preservation of capital should not invest in the Fund.
The Fund invests in any company and industry and in any type of security with
potential for capital appreciation. It invests in well-known and established
companies and in new and unseasoned companies. When selecting securities for the
Fund, Alliance considers the economic and political outlook, the values of
specific securities relative to other investments, trends in the determinants of
corporate profits and management capability and practices.
The Fund invests principally in equity securities, but it also invests to a
limited degree in non-convertible bonds and preferred stocks. The Fund invests
in listed and unlisted U.S. and foreign securities. The Fund periodically
invests in special situations, which occur when the securities of a company are
expected to appreciate due to a development particularly or uniquely applicable
to that company and regardless of general business conditions or movements of
the market as a whole.
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The Fund may also: (i) invest in restricted securities and in other assets
having no ready market, but not more than 10% of its total assets may be
invested in such securities or assets; (ii) make short sales of securities
"against the box," but not more than 15% of its net assets may be deposited on
short sales; and (iii) write call options and purchase and sell put and call
options written by others. For additional information on the use, risks and
costs of these policies and practices see "Additional Investment Practices."
Global Stock Funds
The Global Stock Funds have been designed to enable investors to participate in
the potential for long-term capital appreciation available from investment in
foreign securities.
Alliance International Fund
Alliance International Fund ("International Fund") is a diversified investment
company that seeks a total return on its assets from long-term growth of capital
and from income primarily through a broad portfolio of marketable securities of
established non-U.S. companies, companies participating in foreign economies
with prospects for growth, including U.S. companies having their principal
activities and interests outside the U.S. and foreign government securities.
Normally, more than 80% of the Fund's assets will be invested in such issuers.
The Fund expects to invest primarily in common stocks of established non-U.S.
companies that Alliance believes have potential for capital appreciation or
income or both, but the Fund is not required to invest exclusively in common
stocks or other equity securities, and it may invest in any other type of
investment grade security, including convertible securities, as well as in
warrants, or obligations of the U.S. or foreign governments and their political
subdivisions.
The Fund intends to diversify its investments broadly among countries and
normally invests in at least three foreign countries, although it may invest a
substantial portion of its assets in one or more of such countries. In this
regard, at June 30, 1998, approximately 15% of the Fund's assets were invested
in securities of Japanese issuers. The Fund may invest in companies, wherever
organized, that Alliance judges have their principal activities and interests
outside the U.S. These companies may be located in developing countries, which
involves exposure to economic structures that are generally less diverse and
mature, and to political systems which can be expected to have less stability,
than those of developed countries. The Fund currently does not intend to invest
more than 10% of its total assets in companies in, or governments of, developing
countries.
The Fund may also: (i) purchase or sell forward foreign currency exchange
contracts; (ii) write, sell and purchase U.S. or foreign exchange-listed put and
call options, including exchange-traded index options; (iii) enter into
financial futures contracts, including contracts for the purchase or sale for
future delivery of foreign currencies and stock index futures, and purchase and
write put and call options on futures contracts traded on U.S. or foreign
exchanges or over-the-counter; (iv) purchase and write put options on foreign
currencies traded on securities exchanges or boards of trade or over-the-
counter; (v) lend portfolio securities equal in value to not more than 30% of
its total assets; and (vi) enter into repurchase agreements of up to seven days'
duration, provided that not more than 10% of the Fund's total assets would be so
invested. For additional information on the use, risks and costs of these
policies and practices see "Additional Investment Practices."
Alliance International Premier Growth Fund
Alliance International Premier Growth Fund, Inc. ("International Premier Growth
Fund") is a diversified investment company that seeks long term capital
appreciation by investing predominately in the equity securities of a limited
number of carefully selected non-U.S. companies that are judged likely to
achieve superior earnings growth. Investments will be made based upon their
potential for capital appreciation. Current income is incidental to that
objective.
In the main, the Fund's investments will be in comparatively large, high-quality
companies. Normally, about 60 companies will be represented in the Fund's
portfolio, and the 30 most highly regarded of these companies usually will
constitute approximately 70% of the Fund's net assets. The Fund thus differs
from more typical international equity mutual funds by focusing on a relatively
small number of intensively researched companies. The Fund is designed for
investors seeking to accumulate capital over time. Because of the market risks
inherent in any investment, the selection of securities on the basis of their
appreciation possibilities cannot ensure against possible loss in value, and
there is, of course, no assurance that the Fund's investment objective will be
met.
Alliance expects the average weighted market capitalization of the companies
represented in the Fund's portfolio (i.e., the number of a company's outstanding
shares multiplied by the price per share) normally will be in the range of, or
in excess of, that of the companies comprising the Morgan Stanley Capital
International Europe, Australasia and Far East ("EAFE") Index. As of December
31, 1997, the average weighted market capitalization of those companies was
approximately $2.6 billion.
Within the investment framework described herein, Alliance's Large Cap Growth
Group, headed by Alfred Harrison, Alliance's Vice Chairman, has responsibility
for managing the Fund's portfolio. As discussed below, in selecting the Fund's
portfolio investments Alliance's Large Cap Growth Group will follow a
structured, disciplined research and investment process which is essentially
similar to that which it employs in managing Premier Growth Fund.
In managing the Fund's assets, Alliance's investment strategy will emphasize
stock selection and investment in the securities of a limited number of issuers.
Alliance depends heavily upon the fundamental analysis and research of its large
global equity research team situated in numerous locations around the world. Its
global equity analysts follow a research universe of approximately 900
companies. As one of the largest multinational investment management firms,
Alliance has
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access to considerable information concerning the companies in its research
universe, an in-depth understanding of the products, services, markets and
competition of these companies and a good knowledge of their managements.
Research emphasis is placed on the identification of companies whose superior
prospective earnings growth is not fully reflected in current market valuations.
Companies are constantly added to and deleted from this universe as fundamentals
and valuations change. Alliance's global equity analysts rate companies in three
categories. The performance of each analyst's ratings is an important
determinant of his or her incentive compensation. The equity securities of "one-
rated" companies are expected to significantly outperform the local market in
local currency terms. All equity securities purchased for the Fund's portfolio
will be selected from the universe of approximately 100 "one-rated" companies.
As noted above, approximately 70% of the Fund's net assets will usually be
invested in the approximately 30 most highly regarded such companies. The Fund
will not concentrate more than 25% of its total assets in any one industry.
Within this limit, portfolio emphasis upon particular industries or sectors will
be a by-product of the stock selection process rather than the result of
assigned targets or ranges.
The Fund's investments will be diversified among at least four, and usually
considerably more, countries. No more than 15% of the Fund's total assets will
be invested in issuers in any one foreign country, except that the Fund may
invest up to 25% of its total assets in issuers in each of Canada, France,
Germany, Italy, Japan, The Netherlands, Switzerland and the United Kingdom.
Within these limits, geographic distribution of the Fund's investments among
countries or regions will also be a product of the stock selection process
rather than predetermined allocation. To the extent that the Fund's assets will
be concentrated within any one region, the Fund may be subject to any special
risks that may be associated with that region. While the Fund may engage in
currency hedging programs in periods in which Alliance perceives extreme
exchange rate risk, the Fund will not normally make significant use of currency
hedging strategies.
In the management of the Fund's investment portfolio, Alliance will seek to
utilize market volatility judiciously (assuming no change in company
fundamentals) to adjust the Fund's portfolio positions. To the extent consistent
with local market liquidity considerations, the Fund will strive to capitalize
on apparently unwarranted price fluctuations, both to purchase or increase
positions on weakness and to sell or reduce overpriced holdings. Under normal
circumstances, the Fund will remain substantially fully invested in equity
securities and will not take significant cash positions for market timing
purposes. Rather, through "buying into declines" and "selling into strength,"
Alliance seeks superior relative returns over time.
As a matter of fundamental policy, which may not be changed without shareholder
approval, the Fund will invest under normal circumstances at least 85% of the
value of its total assets in equity securities. The Fund's other investment
policies are not fundamental and, therefore, may be changed by the Board of
Directors of the Fund without shareholder approval. For temporary defensive
purposes, the Fund may vary from its investment policies during periods in which
Alliance believes that business or financial conditions warrant, and may then
invest in high-grade short-term fixed-income securities, including U.S.
Government securities, or hold its assets in cash.
The Fund may invest up to 20% of its total assets in convertible securities of
issuers whose common stocks are eligible for purchase by the Fund. The Fund may
also: (i) invest up to 20% of its total assets in rights or warrants; (ii) write
covered put and call options and purchase put and call options on securities of
the types in which it is permitted to invest and on exchange-traded index
options and may also write uncovered options for cross hedging purposes; (iii)
enter into contracts for the purchase or sale for future delivery of fixed-
income securities or foreign currencies, or contracts based on financial
indices, including any index of U.S. Government securities, foreign government
securities, or common stock and may purchase and write options on such future
contracts; (iv) purchase and write put and call options on foreign currencies
for hedging purposes; (v) purchase or sell forward contracts; (vi) enter into
forward commitments for the purchase or sale of securities; (vii) enter into
currency swaps for hedging purposes; (ix) enter into repurchase agreements
pertaining to U.S. Government securities with member banks of the Federal
Reserve System or primary dealers in such securities; (x) make short sales of
securities or maintain short positions, provided that the Fund may not make a
short sale if as a result more than 5% of its net assets would be held as
collateral for short sales; and (xi) make secured loans of its portfolio
securities not in excess of 30% of its total assets to entities with which it is
permitted to enter into repurchase agreements. For additional information on the
use, risks and costs of these policies and practices see "Additional Investment
Practices".
Alliance Worldwide Privatization Fund
Alliance Worldwide Privatization Fund, Inc. ("Worldwide Privatization Fund") is
a non-diversified investment company that seeks long-term capital appreciation.
As a fundamental policy, the Fund invests at least 65% of its total assets in
equity securities issued by enterprises that are undergoing, or have undergone,
privatization (as described below), although normally significantly more of its
assets will be invested in such securities. The balance of its investments will
include securities of companies believed by Alliance to be beneficiaries of
privatizations. The Fund is designed for investors desiring to take advantage of
investment opportunities, historically inaccessible to U.S. individual
investors, that are created by privatizations of state enterprises in both
established and developing economies, including those in Western Europe and
Scandinavia, Australia, New Zealand, Latin America, Asia and Eastern and Central
Europe and, to a lesser degree, Canada and the United States.
The Fund's investments in enterprises undergoing privatization may comprise
three distinct situations. First, the Fund may invest in the initial offering of
publicly traded equity securities
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(an "initial equity offering") of a government-or state-owned or controlled
company or enterprise (a "state enterprise"). Secondly, the Fund may purchase
securities of a current or former state enterprise following its initial equity
offering. Finally, the Fund may make privately negotiated purchases of stock or
other equity interests in a state enterprise that has not yet conducted an
initial equity offering. Alliance believes that substantial potential for
capital appreciation exists as privatizing enterprises rationalize their
management structures, operations and business strategies in order to compete
efficiently in a market economy, and the Fund will thus emphasize investments in
such enterprises.
The Fund diversifies its investments among a number of countries and normally
invests in issuers based in at least four, and usually considerably more,
countries. No more than 15% of the Fund's total assets, however, will be
invested in issuers in any one foreign country, except that the Fund may invest
up to 30% of its total assets in issuers in any one of France, Germany, Great
Britain, Italy and Japan. The Fund may invest all of its assets within a single
region of the world. To the extent that the Fund's assets are invested within
any one region, the Fund may be subject to any special risks that may be
associated with that region.
Privatization is a process through which the ownership and control of companies
or assets changes in whole or in part from the public sector to the private
sector. Through privatization a government or state divests or transfers all or
a portion of its interest in a state enterprise to some form of private
ownership. Governments and states with established economies, including France,
Great Britain, Germany and Italy, and those with developing economies, including
Argentina, Mexico, Chile, Indonesia, Malaysia, Poland and Hungary, are engaged
in privatizations. The Fund will invest in any country believed to present
attractive investment opportunities.
A major premise of the Fund's approach is that the equity securities of
privatized companies offer opportunities for significant capital appreciation.
In particular, because privatizations are integral to a country's economic
restructuring, securities sold in initial equity offerings often are priced
attractively so as to secure the issuer's successful transition to private
sector ownership. Additionally, these enterprises often dominate their local
markets and typically have the potential for significant managerial and
operational efficiency gains.
Although the Fund anticipates that it will not concentrate its
investments in any industry, it is permitted to invest more than 25% of its
total assets in issuers whose primary business activity is that of national
commercial banking. Prior to so concentrating, however, the Fund's Directors
must determine that its ability to achieve its investment objective would be
adversely affected if it were not permitted to concentrate. The staff of the
Commission is of the view that registered investment companies may not, absent
shareholder approval, change between concentration and non-concentration in a
single industry. The Fund disagrees with the staff's position but has undertaken
that it will not concentrate in the securities of national commercial banks
until, if ever, the issue is resolved. If the Fund were to invest more than 25%
of its total assets in national commercial banks, the Fund's performance could
be significantly influenced by events or conditions affecting this industry,
which is subject to, among other things, increases in interest rates and
deteriorations in general economic conditions, and the Fund's investments may be
subject to greater risk and market fluctuation than if its portfolio represented
a broader range of investments.
The Fund may invest up to 35% of its total assets in debt securities and
convertible debt securities of issuers whose common stocks are eligible for
purchase by the Fund. The Fund may maintain not more than 5% of its net assets
in lower-rated securities. See "Risk Considerations--Securities Ratings" and
"--Investment in Lower-Rated Fixed-Income Securities." The Fund will not retain
a non-convertible security that is downgraded below C or determined by Alliance
to have undergone similar credit quality deterioration following purchase.
The Fund may also: (i) invest up to 20% of its total assets in rights or
warrants; (ii) write covered put and call options and purchase put and call
options on securities of the types in which it is permitted to invest and on
exchange-traded index options; (iii) enter into contracts for the purchase or
sale for future delivery of fixed-income securities or foreign currencies, or
contracts based on financial indices, including any index of U.S. Government
securities, foreign government securities, or common stock and may purchase and
write options on future contracts; (iv) purchase and write put and call options
on foreign currencies for hedging purposes; (v) purchase or sell forward
contracts; (vi) enter into forward commitments for the purchase or sale of
securities; (vii) enter into standby commitment agreements; (viii) enter into
currency swaps for hedging purposes; (ix) enter into repurchase agreements
pertaining to U.S. Government securities with member banks of the Federal
Reserve System or primary dealers in such securities; (x) make short sales of
securities or maintain a short position; and (xi) make secured loans of its
portfolio securities not in excess of 30% of its total assets to entities with
which it can enter into repurchase agreements. For additional information on the
use, risks and costs of these policies and practices see "Additional Investment
Practices."
Alliance New Europe Fund
Alliance New Europe Fund, Inc. ("New Europe Fund") is a non-diversified
investment company that seeks long-term capital appreciation through investment
primarily in the equity securities of companies based in Europe. The Fund
intends to invest substantially all of its assets in the equity securities of
European companies and has a fundamental policy of normally investing at least
65% of its total assets in such securities. Up to 35% of its total assets may be
invested in high quality U.S. dollar or foreign currency denominated
fixed-income securities issued or guaranteed by European governmental entities,
or by European or multinational companies or supranational organizations.
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Alliance believes that the quickening pace of economic integration and political
change in Europe creates the potential for many European companies to experience
rapid growth and that the emergence of new market economies in Europe and the
broadening and strengthening of other European economies may significantly
accelerate economic development. The Fund will invest in companies that Alliance
believes possess rapid growth potential. Thus, the Fund will emphasize
investments in larger, established companies, but will also invest in smaller,
emerging companies.
In recent years, economic ties between the former "east bloc" countries of
Eastern Europe and certain other European countries have been strengthened.
Alliance believes that as this strengthening continues, some Western European
financial institutions and other companies will have special opportunities to
facilitate East-West transactions. The Fund will seek investment opportunities
among such companies and, as such become available, within the former "east
bloc," although the Fund will not invest more than 20% of its total assets in
issuers based therein, or more than 10% of its total assets in issuers based in
any one such country.
The Fund diversifies its investments among a number of European countries and,
under normal circumstances, will invest in companies based in at least three
such countries. Subject to the foregoing and to the limitation on investment in
any one former "east bloc" country, the Fund may invest without limit in a
single European country. While the Fund does not intend to concentrate its
investments in a single country, at times 25% or more of its assets may be
invested in issuers located in a single country. During such times, the Fund
would be subject to a correspondingly greater risk of loss due to adverse
political or regulatory developments, or an economic downturn, within that
country. In this regard, at July 31, 1998, approximately 20% of the Fund's
assets were invested in securities of issuers in the United Kingdom.
The Fund may also: (i) invest up to 10% of its total assets in securities for
which there is no ready market; (ii) invest up to 20% of its total assets in
warrants and rights to purchase equity securities of European companies; (iii)
invest in depositary receipts or other securities convertible into securities of
companies based in European countries, debt securities of supranational entities
denominated in the currency of any European country, debt securities denominated
in European Currency Units of an issuer in a European country (including
supranational issuers) and "semi-governmental securities"; (iv) purchase and
sell forward contracts; (v) write, sell and purchase exchange-traded put and
call options, including exchange-traded index options; (vi) enter into financial
futures contracts, including contracts for the purchase or sale for future
delivery of foreign currencies and futures contracts based on stock indices, and
purchase and write options on futures contracts; (vii) purchase and write put
options on foreign currencies traded on securities exchanges or boards of trade
or over-the-counter; (viii) make secured loans of portfolio securities not in
excess of 30% of its total assets to brokers, dealers and financial
institutions; (ix) enter into forward commitments for the purchase or sale of
securities; and (x) enter into standby commitment agreements. For additional
information on the use, risks and costs of these policies and practices see
"Additional Investment Practices."
Alliance All-Asia Investment Fund
Alliance All-Asia Investment Fund, Inc. ("All-Asia Investment Fund") is a
non-diversified investment company whose investment objective is to seek
long-term capital appreciation. In seeking to achieve its investment objective,
the Fund will invest at least 65% of its total assets in equity securities (for
the purposes of this investment policy, rights, warrants and options to purchase
common stocks are not deemed to be equity securities), preferred stocks and
equity-linked debt securities issued by Asian companies. The Fund may invest up
to 35% of its total assets in debt securities issued or guaranteed by Asian
companies or by Asian governments, their agencies or instrumentalities. The Fund
may also invest in securities issued by non-Asian issuers, provided that the
Fund will invest at least 80% of its total assets in securities issued by Asian
companies and the Asian debt securities referred to above. The Fund expects to
invest, from time to time, a significant portion, which may be in excess of 50%,
of its assets in equity securities of Japanese companies.
In the past decade, Asian countries generally have experienced a high level of
real economic growth due to political and economic changes, including foreign
investment and reduced government intervention in the economy. Alliance believes
that certain conditions exist in Asian countries which create the potential for
continued rapid economic growth. These conditions include favorable demographics
and competitive wage rates, increasing levels of foreign direct investment,
rising per capita incomes and consumer demand, a high savings rate and numerous
privatization programs. Asian countries are also becoming more industrialized
and are increasing their intra-Asian exports while reducing their dependence on
Western export demand. Alliance believes that these conditions are important to
the long-term economic growth of Asian countries.
As the economies of many Asian countries move through the "emerging market"
stage, thus increasing the supply of goods, services and capital available to
less developed Asian markets and helping to spur economic growth in those
markets, the potential is created for many Asian companies to experience rapid
growth. In addition, many Asian companies the securities of which are listed on
exchanges in more developed Asian countries will be participants in the rapid
economic growth of the lesser developed countries. These companies generally
offer the advantages of more experienced management and more developed market
regulation.
As their economies have grown, the securities markets in Asian countries have
also expanded. New exchanges have been created and the number of listed
companies, annual trading volume and overall market capitalization have
increased significantly. Additionally, new markets continue to open to foreign
investments. For example, South Korea and
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India have recently relaxed investment restrictions and Vietnamese direct
investments have recently become available to U.S. investors. The Fund also
offers investors the opportunity to access relatively restricted markets.
Alliance believes that investment opportunities in Asian countries will continue
to expand.
The Fund will invest in companies believed to possess rapid growth potential.
Thus, the Fund will invest in smaller, emerging companies, but will also invest
in larger, more established companies in such growing economic sectors as
capital goods, telecommunications and consumer services.
The Fund will invest in investment grade debt securities, except that the Fund
may maintain not more than 5% of its net assets in lower-rated securities and
lower-rated loans and other lower-rated direct debt instruments. See "Risk
Considerations--Securities Ratings," "--Investment in Lower-Rated Fixed-Income
Securities" and Appendix C in the Fund's Statement of Additional Information for
a description of such ratings. The Fund will not retain a security that is
downgraded below C or determined by Alliance to have undergone similar credit
quality deterioration following purchase.
The Fund may also: (i) invest up to 25% of its net assets in the convertible
securities of companies whose common stocks are eligible for purchase by the
Fund; (ii) invest up to 20% of its net assets in rights or warrants; (iii)
invest in depositary receipts, instruments of supranational entities denominated
in the currency of any country, securities of multinational companies and "semi-
governmental securities;" (iv) invest up to 25% of its net assets in equity-
linked debt securities with the objective of realizing capital appreciation; (v)
invest up to 25% of its net assets in loans and other direct debt instruments;
(vi) write covered put and call options on securities of the types in which it
is permitted to invest and on exchange-traded index options; (vii) enter into
contracts for the purchase or sale for future delivery of fixed-income
securities or foreign currencies, or contracts based on financial indices,
including any index of U.S. Government securities, securities issued by foreign
government entities, or common stock and may purchase and write options on
future contracts; (viii) purchase and write put and call options on foreign
currencies for hedging purposes; (ix) purchase or sell forward contracts; (x)
enter into interest rate swaps and purchase or sell interest rate caps and
floors; (xi) enter into forward commitments for the purchase or sale of
securities; (xii) enter into standby commitment agreements; (xiii) enter into
currency swaps for hedging purposes; (xiv) enter into repurchase agreements
pertaining to U.S. Government securities with member banks of the Federal
Reserve System or primary dealers in such securities; (xv) make short sales of
securities or maintain a short position, in each case only if "against the box;"
and (xvi) make secured loans of its portfolio securities not in excess of 30% of
its total assets to entities with which it can enter into repurchase agreements.
For additional information on the use, risks and costs of these policies and
practices see "Additional Investment Practices."
Alliance Greater China '97 Fund, Inc.
Alliance Greater China '97 Fund, Inc. ("Greater China '97 Fund") is a non-
diversified investment company that seeks long-term capital appreciation through
investment of at least 80% of its total assets in equity securities issued by
Greater China companies. In furtherance of its investment objective, the Fund
expects to invest a significant portion, which may be greater than 50%, of its
assets in equity securities of Hong Kong companies and may invest, from time to
time, all of its assets in Hong Kong companies or companies of either of the
other Greater China countries.
In recent years, China, Hong Kong and Taiwan have each experienced a high level
of real economic growth, although growth is expected to slow in 1998. This
growth has resulted from advantageous economic conditions, including favorable
demographics, competitive wage rates, and rising per capita income and consumer
demand. Significantly, the growth has also been fueled by an easing by both
China and Taiwan of government restrictions and an increased receptivity to
foreign investment. This expanded, if not yet complete, openness to foreign
investment extends as well to the securities markets of both countries. Hong
Kong's free-market economy has historically included securities markets
completely open to foreign investments. All three countries have regulated stock
exchanges upon which shares of an increasing number of Greater China companies
are traded.
With its population estimated at more than 1.2 billion as a driving force, and
notwithstanding its continuing political rigidity, China's economic growth has
been coupled with significantly reduced government economic intervention and
basic economic structural change. Recent years have seen large increases in
industrial production with a significant decline in the state sector share of
industrial output, and increased involvement of local governmental units and the
private sector in establishing new business enterprises.
With China's growth has come an increasing direct and indirect economic
involvement of all three Greater China countries. For some time, Hong Kong, a
world financial and trade center in its own right, with a large stock exchange
and offices of many of the world's multinational companies, has been the gateway
to trade with and foreign investment in China. With the long-awaited transfer on
July 1, 1997 of the sovereignty of Hong Kong from Great Britain to China, not
only the political but the economic ties between China and Hong Kong are
expected to continue to intensify, albeit with the continuation of Hong Kong's
economic system as provided for in the law governing its sovereignty.
Notwithstanding the, at times considerable, political tension between the two
countries, it is generally recognized that substantially increased trade and
investment with China has been generated from Taiwan, in many cases through Hong
Kong. Along with this increased interaction with China, Taiwan is becoming a
regional technological and telecommunication center, while continuing the
process of opening its economy up to foreign investment. Although geographically
limited, Taiwan
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boasts an economy among the world's twenty largest and its foreign exchange
reserves are third largest in the world measured in U.S. dollars. As
China's economy continues to expand, it is expected that Taiwan's economic
interaction with China will likewise increase.
Alliance believes that over the long term conditions are favorable for
continuing and expanding economic growth in all three Greater China countries.
It is this potential which the Fund hopes to take advantage of by investing both
in established and new and emerging companies.
Set forth below under "Certain Considerations and Risks" and in Appendix A to
the Fund's Statement of Additional Information is additional information
concerning the Greater China countries.
In addition to investing in equity securities of Greater China companies, the
Fund may invest up to 20% of its total assets in (i) debt securities issued or
guaranteed by Greater China companies or by Greater China governments, their
agencies or instrumentalities, and (ii) equity or debt securities issued by
issuers other than Greater China companies. The Fund will not invest in debt
securities other than investment grade securities. Should a debt security in
which the Fund is invested be downgraded below investment grade or be determined
by Alliance to have undergone a similar credit quality deterioration, the Fund
will dispose of that security.
The Fund may also: (i) invest up to 25% of its net assets in the convertible
securities of companies whose common stocks are eligible for purchase by the
Fund; (ii) invest up to 20% of its net assets in rights or warrants; (iii)
invest in depositary receipts, instruments of supranational entities denominated
in the currency of any country, securities of multinational companies and "semi-
governmental securities;" (iv) invest up to 25% of its net assets in equity-
linked debt securities with the objective of realizing capital appreciation; (v)
invest up to 20% of its net assets in loans and other direct debt securities;
(vi) write covered put and call options on securities of the types in which it
is permitted to invest and on exchange-traded index options; (vii) enter into
contracts for the purchase or sale for future delivery of fixed-income
securities or foreign currencies, or contracts based on financial indices,
including any index of U.S. Government securities, securities issued by foreign
government entities, or common stock, and may purchase and write options on
future contracts; (viii) purchase and write put and call options on foreign
currencies for hedging purposes; (ix) purchase or sell forward contracts; (x)
enter into interest rate swaps and purchase or sell interest rate caps and
floors; (xi) enter into forward commitments for the purchase or sale of
securities; (xii) enter into standby commitment agreements; (xiii) enter into
currency swaps for hedging purposes; (xiv) enter into repurchase agreements
pertaining to U.S. Government securities with member banks of the Federal
Reserve System or primary dealers in such securities; (xv) make short sales of
securities or maintain a short position, in each case only if "against the box;"
and (xvi) make secured loans of its portfolio securities not in excess of 30% of
its total assets to entities with which it can enter into repurchase agreements.
All or some of the policies and practices listed above may not be available to
the Fund in the Greater China countries, and the Fund will utilize these
policies only to the extent permissible. For additional information on the use,
risks and costs of these policies and practices see "Additional Investment
Practices."
Alliance Global Small Cap Fund
Alliance Global Small Cap Fund, Inc. ("Global Small Cap Fund") is a diversified
investment company that seeks long-term growth of capital through investment in
a global portfolio of the equity securities of selected companies with
relatively small market capitalization. The Fund's portfolio emphasizes
companies with market capitalizations that would have placed them (when
purchased) in about the smallest 20% by market capitalization of actively traded
U.S. companies, or market capitalizations of up to about $1.5 billion. Because
the Fund applies the U.S. size standard on a global basis, its foreign
investments might rank above the lowest 20%, and, in fact, might in some
countries rank among the largest, by market capitalization in local markets.
Normally, the Fund invests at least 65% of its assets in equity securities of
these smaller capitalization issuers, and these issuers are located in at least
three countries, one of which may be the U.S. Up to 35% of the Fund's total
assets may be invested in securities of companies whose market capitalizations
exceed the Fund's size standard. The Fund's portfolio securities may be listed
on a U.S. or foreign exchange or traded over-the-counter.
Alliance believes that smaller capitalization issuers often have sales and
earnings growth rates exceeding those of larger companies, and that these growth
rates tend to cause more rapid share price appreciation. Investing in smaller
capitalization stocks, however, involves greater risk than is associated with
larger, more established companies. For example, smaller capitalization
companies often have limited product lines, markets, or financial resources.
They may be dependent for management on one or a few key persons, and can be
more susceptible to losses and risks of bankruptcy. Their securities may be
thinly traded (and therefore have to be sold at a discount from current market
prices or sold in small lots over an extended period of time), may be followed
by fewer investment research analysts and may be subject to wider price swings
and thus may create a greater chance of loss than when investing in securities
of larger capitalization companies. Transaction costs in small capitalization
stocks may be higher than in those of larger capitalization companies.
The Fund may also: (i) invest up to 10% of its total assets in securities for
which there is no ready market; (ii) invest up to 20% of its total assets in
warrants to purchase equity securities; (iii) invest in depositary receipts or
other securities representing securities of companies based in countries other
than the U.S.; (iv) purchase or sell forward foreign currency contracts; (v)
write and purchase exchange-traded call options and purchase exchange-traded put
options, including put options on market indices; and (vi) make secured loans of
portfolio securities not in excess of 30% of its total assets to
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brokers, dealers and financial institutions. For additional information on the
use, risks and costs of these policies and practices see "Additional Investment
Practices."
Alliance Global Environment Fund
Alliance Global Environment Fund, Inc. ("Global Environment Fund") is a
non-diversified investment company that seeks long-term capital appreciation
through investment in equity securities of Eligible Companies. For purposes of
the Fund's investment objective and investment policies, "equity securities" are
common stocks (but not preferred stocks), rights or warrants to subscribe for or
purchase common stocks, and preferred stocks or debt securities that are
convertible into common stocks without the payment of any further consideration.
Until October 3, 1997, the Fund operated as a closed-end investment company, and
its common stock (which then comprised a single class) was listed on the
Exchange.
The Fund invests in two categories of Eligible Companies--"Environmental
Companies" and "Beneficiary Companies." Environmental Companies are those that
have a principal business involving the sale of systems or services intended to
foster environmental protection, such as waste treatment and disposal,
remediation, air pollution control and recyclying. Under normal circumstances,
the Fund invests at least 65% of its total assets in equity securities of
Environmental Companies. Beneficiary Companies are those whose principal
businesses lie outside the environmental sector but nevertheless anticipate
environmental regulations or consumer preferences through the development of new
products, processes or services that are intended to contribute to a cleaner and
healthier environment. Examples of such companies could be companies that
anticipate the demand for plastic substitutes, aerosol substitutes, alternative
fuels and processes that generate less hazardous waste. In this regard, the Fund
may invest in an issuer with a broadly diversified business only a part of which
provides such products, processes or services, when Alliance believes that these
products, processes or services will yield a competitive advantage that
significantly enhances the issuer's growth prospects. As a matter of fundamental
policy, the Fund will, under normal circumstances, invest substantially all of
its total assets in equity securities of Eligible Companies.
A major premise of the Fund's investment approach is that environmental concerns
will be a significant source of future growth opportunities, and that
Environmental Companies will see an increased demand for their systems and
services. Environmental Companies operate in the areas of pollution control,
clean energy, solid waste management, hazardous waste treatment and disposal,
pulp and paper recycling, waste-to-energy alternatives, biodegradable cartons,
packages, plastics and other products, remedial projects and emergency cleanup
efforts, manufacture of environmental supplies and equipment, the achievement of
purer air, groundwater and foods and the detection, evaluation and treatment of
both existing and potential environmental problems including, among others, air
pollution and acid rain.
The environmental services industry is generally positively affected by
increasing governmental action intended to foster environmental protection. As
environmental regulations are developed and enforced, Environmental Companies
providing the means of compliance with such regulations are afforded substantial
opportunities for growth. Beneficiary Companies may also derive an advantage to
the extent that they have anticipated environmental regulation and are therefore
at a competitive advantage.
In the view of Alliance, increasing public and political awareness of
environmental concerns and resultant environmental regulations are long-term
phenomena that are driven by an emerging global consensus that environmental
protection is a vital and increasingly immediate priority. Alliance believes
that Eligible Companies based in the United States and other economically
developed countries will have increasing opportunities for earnings growth
resulting not only from an increased demand for their existing products or
services but also from innovative responses to changing regulations and
priorities and enforcement policies. Such opportunities will arise, in the
opinion of Alliance, not only within developed countries but also within many
economically developing countries, such as those of Eastern Europe and the
Pacific Rim. These countries lag well behind developed countries in the
conservation and efficient use of natural resources and in their implementation
of policies which protect the environment.
Alliance believes that global investing offers opportunities for superior
investment returns. The Fund spreads investment risk among the capital markets
of a number of countries and invests in equity securities of companies based in
at least three, and normally considerably more, such countries. The percentage
of the Fund's assets invested in securities of companies in a particular country
or denominated in a particular currency will vary in accordance with Alliance's
assessment of the appreciation potential of such securities and the strength of
that currency. As of August 31, 1998, approximately 82% of the Fund's net
assets were invested in equity securities of U.S. companies.
The Fund may also: (i) invest up to 20% of its total assets in warrants to
purchase equity securities to the extent consistent with its investment
objective: (ii) invest in depositary receipts; (iii) purchase and write put and
call options on foreign currencies for hedging purposes; (iv) enter into forward
foreign currency transactions for hedging purposes; (v) invest in currency
futures and options on such futures for hedging purposes; and (vi) make secured
loans of its portfolio securities not in excess of 30% of its total assets. For
additional information on the use, risks and costs of these policies and
practices see "Additional Investment Practices."
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TOTAL RETURN FUNDS
The Total Return Funds have been designed to provide a range of investment
alternatives to investors seeking both growth of capital and current
income.
Alliance Balanced Shares
Alliance Balanced Shares, Inc. ("Balanced Shares") is a diversified investment
company that seeks a high return through a combination of current income and
capital appreciation. Although the Fund's investment objective is not
fundamental, the Fund is a "balanced fund" as a matter of fundamental policy.
The Fund will not purchase a security if as a result less than 25% of its total
assets will be in fixed-income senior securities (including short- and long-term
debt securities, preferred stocks, and convertible debt securities and
convertible preferred stocks to the extent that their values are attributable to
their fixed-income characteristics). Subject to these restrictions, the
percentage of the Fund's assets invested in each type of security will vary. The
Fund's assets are invested in U.S. Government securities, bonds, senior debt
securities and preferred and common stocks in such proportions and of such type
as are deemed best adapted to the current economic and market outlooks. The Fund
may invest up to 15% of the value of its total assets in foreign equity and
fixed-income securities eligible for purchase by the Fund under its investment
policies described above. See "Risk Considerations--Foreign Investment."
The Fund may also: (i) enter into contracts for the purchase or sale for future
delivery of foreign currencies; and (ii) purchase and write put and call options
on foreign currencies and enter into forward foreign currency exchange contracts
for hedging purposes. Subject to market conditions, the Fund may also seek to
realize income by writing covered call options listed on a domestic exchange.
For additional information on the use, risks and costs of these policies and
practices see "Additional Investment Practices."
Alliance Utility Income Fund
Alliance Utility Income Fund, Inc. ("Utility Income Fund") is a diversified
investment company that seeks current income and capital appreciation by
investing primarily in equity and fixed-income securities of companies in the
utilities industry. The Fund may invest in securities of both U.S. and foreign
issuers, although no more than 15% of the Fund's total assets will be invested
in issuers in any one foreign country. The utilities industry consists of
companies engaged in (i) the manufacture, production, generation, provision,
transmission, sale and distribution of gas and electric energy, and
communications equipment and services, including telephone, telegraph,
satellite, microwave and other companies providing communication facilities for
the public, or (ii) the provision of other utility or utility-related goods and
services, including, but not limited to, entities engaged in water provision,
cogeneration, waste disposal system provision, solid waste electric generation,
independent power producers and non-utility generators. The Fund is designed to
take advantage of the characteristics and historical performance of securities
of utility companies, many of which pay regular dividends and increase their
common stock dividends over time. As a fundamental policy, the Fund normally
invests at least 65% of its total assets in securities of companies in the
utilities industry. The Fund considers a company to be in the utilities industry
if, during the most recent twelve-month period, at least 50% of the company's
gross revenues, on a consolidated basis, were derived from its utilities
activities.
At least 65% of the Fund's total assets are invested in income-producing
securities, but there is otherwise no limit on the allocation of the Fund's
investments between equity securities and fixed-income securities. The Fund may
maintain up to 35% of its net assets in lower-rated securities. See "Risk
Considerations--Securities Ratings" and "--Investment in Lower-Rated
Fixed-Income Securities." The Fund will not retain a security that is downgraded
below B or determined by Alliance to have undergone similar credit quality
deterioration following purchase.
The United States utilities industry has experienced significant changes in
recent years. Electric utility companies in general have been favorably affected
by lower fuel costs, the full or near completion of major construction programs
and lower financing costs. In addition, many utility companies have generated
cash flows in excess of current operating expenses and construction
expenditures, permitting some degree of diversification into unregulated
businesses. Regulatory changes with respect to nuclear and conventionally fueled
generating facilities, however, could increase costs or impair the ability of
such electric utilities to operate such facilities, thus reducing their ability
to service dividend payments with respect to the securities they issue.
Furthermore, rates of return of utility companies generally are subject to
review and limitation by state public utilities commissions and tend to
fluctuate with marginal financing costs. Rate changes, however, ordinarily lag
behind the changes in financing costs, and thus can favorably or unfavorably
affect the earnings or dividend pay-outs on utilities stocks depending upon
whether such rates and costs are declining or rising.
Gas transmission companies, gas distribution companies and telecommunications
companies are also undergoing significant changes. Gas utilities have been
adversely affected by declines in the prices of alternative fuels, and have also
been affected by oversupply conditions and competition. Telephone utilities are
still experiencing the effects of the break-up of American Telephone & Telegraph
Company, including increased competition and rapidly developing technologies
with which traditional telephone companies now compete. Although there can be no
assurance that increased competition and other structural changes will not
adversely affect the profitability of such utilities, or that other negative
factors will not develop in the future, in Alliance's opinion, increased
competition and change may provide better positioned utility companies with
opportunities for enhanced profitability.
Utility companies historically have been subject to the risks of increases in
fuel and other operating costs, high interest costs,
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costs associated with compliance with environmental and nuclear safety
regulations, service interruptions, economic slowdowns, surplus capacity,
competition and regulatory changes. There can also be no assurance that
regulatory policies or accounting standards changes will not negatively affect
utility companies' earnings or dividends. Utility companies are subject to
regulation by various authorities and may be affected by the imposition of
special tariffs and changes in tax laws. To the extent that rates are
established or reviewed by governmental authorities, utility companies are
subject to the risk that such authorities will not authorize increased rates.
Because of the Fund's policy of concentrating its investments in utility
companies, the Fund is more susceptible than most other mutual funds to
economic, political or regulatory occurrences affecting the utilities industry.
Foreign utility companies, like those in the U.S., are generally subject to
regulation, although such regulations may or may not be comparable to domestic
regulations. Foreign utility companies in certain countries may be more heavily
regulated by their respective governments than utility companies located in the
U.S. and, as in the U.S., generally are required to seek government approval for
rate increases. In addition, because many foreign utility companies use fuels
that cause more pollution than those used in the U.S., such utilities may yet be
required to invest in pollution control equipment. Foreign utility regulatory
systems vary from country to country and may evolve in ways different from
regulation in the U.S. The percentage of the Fund's assets invested in issuers
of particular countries will vary. See "Risk Considerations--Foreign
Investment."
The Fund may invest up to 35% of its total assets in equity and fixed-income
securities of domestic and foreign corporate and governmental issuers other than
utility companies, including U.S. Government securities and repurchase
agreements pertaining thereto, foreign government securities, corporate
fixed-income securities of domestic issuers, corporate fixed-income securities
of foreign issuers denominated in foreign currencies or in U.S. dollars (in each
case including fixed-income securities of an issuer in one country denominated
in the currency of another country), qualifying bank deposits and prime
commercial paper.
The Fund may also: (i) invest up to 30% of its net assets in the convertible
securities of companies whose common stocks are eligible for purchase by the
Fund; (ii) invest up to 5% of its net assets in rights or warrants; (iii) invest
in depositary receipts, securities of supranational entities denominated in the
currency of any country, securities denominated in European Currency Units and
"semi-governmental securities;" (iv) write covered put and call options and
purchase put and call options on securities of the types in which it is
permitted to invest that are exchange-traded and over-the-counter; (v) purchase
and sell exchange-traded options on any securities index composed of the types
of securities in which it may invest; (vi) enter into contracts for the purchase
or sale for future delivery of fixed-income securities or foreign currencies, or
contracts based on financial indices, including an index of U.S. Government
securities, foreign government securities, corporate fixed-income securities, or
common stock, and may purchase and write options on futures contracts; (vii)
purchase and write put and call options on foreign currencies traded on U.S. and
foreign exchanges or over-the-counter for hedging purposes; (viii) purchase or
sell forward contracts; (ix) enter into interest rate swaps and purchase or sell
interest rate caps and floors; (x) enter into forward commitments for the
purchase or sale of securities; (xi) enter into standby commitment agreements;
(xii) enter into repurchase agreements pertaining to U.S. Government securities
with member banks of the Federal Reserve System or primary dealers in such
securities; (xiii) make short sales of securities or maintain a short position
as described below under "Additional Investment Practices--Short Sales;" and
(xiv) make secured loans of its portfolio securities not in excess of 20% of its
total assets to brokers, dealers and financial institutions. For additional
information on the use, risks and costs of these policies and practices see
"Additional Investment Practices."
Alliance Growth and Income Fund
Alliance Growth and Income Fund, Inc. ("Growth and Income Fund") is a
diversified investment company that seeks appreciation through investments
primarily in dividend-paying common stocks of good quality, although it is
permitted to invest in fixed-income securities and convertible securities.
The Fund may also try to realize income by writing covered call options listed
on domestic securities exchanges. The Fund also invests in foreign securities.
Since the purchase of foreign securities entails certain political and economic
risks, the Fund has restricted its investments in securities in this category to
issues of high quality. The Fund may also purchase and sell financial forward
and futures contracts and options thereon for hedging purposes. For additional
information on the use, risks and costs of these policies and practices see
"Additional Investment Practices."
Alliance Real Estate Investment Fund
Alliance Real Estate Investment Fund, Inc. ("Real Estate Investment Fund") is a
diversified investment company that seeks a total return on its assets from
long-term growth of capital and from income principally through investing in a
portfolio of equity securities of issuers that are primarily engaged in or
related to the real estate industry.
Under normal circumstances, at least 65% of the Fund's total assets will be
invested in equity securities of real estate investment trusts ("REITs") and
other real estate industry companies. A "real estate industry company" is a
company that derives at least 50% of its gross revenues or net profits from the
ownership, development, construction, financing, management or sale of
commercial, industrial or residential real estate or interests therein. The
equity securities in which the Fund will invest for this purpose consist of
common stock, shares of beneficial interest of REITs and securities with common
stock characteristics, such as preferred stock or convertible securities ("Real
Estate Equity Securities").
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The Fund may invest up to 35% of its total assets in (a) securities that
directly or indirectly represent participations in, or are collateralized by and
payable from, mortgage loans secured by real property ("Mortgage-Backed
Securities"), such as mortgage pass-through certificates, real estate mortgage
investment conduit ("REMIC") certificates and collateralized mortgage
obligations ("CMOs") and (b) short-term investments. These instruments are
described below. The risks associated with the Fund's transactions in REMICs,
CMOs and other types of mortgage-backed securities, which are considered to be
derivative securities, may include some or all of the following: market risk,
leverage and volatility risk, correlation risk, credit risk and liquidity and
valuation risk. See "Risk Considerations" for a description of these and other
risks.
As to any investment in Real Estate Equity Securities, Alliance's analysis will
focus on determining the degree to which the company involved can achieve
sustainable growth in cash flow and dividend paying capability. Alliance
believes that the primary determinant of this capability is the economic
viability of property markets in which the company operates and that the
secondary determinant of this capability is the ability of management to add
value through strategic focus and operating expertise. The Fund will purchase
Real Estate Equity Securities when, in the judgment of Alliance, their market
price does not adequately reflect this potential. In making this determination,
Alliance will take into account fundamental trends in underlying property
markets as determined by proprietary models, site visits conducted by
individuals knowledgeable in local real estate markets, price-earnings ratios
(as defined for real estate companies), cash flow growth and stability, the
relationship between asset value and market price of the securities, dividend
payment history, and such other factors which Alliance may determine from time
to time to be relevant. Alliance will attempt to purchase for the Fund Real
Estate Equity Securities of companies whose underlying portfolios are
diversified geographically and by property type.
The Fund may invest without limitation in shares of REITs. REITs are pooled
investment vehicles which invest primarily in income producing real estate or
real estate related loans or interests. REITs are generally classified as equity
REITs, mortgage REITs or a combination of equity and mortgage REITs. Equity
REITs invest the majority of their assets directly in real property and derive
income primarily from the collection of rents. Equity REITs can also realize
capital gains by selling properties that have appreciated in value. Mortgage
REITs invest the majority of their assets in real estate mortgages and derive
income from the collection of interest payments. Similar to investment companies
such as the Fund, REITs are not taxed on income distributed to shareholders
provided they comply with several requirements of the Code. The Fund will
indirectly bear its proportionate share of expenses incurred by REITs in which
the Fund invests in addition to the expenses incurred directly by the Fund.
Investment Process for Real Estate Equity Securities. The Fund's investment
strategy with respect to Real Estate Equity Securities is based on the premise
that property market fundamentals are the primary determinant of growth
underlying the performance of Real Estate Equity Securities. Value added
management further distinguishes the most attractive Real Estate Equity
Securities. The Fund's research and investment process is designed to identify
those companies with strong property fundamentals and strong management teams.
This process is comprised of real estate market research, specific property
inspection and securities analysis. Alliance believes that this process will
result in a portfolio that will consist of Real Estate Equity Securities of
companies that own assets in the most desirable markets across the country,
diversified geographically and by property type.
In implementing the Fund's research and investment process, Alliance will avail
itself of the consulting services of CB Richard Ellis, Inc. ("CBRE"), a publicly
held company and the largest real estate services company in the United States,
comprised of real estate brokerage, property and facilities management, and real
estate finance and investment advisory activities. In 1997, CBRE completed
22,100 sale and lease transactions, managed over 6,600 client properties,
created over $5 billion in mortgage originations, and completed over 3,600
appraisal and consulting assignments. In addition, it advised and managed for
institutions over $4 billion in real estate investments. As consultant to
Alliance, CBRE provides access to its proprietary model, REIT o Score, that
analyzes the approximately 18,000 properties owned by these 142 companies. Using
proprietary databases and algorithms, CBRE analyzes local market rent, expense,
and occupancy trends, market specific transaction pricing, demographic and
economic trends, and leading indicators of real estate supply such as building
permits. Over 1,000 asset-type specific geographic markets are analyzed and
ranked on a relative scale by CBRE in compiling its REIT o Score database. The
relative attractiveness of these real estate industry companies is similarly
ranked based on the composite rankings of the properties they own. See
"Management of the Funds--Consultant to Alliance with Respect to Investments in
Real Estate Securities" for more information about CBRE.
The universe of property-owning real estate industry firms consists of
approximately 142 companies of sufficient size and quality to merit
consideration for investment by the Fund. Once the universe of real estate
industry companies has been distilled through the market research process,
CBRE's local market presence provides the capability to perform site specific
inspections of key properties. This analysis examines specific location,
condition, and sub-market trends. CBRE's use of locally based real estate
professionals provides Alliance with a window on the operations of the portfolio
companies as information can immediately be put in the context of local market
events. Only those companies whose specific property portfolios reflect the
promise of their general markets will be considered for initial and continued
investment by the Fund.
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Alliance further screens the universe of real estate industry companies by using
rigorous financial models and by engaging in regular contact with management of
targeted companies. Each management's strategic plan and ability to execute the
plan are determined and analyzed. Alliance will make extensive use of CBRE's
network of industry analysts in order to assess trends in tenant industries.
This information is then used to further interpret management's strategic plans.
Financial ratio analysis is used to isolate those companies with the ability to
make value-added acquisitions. This information is combined with property market
trends and used to project future earnings potential.
The short-term investments in which Real Estate Investment Fund may invest are:
corporate commercial paper and other short-term commercial obligations, in each
case rated or issued by companies with similar securities outstanding that are
rated Prime-1, Aa or better by Moody's or A-1, AA or better by S&P; obligations
(including certificates of deposit, time deposits, demand deposits and bankers'
acceptances) of banks with securities outstanding that are rated Prime-1, Aa or
better by Moody's or A-1, AA or better by S&P; and obligations issued or
guaranteed by the U.S. Government or its agencies or instrumentalities with
remaining maturities not exceeding 18 months.
The Fund may invest in debt securities rated BBB or higher by S&P or Baa or
higher by Moody's or, if not so rated, of equivalent credit quality as
determined by Alliance. The Fund expects that it will not retain a debt security
which is downgraded below BBB or Baa or, if unrated, determined by Alliance to
have undergone similar credit quality deterioration, subsequent to purchase by
the Fund.
The Fund may also engage in the following investment practices to the extent
indicated: (i) invest up to 10% of its net assets in rights or warrants; (ii)
invest up to 15% of its net assets in the convertible securities of companies
whose common stocks are eligible for purchase by the Fund; (iii) lend portfolio
securities equal in value to not more than 25% of total assets; (iv) enter into
repurchase agreements of up to seven days' duration; (v) enter into forward
commitment transactions as long as the Fund's aggregate commitments under such
transactions are not more than 30% of the Fund's total assets; (vi) enter into
standby commitment agreements; (vii) make short sales of securities or maintain
a short position but only if at all times when a short position is open not more
than 25% of the Fund's net assets (taken at market value) is held as collateral
for such sales; and (viii) invest in illiquid securities unless, as a result,
more than 15% of its net assets would be so invested.
ADDITIONAL INVESTMENT PRACTICES
Some or all of the Funds may engage in the following investment practices to the
extent described above.
Convertible Securities. Prior to conversion, convertible securities have the
same general characteristics as non-convertible debt securities, which generally
provide a stable stream of income with yields that are generally higher than
those of equity securities of the same or similar issuers. The price of a
convertible security will normally vary with changes in the price of the
underlying equity security, although the higher yield tends to make the
convertible security less volatile than the underlying equity security. As with
debt securities, the market value of convertible securities tends to decrease as
interest rates rise and increase as interest rates decline. While convertible
securities generally offer lower interest or dividend yields than non-
convertible debt securities of similar quality, they offer investors the
potential to benefit from increases in the market price of the underlying common
stock. Convertible debt securities that are rated Baa or lower by Moody's or BBB
or lower by S&P, Duff & Phelps or Fitch and comparable unrated securities as
determined by Alliance may share some or all of the risks of non-convertible
debt securities with those ratings. For a description of these risks, see "Risk
Considerations--Securities Ratings" and "--Investment in Lower-Rated Fixed-
Income Securities."
Rights and Warrants. A Fund will invest in rights or warrants only if the
underlying equity securities themselves are deemed appropriate by Alliance for
inclusion in the Fund's portfolio. Rights and warrants entitle the holder to buy
equity securities at a specific price for a specific period of time. Rights are
similar to warrants except that they have a substantially shorter duration.
Rights and warrants may be considered more speculative than certain other types
of investments in that they do not entitle a holder to dividends or voting
rights with respect to the underlying securities nor do they represent any
rights in the assets of the issuing company. The value of a right or warrant
does not necessarily change with the value of the underlying security, although
the value of a right or warrant may decline because of a decrease in the value
of the underlying security, the passage of time or a change in perception as to
the potential of the underlying security, or any combination thereof. If the
market price of the underlying security is below the exercise price set forth in
the warrant on the expiration date, the warrant will expire worthless. Moreover,
a right or warrant ceases to have value if it is not exercised prior to the
expiration date.
Depositary Receipts and Securities of Supranational Entities. Depositary
receipts may not necessarily be denominated in the same currency as the
underlying securities into which they may be converted. In addition, the issuers
of the stock of unsponsored depositary receipts are not obligated to disclose
material information in the United States and, therefore, there may not be a
correlation between such information and the market value of the depositary
receipts. ADRs are depositary receipts typically issued by a U.S. bank or trust
company that evidence ownership of underlying securities issued by a foreign
corporation. GDRs and other types of depositary receipts are typically issued by
foreign banks or trust companies and evidence ownership of underlying securities
issued by either a foreign or a U.S. company. Generally, depositary receipts in
registered form are designed for use in the U.S. securities markets, and
depositary receipts in bearer form are designed
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for use in foreign securities markets. For purposes of determining the country
of issuance, investments in depositary receipts of either type are deemed to be
investments in the underlying securities except with respect to Growth Fund,
where investments in ADRs are deemed to be investments in securities issued by
U.S. issuers and those in GDRs and other types of depositary receipts are deemed
to be investments in the underlying securities.
A supranational entity is an entity designated or supported by the national
government of one or more countries to promote economic reconstruction or
development. Examples of supranational entities include, among others, the World
Bank (International Bank for Reconstruction and Development) and the European
Investment Bank. A European Currency Unit is a basket of specified amounts of
the currencies of the member states of the European Economic Community.
"Semi-governmental securities" are securities issued by entities owned by either
a national, state or equivalent government or are obligations of one of such
government jurisdictions which are not backed by its full faith and credit and
general taxing powers.
Mortgage-Backed Securities. Interest and principal payments (including
prepayments) on the mortgages underlying mortgage-backed securities are passed
through to the holders of the securities. As a result of the pass-through of
prepayments of principal on the underlying securities, mortgage-backed
securities are often subject to more rapid prepayment of principal than their
stated maturity would indicate. Prepayments occur when the mortgagor on a
mortgage prepays the remaining principal before the mortgage's scheduled
maturity date. Because the prepayment characteristics of the underlying
mortgages vary, it is impossible to predict accurately the realized yield or
average life of a particular issue of pass-through certificates. Prepayments are
important because of their effect on the yield and price of the mortgage-backed
securities. During periods of declining interest rates, prepayments can be
expected to accelerate and a Fund investing in such securities would be required
to reinvest the proceeds at the lower interest rates then available. Conversely,
during periods of rising interest rates, a reduction in prepayments may increase
the effective maturity of the securities, subjecting them to a greater risk of
decline in market value in response to rising interest rates. In addition,
prepayments of mortgages underlying securities purchased at a premium could
result in capital losses.
Adjustable Rate Securities. Adjustable rate securities have interest rates that
are reset at periodic intervals, usually by reference to some interest rate
index or market interest rate. Some adjustable rate securities are backed by
pools of mortgage loans. Although the rate-adjustment feature may reduce sharp
changes in the value of adjustable rate securities, these securities can change
in value based on changes in market interest rates or the issuer's
creditworthiness. Changes in the interest rate on adjustable rate securities may
lag behind changes in prevailing market interest rates. Also, some adjustable
rate securities (or the underlying mortgages) are subject to caps or floors that
limit the maximum change in interest rate.
Asset-Backed Securities. Asset-backed securities (unrelated to first mortgage
loans) represent fractional interests in pools of leases, retail installment
loans, revolving credit receivables and other payment obligations, both secured
and unsecured. These assets are generally held by a trust and payments of
principal and interest or interest only are passed through monthly or quarterly
to certificate holders and may be guaranteed up to certain amounts by letters of
credit issued by a financial institution affiliated or unaffiliated with the
trustee or originator of the trust.
Like mortgages underlying mortgage-backed securities, underlying automobile
sales contracts or credit card receivables are subject to prepayment, which may
reduce the overall return to certificate holders. Certificate holders may also
experience delays in payment on the certificates if the full amounts due on
underlying sales contracts or receivables are not realized by the trust because
of unanticipated legal or administrative costs of enforcing the contracts or
because of depreciation or damage to the collateral (usually automobiles)
securing certain contracts, or other factors.
Zero-Coupon and Payment-in-Kind Bonds. Zero-coupon bonds are issued at a
significant discount from their principal amount in lieu of paying interest
periodically. Payment-in-kind bonds allow the issuer to make current interest
payments on the bonds in additional bonds. Because zero-coupon bonds and
payment-in-kind bonds do not pay current interest in cash, their value is
generally subject to greater fluctuation in response to changes in market
interest rates than bonds that pay interest in cash currently. Both zero-coupon
and payment-in-kind bonds allow an issuer to avoid the need to generate cash to
meet current interest payments. Accordingly, such bonds may involve greater
credit risks than bonds paying interest currently. Even though such bonds do not
pay current interest in cash, a Fund is nonetheless required to accrue interest
income on such investments and to distribute such amounts at least annually to
shareholders. Thus, a Fund could be required at times to liquidate other
investments in order to satisfy its dividend requirements.
Equity-Linked Debt Securities. Equity-linked debt securities are securities with
respect to which the amount of interest and/or principal that the issuer thereof
is obligated to pay is linked to the performance of a specified index of equity
securities. Such amount may be significantly greater or less than payment
obligations in respect of other types of debt securities. Adverse changes in
equity securities indices and other adverse changes in the securities markets
may reduce payments made under, and/or the principal of, equity-linked debt
securities held by a Fund. Furthermore, as with any debt securities, the values
of equity-linked debt securities will generally vary inversely with changes in
interest rates. A Fund's ability to dispose of equity-linked debt securities
will depend on the availability of liquid markets for such securities.
Investment in equity-linked debt securities may be considered to be speculative.
As with other securities, a Fund could lose its entire investment in equity-
linked debt securities.
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Loans and Other Direct Debt Instruments. Loans and other direct debt instruments
are interests in amounts owed by a corporate, governmental or other borrower to
another party. They may represent amounts owed to lenders or lending syndicates
(loans and loan participations), to suppliers of goods or services (trade claims
or other receivables), or to other creditors. Direct debt instruments involve
the risk of loss in case of default or insolvency of the borrower and may offer
less legal protection to a Fund in the event of fraud or misrepresentation
than debt securities. In addition, loan participations involve a risk of
insolvency of the lending bank or other financial intermediary. Direct debt
instruments may also include standby financing commitments that obligate a
Fund to supply additional cash to the borrower on demand. Loans and other direct
debt instruments are generally illiquid and may be transferred only through
individually negotiated private transactions.
Purchasers of loans and other forms of direct indebtedness depend primarily upon
the creditworthiness of the borrower for payment of principal and interest.
Direct debt instruments may not be rated by any nationally recognized rating
service. If a Fund does not receive scheduled interest or principal payments
on such indebtedness, the Fund's share price and yield could be adversely
affected. Loans that are fully secured offer a Fund more protection than
unsecured loans in the event of non-payment of scheduled interest or principal.
However, there is no assurance that the liquidation of collateral from a secured
loan would satisfy the borrower's obligation, or that the collateral can be
liquidated. Maturing loans to borrowers whose creditworthiness is poor may
involve substantial risks, and may be highly speculative.
Borrowers that are in bankruptcy or restructuring may never pay off their
indebtedness, or may pay only a small fraction of the amount owed. Direct
indebtedness of Asian countries and Greater China countries will also involve a
risk that the governmental entities responsible for the repayment of the debt
may be unable, or unwilling, to pay interest and repay principal when due.
Investments in loans through direct assignment of a financial institution's
interests with respect to a loan may involve additional risks to a Fund. For
example, if a loan is foreclosed, a Fund could become part owner of any
collateral, and would bear the costs and liabilities associated with owning and
disposing of the collateral. Direct debt instruments may also involve a risk of
insolvency of the lending bank or other intermediary.
A loan is often administered by a bank or other financial institution that acts
as agent for all holders. The agent administers the terms of the loan, as
specified on the loan agreement. Unless, under the terms of the loan or other
indebtedness, a Fund has direct recourse against the borrower, it may have to
rely on the agent to apply appropriate credit remedies against a borrower. If
assets held by the agent for the benefit of a Fund were determined to be
subject to the claims of the agent's general creditors, the Fund might incur
certain costs and delays in realizing payment on the loan or loan participation
and could suffer a loss of principal or interest.
Direct indebtedness purchased by a Fund may include letters of credit,
revolving credit facilities, or other standby financing commitments obligating
a Fund to pay additional cash on demand. These commitments may have the effect
of requiring a Fund to increase its investment in a borrower at a time when it
would not otherwise have done so, even if the borrower's condition makes it
unlikely that the amount will ever be repaid. Greater China '97 Fund will not
invest in lower-rated loans and other lower-rated direct debt instruments.
Mortgage-Backed Securities and Associated Risks. Mortgage-Backed Securities
include mortgage pass-through certificates and multiple-class pass-through
securities, such as REMIC pass-through certificates, CMOs and stripped
mortgage-backed securities ("SMBS"), and other types of Mortgage-Backed
Securities that may be available in the future.
Guaranteed Mortgage Pass-Through Securities. Real Estate Investment Fund may
invest in guaranteed mortgage pass-through securities which represent
participation interests in pools of residential mortgage loans and are issued by
U.S. governmental or private lenders and guaranteed by the U.S. Government or
one of its agencies or instrumentalities, including but not limited to the
Government National Mortgage Association ("Ginnie Mae"), the Federal National
Mortgage Association ("Fannie Mae") and the Federal Home Loan Mortgage
Corporation ("Freddie Mac"). Ginnie Mae certificates are guaranteed by the full
faith and credit of the United States Government for timely payment of principal
and interest on the certificates. Fannie Mae certificates are guaranteed by
Fannie Mae, a federally chartered and privately-owned corporation for full and
timely payment of principal and interest on the certificates. Freddie Mac
certificates are guaranteed by Freddie Mac, a corporate instrumentality of the
United States Government, for timely payment of interest and the ultimate
collection of all principal of the related mortgage loans.
Multiple-Class Pass-Through Securities and Collateralized Mortgage Obligations.
Mortgage-Backed Securities also include CMOs and REMIC pass-through or
participation certificates, which may be issued by, among others, U.S.
Government agencies and instrumentalities as well as private lenders. CMOs and
REMIC certificates are issued in multiple classes and the principal of and
interest on the mortgage assets may be allocated among the several classes of
CMOs or REMIC certificates in various ways. Each class of CMOs or REMIC
certificates, often referred to as a "tranche," is issued at a specific
adjustable or fixed interest rate and must be fully retired no later than its
final distribution date. Generally, interest is paid or accrues on all classes
of CMOs or REMIC certificates on a monthly basis. Real Estate Investment Fund
will not invest in the lowest tranche of CMOs and REMIC certificates.
Typically, CMOs are collateralized by Ginnie Mae or Freddie Mac certificates but
also may be collateralized by other
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mortgage assets such as whole loans or private mortgage pass-through securities.
Debt service on CMOs is provided from payments of principal and interest on
collateral of mortgaged assets and any reinvestment income thereon.
A REMIC is a CMO that qualifies for special tax treatment under the Code and
invests in certain mortgages primarily secured by interests in real property and
other permitted investments. Investors may purchase "regular" and "residual"
interest shares of beneficial interest in REMIC trusts although Real Estate
investment fund does not intend to invest in residual interests.
Risks. Investing in Mortgage-Backed Securities involves certain unique risks in
addition to those generally associated with investing in the real estate
industry in general. These unique risks include the failure of a counterparty to
meet its commitments, adverse interest rate changes and the effects of
prepayments on mortgage cash flows. See "Risk Considerations--Mortgage-Backed
Securities" for a more complete description of the characteristics of
Mortgage-Backed Securities and associated risks.
Illiquid Securities. Subject to any more restrictive applicable fundamental
investment policy, none of the Funds will maintain more than 15% of its net
assets in illiquid securities. Illiquid securities generally include (i) direct
placements or other securities that are subject to legal or contractual
restrictions on resale or for which there is no readily available market (e.g.,
when trading in the security is suspended or, in the case of unlisted
securities, when market makers do not exist or will not entertain bids or
offers), including many individually negotiated currency swaps and any assets
used to cover currency swaps and most privately negotiated investments in state
enterprises that have not yet conducted an initial equity offering, (ii) over-
the-counter options and assets used to cover over-the-counter options, and (iii)
repurchase agreements not terminable within seven days.
Because of the absence of a trading market for illiquid securities, a Fund may
not be able to realize their full value upon sale. With respect to each Fund
that may invest in such securities, Alliance will monitor their illiquidity
under the supervision of the Directors of the Fund. To the extent permitted by
applicable law, Rule 144A securities will not be treated as "illiquid" for
purposes of the foregoing restriction so long as such securities meet liquidity
guidelines established by a Fund's Directors. Investment in non-publicly traded
securities by Growth Fund is restricted to 5% of its total assets (not including
for these purposes Rule 144A securities, to the extent permitted by applicable
law) and is also subject to the 15% restriction on investment in illiquid
securities described above.
A Fund that invests in securities for which there is no ready market may
therefore not be able to readily sell such securities. Such securities are
unlike securities which are traded on in the open market and which can be
expected to be sold immediately if the market is adequate. The sale price of
illiquid securities may be lower or higher than Alliance's most recent estimate
of their fair value. Generally, less public information is available with
respect to the issuers of such securities than with respect to companies whose
securities are traded on an exchange. To the extent that these securities are
foreign securities, there is no law in many of the countries in which a Fund may
invest similar to the Securities Act requiring an issuer to register the sale of
securities with a governmental agency or imposing legal restrictions on resales
of securities, either as to length of time the securities may be held or manner
of resale. However, there may be contractual restrictions on resales of
securities.
Options on Securities. An option gives the purchaser of the option, upon payment
of a premium, the right to deliver to (in the case of a put) or receive from (in
the case of a call) the writer a specified amount of a security on or before a
fixed date at a predetermined price. A call option written by a Fund is
"covered" if the Fund owns the underlying security, has an absolute and
immediate right to acquire that security upon conversion or exchange of another
security it holds, or holds a call option on the underlying security with an
exercise price equal to or less than that of the call option it has written. A
put option written by a Fund is covered if the Fund holds a put option on the
underlying securities with an exercise price equal to or greater than that of
the put option it has written.
A call option is for cross-hedging purposes if a Fund does not own the
underlying security, and is designed to provide a hedge against a decline in
value in another security which the Fund owns or has the right to acquire.
Worldwide Privatization Fund, All-Asia Investment Fund, Greater China '97 Fund,
International Premier Growth Fund and Utility Income Fund each may write call
options for cross-hedging purposes. A Fund would write a call option for cross-
hedging purposes, instead of writing a covered call option, when the premium to
be received from the cross-hedge transaction would exceed that which would be
received from writing a covered call option, while at the same time achieving
the desired hedge.
In purchasing an option, a Fund would be in a position to realize a gain if,
during the option period, the price of the underlying security increased (in the
case of a call) or decreased (in the case of a put) by an amount in excess of
the premium paid; otherwise the Fund would experience a loss equal to the
premium paid for the option.
If an option written by a Fund were exercised, the Fund would be obligated to
purchase (in the case of a put) or sell (in the case of a call) the underlying
security at the exercise price. The risk involved in writing an option is that,
if the option were exercised, the underlying security would then be purchased or
sold by the Fund at a disadvantageous price. These risks could be reduced by
entering into a closing transaction (i.e., by disposing of the option prior to
its exercise). A Fund retains the premium received from writing a put or call
option whether or not the option is exercised. The writing of covered call
options could result in increases in a Fund's portfolio turnover rate,
especially during periods when market prices of the underlying securities
appreciate.
Technology Fund, Quasar Fund, International Fund, New Europe Fund and Global
Small Cap Fund will not write
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uncovered call options. Technology Fund and Global Small Cap Fund will not write
a call option if the premium to be received by the Fund in doing so would not
produce an annualized return of at least 15% of the then current market value of
the securities subject to the option (without giving effect to commissions,
stock transfer taxes and other expenses that are deducted from premium
receipts). Technology Fund, Quasar Fund and Global Small Cap Fund will not write
a call option if, as a result, the aggregate of the Fund's portfolio securities
subject to outstanding call options (valued at the lower of the option price or
market value of such securities) would exceed 15% of the Fund's total assets or
more than 10% of the Fund's assets would be committed to call options that at
the time of sale have a remaining term of more than 100 days. The aggregate cost
of all outstanding options purchased and held by each of Premier Growth Fund,
Technology Fund, Quasar Fund and Global Small Cap Fund will at no time exceed
10% of the Fund's total assets. Neither International Fund nor New Europe Fund
will write uncovered put options.
A Fund that purchases or writes options on securities in privately negotiated
(i.e., over-the-counter) transactions will effect such transactions only with
investment dealers and other financial institutions (such as commercial banks or
savings and loan institutions) deemed creditworthy by Alliance, and Alliance has
adopted procedures for monitoring the creditworthiness of such entities. Options
purchased or written by a Fund in negotiated transactions are illiquid and it
may not be possible for the Fund to effect a closing transaction at an
advantageous time. See "Illiquid Securities."
Options on Securities Indices. An option on a securities index is similar to an
option on a security except that, rather than the right to take or make delivery
of a security at a specified price, an option on a securities index gives the
holder the right to receive, upon exercise of the option, an amount of cash if
the closing level of the chosen index is greater than (in the case of a call) or
less than (in the case of a put) the exercise price of the option.
Futures Contracts and Options on Futures Contracts. A "sale" of a futures
contract means the acquisition of a contractual obligation to deliver the
securities or foreign currencies or other commodity called for by the contract
at a specified price on a specified date. A "purchase" of a futures contract
means the incurring of an obligation to acquire the securities, foreign
currencies or other commodity called for by the contract at a specified price on
a specified date. The purchaser of a futures contract on an index agrees to take
or make delivery of an amount of cash equal to the difference between a
specified dollar multiple of the value of the index on the expiration date of
the contract ("current contract value") and the price at which the contract was
originally struck. No physical delivery of the securities underlying the index
is made.
Options on futures contracts written or purchased by a Fund will be traded on
U.S. or foreign exchanges or over-the-counter. These investment techniques will
be used only to hedge against anticipated future changes in market conditions
and interest or exchange rates which otherwise might either adversely affect the
value of the Fund's portfolio securities or adversely affect the prices of
securities which the Fund intends to purchase at a later date.
No Fund will enter into any futures contracts or options on futures contracts if
immediately thereafter the market values of the outstanding futures contracts of
the Fund and the currencies and futures contracts subject to outstanding options
written by the Fund would exceed 50% of its total assets, or in the case of
International Premier Growth Fund 100% of its total assets. Premier Growth
Fund and Growth and Income Fund may not purchase or sell a stock index future if
immediately thereafter more than 30% of its total assets would be hedged by
stock index futures. Premier Growth Fund and Growth and Income Fund may not
purchase or sell a stock index future if, immediately thereafter, the sum of the
amount of margin deposits on the Fund's existing futures positions would exceed
5% of the market value of the Fund's total assets.
Options on Foreign Currencies. As in the case of other kinds of options, the
writing of an option on a foreign currency constitutes only a partial hedge, up
to the amount of the premium received, and a Fund could be required to purchase
or sell foreign currencies at disadvantageous exchange rates, thereby incurring
losses. The purchase of an option on a foreign currency may constitute an
effective hedge against fluctuations in exchange rates although, in the event of
rate movements adverse to a Fund's position, it may forfeit the entire amount of
the premium plus related transaction costs. See the Statement of Additional
Information of each Fund that may invest in options on foreign currencies for
further discussion of the use, risks and costs of options on foreign currencies.
Forward Foreign Currency Exchange Contracts. A Fund purchases or sells forward
foreign currency exchange contracts to minimize the risk to it from adverse
changes in the relationship between the U.S. dollar and other currencies. A
forward contract is an obligation to purchase or sell a specific currency for an
agreed price at a future date, and is individually negotiated and privately
traded.
A Fund may enter into a forward contract, for example, when it enters into a
contract for the purchase or sale of a security denominated in a foreign
currency in order to "lock in" the U.S. dollar price of the security
("transaction hedge"). A Fund will not engage in transaction hedges with respect
to the currency of a particular country to an extent greater than the aggregate
amount of the Fund's transactions in that currency. When a Fund believes that a
foreign currency may suffer a substantial decline against the U.S. dollar, it
may enter into a forward sale contract to sell an amount of that foreign
currency approximating the value of some or all of the Fund's portfolio
securities denominated in such foreign currency, or when the Fund believes that
the U.S. dollar may suffer a substantial decline against a foreign currency, it
may enter into a forward purchase contract to buy that foreign currency for a
fixed dollar amount ("position hedge"). A Fund will not position hedge with
respect to a particular currency to an extent greater than the
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aggregate market value (at the time of making such sale) of the securities held
in its portfolio denominated or quoted in that currency. Instead of entering
into a position hedge, a Fund may, in the alternative, enter into a forward
contract to sell a different foreign currency for a fixed U.S. dollar amount
where the Fund believes that the U.S. dollar value of the currency to be sold
pursuant to the forward contract will fall whenever there is a decline in the
U.S. dollar value of the currency in which portfolio securities of the Fund are
denominated ("cross-hedge"). Unanticipated changes in currency prices may result
in poorer overall performance for the Fund than if it had not entered into such
forward contracts.
Hedging against a decline in the value of a currency does not eliminate
fluctuations in the prices of portfolio securities or prevent losses if the
prices of such securities decline. Such transactions also preclude the
opportunity for gain if the value of the hedged currency should rise. Moreover,
it may not be possible for a Fund to hedge against a devaluation that is so
generally anticipated that the Fund is not able to contract to sell the currency
at a price above the devaluation level it anticipates. International Fund, New
Europe Fund and Global Small Cap Fund will not enter into a forward contract
with a term of more than one year or if, as a result, more than 50% of its total
assets would be committed to such contracts. The dealings of International Fund,
New Europe Fund and Global Small Cap Fund in forward contracts will be limited
to hedging involving either specific transactions or portfolio positions.
Growth Fund may also purchase and sell foreign currency on a spot basis.
Forward Commitments. Forward commitments for the purchase or sale of securities
may include purchases on a "when-issued" basis or purchases or sales on a
"delayed delivery" basis. In some cases, a forward commitment may be conditioned
upon the occurrence of a subsequent event, such as approval and consummation of
a merger, corporate reorganization or debt restructuring (i.e., a "when, as and
if issued" trade).
When forward commitment transactions are negotiated, the price is fixed at the
time the commitment is made, but delivery and payment for the securities take
place at a later date. Normally, the settlement date occurs within two months
after the transaction, but settlements beyond two months may be negotiated.
Securities purchased or sold under a forward commitment are subject to market
fluctuation, and no interest or dividends accrue to the purchaser prior to the
settlement date. At the time a Fund intends to enter into a forward commitment,
it records the transaction and thereafter reflects the value of the security
purchased or, if a sale, the proceeds to be received, in determining its net
asset value. Any unrealized appreciation or depreciation reflected in such
valuation of a "when, as and if issued" security would be canceled in the event
that the required conditions did not occur and the trade was canceled.
The use of forward commitments enables a Fund to protect against anticipated
changes in interest rates and prices. For instance, in periods of rising
interest rates and falling bond prices, a Fund might sell securities in its
portfolio on a forward commitment basis to limit its exposure to falling prices.
In periods of falling interest rates and rising bond prices, a Fund might sell a
security in its portfolio and purchase the same or a similar security on a when-
issued or forward commitment basis, thereby obtaining the benefit of currently
higher cash yields. However, if Alliance were to forecast incorrectly the
direction of interest rate movements, a Fund might be required to complete such
when-issued or forward transactions at prices inferior to the then current
market values. When-issued securities and forward commitments may be sold prior
to the settlement date, but a Fund enters into when-issued and forward
commitments only with the intention of actually receiving securities or
delivering them, as the case may be. If a Fund chooses to dispose of the right
to acquire a when-issued security prior to its acquisition or dispose of its
right to deliver or receive against a forward commitment, it may incur a gain or
loss. Any significant commitment of Fund assets to the purchase of securities on
a "when, as and if issued" basis may increase the volatility of the Fund's net
asset value. No forward commitments will be made by New Europe Fund,
International Premier Growth Fund, All-Asia Investment Fund, Greater China '97
Fund, Worldwide Privatization Fund, Real Estate Investment Fund or Utility
Income Fund if, as a result, the Fund's aggregate commitments under such
transactions would be more than 30% of the Fund's total assets. In the event the
other party to a forward commitment transaction were to default, a Fund might
lose the opportunity to invest money at favorable rates or to dispose of
securities at favorable prices.
Standby Commitment Agreements. Standby commitment agreements commit a Fund, for
a stated period of time, to purchase a stated amount of a security that may be
issued and sold to the Fund at the option of the issuer. The price and coupon of
the security are fixed at the time of the commitment. At the time of entering
into the agreement the Fund is paid a commitment fee, regardless of whether the
security ultimately is issued, typically equal to approximately 0.5% of the
aggregate purchase price of the security the Fund has committed to purchase. A
Fund will enter into such agreements only for the purpose of investing in the
security underlying the commitment at a yield and price considered advantageous
to the Fund and unavailable on a firm commitment basis. No Fund, other than
Internation Premier Growth Fund, will enter into a standby commitment with a
remaining term in excess of 45 days. Investments in standby commitments will be
limited so that the aggregate purchase price of the securities subject to the
commitments will not exceed 25% with respect to New Europe Fund and Real Estate
Investment Fund, 50% with respect to International Premier Growth Fund,
Worldwide Privatization Fund, All-Asia Investment Fund and Greater China '97
Fund and 20% with respect to Utility Income Fund, of the Fund's assets taken at
the time of making the commitment.
There is no guarantee that a security subject to a standby commitment will be
issued and the value of the security, if
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issued, on the delivery date may be more or less than its purchase price. Since
the issuance of the security underlying the commitment is at the option of the
issuer, a Fund will bear the risk of capital loss in the event the value of the
security declines and may not benefit from an appreciation in the value of the
security during the commitment period if the issuer decides not to issue and
sell the security to the Fund.
Currency Swaps. Currency swaps involve the individually negotiated exchange by a
Fund with another party of a series of payments in specified currencies. A
currency swap may involve the delivery at the end of the exchange period of a
substantial amount of one designated currency in exchange for the other
designated currency. Therefore the entire principal value of a currency swap is
subject to the risk that the other party to the swap will default on its
contractual delivery obligations. The net amount of the excess, if any, of a
Fund's obligations over its entitlements with respect to each currency swap will
be accrued on a daily basis. A Fund will not enter into any currency swap unless
the credit quality of the unsecured senior debt or the claims-paying ability of
the other party thereto is rated in the highest rating category of at least one
nationally recognized rating organization at the time of entering into the
transaction. If there is a default by the other party to such a transaction,
such Fund will have contractual remedies pursuant to the agreements related to
the transactions.
Interest Rate Transactions. Each Fund that may enter into interest rate
transactions expects to do so primarily to preserve a return or spread on a
particular investment or portion of its portfolio or to protect against any
increase in the price of securities the Fund anticipates purchasing at a later
date. The Funds do not intend to use these transactions in a speculative manner.
Interest rate swaps involve the exchange by a Fund with another party of their
respective commitments to pay or receive interest (e.g., an exchange of floating
rate payments for fixed rate payments). Interest rate swaps are entered on a net
basis (i.e., the two payment streams are netted out, with the Fund receiving or
paying, as the case may be, only the net amount of the two payments). With
respect to All-Asia Investment Fund, Greater China '97 Fund and Utility Income
Fund, the exchange commitments can involve payments in the same currency or in
different currencies. The purchase of an interest rate cap entitles the
purchaser, to the extent that a specified index exceeds a predetermined interest
rate, to receive payments of interest on a contractually-based principal amount
from the party selling such interest rate cap. The purchase of an interest rate
floor entitles the purchaser, to the extent that a specified index falls below a
predetermined interest rate, to receive payments of interest on an agreed
principal amount from the party selling the interest rate floor.
A Fund may enter into interest rate swaps, caps and floors on either an
asset-based or liability-based basis, depending upon whether it is hedging its
assets or liabilities. The net amount of the excess, if any, of a Fund's
obligations over its entitlements with respect to each interest rate swap, cap
and floor is accrued daily. A Fund will not enter into an interest rate swap,
cap or floor transaction unless the unsecured senior debt or the claims-paying
ability of the other party thereto is then rated in the highest rating category
of at least one nationally recognized rating organization. Alliance will monitor
the creditworthiness of counterparties on an ongoing basis. The swap market has
grown substantially in recent years, with a large number of banks and investment
banking firms acting both as principals and as agents utilizing standardized
swap documentation. As a result, the swap market has become relatively liquid.
Caps and floors are more recent innovations for which standardized documentation
has not yet been developed and, accordingly, they are less liquid than swaps.
The use of interest rate transactions is a highly specialized activity which
involves investment techniques and risks different from those associated with
ordinary portfolio securities transactions. If Alliance were to incorrectly
forecast market values, interest rates and other applicable factors, the
investment performance of a Fund would be adversely affected by the use of these
investment techniques. Moreover, even if Alliance is correct in its forecasts,
there is a risk that the transaction position may correlate imperfectly with the
price of the asset or liability being hedged. There is no limit on the amount of
interest rate transactions that may be entered into by a Fund that is permitted
to enter into such transactions. These transactions do not involve the delivery
of securities or other underlying assets or principal. Accordingly, the risk of
loss with respect to interest rate transactions is limited to the net amount of
interest payments that a Fund is contractually obligated to make. If the other
party to an interest rate transaction defaults, a Fund's risk of loss consists
of the net amount of interest payments that the Fund contractually is entitled
to receive.
Repurchase Agreements. A repurchase agreement arises when a buyer purchases a
security and simultaneously agrees to resell it to the vendor at an agreed-upon
future date, normally a day or a few days later. The resale price is greater
than the purchase price, reflecting an agreed-upon interest rate for the period
the buyer's money is invested in the security. Such agreements permit a Fund to
keep all of its assets at work while retaining "overnight" flexibility in
pursuit of investments of a longer-term nature. If a vendor defaults on its
repurchase obligation, a Fund would suffer a loss to the extent that the
proceeds from the sale of the collateral were less than the repurchase price. If
a vendor goes bankrupt, a Fund might be delayed in, or prevented from, selling
the collateral for its benefit. Alliance monitors the creditworthiness of the
vendors with which the Fund enters into repurchase agreements. There is no
percentage restriction on a Fund's ability to enter into repurchase agreements,
other than as indicated under "Investment Objectives and Policies."
Short Sales. A short sale is effected by selling a security that a Fund does not
own, or if the Fund does own such security, it is not to be delivered upon
consummation of the sale. A short sale is "against the box" to the extent that a
Fund contemporaneously owns or has the right to obtain securities
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identical to those sold short without payment. Worldwide Privatization Fund,
All-Asia Investment Fund, Greater China '97 Fund and Utility Income Fund each
may make short sales of securities or maintain short positions only for the
purpose of deferring realization of gain or loss for U.S. federal income tax
purposes, provided that at all times when a short position is open the Fund owns
an equal amount of securities of the same issue as, and equal in amount to, the
securities sold short. In addition, each of those Funds may not make a short
sale if as a result more than 10% of the Fund's net assets would be held as
collateral for short sales, except that All-Asia Investment Fund, Greater China
'97 Fund and Real Estate Investment Fund may not make a short sale if as a
result more than 25% of the Fund's net assets would be held as collateral for
short sales. If the price of the security sold short increases between the time
of the short sale and the time a Fund replaces the borrowed security, the Fund
will incur a loss; conversely, if the price declines, the Fund will realize a
capital gain. See "Certain Fundamental Investment Policies." Certain special
federal income tax considerations may apply to short sales entered into by a
Fund. See "Dividends, Distributions and Taxes" in the relevant Fund's Statement
of Additional Information.
Loans of Portfolio Securities. The risk in lending portfolio securities, as with
other extensions of credit, consists of the possible loss of rights in the
collateral should the borrower fail financially. In determining whether to lend
securities to a particular borrower, Alliance will consider all relevant facts
and circumstances, including the creditworthiness of the borrower. While
securities are on loan, the borrower will pay the Fund any income earned thereon
and the Fund may invest any cash collateral in portfolio securities, thereby
earning additional income, or receive an agreed upon amount of income from a
borrower who has delivered equivalent collateral. Each Fund will have the right
to regain record ownership of loaned securities or equivalent securities in
order to exercise ownership rights such as voting rights, subscription rights
and rights to dividends, interest or distributions. A Fund may pay reasonable
finders', administrative and custodial fees in connection with a loan. A Fund
will not lend its portfolio securities to any officer, director, employee or
affiliate of the Fund or Alliance.
General. The successful use of the foregoing investment practices draws upon
Alliance's special skills and experience with respect to such instruments and
usually depends on Alliance's ability to forecast price movements, interest
rates or currency exchange rate movements correctly. Should interest rates,
prices or exchange rates move unexpectedly, a Fund may not achieve the
anticipated benefits of the transactions or may realize losses and thus be in a
worse position than if such strategies had not been used. Unlike many
exchange-traded futures contracts and options on futures contracts, there are no
daily price fluctuation limits with respect to certain options and forward
contracts, and adverse market movements could therefore continue to an unlimited
extent over a period of time. In addition, the correlation between movements in
the prices of futures contracts, options and forward contracts and movements in
the prices of the securities and currencies hedged or used for cover will not be
perfect and could produce unanticipated losses.
A Fund's ability to dispose of its position in futures contracts, options and
forward contracts depends on the availability of liquid markets in such
instruments. Markets in options and futures with respect to a number of types of
securities and currencies are relatively new and still developing, and there is
no public market for forward contracts. It is impossible to predict the amount
of trading interest that may exist in various types of futures contracts,
options and forward contracts. If a secondary market does not exist with respect
to an option purchased or written by a Fund, it might not be possible to effect
a closing transaction in the option (i.e., dispose of the option), with the
result that (i) an option purchased by the Fund would have to be exercised in
order for the Fund to realize any profit and (ii) the Fund may not be able to
sell currencies or portfolio securities covering an option written by the Fund
until the option expires or it delivers the underlying security, futures
contract or currency upon exercise. Therefore, no assurance can be given that
the Funds will be able to utilize these instruments effectively for the purposes
set forth above. Furthermore, a Fund's ability to engage in options and futures
transactions may be limited by tax considerations and the use of certain hedging
techniques may adversely impact the characterization of income to a Fund for
U.S. federal income tax purposes. See "Dividends, Distributions and Taxes" in
the Statement of Additional Information of each Fund that invests in options and
futures.
Future Developments. A Fund may, following written notice to its shareholders,
take advantage of other investment practices that are not currently contemplated
for use by the Fund or are not available but may yet be developed, to the extent
such investment practices are consistent with the Fund's investment objective
and legally permissible for the Fund. Such investment practices, if they arise,
may involve risks that exceed those involved in the activities described above.
Defensive Position. For temporary defensive purposes, each Fund may reduce its
position in equity securities and invest in without limit certain types of
short-term, liquid, high grade or high quality (depending on the Fund) debt
securities. These securities may include U.S. Government securities, qualifying
bank deposits, money market instruments, prime commercial paper and other types
of short-term debt securities including notes and bonds. For Funds that may
invest in foreign countries, such securities may also include short-term,
foreign-currency denominated securities of the type mentioned above issued by
foreign governmental entities, companies and supranational organizations. For a
complete description of the types of securities each Fund may invest in while in
a temporary defensive position, please see such Fund's Statement of Additional
Information.
Portfolio Turnover. Portfolio turnover rates are set forth under "Financial
Highlights." These portfolio turnover rates are greater than those of most other
investment companies, including those which emphasize capital appreciation as a
basic policy. A high rate of portfolio turnover involves
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correspondingly greater brokerage and other expenses than a lower rate, which
must be borne by the Fund and its shareholders. High portfolio turnover also may
result in the realization of substantial net short-term capital gains. See
"Dividends, Distributions and Taxes" in each Fund's Statement of Additional
Information.
CERTAIN FUNDAMENTAL INVESTMENT POLICIES
Each Fund has adopted certain fundamental investment policies listed below,
which may not be changed without the approval of its shareholders. Additional
investment restrictions with respect to a Fund are set forth in its Statement of
Additional Information.
Alliance Fund may not: (i) invest more than 5% of its total assets in the
securities of any one issuer (other than the U.S. Government); (ii) acquire more
than 10% of the voting or other securities of any one issuer; or (iii) buy
securities of any company that (including its predecessors) has not been in
business at least three continuous years. Pursuant to investment policies which
are not fundamental, the Fund does not invest (i) in puts or calls (except as
discussed above); (ii) in straddles, spreads, or any combination thereof; (iii)
in oil, gas or other mineral exploration or development programs; or (iv) more
than 5% of its gross assets in securities the disposition of which would be
subject to restrictions under the federal securities laws.
Growth Fund may not: (i) invest more than 5% of its total assets in the
securities of any one issuer (other than U.S. Government securities and
repurchase agreements relating thereto), although up to 25% of each Fund's total
assets may be invested without regard to this restriction; or (ii) invest 25% or
more of its total assets in the securities of any one industry.
Premier Growth Fund may not: (i) purchase more than 10% of the outstanding
voting securities of any one issuer; (ii) invest 25% or more of the value of its
total assets in the same industry; (iii) borrow money or issue senior securities
except for temporary or emergency purposes in an amount not exceeding 5% of the
value of its total assets at the time the borrowing is made; (iv) pledge,
mortgage, hypothecate or otherwise encumber any of its assets except in
connection with the writing of call options and except to secure permitted
borrowings; or (v) invest in the securities of any issuer that has a record of
less than three years of continuous operation (including the operation of any
predecessor) if as a result more than 10% of the value of the total assets of
the Fund would be invested in the securities of such issuer or issuers.
Technology Fund may not: (i) with respect to 75% of its total assets, have such
assets represented by other than:(a) cash and cash items, (b) U.S. Government
securities, or (c) securities of any one issuer (other than the U.S. Government
and its agencies or instrumentalities) not greater in value than 5% of the
Fund's total assets, and not more than 10% of the outstanding voting securities
of such issuer; (ii) purchase the securities of any one issuer, other than the
U.S. Government and its agencies or instrumentalities, if as a result (a) the
value of the holdings of the Fund in the securities of such issuer exceeds 25%
of its total assets, or (b) the Fund owns more than 25% of the outstanding
securities of any one class of securities of such issuer; (iii) concentrate its
investments in any one industry, but the Fund has reserved the right to invest
up to 25% of its total assets in a particular industry; and (iv) invest in the
securities of any issuer which has a record of less than three years of
continuous operation (including the operation of any predecessor) if such
purchase would cause 10% or more of its total assets to be invested in the
securities of such issuers.
Quasar Fund may not: (i) purchase the securities of any one issuer, other than
the U.S. Government or any of its agencies or instrumentalities, if as a result
more than 5% of its total assets would be invested in such issuer or the Fund
would own more than 10% of the outstanding voting securities of such issuer,
except that up to 25% of its total assets may be invested without regard to
these 5% and 10% limitations; (ii) invest more than 25% of its total assets in
any particular industry; (iii) borrow money except for temporary or emergency
purposes in an amount not exceeding 5% of its total assets at the time the
borrowing is made; or (iv) invest more than 10% of its assets in restricted
securities.
International Fund may not: (i) invest more than 5% of the value of its total
assets in securities of a single issuer (including repurchase agreements with
any one entity), except U.S. Government securities or foreign government
securities; provided, however, that the Fund may not, with respect to 75% of its
total assets, invest more than 5% of its total assets in securities of any one
foreign government issuer; (ii) own more than 10% of the outstanding securities
of any class of any issuer (for this purpose, all preferred stocks of an issuer
shall be deemed a single class, and all indebtedness of an issuer shall be
deemed a single class), except U.S. Government securities; (iii) invest more
than 25% of the value of its total assets in securities of issuers having their
principal business activities in the same industry; provided, that this
limitation does not apply to U.S. Government securities or foreign government
securities; (iv) invest more than 5% of the value of its total assets in the
securities of any issuer that has a record of less than three years of
continuous operation (including the operation of any predecessor or
unconditional guarantor), except U.S. Government securities or foreign
government securities; (v) invest more than 5% of the value of its total assets
in securities with legal or contractual restrictions on resale, other than
repurchase agreements, or more than 10% of the value of its total assets in
securities that are not readily marketable (including restricted securities and
repurchase agreements not terminable within seven business days); and (vi)
borrow money, except as a temporary measure for extraordinary or emergency
purposes, and then only from banks in amounts not exceeding 5% of its total
assets.
International Premier Growth Fund may not: (i) invest 25% or more of its total
assets in securities of issuers conducting their principal business activities
in the same industry, except
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that this restriction does not apply to U.S. Government Securities; (ii) borrow
money or issue senior securities, except that the Fund may borrow (a) from a
bank if immediately after such borrowing there is asset coverage of at least
300% as defined in the 1940 Act and (b) for temporary purposes in an amount not
exceeding 5% of the value of the total assets of the Fund; or (iii) pledge,
hypothecate, mortgage or otherwise encumber its assets, except to secure
permitted borrowings.
Worldwide Privatization Fund may not: (i) invest 25% or more of its total assets
in securities of issuers conducting their principal business activities in the
same industry, except that this restriction does not apply to (a) U.S.
Government securities, or (b) the purchase of securities of issuers whose
primary business activity is in the national commercial banking industry, so
long as the Fund's Directors determine, on the basis of factors such as
liquidity, availability of investments and anticipated returns, that the Fund's
ability to achieve its investment objective would be adversely affected if the
Fund were not permitted to invest more than 25% of its total assets in those
securities, and so long as the Fund notifies its shareholders of any decision by
the Directors to permit or cease to permit the Fund to invest more than 25% of
its total assets in those securities, such notice to include a discussion of any
increased investment risks to which the Fund may be subjected as a result of the
Directors' determination; (ii) borrow money except from banks for temporary or
emergency purposes, including the meeting of redemption requests that might
require the untimely disposition of securities; borrowing in the aggregate may
not exceed 15%, and borrowing for purposes other than meeting redemptions may
not exceed 5%, of the Fund's total assets (including the amount borrowed) less
liabilities (not including the amount borrowed) at the time the borrowing is
made; outstanding borrowings in excess of 5% of the value of the Fund's total
assets will be repaid before any investments are made; or (iii) pledge,
hypothecate, mortgage or otherwise encumber its assets, except to secure
permitted borrowings. The exception contained in clause (i)(b) above is subject
to the operating policy regarding concentration described in this Prospectus.
New Europe Fund may not: (i) purchase more than 10% of the outstanding voting
securities of any one issuer; (ii) invest more than 15% of its total assets in
the securities of any one issuer or 25% or more of its total assets in the same
industry, provided, however, that the foregoing restriction shall not be deemed
to prohibit the Fund from purchasing the securities of any issuer pursuant to
the exercise of rights distributed to the Fund by the issuer, except that no
such purchase may be made if as a result the Fund will fail to meet the
diversification requirements of the Code and any such acquisition in excess of
the foregoing 15% or 25% limits will be sold by the Fund as soon as reasonably
practicable (this restriction does not apply to U.S. Government securities, but
will apply to foreign government securities unless the Commission permits their
exclusion); (iii) borrow money except from banks for temporary or emergency
purposes, including the meeting of redemption requests that might require the
untimely disposition of securities; borrowing in the aggregate may not exceed
15%, and borrowing for purposes other than meeting redemptions may not exceed
5%, of the Fund's total assets (including the amount borrowed) less liabilities
(not including the amount borrowed) at the time the borrowing is made;
outstanding borrowings in excess of 5% of the Fund's total assets will be repaid
before any subsequent investments are made; or (iv) purchase a security (unless
the security is acquired pursuant to a plan of reorganization or an offer of
exchange) if, as a result, the Fund would own any securities of an open-end
investment company or more than 3% of the total outstanding voting stock of any
closed-end investment company, or more than 5% of the value of the Fund's total
assets would be invested in securities of any closed-end investment company, or
more than 10% of such value in closed-end investment companies in general.
All-Asia Investment Fund may not: (i) invest 25% or more of its total assets in
securities of issuers conducting their principal business activities in the same
industry; (ii) borrow money except from banks for temporary or emergency
purposes, including the meeting of redemption requests that might require the
untimely disposition of securities; borrowing in the aggregate may not exceed
15%, and borrowing for purposes other than meeting redemptions may not exceed
5%, of the Fund's total assets (including the amount borrowed) less liabilities
(not including the amount borrowed) at the time the borrowing is made;
outstanding borrowings in excess of 5% of the value of the Fund's total assets
will be repaid before any investments are made; or (iii) pledge, hypothecate,
mortgage or otherwise encumber its assets, except to secure permitted
borrowings.
Greater China '97 Fund may not: (i) invest 25% or more of its total assets on
securities of issuers conducting their principal business activities in the same
industry; (ii) borrow money except from banks for temporary or emergency
purposes, including the meeting of redemption requests that might require the
untimely disposition of securities; borrowing in the aggregate may not exceed
15%, and borrowing for purposes other than meeting redemption may not exceed 5%,
of the Fund's total assets (including the amount borrowed) less liabilities (not
including the amount borrowed) at the time the borrowing is made; outstanding
borrowings in excess of 5% of the value of the Fund's total assets will be
repaid before any investments are made; or (iii) pledge, hypothecate, mortgage
or otherwise encumber its assets, except to secure permitted borrowings.
Global Small Cap Fund may not: (i) purchase the securities of any one issuer,
other than the U.S. Government or any of its agencies or instrumentalities, if
immediately after such purchase more than 5% of the value of its total assets
would be invested in such issuer or the Fund would own more than 10% of the
outstanding voting securities of such issuer, except that up to 25% of the
Fund's total assets may be invested without regard to these 5% and 10%
limitations; (ii) invest 25% or more of its total assets in the same industry;
this restriction does not apply to U.S. Government securities, but will apply to
foreign government securities unless the Commission permits their exclusion;
(iii) borrow money except from banks for emergency or temporary purposes in an
amount not exceeding
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5% of the total assets of the Fund; or (iv) make short sales of securities or
maintain a short position, unless at all times when a short position is open it
owns an equal amount of such securities or securities convertible into or
exchangeable for, without payment of any further consideration, securities of
the same issue as, and equal in amount to, the securities sold short and unless
not more than 5% of the Fund's net assets is held as collateral for such sales
at any one time.
Global Environment Fund may not: (i) purchase more than 10% of the outstanding
voting securities of any one issuer; (ii) invest more than 15% of the value of
its total assets in the securities of any one issuer or 25% or more of the value
of its total assets in the same industry, except that the Fund will invest more
than 25% of its total assets in Environmental Companies, provided that this
restriction does not apply to U.S. Government securities, but will apply to
foreign government obligations unless the Commission permits their exclusion;
(iii) borrow money or issue senior securities, except that the Fund may borrow
(a) from a bank if immediately after such borrowing there is asset coverage of
at least 300% as defined in the 1940 Act and (b) for temporary purposes in an
amount not exceeding 5% of the value of the total assets of the Fund; (iv)
pledge, hypothecate, mortgage or otherwise encumber its assets, except (a) to
secure permitted borrowings and (b) in connection with initial and variation
margin deposits relating to futures contracts; (v) purchase a security (unless
the security is acquired pursuant to a plan of reorganization or an offer of
exchange) if, as result, the Fund would own any securities of an open-end
investment company or more than 3% of the total outstanding voting stock of any
closed-end investment company, or more than 5% of the value of the Fund's total
assets would be invested in securities of any closed-end investment company or
more than 10% of such value in closed-end investment companies in the aggregate;
(vi) make short sales of securities or maintain a short position, unless at all
times when a short position is open it owns an equal amount of such securities
or securities convertible into or exchangeable for, without payment of any
further consideration, securities of the same issue as, and equal in amount to,
the securities sold short ("short sales against the box"), and unless not more
than 5% of the Fund's net assets (taken at market value) is held as collateral
for such sales at any one time; or (vii) buy or write (i.e., sell) put or call
options, except (a) the Fund may buy foreign currency options or write covered
foreign currency options and options on foreign currency futures and (b) the
Fund may purchase warrants.
Balanced Shares may not: (i) invest more than 5% of its total assets in the
securities of any one issuer, except U.S. Government securities; or (ii) own
more than 10% of the outstanding voting securities of any one issuer.
Utility Income Fund may not: (i) invest more than 5% of its total assets in the
securities of any one issuer except the U.S. Government, although with respect
to 25% of its total assets it may invest in any number of issuers; (ii) invest
25% or more of its total assets in the securities of issuers conducting their
principal business activities in any one industry, other than the utilities
industry, except that this restriction does not apply to U.S. Government
securities; (iii) purchase more than 10% of any class of the voting securities
of any one issuer; (iv) borrow money except from banks for temporary or
emergency purposes, including the meeting of redemption requests that might
require the untimely disposition of securities; borrowing in the aggregate may
not exceed 15%, and borrowing for purposes other than meeting redemptions may
not exceed 5%, of the Fund's total assets (including the amount borrowed) less
liabilities (not including the amount borrowed) at the time the borrowing is
made; outstanding borrowings in excess of 5% of the Fund's total assets will be
repaid before any subsequent investments are made; or (v) purchase a security
if, as a result (unless the security is acquired pursuant to a plan of
reorganization or an offer of exchange), the Fund would own any securities of an
open-end investment company or more than 3% of the total outstanding voting
stock of any closed-end investment company or more than 5% of the value of the
Fund's net assets would be invested in securities of any one or more closed-end
investment companies.
Growth and Income Fund may not (i) invest more than 5% of its net assets in the
security of any one issuer, except U.S. Government obligations or (ii) own more
than 10% of the outstanding voting securities of any issuer.
Real Estate Investment Fund may not: (i) with respect to 75% of its total
assets, have such assets represented by other than: (a) cash and cash items, (b)
U.S. Government securities, or (c) securities of any one issuer (other than the
U.S. Government and its agencies or instrumentalities) not greater in value than
5% of the Fund's total assets, and not more than 10% of the outstanding voting
securities of such issuer; (ii) purchase the securities of any one issuer, other
than the U.S. Government and its agencies or instrumentalities, if as a result
(a) the value of the holdings of the Fund in the securities of such issuer
exceeds 25% of its total assets, or (b) the Fund owns more than 25% of the
outstanding securities of any one class of securities of such issuer; (iii)
invest 25% or more of its total assets in the securities of issuers conducting
their principal business activities in any one industry, other than the real
estate industry in which the Fund will invest at least 25% or more of its total
assets, except that this restriction does not apply to U.S. Government
securities; (iv) purchase or sell real estate, except that it may purchase and
sell securities of companies which deal in real estate or interests therein,
including Real Estate Equity Securities; or (v) borrow money except for
temporary or emergency purposes or to meet redemption requests, in an amount not
exceeding 5% of the value of its total assets at the time the borrowing is made.
RISK CONSIDERATIONS
Investment in certain of the Funds involves the special risk considerations
described below. These risks may be heightened when investing in emerging
markets.
Investment in Privatized Enterprises by Worldwide Privatization Fund. In certain
jurisdictions, the ability of foreign entities, such as the Fund, to participate
in privatizations may be limited by local law, or the price or terms on which
the Fund
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may be able to participate may be less advantageous than for local investors.
Moreover, there can be no assurance that governments that have embarked on
privatization programs will continue to divest their ownership of state
enterprises, that proposed privatizations will be successful or that governments
will not re-nationalize enterprises that have been privatized. Furthermore, in
the case of certain of the enterprises in which the Fund may invest, large
blocks of the stock of those enterprises may be held by a small group of
stockholders, even after the initial equity offerings by those enterprises. The
sale of some portion or all of those blocks could have an adverse effect on the
price of the stock of any such enterprise.
Most state enterprises or former state enterprises go through an internal
reorganization of management prior to conducting an initial equity offering in
an attempt to better enable these enterprises to compete in the private sector.
However, certain reorganizations could result in a management team that does not
function as well as the enterprise's prior management and may have a negative
effect on such enterprise. After making an initial equity offering, enterprises
that may have enjoyed preferential treatment from the respective state or
government that owned or controlled them may no longer receive such preferential
treatment and may become subject to market competition from which they were
previously protected. Some of these enterprises may not be able to effectively
operate in a competitive market and may suffer losses or experience bankruptcy
due to such competition. In addition, the privatization of an enterprise by its
government may occur over a number of years, with the government continuing to
hold a controlling position in the enterprise even after the initial equity
offering for the enterprise.
Currency Considerations. Substantially all of the assets of International Fund,
International Premier Growth Fund, New Europe Fund, All-Asia Investment Fund,
Greater China '97 Fund and Worldwide Privatization Fund and a substantial
portion of the assets of Global Small Cap Fund and Global Environment Fund will
be invested in securities denominated in foreign currencies, and a corresponding
portion of these Funds' revenues will be received in such currencies. Therefore,
the dollar equivalent of their net assets, distributions and income will be
adversely affected by reductions in the value of certain foreign currencies
relative to the U.S. dollar. If the value of the foreign currencies in which a
Fund receives its income falls relative to the U.S. dollar between receipt of
the income and the making of Fund distributions, the Fund may be required to
liquidate securities in order to make distributions if it has insufficient cash
in U.S. dollars to meet distribution requirements that the Fund must satisfy to
qualify as a regulated investment company for federal income tax purposes.
Similarly, if an exchange rate declines between the time a Fund incurs expenses
in U.S. dollars and the time cash expenses are paid, the amount of the currency
required to be converted into U.S. dollars in order to pay expenses in U.S.
dollars could be greater than the equivalent amount of such expenses in the
currency at the time they were incurred. In light of these risks, a Fund may
engage in certain currency hedging transactions, which themselves involve
certain special risks. See "Additional Investment Practices" above.
Foreign Investment. The securities markets of many foreign countries are
relatively small, with the majority of market capitalization and trading volume
concentrated in a limited number of companies representing a small number of
industries. Consequently, a Fund whose investment portfolio includes such
securities may experience greater price volatility and significantly lower
liquidity than a portfolio invested solely in equity securities of U.S.
companies. These markets may be subject to greater influence by adverse events
generally affecting the market, and by large investors trading significant
blocks of securities, than is usual in the United States. Securities settlements
may in some instances be subject to delays and related administrative
uncertainties. These problems are particularly severe in India, where settlement
is through physical delivery, and, where, currently, a severe shortage of vault
capacity exists among custodial banks, although efforts are being undertaken to
alleviate the shortage. Certain foreign countries require governmental approval
prior to investments by foreign persons or limit investment by foreign persons
to only a specified percentage of an issuer's outstanding securities or a
specific class of securities which may have less advantageous terms (including
price) than securities of the company available for purchase by nationals. These
restrictions or controls may at times limit or preclude investment in certain
securities and may increase the costs and expenses of a Fund. In addition, the
repatriation of investment income, capital or the proceeds of sales of
securities from certain countries is controlled under regulations, including in
some cases the need for certain advance government notification or authority,
and if a deterioration occurs in a country's balance of payments, the country
could impose temporary restrictions on foreign capital remittances.
A Fund could also be adversely affected by delays in, or a refusal to grant, any
required governmental approval for repatriation, as well as by the application
to it of other restrictions on investment. Investing in local markets may
require a Fund to adopt special procedures, which may involve additional costs
to a Fund. The liquidity of a Fund's investments in any country in which any of
these factors exists could be affected and Alliance will monitor the effect of
any such factor or factors on a Fund's investments. Furthermore, transaction
costs including brokerage commissions for transactions both on and off the
securities exchanges in many foreign countries are generally higher than in the
United States.
Issuers of securities in foreign jurisdictions are generally not subject to the
same degree of regulation as are U.S. issuers with respect to such matters as
insider trading rules, restrictions on market manipulation, shareholder proxy
requirements and timely disclosure of information. The reporting, accounting and
auditing standards of foreign countries may differ, in some cases significantly,
from U.S. standards in important respects and less information may be available
to investors in foreign securities than to investors in U.S. securities.
Substantially less information is publicly
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available about certain non-U.S. issuers than is available about U.S. issuers.
The economies of individual foreign countries may differ favorably or
unfavorably from the U.S. economy in such respects as growth of gross domestic
product or gross national product, rate of inflation, capital reinvestment,
resource self-sufficiency and balance of payments position. Nationalization,
expropriation or confiscatory taxation, currency blockage, political changes,
government regulation, political or social instability or diplomatic
developments could affect adversely the economy of a foreign country or the
Fund's investments in such country. In the event of expropriation,
nationalization or other confiscation, a Fund could lose its entire investment
in the country involved. In addition, laws in foreign countries governing
business organizations, bankruptcy and insolvency may provide less protection to
security holders such as the Fund than that provided by U.S. laws.
Investment in United Kingdom Issuers. Investment in securities of United Kingdom
issuers involves certain considerations not present with investment in
securities of U.S. issuers. As with any investment not denominated in the U.S.
dollar, the U.S. dollar value of the Fund's investment denominated in the
British pound sterling will fluctuate with pound sterling--dollar exchange rate
movements. Between 1972, when the pound sterling was allowed to float against
other currencies, and the end of 1992, the pound sterling generally depreciated
against most major currencies, including the U.S. dollar. Between September and
December 1992, after the United Kingdom's exit from the Exchange Rate Mechanism
of the European Monetary System, the value of the pound sterling fell by almost
20% against the U.S. dollar. The pound sterling has since recovered due to
interest rate cuts throughout Europe and an upturn in the economy of the United
Kingdom. The average exchange rate of the U.S. dollar to the pound sterling was
1.50 in 1993 and 1.64 in 1997. On October 13, 1998 the U.S. dollar-pound
sterling exchange rate was 1.71.
The United Kingdom's largest stock exchange is the London Stock Exchange, which
is the third largest exchange in the world. As measured by the FT-SE 100 index,
the performance of the 100 largest companies in the United Kingdom reached
5,135.5 at the end of 1997, up approximately 25% from the end of 1996. On
October 5, 1998 the FT-SE 100 index closed at 4648.7, the lowest close in the
12-month period prior to that date, after reaching a high of 6179.0 on July 20,
1998. The FT-SE 100 index closed at 4990.1 on October 14, 1998.
In January 1999, the Economic and Monetary Union ("EMU") is scheduled to take
effect. The EMU will establish a common currency for European countries that
meet the eligibility criteria and choose to participate. Although the United
Kingdom meets the eligibility criteria, the government has not taken any action
to join the EMU.
From 1979 until 1997 the Conservative Party controlled Parliament. In the May 1,
1997 general elections, however, the Labour Party, led by Tony Blair, won a
majority in Parliament, holding 418 of 658 seats in the House of Commons. Mr.
Blair, who was appointed Prime Minister, has launched a number of reform
initiatives, including an overhaul of the monetary policy framework intended to
protect monetary policy from political forces by vesting responsibility for
setting interest rates in a new Monetary Policy Committee headed by the Governor
of the Bank of England, as opposed to the Treasury. Prime Minister Blair has
also undertaken a comprehensive restructuring of the regulation of the financial
services industry. For further information regarding the United Kingdom, see the
Statement of Additional Information of New Europe Fund.
Investment in Japanese Issuers. Investment in securities of Japanese issuers
involves certain considerations not present with investment in securities of
U.S. issuers. As with any investment not denominated in the U.S. dollar, the
U.S. dollar value of each Fund's investments denominated in the Japanese yen
will fluctuate with yen-dollar exchange rate movements. Between 1985 and 1995,
the Japanese yen generally appreciated against the U.S. dollar, but has since
fallen from its post-World War II high (in 1995) against the U.S. dollar.
Japan's largest stock exchange is the Tokyo Stock Exchange, the First Section of
which is reserved for larger, established companies. As measured by the TOPIX, a
capitalization-weighted composite index of all common stocks listed in the First
Section, the performance of the First Section reached a peak in 1989.
Thereafter, the TOPIX declined approximately 50% through the end of 1997. On
October 13, 1998 the TOPIX closed at 998.98, down approximately 15% from the end
of 1997. Certain valuation measures, such as price-to-book value and price-to-
cash flow ratios, indicate that the Japanese stock market is near its lowest
level in the last twenty years relative to other world markets.
In recent years, Japan has consistently recorded large current account trade
surpluses with the U.S. that have caused difficulties in the relations between
the two countries. On October 1, 1994, the U.S. and Japan reached an agreement
that may lead to more open Japanese markets with respect to trade in certain
goods and services. In June 1995, the two countries agreed in principle to
increase Japanese imports of American automobiles and automotive parts.
Nevertheless it is expected that the continuing friction between the U.S. and
Japan with respect to trade issues will continue for the foreseeable future.
Each Fund's investments in Japanese issuers will be subject to uncertainty
resulting from the instability of recent Japanese ruling coalitions. From 1955
to 1993, Japan's government was controlled by a single political party. Between
August 1993 and October 1996 Japan was ruled by a series of four coalition
governments. As the result of a general election on October 20, 1996, however,
Japan returned to a single-party government led by Ryutaro Hashimoto, a member
of the Liberal Democratic Party ("LDP"). While the LDP does not control a
majority of the seats in the parliament, it is only three seats short of the 251
seats required to attain a majority in the House of Representatives (down from a
12-seat shortfall just after the
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October 1996 election). The popularity of the LDP declined, however, due to the
dissatisfaction with Mr. Hashimoto's leadership. In the July 1998 House of
Councillors election, the LDP's representation fell to 103 seats from 120 seats.
As a result of the LDP's defeat, Mr. Hashimoto resigned as prime minister and
leader of the LDP. Mr. Hashimoto was replaced by Keizo Obuchi. For the past
several years, Japan's banking industry has been weakened by a significant
amount of problem loans. Japan's banks also have significant exposure to the
current financial turmoil in other Asian markets. Following the insolvency of
one of Japan's largest banks in November 1997, the government proposed several
plans designed to strengthen the weakened banking sector. In October 1998, the
Japanese parliament approved several new laws that will make $508 billion in
public funds available to increase the capital of Japanese banks, to guarantee
depositors' accounts and to nationalize the weakest banks. It is unclear whether
these new laws will achieve their intended effect. For further information
regarding Japan, see the Statements of Additional Information of All-Asia
Investment Fund and International Fund.
Investment in Greater China Issuers. China, in particular, but Hong Kong and
Taiwan, as well, in significant measure because of their existing and increasing
economic, and now in the case of Hong Kong, direct political ties with China,
may be subject to a greater degree of economic, political and social instability
than is the case in the United States.
China's economy is very much in transition. While the government still controls
production and pricing in major economic sectors, significant steps have been
taken toward capitalism and China's economy has become increasingly market
oriented. China's strong economic growth and ability to attract significant
foreign investment in recent years stem from the economic liberalization
initiated by Deng Xiaoping who assumed power in the late 1970s. The economic
growth, however, has not been smooth and has been marked by extremes in many
respects of inordinate growth, which has not been tightly controlled, followed
by rigid measures of austerity.
The rapidity and erratic nature of the growth have resulted in inefficiencies
and dislocations, including at times high rates of inflation.
China's economic development has occurred notwithstanding the continuation of
the power of China's Communist Party and China's authoritarian government
control, not only of centrally planned economic decisions, but of many aspects
of the social structure. While a significant portion of China's population has
benefited from China's economic growth, the conditions of many leave much room
for improvement. Notwithstanding restrictions on freedom of expression and the
absence of a free press, and notwithstanding the extreme manner in which past
unrest has been dealt with, the 1989 Tianamen Square uprising being a recent
reminder, the potential for renewed popular unrest associated with demands for
improved social, political and economic conditions cannot be dismissed.
Following the death of Deng Xiaoping in February 1997, Jiang Zemin became the
leader of China's Communist Party. The transfer of political power has
progressed smoothly and Jiang's popularity and credibility have gradually
increased. Jiang continues to consolidate his power, but as of yet does not
appear to have the same degree of control as did Deng Xiaoping. Jiang has
continued the market-oriented policies of Deng. Currently, China's major
economic challenge centers on reforming or eliminating inefficient state-owned
enterprises without creating an unacceptable level of unemployment. Recent
capitalistic policies have in many respects effectively outdated the Communist
Party and the governmental structure, but both remain entrenched. The Communist
Party still controls access to governmental positions and closely monitors
governmental action. Essentially there exists an inefficient set of parallel
bureaucracies and attendant opportunities for corruption.
In addition to the economic impact of China's internal political uncertainties,
the potential effect of China's actions, not only on China itself, but on Hong
Kong and Taiwan as well, could also be significant.
China is heavily dependent on foreign trade, particularly with Japan, the United
States, South Korea and Germany. Political developments adverse to its trading
partners, as well as political and social repression, could cause the United
States and others to alter their trading policy towards China. For example, in
the United States, the continued extension of most favored nation trading status
to China which is reviewed regularly and was reviewed in 1998 is an issue of
significant controversy. Loss of that status would clearly hurt China's economy
by reducing its exports. With much of China's trading activity being funneled
through Hong Kong and with trade through Taiwan becoming increasingly
significant, any sizable reduction in demand for goods from China would have
negative implications for both countries. China is believed to be the largest
investor in Hong Kong and its markets and an economic downturn in China would be
expected to reverberate through Hong Kong's markets as well.
Although China has committed by treaty to preserve Hong Kong's autonomy and its
economic, political and social freedoms for fifty years from the July 1, 1997
transfer of sovereignty from Great Britain to China. Hong Kong is headed by a
chief executive, appointed by the central government of China, whose power is
checked by both the government of China and a Legislative Council. Although
Hong Kong voters voted overwhelmingly for pro-democracy candidates in the recent
election, it remains possible that China could exert its authority so as to
alter the economic structure, political structure or existing social policy of
Hong Kong. Investor and business confidence in Hong Kong can be significantly
affected by such developments, which in turn can affect markets and business
performance. In this connection, it is noted that a substantial portion of the
companies listed on the Hong Kong Stock Exchange are involved in real estate-
related activities.
The securities markets of China and to a lesser extent Taiwan, are relatively
small, with the majority of market capitalization and
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trading volume concentrated in a limited number of companies representing a
small number of industries. Consequently, Greater China '97 Fund may experience
greater price volatility and significantly lower liquidity than a portfolio
invested solely in equity securities of U.S. companies. These markets may be
subject to greater influence by adverse events generally affecting the market,
and by large investors trading significant blocks of securities, than is usual
in the U.S. Securities settlements may in some instances be subject to delays
and related administrative uncertainties.
Foreign investment in the securities markets of China and Taiwan is restricted
or controlled to varying degrees. These restrictions or controls, which apply to
the Greater China '97 Fund may at times limit or preclude investment in certain
securities and may increase the cost and expenses of the Fund. China and Taiwan
require governmental approval prior to investments by foreign persons or limit
investment by foreign persons to only a specified percentage of an issuer's
outstanding securities or a specific class of securities which may have less
advantageous terms (including price) than securities of the company available
for purchase by nationals. In addition, the repatriation of investment income,
capital or the proceeds of sales of securities from China and Taiwan is
controlled under regulations, including in some cases the need for certain
advance government notification or authority, and if a deterioration occurs in a
country's balance of payments, the country could impose restrictions on foreign
capital remittances.
Greater China '97 Fund could be adversely affected by delays in, or a refusal to
grant, any required governmental approval for repatriation, as well as by the
application to it of other restrictions on investment. The liquidity of the
Fund's investments in any country in which any of these factors exists could be
affected by any such factor or factors on the Fund's investments. The limited
liquidity in certain Greater China markets is a factor to be taken into account
in the Fund's valuation of portfolio securities in this category and may affect
the Fund's ability to dispose of securities in order to meet redemption requests
at the price and time it wishes to do so. It is also anticipated that
transaction costs, including brokerage commissions for transactions both on and
off the securities exchanges in Greater China countries, will be higher than in
the U.S.
Issuers of securities in Greater China countries are generally not subject to
the same degree of regulation as are U.S. issuers with respect to such matters
as timely disclosure of information, insider trading rules, restrictions on
market manipulation and shareholder proxy requirements. Reporting, accounting
and auditing standards of Greater China countries may differ, in some cases
significantly, from U.S. standards in important respects, and less information
may be available to investors in securities of Greater China country issuers
than to investors in securities of U.S. issuers.
Investment in Greater China companies which are in the initial stages of their
development involves greater risk than is customarily associated with securities
of more established companies. The securities of such companies may have
relatively limited marketability and may be subject to more abrupt or erratic
market movements than securities of established companies or broad market
indices.
Investment in Smaller, Emerging Companies. The Funds may invest in smaller,
emerging companies. Global Small Cap Fund and New Europe Fund will emphasize
investment in, and All-Asia Investment Fund, Greater China '97 Fund and Global
Environment Fund may emphasize investment in, smaller, emerging companies.
Investment in such companies involves greater risks than is customarily
associated with securities of more established companies. Companies in the
earlier stages of their development often have products and management personnel
which have not been thoroughly tested by time or the marketplace; their
financial resources may not be as substantial as those of more established
companies. The securities of smaller companies may have relatively limited
marketability and may be subject to more abrupt or erratic market movements than
securities of larger companies or broad market indices. The revenue flow of such
companies may be erratic and their results of operations may fluctuate widely
and may also contribute to stock price volatility.
Extreme Governmental Action; Less Protective Laws. In contrast with investing in
the United States, foreign investment may involve in certain situations greater
risk of nationalization, expropriation, confiscatory taxation, currency blockage
or other extreme governmental action which could adversely impact a Fund's
investments. In the event of certain such actions, a Fund could lose its entire
investment in the country involved. In addition, laws in various foreign
countries, including in certain respects each of the Greater China countries,
governing, among other subjects, business organization and practices, securities
and securities trading, bankruptcy and insolvency may provide less protection to
investors such as the Fund than provided under United States laws.
Investing in Environmental Companies by Global Environment Fund. Governmental
regulations or other action can inhibit an Environmental Company's performance,
and it may take years to translate environmental legislation into sales and
profits. Environmental Companies generally face competition in fields often
characterized by relatively short product cycles and competitive pricing
policies. Losses may result from large product development or expansion costs,
unprotected marketing or distribution systems, erratic revenue flows and low
profit margins. Additional risks that Environmental Companies may face include
difficulty in financing the high cost of technological development,
uncertainties due to changing governmental regulation or rapid technological
advances, potential liabilities associated with hazardous components and
operations, and difficulty in finding experienced employees.
The Real Estate Industry. Although Real Estate Investment Fund does not invest
directly in real estate, it invests primarily in Real Estate Equity Securities
and has a policy of concentration of its investments in the real estate
industry. Therefore, an investment in the Fund is subject to certain risks
associated with the direct ownership of real estate and with the real estate
industry in
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general. These risks include, among others: possible declines in the value of
real estate; risks related to general and local economic conditions; possible
lack of availability of mortgage funds; overbuilding; extended vacancies of
properties; increases in competition, property taxes and operating expenses;
changes in zoning laws; costs resulting from the clean-up of, and liability to
third parties for damages resulting from, environmental problems; casualty or
condemnation losses; uninsured damages from floods, earthquakes or other natural
disasters; limitations on and variations in rents; and changes in interest
rates. To the extent that assets underlying the Fund's investments are
concentrated geographically, by property type or in certain other respects, the
Fund may be subject to certain of the foregoing risks to a greater extent.
In addition, if Real Estate Investment Fund receives rental income or income
from the disposition of real property acquired as a result of a default on
securities the Fund owns, the receipt of such income may adversely affect the
Fund's ability to retain its tax status as a regulated investment company. See
"Dividends, Distributions and Taxes" in the Fund's Statement of Additional
Information. Investments by the Fund in securities of companies providing
mortgage servicing will be subject to the risks associated with refinancings and
their impact on servicing rights.
REITs. Investing in REITs involves certain unique risks in addition to those
risks associated with investing in the real estate industry in general. Equity
REITs may be affected by changes in the value of the underlying property owned
by the REITs, while mortgage REITs may be affected by the quality of any credit
extended. REITs are dependent upon management skills, are not diversified, are
subject to heavy cash flow dependency, default by borrowers and
self-liquidation. REITs are also subject to the possibilities of failing to
qualify for tax free pass-through of income under the Code and failing to
maintain their exemptions from registration under the 1940 Act.
REITs (especially mortgage REITs) are also subject to interest rate risks. When
interest rates decline, the value of a REIT's investment in fixed rate
obligations can be expected to rise. Conversely, when interest rates rise, the
value of a REIT's investment in fixed rate obligations can be expected to
decline. In contrast, as interest rates on adjustable rate mortgage loans are
reset periodically, yields on a REIT's investments in such loans will gradually
align themselves to reflect changes in market interest rates, causing the value
of such investments to fluctuate less dramatically in response to interest rate
fluctuations than would investments in fixed rate obligations.
Investing in REITs involves risks similar to those associated with investing in
small capitalization companies. REITs may have limited financial resources, may
trade less frequently and in a limited volume and may be subject to more abrupt
or erratic price movements than larger company securities. Historically, small
capitalization stocks, such as REITs, have been more volatile in price than the
larger capitalization stocks included in the S&P Index of 500 Common Stocks.
Mortgage-Backed Securities. As discussed above, investing in Mortgage-Backed
Securities involves certain unique risks in addition to those risks associated
with investment in the real estate industry in general. These risks include the
failure of a counterparty to meet its commitments, adverse interest rate changes
and the effects of prepayments on mortgage cash flows. When interest rates
decline, the value of an investment in fixed rate obligations can be expected to
rise. Conversely, when interest rates rise, the value of an investment in fixed
rate obligations can be expected to decline. In contrast, as interest rates on
adjustable rate mortgage loans are reset periodically, yields on investments in
such loans will gradually align themselves to reflect changes in market interest
rates, causing the value of such investments to fluctuate less dramatically in
response to interest rate fluctuations than would investments in fixed rate
obligations.
Further, the yield characteristics of Mortgage-Backed Securities, such as those
in which Real Estate Investment Fund may invest, differ from those of
traditional fixed-income securities. The major differences typically include
more frequent interest and principal payments (usually monthly), the
adjustability of interest rates, and the possibility that prepayments of
principal may be made substantially earlier than their final distribution dates.
Prepayment rates are influenced by changes in current interest rates and a
variety of economic, geographic, social and other factors, and cannot be
predicted with certainty. Both adjustable rate mortgage loans and fixed rate
mortgage loans may be subject to a greater rate of principal prepayments in a
declining interest rate environment and to a lesser rate of principal
prepayments in an increasing interest rate environment. Early payment associated
with Mortgage-Backed Securities causes these securities to experience
significantly greater price and yield volatility than that experienced by
traditional fixed-income securities. Under certain interest rate and prepayment
rate scenarios, the Fund may fail to recoup fully its investment in
Mortgage-Backed Securities notwithstanding any direct or indirect governmental
or agency guarantee. When the Fund reinvests amounts representing payments and
unscheduled prepayments of principal, it may receive a rate of interest that is
lower than the rate on existing adjustable rate mortgage pass-through
securities. Thus, Mortgage-Backed Securities, and adjustable rate mortgage pass-
through securities in particular, may be less effective than other types of U.S.
Government securities as a means of "locking in" interest rates.
U.S. and Foreign Taxes. A Fund's investment in foreign securities may be subject
to taxes withheld at the source on dividend or interest payments. Foreign taxes
paid by a Fund may be creditable or deductible by U.S. shareholders for U.S.
income tax purposes. No assurance can be given that applicable tax laws and
interpretations will not change in the future. Moreover, non-U.S. investors may
not be able to credit or deduct such foreign taxes. Investors should review
carefully the information discussed under the heading "Dividends, Distributions
and Taxes" and should discuss with their tax advisers the specific tax
consequences of investing in a Fund.
Fixed-Income Securities. The value of each Fund's shares will fluctuate with the
value of its investments. The value of each
47
<PAGE>
Fund's investments in fixed-income securities will change as the general level
of interest rates fluctuates. During periods of falling interest rates, the
values of fixed-income securities generally rise. Conversely, during periods of
rising interest rates, the values of fixed-income securities generally decline.
Under normal market conditions, the average dollar-weighted maturity of a Fund's
portfolio of debt or other fixed-income securities is expected to vary between
five and 30 years in the case of All-Asia Investment Fund, between five and 25
years in the case of Utility Income Fund and between one year or less and 30
years in the case of all other Funds that invest in such securities. In periods
of increasing interest rates, each of the Funds may, to the extent it holds
mortgage-backed securities, be subject to the risk that the average dollar-
weighted maturity of the Fund's portfolio of debt or other fixed-income
securities may be extended as a result of lower than anticipated prepayment
rates. See "Additional Investment Practices--Mortgage-Backed Securities."
Securities Ratings. The ratings of securities by S&P, Moody's, Duff & Phelps and
Fitch are a generally accepted barometer of credit risk. They are, however,
subject to certain limitations from an investor's standpoint. The rating of an
issuer is heavily weighted by past developments and does not necessarily reflect
probable future conditions. There is frequently a lag between the time a rating
is assigned and the time it is updated. In addition, there may be varying
degrees of difference in credit risk of securities within each rating category.
Securities rated Aaa by Moody's and AAA by S&P, Duff & Phelps and Fitch are
considered to be of the highest quality; capacity to pay interest and repay
principal is extremely strong. Securities rated Aa by Moody's and AA by S&P,
Duff & Phelps and Fitch are considered to be high quality; capacity to repay
principal is considered very strong, although elements may exist that make risks
appear somewhat larger than exist with securities rated Aaa or AAA. Securities
rated A are considered by Moody's to possess adequate factors giving security to
principal and interest. S&P, Duff & Phelps and Fitch consider such securities to
have a strong capacity to pay interest and repay principal. Such securities are
more susceptible to adverse changes in economic conditions and circumstances
than higher-rated securities.
Securities rated Baa by Moody's and BBB by S&P, Duff & Phelps and Fitch are
considered to have an adequate capacity to pay interest and repay principal.
Such securities are considered to have speculative characteristics and share
some of the same characteristics as lower-rated securities. Sustained periods of
deteriorating economic conditions or of rising interest rates are more likely to
lead to a weakening in the issuer's capacity to pay interest and repay principal
than in the case of higher-rated securities. Securities rated Ba by Moody's and
BB by S&P, Duff & Phelps and Fitch are considered to have speculative
characteristics with respect to capacity to pay interest and repay principal
over time; their future cannot be considered as well-assured. Securities rated B
by Moody's, S&P, Duff & Phelps and Fitch are considered to have highly
speculative characteristics with respect to capacity to pay interest and repay
principal. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Securities rated Caa by Moody's and CCC by S&P, Duff & Phelps and Fitch are of
poor standing and there is a present danger with respect to payment of principal
or interest. Securities rated Ca by Moody's and CC by S&P and Fitch are
minimally protected, and default in payment of principal or interest is
probable. Securities rated C by Moody's, S&P and Fitch are in imminent default
in payment of principal or interest and have extremely poor prospects of ever
attaining any real investment standing. Securities rated D by S&P and Fitch are
in default. The issuer of securities rated DD by Duff & Phelps is under an order
of liquidation.
Investment in Lower-Rated Fixed-Income Securities. Lower-rated securities, i.e.,
those rated Ba and lower by Moody's or BB and lower by S&P, Duff & Phelps or
Fitch, are subject to greater risk of loss of principal and interest than
higher-rated securities. They are also generally considered to be subject to
greater market risk than higher-rated securities, and the capacity of issuers of
lower-rated securities to pay interest and repay principal is more likely to
weaken than is that of issuers of higher-rated securities in times of
deteriorating economic conditions or rising interest rates. In addition,
lower-rated securities may be more susceptible to real or perceived adverse
economic conditions than investment grade securities.
The market for lower-rated securities may be thinner and less active than that
for higher-rated securities, which can adversely affect the prices at which
these securities can be sold. To the extent that there is no established
secondary market for lower-rated securities, a Fund may experience difficulty in
valuing such securities and, in turn, the Fund's assets. In addition, adverse
publicity and investor perceptions about lower-rated securities, whether or not
factual, may tend to impair their market value and liquidity.
Alliance will try to reduce the risk inherent in investment in lower-rated
securities through credit analysis, diversification and attention to current
developments and trends in interest rates and economic and political conditions.
However, there can be no assurance that losses will not occur. Since the risk of
default is higher for lower-rated securities, Alliance's research and credit
analysis are a correspondingly more important aspect of its program for managing
a Fund's securities than would be the case if a Fund did not invest in lower-
rated securities.
In seeking to achieve a Fund's investment objective, there will be times, such
as during periods of rising interest rates, when depreciation and realization of
capital losses on securities in a Fund's portfolio will be unavoidable.
Moreover, medium- and lower-rated securities and non-rated securities of
comparable quality may be subject to wider fluctuations in yield and market
values than higher-rated securities under certain market conditions. Such
fluctuations after a security is acquired do not affect the cash income received
from that security but are reflected in the net asset value of a Fund. See the
Statement of
48
<PAGE>
Additional Information for each Fund that invests in lower-rated securities for
a description of the bond ratings of Moody's, S&P, Duff & Phelps and Fitch.
Certain lower-rated securities in which Growth Fund, and Utility Income Fund may
invest may contain call or buy-back features that permit the issuers thereof to
call or repurchase such securities. Such securities may present risks based on
prepayment expectations. If an issuer exercises such a provision, a Fund may
have to replace the called security with a lower yielding security, resulting in
a decreased rate of return to the Fund.
Non-Diversified Status. Each of Worldwide Privatization Fund, New Europe Fund,
All-Asia Investment Fund, Greater China '97 Fund and Global Environment Fund is
a "non-diversified" investment company, which means the Fund is not limited in
the proportion of its assets that may be invested in the securities of a single
issuer. However, each Fund intends to conduct its operations so as to qualify to
be taxed as a "regulated investment company" for purposes of the Code, which
will relieve the Fund of any liability for federal income tax to the extent its
earnings are distributed to shareholders. See "Dividends, Distributions and
Taxes" in each Fund's Statement of Additional Information. To so qualify, among
other requirements, the Fund will limit its investments so that, at the close of
each quarter of the taxable year, (i) not more than 25% of the Fund's total
assets will be invested in the securities of a single issuer, and (ii) with
respect to 50% of its total assets, not more than 5% of its total assets will be
invested in the securities of a single issuer and the Fund will not own more
than 10% of the outstanding voting securities of a single issuer. A Fund's
investments in U.S. Government securities and other regulated investment
companies are not subject to these limitations. Because each of Worldwide
Privatization Fund, New Europe Fund, Greater China '97 Fund and Global
Environment Fund and All-Asia Investment Fund is a non-diversified investment
company, it may invest in a smaller number of individual issuers than a
diversified investment company, and an investment in such Fund may, under
certain circumstances, present greater risk to an investor than an investment in
a diversified investment company.
Foreign government securities are not treated like U.S. Government securities
for purposes of the diversification tests described in the preceding paragraph,
but instead are subject to these tests in the same manner as the securities of
non-governmental issuers.
Year 2000 and Euro. Many computer systems and applications in use today process
transactions using two-digit date fields for the year of the transaction, rather
than the full four digits. If these systems are not modified or replaced,
transactions occurring after 1999 could be processed as year "1900", which could
result in processing inaccuracies and computer system failures. This is commonly
known as the Year 2000 problem. In addition to the Year 2000 problem, the
European Economic and Monetary Union has established a single currency, the Euro
Currency ("Euro") that will replace the national currency of certain European
countries effective January 1, 1999. Computer systems and applications must be
adapted in order to be able to process Euro sensitive information accurately
beginning in 1999. Should any of the computer systems employed by the Funds'
major service providers fail to process Year 2000 or Euro related information
properly, that could have a significant negative impact on the Funds' operations
and the services that are provided to the Funds' shareholders. In addition, to
the extent that the operations of issuers of securities held by the Funds are
impaired by the Year 2000 problem or the Euro, or prices of securities held by
the Funds decline as a result of real or perceived problems relating to the Year
2000 or the Euro, the value of the Funds' shares may be materially
affected.
With respect to the Year 2000, the Funds have been advised that Alliance, each
Fund's investment adviser, Alliance Fund Distributors, Inc. ("AFD"), each Fund's
principal underwriter, and Alliance Fund Services, Inc. ("AFS"), each Fund's
registrar, transfer agent and dividend disbursing agent (collectively,
"Alliance") began to address the Year 2000 issue several years ago in connection
with the replacement or upgrading of certain computer systems and applications.
During 1997, Alliance began a formal Year 2000 initiative, which established a
structured and coordinated process to deal with the Year 2000 issue. Alliance
reports that it has completed its assessment of the Year 2000 issues on its
domestic and international computer systems and applications. Currently,
management of Alliance expects that the required modifications for the majority
of its significant systems and applications that will be in use on January 1,
2000, will be completed and tested by the end of 1998. Full integration testing
of these systems and testing of interfaces with third-party suppliers will
continue through 1999. At this time, management of Alliance believes that the
costs associated with resolving this issue will not have a material adverse
effect on its operations or on its ability to provide the level of services it
currently provides to the Funds.
With respect to the Euro, the Funds have been advised that Alliance has
established a project team to assess changes that will be required in connection
with the introduction of the Euro. Alliance reports that its project team has
assessed all systems, including those developed or managed internally, as well
as those provided by vendors, in order to determine the modifications that will
be required to process accurately transactions denominated in Euro after 1998.
At this time, management of Alliance expects that the required modifications for
the introduction of the Euro will be completed and tested before the end of
1998. Management of Alliance believes that the costs associated with resolving
this issue will not have a material adverse effect on its operations or on its
ability to provide the level of services it currently provides to the
Funds.
The Funds and Alliance have been advised by the Funds' Custodians that they are
also in the process of reviewing their systems with the same goals. As of the
date of this prospectus, the Funds and Alliance have no reason to believe that
the Custodians will be unable to achieve these goals.
49
<PAGE>
- --------------------------------------------------------------------------------
PURCHASE AND SALE
- --------------------------------------------------------------------------------
OF SHARES
- --------------------------------------------------------------------------------
HOW TO BUY SHARES
You can purchase shares of any of the Funds at a price based on the next
calculation of their net asset value after receipt of a proper purchase order
either through broker-dealers, banks or other financial intermediaries, or
directly through AFD. The minimum initial investment in each Fund is $250. The
minimum for subsequent investments in each Fund is $50. Investments of $25 or
more are allowed under the automatic investment program of each Fund. Share
certificates are issued only upon request. See the Subscription Application and
Statements of Additional Information for more information.
Existing shareholders may make subsequent purchases by electronic funds transfer
if they have completed the appropriate section of the Subscription Application
or the Shareholder Options form obtained from AFS. Telephone purchase orders can
be made by calling 800-221-5672 and may not exceed $500,000.
Each Fund offers three classes of shares through this prospectus, Class A, Class
B and Class C. The Funds may refuse any order to purchase shares. In this
regard, the Funds reserve the right to restrict purchases of shares (including
through exchanges) when they appear to evidence a pattern of frequent purchases
and sales made in response to short-term considerations.
Class A Shares--Initial Sales Charge Alternative
You can purchase Class A shares at net asset value plus an initial sales charge,
as follows:
<TABLE>
<CAPTION>
Initial Sales Charge
as % of Commission to
Net Amount as % of Dealer/Agent as %
Amount Purchased Invested Offering Price of Offering Price
- --------------------------------------------------------------------------------------
<S> <C> <C> <C>
Less than $100,000 4.44% 4.25% 4.00%
- --------------------------------------------------------------------------------------
$100,000 to
less than $250,000 3.36 3.25 3.00
- --------------------------------------------------------------------------------------
$250,000 to
less than $500,000 2.30 2.25 2.00
- --------------------------------------------------------------------------------------
$500,000 to
less than $1,000,000 1.78 1.75 1.50
- --------------------------------------------------------------------------------------
</TABLE>
On purchases of $1,000,000 or more, you pay no initial sales charge but may pay
a contingent deferred sales charge ("CDSC") equal to 1% of the lesser of net
asset value at the time of redemption or original cost if you redeem within one
year; Alliance may pay the dealer or agent a fee of up to 1% of the dollar
amount purchased. Certain purchases of Class A shares may qualify for reduced or
eliminated sales charges in accordance with a Fund's Combined Purchase
Privilege, Cumulative Quantity Discount, Statement of Intention, Privilege for
Certain Retirement Plans, Reinstatement Privilege and Sales at Net Asset Value
programs. Consult the Subscription Application and Statements of Additional
Information.
Class B Shares--Deferred Sales Charge Alternative
You can purchase Class B shares at net asset value without an initial sales
charge. A Fund will thus receive the full amount of your purchase. However, you
may pay a CDSC if you redeem shares within four years after purchase. The amount
of the CDSC (expressed as a percentage of the lesser of the current net asset
value or original cost) will vary according to the number of years from the
purchase of Class B shares until the redemption of those shares.
The amount of the CDSC for Class B shares for each Fund is as set forth below.
Class B shares of a Fund purchased prior to the date of this Prospectus may be
subject to a different CDSC schedule, which was disclosed in the Fund's
prospectus in use at the time of purchase and is set forth in the Fund's current
Statement of Additional Information.
<TABLE>
<CAPTION>
Year Since Purchase CDSC
--------------------------------------------
<S> <C>
First ................................ 4.0%
Second ............................... 3.0%
Third ................................ 2.0%
Fourth ............................... 1.0%
Fifth ................................ None
</TABLE>
Class B shares are subject to higher distribution fees than Class A shares for a
period (after which they convert to Class A shares) of eight years. The higher
fees mean a higher expense ratio, so Class B shares pay correspondingly lower
dividends and may have a lower net asset value than Class A shares.
Class C Shares--Asset-Based Sales Charge Alternative
You can purchase Class C shares at net asset value without any initial sales
charge. A Fund will thus receive the full amount of your purchase, and, if you
hold your shares for one year or more, you will receive the entire net asset
value of your shares upon redemption. Class C shares incur higher distribution
fees than Class A shares and do not convert to any other class of shares of the
Fund. The higher fees mean a higher expense ratio, so Class C shares pay
correspondingly lower dividends and may have a lower net asset value than Class
A shares.
Class C shares redeemed within one year of purchase will be subject to a CDSC
equal to 1% of the lesser of their original cost or net asset value at the time
of redemption.
Application of the CDSC
Shares obtained from dividend or distribution reinvestment are not subject to
the CDSC. The CDSC is deducted from the amount of the redemption and is paid to
AFD. The CDSC will be waived on redemptions of shares following the death or
disability of a shareholder, to meet the requirements of certain qualified
retirement plans or pursuant to a monthly, bimonthly or quarterly systematic
withdrawal plan. See the Statements of Additional Information.
How the Funds Value Their Shares
The net asset value of each Class of shares of a Fund is calculated by dividing
the value of the Fund's net assets allocable to that Class by the outstanding
shares of that Class. Shares are valued each day the Exchange is open as of the
close of regular trading (currently 4:00 p.m. Eastern time). The securities in a
Fund are valued at their current market value determined on the basis of market
quotations or, if such quotations are not readily
50
<PAGE>
available, such other methods as the Fund's Directors believe accurately
reflects fair market value.
Employee Benefit Plans
Certain employee benefit plans, including employer-sponsored tax-qualified
401(k) plans and other defined contribution retirement plans ("Employee Benefit
Plans"), may establish requirements as to the purchase, sale or exchange of
shares, including maximum and minimum initial investment requirements, that are
different from those described in this Prospectus. Employee Benefit Plans may
also not offer all classes of shares of the Funds. In order to enable
participants investing through Employee Benefit Plans to purchase shares of the
Funds, the maximum and minimum investment amounts may be different for shares
purchased through Employee Benefit Plans from those described in this
Prospectus. In addition, the Class A, Class B and Class C CDSC may be waived for
investments made through Employee Benefit Plans.
General
The decision as to which class of shares is more beneficial to you depends on
the amount and intended length of your investment. If you are making a large
investment, thus qualifying for a reduced sales charge, you might consider Class
A shares. If you are making a smaller investment, you might consider Class B
shares because 100% of your purchase is invested immediately. If you are unsure
of the length of your investment, you might consider Class C shares because
there is no initial sales charge and no CDSC as long as the shares are held for
one year or more. Consult your financial agent. Dealers and agents may receive
differing compensation for selling Class A, Class B or Class C shares. There is
no size limit on purchases of Class A shares. The maximum purchase of Class B
shares is $250,000. The maximum purchase of Class C shares is $1,000,000.
Each Fund offers a fourth class of shares, Advisor Class shares, by means of
separate prospectus. Advisor Class shares may be purchased and held solely by
(i) accounts established under a fee-based program sponsored and maintained by a
registered broker-dealer or other financial intermediary and approved by AFD,
(ii) a self-directed defined contribution employee benefit plan (e.g., a 401(k)
plan) that has at least 1,000 participants or $25 million in assets and (iii)
certain other categories of investors described in the prospectus for the
Advisor Class, including investment advisory clients of, and certain other
persons associated with, Alliance and its affiliates or the Funds. Advisor Class
shares are offered without any initial sales charge or CDSC and without an
ongoing distribution fee and are expected, therefore, to have different
performance than Class A, Class B or Class C shares. You can obtain more
information about Advisor Class shares by contacting AFS at 800-221-5672 or by
contacting your financial representative.
A transaction, service, administrative or other similar fee may be charged by
your broker-dealer, agent, financial intermediary or other financial
representative with respect to the purchase, sale or exchange of Class A, Class
B or Class C shares made through such financial representative. Such financial
intermediaries may also impose requirements with respect to the purchase, sale
or exchange of shares that are different from, or in addition to, those imposed
by a Fund, including requirements as to the minimum initial and subsequent
investment amounts.
In addition to the discount or commission paid to dealers or agents, AFD from
time to time pays additional cash or other incentives to dealers or agents in
connection with the sale of shares of the Funds. Such additional amounts may be
utilized, in whole or in part, in some cases together with other revenues of
such dealers or agents, to provide additional compensation to registered
representatives who sell shares of the Funds. On some occasions, such cash or
other incentives will be conditioned upon the sale of a specified minimum dollar
amount of the shares of a Fund and/or other Alliance Mutual Funds during a
specific period of time. Such incentives may take the form of payment for
attendance at seminars, meals, sporting events or theater performances, or
payment for travel, lodging and entertainment incurred in connection with travel
by persons associated with a dealer or agent to urban or resort locations within
or outside the United States. Such dealer or agent may elect to receive cash
incentives of equivalent amount in lieu of such payments.
HOW TO SELL SHARES
You may "redeem"(i.e., sell your shares in a Fund to the Fund) on any day the
Exchange is open, either directly or through your financial intermediary. The
price you will receive is the net asset value (less any applicable CDSC) next
calculated after the Fund receives your request in proper form. Proceeds
generally will be sent to you within seven days. However, for shares recently
purchased by check or electronic funds transfer, a Fund will not send proceeds
until it is reasonably satisfied that the check or electronic funds transfer has
been collected (which may take up to 15 days).
Selling Shares Through Your Broker
Your broker must receive your request before 4:00 p.m. Eastern time, and your
broker must transmit your request to the Fund by 5:00 p.m. Eastern time, for you
to receive that day's net asset value (less any applicable CDSC). Your broker is
responsible for furnishing all necessary documentation to a Fund and may charge
you for this service.
Selling Shares Directly To A Fund
Send a signed letter of instruction or stock power form to AFS along with
certificates, if any, that represent the shares you want to sell. For your
protection, signatures must be guaranteed by a bank, a member firm of a national
stock exchange or other eligible guarantor institution. Stock power forms are
available from your financial intermediary, AFS, and many commercial banks.
Additional documentation is required for the sale of shares by corporations,
intermediaries, fiduciaries and surviving joint owners. For details contact:
Alliance Fund Services
P.O. Box 1520
Secaucus, NJ 07096-1520
800-221-5672
51
<PAGE>
Alternatively, a request for redemption of shares for which no stock
certificates have been issued can also be made by telephone to 800-221-5672.
Telephone redemption requests must be made by 4:00 p.m. Eastern time on a Fund
business day in order to receive that day's net asset value. A shareholder who
has completed the appropriate section of the Subscription Application, or the
Shareholder Options form obtained from AFS, can elect to have the proceeds of
his or her redemption sent to his or her bank via an electronic funds transfer.
Proceeds of telephone redemptions also may be sent by check to a shareholder's
address of record. Redemption requests by electronic funds transfer may not
exceed $100,000 and redemption requests by check may not exceed $50,000 per day.
Telephone redemption is not available for shares held in nominee or "street
name" accounts or retirement plan accounts or shares held by a shareholder who
has changed his or her address of record within the previous 30 calendar
days.
General
The sale of shares is a taxable transaction for federal tax purposes. Under
unusual circumstances, a Fund may suspend redemptions or postpone payment for up
to seven days or longer, as permitted by federal securities law. The Funds
reserve the right to close an account that through redemption has remained below
$200 for 90 days. Shareholders will receive 60 days' written notice to increase
the account value before the account is closed.
During drastic economic or market developments, you might have difficulty
reaching AFS by telephone, in which event you should issue written instructions
to AFS. AFS is not responsible for the authenticity of telephonic requests to
purchase, sell or exchange shares. AFS will employ reasonable procedures to
verify that telephone requests are genuine, and could be liable for losses
resulting from unauthorized transactions if it fails to do so. Dealers and
agents may charge a commission for handling telephonic requests. The telephone
service may be suspended or terminated at any time without notice.
SHAREHOLDER SERVICES
AFS offers a variety of shareholder services. For more information about these
services or your account, call AFS's toll-free number, 800-221-5672. Some
services are described in the attached Subscription Application. A shareholder's
manual explaining all available services will be provided upon request. To
request a shareholder manual, call 800-227-4618.
HOW TO EXCHANGE SHARES
You may exchange your shares of any Fund for shares of the same class of other
Alliance Mutual Funds (including AFD Exchange Reserves, a money market fund
managed by Alliance). Exchanges of shares are made at the net asset values next
determined, without sales or service charges. Exchanges may be made by telephone
or written request. Telephone exchange requests must be received by AFS by 4:00
p.m. Eastern time on a Fund business day in order to receive that day's net
asset value.
Shares will continue to age without regard to exchanges for purposes of
determining the CDSC, if any, upon redemption and, in the case of Class B
shares, for the purposes of conversion to Class A shares. After an exchange,
your Class B shares will automatically convert to Class A shares in accordance
with the conversion schedule applicable to the Class B shares of the Alliance
Mutual Fund you originally purchased for cash ("original shares"). When
redemption occurs, the CDSC applicable to the original shares is applied.
Please read carefully the Prospectus of the mutual fund into which you are
exchanging before submitting the request. Call AFS at 800-221-5672 to exchange
uncertificated shares. An exchange is a taxable capital transaction for federal
tax purposes. The exchange service may be changed, suspended or terminated on
60 days' written notice.
- --------------------------------------------------------------------------------
MANAGEMENT OF THE FUNDS
- --------------------------------------------------------------------------------
ADVISER
Alliance, which is a Delaware limited partnership with principal offices at 1345
Avenue of the Americas, New York, New York 10105, has been retained under an
advisory agreement (the "Advisory Agreement") to provide investment advice and,
in general, to conduct the management and investment program of each Fund,
subject to the general supervision and control of the Directors of the Fund.
The following table lists the person or persons who are primarily responsible
for the day-to-day management of each Fund's portfolio, the length of time that
each person has been primarily responsible, and each person's principal
occupation during the past five years.
<TABLE>
<CAPTION>
Principal occupation
during the past
Fund Employee; year; title five years
- -------------------------------------------------------------------------------------
<S> <C> <C>
Alliance Fund Alden M. Stewart since 1997-- Associated with
Executive Vice President of Alliance
Alliance Capital Management
Corporation (ACMC*)
Randall E. Haase since 1997-- Associated with
Senior Vice President of ACMC Alliance
Growth Fund Tyler Smith since inception-- Associated with
Senior Vice President of ACMC Alliance
Premier Growth Alfred Harrison since inception-- Associated with
Fund Vice Chairman of ACMC Alliance
Technology Fund Peter Anastos since 1992-- Associated with
Senior Vice President of ACMC Alliance
Gerald T. Malone since 1992-- Associated with
Senior Vice President of ACMC Alliance
Quasar Fund Alden M. Stewart since 1994-- (see above)
(see above)
Randall E. Haase since 1994-- (see above)
(see above)
International Fund Bruce W. Calvert since 1998-- Associated with
Vice Chairman and Chief Alliance
Investment Officer
of ACMC
International Premier Alfred Harrison since 1998-- (see above)
Growth Fund (see above)
Thomas Kamp since 1998-- Associated with
Senior Vice President of ACMC Alliance
Worldwide Privatization Mark H. Breedon since inception Associated with
Fund Senior Vice President of ACMC Alliance
and Director and Vice President
of Alliance Capital Limited **
</TABLE>
52
<PAGE>
<TABLE>
<CAPTION>
Principal occupation
during the past
Fund Employee; year; title five years
- ----------------------------------------------------------------------------------
<S> <C> <C>
New Europe Fund Steven Beinhacker since 1997-- Associated with
Vice President of ACMC Alliance
All-Asia Investment Hiroshi Motoki since 1998-- Associated with
Fund Senior Vice President of ACMC Alliance since
and director of Japanese/Asian 1994; prior
Equity research thereto,
associated with
Ford Motor
Company
Greater China '97 Matthew W. S. Lee since 1997-- Associated with
Fund Vice President of ACMC Alliance since
1997; prior
thereto,
associated
with National
Mutual Funds
Management
(Asia) since 1994
and James Capel
and Co. since
prior to 1994
Global Small Cap Alden M. Stewart since 1994-- (see above)
Fund (see above)
Randall E. Haase since 1994-- (see above)
(see above)
Ronald L. Simcoe since 1993-- Associated with
Vice President of ACMC Alliance
Global Environment Linda Bolton Weiser since 1998-- Associated with
Fund Vice President of ACMC Alliance
Balanced Shares Paul Rissman since 1997-- Associated with
Senior Vice President of ACMC Alliance
Utility Income Fund Paul Rissman since 1996-- (see above)
(See above)
Growth & Income Paul Rissman since 1994-- (see above)
Fund (see above)
Real Estate Daniel G. Pine since 1996-- Associated with
Investment Fund Senior Vice President of ACMC Alliance since
1996; prior
thereto, Senior
Vice President of
Desai Capital
Management
Real Estate David Kruth since 1997-- Associated with
Investment Fund Vice President of ACMC Alliance since
(cont.) 1997; prior
thereto Senior
Vice President of
the Yarmouth
Group
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
* The sole general partner of Alliance.
** An indirect wholly-owned subsidiary of Alliance.
Alliance is a leading international investment manager supervising client
accounts with assets as of June 30, 1998 totaling more than $262 billion (of
which approximately $107 billion represented the assets of investment
companies). Alliance's clients are primarily major corporate employee benefit
funds, public employee retirement systems, investment companies, foundations and
endowment funds. The 58 registered investment companies managed by Alliance
comprising 123 separate investment portfolios currently have over two million
shareholders. As of June 30, 1998, Alliance was an investment manager of
employee benefit plan assets for 32 of the Fortune 100 companies.
ACMC, the sole general partner of, and the owner of a 1% general partnership
interest in, Alliance, is an indirect wholly-owned subsidiary of The Equitable
Life Assurance Society of the United States ("Equitable"), one of the largest
life insurance companies in the United States, which is a wholly-owned
subsidiary of The Equitable Companies Incorporated, a holding company controlled
by AXA-UAP, a French insurance holding company. Certain information concerning
the ownership and control of Equitable by AXA-UAP is set forth in each Fund's
Statement of Additional Information under "Management of the Funds."
Performance of Similarly Managed Portfolios. In addition to managing the assets
of Premier Growth Fund, Mr. Harrison has ultimate responsibility for the
management of discretionary tax-exempt accounts of institutional clients managed
as described below without significant client-imposed restrictions "(Historical
Portfolios"). These accounts have substantially the same investment objectives
and policies and are managed in accordance with essentially the same investment
strategies and techniques as those for Premier Growth Fund, except for the
ability of Premier Growth Fund to use futures and options as hedging tools and
to invest in warrants. The Historical Portfolios are also not subject to certain
limitations, diversification requirements and other restrictions imposed under
the 1940 Act and the Code to which Premier Growth Fund, as a registered
investment company, is subject and which, if applicable to the Historical
Portfolios, may have adversely affected the performance results of the
Historical Portfolios. See "Investment Objective and Policies."
Set forth below is performance data provided by Alliance relating to the
Historical Portfolios for each of the nineteen full calendar years during which
Mr. Harrison has managed the Historical Portfolios as an employee of Alliance
and cumulatively through September 30, 1998. As of September 30, 1998, the
assets in the Historical Portfolios totaled approximately $12.3 billion and the
average size of an institutional account in the Historical Portfolio was $412
million. Each Historical Portfolio has a nearly identical composition of
investment holdings and related percentage weightings.
The performance data is net of all fees (including brokerage commissions)
charged to those accounts. The performance data is computed in accordance with
standards formulated by the Association of Investment Management and Research
and has not been adjusted to reflect any fees that will be payable by Premier
Growth Fund, which are higher than the fees imposed on the Historical Portfolio
and will result in a higher expense ratio and lower returns for Premier Growth
Fund. Expenses associated with the distribution of Class A, Class B and Class C
shares of Premier Growth Fund in accordance with the plan adopted by Premier
Growth Fund's Board of Directors pursuant to Rule 12b-1 under the 1940 Act
("distribution fees") are also excluded. See "Expense Information." The
performance data has also not been adjusted for corporate or individual taxes,
if any, payable by the account owners.
53
<PAGE>
Alliance has calculated the investment performance of the Historical Portfolios
on a trade-date basis. Dividends have been accrued at the end of the month and
cash flows weighted daily. Composite investment performance for all portfolios
has been determined on an asset weighted basis. New accounts are included in the
composite investment performance computations at the beginning of the quarter
following the initial contribution. The total returns set forth below are
calculated using a method that links the monthly return amounts for the
disclosed periods, resulting in a time-weighted rate of return.
As reflected below, the Historical Portfolios have over time performed favorably
when compared with the performance of recognized performance indices. The S&P
500 Index is a widely recognized, unmanaged index of market activity based upon
the aggregate performance of a selected portfolio of publicly traded common
stocks, including monthly adjustments to reflect the reinvestment of dividends
and other distributions. The S&P 500 Index reflects the total return of
securities comprising the Index, including changes in market prices as well as
accrued investment income, which is presumed to be reinvested. The Russell 1000
universe of securities is compiled by Frank Russell Company and is segmented
into two style indices, based on the capitalization-weighted median
book-to-price ratio of each of the securities. At each reconstitution, the
Russell 1000 constituents are ranked by their book-to-price ratio. Once so
ranked, the breakpoint for the two styles is determined by the median market
capitalization of the Russell 1000. Thus, those securities falling within the
top fifty percent of the cumulative market capitalization (as ranked by
descending book-to-price) become members of the Russell Price-Driven Indices.
The Russell 1000 Growth Index is, accordingly, designed to include those Russell
1000 securities with a greater-than-average growth orientation. In contrast with
the securities in the Russell Price-Driven Indices, companies in the Growth
Index tend to exhibit higher price-to-book and price-earnings ratios, lower
dividend yield and higher forecasted growth values.
To the extent Premier Growth Fund does not invest in U.S. common stocks or
utilizes investment techniques such as futures or options, the S&P 500 Index and
Russell 1000 Growth Index may not be substantially comparable to Premier Growth
Fund. The S&P 500 Index and Russell 1000 Growth Index are included to illustrate
material economic and market factors that existed during the time period shown.
The S&P 500 Index and Russell 1000 Growth Index do not reflect the deduction of
any fees. If Premier Growth Fund were to purchase a portfolio of securities
substantially identical to the securities comprising the S&P 500 Index or the
Russell 1000 Growth Index, Premier Growth Fund's performance relative to the
index would be reduced by Premier Growth Fund's expenses, including brokerage
commissions, advisory fees, distribution fees, custodial fees, transfer agency
costs and other administrative expenses, as well as by the impact on Premier
Growth Fund's shareholders of sales charges and income taxes.
The Lipper Growth Fund Index is prepared by Lipper Analytical Services, Inc. and
represents a composite index of the investment performance for the 30 largest
growth mutual funds. The composite investment performance of the Lipper Growth
Fund Index reflects investment management and administrative fees and other
operating expenses paid by these mutual funds and reinvested income dividends
and capital gain distributions, but excludes the impact of any income taxes and
sales charges.
The following performance data is provided solely to illustrate Mr. Harrison's
performance in managing the Historical Portfolios and the Premier Growth Fund as
measured against certain broad based market indices and against the composite
performance of other open-end growth mutual funds. Investors should not rely on
the following performance data of the Historical Portfolios as an indication of
future performance of Premier Growth Fund. The composite investment performance
for the periods presented may not be indicative of future rates of return. Other
methods of computing investment performance may produce different results, and
the results for different periods may vary.
Schedule of Composite Investment Performance--Historical Portfolios*
<TABLE>
<CAPTION>
Russell Lipper
Premier Historical S&P 500 1000 Growth
Growth Portfolios Index Growth Index Fund Index
Fund Total Return** Total Return Total Return Total Return
---- -------------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
1/1/98-
9/30/98*** 9.09% 15.27% 6.04% 9.44% 2.38%
Year ended December:
1997*** 27.05% 34.64% 33.36% 30.49% 25.30%
1996*** 18.84 22.06 22.96 23.12 17.48
1995*** 40.66 39.83 37.58 37.19 32.65
1994 (9.78) (4.82) 1.32 2.66 (1.57)
1993 5.35 10.54 10.08 2.90 11.98
1992 -- 12.18 7.62 5.00 7.63
1991 -- 38.91 30.47 41.16 35.20
1990 -- (1.57) (3.10) (0.26) (5.00)
1989 -- 38.80 31.69 35.92 28.60
1988 -- 10.88 16.61 11.27 15.80
1987 -- 8.49 5.25 5.31 1.00
1986 -- 27.40 18.67 15.36 15.90
1985 -- 37.41 31.73 32.85 30.30
1984 -- (3.31) 6.27 (.95) (2.80)
1983 -- 20.80 22.56 15.98 22.30
1982 -- 28.02 21.55 20.46 20.20
1981 -- (1.09) (4.92) (11.31) (8.40)
1980 -- 50.73 32.50 39.57 37.30
1979 -- 30.76 18.61 23.91 27.40
Cumulative total
return for the
period
January 1,
1979 to
September 30,
1998 -- 3,542% 2,064% 1,852% 1,613%
- ----------------------------------------------------------------------------------------------
</TABLE>
* Total return is a measure of investment performance that is based upon the
change in value of an investment from the beginning to the end of a
specified period and assumes reinvestment of all dividends and other
distributions. The basis of preparation of this data is described in the
preceding discussion. Total returns for Premier Growth Fund are for Class A
shares, with imposition of the maximum 4.25% sales charge.
** Assumes imposition of the maximum advisory fee charged by Alliance for any
Historical Portfolio for the period involved.
*** During this period, the Historical Portfolios differed from Premier Growth
Fund in that Premier Growth Fund invested a portion of its net assets in
warrants on equity securities in which the Historical Portfolios were
unable, by their investment restrictions, to purchase. In lieu of warrants,
the Historical Portfolios acquired the common stock upon which the warrants
were based.
54
<PAGE>
The average annual total returns presented below are based upon the cumulative
total return as of September 30, 1998 and, for more than one year, assume a
steady compounded rate of return and are not year-by-year results, which
fluctuated over the periods as shown.
<TABLE>
<CAPTION>
Average Annual Total Returns
-----------------------------------------------------------------------
Premier Russell Lipper
Growth Historical S&P 500 1000 Growth
Fund Portfolios** Index Growth Index Fund Index
---- ---------- ----- ------------ ----------
<S> <C> <C> <C> <C> <C>
One year ................ 6.21% 13.19% 6.08% 11.11% 3.07%
Three years ............. 21.82 24.22 22.60 22.50 16.43
Five years .............. 20.23 20.70 19.91 20.80 15.52
Ten years ............... 19.98+ 19.70 17.29 18.07 15.01
Since January 1,
1979 .................. -- 19.97 16.84 16.23 15.47
- ----------------------------------------------------------------------------------------------------
</TABLE>
+ Since inception on 9/28/92
ADMINISTRATOR TO ALL-ASIA INVESTMENT FUND
Alliance has been retained by All-Asia Investment Fund under an administration
agreement (the "Administration Agreement") to perform administrative services
necessary for the operation of the Fund. For a description of such services, see
the Statement of Additional Information of the Fund.
CONSULTANT TO ALLIANCE WITH RESPECT TO GREATER CHINA COUNTRIES
In connection with its provision of advisory services to Greater China '97 Fund.
Alliance has retained at its expense as a consultant New Alliance, a joint
venture company headquartered in Hong Kong which was formed in 1997 by Alliance
and Sun Hung Kai Properties Limited ("SHKP"). New Alliance provides Alliance
with ongoing, current and comprehensive information and analysis of conditions
and developments in Greater China countries consisting of, but not limited to,
statistical and factual research and assistance with respect to economic,
financial, political, technological and social conditions and trends in Greater
China countries, including information on markets and industries. In addition to
its own staff of professionals, New Alliance has access to the expertise and
personnel of SHKP, one of Hong Kong's preeminent property and business groups.
SHKP is one of the largest enterprises in Hong Kong measured by market
capitalization and has considerable expertise in evaluating business and market
conditions in Hong Kong and the other Greater China countries. Its activities
complementary to property development include insurance and estate management,
and SHKP is diversified as well into telecommunications and infrastructure
projects.
CONSULTANT TO ALLIANCE WITH RESPECT TO INVESTMENT IN REAL ESTATE SECURITIES
Alliance, with respect to investment in real estate securities, has retained as
a consultant CB Commercial Richard Ellis, Inc. ("CBRE"), a publicly held company
and the largest real estate services company in the United States, comprised of
real estate brokerage, property and facilities management, and real estate
finance and investment advisory activities. In 1997, CBRE completed 22,100 sale
and lease transactions, managed over 6,600 client properties, created over $5
billion in mortgage originations, and completed over 3,600 appraisal and
consulting assignments. In addition, they advised and managed for institutions
over $4 billion in real estate investments. CBRE will make available to Alliance
the CBRE's National Real Estate Index, which gathers, analyzes and publishes
targeted research data for the 66 largest U.S. markets, based on a variety of
public-sector and private-sector sources as well as CBRE's proprietary database
of approximately 80,000 property transactions representing over $500 billion of
investment property. This information provides a substantial component of the
research and data used to create the REIToScore model. As a consultant, CBRE
provides to Alliance, at Alliance's expense, such in-depth information regarding
the real estate market, the factors influencing regional valuations and analysts
of recent transactions in office, retail, industrial and multi-family properties
as Alliance shall from time to time request. CBRE will not furnish advice or
make recommendations regarding the purchase or sale of securities by the Fund
nor will it be responsible for making investment decisions involving Fund
assets.
CBRE is one of the three largest fee-based property management firms in the
United States, the largest commercial real estate lease brokerage firm in the
country, the largest investment property brokerage firm in the country, as well
as one of the largest publishers of real estate research, with approximately
8,000 employees worldwide. CBRE will provide Alliance with exclusive access to
its REIT o Score model which ranks approximately 142 REITS based on the relative
attractiveness of the property markets in which they own real estate. This model
scores the approximately 18,000 individual properties owned by these companies.
REIT o Score is in turn based on CBRE's National Real Estate Index which
gathers, analyzes and publishes targeted research for the 66 largest U.S. real
estate markets based on a variety of public- and private-sector sources as well
as CBRE's proprietary database of 80,000 commercial property transactions
representing over $500 billion of investment property and over 2,500 tracked
properties which report rent and expense data quarterly. CBRE has previously
provided access to its REIT o Score model results primarily to the institutional
market through subscriptions. The model is no longer provided to any research
publications and Real Estate Investment Fund is currently the only mutual fund
available to retail investors that has access to CBRE's REIT o Score model.
Distribution Services Agreements
Rule 12b-1 adopted by the Commission under the 1940 Act permits an investment
company to pay expenses associated with the distribution of its shares in
accordance with a duly adopted plan. Each Fund has adopted one or more "Rule
12b-1 plans" (for each Fund, a "Plan") and has entered into a Distribution
Services Agreement (the "Agreement") with AFD. Pursuant to its Plan, a Fund pays
to AFD a Rule 12b-1 distribution services fee, which may not exceed an annual
rate of .30% (.50% with respect to Growth Fund and Premier Growth Fund) of the
Fund's aggregate average daily net assets attributable to the Class A shares,
1.00% of the Fund's aggregate average daily net assets attributable to the Class
B shares and 1.00% of the Fund's aggregate average daily net
55
<PAGE>
assets attributable to the Class C shares, for distribution expenses. The
Directors of Growth Fund currently limit payments with respect to Class A shares
under the Plan to .30% of the Fund's aggregate average daily net assets
attributable to Class A shares. The Directors of Premier Growth Fund currently
limit payments under the Plan with respect to sales of Class A shares made after
November 1993 to .30% of the Fund's aggregate average daily net assets. The
Plans provide that a portion of the distribution services fee in an amount not
to exceed .25% of the aggregate average daily net assets of each Fund
attributable to each of the Class A, Class B and Class C shares constitutes a
service fee used for personal service and/or the maintenance of shareholder
accounts.
The Plans provide that AFD will use the distribution services fee received from
a Fund in its entirety for payments (i) to compensate broker-dealers or other
persons for providing distribution assistance, (ii) to otherwise promote the
sale of shares of the Fund, and (iii) to compensate broker-dealers, depository
institutions and other financial intermediaries for providing administrative,
accounting and other services with respect to the Fund's shareholders. In this
regard, some payments under the Plans are used to compensate financial
intermediaries with trail or maintenance commissions in an amount equal to .25%,
annualized, with respect to Class A shares and Class B shares, and 1.00%,
annualized, with respect to Class C shares, of the assets maintained in a Fund
by their customers. Distribution services fees received from the Funds, except
Growth Fund, with respect to Class A shares will not be used to pay any interest
expenses, carrying charges or other financing costs or allocation of overhead of
AFD. Distribution services fees received from the Funds, with respect to Class B
and Class C shares, may be used for these purposes. The Plans also provide that
Alliance may use its own resources to finance the distribution of each Fund's
shares.
The Funds are not obligated under the Plans to pay any distribution services fee
in excess of the amounts set forth above. Except as noted below for Growth Fund,
with respect to Class A shares of each Fund, distribution expenses accrued by
AFD in one fiscal year may not be paid from distribution services fees received
from the Fund in subsequent fiscal years. Except as noted below for Growth Fund
AFD's compensation with respect to Class B and Class C shares under the Plans of
the other Funds is directly tied to its expenses incurred. Actual distribution
expenses for such Class B and Class C shares for any given year, however, will
probably exceed the distribution services fees payable under the applicable Plan
with respect to the class involved and, in the case of Class B and Class C
shares, payments received from CDSCs. The excess will be carried forward by AFD
and reimbursed from distribution services fees payable under the Plan with
respect to the class involved and, in the case of Class B and Class C shares,
payments subsequently received through CDSCs, so long as the Plan and the
Agreement are in effect. Since AFD's compensation under the Plans of Growth Fund
is not directly tied to the expenses incurred by AFD, the amount of compensation
received by it under the applicable Plan during any year may be more or less
than its actual expenses.
Unreimbursed distribution expenses incurred as of the end of each Fund's most
recently completed fiscal period, and carried over for reimbursement in future
years in respect of the Class B and Class C shares for all Funds were, as of
that time, as follows:
<TABLE>
<CAPTION>
Amount of Unreimbursed Distribution Expenses
(as % of Net Assets of Class)
--------------------------------------------
Class B Class C
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Alliance Fund $ 3,782,063 (5.37%) $1,025,156 (5.43%)
Premier Growth Fund $20,874,319 (2.43%) $1,413,557 (0.79%)
Technology Fund $32,259,341 (3.06%) $1,464,569 (0.80%)
Quasar Fund $15,242,262 (3.03%) $1,262,697 (0.90%)
International Fund $ 2,638,659 (3.70%) $ 838,475 (4.10%)
International Premier Growth
Fund $ 325,310 (4.62%) $ 15,653 (1.54%)
Worldwide Privatization Fund $ 6,609,791 (4.23%) $ 537,949 (2.02%)
New Europe Fund $ 4,377,262 (3.19%) $ 741,808 (1.87%)
All-Asia Investment Fund $ 1,690,408 (14.78%) $ 162,319 (8.73%)
Greater China '97 Fund $ 533,473 (34.39%) $ 18,510 (18.19%)
Global Small Cap Fund $ 2,594,264 (6.68%) $ 676,624 (7.14%)
Balanced Shares $ 2,579,772 (5.41%) $ 608,865 (5.61%)
Utility Income Fund $ 1,400,456 (9.47%) $ 456,135 (13.37%)
Growth and Income Fund $11,066,118 (2.42%) $1,326,535 (1.25%)
Real Estate Investment Fund $12,995,878 (4.83%) $ 699,723 (1.01%)
- ------------------------------------------------------------------------------
</TABLE>
The Plans are in compliance with rules of the National Association of Securities
Dealers, Inc. which effectively limit the annual asset-based sales charges and
service fees that a mutual fund may pay on a class of shares to .75% and .25%,
respectively, of the average annual net assets attributable to that class. The
rules also limit the aggregate of all front-end, deferred and asset-based sales
charges imposed with respect to a class of shares by a mutual fund that also
charges a service fee to 6.25% of cumulative gross sales of shares of that
class, plus interest at the prime rate plus 1% per annum.
The Glass-Steagall Act and other applicable laws may limit the ability of a bank
or other depository institution to become an underwriter or distributor of
securities. However, in the opinion of the Funds' management, based on the
advice of counsel, these laws do not prohibit such depository institutions from
providing services for investment companies such as the administrative,
accounting and other services referred to in the Agreements. In the event that a
change in these laws prevented a bank from providing such services, it is
expected that other services arrangements would be made and that shareholders
would not be adversely affected. The State of Texas requires that shares of a
Fund may be sold in that state only by dealers or other financial institutions
that are registered there as broker-dealers.
- --------------------------------------------------------------------------------
DIVIDENDS, DISTRIBUTIONS
- --------------------------------------------------------------------------------
AND TAXES
- --------------------------------------------------------------------------------
Dividends and Distributions
If you receive an income dividend or capital gains distribution in cash you may,
within 120 days following the date of its payment, reinvest the dividend or
distribution in additional shares of that Fund without charge by returning to
Alliance,
56
<PAGE>
with appropriate instructions, the check representing such dividend or
distribution. Thereafter, unless you otherwise specify, you will be deemed to
have elected to reinvest all subsequent dividends and distributions in shares of
that Fund. Each income dividend and capital gains distribution, if any, declared
by a Fund on its outstanding shares will, at the election of each shareholder,
be paid in cash or in additional shares of the same class of shares of that Fund
having an aggregate net asset value as of the close of business on the day
following the declaration date of such dividend or distribution equal to the
cash amount of such income dividend or distribution. Election to receive
dividends and distributions in cash or shares is made at the time shares are
initially purchased and may be changed at any time prior to the record date for
a particular dividend or distribution. Cash dividends can be paid by check or,
if the shareholder so elects, electronically via the ACH network. There is no
sales or other charge in connection with the reinvestment of dividends and
capital gains distributions. Dividends paid by a Fund, if any, with respect to
Class A, Class B and Class C shares will be calculated in the same manner at the
same time on the same day and will be in the same amount, except that the higher
distribution services fees applicable to Class B and C shares, and any
incremental transfer agency costs relating to Class B and Class C shares, will
be borne exclusively by the class to which they relate.
While it is the intention of each Fund to distribute to its shareholders
substantially all of each fiscal year's net income and net realized capital
gains, if any, the amount and time of any such dividend or distribution must
necessarily depend upon the realization by such Fund of income and capital gains
from investments. There is no fixed dividend rate, and there can be no assurance
that a Fund will pay any dividends or realize any capital gains. Since REITs pay
distributions based on cash flow, without regard to depreciation and
amortization, it is likely that a portion of the distributions paid to Real
Estate Investment Fund and subsequently distributed to shareholders may be a
nontaxable return of capital. The final determination of the amount of a Fund's
return of capital distributions for the period will be made after the end of
each calendar year.
If you buy shares just before a Fund deducts a distribution from its net asset
value, you will pay the full price for the shares and then receive a portion of
the price back as a taxable distribution.
Foreign Income Taxes
Investment income received by a Fund from sources within foreign countries may
be subject to foreign income taxes withheld at the source. To the extent that
any Fund is liable for foreign income taxes withheld at the source, each Fund
intends, if possible, to operate so as to meet the requirements of the Code to
"pass through" to the Fund's shareholders credits for foreign income taxes paid
(or to permit shareholders to claim a deduction for such foreign taxes), but
there can be no assurance that any Fund will be able to do so. Furthermore, a
shareholder's ability to claim a foreign tax credit or deduction in respect of
foreign taxes paid by a Fund may be subject to certain limitations imposed by
the Code, as a result of which a shareholder may not be permitted to claim a
full credit or deduction for the amount of such taxes.
U.S. Federal Income Taxes
Each Fund intends to qualify to be taxed as a "regulated investment company"
under the Code. Qualification as a regulated investment company relieves that
Fund of federal income taxes on that part of its taxable income, including net
capital gain, which it pays out to its shareholders. Dividends out of net
ordinary income and distributions of net short-term capital gains are taxable to
the recipient shareholders as ordinary income. In the case of corporate
shareholders, such dividends may be eligible for the dividends-received
deduction, except that the amount eligible for the deduction is limited to the
amount of qualifying dividends received by the Fund. Distributions received from
REITs or from foreign corporations generally do not constitute qualifying
dividends. A corporation's dividends-received deduction generally will be
disallowed unless the corporation holds shares in the Fund at least 46 days
during the 90-day period beginning 45 days before the date on which the
corporation becomes entitled to receive the dividend. Furthermore, the
dividends-received deduction will be disallowed to the extent a corporation's
investment in shares of a Fund is financed with indebtedness.
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 a Fund. Distributions of
net captial gain are not eligible for the dividends-received deduction referred
to above.
Under current federal tax law, the amount of an income dividend or capital
gains distribution declared by a Fund during October, November or December of a
year to shareholders of record as of a specified date in such a month that is
paid during January of the following year is includable in the prior year's
taxable income of shareholders that are calendar year taxpayers.
Any dividend or distribution received by a shareholder on shares of a Fund will
have the effect of reducing the net asset value of such shares by the amount of
such dividend or distribution. Furthermore, a dividend or distribution made
shortly after the purchase of such shares by a shareholder, although in effect a
return of capital to that particular shareholder, would be taxable to him or her
as described above. If a shareholder held shares six months or less and during
that period received a distribution of net capital gain, any loss realized on
the sale of such shares during such six-month period would be a long-term
capital loss to the extent of such distribution.
A dividend or capital gains distribution with respect to shares of a Fund held
by a tax-deferred or qualified plan, such as an individual retirement account,
403(b)(7) retirement plan or corporate pension or profit-sharing plan, generally
will not be taxable to the plan. Distributions from such plans will be
57
<PAGE>
taxable to individual participants under applicable tax rules without regard to
the character of the income earned by the qualified plan.
A Fund will be required to withhold 31% of any payments made to a shareholder if
the shareholder has not provided a certified taxpayer identification number to
the Fund, or the Secretary of the Treasury notifies a Fund that a shareholder
has not reported all interest and dividend income required to be shown on the
shareholder's Federal income tax return.
Under certain circumstances, if a Fund realizes losses (e.g., from fluctuations
in currency exchange rates) after paying a dividend, all or a portion of the
dividend may subsequently be characterized as a return of capital. Returns of
capital are generally nontaxable, but will reduce a shareholder's basis in
shares of a Fund. If that basis is reduced to zero (which could happen if the
shareholder does not reinvest distributions and returns of capital are
significant) any further returns of capital will be taxable as capital gain. See
"Dividends, Distributions and Taxes" in the Statement of Additional Information.
Shareholders will be advised annually as to the federal tax status of dividends
and capital gains and return of capital distributions made by a Fund for the
preceding year. Shareholders are urged to consult their tax advisers regarding
their own tax situation. Distributions by a Fund may be subject to state and
local taxes.
- --------------------------------------------------------------------------------
GENERAL INFORMATION
- --------------------------------------------------------------------------------
PORTFOLIO TRANSACTIONS
Consistent with the Conduct Rules of the National Association of Securities
Dealers, Inc., and subject to seeking best price and execution, a Fund may
consider sales of its shares as a factor in the selection of dealers to enter
into portfolio transactions with the Fund.
ORGANIZATION
Each of the following Funds is a Maryland corporation organized in the year
indicated: The Alliance Fund, Inc. (1938), Alliance Balanced Shares, Inc.
(1932), Alliance Premier Growth Fund, Inc. (1992), Alliance Technology Fund,
Inc. (1980), Alliance Quasar Fund, Inc. (1968), Alliance International Premier
Growth Fund (1997), Alliance Worldwide Privatization Fund, Inc. (1994), Alliance
New Europe Fund, Inc. (1990), Alliance All-Asia Investment Fund, Inc. (1994),
Alliance Greater China '97 Fund (1997), Alliance Global Small Cap Fund, Inc.
(1966), Alliance Global Environment Fund, Inc. (1990), Alliance Utility Income
Fund, Inc. (1993), Alliance Growth and Income Fund, Inc. (1932), and Alliance
Real Estate Investment Fund, Inc. (1996). Each of the following Funds is either
a Massachusetts business trust or a series of a Massachusetts business trust
organized in the year indicated: Alliance Growth Fund (a series of The Alliance
Portfolios) (1987), and Alliance International Fund (1980). Prior to August 2,
1993, The Alliance Portfolios was known as The Equitable Funds and Growth Fund
was known as The Equitable Growth Fund.
It is anticipated that annual shareholder meetings will not be held; shareholder
meetings will be held only when required by federal or state law. Shareholders
have available certain procedures for the removal of Directors.
A shareholder in a Fund will be entitled to share pro rata with other holders of
the same class of shares all dividends and distributions arising from the Fund's
assets and, upon redeeming shares, will receive the then current net asset value
of the Fund represented by the redeemed shares less any applicable CDSC. The
Funds are empowered to establish, without shareholder approval, additional
portfolios, which may have different investment objectives and policies than
those of the Funds, and additional classes of shares within the Funds. If an
additional portfolio or class were established in a Fund, each share of the
portfolio or class would normally be entitled to one vote for all purposes.
Generally, shares of each portfolio and class would vote together as a single
class on matters, such as the election of Directors, that affect each portfolio
and class in substantially the same manner. Class A, B, C and Advisor Class
shares have identical voting, dividend, liquidation and other rights, except
that each class bears its own transfer agency expenses, each of Class A, Class B
and Class C shares of each 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 each Fund votes separately with respect
to a Fund's Rule 12b-1 distribution plan and other matters for which separate
class voting is appropriate under applicable law. Shares are freely
transferable, are entitled to dividends as determined by the Directors and, in
liquidation of a Fund, are entitled to receive the net assets of the Fund. Since
this Prospectus sets forth information about all the Funds, it is theoretically
possible that a Fund might be liable for any materially inaccurate or incomplete
disclosure in this Prospectus concerning another Fund. Based on the advice of
counsel, however, the Funds believe that the potential liability of each Fund
with respect to the disclosure in this Prospectus extends only to the disclosure
relating to that Fund. Certain additional matters relating to a Fund's
organization are discussed in its Statement of Additional Information.
REGISTRAR, TRANSFER AGENT AND DIVIDEND-DISBURSING AGENT
AFS, an indirect wholly-owned subsidiary of Alliance, located at 500 Plaza
Drive, Secaucus, New Jersey 07094, acts as each Fund's registrar, transfer agent
and dividend-disbursing agent for a fee based upon the number of shareholder
accounts maintained for the Funds. The transfer agency fee with respect to the
Class B shares will be higher than the transfer agency fee with respect to the
Class A shares or Class C shares.
58
<PAGE>
PRINCIPAL UNDERWRITER
AFD, an indirect wholly-owned subsidiary of Alliance, located at 1345 Avenue of
the Americas, New York, New York 10105, is the principal underwriter of shares
of the Funds.
PERFORMANCE INFORMATION
From time to time, the Funds advertise their "total return," which is computed
separately for Class A, Class B and Class C shares. Such advertisements disclose
a Fund's average annual compounded total return for the periods prescribed by
the Commission. A Fund's total return for each such period is computed by
finding, through the use of a formula prescribed by the Commission, the average
annual compounded rate of return over the period that would equate an assumed
initial amount invested to the value of the investment at the end of the period.
For purposes of computing total return, income dividends and capital gains
distributions paid on shares of a Fund are assumed to have been reinvested when
paid and the maximum sales charges applicable to purchases and redemptions of a
Fund's shares are assumed to have been paid.
Balanced Shares, Growth and Income Fund, Real Estate Investment Fund and Utility
Income Fund may also advertise their "yield," which is also computed separately
for Class A, Class B and Class C shares. A Fund's yield for any 30-day (or one-
month) period is computed by dividing the net investment income per share earned
during such period by the maximum public offering price per share on the last
day of the period, and then annualizing such 30-day (or one-month) yield in
accordance with a formula prescribed by the Commission which provides for
compounding on a semi-annual basis.
Real Estate Investment Fund, Balanced Shares, Utility Income Fund and Growth and
Income Fund may also state in sales literature an "actual distribution rate" for
each class which is computed in the same manner as yield except that actual
income dividends declared per share during the period in question are
substituted for net investment income per share. The actual distribution rate is
computed separately for Class A, Class B and Class C shares.
A Fund's advertisements may quote performance rankings or ratings of a Fund by
financial publications or independent organizations such as Lipper Analytical
Services, Inc. and Morningstar, Inc. or compare a Fund's performance to various
indices.
ADDITIONAL INFORMATION
This Prospectus and the Statements of Additional Information, which have been
incorporated by reference herein, do not contain all the information set forth
in the Registration Statements filed by the Funds with the Commission under the
Securities Act. Copies of the Registration Statements may be obtained at a
reasonable charge from the Commission or may be examined, without charge, at the
offices of the Commission in Washington, D.C.
This prospectus does not constitute an offering in any state in which such
offering may not lawfully be made.
This prospectus is intended to constitute an offer by each Fund only of the
securities of which it is the issuer and is not intended to constitute an offer
by any Fund of the securities of any other Fund whose securities are also
offered by this prospectus. No Fund intends to make any representation as to the
accuracy or completeness of the disclosure in this prospectus relating to any
other Fund. See "General Information--Organization."
59
<PAGE>
================================================================================
ALLIANCE STOCK FUNDS
SUBSCRIPTION APPLICATION
================================================================================
The Alliance Fund
Growth Fund
Premier Growth Fund
Technology Fund
Quasar Fund
International Fund
International Premier Growth Fund
Worldwide Privatization Fund
New Europe Fund
All-Asia Investment Fund
Alliance Greater China '97 Fund
Global Small Cap Fund
Global Environment Fund
Balanced Shares
Utility Income Fund
Growth & Income Fund
Real Estate Investment Fund
To Open Your New Alliance Account...
Please complete the application and mail it to:
Alliance Fund Services, Inc.
P.O. Box 1520
Secaucus, New Jersey 07096-1520
For certified or overnight deliveries, send to:
Alliance Fund Services, Inc.
500 Plaza Drive
Secaucus, New Jersey 07094
Section 1 Your Account Registration
(Required)
Complete one of the available choices. To ensure proper tax reporting to the
IRS:
-- Individuals, Joint Tenants, Transfer on Death and Gift/Transfer to a
Minor:
o Indicate your name(s) exactly as it appears on your social
security card.
-- Transfer on Death:
o Ensure that your state participates
-- Trust/Other:
o Indicate the name of the entity exactly as it appeared on the
notice you received from the IRS when your Employer
Identification number was assigned.
Section 2 Your Address (Required) Complete in full.
-- Non-Resident Alien:
o Indicate your permanent country of residence.
Section 3 Your Initial Investment (Required)
For each Fund in which you are investing: (1) Write the three digit fund number
in the column titled 'Indicate three digit fund number located below'. (2) Write
the dollar amount of your initial purchase in the column titled 'Indicate dollar
amount'.
(If you are eligible for a reduced sales charge, you must also complete Section
4F). (3) Check off a distribution
<PAGE>
option for your dividends. (4) Check off a distribution option for your capital
gains. All distributions (dividends and capital gains) will be reinvested into
your fund account unless you direct otherwise. If you want distributions sent
directly to your bank account, then you must complete Section 4D and attach a
preprinted, voided check for that account. If you want your distributions sent
to a third party you must complete Section 4E.
Section 4 Your Shareholder Options (Complete only those options you want)
A. Automatic Investment Plans (AIP) - You can make periodic investments into
any of your Alliance Funds in one of three ways. First, by a periodic
withdrawal ($25 minimum) directly from your bank account and invested into an
Alliance Fund. Second, you can direct your distributions (dividends and capital
gains) from one Alliance Fund into another Fund. Or third, you can
automatically exchange monthly ($25 minimum) shares of one Alliance Fund for
shares of another Fund. To elect one of these options, complete the appropriate
portion of Section 4A & 4D. If more than one dividend direction or monthly
exchange is desired, please call our Literature Center to obtain a Shareholder
Account Services Options Form for completion.
B. Telephone Transactions via EFT - Complete this option if you would like to
be able to transact via telephone between your fund account and your bank
account.
C. Systematic Withdrawal Plans (SWP) - Complete this option if you wish to
periodically redeem dollars from one of your fund accounts. Payments can be
made via Electronic Funds Transfer (EFT) to your bank account or by check.
D. Bank Information - If you have elected any options that involve transactions
between your bank account and your fund account or have elected cash
distribution options and would like the payments sent to your bank account,
please tape a preprinted, voided check of the account you wish to use to this
section of the application.
E. Third Party Payment Details - If you have chosen cash distributions and/or a
Systematic Withdrawal Plan and would like the payments sent to a person and/or
address other than those provided in section 1 or 2, complete this option.
Medallion Signature Guarantee is required if your account is not maintained by
a broker dealer.
F. Reduced Charges (Class A Only) - Complete if you would like to link fund
accounts that have combined balances that might exceed $100,000 so that future
purchases will receive discounts. Complete if you intend to purchase over
$100,000 within 13 months.
Section 5 Shareholder Authorization (Required)
All owners must sign. If it is a custodial, corporate, or trust account, the
custodian, an authorized officer, or the trustee respectively must sign.
If We Can Assist You In Any Way, Please Do Not Hesitate To Call Us At: (800)
221-5672.
================================================================================
For Literature Call: (800) 227-4618
================================================================================
<PAGE>
The Alliance Stock Funds Subscription Application
<TABLE>
- --------------------------------------------------------------------------------------------------------------------------
1. YOUR ACCOUNT REGISTRATION (Please Print in Capital Letters and Mark Check Boxes Where Applicable)
- --------------------------------------------------------------------------------------------------------------------------
<S> <C>
|_| Individual Account { |_| Male |_| Female } --or-- Joint Account --or--
|_| Transfer On Death { |_| Male |_| Female } --or-- Gift/Transfer to a Minor
|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|
Owner or Custodian (First Name) (MI) (Last Name)
|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|
(First Name) Joint Owner*, Transfer On Death Beneficiary or Minor (MI) (Last Name)
|_|_|_|-|_|_|-|_|_|_|_| If Uniform Gift/Transfer
Social Security Number of Owner or Minor (required to open account) to Minor Account:
|_| |_| Minor's State of Residence
If Joint Tenants Account: *The Account will be registered
"Joint Tenants with right of Survivorship" unless you indicate
otherwise below:
|_| In Common |_| By Entirety |_| Community Property
|_| Trust --or-- |_| Corporation --or-- |_| Other_____________________________
|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|
Name of Trustee if applicable (First Name) (MI) (Last Name)
|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|
Name of Trust or Corporation or Other Entity
|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|
Name of Trust or Corporation or Other Entity continued
|_|_|_|_|_|_|_|_| |_|_|_|_|_|_|_|_|_|
Trust Dated (MM,DD,YYYY) Tax ID Number (required to open account)
|_| Employer ID Number --or-- |_| Social Security
Number
- --------------------------------------------------------------------------------------------------------------------------
2. YOUR ADDRESS
- --------------------------------------------------------------------------------------------------------------------------
|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_| |_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|
Street Number Street Name
|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_| |_|_| |_|_|_|_|_|
City State Zip code
|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_| |_|_|_| - |_|_|_| - |_|_|_|_|
If Non-U.S., Specify Country Daytime Phone Number
|_| U.S. Citizen |_| Resident Alien |_| Non-Resident Alien
</TABLE>
Alliance Capital[LOGO](R)
80841GEN-TASFApp=P1
1
<PAGE>
<TABLE>
- --------------------------------------------------------------------------------------------------------------------------
3. Your Initial Investment The minimum investment is $250 per fund.
The maximum investment in Class B is $250,000; Class C is $1,000,000.
- --------------------------------------------------------------------------------------------------------------------------
<S> <C>
I hereby subscribe for shares of the following Alliance Stock Fund(s) and elect distribution options as indicated.
Dividend and Capital Gain Distribution Options:
R Reinvest distributions into my fund account.
- ----------------------
- ------------------------------------------ C Send my distributions in cash to the address I have provided in
Broker/Dealer Use Only: Wire Confirm # - -----------------------------
|_|_|_|_|_|_|_|_| Section 2. (Complete Section 4D for direct deposit to your bank
- ------------------------------------------ account. Complete Section 4E for payment to a third party)
D Direct my distributions to another Alliance Fund. Complete the
- ------------------------------------------------
appropriate portion of Section 4A to direct your distributions
(dividends and capital gains) to another Alliance Fund (the $250
minimum investment requirement applies to Funds into which
distributions are directed).
- ------------- ============== ======================== =============================
Indicate three Distributions Options
digit Fund *Check One*
number located Indicate Dollar Amount =============================
below Dividends Captital Gains
Make all ============== ======================== =============================
checks*
payable to: |_|_|_| $ R C D R C D
Alliance
-------- |_|_|_| $ R C D R C D
Funds
----- |_|_|_| $ R C D R C D
- -------------
|_|_|_| $ R C D R C D
==========================
Total Investment $
==========================
*Cash and money orders are not accepted
- --------------------------------------------------------------------------------------------------------------------------
Alliance Stock Fund Names and Numbers
- --------------------------------------------------------------------------------------------------------------------------
============= ============== =================
Contingent
Initial Sales Deferred Sales Asset-Based Sales
Charge Charge Charge
A B C
============= ============== =================
Domestic The Alliance Fund 044 043 344
Growth Fund 031 001 331
Premier Growth Fund 078 079 378
Technology Fund 082 282 382
Quasar Fund 026 029 326
Global International Fund 040 041 340
International Premier Growth 179 279 379
Worldwide Privatization Fund 112 212 312
New Europe Fund 062 058 362
All-Asia Investment Fund 118 218 318
Alliance Greater China '97 Fund 160 260 360
Global Small Cap Fund 045 048 345
Global Environment Fund 181 281 381
Total Return Balanced Shares 096 075 396
Utility Income Fund 009 209 309
Real Estate Investment Fund 110 210 310
Growth & Income Fund 094 074 394
</TABLE>
80841GEN-TASFApp-P2
2
<PAGE>
<TABLE>
- --------------------------------------------------------------------------------------------------------------------------
4. Your Shareholder Options
- --------------------------------------------------------------------------------------------------------------------------
<S> <C>
A. Automatic Investment Plans (AIP)
|_| Withdraw From My Bank Account Via EFT*
I authorize Alliance to draw on my bank account for investment in my fund account(s) as indicated below
(Complete Section 4D also for the bank account you wish to use).
1- |_|_|_| |_|_|_|_| |_|_| , |_|_|_| .00 |_|
Fund Number Beginning Date (MM,DD) Amount ($25 minimum) Frequency
Frequency:
2- |_|_|_| |_|_|_|_| |_|_| , |_|_|_| .00 |_| M = monthly
Fund Number Beginning Date (MM,DD) Amount ($25 minimum) Frequency Q = quarterly
A = Annually
3- |_|_|_| |_|_|_|_| |_|_| , |_|_|_| .00 |_|
Fund Number Beginning Date (MM,DD) Amount ($25 minimum) Frequency
*Electronic Funds Transfer. Your bank must be a member of the National Automated Clearing House Association (NACHA)
|_| Direct My Distributions
As indicated in Section 3, I would like my dividends and/or capital gains directed to the same class of shares of
another Alliance Fund.
FROM: |_|_|_| |_|_|_|_|_|_|_|_|_|_| - |_|
Fund Number Account Number (if existing)
TO : |_|_|_| |_|_|_|_|_|_|_|_|_|_| - |_|
Fund Number Account Number (if existing)
|_| Exchange My Shares Monthly
I authorize Alliance to transact monthly exchanges, within the same class of shares, between my fund accounts as
listed below.
FROM: |_|_|_| |_|_|_|_|_|_|_|_|_|_| - |_|
Fund Number Account Number (if existing)
|_|_| , |_|_|_| .00 |_|_|
Amount ($25 minimum) Day of Exchange**
TO : |_|_|_| |_|_|_|_|_|_|_|_|_|_| - |_|
Fund Number Account Number (if existing)
**Shares exchanged will be redeemed at the net asset value on the "Day of Exchange" (If the "Day of Exchange" is not a
fund business day, the exchange transaction will be processed on the next fund business day). The exchange privilege is not
available if stock certificates have been issued.
B. Purchases and Redemptions Via EFT
You can call our toll-free number 1-800-221-5672 and instruct Alliance Fund Services, Inc. in a recorded conversation
to purchase, redeem or exchange shares for your account. Purchase and redemption requests will be processed via
electronic funds transfer (EFT) to and from your bank account.
Instructions: o Review the information in the Prospectus about telephone transaction services.
o If you select the telephone purchase or redemption privilege, you must write "VOID" across the face of
a check from the bank account you wish to use and attach it to Section 4D of this application.
|_| Purchases and Redemptions via EFT
I hereby authorize Alliance Fund Services, Inc. to effect the purchase and/or redemption of Fund shares for my account
according to my telephone instructions or telephone instructions from my Broker/Agent, and to withdraw money or credit
money for such shares via EFT from the bank account I have selected.
- --------------------------------------------------------------------------------------------------------------------------
For shares recently purchased by check or electronic funds transfer, redemption proceeds will not be made available
until the Fund is reasonably assured that the check or electronic funds transfer has been collected, normally 15
calendar days after the purchase date.
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
3
<PAGE>
4. Your Shareholder Options (CONTINUED)
C. Systematic Withdrawal Plans (SWP)
In order to establish a SWP, you must reinvest all dividends and capital
gains.
[_] I authorize Alliance to transact periodic redemptions from my fund
account and send the proceeds to me as indicated below.
<TABLE>
<S> <C> <C> <C> <C> <C>
1- [_] [_] [_] [_] [_] [_] [_] [_] [_],[_] [_] [_].00 [_]
Fund Number Beginning Date (MM,DD) Amount ($25 minimum) Frequency
Frequency:
2- [_] [_] [_] [_] [_] [_] [_] [_] [_],[_] [_] [_].00 [_] M = monthly
Fund Number Beginning Date (MM,DD) Amount ($25 minimum) Frequency Q = quarterly
A = annually
3- [_] [_] [_] [_] [_] [_] [_] [_] [_],[_] [_] [_].00 [_]
Fund Number Beginning Date (MM,DD) Amount ($25 minimum) Frequency
</TABLE>
Please send my SWP proceeds to:
[_] My Address of Record (via check)
[_] The Payee and address specified in section 4E (via check)(Medallion
Signature Guarantee required)
[_] My checking account-via EFT (complete section 4D) Your bank must be a
member of the National Automated Clearing House Association (NACHA)
in order for you to receive SWP proceeds directly into your bank
account. Otherwise payment will be made by check
D. Bank Information This bank account information will be used for:
[_] Distributions (Section 3) [_] Telephone Transactions
(Section 4B)
[_] Automatic Investments (Section 4A) [_] Withdrawals (Section 4C)
Please Tape a Pre-printed Voided Check Here*
103
J. Smith
123 Main Street
ANYTOWN, USA 12345 ____ 19 __
Pay to the
Order of ________________________________________$ _______________
____________________________________________________________Dollars
YOUR BANK
123 STREET
ANYTOWN, USA 12345 VOID
Note ___________________________ _______________________________
:000000000:103 000000000:765
ABA Routing Number Check Bank Account Number
Number
* The above services cannot be established without a pre-printed voided check.
For EFT transactions, the fund requires signatures of bank account owners
exactly as they appear on bank records. If the registration at the bank differs
from that on the Alliance mutual fund, all parties must sign in Section 5.
[_] [_] [_] [_] [_] [_] [_] [_] [_] [_] [_] [_] [_] [_] [_] [_] [_] [_] [_] [_]
Your Bank's ABA Routing Number Your Bank Account Number
[_] Checking Account [_] Savings Account
80887GEN-TASFApp-Advisor-P4
4
<PAGE>
<TABLE>
- --------------------------------------------------------------------------------------------------------------------------
4. YOUR SHAREHOLDER OPTIONS(CONTINUED)
- --------------------------------------------------------------------------------------------------------------------------
<S> <C>
E. THIRD PARTY PAYMENT DETAILS Your signautre(s) in Section 5 must be Medallion Signature Guaranteed if your account is
not maintained by a dealer/broker. This third party payee information will be used for:
|_| Distributions (section 3) |_| Systematic Withdrawals (section 4C)
|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_| |_| |_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_||_|_|_|_|
Name (First Name) (MI) (Last Name)
|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_| |_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|
Street Number Street Name
|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_| |_|_| |_|_|_|_|_|
City State Zip code
F. REDUCED CHARGES (CLASS A ONLY) If you, your spouse or minor children own shares in other Alliance Funds, you may be eligible
for a reduced sales charge. Please complete the Right of Accumulation section or the Statement of Intent section.
[ ] A. RIGHT OF ACCUMULATION
Please link the tax identification numbers or account numbers listed below for Right of Accumulation privilieges, so
that this and future purchases will receive any discount for which they are eligible.
|_________________________________| |_________________________________| |_________________________________|
Tax ID or Account Number Tax ID or Account Number Tax ID or Account Number
[ ] B. STATEMENT OF INTENT
I want to reduce my sales charge by agreeing to invest the following amount over a 13-month period.
|_| $100,000 |_| $250,000 |_| $500,000 |_| $1,000,000
If the full amount indicated is not purchased within 13 months, I understand that an additional sales charge must be
paid from my account.
- --------------------------------------------------------------------------------------------------------------------------
DEALER/AGENT AUTHORIZATION -- For selected Dealers or Agents ONLY.
- --------------------------------------------------------------------------------------------------------------------------
We hereby authorize Alliance Fund Services, Inc. to act as our agent in connection with transactions under this
authorization form; and we guarantee the signature(s) set forth in Section 5, as well as the legal capacity of
the shareholder.
|_____________________________________________________________| |_______________________________________________________|
Dealer/Agent Firm Authorized Signature
|________________________________________________________| |__| |_______________________________________________________|
Representative First Name MI Last Name
|_____________________________________________________________| |_______________________________________________________|
Dealer/Agent Firm Number Representative Number
|_____________________________________________________________| |_______________________________________________________|
Branch Number Branch Telephone Number
|_____________________________________________________________| |_______________________________________________________|
Branch Office Address
|_____________________________________________________________| |_||_| |_______________________________________________|
City State Zip Code
</TABLE>
5
<PAGE>
- --------------------------------------------------------------------------------
5. SHAREHOLDER AUTHORIZATION -- This section MUST be completed
----
- --------------------------------------------------------------------------------
Telephone Exchanges and Redemptions by Check
Unless I have checked one or both boxes below, these privileges will
automatically apply, and by signing this application, I hereby authorize
Alliance Fund Services, Inc. to act on my telephone instructions, or on
telephone instructions from any person representing himself to be an
authorized employee of an investment dealer or agent requesting a
redemption or exchange on my behalf. (NOTE: Telephone exchanges may only be
processed between accounts that have identical registrations.) Telephone
redemption checks will only be mailed to the name and address of record;
and the address must not have changed within the last 30 days. The maximum
telephone redemption amount is $50,000 for redemptions by check.
|_| I do not elect the telephone exchange service.
|_| I do not elect the telephone redemption by check service.
By selecting any of the above telephone privileges, I agree that neither
the Fund nor Alliance, Alliance Fund Distributors, Inc., Alliance Fund
Services, Inc. or other Fund Agent will be liable for any loss, injury,
damage or expense as a result of acting upon telephone instructions
purporting to be on my behalf, that the Fund reasonably believes to be
genuine, and that neither the Fund nor any such party will be responsible
for the authenticity of such telephone instructions. I understand that any
or all of these privileges may be discontinued by me or the Fund at any
time. I understand and agree that the Fund reserves the right to refuse any
telephone instructions and that my investment dealer or agent reserves the
right to refuse to issue any telephone instructions I may request.
For non-residents only: Under penalties of perjury, I certify that to the
best of my knowledge and belief, I qualify as a foreign person as indicated
in Section 2.
I am of legal age and capacity and have received and read the Prospectus
and agree to its terms.
I CERTIFY UNDER PENALTY OF PERJURY THAT THE NUMBER SHOWN IN SECTION 1 OF
THIS FORM IS MY CORRECT TAX IDENTIFICATION NUMBER OR I AM WAITING FOR A
NUMBER TO BE ISSUED TO ME AND THAT I HAVE NOT BEEN NOTIFIED THAT THIS
ACCOUNT IS SUBJECT TO BACKUP WITHHOLDING.
THE INTERNAL REVENUE SERVICE DOES NOT REQUIRE YOUR CONSENT TO ANY PROVISION
OF THIS DOCUMENT OTHER THAN THE CERTIFICATION REQUIRED TO AVOID BACKUP
WITHHOLDING.
- ---------------------------------------------------- -------------------------
| | | |
- ---------------------------------------------------- -------------------------
Signature Date
- ---------------------------------------------------- -------------------------
| | | |
- ---------------------------------------------------- -------------------------
Signature Date
- ----------------------------------------------
Medallion Signature Guarantee required if
completing Section 4E and your mutual fund is
not maintained by a broker dealer
Alliance Capital [LOGO]
80841GEN-TASFApp-P6
6
<PAGE>
<PAGE>
The Alliance
- --------------------------------------------------------------------------------
Stock Funds
- --------------------------------------------------------------------------------
c/o Alliance Fund Services, Inc.
P.O. Box 1520, Secaucus, New Jersey 07096-1520
Toll Free (800) 221-5672
For Literature: Toll Free (800) 227-4618
Prospectus and Application
Advisor Class
November 2, 1998
Domestic Stock Funds Global Stock Funds
- -The Alliance Fund -Alliance International Fund
- -Alliance Growth Fund
- -Alliance Premier Growth Fund -Alliance International
- -Alliance Technology Fund Premier Growth Fund
- -Alliance Quasar Fund -Alliance Worldwide
Privatization Fund
-Alliance New Europe Fund
-Alliance All-Asia Investment
Fund
-Alliance Greater China '97
Fund
-Alliance Global Small Cap
Fund
-Alliance Global
Environment Fund
Total Return Funds
-Alliance Balanced Shares
-Alliance Utility Income Fund
-Alliance Growth and Income Fund
-Alliance Real Estate Investment Fund
<TABLE>
<CAPTION>
Table of Contents Page
<S> <C>
The Funds at a Glance................................................. 2
Expense Information................................................... 4
Financial Highlights.................................................. 7
Glossary.............................................................. 11
Description of the Funds.............................................. 12
Investment Objectives and Policies............................... 12
Additional Investment Practices.................................. 24
Certain Fundamental Investment Policies.......................... 31
Risk Considerations.............................................. 34
Purchase and Sale of Shares........................................... 41
Management of the Funds............................................... 43
Dividends, Distributions and Taxes.................................... 47
Conversion Feature.................................................... 48
General Information................................................... 48
</TABLE>
Adviser
Alliance Capital Management L.P.
1345 Avenue Of The Americas
New York, New York 10105
The Alliance Stock Funds provide a broad selection of investment alternatives to
investors seeking capital growth or high total return. The Domestic Stock Funds
invest mainly in the United States equity markets and the Global Stock Funds
diversify their investments among equity markets around the world, while the
Total Return Funds invest in both equity and fixed-income securities.
Each fund or portfolio (each a "Fund") is, or is a series of, an open-end
management investment company. This Prospectus sets forth concisely the
information which a prospective investor should know about each Fund before
investing. A "Statement of Additional Information" for each Fund which provides
further information regarding certain matters discussed in this Prospectus and
other matters which may be of interest to some investors has been filed with the
Securities and Exchange Commission and is incorporated herein by reference. For
a free copy, call or write Alliance Fund Services, Inc. at the indicated address
or call the "For Literature" telephone number shown above.
This Prospectus offers the Advisor Class shares of each Fund which may be
purchased at net asset value without any initial or contingent deferred sales
charges and without ongoing distribution expenses. Advisor Class shares are
offered solely to (i) investors participating in fee-based programs meeting
certain standards established by Alliance Fund Distributors, Inc., each Fund's
principal underwriter, (ii) participants in self-directed defined contribution
employee benefit plans (e.g., 401(k) plans) that meet certain minimum standards
and (iii) certain other categories of investors described in the Prospectus,
including investment advisory clients of, and certain other persons associated
with, Alliance Capital Management L.P. and its affiliates or the Funds. See
"Purchase and Sale of Shares."
An investment in these securities is not a deposit or obligation of, or
guaranteed or endorsed by, any bank and is not federally insured by the Federal
Deposit Insurance Corporation, the Federal Reserve Board or any other agency.
Investors are advised to read this Prospectus carefully and to retain it for
future reference.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
ALLIANCE(R)
Investing without the Mystery./SM/
(R)/SM These are registered marks used under licenses from the owner, Alliance
Capital Management L.P.
<PAGE>
The Funds At A Glance
The following summary is qualified in its entirety by the more detailed
information contained in this Prospectus.
The Funds' Investment Adviser Is . . .
Alliance Capital Management L.P. ("Alliance"), a global investment manager
providing diversified services to institutions and individuals through a broad
line of investments including more than 120 mutual funds. Since 1971, Alliance
has earned a reputation as a leader in the investment world with over $262
billion in assets under management as of June 30, 1998. Alliance provides
investment management services to employee benefit plans for 32 of the FORTUNE
100 companies.
Domestic Stock Funds
Alliance Fund
Seeks . . . Long-term growth of capital and income primarily through investment
in common stocks.
Invests Principally in . . . A diversified portfolio of equity securities that,
in the judgment of Alliance, have the potential to achieve capital appreciation.
Growth Fund
Seeks . . . Long-term growth of capital by investing primarily in common stocks
and other equity securities.
Invests Principally in . . . A diversified portfolio of equity securities of
companies with a favorable outlook for earnings and whose rate of growth is
expected to exceed that of the United States economy over time.
Premier Growth Fund
Seeks . . . Long-term growth of capital by investing in the equity securities of
a limited number of large, carefully selected, high-quality American companies
from a relatively small universe of intensively researched companies.
Invests Principally in . . . A diversified portfolio of equity securities that,
in the judgment of Alliance, are likely to achieve superior earnings growth.
Normally, approximately 40-50 companies will be represented in the Fund's
investment portfolio. The Fund's investments in 25 of these companies most
highly regarded at any point in time by Alliance will usually constitute
approximately 70% of the Fund's net assets.
Technology Fund
Seeks . . . Growth of capital through investment in companies expected to
benefit from advances in technology.
Invests Principally in . . . A diversified portfolio of securities of companies
which use technology extensively in the development of new or improved products
or processes.
Quasar Fund
Seeks . . . Growth of capital by pursuing aggressive investment policies.
Invests Principally in . . . A diversified portfolio of equity securities of any
company and industry and in any type of security which is believed to offer
possibilities for capital appreciation.
Global Stock Funds
International Fund
Seeks . . . A total return on its assets from long-term growth of capital and
from income.
Invests Principally in . . . A diversified portfolio of marketable securities of
established non-United States companies, companies participating in foreign
economies with prospects for growth, and foreign government securities.
International Premier Growth Fund
Seeks . . . Long-term capital appreciation.
Invests Principally in . . . A diversified portfolio of equity securities of a
limited number of large, carefully selected, high-quality non-U.S. companies
that are judged likely to achieve superior earnings growth.
Worldwide Privatization Fund
Seeks . . . Long-term capital appreciation.
Invests Principally in . . . A non-diversified portfolio of equity securities
issued by enterprises that are undergoing, or have undergone, privatization. The
balance of the Fund's investment portfolio will include securities of companies
that are believed by Alliance to be beneficiaries of the privatization process.
New Europe Fund
Seeks . . . Long-term capital appreciation through investment primarily in the
equity securities of companies based in Europe.
Invests Principally in . . . A non-diversified portfolio of equity securities of
European companies.
All-Asia Investment Fund
Seeks . . . Long-term capital appreciation.
Invests Principally in . . . A non-diversified portfolio of equity securities of
Asian/Pacific companies.
Greater China '97 Fund
Seeks . . . Long-term capital appreciation.
Invests Principally in . . . A non-diversified portfolio of equity securities of
Greater China companies.
Global Small Cap Fund
Seeks . . . Long-term growth of capital.
Invests Principally in . . . A diversified global portfolio of the equity
securities of small capitalization companies.
Global Environment Fund
Seeks . . . Long-term capital appreciation.
2
<PAGE>
Invests Principally in . . . A non-diversified portfolio of equity securities of
companies expected to benefit from advances or improvements in products,
processes or services intended to foster the protection of the environment.
Total Return Funds
Balanced Shares
Seeks . . . A high return through a combination of current income and capital
appreciation.
Invests Principally in . . . A diversified portfolio of equity and fixed-income
securities such as common and preferred stocks, U.S. Government and agency
obligations, bonds and senior debt securities.
Utility Income Fund
Seeks . . . Current income and capital appreciation through investment in the
utilities industry.
Invests Principally in . . . A diversified portfolio of equity securities, such
as common stocks, securities convertible into common stocks and rights and
warrants to subscribe for purchase of common stocks, and in fixed-income
securities such as bonds and preferred stocks.
Growth and Income Fund
Seeks . . . Income and appreciation through investment in dividend-paying common
stocks of quality companies.
Invests Principally in . . . A diversified portfolio of dividend-paying common
stocks of good quality, and, under certain market conditions, other types of
securities, including bonds, convertible bonds and preferred stocks.
Real Estate Investment Fund
Seeks . . . Total return on its assets from long-term growth of capital and from
income.
Invests Principally in . . . A diversified portfolio of equity securities of
issuers that are primarily engaged in or related to the real estate industry.
Distributions . . .
Balanced Shares, Utility Income Fund, Growth and Income Fund and Real Estate
Investment Fund intend to make distributions quarterly to shareholders. These
distributions may include ordinary income and capital gain (each of which is
taxable) and a return of capital (which is generally nontaxable). See
"Dividends, Distributions and Taxes."
A Word About Risk . . .
The price of the shares of the Alliance Stock Funds will fluctuate as the daily
prices of the individual securities in which they invest fluctuate, so that your
shares, when redeemed, may be worth more or less than their original cost. With
respect to those Funds permitted to invest in foreign currency denominated
securities, these fluctuations may be magnified by changes in foreign exchange
rates. Investment in the Global Stock Funds involves risks not associated with
funds that invest primarily in securities of U.S. issuers. While the Funds
invest principally in common stocks and other equity securities, in order to
achieve their investment objectives the Funds may at times use certain types of
investment derivatives, such as options, futures, forwards and swaps. These
involve risks different from, and, in certain cases, greater than, the risks
presented by more traditional investments. An investment in the Real Estate
Investment Fund is subject to certain risks associated with the direct ownership
of real estate in general, including possible declines in the value of real
estate, general and local economic conditions, environmental problems and
changes in interest rates. Investments by Greater China '97 Fund in Greater
China companies entail certain risks which are different from, and in certain
cases, greater than, risks associated with investments in other international
markets. These risks are fully discussed in this Prospectus.
Getting Started . . .
Shares of the Funds are available through your financial representative. Each
Fund offers multiple classes of shares, of which only the Advisor Class is
offered by this Prospectus. Advisor Class shares may be purchased at net asset
value without any initial or contingent deferred sales charges and are not
subject to ongoing distribution expenses. Advisor Class shares may be purchased
and held solely (i) through accounts established under a fee-based program,
sponsored and maintained by a registered broker-dealer or other financial
intermediary and approved by Alliance Fund Distributors, Inc. ("AFD"), each
Fund's principal underwriter, (ii) through a self-directed defined contribution
employee benefit plan (e.g., a 401(k) plan) that has at least 1,000 participants
or $25 million in assets, (iii) by investment advisory clients of, and certain
other persons associated with, Alliance and its affiliates or the Funds, and
(iv) through registered investment advisers or other financial intermediaries
who charge a management, consulting or other fee for their service and who
purchase shares through a broker or agent approved by AFD and clients of such
registered investment advisers or financial intermediaries whose accounts are
linked to the master account of such investment adviser or financial
intermediary on the books of such approved broker or agent. A shareholder's
Advisor Class shares will automatically convert to Class A shares of the same
Fund under certain circumstances. See "Conversion Feature--Conversion to Class A
Shares." Generally, a fee-based program must charge an asset-based or other
similar fee and must invest at least $250,000 in Advisor Class shares of each
Fund in which the program invests in order to be approved by AFD for investment
in Advisor Class shares. For more detailed information about who may purchase
and hold Advisor Class shares see the Statement of Additional Information. Fee-
based and other programs through which Advisor Class shares may be purchased may
impose different requirements with respect to investment in Advisor Class shares
than described above. For detailed information about purchasing and selling
shares, see "Purchase and Sale of Shares."
ALLIANCE(R)
Investing without the Mystery./SM/
(R)/SM These are registered marks used under licenses from the owner, Alliance
Capital Management L.P.
3
<PAGE>
- --------------------------------------------------------------------------------
Expense Information
- --------------------------------------------------------------------------------
Shareholder Transaction Expenses are one of several factors to consider when you
invest in a Fund. The following table summarizes your maximum transaction costs
from investing in the Advisor Class shares of each Fund and estimated annual
expenses for Advisor Class shares of each Fund. For each Fund, the "Examples" to
the right of the table below show the cumulative expenses attributable to a
hypothetical $1,000 investment in Advisor Class shares for the periods
specified.
Advisor Class Shares
--------------------
Maximum sales charge imposed on purchases.............. None
Sales charge imposed on dividend reinvestments......... None
Deferred sales charge.................................. None
Exchange fee........................................... None
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Operating Expenses Examples
---------------------------------------- -------------------------------------------
Alliance Fund Advisor Class Advisor Class
-------------- -------------
<S> <C> <C> <C>
Management fees .68% After 1 year $ 8
12b-1 fees None After 3 years $ 26
Other expenses (a) .15% After 5 years $ 46
---- After 10 years $103
Total fund
operating expenses (b) .83%
===
Growth Fund Advisor Class Advisor Class
------------- -------------
Management fees .74% After 1 year $ 10
12b-1 fees None After 3 years $ 31
Other expenses (a) .24% After 5 years $ 54
---- After 10 years $120
Total fund
operating expenses (b) .98%
====
Premier Growth Fund Advisor Class Advisor Class
------------- -------------
Management fees 1.00% After 1 year $ 13
12b-1 fees None After 3 years $ 40
Other expenses (a) .25% After 5 years $ 69
---- After 10 years $151
Total fund
operating expenses (b) 1.25%
====
Technology Fund Advisor Class Advisor Class
------------- -------------
Management fees (f) 1.04% After 1 year $ 14
12b-1 fees None After 3 years $ 44
Other expenses (a) .35% After 5 years $ 76
---- After 10 years $167
Total fund
operating expenses (b) 1.39%
====
Quasar Fund Advisor Class Advisor Class
------------- -------------
Management fees (f) 1.16% After 1 year $ 16
12b-1 fees None After 3 years $ 50
Other expenses (a) .42% After 5 years $ 86
----
Total fund
operating expenses (b) 1.58%
====
International Fund Advisor Class Advisor Class
------------- -------------
Management fees
(after waiver) (c)(f) .85% After 1 year $ 15
12b-1 fees None After 3 years $ 46
Other expenses (a) .62% After 5 years $ 80
---- After 10 years $176
Total fund
operating expenses (b) (e) 1.47%
====
International Premier
Growth Fund Advisor Class Advisor Class
------------- -------------
Management fees (g) 1.00% After 1 year $ 22
12b-1 fees None After 3 years $ 69
Other expenses (a) 1.20% After 5 years $118
---- After 10 years $253
Total fund
operating expenses (b)(e) 2.20%
====
</TABLE>
- --------------------------------------------------------------------------------
Please refer to the footnotes and the discussion following these tables on page
6.
4
<PAGE>
<TABLE>
<CAPTION>
Operating Expenses Examples
- ---------------------------------------------- -------------------------------------------
Worldwide Privatization Fund Advisor Class Advisor Class
------------- -------------
<S> <C> <C> <C>
Management fees 1.00% After 1 year $ 15
12b-1 fees None After 3 years $ 46
Other expenses (a) .45% After 5 years $ 79
---- After 10 years $174
Total fund
operating expenses (b) 1.45%
====
New Europe Fund Advisor Class Advisor Class
------------- -------------
Management fees 1.02% After 1 year $ 16
12b-1 fees None After 3 years $ 49
Other expenses (a) .52% After 5 years $ 84
---- After 10 years $183
Total fund
operating expenses (b) 1.54%
====
All-Asia Investment Fund Advisor Class Advisor Class
------------- -------------
Management fees
(after waiver) (c) .65% After 1 year $ 18
12b-1 fees None After 3 years $ 56
Other expenses After 5 years $ 96
Administration fees After 10 years $209
(after waiver) (d) .00%
Other operating expenses (a) 1.13%
----
Total fund
operating expenses (b) (e) 1.78%
====
Greater China '97 Fund Advisor Class Advisor Class
------------- -------------
Management fees 1.00% After 1 year $ 22
12b-1 fees None After 3 years $ 69
Other expenses (a) 1.20% After 5 years $118
---- After 10 years $253
Total fund
operating expenses (b) (e) 2.20%
====
Global Small Cap Fund Advisor Class Advisor Class
------------- -------------
Management fees 1.00% After 1 year $ 19
12b-1 fees None After 3 years $ 58
Other expenses (a) .84% After 5 years $100
---- After 10 years $216
Total fund
operating expenses (b) 1.84%
====
Global Environment Fund Advisor Class Advisor Class
------------- -------------
Management fees 1.10% After 1 year $ 24
12b-1 fees None After 3 years $ 75
Other expenses (a) 1.29% After 5 years $128
---- After 10 years $273
Total fund
operating expenses (b) 2.39%
====
Balanced Shares Advisor Class Advisor Class
------------- -------------
Management fees .63% After 1 year $ 11
12b-1 fees None After 3 years $ 33
Other expenses (a) .42% After 5 years $ 58
---- After 10 years $128
Total fund
operating expenses (b) 1.05%
====
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
Operating Expenses Examples
- ------------------------------------------- --------------------------------------------
Utility Income Fund Advisor Class Advisor Class
------------- -------------
<S> <C> <C> <C>
Management fees
(after waiver) (c) .00% After 1 year $ 12
12b-1 fees None After 3 years $ 38
Other expenses (a) 1.20% After 5 years $ 66
---- After 10 years $145
Total fund
operating expenses (b) (e) 1.20%
====
Growth and Income Fund Advisor Class Advisor Class
------------- -------------
Management fees .49% After 1 year $ 7
12b-1 fees None After 3 years $ 23
Other expenses (a) .22% After 5 years $ 40
---- After 10 years $ 88
Total fund
operating expenses (b) .71%
====
Real Estate Investment Fund Advisor Class Advisor Class
------------- -------------
Management fees .90% After 1 year $ 13
12b-1 fees None After 3 years $ 40
Other expenses (a) .35% After 5 years $ 69
---- After 10 years $151
Total fund
operating expenses (b) 1.25%
====
</TABLE>
- --------------------------------------------------------------------------------
(a) These expenses include a transfer agency fee payable to Alliance Fund
Services, Inc., an affiliate of Alliance. The expenses shown include the
application of credits that reduce Fund expenses.
(b) The expense information does not reflect any charges or expenses imposed by
your financial representative or your employee benefit plan.
(c) Net of voluntary fee waiver. In the absence of such waiver, management fees
would be 1.00% for All-Asia Investment Fund,.75% for Utility Income Fund and
1.00% for International Fund.
(d) Net of voluntary fee waiver. Absent such fee waiver, administration fees
would have been .15%. Reflects the fees payable by All-Asia Investment Fund
to Alliance pursuant to an administration agreement.
(e) Net of voluntary fee waivers and expense reimbursements. Absent such waivers
and/or reimbursements, total fund operating expenses would have been as
follows:
All-Asia Investment Fund International Premier Growth Fund
Advisor Class 2.28% Advisor Class 8.36%
International Fund Utility Income Fund
Advisor Class 1.62% Advisor Class 3.29%
Greater China '97 Fund
Advisor Class 18.13%
(f) Calculated based on average daily net assets. Maximum contractual rate,
based on quarter-end net assets, is 1.00% for International Fund, Quasar
Fund and Technology Fund.
The purpose of the foregoing table is to assist the investor in understanding
the various costs and expenses that an investor in a Fund will bear directly or
indirectly. "Management fees" for All-Asia Investment Fund and "Administration
fees" for All-Asia Investment Fund have been restated to reflect current
voluntary fee waivers. "Other Expenses" for Global Environment Fund and
International Premier Growth Fund are based on estimated amounts for its current
fiscal year. The Examples set forth above assume reinvestment of all dividends
and distributions and utilize a 5% annual rate of return as mandated by
Commission regulations. The Examples should not be considered representative of
future expenses; actual expenses may be greater or less than those shown.
6
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
The tables on the following pages present per share income and capital changes
for an Advisor Class share outstanding throughout each period indicated. Except
as otherwise indicated, information for Alliance Fund, Growth Fund, Premier
Growth Fund, Balanced Shares, Utility Income Fund, Worldwide Privatization Fund,
International Premier Growth Fund and Growth and Income Fund has been audited
by PricewaterhouseCoopers LLP, the independent accountants for each such Fund,
and for All-Asia Investment Fund, Technology Fund, Quasar Fund, International
Fund, New Europe Fund, Greater China '97 Fund, Global Small Cap Fund and Real
Estate Investment Fund by Ernst & Young LLP, the independent auditors for each
such Fund. A report of PricewaterhouseCoopers LLP or Ernst & Young LLP, as the
case may be, on the information with respect to each Fund, appears in the Fund's
Statement of Additional Information. The following information for each Fund
should be read in conjunction with the financial statements and related notes
which are included in the Fund's Statement of Additional Information.
Further information about a Fund's performance is contained in the Fund's annual
report to shareholders, which may be obtained without charge by contacting
Alliance Fund Services, Inc. at the address or the "For Literature" telephone
number shown on the cover of this Prospectus.
7
<PAGE>
<TABLE>
<CAPTION>
Net Net Net
Asset Realized and Increase
Value Unrealized (Decrease) In
Beginning Of Net Investment Gain (Loss) On Net Asset Value
Fiscal Year or Period Period Income (Loss) Investments From Operations
--------------------- ------------ -------------- -------------- ---------------
<S> <C> <C> <C> <C>
Alliance Fund
Advisor Class
12/1/97 to 5/31/98++ $ 8.69 0.00(b) $ .48 $ .48
Year ended 11/30/97 7.71 (.02)(b) 2.10 2.08
10/2/96+ to 11/30/96 6.99 0.00 .72 .72
Growth Fund
Advisor Class
11/1/97 to 4/30/98++ $ 44.08 $ .12(b) $ 7.50 $ 7.62
Year ended 10/31/97 34.91 (.05)(b) 10.25 10.20
10/2/96+ to 10/31/96 34.14 0.00(b) .77 .77
Premier Growth Fund
Advisor Class
12/1/97 to- 5/31/98++ $ 22.10 $ (.02)(b) $ 4.74 $ 4.72
Year ended 11/30/97 17.99 (.06)(b) 5.25 5.19
10/2/96+ to 11/30/96 15.94 (.01)(b) 2.06 2.05
Technology Fund
Advisor Class
12/1/97 to 5/31/98++ $ 54.63 $ (.21)(b) $ 6.92 $ 6.71
Year ended 11/30/97 51.17 (.45)(b) 4.33 3.88
10/2/96+ to 11/30/96 47.32 (.05)(b) 3.90 3.85
Quasar Fund
Advisor Class
10/1/97 to 3/31/98++ $ 30.42 $ (.06)(b) $ 2.37 $ 2.31
10/2/96+ to 9/30/97 27.82 (.17)(b) 6.88 6.71
International Fund
Advisor Class
Year ended 6/30/98 $ 18.67 $ .02(b)(c) $ 1.13 $ 1.15
10/2/96+ to 6/30/97 17.96 .16(b) 1.78 1.94
International Premier Growth Fund
Advisor Class
3/31/98+ to 5/31/98++ $ 10.00 $ .06(b)(c) $ .29 $ .35
Worldwide Privatization Fund
Advisor Class
Year ended 6/30/98 $ 13.23 $ .19(b) $ .80 $ .99
10/2/96+ to 6/30/97 12.14 .18(b) 2.52 2.70
New Europe Fund
Advisor Class
Year ended 7/31/98 $ 18.57 $ .08(b) $ 5.28 $ 5.36
10/2/96+ to 7/31/97 16.25 .11(b) 3.76 3.87
All-Asia Investment Fund
Advisor Class
11/1/97 to 4/30/98++ $ 7.56 $ (.06)(b)(c) $ (.25) $ (.31)
Year ended 10/31/97 11.04 (.15)(b)(c) (2.99) (3.14)
10/2/96+ to 10/31/96 11.65 0.00(c) (.61) (.61)
Greater China '97 Fund
Advisor Class
9/3/97+ to 7/31/98 $ 10.00 $ .10(b)(c) $ (5.18) $ (5.08)
Global Small Cap Fund
Advisor Class
Year ended 7/31/98 $ 12.89 $ (.07)(b) $ .37 $ .30
10/2/96+ to 7/31/97 12.56 (.08)(b) 1.97 1.89
Global Environment
12/29/97+ to 4/30/98 $ 9.15 $ (.10)(b) $ 1.83 $ 1.73
Balanced Shares
Advisor Class
Year ended 7/31/98 $ 16.17 $ .37(b) $ 1.87 $ 2.24
10/2/96+ to 7/31/97 14.79 .23 3.22 3.45
Utility Income Fund
Advisor Class
12/1/97 to 5/31/98++ $ 12.49 $ .17(b)(c) $ 1.40 $ 1.57
Year ended 11/30/97 10.59 .36(b)(c) 2.04 2.40
10/2/96+ to 11/30/96 9.95 .03(b)(c) .61 .64
Growth and Income Fund
Advisor Class
11/1/97 to 4/30/98++ $ 3.48 $ .02(b) $ .59 $ .61
Year ended 10/31/97 3.00 .05(b) .87 .92
10/2/96+ to 10/31/96 2.97 0.00 .03 .03
Real Estate Investment Fund
Advisor Class
Year ended 8/31/98 $ 12.82 $ .55(b) $ (2.34) $ (1.79)
10/1/96+ to 8/31/97 10.00 .35(b) 2.88 3.23
</TABLE>
<TABLE>
<CAPTION>
Distributions
Dividends From In Excess Of
Net Investment Net Investment
Fiscal Year or Period Income Income
--------------------- --------------- --------------
<S> <C> <C>
Alliance Fund
Advisor Class
12/1/97 to 5/31/98++ $ 0.00 $ 0.00
Year ended 11/30/97 (.04) 0.00
10/2/96+ to 11/30/96 0.00 0.00
Growth Fund
Advisor Class
11/1/97 to 4/30/98++ $ 0.00 $ 0.00
Year ended 10/31/97 0.00 0.00
10/2/96+ to 10/31/96 0.00 0.00
Premier Growth Fund
Advisor Class
12/1/97 to- 5/31/98++ $ 0.00 $ 0.00
Year ended 11/30/97 0.00 0.00
10/2/96+ to 11/30/96 0.00 0.00
Technology Fund
Advisor Class
12/1/97 to 5/31/98++ $ 0.00 $ 0.00
Year ended 11/30/97 0.00 0.00
10/2/96+ to 11/30/96 0.00 0.00
Quasar Fund
Advisor Class
10/1/97 to 3/31/98++ $ 0.00 $ 0.00
10/2/96+ to 9/30/97 0.00 0.00
International Fund
Advisor Class
Year ended 6/30/98 $ (.07) $ 0.00
10/2/96+ to 6/30/97 (.15) 0.00
International Premier Growth Fund
Advisor Class
3/31/98+ to 5/31/98++ $ 0.00 $ 0.00
Worldwide Privatization Fund
Advisor Class
Year ended 6/30/98 $ (.23) $ 0.00
10/2/96+ to 6/30/97 (.19) 0.00
New Europe Fund
Advisor Class
Year ended 7/31/98 $ 0.00 $ (.09)
10/2/96+ to 7/31/97 (.09) (.14)
All-Asia Investment Fund
Advisor Class
11/1/97 to 4/30/98++ $ 0.00 $ 0.00
Year ended 10/31/97 0.00 0.00
10/2/96+ to 10/31/96 0.00 0.00
Greater China '97 Fund
Advisor Class
9/3/97+ to 7/31/98 $ (.07) $ 0.00
Global Small Cap Fund
Advisor Class
Year ended 7/31/98 $ 0.00 $ 0.00
10/2/96+ to 7/31/97 0.00 0.00
Global Environment
12/29/97+ to 4/30/98 $ 0.00 $ 0.00
Balanced Shares
Advisor Class
Year ended 7/31/98 $ (.36) $ 0.00
10/2/96+ to 7/31/97 (.27) 0.00
Utility Income Fund
Advisor Class
12/1/97 to 5/31/98++ $ (.18) $ 0.00
Year ended 11/30/97 (.37) 0.00
10/2/96+ to 11/30/96 0.00 0.00
Growth and Income Fund
Advisor Class
11/1/97 to 4/30/98++ $ (.03) $ 0.00
Year ended 10/31/97 (0.06) 0.00
10/2/96+ to 10/31/96 0.00 0.00
Real Estate Investment Fund
Advisor Class
Year ended 8/31/98 $ (.54) $ 0.00
10/1/96+ to 8/31/97 (.41)(f) 0.00
</TABLE>
Please refer to the footnotes on page 10.
8
<PAGE>
<TABLE>
<CAPTION>
Total Net Assets Ratio Of Net
Total Net Asset Investment At End of Ratio Of Investment
Distributions Dividends Value Return Based Period Expenses Income (Loss)
From Net And End Of on Net Asset (000's To Average To Average Portfolio
Realized Gains Distributions Period Value (a) omitted) Net Assets Net Assets Turnover Rate
--------------- ------------- ----------- ------------- ----------- ------------ ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
$(2.17) $(2.17) $7.00 7.47 % $ 13,947 .79%* (.09)%* 53%
(1.06) (1.10) $8.69 32.00 10,275 .83 (.21) 158
0.00 0.00 $7.71 10.30 1,083 .89* 0.38* 80
$(2.91) $(2.91) $48.79 18.12 % $141,589 .87%* .55%* 27%
(1.03) (1.03) $44.08 29.92 101,205 .98(e) (.12) 48
0.00 0.00 $34.91 2.26 946 1.26* .50* 46
$(1.44) $(1.44) $25.38 22.92 % $201,873 1.19%* (.15)%* 30%
(1.08) (1.08) $22.10 30.98 53,459 1.25 (.28) 76
0.00 0.00 $17.99 12.86 1,922 1.50* (.48)* 95
$ (.58) $ (.58) $60.76 12.41 % $169,504 1.33%* (.74)%* 31%
(.42) (.42) $54.63 7.65 167,120 1.39(e) (.81) 51
0.00 0.00 $51.17 8.14 566 1.75* (1.21)* 30
$(1.23) $(1.23) $31.50 8.09 % $192,181 1.35%* (.42)%* 63%
(4.11) (4.11) $30.42 28.47 62,455 1.58 (.74) 135
$(1.21) $(1.28) $18.54 6.98 % $ 47,154 1.47%(d) .13% 121%
(1.08) (1.23) $18.67 11.57 8,697 1.69(d)* 1.47* 94
$ 0.00 $ 0.00 $10.35 3.50 % $ 1,612 2.20%*(d) 2.31%* 26%
$(1.36) $(1.59) $12.63 9.48 % $ 1,716 1.45% 1.48% 53%
(1.42) (1.61) $13.23 25.24 374 1.96* 2.97* 48
$(2.05) $(2.14) $21.79 32.55 % $ 3,143 1.56%(e) .39% 99%
(1.32) (1.55) $18.57 25.76 4,130 1.71(d)* .77* 89
$ 0.00 $ 0.00 $7.25 (4.10) % $ 1,494 3.53%* (1.66)%* 87%
(.34) (.34) $7.56 (29.42) 1,338 3.21(d) (1.51) 70
0.00 0.00 $11.04 (5.24) 27 4.97*(d) 1.63* 66
$ 0.00 $ (.07) $4.85 (51.06)% $ 60 2.22%(d)(e)* 1.51% 58%
$ (.99) $ (.99) $12.20 2.82 % $ 392 1.87%(e) (.57)% 113%
(1.56) (1.56) $12.89 17.08 333 2.05*(e) (.84)* 129
$ 0.00 $ 0.00 $10.88 18.91 % $ 6 2.54%* (2.04)%* 199%
$(2.07) $(2.43) $15.98 15.32 % $ 2,079 1.06%(e) 2.33% 145%
$(1.80) $(2.07) $16.17 25.96 1,565 1.30*(e) 2.15* 207
$ (.47) $ (.65) $13.41 12.88 % $ 52 1.21%*(e) 2.59%* 9%
(.13) (.50) $12.49 23.57 42 1.20 3.29 37
0.00 0.00 $10.59 6.33 33 1.20*(d) 4.02* 98
$ (.46) $ (.49) $3.60 19.45 % $ 4,357 .66%* 1.16%* 41%
(.38) (.44) $3.48 33.61 3,207 .71(e) 1.42 88
0.00 0.00 $3.00 1.01 87 0.37* 3.40* 88
$ (.01) $ (.55) $10.48 (14.74) $ 2,899 1.25% 4.08% 23%
0.00 (.41) $12.82 32.72 2,313 1.45*(d)(e) 3.07* 20
---------------------------------------------------------------------------------------------------------------------
</TABLE>
9
<PAGE>
________________
+ Commencement of distribution.
++ Unaudited.
* Annualized.
(a) Total investment return is calculated assuming an initial investment made
at the net asset value at the beginning of the period, reinvestment of all
dividends and distributions at the net asset value during the period, and
redemption on the last day of the period. Initial sales charges or
contingent deferred sales charges are not reflected in the calculation of
total investment return. Total investment return calculated for a period of
less than one year are not annualized.
(b) Based on average shares outstanding.
(c) Net of fee waiver and expense reimbursement.
(d) Net of expenses assumed and/or waived/reimbursed. If the following Funds
had borne all expenses in their most recent fiscal year, their expense
ratios, without giving effect to the expense offset arrangements described
in (e) below, would have been as follows:
<TABLE>
<CAPTION>
1996 1997 1998 1997 1998
<S> <C> <C> <C> <C> <C> <C>
All-Asia Investment Fund International Fund
Advisor Class 5.54%* 3.43 -- Advisor Class -- 1.62%
Utility Income Fund Greater China '97 Fund
Advisor Class 3.48%* 3.29 -- Advisor Class -- 18.13%*
Real Estate Investment Fund
Advisor Class -- 1.47%* --
</TABLE>
(e) Amounts do not reflect the impact of expense offset arrangements with the
transfer agent. Taking into account such expense offset arrangements, the
rate of expenses to average net assets assuming the assumption and/or
waived reimbursement of expenses described in note (d) above would have
been as follows:
<TABLE>
<CAPTION>
1997 1998 1997 1998 1997 1998
<S> <C> <C> <C> <C> <C> <C> <C> <C>
International Fund Balanced Shares Growth Fund
Advisor Class 1.69%* -- Advisor Class 1.29%* 1.05% Advisor Class .96% --
Global Small Cap Fund Real Estate Investment Fund Technology Fund
Advisor Class 2.04%* 1.84% Advisor Class 1.44%* -- Advisor Class 1.38%
New Europe Fund Growth and Income Fund Greater China '97 Fund
Advisor Class 1.71%* 1.54% Advisor Class .70% -- Advisor Class -- 2.20%*
</TABLE>
___________________________
(f) Distributions from net investment income include a tax return of capital of
$.03.
10
<PAGE>
--------------------------------
Glossary
--------------------------------
The following terms are frequently used in this Prospectus.
Equity securities, except as noted otherwise, are (i) common stocks, partnership
interests, business trust shares and other equity or ownership interests in
business enterprises, and (ii) securities convertible into, and rights and
warrants to subscribe for the purchase of, such stocks, shares and interests.
Debt securities are bonds, debentures, notes, bills, repurchase agreements,
loans, other direct debt instruments and other fixed, floating and variable rate
debt obligations, but do not include convertible securities.
Fixed-income securities are debt securities and dividend-paying preferred stocks
and include floating rate and variable rate instruments.
Convertible securities are fixed-income securities that are convertible into
common stock.
U.S. Government securities are securities issued or guaranteed by the United
States Government, its agencies or instrumentalities.
Foreign government securities are securities issued or guaranteed, as to payment
of principal and interest, by governments, quasi-governmental entities,
governmental agencies or other governmental entities.
Asian company is an entity that (i) is organized under the laws of an Asian
country and conducts business in an Asian country, (ii) derives 50% or more of
its total revenues from business in Asian countries, or (iii) issues equity or
debt securities that are traded principally on a stock exchange in an Asian
country.
Asian countries are Australia, the Democratic Socialist Republic of Sri Lanka,
the Hong Kong Special Administrative Region of the People's Republic of China
(Hong Kong), the Islamic Republic of Pakistan, Japan, the Kingdom of Thailand,
Malaysia, Negara Brunei Darussalam (Brunei), New Zealand, the People's Republic
of China, the People's Republic of Kampuchea (Cambodia), the Republic of China
(Taiwan), the Republic of India, the Republic of Indonesia, the Republic of
Korea (South Korea), the Republic of the Philippines, the Republic of Singapore,
the Socialist Republic of Vietnam and the Union of Myanmar.
Greater China company is an entity that (i) is organized under the laws of a
Greater China country and conducts business in a Greater China country, (ii)
derives 50% or more of its total revenues from business in Greater China
countries, or (iii) issues equity or debt securities that are traded principally
on a stock exchange in a Greater China country. A company of a particular
Greater China country is a company that meets any of these criteria with respect
to that country.
Greater China countries are the People's Republic of China ("China"), the Hong
Kong Special Administrative Region of the People's Republic of China ("Hong
Kong") and the Republic of China ("Taiwan").
Non-U.S. company is an entity that (i) is organized under the laws of a
foreign country and conducts business in a foreign country, (ii) derives 50% or
more of its total revenues from business in foreign countries, or (iii) issues
equity or debt securities that are traded principally on a stock exchange in a
foreign country.
Eligible Companies are companies expected to benefit from advances or
improvements in products, processes or services intended to foster the
protection of the environment.
Environmental Companies are Eligible Companies that have a principal business
involving the sale of systems or services intended to foster environmental
protection, such as waste treatment and disposal, remediation, air pollution
control and recycling.
Beneficiary Companies are Eligible Companies whose principal businesses lie
outside the environmental sector but nevertheless anticipate environmental
regulations or consumer preferences through the development of new products,
processes or services that are intended to contribute to a cleaner and healthier
environment, such as companies that anticipate the demand for plastic
substitutes, aerosol substitutes, alternative fuels and processes that generate
less hazardous waste.
Moody's is Moody's Investors Service, Inc.
S&P is Standard & Poor's Ratings Services.
Duff & Phelps is Duff & Phelps Credit Rating Co.
Fitch is Fitch IBCA, Inc.
Investment grade securities are fixed-income securities rated Baa and above by
Moody's or BBB and above by S&P, Duff & Phelps or Fitch, or determined by
Alliance to be of equivalent quality.
Lower-rated securities are fixed-income securities rated Ba or below by Moody's
or BB or below by S&P, Duff & Phelps or Fitch, or determined by Alliance to be
of equivalent quality, and are commonly referred to as "junk bonds."
Prime commercial paper is commercial paper rated Prime 1 by Moody's or A-1 or
higher by S&P or, if not rated, issued by companies that have an outstanding
debt issue rated Aa or higher by Moody's or AA or higher by S&P.
Qualifying bank deposits are certificates of deposit, bankers' acceptances and
interest-bearing savings deposits of banks having total assets of more than $1
billion and which are members of the Federal Deposit Insurance Corporation.
Rule 144A securities are securities that may be resold pursuant to Rule 144A
under the Securities Act of 1933, as amended (the "Securities Act").
Depositary receipts include American Depositary Receipts ("ADRs"), Global
Depositary Receipts ("GDRs") and other types of depositary receipts.
Commission is the Securities and Exchange Commission.
1940 Act is the Investment Company Act of 1940, as amended.
Code is the Internal Revenue Code of 1986, as amended.
Exchange is the New York Stock Exchange.
11
<PAGE>
--------------------------------
Description Of The Funds
--------------------------------
Except as noted, (i) the Funds' investment objectives are "fundamental" and
cannot be changed without shareholder vote, and (ii) the Funds' investment
policies are not fundamental and thus can be changed without a shareholder vote.
No Fund will change a non-fundamental objective or policy without notifying its
shareholders. There is no guarantee that any Fund will achieve its investment
objective.
INVESTMENT OBJECTIVES AND POLICIES
DOMESTIC STOCK FUNDS
The Domestic Stock Funds have been designed to offer investors seeking capital
appreciation a range of alternative approaches to investing in the U.S. equity
markets.
The Alliance Fund
The Alliance Fund, Inc. ("Alliance Fund") is a diversified investment company
that seeks long-term growth of capital and income primarily through investment
in common stocks. The Fund normally invests substantially all of its assets in
common stocks that Alliance believes will appreciate in value, but it may invest
in other types of securities such as convertible securities, high grade
instruments, U.S. Government securities and high quality, short-term obligations
such as repurchase agreements, bankers' acceptances and domestic certificates of
deposit, and may invest without limit in foreign securities. While the
diversification and generally high quality of the Fund's investments cannot
prevent fluctuations in market values, they tend to limit investment risk and
contribute to achieving the Fund's objective. The Fund generally does not effect
portfolio transactions in order to realize short-term trading profits or
exercise control.
The Fund may also: (i) make secured loans of its portfolio securities equal in
value up to 25% of its total assets to brokers, dealers and financial
institutions; (ii) enter into repurchase agreements of up to one week in
duration with commercial banks, but only if those agreements together with any
restricted securities and any securities which do not have readily available
market quotations do not exceed 10% of its net assets; and (iii) write exchange-
traded covered call options with respect to up to 25% of its total assets. For
additional information on the use, risks and costs of these policies and
practices see "Additional Investment Practices."
Alliance Growth Fund
Alliance Growth Fund ("Growth Fund") is a diversified investment company that
seeks long-term growth of capital. Current income is only an incidental
consideration. The Fund seeks to achieve its objective by investing primarily in
equity securities of companies with favorable earnings outlooks and whose long-
term growth rates are expected to exceed that of the U.S. economy over time. The
Fund's investment objective is not fundamental.
The Fund may also invest up to 25% of its total assets in lower-rated fixed-
income and convertible securities. See "Risk Considerations--Securities Ratings"
and "--Investment in Lower-Rated Fixed-Income Securities." The Fund generally
will not invest in securities rated at the time of purchase below Caa- by
Moody's and CCC- by S&P, Duff & Phelps or Fitch or in securities judged by
Alliance to be of comparable investment quality. However, from time to time, the
Fund may invest in securities rated in the lowest grades (i.e., C by Moody's or
D or equivalent by S&P, Duff & Phelps or Fitch), or securities Alliance judges
to be of comparable investment quality, if there are prospects for an upgrade or
a favorable conversion into equity securities. If the credit rating of a
security held by the Fund falls below its rating at the time of purchase (or
Alliance determines that the quality of such security has so deteriorated), the
Fund may continue to hold the security if such investment is considered
appropriate under the circumstances.
The Fund may also: (i) invest in "zero-coupon" bonds and "payment-in-kind"
bonds; (ii) invest in foreign securities, although the Fund will not generally
invest more than 15% of its total assets in foreign securities; (iii) invest in
securities that are not publicly traded, including Rule 144A securities; (iv)
buy or sell foreign currencies, options on foreign currencies, foreign currency
futures contracts (and related options) and deal in forward foreign exchange
contracts; (v) lend portfolio securities amounting to not more than 25% of its
total assets; (vi) enter into repurchase agreements of up to 25% of its total
assets and purchase and sell securities on a forward commitment basis; (vii) buy
and sell stock index futures contracts and buy and sell options on those
contracts and on stock indices; (viii) purchase and sell futures contracts,
options thereon and options with respect to U.S. Treasury securities; (ix) write
covered call and put options on securities it owns or in which it may invest;
and (x) purchase and sell put and call options. For additional information on
the use, risks and costs of these policies and practices see "Additional
Investment Practices."
Alliance Premier Growth Fund
Alliance Premier Growth Fund, Inc. ("Premier Growth Fund") is a diversified
investment company that seeks long-term growth of capital by investing
predominantly in the equity securities of a limited number of large, carefully
selected, high-quality U.S. companies that are judged likely to achieve superior
earnings growth. Normally, about 40-50 companies will be represented in the
Fund's portfolio, with the 25 most highly regarded of these companies usually
constituting approximately 70% of the Fund's net assets. The Fund is thus
atypical from most equity mutual funds in its focus on a relatively small number
of intensively researched companies and is designed for those seeking to
accumulate capital over time with less volatility than that associated with
investment in smaller companies.
As a matter of fundamental policy, the Fund normally invests at least 85% of its
total assets in the equity securities of U.S. companies. These are companies (i)
organized under U.S. law that have their principal office in the U.S., and (ii)
the equity
12
<PAGE>
securities of which are traded principally in the U.S. Alliance's investment
strategy for the Fund emphasizes stock selection and investment in the
securities of a limited number of issuers. Alliance relies heavily upon the
fundamental analysis and research of its large internal research staff, which
generally follows a primary research universe of more than 600 companies that
have strong management, superior industry positions, excellent balance sheets
and superior earnings growth prospects. An emphasis is placed on identifying
companies whose substantially above average prospective earnings growth is not
fully reflected in current market valuations.
In managing the Fund, Alliance seeks to utilize market volatility judiciously
(assuming no change in company fundamentals), striving to capitalize on
apparently unwarranted price fluctuations, both to purchase or increase
positions on weakness and to sell or reduce overpriced holdings. The Fund
normally remains nearly fully invested and does not take significant cash
positions for market timing purposes. During market declines, while adding to
positions in favored stocks, the Fund becomes somewhat more aggressive,
gradually reducing the number of companies represented in its portfolio.
Conversely, in rising markets, while reducing or eliminating fully valued
positions, the Fund becomes somewhat more conservative, gradually increasing the
number of companies represented in its portfolio. Alliance thus seeks to gain
positive returns in good markets while providing some measure of protection in
poor markets.
Alliance expects the average market capitalization of companies represented in
the Fund's portfolio normally to be in the range, or in excess, of the average
market capitalization of companies comprising the "S&P 500" (the Standard &
Poor's 500 Composite Stock Price Index, a widely recognized unmanaged index of
market activity).
The Fund may also: (i) invest up to 20% of its net assets in convertible
securities of companies whose common stocks are eligible for purchase by it;
(ii) invest up to 5% of its net assets in rights or warrants; (iii) invest up to
15% of its total assets in securities of foreign issuers whose common stocks are
eligible for purchase by it; (iv) purchase and sell exchange-traded index
options and stock index futures contracts; and (v) write covered exchange-traded
call options on common stocks, unless as a result, the amount of its securities
subject to call options would exceed 15% of its total assets, and purchase and
sell exchange-traded call and put options on common stocks written by others,
but the total cost of all options held by the Fund (including exchange-traded
index options) may not exceed 10% of its total assets. For additional
information on the use, risks and costs of these policies and practices see
"Additional Investment Practices." The Fund will not write put options.
Alliance Technology Fund
Alliance Technology Fund, Inc. ("Technology Fund") is a diversified investment
company that emphasizes growth of capital and invests for capital appreciation,
and only incidentally for current income. The Fund may seek income by writing
listed call options. The Fund invests primarily in securities of companies
expected to benefit from technological advances and improvements (i.e.,
companies that use technology extensively in the development of new or improved
products or processes). The Fund will normally have at least 80% of its assets
invested in the securities of these companies. The Fund normally will have
substantially all its assets invested in equity securities, but it also invests
in debt securities offering an opportunity for price appreciation. The Fund will
invest in listed and unlisted securities and U.S. and foreign securities, but it
will not purchase a foreign security if as a result 10% or more of the Fund's
total assets would be invested in foreign securities.
The Fund's policy is to invest in any company and industry and in any type of
security with potential for capital appreciation. It invests in well-known and
established companies and in new and unseasoned companies.
The Fund may also: (i) write and purchase exchange-listed call options and
purchase listed put options, including exchange-traded index put options; (ii)
invest up to 10% of its total assets in warrants; (iii) invest in restricted
securities and in other assets having no ready market if as a result no more
than 10% of the Fund's net assets are invested in such securities and assets;
(iv) lend portfolio securities equal in value to not more than 30% of the Fund's
total assets; and (v) invest up to 10% of its total assets in foreign
securities. For additional information on the use, risks and costs of the
policies and practices see "Additional Investment Practices."
Alliance Quasar Fund
Alliance Quasar Fund, Inc. ("Quasar Fund") is a diversified investment company
that seeks growth of capital by pursuing aggressive investment policies. It
invests for capital appreciation and only incidentally for current income. The
selection of securities based on the possibility of appreciation cannot prevent
loss in value. Moreover, because the Fund's investment policies are aggressive,
an investment in the Fund is risky and investors who want assured income or
preservation of capital should not invest in the Fund.
The Fund invests in any company and industry and in any type of security with
potential for capital appreciation. It invests in well-known and established
companies and in new and unseasoned companies. When selecting securities for the
Fund, Alliance considers the economic and political outlook, the values of
specific securities relative to other investments, trends in the determinants of
corporate profits and management capability and practices.
The Fund invests principally in equity securities, but it also invests to a
limited degree in non-convertible bonds and preferred stocks. The Fund invests
in listed and unlisted U.S. and foreign securities. The Fund periodically
invests in special situations, which occur when the securities of a company are
expected to appreciate due to a development particularly or uniquely applicable
to that company and regardless of general business conditions or movements of
the market as a whole.
The Fund may also: (i) invest in restricted securities and in other assets
having no ready market, but not more than 10%
13
<PAGE>
of its total assets may be invested in such securities or assets; (ii) make
short sales of securities "against the box," but not more than 15% of its net
assets may be deposited on short sales; and (iii) write call options and
purchase and sell put and call options written by others. For additional
information on the use, risks and costs of these policies and practices see
"Additional Investment Practices."
GLOBAL STOCK FUNDS
The Global Stock Funds have been designed to enable investors to participate in
the potential for long-term capital appreciation available from investment in
foreign securities.
Alliance International Fund
Alliance International Fund ("International Fund") is a diversified investment
company that seeks a total return on its assets from long-term growth of capital
and from income primarily through a broad portfolio of marketable securities of
established non-U.S. companies, companies participating in foreign economies
with prospects for growth, including U.S. companies having their principal
activities and interests outside the U.S. and foreign government securities.
Normally, more than 80% of the Fund's assets will be invested in such issuers.
The Fund expects to invest primarily in common stocks of established non-U.S.
companies that Alliance believes have potential for capital appreciation or
income or both, but the Fund is not required to invest exclusively in common
stocks or other equity securities, and it may invest in any other type of
investment grade security, including convertible securities, as well as in
warrants, or obligations of the U.S. or foreign governments and their political
subdivisions.
The Fund intends to diversify its investments broadly among countries and
normally invests in at least three foreign countries, although it may invest a
substantial portion of its assets in one or more of such countries. In this
regard, at June 30, 1998, approximately 15% of the Fund's assets were invested
in securities of Japanese issuers. The Fund may invest in companies, wherever
organized, that Alliance judges have their principal activities and interests
outside the U.S. These companies may be located in developing countries, which
involves exposure to economic structures that are generally less diverse and
mature, and to political systems which can be expected to have less stability,
than those of developed countries. The Fund currently does not intend to invest
more than 10% of its total assets in companies in, or governments of, developing
countries.
The Fund may also: (i) purchase or sell forward foreign currency exchange
contracts; (ii) write, sell and purchase U.S. or foreign exchange-listed put and
call options, including exchange-traded index options; (iii) enter into
financial futures contracts, including contracts for the purchase or sale for
future delivery of foreign currencies and stock index futures, and purchase and
write put and call options on futures contracts traded on U.S. or foreign
exchanges or over-the-counter; (iv) purchase and write put options on foreign
currencies traded on securities exchanges or boards of trade or over-the-
counter; (v) lend portfolio securities equal in value to not more than 30% of
its total assets; and (vi) enter into repurchase agreements of up to seven days'
duration, provided that not more than 10% of the Fund's total assets would be so
invested. For additional information on the use, risks and costs of these
policies and practices see "Additional Investment Practices."
Alliance International Premier Growth Fund, Inc.
Alliance International Premier Growth Fund, Inc. ("International Premier Growth
Fund") is a diversified investment company that seeks long term capital
appreciation by investing predominantly in the equity securities of a limited
number of carefully selected non-U.S. companies that are judged likely to
achieve superior earnings growth. Investments will be made based upon their
potential for capital appreciation. Current income is incidental to that
objective.
In the main, the Fund's investments will be in comparatively large, high-quality
companies. Normally, about 60 companies will be represented in the Fund's
portfolio, and the 30 most highly regarded of these companies usually will
constitute approximately 70% of the Fund's net assets. The Fund thus differs
from more typical international equity mutual funds by focusing on a relatively
small number of intensively researched companies. The Fund is designed for
investors seeking to accumulate capital over time. Because of the market risks
inherent in any investment, the selection of securities on the basis of their
appreciation possibilities cannot ensure against possible loss in value, and
there is, of course, no assurance that the Fund's investment objective will be
met.
Alliance expects the average weighted market capitalization of the companies
represented in the Fund's portfolio (i.e., the number of a company's outstanding
shares multiplied by the price per share) normally will be in the range of, or
in excess of, that of the companies comprising the Morgan Stanley Capital
International Europe, Australasia and Far East ("EAFE") Index. As of December
31, 1997, the average weighted market capitalization of those companies was
approximately $2.6 billion.
Within the investment framework described herein, Alliance's Large Cap Growth
Group, headed by Alfred Harrison, Alliance's Vice Chairman, has responsibility
for managing the Fund's portfolio. As discussed below, in selecting the Fund's
portfolio investments Alliance's Large Cap Growth Group will follow a
structured, disciplined research and investment process which is essentially
similar to that which it employs in managing Premier Growth Fund.
In managing the Fund's assets, Alliance's investment strategy will emphasize
stock selection and investment in the securities of a limited number of issuers.
Alliance depends heavily upon the fundamental analysis and research of its large
global equity research team situated in numerous locations around the world. Its
global equity analysts follow a research universe of approximately 900
companies. As one of the largest multinational investment management firms,
Alliance has access to considerable information concerning the companies
14
<PAGE>
in its research universe, an in-depth understanding of the products, services,
markets and competition of these companies and a good knowledge of their
managements. Research emphasis is placed on the identification of companies
whose superior prospective earnings growth is not fully reflected in current
market valuations.
Companies are constantly added to and deleted from this universe as fundamentals
and valuations change. Alliance's global equity analysts rate companies in three
categories. The performance of each analyst's ratings is an important
determinant of his or her incentive compensation. The equity securities of "one-
rated" companies are expected to significantly outperform the local market in
local currency terms. All equity securities purchased for the Fund's portfolio
will be selected from the universe of approximately 100 "one-rated" companies.
As noted above, approximately 70% of the Fund's net assets will usually be
invested in the approximately 30 most highly regarded such companies. The Fund
will not concentrate more than 25% of its total assets in any one industry.
Within this limit, portfolio emphasis upon particular industries or sectors will
be a by-product of the stock selection process rather than the result of
assigned targets or ranges.
The Fund's investments will be diversified among at least four, and usually
considerably more, countries. No more than 15% of the Fund's total assets will
be invested in issuers in any one foreign country, except that the Fund may
invest up to 25% of its total assets in issuers in each of Canada, France,
Germany, Italy, Japan, The Netherlands, Switzerland and the United Kingdom.
Within these limits, geographic distribution of the Fund's investments among
countries or regions will also be a product of the stock selection process
rather than predetermined allocation. To the extent that the Fund's assets will
be concentrated within any one region, the Fund may be subject to any special
risks that may be associated with that region. While the Fund may engage in
currency hedging programs in periods in which Alliance perceives extreme
exchange rate risk, the Fund will not normally make significant use of currency
hedging strategies.
In the management of the Fund's investment portfolio, Alliance will seek to
utilize market volatility judiciously (assuming no change in company
fundamentals) to adjust the Fund's portfolio positions. To the extent consistent
with local market liquidity considerations, the Fund will strive to capitalize
on apparently unwarranted price fluctuations, both to purchase or increase
positions on weakness and to sell or reduce overpriced holdings. Under normal
circumstances, the Fund will remain substantially fully invested in equity
securities and will not take significant cash positions for market timing
purposes. Rather, through "buying into declines" and "selling into strength,"
Alliance seeks superior relative returns over time.
As a matter of fundamental policy, which may not be changed without shareholder
approval, the Fund will invest under normal circumstances at least 85% of the
value of its total assets in equity securities. The Fund's other investment
policies are not fundamental and, therefore, may be changed by the Board of
Directors of the Fund without shareholder approval. For temporary defensive
purposes, the Fund may vary from its investment policies during periods in which
Alliance believes that business or financial conditions warrants, and may then
invest in high-grade short-term fixed-income securities, including U.S.
Government securities, or hold its assets in cash.
The Fund may invest up to 20% of its total assets in convertible securities of
issuers whose common stocks are eligible for purchase by the Fund. The Fund may
also: (i) invest up to 20% of its total assets in rights or warrants; (ii) write
covered put and call options and purchase put and call options on securities of
the types in which it is permitted to invest and on exchange-traded index
options and may also write uncovered options for cross hedging purposes; (iii)
enter into contracts for the purchase or sale for future delivery of fixed-
income securities or foreign currencies, or contracts based on financial
indices, including any index of U.S. Government securities, foreign government
securities, or common stock and may purchase and write options on such futures
contract: (iv) purchase and write put and call options on foreign currencies for
hedging purposes; (v) purchase or sell forward contracts; (vi) enter into
forward commitments for the purchase or sale of securities; (vii) enter into
standby commitment agreements; (viii) enter into currency swaps for hedging
purposes; (ix) enter into repurchase agreements pertaining to U.S. Government
securities with member banks of the Federal Reserve System or primary dealers in
such securities; (x) make short sales of securities or maintain short positions,
provided that the Fund may not make a short sale if as a result more than 5% of
its net assets would be held as collateral for short sales; and (xi) make
secured loans of its portfolio securities not in excess of 30% of its total
assets to entities with which it is permitted to enter into repurchase
agreements. For additional information on the use, risks and costs of these
policies and practices see "Additional Investment Practices."
Alliance Worldwide Privatization Fund
Alliance Worldwide Privatization Fund, Inc. ("Worldwide Privatization Fund") is
a non-diversified investment company that seeks long-term capital appreciation.
As a fundamental policy, the Fund invests at least 65% of its total assets in
equity securities issued by enterprises that are undergoing, or have undergone,
privatization (as described below), although normally significantly more of its
assets will be invested in such securities. The balance of its investments will
include securities of companies believed by Alliance to be beneficiaries of
privatizations. The Fund is designed for investors desiring to take advantage of
investment opportunities, historically inaccessible to U.S. individual
investors, that are created by privatizations of state enterprises in both
established and developing economies, including those in Western Europe and
Scandinavia, Australia, New Zealand, Latin America, Asia and Eastern and Central
Europe and, to a lesser degree, Canada and the United States.
The Fund's investments in enterprises undergoing privatization may comprise
three distinct situations. First, the Fund may invest in the initial offering of
publicly traded equity securities (an "initial equity offering") of a
government- or state-owned or controlled company or enterprise (a "state
enterprise").
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Secondly, the Fund may purchase securities of a current or former state
enterprise following its initial equity offering. Finally, the Fund may make
privately negotiated purchases of stock or other equity interests in a state
enterprise that has not yet conducted an initial equity offering. Alliance
believes that substantial potential for capital appreciation exists as
privatizing enterprises rationalize their management structures, operations and
business strategies in order to compete efficiently in a market economy, and the
Fund will thus emphasize investments in such enterprises.
The Fund diversifies its investments among a number of countries and normally
invests in issuers based in at least four, and usually considerably more,
countries. No more than 15% of the Fund's total assets, however, will be
invested in issuers in any one foreign country, except that the Fund may invest
up to 30% of its total assets in issuers in any one of France, Germany, Great
Britain, Italy and Japan. The Fund may invest all of its assets within a single
region of the world. To the extent that the Fund's assets are invested within
any one region, the Fund may be subject to any special risks that may be
associated with that region.
Privatization is a process through which the ownership and control of companies
or assets changes in whole or in part from the public sector to the private
sector. Through privatization a government or state divests or transfers all or
a portion of its interest in a state enterprise to some form of private
ownership. Governments and states with established economies, including France,
Great Britain, Germany and Italy, and those with developing economies, including
Argentina, Mexico, Chile, Indonesia, Malaysia, Poland and Hungary, are engaged
in privatizations. The Fund will invest in any country believed to present
attractive investment opportunities.
A major premise of the Fund's approach is that the equity securities of
privatized companies offer opportunities for significant capital appreciation.
In particular, because privatizations are integral to a country's economic
restructuring, securities sold in initial equity offerings often are priced
attractively so as to secure the issuer's successful transition to private
sector ownership. Additionally, these enterprises often dominate their local
markets and typically have the potential for significant managerial and
operational efficiency gains.
Although the Fund anticipates that it will not concentrate its investments in
any industry, it is permitted to invest more than 25% of its total assets in
issuers whose primary business activity is that of national commercial banking.
Prior to so concentrating, however, the Fund's Directors must determine that its
ability to achieve its investment objective would be adversely affected if it
were not permitted to concentrate. The staff of the Commission is of the view
that registered investment companies may not, absent shareholder approval,
change between concentration and non-concentration in a single industry. The
Fund disagrees with the staff's position but has undertaken that it will not
concentrate in the securities of national commercial banks until, if ever, the
issue is resolved. If the Fund were to invest more than 25% of its total assets
in national commercial banks, the Fund's performance could be significantly
influenced by events or conditions affecting this industry, which is subject to,
among other things, increases in interest rates and deteriorations in general
economic conditions, and the Fund's investments may be subject to greater risk
and market fluctuation than if its portfolio represented a broader range of
investments.
The Fund may invest up to 35% of its total assets in debt securities and
convertible debt securities of issuers whose common stocks are eligible for
purchase by the Fund. The Fund may maintain not more than 5% of its net assets
in lower-rated securities. See "Risk Considerations--Securities Ratings" and "--
Investment in Lower-Rated Fixed-Income Securities." The Fund will not retain a
non-convertible security that is downgraded below C or determined by Alliance to
have undergone similar credit quality deterioration following purchase.
The Fund may also: (i) invest up to 20% of its total assets in rights or
warrants; (ii) write covered put and call options and purchase put and call
options on securities of the types in which it is permitted to invest and on
exchange-traded index options; (iii) enter into contracts for the purchase or
sale for future delivery of fixed-income securities or foreign currencies, or
contracts based on financial indices, including any index of U.S. Government
securities, foreign government securities, or common stock and may purchase and
write options on future contracts; (iv) purchase and write put and call options
on foreign currencies for hedging purposes; (v) purchase or sell forward
contracts; (vi) enter into forward commitments for the purchase or sale of
securities; (vii) enter into standby commitment agreements; (viii) enter into
currency swaps for hedging purposes; (ix) enter into repurchase agreements
pertaining to U.S. Government securities with member banks of the Federal
Reserve System or primary dealers in such securities; (x) make short sales of
securities or maintain a short position; and (xi) make secured loans of its
portfolio securities not in excess of 30% of its total assets to entities with
which it can enter into repurchase agreements. For additional information on the
use, risks and costs of these policies and practices see "Additional Investment
Practices."
Alliance New Europe Fund
Alliance New Europe Fund, Inc. ("New Europe Fund") is a non-diversified
investment company that seeks long-term capital appreciation through investment
primarily in the equity securities of companies based in Europe. The Fund
intends to invest substantially all of its assets in the equity securities of
European companies and has a fundamental policy of normally investing at least
65% of its total assets in such securities. Up to 35% of its total assets may be
invested in high quality U.S. dollar or foreign currency denominated fixed-
income securities issued or guaranteed by European governmental entities, or by
European or multinational companies or supranational organizations.
Alliance believes that the quickening pace of economic integration and political
change in Europe creates the potential for many European companies to experience
rapid growth and that the emergence of new market economies in Europe and the
broadening and strengthening of other European
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economies may significantly accelerate economic development. The Fund will
invest in companies that Alliance believes possess rapid growth potential. Thus,
the Fund will emphasize investments in larger, established companies, but will
also invest in smaller, emerging companies.
In recent years, economic ties between the former "east bloc" countries of
Eastern Europe and certain other European countries have been strengthened.
Alliance believes that as this strengthening continues, some Western European
financial institutions and other companies will have special opportunities to
facilitate East-West transactions. The Fund will seek investment opportunities
among such companies and, as such become available, within the former "east
bloc," although the Fund will not invest more than 20% of its total assets in
issuers based therein, or more than 10% of its total assets in issuers based in
any one such country.
The Fund diversifies its investments among a number of European countries and,
under normal circumstances, will invest in companies based in at least three
such countries. Subject to the foregoing and to the limitation on investment in
any one former "east bloc" country, the Fund may invest without limit in a
single European country. While the Fund does not intend to concentrate its
investments in a single country, at times 25% or more of its assets may be
invested in issuers located in a single country. During such times, the Fund
would be subject to a correspondingly greater risk of loss due to adverse
political or regulatory developments, or an economic downturn, within that
country. In this regard, at July 31, 1998, approximately 20% of the Fund's
assets were invested in securities of issuers in the United Kingdom.
The Fund may also: (i) invest up to 10% of its total assets in securities for
which there is no ready market; (ii) invest up to 20% of its total assets in
warrants and rights to purchase equity securities of European companies; (iii)
invest in depositary receipts or other securities convertible into securities of
companies based in European countries, debt securities of supranational entities
denominated in the currency of any European country, debt securities denominated
in European Currency Units of an issuer in a European country (including
supranational issuers) and "semi-governmental securities"; (iv) purchase and
sell forward contracts; (v) write, sell and purchase exchange-traded put and
call options, including exchange-traded index options; (vi) enter into financial
futures contracts, including contracts for the purchase or sale for future
delivery of foreign currencies and futures contracts based on stock indices, and
purchase and write options on futures contracts; (vii) purchase and write put
options on foreign currencies traded on securities exchanges or boards of trade
or over-the-counter; (viii) make secured loans of portfolio securities not in
excess of 30% of its total assets to brokers, dealers and financial
institutions; (ix) enter into forward commitments for the purchase or sale of
securities; and (x) enter into standby commitment agreements. For additional
information on the use, risks and costs of these policies and practices see
"Additional Investment Practices."
Alliance All-Asia Investment Fund
Alliance All-Asia Investment Fund, Inc. ("All-Asia Investment Fund") is a non-
diversified investment company whose investment objective is to seek long-term
capital appreciation. In seeking to achieve its investment objective, the Fund
will invest at least 65% of its total assets in equity securities (for the
purposes of this investment policy, rights, warrants and options to purchase
common stocks are not deemed to be equity securities), preferred stocks and
equity-linked debt securities issued by Asian companies. The Fund may invest up
to 35% of its total assets in debt securities issued or guaranteed by Asian
companies or by Asian governments, their agencies or instrumentalities. The Fund
may also invest in securities issued by non-Asian issuers, provided that the
Fund will invest at least 80% of its total assets in securities issued by Asian
companies and the Asian debt securities referred to above. The Fund expects to
invest, from time to time, a significant portion, which may be in excess of 50%,
of its assets in equity securities of Japanese companies.
In the past decade, Asian countries generally have experienced a high level of
real economic growth due to political and economic changes, including foreign
investment and reduced government intervention in the economy. Alliance believes
that certain conditions exist in Asian countries which create the potential for
continued rapid economic growth. These conditions include favorable demographics
and competitive wage rates, increasing levels of foreign direct investment,
rising per capita incomes and consumer demand, a high savings rate and numerous
privatization programs. Asian countries are also becoming more industrialized
and are increasing their intra-Asian exports while reducing their dependence on
Western export demand. Alliance believes that these conditions are important to
the long-term economic growth of Asian countries.
As the economies of many Asian countries move through the "emerging market"
stage, thus increasing the supply of goods, services and capital available to
less developed Asian markets and helping to spur economic growth in those
markets, the potential is created for many Asian companies to experience rapid
growth. In addition, many Asian companies the securities of which are listed on
exchanges in more developed Asian countries will be participants in the rapid
economic growth of the lesser developed countries. These companies generally
offer the advantages of more experienced management and more developed market
regulation.
As their economies have grown, the securities markets in Asian countries have
also expanded. New exchanges have been created and the number of listed
companies, annual trading volume and overall market capitalization have
increased significantly. Additionally, new markets continue to open to foreign
investments. For example, South Korea and India have recently relaxed investment
restrictions and Vietnamese direct investments have recently become available to
U.S. investors. The Fund also offers investors the opportunity to access
relatively restricted markets. Alliance believes that investment opportunities
in Asian countries will continue to expand.
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The Fund will invest in companies believed to possess rapid growth potential.
Thus, the Fund will invest in smaller, emerging companies, but will also invest
in larger, more established companies in such growing economic sectors as
capital goods, telecommunications and consumer services.
The Fund will invest in investment grade debt securities, except that the Fund
may maintain not more than 5% of its net assets in lower-rated securities and
lower-rated loans and other lower-rated direct debt instruments. See "Risk
Considerations--Securities Ratings," "--Investment in Lower-Rated Fixed-Income
Securities" and Appendix C in the Fund's Statement of Additional Information for
a description of such ratings. The Fund will not retain a security that is
downgraded below C or determined by Alliance to have undergone similar credit
quality deterioration following purchase.
The Fund may also: (i) invest up to 25% of its net assets in the convertible
securities of companies whose common stocks are eligible for purchase by the
Fund; (ii) invest up to 20% of its net assets in rights or warrants; (iii)
invest in depositary receipts, instruments of supranational entities denominated
in the currency of any country, securities of multinational companies and "semi-
governmental securities;" (iv) invest up to 25% of its net assets in equity-
linked debt securities with the objective of realizing capital appreciation; (v)
invest up to 25% of its net assets in loans and other direct debt instruments;
(vi) write covered put and call options on securities of the types in which it
is permitted to invest and on exchange-traded index options; (vii) enter into
contracts for the purchase or sale for future delivery of fixed-income
securities or foreign currencies, or contracts based on financial indices,
including any index of U.S. Government securities, securities issued by foreign
government entities, or common stock and may purchase and write options on
future contracts; (viii) purchase and write put and call options on foreign
currencies for hedging purposes; (ix) purchase or sell forward contracts; (x)
enter into interest rate swaps and purchase or sell interest rate caps and
floors; (xi) enter into forward commitments for the purchase or sale of
securities; (xii) enter into standby commitment agreements; (xiii) enter into
currency swaps for hedging purposes; (xiv) enter into repurchase agreements
pertaining to U.S. Government securities with member banks of the Federal
Reserve System or primary dealers in such securities; (xv) make short sales of
securities or maintain a short position, in each case only if "against the box;"
and (xvi) make secured loans of its portfolio securities not in excess of 30% of
its total assets to entities with which it can enter into repurchase agreements.
For additional information on the use, risks and costs of these policies and
practices see "Additional Investment Practices."
Alliance Greater China '97 Fund, Inc.
Alliance Greater China '97 Fund, Inc. ("Greater China '97 Fund") is a non-
diversified investment company that seeks long-term capital appreciation through
investment of at least 80% of its total assets in equity securities issued by
Greater China companies. In furtherance of its investment objective, the Fund
expects to invest a significant portion, which may be greater than 50%, of its
assets in equity securities of Hong Kong companies and may invest, from time to
time, all of its assets in Hong Kong companies or companies of either of the
other Greater China countries.
In recent years, China, Hong Kong and Taiwan have each experienced a high level
of real economic growth, although growth is expected to slow in 1998. This
growth has resulted from advantageous economic conditions, including favorable
demographics, competitive wage rates, and rising per capita income and consumer
demand. Significantly, the growth has also been fueled by an easing by both
China and Taiwan of government restrictions and an increased receptivity to
foreign investment. This expanded, if not yet complete, openness to foreign
investment extends as well to the securities markets of both countries. Hong
Kong's free market economy has historically included securities markets
completely open to foreign investments. All three countries have regulated stock
exchanges upon which shares of an increasing number of Greater China companies
are traded.
With its population estimated at more than 1.2 billion as a driving force, and
notwithstanding its continuing political rigidity, China's economic growth has
been coupled with significantly reduced government economic intervention and
basic economic structural change. Recent years have seen large increases in
industrial production with a significant decline in the state sector share of
industrial output, and increased involvement of local governmental units and the
private sector in establishing new business enterprises.
With China's growth has come an increasing direct and indirect economic
involvement of all three Greater China countries. For some time, Hong Kong, a
world financial and trade center in its own right, with a large stock exchange
and offices of many of the world's multinational companies, has been the
gateway to trade with and foreign investment in China. With the long-awaited
transfer on July 1, 1997 of the sovereignty of Hong Kong from Great Britain to
China, not only the political but the economic ties between China and Hong Kong
are expected to continue to intensify, albeit with the continuation of Hong
Kong's economic system as provided for in the law governing its sovereignty.
Notwithstanding the, at times considerable, political tension between the two
countries, it is generally recognized that substantially increased trade and
investment with China has been generated from Taiwan, in many cases through Hong
Kong. Along with this increased interaction with China, Taiwan is becoming a
regional technological and telecommunication center, while continuing the
process of opening its economy up to foreign investment. Although geographically
limited, Taiwan boasts an economy among the world's twenty largest and its
foreign exchange reserves are third largest in the world measured in U.S.
dollars. As China's economy continues to expand, it is expected that Taiwan's
economic interaction with China will likewise increase.
Alliance believes that over the long term conditions are favorable for
continuing and expanding economic growth in all three Greater China countries.
It is this potential which the
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Fund hopes to take advantage of by investing both in established and new and
emerging companies.
Set forth below under "Certain Considerations and Risks" and in Appendix A to
the Fund's Statement of Additional Information is additional information
concerning the Greater China countries.
In addition to investing in equity securities of Greater China companies, the
Fund may invest up to 20% of its total assets in (i) debt securities issued or
guaranteed by Greater China companies or by Greater China governments, their
agencies or instrumentalities, and (ii) equity or debt securities issued by
issuers other than Greater China companies. The Fund will not invest in debt
securities other than investment grade securities. Should a debt security in
which the Fund is invested be downgraded below investment grade or be determined
by Alliance to have undergone a similar credit quality deterioration, the Fund
will dispose of that security.
The Fund may also: (i) invest up to 25% of its net assets in the convertible
securities of companies whose common stocks are eligible for purchase by the
Fund; (ii) invest up to 20% of its net assets in rights or warrants; (iii)
invest in depositary receipts, instruments of supranational entities denominated
in the currency of any country, securities of multinational companies and "semi-
governmental securities;" (iv) invest up to 25% of its net assets in equity-
linked debt securities with the objective of realizing capital appreciation; (v)
invest up to 20% of its net assets in loans and other direct debt securities;
(vi) write covered put and call options on securities of the types in which it
is permitted to invest and on exchange-traded index options; (vii) enter into
contracts for the purchase or sale for future delivery of fixed-income
securities or foreign currencies, or contracts based on financial indices,
including any index of U.S. Government securities, securities issued by foreign
government entities, or common stock, and may purchase and write options on
future contracts; (viii) purchase and write put and call options on foreign
currencies for hedging purposes; (ix) purchase or sell forward contracts; (x)
enter into interest rate swaps and purchase or sell interest rate caps and
floors; (xi) enter into forward commitments for the purchase or sale of
securities; (xii) enter into standby commitment agreements; (xiii) enter into
currency swaps for hedging purposes; (xiv) enter into repurchase agreements
pertaining to U.S. Government securities with member banks of the Federal
Reserve System or primary dealers in such securities; (xv) make short sales of
securities or maintain a short position, in each case only if "against the box;"
and (xvi) make secured loans of its portfolio securities not in excess of 30% of
its total assets to entities with which it can enter into repurchase agreements.
All or some of the policies and practices listed above may not be available to
the Fund in the Greater China countries, and the Fund will utilize these
policies only to the extent permissible. For additional information on the use,
risks and costs of these policies and practices see "Additional Investment
Practices."
Alliance Global Small Cap Fund
Alliance Global Small Cap Fund, Inc. ("Global Small Cap Fund") is a diversified
investment company that seeks long-term growth of capital through investment in
a global portfolio of the equity securities of selected companies with
relatively small market capitalization. The Fund's portfolio emphasizes
companies with market capitalizations that would have placed them (when
purchased) in about the smallest 20% by market capitalization of actively traded
U.S. companies, or market capitalizations of up to about $1.5 billion. Because
the Fund applies the U.S. size standard on a global basis, its foreign
investments might rank above the lowest 20%, and, in fact, might in some
countries rank among the largest, by market capitalization in local markets.
Normally, the Fund invests at least 65% of its assets in equity securities of
these smaller capitalization issuers, and these issuers are located in at least
three countries, one of which may be the U.S. Up to 35% of the Fund's total
assets may be invested in securities of companies whose market capitalizations
exceed the Fund's size standard. The Fund's portfolio securities may be listed
on a U.S. or foreign exchange or traded over-the-counter.
Alliance believes that smaller capitalization issuers often have sales and
earnings growth rates exceeding those of larger companies, and that these growth
rates tend to cause more rapid share price appreciation. Investing in smaller
capitalization stocks, however, involves greater risk than is associated with
larger, more established companies. For example, smaller capitalization
companies often have limited product lines, markets, or financial resources.
They may be dependent for management on one or a few key persons, and can be
more susceptible to losses and risks of bankruptcy. Their securities may be
thinly traded (and therefore have to be sold at a discount from current market
prices or sold in small lots over an extended period of time), may be followed
by fewer investment research analysts and may be subject to wider price swings
and thus may create a greater chance of loss than when investing in securities
of larger capitalization companies. Transaction costs in small capitalization
stocks may be higher than in those of larger capitalization companies.
The Fund may also: (i) invest up to 10% of its total assets in securities for
which there is no ready market; (ii) invest up to 20% of its total assets in
warrants to purchase equity securities; (iii) invest in depositary receipts or
other securities representing securities of companies based in countries other
than the U.S.; (iv) purchase or sell forward foreign currency contracts; (v)
write and purchase exchange-traded call options and purchase exchange-traded put
options, including put options on market indices; and (vi) make secured loans of
portfolio securities not in excess of 30% of its total assets to brokers,
dealers and financial institutions. For additional information on the use, risks
and costs of these policies and practices see "Additional Investment Practices."
Alliance Global Environment Fund
Alliance Global Environment Fund, Inc. ("Global Environment Fund") is a non-
diversified investment company that seeks long-term capital appreciation through
investment in equity securities of Eligible Companies. For purposes of the
Fund's investment objective and investment policies, "equity securities" are
common stocks (but not preferred stocks), rights or warrants to subscribe for or
purchase common
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stocks, and preferred stocks or debt securities that are convertible into common
stocks without the payment of any further consideration. Until October 3, 1997,
the Fund operated as a closed-end investment company, and its common stock
(which then comprised a single class) was listed on the Exchange.
The Fund invests in two categories of Eligible Companies--"Environmental
Companies" and "Beneficiary Companies." Environmental Companies are those that
have a principal business involving the sale of systems or services intended to
foster environmental protection, such as waste treatment and disposal,
remediation, air pollution control and recycling. Under normal circumstances,
the Fund invests at least 65% of its total assets in equity securities of
Environmental Companies. Beneficiary Companies are those whose principal
businesses lie outside the environmental sector but nevertheless anticipate
environmental regulations or consumer preferences through the development of new
products, processes or services that are intended to contribute to a cleaner and
healthier environment. Examples of such companies could be companies that
anticipate the demand for plastic substitutes, aerosol substitutes, alternative
fuels and processes that generate less hazardous waste. In this regard, the Fund
may invest in an issuer with a broadly diversified business only a part of which
provides such products, processes or services, when Alliance believes that these
products, processes or services will yield a competitive advantage that
significantly enhances the issuer's growth prospects. As a matter of fundamental
policy, the Fund will, under normal circumstances, invest substantially all of
its total assets in equity securities of Eligible Companies.
A major premise of the Fund's investment approach is that environmental concerns
will be a significant source of future growth opportunities, and that
Environmental Companies will see an increased demand for their systems and
services. Environmental Companies operate in the areas of pollution control,
clean energy, solid waste management, hazardous waste treatment and disposal,
pulp and paper recycling, waste-to-energy alternatives, biodegradable cartons,
packages, plastics and other products, remedial projects and emergency cleanup
efforts, manufacture of environmental supplies and equipment, the achievement of
purer air, groundwater and foods and the detection, evaluation and treatment of
both existing and potential environmental problems including, among others, air
pollution and acid rain.
The environmental services industry is generally positively affected by
increasing governmental action intended to foster environmental protection. As
environmental regulations are developed and enforced, Environmental Companies
providing the means of compliance with such regulations are afforded substantial
opportunities for growth. Beneficiary Companies may also derive an advantage to
the extent that they have anticipated environmental regulation and are therefore
at a competitive advantage.
In the view of Alliance, increasing public and political awareness of
environmental concerns and resultant environmental regulations are long-term
phenomena that are driven by an emerging global consensus that environmental
protection is a vital and increasingly immediate priority. Alliance believes
that Eligible Companies based in the United States and other economically
developed countries will have increasing opportunities for earnings growth
resulting not only from an increased demand for their existing products or
services but also from innovative responses to changing regulations and
priorities and enforcement policies. Such opportunities will arise, in the
opinion of Alliance, not only within developed countries but also within many
economically developing countries, such as those of Eastern Europe and the
Pacific Rim. These countries lag well behind developed countries in the
conservation and efficient use of natural resources and in their implementation
of policies which protect the environment.
Alliance believes that global investing offers opportunities for superior
investment returns. The Fund spreads investment risk among the capital markets
of a number of countries and invests in equity securities of companies based in
at least three, and normally considerably more, such countries. The percentage
of the Fund's assets invested in securities of companies in a particular country
or denominated in a particular currency will vary in accordance with Alliance's
assessment of the appreciation potential of such securities and the strength of
that currency. As of August 31, 1998, approximately 82% of the Fund's net assets
were invested in equity securities of U.S. companies.
The Fund may also: (i) invest up to 20% of its total assets in warrants to
purchase equity securities to the extent consistent with its investment
objective; (ii) invest in depositary receipts; (iii) purchase and write put and
call options on foreign currencies for hedging purposes; (iv) enter into forward
foreign currency transactions for hedging purposes; (v) invest in currency
futures and options on such futures for hedging purposes; and (vi) make secured
loans of its portfolio securities not in excess of 30% of its total assets. For
additional information on the use, risks and costs of these policies and
practices see "Additional Investment Practices."
TOTAL RETURN FUNDS
The Total Return Funds have been designed to provide a range of investment
alternatives to investors seeking both growth of capital and current income.
Alliance Balanced Shares
Alliance Balanced Shares, Inc. ("Balanced Shares") is a diversified investment
company that seeks a high return through a combination of current income and
capital appreciation. Although the Fund's investment objective is not
fundamental, the Fund is a "balanced fund" as a matter of fundamental policy.
The Fund will not purchase a security if as a result less than 25% of its total
assets will be in fixed-income senior securities (including short- and long-term
debt securities, preferred stocks, and convertible debt securities and
convertible preferred stocks to the extent that their values are attributable to
their fixed-income characteristics). Subject to these restrictions, the
percentage of the Fund's assets invested in each type of security will vary. The
Fund's assets are invested in U.S. Government securities, bonds,
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senior debt securities and preferred and common stocks in such proportions and
of such type as are deemed best adapted to the current economic and market
outlooks. The Fund may invest up to 15% of the value of its total assets in
foreign equity and fixed-income securities eligible for purchase by the Fund
under its investment policies described above. See "Risk Considerations--Foreign
Investment."
The Fund may also: (i) enter into contracts for the purchase or sale for future
delivery of foreign currencies; and (ii) purchase and write put and call options
on foreign currencies and enter into forward foreign currency exchange contracts
for hedging purposes. Subject to market conditions, the Fund may also seek to
realize income by writing covered call options listed on a domestic exchange.
For additional information on the use, risks and costs of these policies and
practices see "Additional Investment Practices."
Alliance Utility Income Fund
Alliance Utility Income Fund, Inc. ("Utility Income Fund") is a diversified
investment company that seeks current income and capital appreciation by
investing primarily in equity and fixed-income securities of companies in the
utilities industry. The Fund may invest in securities of both U.S. and foreign
issuers, although no more than 15% of the Fund's total assets will be invested
in issuers in any one foreign country. The utilities industry consists of
companies engaged in (i) the manufacture, production, generation, provision,
transmission, sale and distribution of gas and electric energy, and
communications equipment and services, including telephone, telegraph,
satellite, microwave and other companies providing communication facilities for
the public, or (ii) the provision of other utility or utility-related goods and
services, including, but not limited to, entities engaged in water provision,
cogeneration, waste disposal system provision, solid waste electric generation,
independent power producers and non-utility generators. The Fund is designed to
take advantage of the characteristics and historical performance of securities
of utility companies, many of which pay regular dividends and increase their
common stock dividends over time. As a fundamental policy, the Fund normally
invests at least 65% of its total assets in securities of companies in the
utilities industry. The Fund considers a company to be in the utilities industry
if, during the most recent twelve-month period, at least 50% of the company's
gross revenues, on a consolidated basis, were derived from its utilities
activities.
At least 65% of the Fund's total assets are invested in income-producing
securities, but there is otherwise no limit on the allocation of the Fund's
investments between equity securities and fixed-income securities. The Fund may
maintain up to 35% of its net assets in lower-rated securities. See "Risk
Considerations--Securities Ratings" and "--Investment in Lower-Rated Fixed-
Income Securities." The Fund will not retain a security that is downgraded below
B or determined by Alliance to have undergone similar credit quality
deterioration following purchase.
The United States utilities industry has experienced significant changes in
recent years. Electric utility companies in general have been favorably affected
by lower fuel costs, the full or near completion of major construction programs
and lower financing costs. In addition, many utility companies have generated
cash flows in excess of current operating expenses and construction
expenditures, permitting some degree of diversification into unregulated
businesses. Regulatory changes with respect to nuclear and conventionally fueled
generating facilities, however, could increase costs or impair the ability of
such electric utilities to operate such facilities, thus reducing their ability
to service dividend payments with respect to the securities they issue.
Furthermore, rates of return of utility companies generally are subject to
review and limitation by state public utilities commissions and tend to
fluctuate with marginal financing costs. Rate changes, however, ordinarily lag
behind the changes in financing costs, and thus can favorably or unfavorably
affect the earnings or dividend pay-outs on utilities stocks depending upon
whether such rates and costs are declining or rising.
Gas transmission companies, gas distribution companies and telecommunications
companies are also undergoing significant changes. Gas utilities have been
adversely affected by declines in the prices of alternative fuels, and have also
been affected by oversupply conditions and competition. Telephone utilities are
still experiencing the effects of the break-up of American Telephone & Telegraph
Company, including increased competition and rapidly developing technologies
with which traditional telephone companies now compete. Although there can be no
assurance that increased competition and other structural changes will not
adversely affect the profitability of such utilities, or that other negative
factors will not develop in the future, in Alliance's opinion, increased
competition and change may provide better positioned utility companies with
opportunities for enhanced profitability.
Utility companies historically have been subject to the risks of increases in
fuel and other operating costs, high interest costs, costs associated with
compliance with environmental and nuclear safety regulations, service
interruptions, economic slowdowns, surplus capacity, competition and regulatory
changes. There can also be no assurance that regulatory policies or accounting
standards changes will not negatively affect utility companies' earnings or
dividends. Utility companies are subject to regulation by various authorities
and may be affected by the imposition of special tariffs and changes in tax
laws. To the extent that rates are established or reviewed by governmental
authorities, utility companies are subject to the risk that such authorities
will not authorize increased rates. Because of the Fund's policy of
concentrating its investments in utility companies, the Fund is more susceptible
than most other mutual funds to economic, political or regulatory occurrences
affecting the utilities industry.
Foreign utility companies, like those in the U.S., are generally subject to
regulation, although such regulations may or may not be comparable to domestic
regulations. Foreign utility companies in certain countries may be more heavily
regulated by their respective governments than utility companies located in the
U.S. and, as in the U.S., generally are required to seek government
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approval for rate increases. In addition, because many foreign utility companies
use fuels that cause more pollution than those used in the U.S., such utilities
may yet be required to invest in pollution control equipment. Foreign utility
regulatory systems vary from country to country and may evolve in ways different
from regulation in the U.S. The percentage of the Fund's assets invested in
issuers of particular countries will vary. See "Risk Considerations--Foreign
Investment."
The Fund may invest up to 35% of its total assets in equity and fixed-income
securities of domestic and foreign corporate and governmental issuers other than
utility companies, including U.S. Government securities and repurchase
agreements pertaining thereto, foreign government securities, corporate fixed-
income securities of domestic issuers, corporate fixed-income securities of
foreign issuers denominated in foreign currencies or in U.S. dollars (in each
case including fixed-income securities of an issuer in one country denominated
in the currency of another country), qualifying bank deposits and prime
commercial paper.
The Fund may also: (i) invest up to 30% of its net assets in the convertible
securities of companies whose common stocks are eligible for purchase by the
Fund; (ii) invest up to 5% of its net assets in rights or warrants; (iii) invest
in depositary receipts, securities of supranational entities denominated in the
currency of any country, securities denominated in European Currency Units and
"semi-governmental securities;" (iv) write covered put and call options and
purchase put and call options on securities of the types in which it is
permitted to invest that are exchange-traded and over-the-counter; (v) purchase
and sell exchange-traded options on any securities index composed of the types
of securities in which it may invest; (vi) enter into contracts for the purchase
or sale for future delivery of fixed-income securities or foreign currencies, or
contracts based on financial indices, including an index of U.S. Government
securities, foreign government securities, corporate fixed-income securities, or
common stock, and may purchase and write options on futures contracts; (vii)
purchase and write put and call options on foreign currencies traded on U.S. and
foreign exchanges or over-the-counter for hedging purposes; (viii) purchase or
sell forward contracts; (ix) enter into interest rate swaps and purchase or sell
interest rate caps and floors; (x) enter into forward commitments for the
purchase or sale of securities; (xi) enter into standby commitment agreements;
(xii) enter into repurchase agreements pertaining to U.S. Government securities
with member banks of the Federal Reserve System or primary dealers in such
securities; (xiii) make short sales of securities or maintain a short position
as described below under "Additional Investment Practices--Short Sales;" and
(xiv) make secured loans of its portfolio securities not in excess of 20% of its
total assets to brokers, dealers and financial institutions. For additional
information on the use, risks and costs of these policies and practices, see
"Additional Investment Practices."
Alliance Growth and Income Fund
Alliance Growth and Income Fund, Inc. ("Growth and Income Fund") is a
diversified investment company that seeks appreciation through investments
primarily in dividend-paying common stocks of good quality, although it is
permitted to invest in fixed-income securities and convertible securities.
The Fund may also try to realize income by writing covered call options listed
on domestic securities exchanges. The Fund also invests in foreign securities.
Since the purchase of foreign securities entails certain political and economic
risks, the Fund has restricted its investments in securities in this category to
issues of high quality. The Fund may also purchase and sell financial forward
and futures contracts and options thereon for hedging purposes. For additional
information on the use, risks and costs of these policies and practice see
"Additional Investment Practices."
Alliance Real Estate Investment Fund
Alliance Real Estate Investment Fund, Inc. ("Real Estate Investment Fund") is a
diversified investment company that seeks a total return on its assets from
long-term growth of capital and from income principally through investing in a
portfolio of equity securities of issuers that are primarily engaged in or
related to the real estate industry.
Under normal circumstances, at least 65% of the Fund's total assets will be
invested in equity securities of real estate investment trusts ("REITs") and
other real estate industry companies. A "real estate industry company" is a
company that derives at least 50% of its gross revenues or net profits from the
ownership, development, construction, financing, management or sale of
commercial, industrial or residential real estate or interests therein. The
equity securities in which the Fund will invest for this purpose consist of
common stock, shares of beneficial interest of REITs and securities with common
stock characteristics, such as preferred stock or convertible securities ("Real
Estate Equity Securities").
The Fund may invest up to 35% of its total assets in (a) securities that
directly or indirectly represent participations in, or are collateralized by and
payable from, mortgage loans secured by real property ("Mortgage-Backed
Securities"), such as mortgage pass-through certificates, real estate mortgage
investment conduit ("REMIC") certificates and collateralized mortgage
obligations ("CMOs") and (b) short-term investments. These instruments are
described below. The risks associated with the Fund's transactions in REMICs,
CMOs and other types of mortgage-backed securities, which are considered to be
derivative securities, may include some or all of the following: market risk,
leverage and volatility risk, correlation risk, credit risk and liquidity and
valuation risk. See "Risk Considerations" for a description of these and other
risks.
As to any investment in Real Estate Equity Securities, Alliance's analysis will
focus on determining the degree to which the company involved can achieve
sustainable growth in cash flow and dividend paying capability. Alliance
believes that the primary determinant of this capability is the economic
viability of property markets in which the company operates and that the
secondary determinant of this capability is the ability of management to add
value through strategic focus and operating expertise. The Fund will
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purchase Real Estate Equity Securities when, in the judgment of Alliance, their
market price does not adequately reflect this potential. In making this
determination, Alliance will take into account fundamental trends in underlying
property markets as determined by proprietary models, site visits conducted by
individuals knowledgeable in local real estate markets, price-earnings ratios
(as defined for real estate companies), cash flow growth and stability, the
relationship between asset value and market price of the securities, dividend
payment history, and such other factors which Alliance may determine from time
to time to be relevant. Alliance will attempt to purchase for the Fund Real
Estate Equity Securities of companies whose underlying portfolios are
diversified geographically and by property type.
The Fund may invest without limitation in shares of REITs. REITs are pooled
investment vehicles which invest primarily in income producing real estate or
real estate related loans or interests. REITs are generally classified as equity
REITs, mortgage REITs or a combination of equity and mortgage REITs. Equity
REITs invest the majority of their assets directly in real property and derive
income primarily from the collection of rents. Equity REITs can also realize
capital gains by selling properties that have appreciated in value. Mortgage
REITs invest the majority of their assets in real estate mortgages and derive
income from the collection of interest payments. Similar to investment companies
such as the Fund, REITs are not taxed on income distributed to shareholders
provided they comply with several requirements of the Code. The Fund will
indirectly bear its proportionate share of expenses incurred by REITs in which
the Fund invests in addition to the expenses incurred directly by the Fund.
Investment Process for Real Estate Equity Securities. The Fund's investment
strategy with respect to Real Estate Equity Securities is based on the premise
that property market fundamentals are the primary determinant of growth
underlying the performance of Real Estate Equity Securities. Value added
management further distinguishes the most attractive Real Estate Equity
Securities. The Fund's research and investment process is designed to identify
those companies with strong property fundamentals and strong management teams.
This process is comprised of real estate market research, specific property
inspection and securities analysis. Alliance believes that this process will
result in a portfolio that will consist of Real Estate Equity Securities of
companies that own assets in the most desirable markets across the country,
diversified geographically and by property type.
In implementing the Fund's research and investment process, Alliance will avail
itself of the consulting services of CB Richard Ellis, Inc. ("CBRE"), a publicly
held company and the largest real estate services company in the United States,
comprised of real estate brokerage, property and facilities management, and real
estate finance and investment advisory activities. In 1997, CBRE completed
22,100 sale and lease transactions, managed over 6,600 client properties,
created over $5 billion in mortgage originations, and completed over 3,600
appraisal and consulting assignments. In addition, it advised and managed for
institutions over $4 billion in real estate investments. As consultant to
Alliance, CBRE provides access to its proprietary model, REIT.Score, that
analyzes the approximately 18,000 properties owned by these 142 companies. Using
proprietary databases and algorithms, CBRE analyzes local market rent, expense,
and occupancy trends, market specific transaction pricing, demographic and
economic trends, and leading indicators of real estate supply such as building
permits. Over 1,000 asset-type specific geographic markets are analyzed and
ranked on a relative scale by CBRE in compiling its REIT.Score database. The
relative attractiveness of these real estate industry companies is similarly
ranked based on the composite rankings of the properties they own. See
"Management of the Funds--Consultant to Alliance with Respect to Investment in
Real Estate Securities" for more information about CBRE.
The universe of property-owning real estate industry firms consists of
approximately 142 companies of sufficient size and quality to merit
consideration for investment by the Fund. Once the universe of real estate
industry companies has been distilled through the market research process,
CBRE's local market presence provides the capability to perform site specific
inspections of key properties. This analysis examines specific location,
condition, and sub-market trends. CBRE's use of locally based real estate
professionals provides Alliance with a window on the operations of the portfolio
companies as information can immediately be put in the context of local market
events. Only those companies whose specific property portfolios reflect the
promise of their general markets will be considered for initial and continued
investment by the Fund.
Alliance further screens the universe of real estate industry companies by using
rigorous financial models and by engaging in regular contact with management of
targeted companies. Each management's strategic plan and ability to execute the
plan are determined and analyzed. Alliance will make extensive use of CBRE's
network of industry analysts in order to assess trends in tenant industries.
This information is then used to further interpret management's strategic plans.
Financial ratio analysis is used to isolate those companies with the ability to
make value-added acquisitions. This information is combined with property market
trends and used to project future earnings potential.
The short-term investments in which Real Estate Investment Fund may invest are:
corporate commercial paper and other short-term commercial obligations, in each
case rated or issued by companies with similar securities outstanding that are
rated Prime-1, Aa or better by Moody's or A-1, AA or better by S&P; obligations
(including certificates of deposit, time deposits, demand deposits and bankers'
acceptances) of banks with securities outstanding that are rated Prime-1, Aa or
better by Moody's or A-1, AA or better by S&P; and obligations issued or
guaranteed by the U.S. Government or its agencies or instrumentalities with
remaining maturities not exceeding 18 months.
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The Fund may invest in debt securities rated BBB or higher by S&P or Baa or
higher by Moody's or, if not so rated, of equivalent credit quality as
determined by Alliance. The Fund expects that it will not retain a debt security
which is downgraded below BBB or Baa or, if unrated, determined by Alliance to
have undergone similar credit quality deterioration, subsequent to purchase by
the Fund.
The Fund may also engage in the following investment practices to the extent
indicated: (i) invest up to 10% of its net assets in rights or warrants; (ii)
invest up to 15% of its net assets in the convertible securities of companies
whose common stocks are eligible for purchase by the Fund; (iii) lend portfolio
securities equal in value to not more than 25% of total assets; (iv) enter into
repurchase agreements of up to seven days' duration; (v) enter into forward
commitments transactions as long as the Fund's aggregate commitments under such
transactions are not more than 30% of the Fund's total assets; (vi) enter into
standby commitment agreements; (vii) make short sales of securities or maintain
a short position but only if at all times when a short position is open not more
than 25% of the Fund's net assets (taken at market value) is held as collateral
for such sales; and (viii) invest in illiquid securities unless, as a result,
more than 15% of its net assets would be so invested.
ADDITIONAL INVESTMENT PRACTICES
Some or all of the Funds may engage in the following investment practices to the
extent described above.
Convertible Securities. Prior to conversion, convertible securities have the
same general characteristics as non-convertible debt securities, which generally
provide a stable stream of income with yields that are generally higher than
those of equity securities of the same or similar issuers. The price of a
convertible security will normally vary with changes in the price of the
underlying equity security, although the higher yield tends to make the
convertible security less volatile than the underlying equity security. As with
debt securities, the market value of convertible securities tends to decrease as
interest rates rise and increase as interest rates decline. While convertible
securities generally offer lower interest or dividend yields than non-
convertible debt securities of similar quality, they offer investors the
potential to benefit from increases in the market price of the underlying common
stock. Convertible debt securities that are rated Baa or lower by Moody's or BBB
or lower by S&P, Duff & Phelps or Fitch and comparable unrated securities as
determined by Alliance may share some or all of the risks of non-convertible
debt securities with those ratings. For a description of these risks, see "Risk
Considerations--Securities Ratings" and "--Investment in Lower-Rated Fixed-
Income Securities."
Rights and Warrants. A Fund will invest in rights or warrants only if the
underlying equity securities themselves are deemed appropriate by Alliance for
inclusion in the Fund's portfolio.
Rights and warrants entitle the holder to buy equity securities at a specific
price for a specific period of time. Rights are similar to warrants except that
they have a substantially shorter duration. Rights and warrants may be
considered more speculative than certain other types of investments in that they
do not entitle a holder to dividends or voting rights with respect to the
underlying securities nor do they represent any rights in the assets of the
issuing company. The value of a right or warrant does not necessarily change
with the value of the underlying security, although the value of a right or
warrant may decline because of a decrease in the value of the underlying
security, the passage of time or a change in perception as to the potential of
the underlying security, or any combination thereof. If the market price of the
underlying security is below the exercise price set forth in the warrant on the
expiration date, the warrant will expire worthless. Moreover, a right or warrant
ceases to have value if it is not exercised prior to the expiration date.
Depositary Receipts and Securities of Supranational Entities. Depositary
receipts may not necessarily be denominated in the same currency as the
underlying securities into which they may be converted. In addition, the issuers
of the stock of unsponsored depositary receipts are not obligated to disclose
material information in the United States and, therefore, there may not be a
correlation between such information and the market value of the depositary
receipts. ADRs are depositary receipts typically issued by a U.S. bank or trust
company that evidence ownership of underlying securities issued by a foreign
corporation. GDRs and other types of depositary receipts are typically issued by
foreign banks or trust companies and evidence ownership of underlying securities
issued by either a foreign or a U.S. company. Generally, depositary receipts in
registered form are designed for use in the U.S. securities markets, and
depositary receipts in bearer form are designed for use in foreign securities
markets. For purposes of determining the country of issuance, investments in
depositary receipts of either type are deemed to be investments in the
underlying securities except with respect to Growth Fund, where investments in
ADRs are deemed to be investments in securities issued by U.S. issuers and those
in GDRs and other types of depositary receipts are deemed to be investments in
the underlying securities.
A supranational entity is an entity designated or supported by the national
government of one or more countries to promote economic reconstruction or
development. Examples of supranational entities include, among others, the World
Bank (International Bank for Reconstruction and Development) and the European
Investment Bank. A European Currency Unit is a basket of specified amounts of
the currencies of the member states of the European Economic Community. "Semi-
governmental securities" are securities issued by entities owned by either a
national, state or equivalent government or are obligations of one of such
government jurisdictions which are not backed by its full faith and credit and
general taxing powers.
Mortgage-Backed Securities. Interest and principal payments (including
prepayments) on the mortgages underlying mortgage-backed securities are passed
through to the holders of the securities. As a result of the pass-through of
prepayments of principal on the underlying securities, mortgage-backed
securities are often subject to more rapid prepayment of principal than their
stated maturity would
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indicate. Prepayments occur when the mortgagor on a mortgage prepays the
remaining principal before the mortgage's scheduled maturity date. Because the
prepayment characteristics of the underlying mortgages vary, it is impossible to
predict accurately the realized yield or average life of a particular issue of
pass-through certificates. Prepayments are important because of their effect on
the yield and price of the mortgage-backed securities. During periods of
declining interest rates, prepayments can be expected to accelerate and a Fund
investing in such securities would be required to reinvest the proceeds at the
lower interest rates then available. Conversely, during periods of rising
interest rates, a reduction in prepayments may increase the effective maturity
of the securities, subjecting them to a greater risk of decline in market value
in response to rising interest rates. In addition, prepayments of mortgages
underlying securities purchased at a premium could result in capital losses.
Adjustable Rate Securities. Adjustable rate securities have interest rates that
are reset at periodic intervals, usually by reference to some interest rate
index or market interest rate. Some adjustable rate securities are backed by
pools of mortgage loans. Although the rate-adjustment feature may reduce sharp
changes in the value of adjustable rate securities, these securities can change
in value based on changes in market interest rates or the issuer's
creditworthiness. Changes in the interest rate on adjustable rate securities may
lag behind changes in prevailing market interest rates. Also, some adjustable
rate securities (or the underlying mortgages) are subject to caps or floors that
limit the maximum change in interest rate.
Asset-Backed Securities. Asset-backed securities (unrelated to first mortgage
loans) represent fractional interests in pools of leases, retail installment
loans, revolving credit receivables and other payment obligations, both secured
and unsecured. These assets are generally held by a trust and payments of
principal and interest or interest only are passed through monthly or quarterly
to certificate holders and may be guaranteed up to certain amounts by letters of
credit issued by a financial institution affiliated or unaffiliated with the
trustee or originator of the trust.
Like mortgages underlying mortgage-backed securities, underlying automobile
sales contracts or credit card receivables are subject to prepayment, which may
reduce the overall return to certificate holders. Certificate holders may also
experience delays in payment on the certificates if the full amounts due on
underlying sales contracts or receivables are not realized by the trust because
of unanticipated legal or administrative costs of enforcing the contracts or
because of depreciation or damage to the collateral (usually automobiles)
securing certain contracts, or other factors.
Zero-Coupon and Payment-in-Kind Bonds. Zero-coupon bonds are issued at a
significant discount from their principal amount in lieu of paying interest
periodically. Payment-in-kind bonds allow the issuer to make current interest
payments on the bonds in additional bonds. Because zero-coupon bonds and
payment-in-kind bonds do not pay current interest in cash, their value is
generally subject to greater fluctuation in response to changes in market
interest rates than bonds that pay interest in cash currently. Both zero-coupon
and payment-in-kind bonds allow an issuer to avoid the need to generate cash to
meet current interest payments. Accordingly, such bonds may involve greater
credit risks than bonds paying interest currently. Even though such bonds do not
pay current interest in cash, a Fund is nonetheless required to accrue interest
income on such investments and to distribute such amounts at least annually to
shareholders. Thus, a Fund could be required at times to liquidate other
investments in order to satisfy its dividend requirements.
Equity-Linked Debt Securities. Equity-linked debt securities are securities with
respect to which the amount of interest and/or principal that the issuer thereof
is obligated to pay is linked to the performance of a specified index of equity
securities. Such amount may be significantly greater or less than payment
obligations in respect of other types of debt securities. Adverse changes in
equity securities indices and other adverse changes in the securities markets
may reduce payments made under, and/or the principal of, equity-linked debt
securities held by a Fund. Furthermore, as with any debt securities, the values
of equity-linked debt securities will generally vary inversely with changes in
interest rates. A Fund's ability to dispose of equity-linked debt securities
will depend on the availability of liquid markets for such securities.
Investment in equity-linked debt securities may be considered to be speculative.
As with other securities, a Fund could lose its entire investment in equity-
linked debt securities.
Loans and Other Direct Debt Instruments. Loans and other direct debt instruments
are interests in amounts owed by a corporate, governmental or other borrower to
another party. They may represent amounts owed to lenders or lending syndicates
(loans and loan participations), to suppliers of goods or services (trade claims
or other receivables), or to other creditors. Direct debt instruments involve
the risk of loss in case of default or insolvency of the borrower and may offer
less legal protection to a Fund in the event of fraud or misrepresentation
than debt securities. In addition, loan participations involve a risk of
insolvency of the lending bank or other financial intermediary. Direct debt
instruments may also include standby financing commitments that obligate a
Fund to supply additional cash to the borrower on demand. Loans and other direct
debt instruments are generally illiquid and may be transferred only through
individually negotiated private transactions.
Purchasers of loans and other forms of direct indebtedness depend primarily upon
the creditworthiness of the borrower for payment of principal and interest.
Direct debt instruments may not be rated by any nationally recognized rating
service. If a Fund does not receive scheduled interest or principal payments on
such indebtedness, the Fund's share price and yield could be adversely affected.
Loans that are fully secured offer a Fund more protection than unsecured loans
in the event of non-payment of scheduled interest or principal. However, there
is no assurance that the liquidation of collateral from a
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secured loan would satisfy the borrower's obligation, or that the collateral can
be liquidated. Making loans to borrowers whose creditworthiness is poor may
involve substantial risks, and may be highly speculative.
Borrowers that are in bankruptcy or restructuring may never pay off their
indebtedness, or may pay only a small fraction of the amount owed. Direct
indebtedness of Asian countries and Greater China countries will also involve a
risk that the governmental entities responsible for the repayment of the debt
may be unable, or unwilling, to pay interest and repay principal when due.
Investments in loans through direct assignment of a financial institution's
interests with respect to a loan may involve additional risks to a Fund. For
example, if a loan is foreclosed, a Fund could become part owner of any
collateral, and would bear the costs and liabilities associated with owning and
disposing of the collateral. Direct debt instruments may also involve a risk of
insolvency of the lending bank or other intermediary.
A loan is often administered by a bank or other financial institution that acts
as agent for all holders. The agent administers the terms of the loan, as
specified on the loan agreement. Unless, under the terms of the loan or other
indebtedness, a Fund has direct recourse against the borrower, it may have to
rely on the agent to apply appropriate credit remedies against a borrower. If
assets held by the agent for the benefit of a Fund were determined to be
subject to the claims of the agent's general creditors, the Fund might incur
certain costs and delays in realizing payment on the loan or loan participation
and could suffer a loss of principal or interest.
Direct indebtedness purchased by a Fund may include letters of credit,
revolving credit facilities, or other standby financing commitments obligating
a Fund to pay additional cash on demand. These commitments may have the effect
of requiring a Fund to increase its investment in a borrower at a time when it
would not otherwise have done so, even if the borrower's condition makes it
unlikely that the amount will ever be repaid. Greater China '97 Fund will not
invest in lower-rated loans and other lower-rated direct debt instruments.
Mortgage-Backed Securities and Associated Risks. Mortgage-Backed Securities
include mortgage pass-through certificates and multiple-class pass-through
securities, such as REMIC pass-through certificates, CMOs and stripped mortgage-
backed securities ("SMBS"), and other types of Mortgage-Backed Securities that
may be available in the future.
Guaranteed Mortgage Pass-Through Securities. Real Estate Investment Fund may
invest in guaranteed mortgage pass-through securities which represent
participation interests in pools of residential mortgage loans and are issued by
U.S. governmental or private lenders and guaranteed by the U.S. Government or
one of its agencies or instrumentalities, including but not limited to the
Government National Mortgage Association ("Ginnie Mae"), the Federal National
Mortgage Association ("Fannie Mae") and the Federal Home Loan Mortgage
Corporation ("Freddie Mac"). Ginnie Mae certificates are guaranteed by the full
faith and credit of the United States Government for timely payment of principal
and interest on the certificates. Fannie Mae certificates are guaranteed by
Fannie Mae, a federally chartered and privately-owned corporation for full and
timely payment of principal and interest on the certificates. Freddie Mac
certificates are guaranteed by Freddie Mac, a corporate instrumentality of the
United States Government, for timely payment of interest and the ultimate
collection of all principal of the related mortgage loans.
Multiple-Class Pass-Through Securities and Collateralized Mortgage Obligations.
Mortgage-Backed Securities also include CMOs and REMIC pass-through or
participation certificates, which may be issued by, among others, U.S.
Government agencies and instrumentalities as well as private lenders. CMOs and
REMIC certificates are issued in multiple classes and the principal of and
interest on the mortgage assets may be allocated among the several classes of
CMOs or REMIC certificates in various ways. Each class of CMOs or REMIC
certificates, often referred to as a "tranche," is issued at a specific
adjustable or fixed interest rate and must be fully retired no later than its
final distribution date. Generally, interest is paid or accrues on all classes
of CMOs or REMIC certificates on a monthly basis. Real Estate Investment Fund
will not invest in the lowest tranche of CMOs and REMIC certificates.
Typically, CMOs are collateralized by Ginnie Mae or Freddie Mac certificates but
also may be collateralized by other mortgage assets such as whole loans or
private mortgage pass-through securities. Debt service on CMOs is provided from
payments of principal and interest on collateral of mortgaged assets and any
reinvestment income thereon.
A REMIC is a CMO that qualifies for special tax treatment under the Code and
invests in certain mortgages primarily secured by interests in real property and
other permitted investments. Investors may purchase "regular" and "residual"
interest shares of beneficial interest in REMIC trusts although Real Estate
Investment Fund does not intend to invest in residual interests.
Risks. Investing in Mortgage-Backed Securities involves certain unique risks in
addition to those generally associated with investing in the real estate
industry in general. These unique risks include the failure of a counterparty to
meet its commitments, adverse interest rate changes and the effects of
prepayments on mortgage cash flows. See "Risk Considerations--Mortgage-Backed
Securities" for a more complete description of the characteristics of Mortgage-
Backed Securities and associated risks.
Illiquid Securities. Subject to any more restrictive applicable fundamental
investment policy, none of the Funds will maintain more than 15% of its net
assets in illiquid securities. Illiquid securities generally include (i) direct
placements or other securities that are subject to legal or contractual
restrictions on resale or for which there is no readily available market (e.g.,
when trading in the security is suspended or, in the case of unlisted
securities, when market makers do not exist or will not entertain bids or
offers), including many individually
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negotiated currency swaps and any assets used to cover currency swaps and most
privately negotiated investments in state enterprises that have not yet
conducted an initial equity offering, (ii) over-the-counter options and assets
used to cover over-the-counter options, and (iii) repurchase agreements not
terminable within seven days.
Because of the absence of a trading market for illiquid securities, a Fund may
not be able to realize their full value upon sale. With respect to each Fund
that may invest in such securities, Alliance will monitor their illiquidity
under the supervision of the Directors of the Fund. To the extent permitted by
applicable law, Rule 144A securities will not be treated as "illiquid" for
purposes of the foregoing restriction so long as such securities meet liquidity
guidelines established by a Fund's Directors. Investment in non-publicly traded
securities by Growth Fund is restricted to 5% of its total assets (not including
for these purposes Rule 144A securities, to the extent permitted by applicable
law) and is also subject to the 15% restriction on investment in illiquid
securities described above.
A Fund that invests in securities for which there is no ready market may
therefore not be able to readily sell such securities. Such securities are
unlike securities which are traded in the open market and which can be expected
to be sold immediately if the market is adequate. The sale price of illiquid
securities may be lower or higher than Alliance's most recent estimate of their
fair value. Generally, less public information is available with respect to the
issuers of such securities than with respect to companies whose securities are
traded on an exchange. To the extent that these securities are foreign
securities, there is no law in many of the countries in which a Fund may invest
similar to the Securities Act requiring an issuer to register the sale of
securities with a governmental agency or imposing legal restrictions on resales
of securities, either as to length of time the securities may be held or manner
of resale. However, there may be contractual restrictions on resales of
securities.
Options on Securities. An option gives the purchaser of the option, upon payment
of a premium, the right to deliver to (in the case of a put) or receive from (in
the case of a call) the writer a specified amount of a security on or before a
fixed date at a predetermined price. A call option written by a Fund is
"covered" if the Fund owns the underlying security, has an absolute and
immediate right to acquire that security upon conversion or exchange of another
security it holds, or holds a call option on the underlying security with an
exercise price equal to or less than that of the call option it has written. A
put option written by a Fund is covered if the Fund holds a put option on the
underlying securities with an exercise price equal to or greater than that of
the put option it has written.
A call option is for cross-hedging purposes if a Fund does not own the
underlying security, and is designed to provide a hedge against a decline in
value in another security which the Fund owns or has the right to acquire.
Worldwide Privatization Fund, All-Asia Investment Fund, Greater China '97 Fund,
International Premier Growth Fund and Utility Income Fund each may write call
options for cross-hedging purposes. A Fund would write a call option for cross-
hedging purposes, instead of writing a covered call option, when the premium to
be received from the cross-hedge transaction would exceed that which would be
received from writing a covered call option, while at the same time achieving
the desired hedge.
In purchasing an option, a Fund would be in a position to realize a gain if,
during the option period, the price of the underlying security increased (in the
case of a call) or decreased (in the case of a put) by an amount in excess of
the premium paid; otherwise the Fund would experience a loss equal to the
premium paid for the option.
If an option written by a Fund were exercised, the Fund would be obligated to
purchase (in the case of a put) or sell (in the case of a call) the underlying
security at the exercise price. The risk involved in writing an option is that,
if the option were exercised, the underlying security would then be purchased or
sold by the Fund at a disadvantageous price. These risks could be reduced by
entering into a closing transaction (i.e., by disposing of the option prior to
its exercise). A Fund retains the premium received from writing a put or call
option whether or not the option is exercised. The writing of covered call
options could result in increases in a Fund's portfolio turnover rate,
especially during periods when market prices of the underlying securities
appreciate.
Technology Fund, Quasar Fund, International Fund, New Europe Fund and Global
Small Cap Fund will not write uncovered call options. Technology Fund and Global
Small Cap Fund will not write a call option if the premium to be received by the
Fund in doing so would not produce an annualized return of at least 15% of the
then current market value of the securities subject to the option (without
giving effect to commissions, stock transfer taxes and other expenses that are
deducted from premium receipts). Technology Fund, Quasar Fund and Global Small
Cap Fund will not write a call option if, as a result, the aggregate of the
Fund's portfolio securities subject to outstanding call options (valued at the
lower of the option price or market value of such securities) would exceed 15%
of the Fund's total assets or more than 10% of the Fund's assets would be
committed to call options that at the time of sale have a remaining term of more
than 100 days. The aggregate cost of all outstanding options purchased and held
by each of Premier Growth Fund, Technology Fund, Quasar Fund and Global Small
Cap Fund will at no time exceed 10% of the Fund's total assets. Neither
International Fund nor New Europe Fund will write uncovered put options.
A Fund that purchases or writes options on securities in privately negotiated
(i.e., over-the-counter) transactions will effect such transactions only with
investment dealers and other financial institutions (such as commercial banks or
savings and loan institutions) deemed creditworthy by Alliance, and Alliance has
adopted procedures for monitoring the creditworthiness of such entities. Options
purchased or written by a Fund in negotiated transactions are illiquid and it
may not be possible for the Fund to effect a closing transaction at an
advantageous time. See "Illiquid Securities."
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Options on Securities Indices. An option on a securities index is similar to an
option on a security except that, rather than the right to take or make delivery
of a security at a specified price, an option on a securities index gives the
holder the right to receive, upon exercise of the option, an amount of cash if
the closing level of the chosen index is greater than (in the case of a call) or
less than (in the case of a put) the exercise price of the option.
Futures Contracts and Options on Futures Contracts. A "sale" of a futures
contract means the acquisition of a contractual obligation to deliver the
securities or foreign currencies or other commodity called for by the contract
at a specified price on a specified date. A "purchase" of a futures contract
means the incurring of an obligation to acquire the securities, foreign
currencies or other commodity called for by the contract at a specified price on
a specified date. The purchaser of a futures contract on an index agrees to take
or make delivery of an amount of cash equal to the difference between a
specified dollar multiple of the value of the index on the expiration date of
the contract ("current contract value") and the price at which the contract was
originally struck. No physical delivery of the securities underlying the index
is made.
Options on futures contracts written or purchased by a Fund will be traded on
U.S. or foreign exchanges or over-the-counter. These investment techniques will
be used only to hedge against anticipated future changes in market conditions
and interest or exchange rates which otherwise might either adversely affect the
value of the Fund's portfolio securities or adversely affect the prices of
securities which the Fund intends to purchase at a later date.
No Fund will enter into any futures contracts or options on futures contracts if
immediately thereafter the market values of the outstanding futures contracts of
the Fund and the currencies and futures contracts subject to outstanding options
written by the Fund would exceed 50% of its total assets, or in the case of
International Premier Growth Fund 100% of its total assets. Premier Growth Fund
and Growth and Income Fund may not purchase or sell a stock index future if
immediately thereafter more than 30% of its total assets would be hedged by
stock index futures. Premier Growth Fund and Growth and Income Fund may not
purchase or sell a stock index future if, immediately thereafter, the sum of the
amount of margin deposits on the Fund's existing futures positions would exceed
5% of the market value of the Fund's total assets.
Options on Foreign Currencies. As in the case of other kinds of options, the
writing of an option on a foreign currency constitutes only a partial hedge, up
to the amount of the premium received, and a Fund could be required to purchase
or sell foreign currencies at disadvantageous exchange rates, thereby incurring
losses. The purchase of an option on a foreign currency may constitute an
effective hedge against fluctuations in exchange rates although, in the event of
rate movements adverse to a Fund's position, it may forfeit the entire amount of
the premium plus related transaction costs. See the Statement of Additional
Information of each Fund that may invest in options on foreign currencies for
further discussion of the use, risks and costs of options on foreign currencies.
Forward Foreign Currency Exchange Contracts. A Fund purchases or sells forward
foreign currency exchange contracts to minimize the risk to it from adverse
changes in the relationship between the U.S. dollar and other currencies. A
forward contract is an obligation to purchase or sell a specific currency for an
agreed price at a future date, and is individually negotiated and privately
traded.
A Fund may enter into a forward contract, for example, when it enters into a
contract for the purchase or sale of a security denominated in a foreign
currency in order to "lock in" the U.S. dollar price of the security
("transaction hedge"). A Fund will not engage in transaction hedges with respect
to the currency of a particular country to an extent greater than the aggregate
amount of the Fund's transactions in that currency. When a Fund believes that a
foreign currency may suffer a substantial decline against the U.S. dollar, it
may enter into a forward sale contract to sell an amount of that foreign
currency approximating the value of some or all of the Fund's portfolio
securities denominated in such foreign currency, or when the Fund believes that
the U.S. dollar may suffer a substantial decline against a foreign currency, it
may enter into a forward purchase contract to buy that foreign currency for a
fixed dollar amount ("position hedge"). A Fund will not position hedge with
respect to a particular currency to an extent greater than the aggregate market
value (at the time of making such sale) of the securities held in its portfolio
denominated or quoted in that currency. Instead of entering into a position
hedge, a Fund may, in the alternative, enter into a forward contract to sell a
different foreign currency for a fixed U.S. dollar amount where the Fund
believes that the U.S. dollar value of the currency to be sold pursuant to the
forward contract will fall whenever there is a decline in the U.S. dollar value
of the currency in which portfolio securities of the Fund are denominated
("cross-hedge"). Unanticipated changes in currency prices may result in poorer
overall performance for the Fund than if it had not entered into such forward
contracts.
Hedging against a decline in the value of a currency does not eliminate
fluctuations in the prices of portfolio securities or prevent losses if the
prices of such securities decline. Such transactions also preclude the
opportunity for gain if the value of the hedged currency should rise. Moreover,
it may not be possible for a Fund to hedge against a devaluation that is so
generally anticipated that the Fund is not able to contract to sell the currency
at a price above the devaluation level it anticipates. International Fund, New
Europe Fund and Global Small Cap Fund will not enter into a forward contract
with a term of more than one year or if, as a result, more than 50% of its total
assets would be committed to such contracts. The dealings of International Fund,
New Europe Fund and Global Small Cap Fund in forward contracts will be limited
to hedging involving either specific transactions or portfolio positions. Growth
Fund may also purchase and sell foreign currency on a spot basis.
Forward Commitments. Forward commitments for the purchase or sale of securities
may include purchases on a "when-issued" basis or purchases or sales on a
"delayed delivery"
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basis. In some cases, a forward commitment may be conditioned upon the
occurrence of a subsequent event, such as approval and consummation of a merger,
corporate reorganization or debt restructuring (i.e., a "when, as and if issued"
trade).
When forward commitment transactions are negotiated, the price is fixed at the
time the commitment is made, but delivery and payment for the securities take
place at a later date. Normally, the settlement date occurs within two months
after the transaction, but settlements beyond two months may be negotiated.
Securities purchased or sold under a forward commitment are subject to market
fluctuation, and no interest or dividends accrue to the purchaser prior to the
settlement date. At the time a Fund intends to enter into a forward commitment,
it records the transaction and thereafter reflects the value of the security
purchased or, if a sale, the proceeds to be received, in determining its net
asset value. Any unrealized appreciation or depreciation reflected in such
valuation of a "when, as and if issued" security would be canceled in the event
that the required conditions did not occur and the trade was canceled.
The use of forward commitments enables a Fund to protect against anticipated
changes in interest rates and prices. For instance, in periods of rising
interest rates and falling bond prices, a Fund might sell securities in its
portfolio on a forward commitment basis to limit its exposure to falling prices.
In periods of falling interest rates and rising bond prices, a Fund might sell a
security in its portfolio and purchase the same or a similar security on a when-
issued or forward commitment basis, thereby obtaining the benefit of currently
higher cash yields. However, if Alliance were to forecast incorrectly the
direction of interest rate movements, a Fund might be required to complete such
when-issued or forward transactions at prices inferior to the then current
market values. When-issued securities and forward commitments may be sold prior
to the settlement date, but a Fund enters into when-issued and forward
commitments only with the intention of actually receiving securities or
delivering them, as the case may be. If a Fund chooses to dispose of the right
to acquire a when-issued security prior to its acquisition or dispose of its
right to deliver or receive against a forward commitment, it may incur a gain or
loss. Any significant commitment of Fund assets to the purchase of securities on
a "when, as and if issued" basis may increase the volatility of the Fund's net
asset value. No forward commitments will be made by New Europe Fund,
International Premier Growth Fund, All-Asia Investment Fund, Greater China '97
Fund, Worldwide Privatization Fund, Utility Income Fund or Real Estate
Investment Fund if, as a result, the Fund's aggregate commitments under such
transactions would be more than 30% of the Fund's total assets. In the event the
other party to a forward commitment transaction were to default, a Fund might
lose the opportunity to invest money at favorable rates or to dispose of
securities at favorable prices.
Standby Commitment Agreements. Standby commitment agreements commit a Fund, for
a stated period of time, to purchase a stated amount of a security that may be
issued and sold to the Fund at the option of the issuer. The price and coupon of
the security are fixed at the time of the commitment. At the time of entering
into the agreement the Fund is paid a commitment fee, regardless of whether the
security ultimately is issued, typically equal to approximately 0.5% of the
aggregate purchase price of the security the Fund has committed to purchase. A
Fund will enter into such agreements only for the purpose of investing in the
security underlying the commitment at a yield and price considered advantageous
to the Fund and unavailable on a firm commitment basis. No Fund, other than
International Premier Growth Fund, will enter into a standby commitment with a
remaining term in excess of 45 days. Investments in standby commitments will be
limited so that the aggregate purchase price of the securities subject to the
commitments will not exceed 25% with respect to New Europe Fund and Real Estate
Investment Fund, 50% with respect to International Premier Growth Fund,
Worldwide Privatization Fund, All-Asia Investment Fund and Greater China '97
Fund and 20% with respect to Utility Income Fund, of the Fund's assets taken at
the time of making the commitment.
There is no guarantee that a security subject to a standby commitment will be
issued and the value of the security, if issued, on the delivery date may be
more or less than its purchase price. Since the issuance of the security
underlying the commitment is at the option of the issuer, a Fund will bear the
risk of capital loss in the event the value of the security declines and may not
benefit from an appreciation in the value of the security during the commitment
period if the issuer decides not to issue and sell the security to the Fund.
Currency Swaps. Currency swaps involve the individually negotiated exchange by a
Fund with another party of a series of payments in specified currencies. A
currency swap may involve the delivery at the end of the exchange period of a
substantial amount of one designated currency in exchange for the other
designated currency. Therefore the entire principal value of a currency swap is
subject to the risk that the other party to the swap will default on its
contractual delivery obligations. The net amount of the excess, if any, of a
Fund's obligations over its entitlements with respect to each currency swap will
be accrued on a daily basis. A Fund will not enter into any currency swap unless
the credit quality of the unsecured senior debt or the claims-paying ability of
the other party thereto is rated in the highest rating category of at least one
nationally recognized rating organization at the time of entering into the
transaction. If there is a default by the other party to such a transaction,
such Fund will have contractual remedies pursuant to the agreements related to
the transactions.
Interest Rate Transactions. Each Fund that may enter into interest rate
transactions expects to do so primarily to preserve a return or spread on a
particular investment or portion of its portfolio or to protect against any
increase in the price of securities the Fund anticipates purchasing at a later
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date. The Funds do not intend to use these transactions in a speculative manner.
Interest rate swaps involve the exchange by a Fund with another party of their
respective commitments to pay or receive interest (e.g., an exchange of floating
rate payments for fixed rate payments). Interest rate swaps are entered on a net
basis (i.e., the two payment streams are netted out, with the Fund receiving or
paying, as the case may be, only the net amount of the two payments). With
respect to All-Asia Investment Fund, Greater China '97 Fund and Utility Income
Fund, the exchange commitments can involve payments in the same currency or in
different currencies. The purchase of an interest rate cap entitles the
purchaser, to the extent that a specified index exceeds a predetermined interest
rate, to receive payments of interest on a contractually-based principal amount
from the party selling such interest rate cap. The purchase of an interest rate
floor entitles the purchaser, to the extent that a specified index falls below a
predetermined interest rate, to receive payments of interest on an agreed
principal amount from the party selling the interest rate floor.
A Fund may enter into interest rate swaps, caps and floors on either an asset-
based or liability-based basis, depending upon whether it is hedging its assets
or liabilities. The net amount of the excess, if any, of a Fund's obligations
over its entitlements with respect to each interest rate swap, cap and floor is
accrued daily. A Fund will not enter into an interest rate swap, cap or floor
transaction unless the unsecured senior debt or the claims-paying ability of the
other party thereto is then rated in the highest rating category of at least one
nationally recognized rating organization. Alliance will monitor the
creditworthiness of counterparties on an ongoing basis. The swap market has
grown substantially in recent years, with a large number of banks and investment
banking firms acting both as principals and as agents utilizing standardized
swap documentation. As a result, the swap market has become relatively liquid.
Caps and floors are more recent innovations for which standardized documentation
has not yet been developed and, accordingly, they are less liquid than swaps.
The use of interest rate transactions is a highly specialized activity which
involves investment techniques and risks different from those associated with
ordinary portfolio securities transactions. If Alliance were to incorrectly
forecast market values, interest rates and other applicable factors, the
investment performance of a Fund would be adversely affected by the use of these
investment techniques. Moreover, even if Alliance is correct in its forecasts,
there is a risk that the transaction position may correlate imperfectly with the
price of the asset or liability being hedged. There is no limit on the amount of
interest rate transactions that may be entered into by a Fund that is permitted
to enter into such transactions. These transactions do not involve the delivery
of securities or other underlying assets or principal. Accordingly, the risk of
loss with respect to interest rate transactions is limited to the net amount of
interest payments that a Fund is contractually obligated to make. If the other
party to an interest rate transaction defaults, a Fund's risk of loss consists
of the net amount of interest payments that the Fund contractually is entitled
to receive.
Repurchase Agreements. A repurchase agreement arises when a buyer purchases a
security and simultaneously agrees to resell it to the vendor at an agreed-upon
future date, normally a day or a few days later. The resale price is greater
than the purchase price, reflecting an agreed-upon interest rate for the period
the buyer's money is invested in the security. Such agreements permit a Fund to
keep all of its assets at work while retaining "overnight" flexibility in
pursuit of investments of a longer-term nature. If a vendor defaults on its
repurchase obligation, a Fund would suffer a loss to the extent that the
proceeds from the sale of the collateral were less than the repurchase price. If
a vendor goes bankrupt, a Fund might be delayed in, or prevented from, selling
the collateral for its benefit. Alliance monitors the creditworthiness of the
vendors with which the Fund enters into repurchase agreements. There is no
percentage restriction on a Fund's ability to enter into repurchase agreements,
other than as indicated under "Investment Objectives and Policies."
Short Sales. A short sale is effected by selling a security that a Fund does not
own, or if the Fund does own such security, it is not to be delivered upon
consummation of the sale. A short sale is "against the box" to the extent that a
Fund contemporaneously owns or has the right to obtain securities identical to
those sold short without payment. Worldwide Privatization Fund, All-Asia
Investment Fund, Greater China '97 Fund and Utility Income Fund each may make
short sales of securities or maintain short positions only for the purpose of
deferring realization of gain or loss for U.S. federal income tax purposes,
provided that at all times when a short position is open the Fund owns an equal
amount of securities of the same issue as, and equal in amount to, the
securities sold short. In addition, each of those Funds may not make a short
sale if as a result more than 10% of the Fund's net assets would be held as
collateral for short sales, except that All-Asia Investment Fund, Greater China
'97 Fund and Real Estate Investment Fund may not make a short sale if as a
result more than 25% of the Fund's net assets would be held as collateral for
short sales. If the price of the security sold short increases between the time
of the short sale and the time a Fund replaces the borrowed security, the Fund
will incur a loss; conversely, if the price declines, the Fund will realize a
capital gain. See "Certain Fundamental Investment Policies." Certain special
federal income tax considerations may apply to short sales entered into by a
Fund. See "Dividends, Distributions and Taxes" in the relevant Fund's Statement
of Additional Information.
Loans of Portfolio Securities. The risk in lending portfolio securities, as with
other extensions of credit, consists of the possible loss of rights in the
collateral should the borrower fail financially. In determining whether to lend
securities to a particular borrower, Alliance will consider all relevant facts
and circumstances, including the creditworthiness of the borrower. While
securities are on loan, the borrower will pay the Fund
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any income earned thereon and the Fund may invest any cash collateral in
portfolio securities, thereby earning additional income, or receive an agreed
upon amount of income from a borrower who has delivered equivalent collateral.
Each Fund will have the right to regain record ownership of loaned securities or
equivalent securities in order to exercise ownership rights such as voting
rights, subscription rights and rights to dividends, interest or distributions.
A Fund may pay reasonable finders', administrative and custodial fees in
connection with a loan. A Fund will not lend its portfolio securities to any
officer, director, employee or affiliate of the Fund or Alliance.
General. The successful use of the foregoing investment practices draws upon
Alliance's special skills and experience with respect to such instruments and
usually depends on Alliance's ability to forecast price movements, interest
rates or currency exchange rate movements correctly. Should interest rates,
prices or exchange rates move unexpectedly, a Fund may not achieve the
anticipated benefits of the transactions or may realize losses and thus be in a
worse position than if such strategies had not been used. Unlike many exchange-
traded futures contracts and options on futures contracts, there are no daily
price fluctuation limits with respect to certain options and forward contracts,
and adverse market movements could therefore continue to an unlimited extent
over a period of time. In addition, the correlation between movements in the
prices of futures contracts, options and forward contracts and movements in the
prices of the securities and currencies hedged or used for cover will not be
perfect and could produce unanticipated losses.
A Fund's ability to dispose of its position in futures contracts, options and
forward contracts depends on the availability of liquid markets in such
instruments. Markets in options and futures with respect to a number of types of
securities and currencies are relatively new and still developing, and there is
no public market for forward contracts. It is impossible to predict the amount
of trading interest that may exist in various types of futures contracts,
options and forward contracts. If a secondary market does not exist with respect
to an option purchased or written by a Fund, it might not be possible to effect
a closing transaction in the option (i.e., dispose of the option), with the
result that (i) an option purchased by the Fund would have to be exercised in
order for the Fund to realize any profit and (ii) the Fund may not be able to
sell currencies or portfolio securities covering an option written by the Fund
until the option expires or it delivers the underlying security, futures
contract or currency upon exercise. Therefore, no assurance can be given that
the Funds will be able to utilize these instruments effectively for the purposes
set forth above. Furthermore, a Fund's ability to engage in options and futures
transactions may be limited by tax considerations and the use of certain hedging
techniques may adversely impact the characterization of income to a Fund for
U.S. federal income tax purposes. See "Dividends, Distributions and Taxes" in
the Statement of Additional Information of each Fund that invests in options and
futures.
Future Developments. A Fund may, following written notice to its shareholders,
take advantage of other investment practices that are not currently contemplated
for use by the Fund or are not available but may yet be developed, to the extent
such investment practices are consistent with the Fund's investment objective
and legally permissible for the Fund. Such investment practices, if they arise,
may involve risks that exceed those involved in the activities described above.
Defensive Position. For temporary defensive purposes, each Fund may reduce its
position in equity securities and invest without limit in certain types of
short-term, liquid, high grade or high quality (depending on the Fund) debt
securities. These securities may include U.S. Government securities, qualifying
bank deposits, money market instruments, prime commercial paper and other types
of short-term debt securities including notes and bonds. For Funds that may
invest in foreign countries, such securities may also include short-term,
foreign-currency denominated securities of the type mentioned above issued by
foreign governmental entities, companies and supranational organizations. For a
complete description of the types of securities each Fund may invest in while in
a temporary defensive position, please see such Fund's Statement of Additional
Information.
Portfolio Turnover. Portfolio turnover rates for the existing classes of shares
of the Fund are set forth in the tables that begin on page 8. These portfolio
turnover rates are greater than those of most other investment companies,
including those which emphasize capital appreciation as a basic policy. A high
rate of portfolio turnover involves correspondingly greater brokerage and other
expenses than a lower rate, which must be borne by the Fund and its
shareholders. High portfolio turnover also may result in the realization of
substantial net short-term capital gains. See "Dividends, Distributions and
Taxes" in each Fund's Statement of Additional Information.
CERTAIN FUNDAMENTAL INVESTMENT POLICIES
Each Fund has adopted certain fundamental investment policies listed below,
which may not be changed without the approval of its shareholders. Additional
investment restrictions with respect to a Fund are set forth in its Statement of
Additional Information.
Alliance Fund may not: (i) invest more than 5% of its total assets in the
securities of any one issuer (other than the U.S. Government); (ii) acquire more
than 10% of the voting or other securities of any one issuer; or (iii) buy
securities of any company that (including its predecessors) has not been in
business at least three continuous years. Pursuant to investment policies which
are not fundamental, the Fund does not invest (i) in puts or calls (except as
discussed above); (ii) in straddles, spreads, or any combination thereof; (iii)
in oil, gas or other mineral exploration or development programs; or (iv) more
than 5% of its gross assets in securities the disposition of which would be
subject to restrictions under the federal securities laws.
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Growth Fund may not: (i) invest more than 5% of its total assets in the
securities of any one issuer (other than U.S. Government securities and
repurchase agreements relating thereto), although up to 25% of each Fund's total
assets may be invested without regard to this restriction; or (ii) invest 25% or
more of its total assets in the securities of any one industry.
Premier Growth Fund may not: (i) purchase more than 10% of the outstanding
voting securities of any one issuer; (ii) invest 25% or more of the value of its
total assets in the same industry; (iii) borrow money or issue senior securities
except for temporary or emergency purposes in an amount not exceeding 5% of the
value of its total assets at the time the borrowing is made; (iv) pledge,
mortgage, hypothecate or otherwise encumber any of its assets except in
connection with the writing of call options and except to secure permitted
borrowings; or (v) invest in the securities of any issuer that has a record of
less than three years of continuous operation (including the operation of any
predecessor) if as a result more than 10% of the value of the total assets of
the Fund would be invested in the securities of such issuer or issuers.
Technology Fund may not: (i) with respect to 75% of its total assets, have such
assets represented by other than: (a) cash and cash items, (b) U.S. Government
securities, or (c) securities of any one issuer (other than the U.S. Government
and its agencies or instrumentalities) not greater in value than 5% of the
Fund's total assets, and not more than 10% of the outstanding voting securities
of such issuer; (ii) purchase the securities of any one issuer, other than the
U.S. Government and its agencies or instrumentalities, if as a result (a) the
value of the holdings of the Fund in the securities of such issuer exceeds 25%
of its total assets, or (b) the Fund owns more than 25% of the outstanding
securities of any one class of securities of such issuer; (iii) concentrate its
investments in any one industry, but the Fund has reserved the right to invest
up to 25% of its total assets in a particular industry; and (iv) invest in the
securities of any issuer which has a record of less than three years of
continuous operation (including the operation of any predecessor) if such
purchase would cause 10% or more of its total assets to be invested in the
securities of such issuers.
Quasar Fund may not: (i) purchase the securities of any one issuer, other than
the U.S. Government or any of its agencies or instrumentalities, if as a result
more than 5% of its total assets would be invested in such issuer or the Fund
would own more than 10% of the outstanding voting securities of such issuer,
except that up to 25% of its total assets may be invested without regard to
these 5% and 10% limitations; (ii) invest more than 25% of its total assets in
any particular industry; (iii) borrow money except for temporary or emergency
purposes in an amount not exceeding 5% of its total assets at the time the
borrowing is made; or (iv) invest more than 10% of its assets in restricted
securities.
International Fund may not: (i) invest more than 5% of the value of its total
assets in securities of a single issuer (including repurchase agreements with
any one entity), except U.S. Government securities or foreign government
securities; provided, however, that the Fund may not, with respect to 75% of its
total assets, invest more than 5% of its total assets in securities of any one
foreign government issuer; (ii) own more than 10% of the outstanding securities
of any class of any issuer (for this purpose, all preferred stocks of an issuer
shall be deemed a single class, and all indebtedness of an issuer shall be
deemed a single class), except U.S. Government securities; (iii) invest more
than 25% of the value of its total assets in securities of issuers having their
principal business activities in the same industry; provided, that this
limitation does not apply to U.S. Government securities or foreign government
securities; (iv) invest more than 5% of the value of its total assets in the
securities of any issuer that has a record of less than three years of
continuous operation (including the operation of any predecessor or
unconditional guarantor), except U.S. Government securities or foreign
government securities; (v) invest more than 5% of the value of its total assets
in securities with legal or contractual restrictions on resale, other than
repurchase agreements, or more than 10% of the value of its total assets in
securities that are not readily marketable (including restricted securities and
repurchase agreements not terminable within seven business days); and (vi)
borrow money, except as a temporary measure for extraordinary or emergency
purposes, and then only from banks in amounts not exceeding 5% of its total
assets.
International Premier Growth Fund may not: (i) invest 25% or more of its total
assets in securities of issuers conducting their principal business activities
in the same industry, except that this restriction does not apply to U.S.
Government securities; (ii) borrow money or issue senior securities, except that
the Fund may borrow (a) from a bank if immediately after such borrowing there is
asset coverage of at least 300% as defined in the 1940 Act and (b) for temporary
purposes in an amount not exceeding 5% of the value of the total assets of the
Fund; or (iii) pledge, hypothecate, mortgage or otherwise encumber its assets,
except to secure permitted borrowings.
Worldwide Privatization Fund may not: (i) invest 25% or more of its total assets
in securities of issuers conducting their principal business activities in the
same industry, except that this restriction does not apply to (a) U.S.
Government securities, or (b) the purchase of securities of issuers whose
primary business activity is in the national commercial banking industry, so
long as the Fund's Directors determine, on the basis of factors such as
liquidity, availability of investments and anticipated returns, that the Fund's
ability to achieve its investment objective would be adversely affected if the
Fund were not permitted to invest more than 25% of its total assets in those
securities, and so long as the Fund notifies its shareholders of any decision by
the Directors to permit or cease to permit the Fund to invest more than 25% of
its total assets in those securities, such notice to include a discussion of any
increased investment risks to which the Fund may be subjected as a result of the
Directors' determination; (ii) borrow money except from banks for temporary or
emergency purposes, including the meeting of redemption requests that might
require the untimely disposition of securities; borrowing in the aggregate may
not exceed 15%, and borrowing for purposes other than meeting redemptions may
not exceed 5%, of the
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Fund's total assets (including the amount borrowed) less liabilities (not
including the amount borrowed) at the time the borrowing is made; outstanding
borrowings in excess of 5% of the value of the Fund's total assets will be
repaid before any investments are made; or (iii) pledge, hypothecate, mortgage
or otherwise encumber its assets, except to secure permitted borrowings. The
exception contained in clause (i)(b) above is subject to the operating policy
regarding concentration described in this Prospectus.
New Europe Fund may not: (i) purchase more than 10% of the outstanding voting
securities of any one issuer; (ii) invest more than 15% of its total assets in
the securities of any one issuer or 25% or more of its total assets in the same
industry, provided, however, that the foregoing restriction shall not be deemed
to prohibit the Fund from purchasing the securities of any issuer pursuant to
the exercise of rights distributed to the Fund by the issuer, except that no
such purchase may be made if as a result the Fund will fail to meet the
diversification requirements of the Code and any such acquisition in excess of
the foregoing 15% or 25% limits will be sold by the Fund as soon as reasonably
practicable (this restriction does not apply to U.S. Government securities, but
will apply to foreign government securities unless the Commission permits their
exclusion); (iii) borrow money except from banks for temporary or emergency
purposes, including the meeting of redemption requests that might require the
untimely disposition of securities; borrowing in the aggregate may not exceed
15%, and borrowing for purposes other than meeting redemptions may not exceed
5%, of the Fund's total assets (including the amount borrowed) less liabilities
(not including the amount borrowed) at the time the borrowing is made;
outstanding borrowings in excess of 5% of the Fund's total assets will be repaid
before any subsequent investments are made; or (iv) purchase a security (unless
the security is acquired pursuant to a plan of reorganization or an offer of
exchange) if, as a result, the Fund would own any securities of an open-end
investment company or more than 3% of the total outstanding voting stock of any
closed-end investment company, or more than 5% of the value of the Fund's total
assets would be invested in securities of any closed-end investment company, or
more than 10% of such value in closed-end investment companies in general.
All-Asia Investment Fund may not: (i) invest 25% or more of its total assets in
securities of issuers conducting their principal business activities in the same
industry; (ii) borrow money except from banks for temporary or emergency
purposes, including the meeting of redemption requests that might require the
untimely disposition of securities; borrowing in the aggregate may not exceed
15%, and borrowing for purposes other than meeting redemptions may not exceed
5%, of the Fund's total assets (including the amount borrowed) less liabilities
(not including the amount borrowed) at the time the borrowing is made;
outstanding borrowings in excess of 5% of the value of the Fund's total assets
will be repaid before any investments are made; or (iii) pledge, hypothecate,
mortgage or otherwise encumber its assets, except to secure permitted
borrowings.
Greater China '97 Fund may not: (i) invest 25% or more of its assets in
securities of issuers conducting their principal business activities in the same
industry; (ii) borrow money except from banks for temporary or emergency
purposes, including the meeting of redemption requests that might require the
untimely disposition of securities; borrowing in the aggregate may not exceed
15%, and borrowing for purposes other than meeting redemptions may not exceed
5%, of the Fund's total assets (including the amount borrowed) less liabilities
(not including the amount borrowed) at the time the borrowing is made;
outstanding borrowings in excess of 5% of the value of the Fund's total assets
will be repaid before any investments are made; or (iii) pledge, hypothecate,
mortgage or otherwise encumber its assets, except to secure permitted
borrowings.
Global Small Cap Fund may not: (i) purchase the securities of any one issuer,
other than the U.S. Government or any of its agencies or instrumentalities, if
immediately after such purchase more than 5% of the value of its total assets
would be invested in such issuer or the Fund would own more than 10% of the
outstanding voting securities of such issuer, except that up to 25% of the
Fund's total assets may be invested without regard to these 5% and 10%
limitations; (ii) invest 25% or more of its total assets in the same industry;
this restriction does not apply to U.S. Government securities, but will apply to
foreign government securities unless the Commission permits their exclusion;
(iii) borrow money except from banks for emergency or temporary purposes in an
amount not exceeding 5% of the total assets of the Fund; or (iv) make short
sales of securities or maintain a short position, unless at all times when a
short position is open it owns an equal amount of such securities or securities
convertible into or exchangeable for, without payment of any further
consideration, securities of the same issue as, and equal in amount to, the
securities sold short and unless not more than 5% of the Fund's net assets is
held as collateral for such sales at any one time.
Global Environment Fund may not: (i) purchase more than 10% of the outstanding
voting securities of any one issuer; (ii) invest more than 15% of the value of
its total assets in the securities of any one issuer or 25% or more of the value
of its total assets in the same industry, except that the Fund will invest more
than 25% of its total assets in Environmental Companies, provided that this
restriction does not apply to U.S. Government securities, but will apply to
foreign government obligations unless the Commission permits their exclusion;
(iii) borrow money or issue senior securities, except that the Fund may borrow
(a) from a bank if immediately after such borrowing there is asset coverage of
at least 300% as defined in the 1940 Act and (b) for temporary purposes in an
amount not exceeding 5% of the value of the total assets of the Fund; (iv)
pledge, hypothecate, mortgage or otherwise encumber its assets, except (a) to
secure permitted borrowings and (b) in connection with initial and variation
margin deposits relating to futures contracts; (v) purchase a security (unless
the security is acquired pursuant to a plan of reorganization or an offer of
exchange) if, as a result, the Fund would own any securities of an open-end
investment company or more than 3% of the total outstanding voting stock of any
closed-end investment company,
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or more than 5% of the value of the Fund's total assets would be invested in
securities of any closed-end investment company or more than 10% of such value
in closed-end investment companies in the aggregate; (vi) make short sales of
securities or maintain a short position, unless at all times when a short
position is open it owns an equal amount of such securities or securities
convertible into or exchangeable for, without payment of any further
consideration, securities of the same issue as, and equal in amount to, the
securities sold short ("short sales against the box"), and unless not more than
5% of the Fund's net assets (taken at market value) is held as collateral for
such sales at any onetime; or (vii) buy or write (i.e., sell) put or call
options, except (a) the Fund may buy foreign currency options or write covered
foreign currency options and options on foreign currency futures and (b) the
Fund may purchase warrants.
Balanced Shares may not: (i) invest more than 5% of its total assets in the
securities of any one issuer, except U.S. Government securities; or (ii) own
more than 10% of the outstanding voting securities of any one issuer.
Utility Income Fund may not: (i) invest more than 5% of its total assets in the
securities of any one issuer except the U.S. Government, although with respect
to 25% of its total assets it may invest in any number of issuers; (ii) invest
25% or more of its total assets in the securities of issuers conducting their
principal business activities in any one industry, other than the utilities
industry, except that this restriction does not apply to U.S. Government
securities; (iii) purchase more than 10% of any class of the voting securities
of any one issuer; (iv) borrow money except from banks for temporary or
emergency purposes, including the meeting of redemption requests that might
require the untimely disposition of securities; borrowing in the aggregate may
not exceed 15%, and borrowing for purposes other than meeting redemptions may
not exceed 5%, of the Fund's total assets (including the amount borrowed) less
liabilities (not including the amount borrowed) at the time the borrowing is
made; outstanding borrowings in excess of 5% of the Fund's total assets will be
repaid before any subsequent investments are made; or (v) purchase a security
if, as a result (unless the security is acquired pursuant to a plan of
reorganization or an offer of exchange), the Fund would own any securities of an
open-end investment company or more than 3% of the total outstanding voting
stock of any closed-end investment company or more than 5% of the value of the
Fund's net assets would be invested in securities of any one or more closed-end
investment companies.
Growth and Income Fund may not (i) invest more than 5% of its net assets in the
security of any one issuer, except U.S. Government obligations or (ii) own more
than 10% of the outstanding voting securities of any issuer.
Real Estate Investment Fund may not: (i) with respect to 75% of its total
assets, have such assets represented by other than: (a) cash and cash items, (b)
U.S. Government securities, or (c) securities of any one issuer (other than the
U.S. Government and its agencies or instrumentalities) not greater in value than
5% of the Fund's total assets, and not more than 10% of the outstanding voting
securities of such issuer; (ii) purchase the securities of any one issuer, other
than the U.S. Government and its agencies or instrumentalities, if as a result
(a) the value of the holdings of the Fund in the securities of such issuer
exceeds 25% of its total assets, or (b) the Fund owns more than 25% of the
outstanding securities of any one class of securities of such issuer; (iii)
invest 25% or more of its total assets in the securities of issuers conducting
their principal business activities in any one industry, other than the real
estate industry in which the Fund will invest at least 25% or more of its total
assets, except that this restriction does not apply to U.S. Government
securities; (iv) purchase or sell real estate, except that it may purchase and
sell securities of companies which deal in real estate or interests therein,
including Real Estate Equity Securities; or (v) borrow money except for
temporary or emergency purposes or to meet redemption requests, in an amount not
exceeding 5% of the value of its total assets at the time the borrowing is made.
RISK CONSIDERATIONS
Investment in certain of the Funds involves the special risk considerations
described below. These risks may be heightened when investing in emerging
markets.
Investment in Privatized Enterprises by Worldwide Privatization Fund. In certain
jurisdictions, the ability of foreign entities, such as the Fund, to participate
in privatizations may be limited by local law, or the price or terms on which
the Fund may be able to participate may be less advantageous than for local
investors. Moreover, there can be no assurance that governments that have
embarked on privatization programs will continue to divest their ownership of
state enterprises, that proposed privatizations will be successful or that
governments will not re-nationalize enterprises that have been privatized.
Furthermore, in the case of certain of the enterprises in which the Fund may
invest, large blocks of the stock of those enterprises may be held by a small
group of stockholders, even after the initial equity offerings by those
enterprises. The sale of some portion or all of those blocks could have an
adverse effect on the price of the stock of any such enterprise.
Most state enterprises or former state enterprises go through an internal
reorganization of management prior to conducting an initial equity offering in
an attempt to better enable these enterprises to compete in the private sector.
However, certain reorganizations could result in a management team that does not
function as well as the enterprise's prior management and may have a negative
effect on such enterprise. After making an initial equity offering, enterprises
that may have enjoyed preferential treatment from the respective state or
government that owned or controlled them may no longer receive such preferential
treatment and may become subject to market competition from which they were
previously protected. Some of these enterprises may not be able to effectively
operate in a competitive market and may suffer losses or experience bankruptcy
due to such competition. In addition, the privatization of an enterprise by its
government may occur over
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a number of years, with the government continuing to hold a controlling position
in the enterprise even after the initial equity offering for the enterprise.
Currency Considerations. Substantially all of the assets of International Fund,
International Premier Growth Fund, New Europe Fund, All-Asia Investment Fund,
Greater China '97 Fund and Worldwide Privatization Fund and a substantial
portion of the assets of Global Small Cap Fund and Global Environment Fund will
be invested in securities denominated in foreign currencies, and a corresponding
portion of these Funds' revenues will be received in such currencies. Therefore,
the dollar equivalent of their net assets, distributions and income will be
adversely affected by reductions in the value of certain foreign currencies
relative to the U.S. dollar. If the value of the foreign currencies in which a
Fund receives its income falls relative to the U.S. dollar between receipt of
the income and the making of Fund distributions, the Fund may be required to
liquidate securities in order to make distributions if it has insufficient cash
in U.S. dollars to meet distribution requirements that the Fund must satisfy to
qualify as a regulated investment company for federal income tax purposes.
Similarly, if an exchange rate declines between the time a Fund incurs expenses
in U.S. dollars and the time cash expenses are paid, the amount of the currency
required to be converted into U.S. dollars in order to pay expenses in U.S.
dollars could be greater than the equivalent amount of such expenses in the
currency at the time they were incurred. In light of these risks, a Fund may
engage in certain currency hedging transactions, which themselves involve
certain special risks. See "Additional Investment Practices" above.
Foreign Investment. The securities markets of many foreign countries are
relatively small, with the majority of market capitalization and trading volume
concentrated in a limited number of companies representing a small number of
industries. Consequently, a Fund whose investment portfolio includes such
securities may experience greater price volatility and significantly lower
liquidity than a portfolio invested solely in equity securities of U.S.
companies. These markets may be subject to greater influence by adverse events
generally affecting the market, and by large investors trading significant
blocks of securities, than is usual in the United States. Securities settlements
may in some instances be subject to delays and related administrative
uncertainties. These problems are particularly severe in India, where settlement
is through physical delivery, and, where, currently, a severe shortage of vault
capacity exists among custodial banks, although efforts are being undertaken to
alleviate the shortage. Certain foreign countries require governmental approval
prior to investments by foreign persons or limit investment by foreign persons
to only a specified percentage of an issuer's outstanding securities or a
specific class of securities which may have less advantageous terms (including
price) than securities of the company available for purchase by nationals. These
restrictions or controls may at times limit or preclude investment in certain
securities and may increase the costs and expenses of a Fund. In addition, the
repatriation of investment income, capital or the proceeds of sales of
securities from certain countries is controlled under regulations, including in
some cases the need for certain advance government notification or authority,
and if a deterioration occurs in a country's balance of payments, the country
could impose temporary restrictions on foreign capital remittances.
A Fund could also be adversely affected by delays in, or a refusal to grant, any
required governmental approval for repatriation, as well as by the application
to it of other restrictions on investment. Investing in local markets may
require a Fund to adopt special procedures, which may involve additional costs
to a Fund. The liquidity of a Fund's investments in any country in which any of
these factors exists could be affected and Alliance will monitor the effect of
any such factor or factors on a Fund's investments. Furthermore, transaction
costs including brokerage commissions for transactions both on and off the
securities exchanges in many foreign countries are generally higher than in the
United States.
Issuers of securities in foreign jurisdictions are generally not subject to the
same degree of regulation as are U.S. issuers with respect to such matters as
insider trading rules, restrictions on market manipulation, shareholder proxy
requirements and timely disclosure of information. The reporting, accounting and
auditing standards of foreign countries may differ, in some cases significantly,
from U.S. standards in important respects and less information may be available
to investors in foreign securities than to investors in U.S. securities.
Substantially less information is publicly available about certain non-U.S.
issuers than is available about U.S. issuers.
The economies of individual foreign countries may differ favorably or
unfavorably from the U.S. economy in such respects as growth of gross domestic
product or gross national product, rate of inflation, capital reinvestment,
resource self-sufficiency and balance of payments position. Nationalization,
expropriation or confiscatory taxation, currency blockage, political changes,
government regulation, political or social instability or diplomatic
developments could affect adversely the economy of a foreign country or the
Fund's investments in such country. In the event of expropriation,
nationalization or other confiscation, a Fund could lose its entire investment
in the country involved. In addition, laws in foreign countries governing
business organizations, bankruptcy and insolvency may provide less protection to
security holders such as the Fund than that provided by U.S. laws.
Investment in United Kingdom Issuers. Investment in securities of United Kingdom
issuers involves certain considerations not present with investment in
securities of U.S. issuers. As with any investment not denominated in the U.S.
dollar, the U.S. dollar value of the Fund's investment denominated in the
British pound sterling will fluctuate with pound sterling--dollar exchange rate
movements. Between 1972, when the pound sterling was allowed to float against
other currencies, and the end of 1992, the pound sterling generally depreciated
against most major currencies, including the U.S. dollar. Between September and
December 1992, after the United Kingdom's exit
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from the Exchange Rate Mechanism of the European Monetary System, the value of
the pound sterling fell by almost 20% against the U.S. dollar. The pound
sterling has since recovered due to interest rate cuts throughout Europe and an
upturn in the economy of the United Kingdom. The average exchange rate of the
U.S. dollar to the pound sterling was 1.50 in 1993 and 1.64 in 1997. On October
13, 1998 the U.S. dollar-pound sterling exchange rate was 1.71.
The United Kingdom's largest stock exchange is the London Stock Exchange, which
is the third largest exchange in the world. As measured by the FT-SE 100 index,
the performance of the 100 largest companies in the United Kingdom reached
5,135.5 at the end of 1997, up approximately 25% from the end of 1996. On
October 5, 1998, the FT-SE 100 index closed at 4648.7, the lowest close in the
12-month period prior to that date, after reaching a high of 6179.0 on July 20,
1998. The FT-SE 100 index closed at 4990.1 on October 14, 1998.
In January 1999, the Economic and Monetary Union ("EMU") is scheduled to take
effect. The EMU will establish a common currency for European countries that
meet the eligibility criteria and choose to participate. Although the United
Kingdom meets the eligibility criteria, the government has not taken any action
to join the EMU.
From 1979 until 1997 the Conservative Party controlled Parliament. In the May 1,
1997 general elections, however, the Labour Party, led by Tony Blair, won a
majority in Parliament, holding 418 of 658 seats in the House of Commons. Mr.
Blair, who was appointed Prime Minister, has launched a number of reform
initiatives, including an overhaul of the monetary policy framework intended to
protect monetary policy from political forces by vesting responsibility for
setting interest rates in a new Monetary Policy Committee headed by the Governor
of the Bank of England, as opposed to the Treasury. Prime Minister Blair has
also undertaken a comprehensive restructuring of the regulation of the financial
services industry. For further information regarding the United Kingdom, see the
Statement of Additional Information of New Europe Fund.
Investment in Japanese Issuers. Investment in securities of Japanese issuers
involves certain considerations not present with investment in securities of
U.S. issuers. As with any investment not denominated in the U.S. dollar, the
U.S. dollar value of each Fund's investments denominated in the Japanese yen
will fluctuate with yen-dollar exchange rate movements. Between 1985 and 1995,
the Japanese yen generally appreciated against the U.S. dollar, but has since
fallen from its post-World War II high (in 1995) against the U.S. dollar.
Japan's largest stock exchange is the Tokyo Stock Exchange, the First Section of
which is reserved for larger, established companies. As measured by the TOPIX, a
capitalization-weighted composite index of all common stocks listed in the First
Section, the performance of the First Section reached a peak in 1989.
Thereafter, the TOPIX declined approximately 50% through the end of 1997. On
October 13, 1998, the TOPIX closed at 998.98, down approximately 15% from the
end of 1997. Certain valuation measures, such as price-to-book value and price-
to-cash flow ratios, indicate that the Japanese stock market is near its lowest
level in the last twenty years relative to other world markets.
In recent years, Japan has consistently recorded large current account trade
surpluses with the U.S. that have caused difficulties in the relations between
the two countries. On October 1, 1994, the U.S. and Japan reached an agreement
that may lead to more open Japanese markets with respect to trade in certain
goods and services. In June 1995, the two countries agreed in principle to
increase Japanese imports of American automobiles and automotive parts.
Nevertheless it is expected that the continuing friction between the U.S. and
Japan with respect to trade issues will continue for the foreseeable future.
Each Fund's investments in Japanese issuers will be subject to uncertainty
resulting from the instability of recent Japanese ruling coalitions. From 1955
to 1993, Japan's government was controlled by a single political party. Between
August 1993 and October 1996 Japan was ruled by a series of four coalition
governments. As the result of a general election on October 20, 1996, however,
Japan returned to a single-party government led by Ryutaro Hashimoto, a member
of the Liberal Democratic Party ("LDP"). While the LDP does not control a
majority of the seats in the parliament, it is only three seats short of the 251
seats required to attain a majority in the House of Representatives (down from a
12-seat shortfall just after the October 1996 election). The popularity of the
LDP declined, however, due to dissatisfaction with Mr. Hashimoto's leadership.
In the July 1998 House of Councillors election, the LDP's representation fell to
103 seats from 120 seats. As a result of the LDP's defeat, Mr. Hashimoto
resigned as prime minister and leader of the LDP. Mr. Hashimoto was replaced by
Keizo Obuchi. For the past several years, Japan's banking industry has been
weakened by a significant amount of problem loans. Japan's banks also have
significant exposure to the current financial turmoil in other Asian markets.
Following the insolvency of one of Japan's largest banks in November 1997, the
government proposed several plans designed to strengthen the weakened banking
sector. In October 1998, the Japanese parliament approved several new laws that
will make $508 billion in public funds available to increase the capital of
Japanese banks, to guarantee depositors' accounts and to nationalize the weakest
banks. It is unclear whether these new laws will achieve their intended effect.
For further information regarding Japan, see the Statements of Additional
Information for All-Asia Investment Fund and International Fund.
Investment in Greater China Issuers. China, in particular, but Hong Kong and
Taiwan, as well, in significant measure because of their existing and increasing
economic, and now in the case of Hong Kong, direct political ties with China,
may be subject to a greater degree of economic, political and social instability
than is the case in the United States.
China's economy is very much in transition. While the government still controls
production and pricing in major economic sectors, significant steps have been
taken toward capitalism and China's economy has become increasingly market
oriented. China's strong economic growth and ability to attract significant
foreign investment in recent years stem from the economic liberalization
initiated by Deng Xiaoping who assumed
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power in the late 1970s. The economic growth, however, has not been smooth and
has been marked by extremes in many respects of inordinate growth, which has not
been tightly controlled, followed by rigid measures of austerity.
The rapidly and erratic nature of the growth have resulted in inefficiencies and
dislocations, including at times high rates of inflation.
China's economic development has occurred notwithstanding the continuation of
the power of China's Communist Party and China's authoritarian government
control, not only of centrally planned economic decisions, but of many aspects
of the social structure. While a significant portion of China's population has
benefited from China's economic growth, the conditions of many leave much room
for improvement. Notwithstanding restrictions on freedom of expression and the
absence of a free press, and notwithstanding the extreme manner in which past
unrest has been dealt with, the 1989 Tiananmen Square uprising being a recent
reminder, the potential for renewed popular unrest associated with demands for
improved social, political and economic conditions be dismissed.
Following the death of Deng Xiaoping in February 1997, Jiang Zemin became the
leader of China's Communist Party. The transfer of political power has
progressed smoothly and Jiang's popularity and credibility have gradually
increased. Jiang continues to consolidate his power, but as of yet does not
appear to have the same degree of control as did Deng Xiaoping. Jiang has
continued the market-oriented policies of Deng. Currently, China's major
economic challenge centers on reforming or eliminating inefficient state-owned
enterprises without creating an unacceptable level of unemployment. Recent
capitalistic policies have in many respects effectively outdated the Communist
Party and the governmental structure, but both remain entrenched. The Communist
Party still controls access to governmental positions and closely monitors
governmental action. Essentially there exists an inefficient set of parallel
bureaucracies and attendant opportunities for corruption.
In addition to the economic impact of China's internal political uncertainties,
the potential effect of China's actions, not only on China itself, but on Hong
Kong and Taiwan as well, could also be significant.
China is heavily dependent on foreign trade, particularly with the United
States, South Korea, Japan and Germany. Political developments adverse to its
trading partners, as well as political and social repression, could cause the
United States and others to alter their trading policy towards China. For
example, in the United States, the continued extension of most favored nation
trading status to China which is reviewed regularly and was renewed in 1999, is
an issue of significant controversy. Loss of that status would clearly hurt
China's economy by reducing its exports. With much of China's trading activity
being funneled through Hong Kong and with trade through Taiwan becoming
increasingly significant, any sizable reduction in demand for goods from China
would have negative implications for both countries. China is believed to be the
largest investor in Hong Kong and its markets and an economic downturn in China
would be expected to reverberate through Hong Kong's markets as well.
Although China has committed by treaty to preserve Hong Kong's autonomy and its
economic, political and social freedoms for fifty years from the July 1, 1997
transfer of sovereignty from Great Britain to China. Hong Kong is headed by a
chief executive, appointed by the central government of China, whose power is
checked by both the government of China and a Legislative Council. Although Hong
Kong voters voted overwhelmingly for pro-democracy candidates in the recent
election, it remains possible that China could exert its authority so as to
alter the economic structure, political structure or existing social policy of
Hong Kong. Investor and business confidence in Hong Kong can be significantly
affected by such developments, which in turn can affect markets and business
performance. In this connection, it is noted that a substantial portion of the
companies listed on the Hong Kong Stock Exchange are involved in real estate-
related activities.
The securities markets of China, and to a lesser extent Taiwan, are relatively
small, with the majority of market capitalization and trading volume
concentrated in a limited number of companies representing a small number of
industries. Consequently, Greater China '97 Fund may experience greater price
volatility and significantly lower liquidity than a portfolio invested solely in
equity securities of U.S. companies. These markets may be subject to greater
influence by adverse events generally affecting the market, and by large
investors trading significant blocks of securities, than is usual in the U.S.
Securities settlements may in some instances be subject to delays and related
administrative uncertainties.
Foreign investment in the securities markets of China and Taiwan is restricted
or controlled to varying degrees. These restrictions or controls, which apply to
the Greater China '97 Fund, may at times limit or preclude investment in certain
securities and may increase the cost and expenses of the Fund. China and Taiwan
require governmental approval prior to investments by foreign persons or limit
investment by foreign persons to only a specified percentage of an issuer's
outstanding securities or a specific class of securities which may have less
advantageous terms (including price) than securities of the company available
for purchase by nationals. In addition, the repatriation of investment income,
capital or the proceeds of sales of securities from China and Taiwan is
controlled under regulations, including in some cases the need for certain
advance government notification or authority, and if a deterioration occurs in a
country's balance of payments, the country could impose restrictions on foreign
capital remittances.
Greater China '97 Fund could be adversely affected by delays in, or a refusal to
grant, any required governmental approval for repatriation, as well as by the
application to it of other restrictions on investment. The liquidity of the
Fund's investments in any country in which any of these factors exists could be
affected by any such factor or factors on the Fund's investments.
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The limited liquidity in certain Greater China markets is a factor to be taken
into account in the Fund's valuation of portfolio securities in this category
and may affect the Fund's ability to dispose of securities in order to meet
redemption requests at the price and time it wishes to do so. It is also
anticipated that transaction costs, including brokerage commissions for
transactions both on and off the securities exchanges in Greater China
countries, will be higher than in the U.S.
Issuers of securities in Greater China countries are generally not subject to
the same degree of regulation as are U.S. issuers with respect to such matters
as timely disclosure of information, insider trading rules, restrictions on
market manipulation and shareholder proxy requirements. Reporting, accounting
and auditing standards of Greater China countries may differ, in some cases
significantly, from U.S. standards in important respects, and less information
may be available to investors in securities of Greater China country issuers
than to investors in securities of U.S. issuers.
Investment in Greater China companies which are in the initial stages of their
development involves greater risk than is customarily associated with securities
of more established companies. The securities of such companies may have
relatively limited marketability and may be subject to more abrupt or erratic
market movements than securities of established companies or broad market
indices.
Investment in Smaller, Emerging Companies. The Funds may invest in smaller,
emerging companies. Global Small Cap Fund and New Europe Fund will emphasize
investment in, and All-Asia Investment Fund, Greater China '97 Fund and Global
Environment Fund may emphasize investment in, smaller, emerging companies.
Investment in such companies involves greater risks than is customarily
associated with securities of more established companies. Companies in the
earlier stages of their development often have products and management personnel
which have not been thoroughly tested by time or the marketplace; their
financial resources may not be as substantial as those of more established
companies. The securities of smaller companies may have relatively limited
marketability and may be subject to more abrupt or erratic market movements than
securities of larger companies or broad market indices. The revenue flow of such
companies may be erratic and their results of operations may fluctuate widely
and may also contribute to stock price volatility.
Extreme Governmental Action; Less Protective Laws. In contrast with investing
in the United States, foreign investment may involve in certain situations
greater risk of nationalization, expropriation, confiscatory taxation, currency
blockage or other extreme governmental action which could adversely impact a
Fund's investment. In the event of certain such actions, a Fund could lose its
entire investment in the country involved. In addition, laws in various foreign
countries, including in certain respects each of the Greater China countries,
governing, among other subjects, business organization and practices, securities
and securities trading, bankruptcy and insolvency may provide less protection to
investors such as the Fund than provided under United States laws.
Investing in Environmental Companies by Global Environment Fund. Governmental
regulations or other action can inhibit an Environmental Company's performance,
and it may take years to translate environmental legislation into sales and
profits. Environmental Companies generally face competition in fields often
characterized by relatively short product cycles and competitive pricing
policies. Losses may result from large product development or expansion costs,
unprotected marketing or distribution systems, erratic revenue flows and low
profit margins. Additional risks that Environmental Companies may face include
difficulty in financing the high cost of technological development,
uncertainties due to changing governmental regulation or rapid technological
advances, potential liabilities associated with hazardous components and
operations, and difficult in finding experienced employees.
The Real Estate Industry. Although Real Estate Investment Fund does not invest
directly in real estate, it invests primarily in Real Estate Equity
Securities and has a policy of concentration of its investments in the
real estate industry. Therefore, an investment in the Fund is subject to certain
risks associated with the direct ownership of real estate and with the real
estate industry in general. These risks include, among others: possible declines
in the value of real estate; risks related to general and local economic
conditions; possible lack of availability of mortgage funds; overbuilding;
extended vacancies of properties; increases in competition, property taxes and
operating expenses; changes in zoning laws; costs resulting from the clean-up
of, and liability to third parties for damages resulting from, environmental
problems; casualty or condemnation losses; uninsured damages from floods,
earthquakes or other natural disasters; limitations on and variations in rents;
and changes in interest rates. To the extent that assets underlying the Fund's
investments are concentrated geographically, by property type or in certain
other respects, the Fund may be subject to certain of the foregoing risks to a
greater extent.
In addition, if Real Estate Investment Fund receives rental income or income
from the disposition of real property acquired as a result of a default on
securities the Fund owns, the receipt of such income may adversely affect the
Fund's ability to retain its tax status as a regulated investment company. See
"Dividends, Distributions and Taxes" in the Fund's Statement of Additional
Information. Investments by the Fund in securities of companies providing
mortgage servicing will be subject to the risks associated with refinancings and
their impact on servicing rights.
REITs. Investing in REITs involves certain unique risks in addition to those
risks associated with investing in the real estate industry in general. Equity
REITs may be affected by changes in the value of the underlying property owned
by the REITs, while mortgage REITs may be affected by the quality of any credit
extended. REITs are dependent upon management skills, are not diversified, are
subject to heavy cash flow dependency, default by borrowers and self-
liquidation. REITs are also subject to the possibilities of failing to qualify
for tax free pass-through of income under the Code and failing to maintain their
exemptions from registration under the 1940 Act.
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REITs (especially mortgage REITs) are also subject to interest rate risks. When
interest rates decline, the value of a REIT's investment in fixed rate
obligations can be expected to rise. Conversely, when interest rates rise, the
value of a REIT's investment in fixed rate obligations can be expected to
decline. In contrast, as interest rates on adjustable rate mortgage loans are
reset periodically, yields on a REIT's investments in such loans will gradually
align themselves to reflect changes in market interest rates, causing the value
of such investments to fluctuate less dramatically in response to interest rate
fluctuations than would investments in fixed rate obligations.
Investing in REITs involves risks similar to those associated with investing in
small capitalization companies. REITs may have limited financial resources, may
trade less frequently and in a limited volume and may be subject to more abrupt
or erratic price movements than larger company securities. Historically, small
capitalization stocks, such as REITs, have been more volatile in price than the
larger capitalization stocks included in the S&P Index of 500 Common Stocks.
Mortgage-Backed Securities. As discussed above, investing in Mortgage-Backed
Securities involves certain unique risks in addition to those risks associated
with investment in the real estate industry in general. These risks include the
failure of a counterparty to meet its commitments, adverse interest rate changes
and the effects of prepayments on mortgage cash flows. When interest rates
decline, the value of an investment in fixed rate obligations can be expected to
rise. Conversely, when interest rates rise, the value of an investment in fixed
rate obligations can be expected to decline. In contrast, as interest rates on
adjustable rate mortgage loans are reset periodically, yields on investments in
such loans will gradually align themselves to reflect changes in market interest
rates, causing the value of such investments to fluctuate less dramatically in
response to interest rate fluctuations than would investments in fixed rate
obligations.
Further, the yield characteristics of Mortgage-Backed Securities, such as those
in which Real Estate Investment Fund may invest, differ from those of
traditional fixed-income securities. The major differences typically include
more frequent interest and principal payments (usually monthly), the
adjustability of interest rates, and the possibility that prepayments of
principal may be made substantially earlier than their final distribution dates.
Prepayment rates are influenced by changes in current interest rates and a
variety of economic, geographic, social and other factors, and cannot be
predicted with certainty. Both adjustable rate mortgage loans and fixed rate
mortgage loans may be subject to a greater rate of principal prepayments in a
declining interest rate environment and to a lesser rate of principal
prepayments in an increasing interest rate environment. Early payment associated
with Mortgage-Backed Securities causes these securities to experience
significantly greater price and yield volatility than that experienced by
traditional fixed-income securities. Under certain interest rate and prepayment
rate scenarios, the Fund may fail to recoup fully its investment in Mortgage-
Backed Securities notwithstanding any direct or indirect governmental or agency
guarantee. When the Fund reinvests amounts representing payments and unscheduled
prepayments of principal, it may receive a rate of interest that is lower than
the rate on existing adjustable rate mortgage pass-through securities. Thus,
Mortgage-Backed Securities, and adjustable rate mortgage pass-through securities
in particular, may be less effective than other types of U.S. Government
securities as a means of "locking in" interest rates.
U.S. and Foreign Taxes. A Fund's investment in foreign securities may be subject
to taxes withheld at the source on dividend or interest payments. Foreign taxes
paid by a Fund may be creditable or deductible by U.S. shareholders for U.S.
income tax purposes. No assurance can be given that applicable tax laws and
interpretations will not change in the future. Moreover, non-U.S. investors may
not be able to credit or deduct such foreign taxes. Investors should review
carefully the information discussed under the heading "Dividends, Distributions
and Taxes" and should discuss with their tax advisers the specific tax
consequences of investing in a Fund.
Fixed-Income Securities. The value of each Fund's shares will fluctuate with the
value of its investments. The value of each Fund's investments in fixed-income
securities will change as the general level of interest rates fluctuates. During
periods of falling interest rates, the values of fixed-income securities
generally rise. Conversely, during periods of rising interest rates, the values
of fixed-income securities generally decline.
Under normal market conditions, the average dollar-weighted maturity of a Fund's
portfolio of debt or other fixed-income securities is expected to vary between
five and 30 years in the case of All-Asia Investment Fund, between five and 25
years in the case of Utility Income Fund and between one year or less and 30
years in the case of all other Funds that invest in such securities. In periods
of increasing interest rates, each of the Funds may, to the extent it holds
mortgage-backed securities, be subject to the risk that the average dollar-
weighted maturity of the Fund's portfolio of debt or other fixed-income
securities may be extended as a result of lower than anticipated prepayment
rates. See "Additional Investment Practices--Mortgage-Backed Securities."
Securities Ratings. The ratings of securities by S&P, Moody's, Duff & Phelps and
Fitch are a generally accepted barometer of credit risk. They are, however,
subject to certain limitations from an investor's standpoint. The rating of an
issuer is heavily weighted by past developments and does not necessarily reflect
probable future conditions. There is frequently a lag between the time a rating
is assigned and the time it is updated. In addition, there may be varying
degrees of difference in credit risk of securities within each rating category.
Securities rated Aaa by Moody's and AAA by S&P, Duff & Phelps and Fitch are
considered to be of the highest quality; capacity to pay interest and repay
principal is extremely strong. Securities rated Aa by Moody's and AA by S&P,
Duff & Phelps and Fitch are considered to be high quality; capacity to repay
principal is considered very strong, although elements may exist that make risks
appear somewhat larger than exist with securities rated Aaa
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or AAA. Securities rated A are considered by Moody's to
possess adequate factors giving security to principal and interest. S&P, Duff &
Phelps and Fitch consider such securities to have a strong capacity to pay
interest and repay principal. Such securities are more susceptible to adverse
changes in economic conditions and circumstances than higher-rated securities.
Securities rated Baa by Moody's and BBB by S&P, Duff & Phelps and Fitch are
considered to have an adequate capacity to pay interest and repay principal.
Such securities are considered to have speculative characteristics and share
some of the same characteristics as lower-rated securities. Sustained periods of
deteriorating economic conditions or of rising interest rates are more likely to
lead to a weakening in the issuer's capacity to pay interest and repay principal
than in the case of higher-rated securities. Securities rated Ba by Moody's and
BB by S&P, Duff & Phelps and Fitch are considered to have speculative
characteristics with respect to capacity to pay interest and repay principal
over time; their future cannot be considered as well-assured. Securities rated B
by Moody's, S&P, Duff & Phelps and Fitch are considered to have highly
speculative characteristics with respect to capacity to pay interest and repay
principal. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Securities rated Caa by Moody's and CCC by S&P, Duff & Phelps and Fitch are of
poor standing and there is a present danger with respect to payment of principal
or interest. Securities rated Ca by Moody's and CC by S&P and Fitch are
minimally protected, and default in payment of principal or interest is
probable. Securities rated C by Moody's, S&P and Fitch are in imminent default
in payment of principal or interest and have extremely poor prospects of ever
attaining any real investment standing. Securities rated D by S&P and Fitch are
in default. The issuer of securities rated DD by Duff & Phelps is under an order
of liquidation.
Investment in Lower-Rated Fixed-Income Securities. Lower-rated securities, i.e.,
those rated Ba and lower by Moody's or BB and lower by S&P, Duff & Phelps or
Fitch, are subject to greater risk of loss of principal and interest than
higher-rated securities. They are also generally considered to be subject to
greater market risk than higher-rated securities, and the capacity of issuers of
lower-rated securities to pay interest and repay principal is more likely to
weaken than is that of issuers of higher-rated securities in times of
deteriorating economic conditions or rising interest rates. In addition, lower-
rated securities may be more susceptible to real or perceived adverse economic
conditions than investment grade securities.
The market for lower-rated securities may be thinner and less active than that
for higher-rated securities, which can adversely affect the prices at which
these securities can be sold. To the extent that there is no established
secondary market for lower-rated securities, a Fund may experience difficulty in
valuing such securities and, in turn, the Fund's assets. In addition, adverse
publicity and investor perceptions about lower-rated securities, whether or not
factual, may tend to impair their market value and liquidity.
Alliance will try to reduce the risk inherent in investment in lower-rated
securities through credit analysis, diversification and attention to current
developments and trends in interest rates and economic and political conditions.
However, there can be no assurance that losses will not occur. Since the risk of
default is higher for lower-rated securities, Alliance's research and credit
analysis are a correspondingly more important aspect of its program for managing
a Fund's securities than would be the case if a Fund did not invest in lower-
rated securities.
In seeking to achieve a Fund's investment objective, there will be times, such
as during periods of rising interest rates, when depreciation and realization of
capital losses on securities in a Fund's portfolio will be unavoidable.
Moreover, medium- and lower-rated securities and non-rated securities of
comparable quality may be subject to wider fluctuations in yield and market
values than higher-rated securities under certain market conditions. Such
fluctuations after a security is acquired do not affect the cash income received
from that security but are reflected in the net asset value of a Fund. See the
Statement of Additional Information for each Fund that invests in lower-rated
securities for a description of the bond ratings of Moody's, S&P, Duff & Phelps
and Fitch.
Certain lower-rated securities in which Growth Fund and Utility Income Fund may
invest may contain call or buy-back features that permit the issuers thereof to
call or repurchase such securities. Such securities may present risks based on
prepayment expectations. If an issuer exercises such a provision, a Fund may
have to replace the called security with a lower yielding security, resulting in
a decreased rate of return to the Fund.
Non-Diversified Status. Each of Worldwide Privatization Fund, New Europe Fund,
All-Asia Investment Fund, Greater China '97 Fund and Global Environmental Fund
is a "non-diversified" investment company, which means the Fund is not limited
in the proportion of its assets that may be invested in the securities of a
single issuer. However, each Fund intends to conduct its operations so as to
qualify to be taxed as a "regulated investment company" for purposes of the
Code, which will relieve the Fund of any liability for federal income tax to the
extent its earnings are distributed to shareholders. See "Dividends,
Distributions and Taxes" in each Fund's Statement of Additional Information. To
so qualify, among other requirements, the Fund will limit its investments so
that, at the close of each quarter of the taxable year, (i) not more than 25% of
the Fund's total assets will be invested in the securities of a single issuer,
and (ii) with respect to 50% of its total assets, not more than 5% of its total
assets will be invested in the securities of a single issuer and the Fund will
not own more than 10% of the outstanding voting securities of a single issuer. A
Fund's investments in U.S. Government securities and other regulated investment
companies are not subject to these limitations. Because each of Worldwide
Privatization Fund, New Europe Fund, Greater China '97 Fund, Global Environment
Fund and All-Asia Investment Fund is a non-diversified investment company, it
may invest in a smaller number of individual issuers than a diversified
investment
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company, and an investment in such Fund may, under certain circumstances,
present greater risk to an investor than an investment in a diversified
investment company.
Foreign government securities are not treated like U.S. Government securities
for purposes of the diversification tests described in the preceding paragraph,
but instead are subject to these tests in the same manner as the securities of
non-governmental issuers.
Year 2000 and Euro. Many computer systems and applications in use today process
transactions using two-digit date fields for the year of the transaction, rather
than the full four digits. If these systems are not modified or replaced,
transactions occurring after 1999 could be processed as year "1900", which could
result in processing inaccuracies and computer system failures. This is commonly
known as the Year 2000 problem. In addition to the Year 2000 problem, the
European Economic and Monetary Union has established a single currency, the Euro
Currency ("Euro") that will replace the national currency of certain European
countries effective January 1, 1999. Computer systems and applications must be
adapted in order to be able to process Euro sensitive information accurately
beginning in 1999. Should any of the computer systems employed by the Funds'
major service providers fail to process Year 2000 or Euro related information
properly, that could have a significant negative impact on the Funds' operations
and the services that are provided to the Funds' shareholders. In addition, to
the extent that the operations of issuers of securities held by the Funds are
impaired by the Year 2000 problem or the Euro, or prices of securities held by
the Funds' decline as a result of real or perceived problems relating to the
Year 2000 or the Euro, the value of the Funds' shares may be materially
affected.
With respect to the Year 2000, the Funds have been advised that Alliance, each
Fund's investment adviser, Alliance Fund Distributors, Inc. ("AFD"), each Fund's
principal underwriter, and Alliance Fund Services, Inc. ("AFS"), each Fund's
registrar transfer agent and dividend disbursing agent (collectively,
"Alliance") began to address the Year 2000 issue several years ago in connection
with the replacement or upgrading of certain computer systems and applications.
During 1997, Alliance began a formal Year 2000 initiative, which established a
structured and coordinated process to deal with the Year 2000 issue. Alliance
reports that it has completed its assessment of the Year 2000 issues on its
domestic and international computer systems and applications. Currently,
management of Alliance expects that the required modifications for the majority
of its significant systems and applications that will be in use on January 1,
2000, will be completed and tested by the end of 1998. Full integration testing
of these systems and testing of interfaces with third-party suppliers will
continue through 1999. At this time, management of Alliance believes that the
costs associated with resolving this issue will not have a material adverse
effect on its operations or on its ability to provide the level of services it
currently provides to the Funds.
With respect to the Euro, the Funds have been advised that Alliance has
established a project team to assess changes that will be required in connection
with the introduction of the Euro. Alliance reports that its project team has
assessed all systems, including those developed or managed internally, as well
as those provided by vendors, in order to determine the modifications that will
be required to process accurately transactions denominated in Euro after 1998.
At this time, management of Alliance expects that the required modifications for
the introduction of the Euro will be completed and tested before the end of
1998. Management of Alliance believes that the costs associated with resolving
this issue will not have a material adverse effect on its operations or on its
ability to provide the level of services it currently provides to the Funds.
The Funds and Alliance have been advised by the Funds' Custodians that they are
also in the process of reviewing their systems with the same goals. As of the
date of this prospectus, the Funds and Alliance have no reason to believe that
the Custodians will be unable to achieve these goals.
--------------------------------------
Purchase And Sale
--------------------------------------
Of Shares
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HOW TO BUY SHARES
Each Fund offers multiple classes of shares, of which only the Advisor Class is
offered by this Prospectus. Advisor Class shares of each Fund may be purchased
through your financial representative at net asset value without any initial or
contingent deferred sales charges and are not subject to ongoing distribution
expenses. Advisor Class shares may be purchased and held solely (i) through
accounts established under a fee-based program, sponsored and maintained by a
registered broker-dealer or other financial intermediary and approved by AFD,
(ii) through a self-directed defined contribution employee benefit plan (e.g., a
401(k) plan) that has at least 1,000 participants or $25 million in assets,
(iii) by investment advisory clients of, and certain other persons associated
with, Alliance and its affiliates or the Funds, and (iv) through registered
investment advisers or other financial intermediaries who charge a management,
consulting or other fee for their service and who purchase shares through a
broker or agent approved by AFD and clients of such registered investment
advisers or financial intermediaries whose accounts are linked to the master
account of such investment adviser or financial intermediary on the books of
such approved broker or agent. For more detailed information about who may
purchase and hold Advisor Class shares see the Statements of Additional
Information. A shareholder's Advisor Class shares will automatically convert to
Class A shares of the same Fund under certain circumstances.
For a more detailed description of the conversion feature and Class A shares,
see "Conversion Feature."
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Generally, a fee-based program must charge an asset-based or other similar fee
and must invest at least $250,000 in Advisor Class shares of each Fund in which
the program invests in order to be approved by AFD for investment in Advisor
Class shares. Share certificates are issued only upon request. See the
Subscription Application and the Statements of Additional Information for more
information.
The Funds may refuse any order to purchase Advisor Class shares. In this regard,
the Funds reserve the right to restrict purchases of Advisor Class shares
(including through exchanges) when there appears to be evidence of a pattern of
frequent purchases and sales made in response to short-term considerations.
How the Funds Value Their Shares
The net asset value of Advisor Class shares of a Fund is calculated by dividing
the value of the Fund's net assets allocable to the Advisor Class by the
outstanding shares of the Advisor Class. Shares are valued each day the Exchange
is open as of the close of regular trading (currently 4:00 p.m. Eastern time).
The securities in a Fund are valued at their current market value determined on
the basis of market quotations or, if such quotations are not readily available,
such other methods as the Fund's Directors believe accurately reflects fair
market value.
HOW TO SELL SHARES
You may "redeem" (i.e., sell your shares in a Fund to the Fund) on any day the
Exchange is open, either directly or through your financial representative. The
price you will receive is the net asset value next calculated after the Fund
receives your request in proper form. Proceeds generally will be sent to you
within seven days. However, for shares recently purchased by check or electronic
funds transfer, a Fund will not send proceeds until it is reasonably satisfied
that the check or electronic funds transfer has been collected (which may take
up to 15 days). If you are in doubt about what documents are required by your
fee-based program or employee benefit plan, you should contact your financial
representative.
Selling Shares Through Your Financial Representative
Your financial representative must receive your request before 4:00 p.m. Eastern
time, and your financial representative must transmit your request to the Fund
by 5:00 p.m. Eastern time, for you to receive that day's net asset value. Your
financial representative is responsible for furnishing all necessary
documentation to a Fund and may charge you for this service.
Selling Shares Directly To A Fund
Send a signed letter of instruction or stock power form to AFS along with
certificates, if any, that represent the shares you want to sell. For your
protection, signatures must be guaranteed by a bank, a member firm of a national
stock exchange or other eligible guarantor institution. Stock power forms are
available from your financial representative, AFS, and many commercial banks.
Additional documentation is required for the sale of shares by corporations,
intermediaries, fiduciaries and surviving joint owners. For details contact:
Alliance Fund Services
P.O. Box 1520
Secaucus, NJ 07096-1520
800-221-5672
Alternatively, a request for redemption of shares for which no stock
certificates have been issued can also be made by telephone to 800-221-5672.
Telephone redemption requests must be made by 4 p.m. Eastern time on a Fund
business day in order to receive that day's net asset value. A shareholder who
has completed the appropriate section of the Subscription Application, or the
Shareholder Options form obtained from AFS, can elect to have the proceeds of
his or her redemption sent to his or her bank via an electronic funds transfer.
Proceeds of telephone redemptions also may be sent by check to a shareholder's
address of record. Except for certain omnibus accounts, redemption requests by
electronic funds transfer may not exceed $100,000 and redemption requests by
check may not exceed $50,000 per day. Telephone redemption is not available for
shares held in nominee or "street name" accounts or retirement plan accounts or
shares held by a shareholder who has changed his or her address of record within
the previous 30 calendar days.
General
The sale of shares is a taxable transaction for federal tax purposes. Under
unusual circumstances, a Fund may suspend redemptions or postpone payment for up
to seven days or longer, as permitted by federal securities law. The Funds
reserve the right to close an account that through redemption has remained below
$200 for 90 days. Shareholders will receive 60 days' written notice to increase
the account value before the account is closed.
During drastic economic or market developments, you might have difficulty
reaching AFS by telephone, in which event you should issue written instructions
to AFS. AFS is not responsible for the authenticity of telephonic requests to
purchase, sell or exchange shares. AFS will employ reasonable procedures to
verify that telephone requests are genuine, and could be liable for losses
resulting from unauthorized transactions if it failed to do so. Dealers and
agents may charge a commission for handling telephonic requests. The telephone
service may be suspended or terminated at any time without notice.
AFD from time to time pays additional cash or other incentives to dealers or
agents in connection with the sale of shares of the Funds. Such additional
amounts may be utilized, in whole or in part, in some cases together with other
revenues of such dealers or agents, to provide additional compensation to
registered representatives who sell shares of the Funds. On some occasions, such
cash or other incentives will be conditioned upon the sale of specified minimum
dollar amount of the shares of a Fund and/or other Alliance Mutual Funds during
a specific period of time. Such incentives may take the
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form of payment for attendance at seminars, meals, sporting events or theater
performances, or payment for travel, lodging and entertainment incurred in
connection with travel by persons associated with dealer or agent to urban or
resort locations within or outside the United States. Such dealer or agent may
elect to receive cash incentives of equivalent amount in lieu of such payments.
SHAREHOLDER SERVICES
AFS offers a variety of shareholder services. For more information about these
services or your account, call AFS's toll-free number, 800-221-5672.
HOW TO EXCHANGE SHARES
You may exchange your Advisor Class shares of any Fund for Advisor Class shares
of other Alliance Mutual Funds (including AFD Exchange Reserves, a money market
fund managed by Alliance). Exchanges of shares are made at the net asset value
next determined and without sales or service charges. Exchanges may be made by
telephone or written request. Telephone exchange requests must be received by
AFS by 4:00 p.m. Eastern time on a Fund business day in order to receive that
day's net asset value.
Please read carefully the prospectus of the mutual fund into which you are
exchanging before submitting the request. Call AFS at 800-221-5672 to exchange
uncertificated shares. An exchange is a taxable capital transaction for federal
tax purposes. The exchange service may be changed, suspended, or terminated on
60 days' written notice.
GENERAL
If you are a Fund shareholder through an account established under a fee-based
program, your fee-based program may impose requirements with respect to the
purchase, sale or exchange of Advisor Class shares of a Fund that are different
from those described in this Prospectus. A transaction, service, administrative
or other similar fee may be charged by your broker-dealer, agent, financial
intermediary or other financial representative with respect to the purchase,
sale or exchange of Advisor Class shares made through such financial
representative. Such financial intermediaries may also impose requirements with
respect to the purchase, sale or exchange of shares that are different from, or
in addition to, those imposed by a Fund, including requirements as to the
minimum initial and subsequent investment amounts.
Each Fund offers three classes of shares other than the Advisor Class, which are
Class A, Class B and Class C. All classes of shares of a Fund have a common
investment objective and investment portfolio. Class A shares are offered with
an initial sales charge and pay a distribution services fee. Class B shares have
a contingent deferred sales charge (a "CDSC") and also pay a distribution
services fee. Class C shares have no initial sales charge or CDSC as long as
they are not redeemed within one year of purchase, but pay a distribution
services fee. Because Advisor Class shares have no initial sales charge or CDSC
and pay no distribution services fee, Advisor Class shares are expected to have
different performance from Class A, Class B or Class C shares. You can obtain
more information about Class A, Class B and Class C shares, which are not
offered by this Prospectus, by contacting AFS by telephone at 800-221-5672 or by
contacting your financial representative.
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Management Of The Funds
-----------------------------------
ADVISER
Alliance, which is a Delaware limited partnership with principal offices at 1345
Avenue of the Americas, New York, New York 10105, has been retained under an
advisory agreement (the "Advisory Agreement") to provide investment advice and,
in general, to conduct the management and investment program of each Fund,
subject to the general supervision and control of the Directors of the Fund.
The following table lists the person or persons who are primarily responsible
for the day-to-day management of each Fund's portfolio, the length of time that
each person has been primarily responsible, and each person's principal
occupation during the past five years.
<TABLE>
Principal occupation
during the past
Fund Employee; year; title five years
- --------------------------------------------------------------------------------
<S> <C> <C>
Alliance Fund Alden M. Stewart since 1997- Associated with
Executive Vice President of Alliance
Alliance Capital Management
Corporation ("ACMC")*
Randall E. Haase since 1997- Associated with
Senior Vice President of ACMC Alliance
Growth Fund Tyler Smith since inception- Associated with
Senior Vice President of ACMC Alliance
Premier Growth Fund Alfred Harrison since inception- Associated with
Vice Chairman of ACMC Alliance
Technology Fund Peter Anastos since 1992- Associated with
Senior Vice President of ACMC Alliance
Gerald T. Malone since 1992- Associated with
Senior Vice President of ACMC Alliance
Quasar Fund Alden M. Stewart since (see above)
1994--
(see above)
Randall E. Haase since (see above)
1994--
(see above)
International Fund Bruce W. Calvert since 1998-- Associated with
Vice Chairman and Chief Alliance
Investment Officer
of ACMC
International Premier Alfred Harrison since 1998-- (see above)
Growth Fund (see above)
Thomas Kamp since 1998-- Associated with
Senior Vice President Alliance
of ACMC
</TABLE>
43
<PAGE>
<TABLE>
Principal occupation
during the past
Fund Employee; year; title five years
- --------------------------------------------------------------------------------
<S> <C> <C>
Worldwide Privatization Mark H. Breedon since inception-- Associated with
Fund Senior Vice President of ACMC Alliance
and Director and Vice President
of Alliance Capital Limited **
New Europe Fund Steven Beinhacker since 1997-- Associated with
Vice President of ACMC Alliance
All-Asia Hiroshi Motoki since 1998-- Associated with
Investment Fund Senior Vice President of ACMC Alliance since
and Director of Japanese/Asian 1994; prior
Equity research thereto
associated
with Ford Motor
Company
Greater China Matthew W. S. Lee since 1997-- Associated with
'97 Fund Vice President of ACMC Alliance since
1997; prior
thereto
associated with
National Mutual
Funds
Management (Asia)
since 1994 and
James Capel and
Co. since prior to
1994
Global Small Cap Alden M. Stewart since 1994-- (see above)
Fund (see above)
Randall E. Haase since 1994-- (see above)
(see above)
Ronald L. Simcoe since 1993-- Associated with
Vice President of ACMC Alliance
Global Environment Linda Bolton Weiser since 1998-- Associated with
Fund Vice President of ACMC Alliance
Balanced Shares Paul Rissman since 1997-- Associated with
Senior Vice President of ACMC Alliance
Utility Income Fund Paul Rissman since 1996-- (see above)
(see above)
Growth & Income Paul Rissman since 1994-- (see above)
Fund (see above)
Real Estate Daniel G. Pine since 1996-- Associated with
Investment Fund Senior Vice President Alliance since
of ACMC 1996; prior
thereto, Senior
Vice President of
Desai Capital
Management
David Kruth since 1997-- Associated with
Vice President of ACMC Alliance since
1997; prior
thereto Senior
Vice President of
the Yarmouth
Group
- --------------------------------------------------------------------------------
</TABLE>
* The sole general partner of Alliance.
** An indirect wholly-owned subsidiary of Alliance.
Alliance is a leading international investment manager supervising client
accounts with assets as of June 30, 1998 totaling more than $262 billion (of
which approximately $107 billion represented the assets of investment
companies). Alliance's clients are primarily major corporate employee benefit
funds, public employee retirement systems, investment companies, foundations and
endowment funds. The 58 registered investment companies managed by Alliance
comprising 123 separate investment portfolios currently have over two million
shareholders. As of June 30, 1998, Alliance was an investment manager of
employee benefit plan assets for 32 of the Fortune 100 companies.
Alliance Capital Management Corporation ("ACMC"), the sole general partner of,
and the owner of a 1% general partnership interest in, Alliance, is an indirect
wholly-owned subsidiary of The Equitable Life Assurance Society of the United
States ("Equitable"), one of the largest life insurance companies in the United
States, which is a wholly-owned subsidiary of The Equitable Companies
Incorporated, a holding company controlled by AXA-UAP, a French insurance
holding company. Certain information concerning the ownership and control of
Equitable by AXA-UAP is set forth in each Fund's Statement of Additional
Information under "Management of the Funds."
Performance of Similarly Managed Portfolios. In addition to managing the assets
of Premier Growth Fund, Mr. Harrison has ultimate responsibility for the
management of discretionary tax-exempt accounts of institutional clients managed
as described below without significant client-imposed restrictions ("Historical
Portfolios"). These accounts have substantially the same investment objectives
and policies and are managed in accordance with essentially the same investment
strategies and techniques as those for Premier Growth Fund, except for the
ability of Premier Growth Fund to use futures and options as hedging tools and
to invest in warrants. The Historical Portfolios are also not subject to certain
limitations, diversification requirements and other restrictions imposed under
the 1940 Act and the Code to which Premier Growth Fund, as a registered
investment company, is subject and which, if applicable to the Historical
Portfolios, may have adversely affected the performance results of the
Historical Portfolios. See "Investment Objective and Policies."
Set forth below is performance data provided by Alliance relating to the
Historical Portfolios for each of the nineteen full calendar years during which
Mr. Harrison has managed the Historical Portfolios as an employee of Alliance
and cumulatively through September 30, 1998. As of September 30, 1998, the
assets in the Historical Portfolios totaled approximately $12.3 billion and the
average size of an institutional account in the Historical Portfolio was $412
million. Each Historical Portfolio has a nearly identical composition of
investment holdings and related percentage weightings.
The performance data is net of all fees (including brokerage commissions)
charged to those accounts. The performance data is computed in accordance with
standards formulated by the Association of Investment Management and Research
and has not been adjusted to reflect any fees that will be
44
<PAGE>
payable by Premier Growth Fund, which are higher than the fees imposed on the
Historical Portfolio and will result in a higher expense ratio and lower returns
for Premier Growth Fund. Expenses associated with the distribution of Class A,
Class B and Class C shares of Premier Growth Fund in accordance with the plan
adopted by Premier Growth Fund's Board of Directors pursuant to Rule 12b-1 under
the 1940 Act ("distribution fees") are also excluded. See "Expense Information."
The performance data has also not been adjusted for corporate or individual
taxes, if any, payable by the account owners.
Alliance has calculated the investment performance of the Historical Portfolios
on a trade-date basis. Dividends have been accrued at the end of the month and
cash flows weighted daily. Composite investment performance for all portfolios
has been determined on an asset-weighted basis. New accounts are included in the
composite investment performance computations at the beginning of the quarter
following the initial contribution. The total returns set forth below are
calculated using a method that links the monthly return amounts for the
disclosed periods, resulting in a time-weighted rate of return.
As reflected below, the Historical Portfolios have over time performed favorably
when compared with the performance of recognized performance indices. The S&P
500 Index is a widely recognized, unmanaged index of market activity based upon
the aggregate performance of a selected portfolio of publicly traded common
stocks, including monthly adjustments to reflect the reinvestment of dividends
and other distributions. The S&P 500 Index reflects the total return of
securities comprising the Index, including changes in market prices as well as
accrued investment income, which is presumed to be reinvested. The Russell 1000
universe of securities is compiled by Frank Russell Company and is segmented
into two style indices, based on the capitalization-weighted median book-to-
price ratio of each of the securities. At each reconstitution, the Russell 1000
constituents are ranked by their book-to-price ratio. Once so ranked, the
breakpoint for the two styles is determined by the median market capitalization
of the Russell 1000. Thus, those securities falling within the top fifty percent
of the cumulative market capitalization (as ranked by descending book-to-price)
become members of the Russell Price-Driven Indices. The Russell 1000 Growth
Index is, accordingly, designed to include those Russell 1000 securities with a
greater-than-average growth orientation. In contrast with the securities in the
Russell Price-Driven Indices, companies in the Growth Index tend to exhibit
higher price-to-book and price-earnings ratios, lower dividend yield and higher
forecasted growth values.
To the extent Premier Growth Fund does not invest in U.S. common stocks or
utilizes investment techniques such as futures or options, the S&P 500 Index and
Russell 1000 Growth Index may not be substantially comparable to Premier Growth
Fund. The S&P 500 Index and Russell 1000 Growth Index are included to illustrate
material economic and market factors that existed during the time period shown.
The S&P 500 Index and Russell 1000 Growth Index do not reflect the deduction of
any fees. If Premier Growth Fund were to purchase a portfolio of securities
substantially identical to the securities comprising the S&P 500 Index or the
Russell 1000 Growth Index, Premier Growth Fund's performance relative to the
index would be reduced by Premier Growth Fund's expenses, including brokerage
commissions, advisory fees, distribution fees, custodial fees, transfer agency
costs and other administrative expenses as well as by the impact on Premier
Growth Fund's shareholders of sales charges and income taxes.
The Lipper Growth Fund Index is prepared by Lipper Analytical Services, Inc. and
represents a composite index of the investment performance for the 30 largest
growth mutual funds. The composite investment performance of the Lipper Growth
Fund Index reflects investment management and administrative fees and other
operating expenses paid by these mutual funds and reinvested income dividends
and capital gain distributions, but excludes the impact of any income taxes and
sales charges.
The following performance data is provided solely to illustrate Mr. Harrison's
performance in managing the Historical Portfolios and the Premier Growth Fund as
measured against certain broad based market indices and against the composite
performance of other open-end growth mutual funds. Investors should not rely on
the following performance data of the Historical Portfolios as an indication of
future performance of Premier Growth Fund. The composite investment performance
for the periods presented may not be indicative of future rates of return. Other
methods of computing investment performance may produce different results, and
the results for different periods may vary.
<TABLE>
<CAPTION>
Schedule of Composite Investment Performance--Historical Portfolios*
Russell Lipper
Premier Historical S&P 500 1000 Growth
Growth Portfolios Index Growth Index Fund Index
Fund Total Return** Total Return Total Return Total Return
------ --------------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
1/1/98 to
9/30/98*** 9.09% 15.27% 6.04% 9.44% 2.38%
Year ended:
1997*** 27.05% 34.64% 33.36% 30.49% 25.30%
1996*** 18.84 22.06 22.96 23.12 17.48
1995*** 40.66 39.83 37.58 37.19 32.65
1994 (9.78) (4.82) 1.32 2.66 (1.57)
1993 5.35 10.54 10.08 2.90 11.98
1992 -- 12.18 7.62 5.00 7.63
1991 -- 38.91 30.47 41.16 35.20
1990 -- (1.57) (3.10) (0.26) (5.00)
1989 -- 38.80 31.69 35.92 28.60
1988 -- 10.88 16.61 11.27 15.80
1987 -- 8.49 5.25 5.31 1.00
1986 -- 27.40 18.67 15.36 15.90
1985 -- 37.41 31.73 32.85 30.30
1984 -- (3.31) 6.27 (.95) (2.80)
1983 -- 20.80 22.56 15.98 22.30
1982 -- 28.02 21.55 20.46 20.20
1981 -- (1.09) (4.92) (11.31) (8.40)
1980 -- 50.73 32.50 39.57 37.30
1979 -- 30.76 18.61 23.91 27.40
</TABLE>
45
<PAGE>
<TABLE>
<CAPTION>
Russell Lipper
Premier Historical S&P 500 1000 Growth
Growth Portfolios Index Growth Index Fund Index
Fund Total Return** Total Return Total Return Total Return
------ --------------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Cumulative total
return for
the period
January 1,
1979 to
September 30,
1998 -- 3,542% 2,064% 1,852% 1,613%
</TABLE>
* Total return is a measure of investment performance that is based upon the
change in value of an investment from the beginning to the end of a
specified period and assumes reinvestment of all dividends and other
distributions. The basis of preparation of this data is described in the
preceding discussion. Total returns for Premier Growth Fund are for Class A
Shares with imposition of the maximum 4.25% sales charge.
** Assumes imposition of the maximum advisory fee charged by Alliance for any
Historical Portfolio for the period involved.
*** During this period, the Historical Portfolios differed from Premier Growth
Fund in that Premier Growth Fund invested a portion of its net assets in
warrants on equity securities in which the Historical Portfolios were
unable, by their investment restrictions, to purchase. In lieu of warrants,
the Historical Portfolios acquired the common stock upon which the warrants
were based.
The average annual total returns presented below are based upon the cumulative
total return as of September 30, 1998, and for more than one year assume a
steady compounded rate of return and are not year-by-year results, which
fluctuated over the periods as shown.
<TABLE>
<CAPTION>
Average Annual Total Returns
---------------------------------------------------------------
Premier Russell Lipper
Growth Historical S&P 500 1000 Growth
Fund Portfolios** Index Growth Index Fund Index
-------- ------------- -------- ------------ ----------
<S> <C> <C> <C> <C> <C>
One year........ 6.21% 13.19% 6.08% 11.11% 3.07%
Three years..... 21.82 24.22 22.60 22.50 16.43
Five years...... 20.23 20.70 19.91 20.80 15.52
Ten years*...... 19.98+ 19.70 17.29 18.07 15.01
Since January 1,
1979.......... -- 19.97 16.84 16.23 15.47
---------------------------------------------------------------
</TABLE>
* Since inception on 9/28/92
ADMINISTRATOR TO ALL-ASIA INVESTMENT FUND
Alliance has been retained by All-Asia Investment Fund under an administration
agreement (the "Administration Agreement") to perform administrative services
necessary for the operation of the Fund. For a description of such services, see
the Statement of Additional Information of the Fund.
CONSULTANT TO ALLIANCE WITH RESPECT TO GREATER CHINA COUNTRIES
In connection with its provisions of advisory services to Greater China '97
Fund, Alliance has retained at its expense as a consultant New Alliance, a joint
venture company headquartered in Hong Kong which was formed in 1997 by Alliance
and Sun Hung Kai Properties Limited ("SHKP"). New Alliance provides Alliance
with ongoing, current and comprehensive information and analysis of conditions
and developments in Greater China countries consisting of, but not limited to,
statistical and factual research and assistance with respect to economic,
financial, political, technological and social conditions and trends in Greater
China countries, including information on markets and industries. In addition to
its own staff of professionals, New Alliance has access to the expertise and
personnel of SHKP, one of Hong Kong's preeminent property and business groups.
SHKP is one of the largest enterprises in Hong Kong measured by market
capitalization and has considerable expertise in evaluating business and market
conditions in Hong Kong and the other Greater China countries. Its activities
complementary to property development include insurance and estate management,
and SHKP is diversified as well into telecommunications and infrastructure
projects.
CONSULTANT TO ALLIANCE WITH RESPECT TO INVESTMENT IN REAL ESTATE SECURITIES
Alliance, with respect to investment in real estate securities, has retained as
a consultant CB Richard Ellis, Inc. ("CBRE"), a publicly held company and the
largest real estate services company in the United States, comprised of real
estate brokerage, property and facilities management, and real estate finance
and investment advisory activities. In 1997, CBRE completed 22,100 sale and
lease transactions, managed over 6,600 client properties, created over $5
billion in mortgage originations, and completed over 3,600 appraisal and
consulting assignments. In addition, they advised and managed for institutions
over $4 billion in real estate investments. CBRE will make available to Alliance
the CBRE National Real Estate Index, which gathers, analyzes and publishes
targeted research data for the 66 largest U.S. markets, based on a variety of
public-sector and private-sector sources as well as CBRE's proprietary database
of approximately 80,000 property transactions representing over $500 billion of
investment property. This information provides a substantial component of the
research and data used to create the REIT.Score model. As a consultant, CBRE
provides to Alliance, at Alliance's expense, such in-depth information regarding
the real estate market, the factors influencing regional valuations and analysts
of recent transactions in office, retail, industrial and multi-family properties
as Alliance shall from time to time request. CBRE will not furnish advice or
make recommendations regarding the purchase or sale of securities by the Fund
nor will it be responsible for making investment decisions involving Fund
assets.
CBRE is one of the three largest fee-based property management firms in the
United States, the largest commercial real estate lease brokerage firm in the
country, the largest investment property brokerage firm in the country, as well
as one of the largest publishers of real estate research, with approximately
8,000 employees worldwide. CBRE will provide Alliance with exclusive access to
its REIT . Score model which ranks approximately 142 REITs based on the relative
attractiveness of the property markets in which they own real estate. This model
scores the approximately 18,000 individual properties owned by these companies.
REIT . Score is in turn based on CBRE's National Real Estate Index which
gathers, analyzes and publishes targeted research for the 66 largest U.S. real
estate markets based on a variety of public- and private-sector sources as well
as CBRE's proprietary database of 80,000 commercial property transactions
representing over $500 billion of investment property and over 2,500 tracked
properties which report rent and expense data quarterly. CBRE has previously
provided access to its REIT.Score model results primarily to the institutional
market
46
<PAGE>
through subscriptions. The model is no longer provided to any research
publications and Real Estate Investment Fund is currently the only mutual fund
available to retail investors that has access to CBRE's REIT . Score model.
DISTRIBUTION SERVICES AGREEMENTS
Each Fund has entered into a Distribution Services Agreement with AFD with
respect to the Advisor Class shares. The Glass-Steagall Act and other applicable
laws may limit the ability of a bank or other depository institution to become
an underwriter or distributor of securities. However, in the opinion of the
Funds' management, based on the advice of counsel, these laws do not prohibit
such depository institutions from providing services for investment companies
such as the administrative, accounting and other services referred to in the
Agreements. In the event that a change in these laws prevented a bank from
providing such services, it is expected that other service arrangements would be
made and that shareholders would not be adversely affected. The State of Texas
requires that shares of a Fund may be sold in that state only by dealers or
other financial institutions that are registered there as broker-dealers.
--------------------------------
Dividends, Distributions
And Taxes
--------------------------------
DIVIDENDS AND DISTRIBUTIONS
If you receive an income dividend or capital gains distribution in cash you may,
within 120 days following the date of its payment, reinvest the dividend or
distribution in additional shares of that Fund without charge by returning to
Alliance, with appropriate instructions, the check representing such dividend or
distribution. Thereafter, unless you otherwise specify, you will be deemed to
have elected to reinvest all subsequent dividends and distributions in shares of
that Fund.
Each income dividend and capital gains distribution, if any, declared by a Fund
on its outstanding shares will, at the election of each shareholder, be paid in
cash or in additional shares of the same class of shares of that Fund having an
aggregate net asset value as of the payment date of such dividend or
distribution equal to the cash amount of such income dividend or distribution.
Election to receive dividends and distributions in cash or shares is made at the
time shares are initially purchased and may be changed at any time prior to the
record date for a particular dividend or distribution. Cash dividends can be
paid by check or, if the shareholder so elects, electronically via the ACH
network. There is no sales or other charge in connection with the reinvestment
of dividends and capital gains distributions.
While it is the intention of each Fund to distribute to its shareholders
substantially all of each fiscal year's net income and net realized capital
gains, if any, the amount and time of any such dividend or distribution must
necessarily depend upon the realization by such Fund of income and capital gains
from investments. There is no fixed dividend rate, and there can be no assurance
that a Fund will pay any dividends or realize any capital gains. Since REITs pay
distributions based on cash flow, without regard to depreciation and
amortization, it is likely that a portion of the distributions paid to Real
Estate Investment Fund and subsequently distributed to shareholders may be a
nontaxable return of capital. The final determination of the amount of a Fund's
return of capital distributions for the period will be made after the end of
each calendar year.
If you buy shares just before a Fund deducts a distribution from its net asset
value, you will pay the full price for the shares and then receive a portion of
the price back as a taxable distribution.
FOREIGN INCOME TAXES
Investment income received by a Fund from sources within foreign countries may
be subject to foreign income taxes withheld at the source. To the extent that
any Fund is liable for foreign income taxes withheld at the source, each Fund
intends, if possible, to operate so as to meet the requirements of the Code to
"pass through" to the Fund's shareholders credits for foreign income taxes paid
(or to permit shareholders to claim a deduction for such foreign taxes), but
there can be no assurance that any Fund will be able to do so. Furthermore, a
shareholder's ability to claim a foreign tax credit or deduction in respect of
foreign taxes paid by a Fund may be subject to certain limitations imposed by
the Code, as a result of which a shareholder may not be permitted to claim a
full credit or deduction for the amount of such taxes.
U.S. FEDERAL INCOME TAXES
Each Fund intends to qualify to be taxed as a "regulated investment company"
under the Code. Qualification as a regulated investment company relieves that
Fund of federal income taxes on that part of its taxable income including net
capital gain which it pays out to its shareholders. Dividends out of net
ordinary income and distributions of net short-term capital gains are taxable to
the recipient shareholders as ordinary income. In the case of corporate
shareholders, such dividends may be eligible for the dividends-received
deduction, except that the amount eligible for the deduction is limited to the
amount of qualifying dividends received by the Fund. Dividends received from
REITs or from foreign corporations generally do not constitute qualifying
dividends. A corporation's dividends-received deduction generally will be
disallowed unless the corporation holds shares in the Fund at least 46 days
during the 90 day period beginning 45 days before the date on which the
corporation becomes entitled to receive the dividend. Furthermore, the
dividends-received deduction will be disallowed to the extent a corporation's
investment in shares of a Fund is financed with indebtedness.
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 a Fund. Distributions of
net capital gain are not eligible for the dividends-received deduction referred
to above.
Under current federal tax law, the amount of an income dividend or capital gains
distribution declared by a Fund
47
<PAGE>
during October, November or December of a year to shareholders of record as of a
specified date in such a month that is paid during January of the following year
is includable in the prior year's taxable income of shareholders that are
calendar year taxpayers.
Any dividend or distribution received by a shareholder on shares of a Fund will
have the effect of reducing the net asset value of such shares by the amount of
such dividend or distribution. Furthermore, a dividend or distribution made
shortly after the purchase of such shares by a shareholder, although in effect a
return of capital to that particular shareholder, would be taxable to him or her
as described above. If a shareholder held shares six months or less and during
that period received a distribution of net capital gain, any loss realized on
the sale of such shares during such six-month period would be a long-term
capital loss to the extent of such distribution.
A dividend or capital gains distribution with respect to shares of a Fund held
by a tax-deferred or qualified plan, such as an individual retirement account,
403(b)(7) retirement plan or corporate pension or profit-sharing plan, generally
will not be taxable to the plan. Distributions from such plans will be taxable
to individual participants under applicable tax rules without regard to the
character of the income earned by the qualified plan.
A Fund will be required to withhold 31% of any payments made to a shareholder if
the shareholder has not provided a certified taxpayer identification number to
the Fund, or the Secretary of the Treasury notifies a Fund that a shareholder
has not reported all interest and dividend income required to be shown on the
shareholder's Federal income tax return.
Under certain circumstances, if a Fund realizes losses (e.g., from fluctuations
in currency exchange rates) after paying a dividend, all or a portion of the
dividend may subsequently be characterized as a return of capital. Returns of
capital are generally nontaxable, but will reduce a shareholder's basis in
shares of a Fund. If that basis is reduced to zero (which could happen if the
shareholder does not reinvest distributions and returns of capital are
significant) any further returns of capital will be taxable as capital gain. See
"Dividends, Distributions and Taxes" in the Statements of Additional
Information. Shareholders will be advised annually as to the tax status of
dividends and capital gains and return of capital distributions. Shareholders
are urged to consult their tax advisors regarding their own tax situation.
Distributions by a Fund may be subject to state and local taxes.
------------------------------
Conversion Feature
------------------------------
CONVERSION TO CLASS A SHARES
Advisor Class shares may be held solely through the fee-based program accounts,
employee benefit plans and registered investment advisory or other financial
intermediary relationships described above under "Purchase and Sale of Shares--
How to Buy Shares," and by investment advisory clients of, and certain other
persons associated with, Alliance and its affiliates or the Funds. If (i) a
holder of Advisor Class shares ceases to participate in the fee-based program or
plan, or to be associated with an investment advisor or financial intermediary,
in each case that satisfies the requirements to purchase shares set forth under
"Purchase and Sale of Shares--How to Buy Shares" or (ii) the holder is otherwise
no longer eligible to purchase Advisor Class shares as described in this
Prospectus (each, a "Conversion Event"), then all Advisor Class shares held by
the shareholder will convert automatically and without notice to the
shareholder, other than the notice contained in this Prospectus, to Class A
shares of the Fund during the calendar month following the month in which the
Fund is informed of the occurrence of the Conversion Event. The failure of a
shareholder or a fee-based program to satisfy the minimum investment
requirements to purchase Advisor Class shares will not constitute a Conversion
Event. The conversion would occur on the basis of the relative net asset values
of the two classes and without the imposition of any sales load, fee or other
charge. Class A shares are subject to a distribution fee that may not exceed an
annual rate of .30%. The higher fees mean a higher expense ratio, so Class A
shares pay correspondingly lower dividends and may have a lower net asset value
than Advisor Class shares.
--------------------------------
General Information
--------------------------------
PORTFOLIO TRANSACTIONS
Consistent with the Conduct Rules of the National Association of Securities
Dealers, Inc., and subject to seeking best price and execution, a Fund may
consider sales of its shares as a factor in the selection of dealers to enter
into portfolio transactions with the Fund.
ORGANIZATION
Each of the following Funds is a Maryland corporation organized in the year
indicated: The Alliance Fund, Inc. (1938), Alliance Balanced Shares, Inc.
(1932), Alliance Premier Growth Fund, Inc. (1992), Alliance Technology Fund,
Inc. (1980), Alliance Quasar Fund, Inc. (1968), Alliance International Premier
Growth Fund (1997), Alliance Worldwide Privatization Fund, Inc. (1994), Alliance
New Europe Fund, Inc. (1990), Alliance All-Asia Investment Fund, Inc. (1994),
Alliance Greater China '97 Fund (1997), Alliance Global Small Cap Fund, Inc.
(1966), Alliance Global Environment Fund, Inc. (1990), Alliance Utility Income
Fund, Inc. (1993), Alliance Growth and Income Fund, Inc. (1932) and Real Estate
Investment Fund, Inc. (1996). Each of the following Funds is either a
Massachusetts business trust or a series of a Massachusetts business trust
organized in the year indicated: Alliance Growth Fund (a series of The Alliance
Portfolios) (1987), and Alliance International Fund (1980). Prior to August 2,
1993, The Alliance Portfolios was known as The Equitable Funds and Growth Fund
was known as The Equitable Growth Fund.
48
<PAGE>
It is anticipated that annual shareholder meetings will not be held; shareholder
meetings will be held only when required by federal or state law. Shareholders
have available certain procedures for the removal of Directors.
A shareholder in a Fund will be entitled to share pro rata with other holders of
the same class of shares all dividends and distributions arising from the Fund's
assets and, upon redeeming shares, will receive the then current net asset value
of the Fund represented by the redeemed shares. The Funds are empowered to
establish, without shareholder approval, additional portfolios, which may have
different investment objectives and policies than those of the Fund, and
additional classes of shares within the Funds, if an additional portfolio or
class were established in a Fund, each share of the portfolio or class would
normally be entitled to one vote for all purposes. Generally, shares of each
portfolio and class would vote together as a single class on matters, such as
the election of Directors, that affect each portfolio and class in substantially
the same manner. Advisor Class, Class A, Class B and Class C shares have
identical voting, dividend, liquidation and other rights, except that each class
bears its own transfer agency expenses, each of Class A, Class B and Class C
shares of each Fund bears its own distribution expenses and Class B and Advisor
Class shares convert to Class A shares under certain circumstances. Each class
of shares of each Fund votes separately with respect to matters for which
separate class voting is appropriate under applicable law. Shares are freely
transferable, are entitled to dividends as determined by the Directors and, in
liquidation of a Fund, are entitled to receive the net assets of the Fund. Since
this Prospectus sets forth information about all the Funds, it is theoretically
possible that a Fund might be liable for any materially inaccurate or incomplete
disclosure in this Prospectus concerning another Fund. Based on the advice of
counsel, however, the Funds believe that the potential liability of each Fund
with respect to the disclosure in this Prospectus extends only to the disclosure
relating to that Fund. Certain additional matters relating to a Fund's
organization are discussed in its Statement of Additional Information.
REGISTRAR, TRANSFER AGENT AND DIVIDEND-DISBURSING AGENT
AFS, an indirect wholly-owned subsidiary of Alliance, located at 500 Plaza
Drive, Secaucus, New Jersey 07094, acts as each Fund's registrar, transfer agent
and dividend-disbursing agent for a fee based upon the number of shareholder
accounts maintained for the Funds.
PRINCIPAL UNDERWRITER
AFD, an indirect wholly-owned subsidiary of Alliance, located at 1345 Avenue of
the Americas, New York, New York 10105, is the principal underwriter of shares
of the Funds.
PERFORMANCE INFORMATION
From time to time, the Funds advertise their "total return," which is computed
separately for each class of shares, including Advisor Class shares. Such
advertisements disclose a Fund's average annual compounded total return for the
periods prescribed by the Commission. A Fund's total return for each such period
is computed by finding, through the use of a formula prescribed by the
Commission, the average annual compounded rate of return over the period that
would equate an assumed initial amount invested to the value of the investment
at the end of the period. For purposes of computing total return, income
dividends and capital gains distributions paid on shares of a Fund are assumed
to have been reinvested when paid and the maximum sales charges applicable to
purchases and redemptions of a Fund's shares are assumed to have been paid.
Balanced Shares, Growth and Income Fund, Real Estate Investment Fund and Utility
Income Fund may also advertise their "yield," which is also computed separately
for each class of shares, including Advisor Class shares. A Fund's yield for any
30-day (or one-month) period is computed by dividing the net investment income
per share earned during such period by the maximum public offering price per
share on the last day of the period, and then annualizing such 30-day (or one-
month) yield in accordance with a formula prescribed by the Commission which
provides for compounding on a semi-annual basis.
Balanced Shares, Utility Income Fund, Real Estate Investment Fund and Growth and
Income Fund may also state in sales literature an "actual distribution rate" for
each class which is computed in the same manner as yield except that actual
income dividends declared per share during the period in question are
substituted for net investment income per share. The actual distribution rate is
computed separately for each class of shares, including Advisor Class shares.
A Fund's advertisements may quote performance rankings or ratings of a Fund by
financial publications or independent organizations such as Lipper Analytical
Services, Inc. and Morningstar, Inc. or compare a Fund's performance to various
indices.
ADDITIONAL INFORMATION
This Prospectus and the Statements of Additional Information, which have been
incorporated by reference herein, do not contain all the information set forth
in the Registration Statements filed by the Funds with the Commission under the
Securities Act. Copies of the Registration Statements may be obtained at a
reasonable charge from the Commission or may be examined, without charge, at the
offices of the Commission in Washington, D.C.
This prospectus does not constitute an offering in any state in which such
offering may not lawfully be made.
This prospectus is intended to constitute an offer by each Fund only of the
securities of which it is the issuer and is not intended to constitute an offer
by any Fund of the securities of any other Fund whose securities are also
offered by this prospectus. No Fund intends to make any representation as to the
accuracy or completeness of the disclosure in this prospectus relating to any
other Fund. See "General Information--Organization."
49
<PAGE>
- --------------------------------------
Alliance Stock Funds
Subscription Application
- - Advisor Class
- --------------------------------------
The Alliance Fund
Growth Fund
Premier Growth Fund
Technology Fund
Quasar Fund
International Fund
International Premier Growth Fund
Worldwide Privatization Fund
New Europe Fund
All-Asia Investment Fund
Greater China '97 Fund
Global Small Cap Fund
Global Environment Fund
Balanced Shares
Utility Income Fund
Growth & Income Fund
Fund Real Estate Investment Fund
To Open Your New Alliance Account...
Please complete the application and mail it to:
Alliance Fund Services, Inc.
P.O. Box 1520
Secaucus, New Jersey 07096-1520
For certified or overnight deliveries, send to:
Alliance Fund Services, Inc.
500 Plaza Drive
Secaucus, New Jersey 07094
Section 1 Your Account Registration
(Required)
Complete one of the available choices. To ensure proper
tax reporting to the IRS:
. Individuals, Joint Tenants, Transfer on Death and
Gift/Transfer to a Minor:
o Indicate your name(s) exactly as it appears on
your social security card.
. Transfer on Death:
o Ensure that your state participates
. Trust/Other:
o Indicate the name of the entity exactly as it
appeared on the notice you received from the IRS
when your Employer Identification number was
assigned.
Section 2 Your Address (Required) Complete in full.
. Non-Resident Alien:
o Indicate your permanent country of residence.
Section 3 Your Initial Investment (Required) For each fund in which you are
investing (1) Write the three digit fund number in the column titled `Indicate
three digit fund number located below'.
<PAGE>
(2) Write the dollar amount of your initial purchase in the column titled
`Indicate Dollar Amount'.
(3) Check off a distribution option for your dividends.
(4) Check off a distribution option for your capital gains. All distributions
(dividends and capital gains) will be reinvested into your fund account unless
you direct otherwise. If you want distributions sent directly to your bank
account, then you must complete Section 4D and attach a preprinted, voided check
for that account. If you want your distributions sent to a third party you must
complete Section 4E.
Section 4 Your Shareholder Options (Complete only those options you want)
A. Automatic Investment Plans (AIP) - You can make periodic investments into any
of your Alliance Funds in one of three ways. First, by a periodic withdrawal
($25 minimum) directly from your bank account and invested into an Alliance
Fund. Second, you can direct your distributions (dividends and capital gains)
from one Alliance Fund into another Fund. Or third, you can automatically
exchange monthly ($25 minimum) shares of one Alliance Fund for shares of another
Fund. To elect one of these options, complete the appropriate portion of Section
4A & 4D. If more than one dividend direction or monthly exchange is desired,
please call our Literature Center to obtain a Shareholder Account Services
Options Form for completion.
B. Telephone Transactions via EFT - Complete this option if you would like to be
able to transact via telephone between your fund account and your bank account.
C. Systematic Withdrawal Plans (SWP) - Complete this option if you wish to
periodically redeem dollars from one of your fund accounts. Payments can be made
via Electronic Funds Transfer (EFT) to your bank account or by check.
D. Bank Information - If you have elected any options that
involve transactions between your bank account and your fund account or have
elected cash distribution options and would like the payments sent to your bank
account, please tape a preprinted,voided check of the account you wish to use to
this section of the application.
E. Third Party Payment Details - If you have chosen cash distributions and/or a
Systematic Withdrawal Plan and would like the payments sent to a person and/or
address other than those provided in section 1 or 2, complete this
option. Medallion Signature Guarantee is required if your account is not
maintained by a broker dealer.
Section 5 Shareholder Authorization (Required) All owners must sign. If it is a
custodial, corporate, or trust account, the custodian, an authorized officer, or
the trustee respectively must sign.
If We Can Assist You In Any Way, Please Do Not Hesitate To Call Us At:
(800) 221-5672.
- ------------------------------------
For Literature Call: (800) 227-4618
- ------------------------------------
<PAGE>
The Alliance Stock Funds Subscription Application - Advisor Class
1. Your Account Registration (Please Print in Capital Letters and Mark Check
Boxes Where Applicable)
[_] Individual Account { [_] Male [_] Female } -or- [_] Joint Account -or-
[_] Transfer On Death { [_] Male [_] Female } -or- [_] Gift/Transfer to a Minor
[_][_][_][_][_][_][_][_][_][_] [_] [_][_][_][_][_][_][_][_][_][_]
Owner or Custodian (First Name) (MI) (Last Name)
[_][_][_][_][_][_][_][_][_][_] [_] [_][_][_][_][_][_][_][_][_][_]
(First Name) Joint Owner*, (MI) (Last Name)
Transfer On Death Beneficiary
or Minor
[_][_][_]-[_][_]-[_][_][_][_] If Uniform Gift/Transfer
Social Security Number of Owner to Minor Account:
or Minor (required to open account) [_][_] Minor's State of Residence
If Joint Tenants Account: * The Account will be registered
"Joint Tenants with right of Survivorship" unless you indicate
otherwise below:
[_] In Common [_] By Entirety [_] Community Property
[_] Trust -or- [_] Corporation -or- [_] Other_______________________________
[_][_][_][_][_][_][_][_][_][_] [_] [_][_][_][_][_][_][_][_][_][_]
Name of Trustee if applicable (MI) (Last Name)
(First Name)
[_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_]
Name of Trust or Corporation or Other Entity
[_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_][_]
Name of Trust or Corporation or Other Entity continued
[_][_][_][_][_][_][_][_] [_][_][_][_][_][_][_][_][_]
Trust Dated (MM,DD,YYYY) Tax ID Number (required to open account)
[_] Employer ID Number - OR - [_]Social
Security
Number
2. Your Address
[_][_][_][_][_][_][_] [_][_][_][_][_][_][_][_][_][_][_][_][_][_]
Street Number Street Name
[_][_][_][_][_][_][_][_][_][_][_][_][_] [_][_] [_][_][_][_][_]
City State Zip code
[_][_][_][_][_][_][_][_][_] [_][_][_] - [_][_][_] - [_][_][_][_]
If Non-U.S., Specify Country Daytime Phone Number
[_] U.S. Citizen [_] Resident Alien [_] Non-Resident Alien
ALLIANCE CAPITAL [LOGO]
80887GEN-TASFApp-Advisor-P1
1
<PAGE>
- -----------------------------------
3. Your Initial Investment
- -----------------------------------
I hereby subscribe for shares of the following Alliance Stock Fund(s) Advisor
Class and elect distribution options as indicated.
Broker/Dealer Use Only: Wire Confirm #
Dividend and Capital Gain Distribution Options:
R Reinvest distributions into my fund account.
- - ----------------------
C Send my distributions in cash to the address I have provided in Section 2.
- - -----------------------------
(Complete Section 4D for direct deposit to your bank account. Complete
Section 4E for payment to a third party).
D Direct my distributions to another Alliance fund. Complete the appropriate
- - ------------------------------------------------
portion of Section 4A to direct your distributions (dividends and capital
gains) to another Alliance Fund.
- ----------- -------------- ---------------------- ------------------------
Make all Indicate three Distributions Options
checks/*/ digit Fund Indicate Dollar Amount /*/Check One/*/
payable to: number ------------------------
Alliance located below --------- -------------
Funds Dividends Capital Gains
- ----------- -------------- ---------------------- --------- -------------
R C D R C D
- ----------------------------
Total Investment
- ----------------------------
/*/ Cash and money orders are not accepted
- -----------------------------------------------------
Alliance Stock Fund Names and Numbers
- -----------------------------------------------------
------------
Advisor
Class
------------
The Alliance Fund 444
Growth Fund 431
- -------- Premier Growth Fund 478
DOMESTIC Technology Fund 482
- -------- Quasar Fund 426
International Fund 440
International Premier Growth 479
Worldwide Privatization Fund 412
- ------ New Europe Fund 462
GLOBAL All-Asia Investment Fund 418
- ------ Greater China '97 Fund 460
Global Small Cap Fund 445
Global Environment Fund 481
- ------ Balanced Shares 496
TOTAL Utility Income Fund 409
RETURN Growth & Income Fund 494
- ------ Real Estate Investment Fund 410
80887GEN-TASFApp-Advisor-P2
2
<PAGE>
4. Your Shareholder Options
A. Automatic Investment Plans (AIP)
[_] Withdraw From My Bank Account Via EFT(*) I authorize Alliance to draw on my
bank account for investment in my fund account(s) as indicated below
(Complete Section 4D also for the bank account you wish to use).
<TABLE>
<S> <C> <C> <C>
1- [_] [_] [_] [_] [_] [_] [_] [_] [_],[_] [_] [_].00 [_] Frequency:
Fund Number Beginning Date (MM,DD) Amount ($25 minimum) Frequency M = monthly
Q = quarterly
A = annually
2- [_] [_] [_] [_] [_] [_] [_] [_] [_],[_] [_] [_].00 [_]
Fund Number Beginning Date (MM,DD) Amount ($25 minimum) Frequency
3- [_] [_] [_] [_] [_] [_] [_] [_] [_],[_] [_] [_].00 [_]
Fund Number Beginning Date (MM,DD) Amount ($25 minimum) Frequency
(*) Electronic Funds Transfer. Your bank must be a member of the National Automated Clearing House Association (NACHA)
</TABLE>
[_] Direct My Distributions As indicated in Section 3, I would like my
dividends and/or capital gains directed to the same class of shares of
another Alliance Fund.
FROM:
---- [_] [_] [_] [_] [_] [_] [_] [_] [_] [_] [_] [_] [_] - [_]
Fund Number Account Number (If existing)
TO:
-- [_] [_] [_] [_] [_] [_] [_] [_] [_] [_] [_] [_] [_] - [_]
Fund Number Account Number (If existing)
[_] Exchange My Shares Monthly I authorize Alliance to transact monthly
exchanges, within the same class of shares, between my fund accounts as
listed below.
FROM:
---- [_] [_] [_] [_] [_] [_] [_] [_] [_] [_] [_] [_] [_] - [_]
Fund Number Account Number (If existing)
[_] [_], [_] [_] [_].00 [_] [_]
Amount ($25 minimum) Day of Exchange(**)
TO:
-- [_] [_] [_] [_] [_] [_] [_] [_] [_] [_] [_] [_] [_] - [_]
Fund Number Account Number (If existing)
(**) Shares exchanged will be redeemed at the net asset value on the "Day
of Exchange" (If the "Day of Exchange" is not a fund business day, the
exchange transaction will be processed on the next fund business day). The
exchange privilege is not available if stock certificates have been issued.
B. Purchases and Redemptions Via EFT
You can call our toll-free number 1-800-221-5672 and instruct Alliance Fund
Services, Inc. in a recorded conversation to purchase, redeem or exchange
shares for your account. Purchase and redemption requests will be processed
via electronic funds transfer (EFT) to and from your bank account.
Instructions: -- Review the information in the Prospectus about telephone
transaction services.
-- If you select the telephone purchase or redemption
privilege, you must write "VOID" across the face of a
check from the bank account you wish to use and attach it
to Section 4D of this application.
[_] Purchases and Redemptions via EFT
I hereby authorize Alliance Fund Services, Inc. to effect the purchase
and/or redemption of Fund shares for my account according to my telephone
instructions or telephone instructions from my Broker/Agent, and to
withdraw money or credit money for such shares via EFT from the bank
account I have selected.
- --------------------------------------------------------------------------------
For shares recently purchased by check or electronic funds transfer
redemption proceeds will not be made available until the Fund is reasonably
assured the check or electronic funds transfer has been collected, normally
15 calendar days after the purchase date.
- --------------------------------------------------------------------------------
80887GEN-TASFApp-Advisor-P3
3
<PAGE>
4. Your Shareholder Options (CONTINUED)
C. Systematic Withdrawal Plans (SWP)
In order to establish a SWP, you must reinvest all dividends and capital
gains.
[_] I authorize Alliance to transact periodic redemptions from my fund
account and send the proceeds to me as indicated below.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
1- [_] [_] [_] [_] [_] [_] [_] [_] [_],[_] [_] [_].00 [_]
Fund Number Beginning Date (MM,DD) Amount ($25 minimum) Frequency
Frequency:
2- [_] [_] [_] [_] [_] [_] [_] [_] [_],[_] [_] [_].00 [_] M = monthly
Fund Number Beginning Date (MM,DD) Amount ($25 minimum) Frequency Q = quarterly
A = annually
3- [_] [_] [_] [_] [_] [_] [_] [_] [_],[_] [_] [_].00 [_]
Fund Number Beginning Date (MM,DD) Amount ($25 minimum) Frequency
Please send my SWP proceeds to:
[_] My Address of Record (via check)
[_] The Payee and address specified in section 4E (via check)(Medallion
Signature Guarantee required)
[_] My checking account-via EFT (complete section 4D) Your bank must be a
member of the National Automated Clearing House Association (NACHA)
in order for you to receive SWP proceeds directly into your bank
account. Otherwise payment will be made by check
D. Bank Information This bank account information will be used for:
[_] Distributions (Section 3) [_] Telephone Transactions
(Section 4B)
[_] Automatic Investments (Section 4A) [_] Withdrawals (Section 4C)
Please Tape a Pre-printed Voided Check Here(*)
103
J. Smith
123 Main Street
ANYTOWN, USA 12345 ____ 19 __
Pay to the
Order of ________________________________________$ _______________
____________________________________________________________Dollars
YOUR BANK
123 STREET
ANYTOWN, USA 12345 VOID
Note ___________________________ _______________________________
:000000000: 103 000000000:765
ABA Routing Number Check Bank Account Number
Number
(*) The above services cannot be established without a pre-printed voided check.
For EFT transactions, the fund requires signatures of bank account owners
exactly as they appear on bank records. If the registration at the bank differs
from that on the Alliance mutual fund, all parties must sign in Section 5.
[_] [_] [_] [_] [_] [_] [_] [_] [_] [_] [_] [_] [_] [_] [_] [_] [_] [_] [_] [_] [_] [_]
Your Bank's ABA Routing Number Your Bank Account Number
</TABLE>
[_] Checking Account [_] Savings Account
80887GEN-TASFApp-Advisor-P4
4
<PAGE>
4. Your Shareholder Options (CONTINUED)
E. Third Party Payment Details Your signature(s) in Section 5 must be Medallion
Signature Guaranteed if your account is not maintained by a broker/dealer.
This third party payee information will be used for:
[_] Distributions (section 3) [_] Systematic Withdrawals (section 4C)
[_] [_] [_] [_] [_] [_] [_] [_] [_] [_] [_] [_] [_] [_] [_] [_] [_] [_] [_]
Name (First Name) (MI) (Last Name)
[_] [_] [_] [_] [_] [_] [_] [_] [_] [_][_][_][_] [_] [_] [_] [_] [_] [_][_]
Street Number Street Name
[_] [_] [_] [_] [_] [_] [_] [_] [_] [_] [_] [_] [_] [_][_][_] [_] [_]
City State Zip code
Dealer/Agent Authorization - For selected Dealers or Agents ONLY.
We hereby authorize Alliance Fund Services, Inc. to act as our agent in
connection with transactions under this authorization form; and we guarantee the
signature(s) set forth in Section 5, as well as the legal capacity of the
shareholder.
- ------------------------------------- --------------------------------------
- ------------------------------------- --------------------------------------
Dealer/Agent Firm Authorized Signature
- --------------------------------- ---- --------------------------------------
- --------------------------------- ---- --------------------------------------
Representative First Name MI Last Name
- ------------------------------------- --------------------------------------
- ------------------------------------- --------------------------------------
Dealer/Agent Firm Number Representative Number
- ------------------------------------- --------------------------------------
- ------------------------------------- --------------------------------------
Branch Number Branch Telephone Number
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Branch Office Address
- -------------------------------- ----- ---- --------------------------------
- -------------------------------- ----- ---- --------------------------------
City State Zip Code
80887GEN-TASFApp-Advisor-P5
5
<PAGE>
5. Shareholder Authorization -- This section MUST be completed
Telephone Exchanges and Redemptions by Check
Unless I have checked one or both boxes below, these privileges will
automatically apply, and by signing this application, I hereby authorize
Alliance Fund Services, Inc. to act on my telephone instructions, or on
telephone instructions from any person representing himself to be an
authorized employee of an investment dealer or agent requesting a redemption
or exchange on my behalf. (NOTE: Telephone exchanges may only be processed
between accounts that have identical registrations.) Telephone redemption
checks will only be mailed to the name and address of record; and the
address must not have changed within the last 30 days. The maximum telephone
redemption amount is $50,000 for redemptions by check.
[_] I do not elect the telephone exchange service
[_] I do not elect the telephone redemption by check service
By selecting any of the above telephone privileges, I agree that neither the
Fund nor Alliance, Alliance Fund Distributors, Inc., Alliance Fund Services,
Inc. or other Fund Agent will be liable for any loss, injury, damage or
expense as a result of acting upon telephone instructions purporting to be
on my behalf, that the Fund reasonably believes to be genuine, and that
neither the Fund nor any such party will be responsible for the authenticity
of such telephone instructions. I understand that any or all of these
privileges may be discontinued by me or the Fund at any time. I understand
and agree that the Fund reserves the right to refuse any telephone
instructions and that my investment dealer or agent reserves the right to
refuse to issue any telephone instructions I may request.
For non-residents only: Under penalties of perjury, I certify that to the
best of my knowledge and belief, I qualify as a foreign person as indicated
in Section 2.
I am of legal age and capacity and have received and read the Prospectus and
agree to its terms.
I certify under penalty of perjury that the number shown in Section 1 of
this form is my correct tax identification number or I am waiting for a
number to be issued to me and that I have not been notified that this
account is subject to backup withholding.
The Internal Revenue Service does not require your consent to any provision
of this document other than the certification required to avoid backup
withholding.
- ------------------------------------------------ ---------------------
- ------------------------------------------------ ---------------------
Signature Date
- ------------------------------------------------ ---------------------
- ------------------------------------------------ ---------------------
Signature Date
- -----------------------------------------
Medallion Signature Guarantee required if
completing Section 4E and your mutual
fund is not maintained by a broker dealer
ALLIANCE CAPITAL [LOGO]
80887GEN-TASFApp-Advisor-P6
6
<PAGE>
(LOGO)
ALLIANCE INTERNATIONAL FUND
_______________________________________________________________
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
November 2, 1998
_______________________________________________________________
This Statement of Additional Information is not a
prospectus but supplements and should be read in conjunction with
the current Prospectus for the Alliance International Fund (the
"Fund") that offers the Class A, Class B and Class C shares of
the Fund and the current Prospectus for the Fund that offers the
Advisor Class shares of the Fund (the "Advisor Class Prospectus"
and, together with the Prospectus for the Fund that offers the
Class A, Class B and Class C shares of the Fund, the
"Prospectus"). Copies of such Prospectus may be obtained by
contacting Alliance Fund Services, Inc. at the address or the
"For Literature" telephone number shown above.
Table Of Contents
Page
Description of the Fund...............................
Management of the Fund................................
Expenses of the Fund..................................
Purchase of Shares....................................
Redemption and Repurchase of Shares...................
Shareholder Services..................................
Net Asset Value.......................................
Dividends, Distributions and Taxes....................
Brokerage and Portfolio Transactions..................
General Information...................................
Report of Independent Auditors
and Financial Statements............................
Appendix A: Futures Contracts and Options on
Futures Contracts and Foreign Currencies............ A-1
Appendix B: Additional Information About Japan........ B-1
Appendix C: Certain Employee Benefit Plans ........... C-1
_____________________
(R): This registered service mark used under license from the
owner, Alliance Capital Management L.P.
<PAGE>
_______________________________________________________________
DESCRIPTION OF THE FUND
_______________________________________________________________
Investment Objective And Policies
The fundamental investment objective of the Fund is to
seek to obtain a total return on its assets from long-term growth
of capital and from income principally through a broad portfolio
of marketable securities of established non-United States
companies (e.g., incorporated outside the United States),
companies participating in foreign economies with prospects for
growth, and foreign government securities. The management of the
Fund considers it consistent with this objective to acquire
securities of companies incorporated in the United States and
having their principal activities and interests outside of the
United States. The Fund intends to be invested primarily in such
issuers and under normal circumstances more than 80% of its
assets will be so invested. The foregoing investment objective
is a fundamental policy of the Fund and cannot be changed without
shareholder approval.
In seeking its objective, the Fund expects to invest its
assets primarily in common stocks of established non-United
States companies which in the opinion of Alliance Capital
Management L.P. (the "Adviser") have potential for growth of
capital or income or both. However, there is no requirement that
the Fund invest exclusively in common stocks or other equity
securities, and, if deemed advisable, the Fund may invest in any
other type of investment grade security including, but not
limited to, convertible securities, preferred stocks, bonds,
notes and other debt securities of foreign issuers (Euro-dollar
securities), as well as in warrants, or obligations of the United
States or foreign governments and their political subdivisions.
Investments may be made for capital appreciation or for
income or any combination of both for the purpose of achieving a
higher overall return than might otherwise be obtained solely
from investing for growth of capital or for income. There is no
limitation on the percent or amount of the Fund's assets which
may be invested for growth or income, and therefore, at any point
in time, the investment emphasis may be placed solely or
primarily on growth of capital or solely or primarily on income.
There can be no assurance, of course, that the Fund will achieve
its objective.
In determining whether the Fund will be invested for
capital appreciation or for income or any combination of both,
the Adviser regularly analyzes a broad range of international
equity and fixed-income markets in order to assess the degree of
2
<PAGE>
risk and level of return that can be expected from each market.
Based upon the current assessment of the Adviser, the Fund
expects that its objective will, over the long term, be met
principally through investing in the equity securities of
established non-United States companies which, in the opinion of
the Adviser, have potential for growth of capital. However, the
Fund can be expected during certain periods to place substantial
emphasis on income through investment in foreign debt securities
when it appears that the total return from such securities will
equal or exceed the return on equity securities.
When management believes that the total return on debt
securities will equal or exceed the return on common stocks, the
Fund may, in seeking its objective of total return, substantially
increase its holdings in such debt securities. The Fund may
establish and maintain temporary cash balances for defensive
purposes or to enable it to take advantage of buying
opportunities.
The Adviser believes a portfolio of investments solely
in issuers located in the United States or in any other single
country ties the performance of such a portfolio to the economic
and market swings of one country, and that diversification by
country, as well as by industry, can alleviate the impact of
downturns in any one country. The Fund intends to diversify
investments broadly among countries and normally to have
represented in the portfolio business activities of not less than
three different countries, excluding the United States. The Fund
may invest all or a substantial portion of its assets in one or
more of such countries. At June 30, 1998, approximately 15% of
the Fund's assets were invested in securities of Japanese
issuers. For a description of Japan, see Appendix B. The Fund
may purchase securities of companies, wherever organized, which,
in the judgment of the Adviser, have their principal activities
and interests outside the United States determined on the basis
of such factors as location of the company's assets, or
personnel, or sales and earnings.
It is the present intention of the Adviser to invest in
companies based in (or governments of or within) the Far East
(Japan, the Special Administrative Region of China ("Hong Kong"),
Singapore and Malaysia), Western Europe (United Kingdom, Germany,
The Netherlands, France, Switzerland), Australia, Canada, and
such other areas and countries as the Adviser may determine from
time to time. However, investments may be made from time to time
in companies in, or governments of, developing countries as well
as developed countries. Although there is no universally
accepted definition, a developing country is generally considered
to be a country which is in the initial stages of its
industrialization cycle with a low per capita gross national
product. Historical experience indicates that the markets of
3
<PAGE>
developing countries have been more volatile than the markets of
the more mature economies of developed countries; however, such
markets often have provided higher rates of return to investors.
Shareholders should be aware that investing in the equity and
fixed-income markets of developing countries involves exposure to
economic structures that are generally less diverse and mature,
and to political systems which can be expected to have less
stability than those of developed countries. Management at
present does not intend to invest more than 10% of the Fund's
total assets in companies in, or governments of, developing
countries.
The Adviser, in determining the composition of the
Fund's portfolio, will initially seek the appropriate
distribution of investments among various countries and
geographic regions. Accordingly, the Adviser will consider the
following factors in making investment decisions on this basis:
prospects for relative economic growth between foreign countries;
expected levels of inflation; government policies influencing
business conditions; the outlook for currency relationships; and
the range of individual investment opportunities available to the
international portfolio investor.
The Adviser will, in analyzing individual companies for
the investment, look for one or more of the following
characteristics: an above average earnings growth per share;
high return on invested capital; healthy balance sheet; sound
financial and accounting policies and overall financial strength;
strong competitive advantages; effective research and product
development and marketing; efficient service; pricing
flexibility; strength of management; and general operating
characteristics which will enable the companies to compete
successfully in their marketplace. While current dividend income
is not a prerequisite in the selection of portfolio companies,
the companies in which the Fund invests normally will have a
record of paying dividends for at least one year, and will
generally be expected to increase the amounts of such dividends
in future years as earnings increase.
Foreign securities such as those purchased by the Fund
may be subject to foreign government taxes which could reduce the
yield on such securities, although a shareholder otherwise
subject to U.S. federal income taxes may, subject to certain
limitations, be entitled to claim a credit or deduction for U.S.
federal income tax purposes for his or her proportionate share of
such foreign taxes paid by the Fund.
Under exceptional economic or market conditions abroad,
the Fund may temporarily invest for defensive purposes all or a
major portion of its assets in U.S. government obligations or
debt obligations of companies incorporated in and having their
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principal activities in the United States. The Fund may also
from time to time invest its temporary cash balances in United
States, as well as foreign, short-term, high-grade money market
instruments, including, but not limited to, government
obligations, certificates of deposit, bankers' acceptances,
commercial paper, short-term corporate debt securities and
repurchase agreements.
The following investment policies and restrictions
supplement, and should be read in conjunction with, the
information set forth in the Fund's Prospectus under the heading
"Investment Objectives and Policies." While the Fund's
investment objective of total return for long-term growth of
capital and from income cannot be changed without shareholder
approval, the Fund's investment policies are not fundamental and
may be changed by the Trustees of the Fund without shareholder
approval. However, shareholders will be notified prior to a
material change in such policies.
Derivative Investment Products
The Fund may use various derivative investment products
to reduce certain risks to the Fund of exposure to local market
and currency movements. These products include forward foreign
currency exchange contracts, futures contracts, including stock
index futures, and options thereon, put and call options and
combinations thereof. The Adviser will use such products as
market conditions warrant. The Fund's ability to use these
products may be limited by market conditions, regulatory limits
and tax considerations and there can be no assurance that any of
these products would succeed in reducing the risk to the Fund of
exposure to local market and currency movements. See "Investment
Policies and Restrictions" in the Statement of Additional
Information. New financial products and risk management
techniques continue to be developed and the Fund may use these
new investments and techniques to the extent consistent with its
investment objective and policies.
Forward Foreign Currency Exchange Contracts. The Fund
may purchase or sell forward foreign currency exchange contracts
("forward contracts") to attempt to minimize the risk to the Fund
from adverse changes in the relationship between the U.S. Dollar
and other currencies. A forward contract is an obligation to
purchase or sell a specific currency for an agreed price at a
future date which is individually negotiated and privately traded
by currency traders and their customers. The Fund's dealings in
forward contracts will be limited to hedging involving either
specific transactions or portfolio positions. Transaction
hedging is the purchase or sale of forward contracts with respect
to specific receivables or payables of the Fund accruing in
connection with the purchase and sale of its portfolio securities
5
<PAGE>
or the payment of dividends and distributions by the Fund.
Position hedging is the sale of forward contracts with respect to
portfolio security positions denominated or quoted in such
foreign currency. The Fund will not speculate in forward
contracts and, therefore, the Adviser believes that the Fund will
not be subject to the risks frequently associated with the
speculative use of such transactions. The Fund may not position
hedge with respect to the currency of a particular country to an
extent greater than the aggregate market value (at the time of
making such sale) of the securities held in its portfolio
denominated or quoted in that particular foreign currency. If
the Fund enters into a position hedging transaction, its
custodian bank will to the extent required by applicable law,
place liquid assets in a separate account of the Fund in an
amount equal to the value of the Fund's total assets committed to
the consummation of such forward contract. If the value of the
assets placed in the separate account declines, additional liquid
assets will be placed in the account so that the value of the
account will equal the amount of the Fund's commitment with
respect to such contracts. In addition, the Fund may use other
such methods of "cover" as are permitted by applicable law.
Hedging against a decline in the value of a currency does not
eliminate fluctuations in the prices of portfolio securities or
prevent losses if the prices of such securities decline. Such
transactions also preclude the opportunity for gain if the value
of the hedge currency should rise. Moreover, it may not be
possible for the Fund to hedge against a devaluation that is so
generally anticipated that the Fund is not able to contract to
sell the currency at a price above the devaluation level it
anticipates. The Fund will not enter into a forward contract
with a term of more than one year or if, as a result thereof,
more than 50% of the Fund's total assets would be committed to
such contracts.
While these contracts are not presently regulated by the
Commodity Futures Trading Commission ("CFTC"), the CFTC may in
the future assert authority to regulate forward contracts. In
such event the Fund's ability to utilize forward contracts in the
manner set forth in the Prospectus may be restricted. Forward
contracts will reduce the potential gain from a positive change
in the relationship between the U.S. Dollar and foreign
currencies. Unanticipated changes in currency prices may result
in poorer overall performance for the Fund if it had not entered
into such contracts. The use of foreign currency forward
contracts will not eliminate fluctuations in the underlying U.S.
Dollar equivalent value of the prices of or rates of return on
the Fund's foreign currency-denominated portfolio securities and
the use of such techniques will subject the Fund to certain
risks.
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The matching of the increase in value of a forward
contract and the decline in the U.S. Dollar equivalent value of
the foreign currency-denominated asset that is the subject of the
hedge generally will not be precise. In addition, the Fund may
not always be able to enter into foreign currency forward
contracts at attractive prices and this will limit the Fund's
ability to use such contracts to hedge or cross-hedge its assets.
Also, with regard to the Fund's use of cross-hedges, there can be
no assurance that historical correlations between the movement of
certain foreign currencies relative to the U.S. Dollar will
continue. Thus, at any time poor correlation may exist between
movements in the exchange rates of the foreign currencies
underlying the Fund's cross-hedges and the movements in the
exchange rates of the foreign currencies in which the Fund's
assets that are the subject of such cross-hedges are denominated.
Options. The Fund may write, sell and purchase put and
call options listed on one or more U.S. or foreign securities
exchanges, including options on market indices. A call option
gives the purchaser of the option, for paying the writer 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. A put option gives the buyer of the
option, for paying the writer a premium, 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.
Writing, purchasing and selling put and call options are
highly specialized activities and entail greater than ordinary
investment risks. When puts written by the Fund are exercised,
the Fund will be obligated to purchase stocks above their then
current market price. The Fund will not write a put option
unless at all times during the option period the Fund has
(a) sold short the optioned securities, or securities convertible
into or carrying rights to acquire the optioned securities, or
(b) purchased an offsetting put on the same securities. When
calls written by the Fund are exercised, the Fund will be
obligated to sell stocks below their then current market price.
The Fund will not write a call option 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.
Option On Market Indices. An option on a securities
index is similar to an option on a security except that, rather
than the right to take or make delivery of a security at a
specified price, an option on a securities index gives the holder
the right to receive, upon exercise of the option, an amount of
cash if the closing level of the chosen index is greater than (in
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<PAGE>
the case of a call) or less than (in the case of a put) the
exercise price of the option.
Financial Futures Contracts, Including Stock Index
Futures, And Options On Futures Contracts. The Fund may enter
into financial futures contracts, including contracts for the
purchase or sale for future delivery of foreign currencies and
futures contracts based on stock indices and may purchase and
write put and call options to buy or sell futures contracts
("options on futures contracts"). A sale of a futures contract
entails the acquisition of a contractual obligation to deliver
the foreign currency or other commodity called for by the
contract at a specified price on a specified date. A purchase of
a futures contract entails the incurring of a contractual
obligation to acquire the commodity called for by the contract at
a specified price on a specified date. The Fund's Custodian will
place liquid assets in a separate account of the Fund having a
value equal to the aggregate amount of the Fund's commitments in
futures contracts. The purchaser of a futures contract on an
index agrees to take or make delivery of an amount of cash equal
to the difference between a specified dollar multiple of the
value of the index on the expiration date of the contract and the
price at which the contract was originally struck. No physical
delivery of the securities underlying the index is made. In
connection with its purchase of stock index futures contracts the
Fund will deposit in a segregated account with the Fund's
Custodian an amount of liquid assets equal to the market value of
the futures contracts less any amounts maintained in a margin
account with the Fund's broker. Options on futures contracts to
be written or purchased by the Fund will be traded on U.S. or
foreign exchanges or over-the-counter.
With respect to futures contracts and options on futures
contracts that are purchased for purposes other than for "bona
fide hedging purposes" (as defined in Commodity Futures Trading
Commission Regulations promulgated under the Commodity Exchange
Act), the aggregate initial margin and premiums required to be
paid by the Fund to establish such positions will not exceed on
all outstanding futures contracts of the Fund and premiums paid
on outstanding options on futures contracts 5% of the liquidation
value of the total assets of the Fund, after taking into account
unrealized profits and unrealized losses on any such contracts
the Fund has entered into.
For additional information on the use, risks and costs
of futures contracts and options on futures contracts and foreign
currencies, see Appendix A.
Options On Foreign Currencies. The Fund may write, sell
and purchase put and call options on foreign currencies traded on
securities exchanges or boards of trade (foreign and domestic) or
8
<PAGE>
over-the-counter. As in the case of other kinds of options, the
writing of an option on a foreign currency constitutes only a
partial hedge, up to the amount of the premium received, and the
Fund could be required to purchase or sell foreign currencies at
disadvantageous exchange rates, thereby incurring losses. The
purchase of an option on a foreign currency may constitute an
effective hedge against fluctuations in exchange rates although,
in the event of rate movements adverse to the Fund's position, it
may forfeit the entire amount of the premium plus related
transaction costs. There is no specific percentage limitation on
the Fund's investments in options on foreign currencies. See the
Fund's Statement of Additional Information for further discussion
of the use, risks and costs of options on foreign currencies.
General. The successful use of the foregoing derivative
investment products draws upon the Adviser's special skills and
substantial experience with respect to such products and depends
on the Adviser's ability to forecast currency exchange rate
movements correctly. Should exchange rates move in an unexpected
manner, the Fund may not necessarily achieve the anticipated
benefits of futures contracts, options or forward contracts or
may realize losses and thus be in a worse position than if such
products had not been used. Unlike many exchange-traded futures
contracts and options on futures contracts, there are no daily
price fluctuation limits with respect to options on currencies
and forward contracts, and adverse market movements could
therefore continue to an unlimited extent over a period of time.
In addition, the correlation between movements in the prices of
such instruments and movements in the price of the securities and
currencies hedged or used for cover will not be perfect and could
produce unanticipated losses.
The Fund's ability to dispose of its positions in
futures contracts, options and forward contracts will depend on
the availability of liquid markets in such instruments. Markets
in options and futures with respect to a number of securities and
currencies are relatively new and still developing. It is
impossible to predict the amount of trading interest that may
exist in various types of futures contracts, options and forward
contracts. If a secondary market does not exist with respect to
an over-the-counter option purchased or written by the Fund, it
might not be possible to effect a closing transactions in the
option (i.e., dispose of the option), with the result that (i) an
option purchased by the Fund would have to be exercised in order
for the Fund to realize any profit and (ii) the Fund may not be
able to sell currencies or portfolio securities covering an
option written by the Fund until the option expires or it
delivers the underlying futures contract or currency upon
exercise. Therefore, no assurance can be given that the Fund
will be able to utilize these instruments effectively for the
purposes set forth above. Furthermore, the Fund's ability to
9
<PAGE>
engage in options and futures transactions may be limited by tax
considerations. See "Dividends, Distributions and Taxes--U.S.
Federal Income Taxes."
Other Investment Practices
Lending Of Portfolio Securities. Although it has no
present intention of doing so, the Fund may seek to increase
income by lending portfolio securities. Under present regulatory
policies, such loans may be made to member firms of the New York
Stock Exchange, Inc. (the "Exchange") and are required to be
secured continuously by collateral consisting of cash, U.S.
Government Securities or bank letters of credit in an amount at
least equal to the market value of the securities loaned. The
value of the securities loaned will not exceed 30% of the value
of the Fund's total assets.
The Fund may seek to increase income by lending
portfolio securities. The Fund will have the right to call a
loan to obtain the securities loaned or equivalent securities at
any time on five days' notice or such shorter period as may be
necessary to vote the securities. During the existence of a loan
the Fund will receive the income earned on investment of the
collateral. The Fund will not, however, have the right to vote
any securities having voting rights during the existence of the
loan, but the Fund will call the loan in anticipation of an
important vote to be taken among holders of the securities or the
giving or withholding of their consent on a material matter
affecting the investment. As with other extensions of credit
there are risks of delay in recovery or even loss of rights in
the collateral should the borrower of the securities fail
financially. However, the loans would be made only to firms
deemed by management of the Fund to be in good standing, and
when, in the judgment of management, the amount which may be
earned currently from securities loans of this type justifies the
attendant risk.
Repurchase Agreements. The Fund may enter into
repurchase agreements, which are instruments through which an
investor (e.g., the Fund) purchases a security (the "underlying
security") from a bank or well-established securities dealer,
with an agreement by the seller to repurchase the security at the
same price, plus interest at a specified rate. The underlying
securities are limited to those which would otherwise qualify for
investment by the Fund. Repurchase agreements usually have a
short duration, often less than one week. The Fund will not
enter into a repurchase agreement of a duration of more than
seven business days if, as a result, more than 10% of the value
of the Fund's total assets would be so invested.
10
<PAGE>
Warrants. The Fund may invest 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 the warrant does not necessarily change with the
value of the underlying securities and a warrant ceases to have
value if it is not exercised prior to the expiration date.
It is expected that the Fund's investments will
ordinarily be traded on exchanges located in the respective
countries in which the various issuers of such securities are
principally based and in some case on other exchanges. As much
as 25% of the value of the Fund's total assets may be invested in
the securities of issuers having their principal business
activities in the same industry.
In connection with the qualification or registration of
the Fund's shares for sale under the securities laws of certain
states, the Fund has agreed that it will not invest in warrants
(other than warrants acquired by the Fund as a part of a unit or
attached to securities at the time of purchase) if as a result
such warrants valued at the lower of cost or market would exceed
10% of the value of the Fund's assets at the time of
purchase.
Portfolio Turnover. Generally, the Fund does not trade
in securities for short-term profits but, when circumstances
warrant, securities may be sold without regard to the length of
time held. Although the Fund cannot accurately predict its
annual portfolio turnover rate, management does not expect it to
exceed 100%. A 100% annual turnover rate would occur, for
example, if all the securities in the Fund's portfolio were
replaced in a period of one year. A 100% turnover rate is
greater than that of most other investment companies, including
those which emphasize capital appreciation as a basic policy, and
may result in correspondingly greater brokerage commissions being
paid by the Fund. The portfolio turnover rates for the fiscal
years ended June 30, 1998 and 1997 were 121% and 94%,
respectively.
Special Risk Considerations
Investors should understand and consider carefully the
substantial risks involved in securities of foreign companies and
governments of foreign nations, some of which are referred to
below, and which are in addition to the usual risks inherent in
domestic investments. Investing in securities of non-United
States companies which are generally denominated in foreign
11
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currencies, and utilization of derivative investment products
denominated in, or the value of which is dependent upon movements
in the relative value of, a foreign currency, involve certain
considerations comprising both risk and opportunity not typically
associated with investing in United States companies. These
considerations include changes in exchange rates and exchange
control regulations, political and social instability,
expropriation, imposition of foreign taxes, less liquid markets
and less available information than are generally the case in the
United States, higher transaction costs, less government
supervision of exchanges, brokers and issuers, difficulty in
enforcing contractual obligations, lack of uniform accounting and
auditing standards and greater price volatility.
There is generally less publicly available information
about foreign companies comparable to reports and ratings that
are published about companies in the United States. Foreign
companies are also generally not subject to uniform accounting
and auditing and financial reporting standards, practices and
requirements comparable to those applicable to United States
companies.
It is contemplated that foreign securities will be
purchased in over-the-counter markets or on stock exchanges
located in the countries in which the respective principal
offices of the issuers of the various securities are located, if
that is the best available market. Foreign securities markets
are generally not as developed or efficient as those in the
United States. While growing in volume, they usually have
substantially less volume than the Exchange, and securities of
some foreign companies are less liquid and more volatile than
securities of comparable United States companies. Similarly,
volume and liquidity in most foreign bond markets is less than in
the United States and, at times, volatility of price can be
greater than in the United States. Fixed commissions on foreign
stock exchanges are generally higher than negotiated commissions
on United States exchanges, although the Fund will endeavor to
achieve the most favorable net results on its portfolio
transactions. There is generally less government supervision and
regulation of stock exchanges, brokers and listed companies than
in the United States.
With respect to certain foreign countries, there is the
possibility of adverse changes in investment or exchange control
regulations and interest rates, expropriation or confiscatory
taxation, limitations on the removal of funds or other assets of
the Fund, political or social instability, or diplomatic
developments which could affect United States investments in
those countries. Moreover, individual foreign economies may
differ favorably or unfavorably from the United States' economy
in such respects as growth of gross national product, rate of
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<PAGE>
inflation, capital reinvestment, resource self-sufficiency and
balance of payments position.
The dividends and interest payable on certain of the
Fund's foreign portfolio securities may be subject to foreign
withholding taxes, thus reducing the net amount of income
available for distribution to the Fund's shareholders. A
shareholder otherwise subject to United States Federal income
taxes may, subject to certain limitations, be entitled to claim a
credit or deduction for U.S. Federal income tax purposes for his
or her proportionate share of such foreign taxes paid by the
Fund. See "U.S. Federal Income Taxes."
Although the Fund values its assets daily in terms of
U.S. dollars, it does not intend to convert its holdings of
foreign currencies into U.S. dollars on a daily basis. It will
do so from time to time, and investors should be aware of the
costs of currency conversion. Although foreign exchange dealers
do not charge a fee for conversion, they do realize a profit
based on the difference (commonly known as the "spread") between
the price at which they are buying and selling various
currencies. Thus, a dealer may offer to sell a foreign currency
to the Fund at one rate, while offering a lesser rate of exchange
should the Fund desire to resell that currency to the dealer.
Investors should understand that the expense ratio of
the Fund can be expected to be higher than investment companies
investing in domestic securities since, among other things, the
cost of maintaining the custody of foreign securities is higher
and the purchase and sale of portfolio securities may be subject
to higher transaction charges, such as stamp duties and turnover
taxes.
Investors should further understand that all investments
have a risk factor. There can be no guarantee against loss
resulting from an investment in the Fund, and there can be no
assurance that the Fund's investment objective will be attained.
The Fund is designed for individual and institutional investors
who wish to diversify beyond the United States in an actively
researched and managed portfolio. The Fund may not be suitable
for all investors and is intended for long-term investors who can
accept the risks entailed in seeking long-term growth of capital
through investment in foreign securities as described above.
Fundamental Investment Policies
In addition to the investment objective and policies
described above, the Fund has adopted certain fundamental
investment policies which may not be changed without shareholder
approval, which means the vote of (1) 67% or more of the shares
represented at a meeting at which more than 50% of the
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<PAGE>
outstanding shares are represented or (2) more than 50% of the
outstanding shares, whichever is less. Whenever any investment
restriction states a maximum percentage of the Fund's assets
which may be invested in any security or other asset, it is
intended that such maximum percentage limitation be determined
immediately after and as a result of the Fund's acquisition of
such securities or other assets. Accordingly, any later increase
or decrease in percentage beyond the specified limitation
resulting from a change in values or net assets will not be
considered a violation.
Briefly, the policies provide that the Fund may not:
(i) invest more than 5% of the value of its total
assets in securities of a single issuer
(including repurchase agreements with any one
entity), except securities issued or guaranteed
by the United States Government, its agencies or
instrumentalities ("U.S. Government Securities")
or the government of any foreign country, its
agencies or instrumentalities ("Foreign
Government Securities"); provided, however, that
the Fund may not, with respect to 75% of the
value of its total assets, invest more than 5%
of the value of its total assets in securities
of any one foreign government issuer;
(ii) own more than 10% of the outstanding securities
of any class of any issuer (for this purpose,
all preferred stocks of an issuer shall be
deemed a single class, and all indebtedness of
an issuer shall be deemed a single class),
except U.S. Government Securities;
(iii) invest more than 25% of the value of its total
assets in securities of issuers having their
principal business activities in the same
industry; provided, that this limitation does
not apply to U.S. Government Securities or
Foreign Government Securities;
(iv) invest more than 5% of the value of its total
assets in the securities of any issuer that has
a record of less than three years of continuous
operation (including the operation of any
predecessor or unconditional guarantor), except
U.S. Government Securities or Foreign Government
Securities;
(v) invest more than 5% of the value of its total
assets in securities with legal or contractual
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<PAGE>
restrictions on resale ("restricted
securities"), other than repurchase agreements,
or more than 10% of the value of its total
assets in securities that are not readily
marketable (including restricted securities and
repurchase agreements not terminable within
seven business days);
(vi) borrow money, except as a temporary measure for
extraordinary or emergency purposes, and then
only from banks in amounts not exceeding 5% of
its total assets valued at market;
(vii) own, in contravention of the applicable laws or
regulations of Germany, any securities of
another investment company;
(viii) unless the securities are acquired pursuant to a
plan of reorganization or an offer of exchange,
own any securities of an open-end investment
company or more than 3% of the total outstanding
voting stock of any closed-end investment
company or more than 10% of such value in
closed-end investment companies in general;
(ix) purchase or sell real property (including
limited partnership interests although it may
purchase readily marketable interests in real
estate investment trusts or readily marketable
securities of companies which invest in real
estate);
(x) purchase or sell commodity contracts; provided,
however, that this policy does not prevent the
Fund from entering into (a) forward foreign
currency exchange contracts, (b) financial
futures contracts, including contracts for the
purchase or sale for future delivery of foreign
currencies and futures contracts based on stock
indices, (c) options or financial futures
contracts, or (d) other, similar contracts or
transactions;
(xi) purchase participations or other direct
interests in oil, gas, or other mineral leases
exploration or development programs;
(xii) purchase securities on margin, except for use of
the short-term credit necessary for clearance of
purchases of portfolio securities;
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<PAGE>
(xiii) effect short sales of securities;
(xiv) make loans, except for use of the short-term
credit necessary for clearance of purchases of
portfolio securities, except that it may
purchase debt securities, enter into repurchase
agreements and lend its portfolio securities, as
described in the Fund's Prospectus;
(xv) mortgage, pledge, hypothecate, or in any other
manner transfer as security for indebtedness any
security owned by the Fund, except as may be
necessary in connection with permissible
borrowings, and in the aggregate amount not to
exceed 10% of the Fund's total assets valued at
market at the time of such mortgaging, pledging
or hypothecating;
(xvi) act as an underwriter of securities, except
insofar as it might be deemed to be such for
purposes of the Securities Act of 1933, as
amended (the "Securities Act"), with respect to
the disposition of certain portfolio securities
acquired within the limitations of (v) above;
(xvii) purchase or retain the securities of any issuer
if, to the knowledge of the Fund's management,
those officers and Trustees of the Fund, and of
its adviser, who each owns beneficially more
than one-half of 1% of the outstanding security
of such issuer, together own beneficially more
than 5% of the securities of such issuer;
(xviii) invest in companies for the purpose of
exercising management or control; and
(xix) issue senior securities except as permitted by
the Investment Company Act of 1940, as amended
(the "1940 Act").
_______________________________________________________________
MANAGEMENT OF THE FUND
_______________________________________________________________
Adviser
Alliance Capital Management L.P., a Delaware limited
partnership with principal offices at 1345 Avenue of the
Americas, New York, New York 10105, has been retained under an
investment advisory agreement (the "Advisory Agreement") to
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<PAGE>
provide investment advice and, in general, to conduct the
management and investment program of the Fund under the
supervision of the Fund's Board of Directors (see "Management of
the Fund" in the Prospectus).
The Adviser is a leading international investment
manager supervising client accounts with assets as of June 30,
1998, totaling more than $262 billion (of which more than $107
billion represented the assets of investment companies). The
Adviser's clients are primarily major corporate employee benefit
funds, public employee retirement systems, investment companies,
foundations and endowment funds. The 55 registered investment
companies managed by the Adviser, comprising 120 separate
investment portfolios, currently have more than 3.5 million
shareholders. As of July 31, 1998, the Adviser and its
subsidiaries employed approximately 2,000 employees who operate
out of domestic offices and the offices of subsidiaries in
Bahrain, Bangalore, Cairo, Chennai, Hong Kong, Istanbul,
Johannesburg, London, Luxembourg, Madrid, Moscow, Mumbai, New
Delhi, Paris, Pune, Sao Paolo, Seoul, Singapore, Sydney, Tokyo,
Toronto, Vienna and Warsaw. As of June 30, 1998, the Adviser was
retained as an investment manager for employee benefit plan
assets of 32 of the FORTUNE 100 companies.
Alliance Capital Management Corporation ("ACMC"), the
sole general partner of, and the owner of a 1% general
partnership interest in the Adviser, is an indirect wholly-owned
subsidiary of the Equitable Life Assurance Society of the United
States ("Equitable"), one of the largest life insurance companies
in the United States and a wholly-owned subsidiary of the
Equitable Companies Incorporated ("ECI"). ECI is a holding
company controlled by AXA-UAP ("AXA") a French insurance holding
company which at March 1, 1998, beneficially owned approximately
59% of the outstanding voting shares of ECI. As of June 30,
1998, ACMC, Inc. and Equitable Capital Management Corporation,
each a wholly-owned direct or indirect subsidiary of Equitable,
together with Equitable, owned in the aggregate approximately 57%
of the issued and outstanding units representing assignments of
beneficial ownership of limited partnership interests in the
Adviser.
AXA is a holding company for an international group of
insurance and related financial services companies. AXA's
insurance operations include activities in life insurance,
property and casualty insurance and reinsurance. The insurance
operations are diverse geographically, with activities
principally in Western Europe, North America and the Asia/Pacific
area. AXA is also engaged in asset management, investment
banking, securities trading, brokerage, real estate and other
financial services activities principally in the United States,
as well as in Western Europe and the Asia/Pacific area.
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Based on information provided by AXA, as of March 31,
1998, more than 30% of the voting power of AXA was controlled
directly and indirectly by FINAXA, a French holding company. As
of March 31, 1998 approximately 74% of the voting power of FINAXA
was controlled directly and indirectly by four French mutual
insurance companies (the "Mutuelles AXA"), one of which, AXA
Assurances I.A.R.D. Mutuelle, itself controlled directly and
indirectly more than 42% of the voting power of FINAXA. Acting
as a group, the Mutuelles AXA control AXA and FINAXA.
The Advisory Agreement became effective on July 22,
1992, having been approved by the unanimous vote, cast in person,
of the Fund's Trustees (including the Trustees who are not
parties to the Advisory Agreement or interested persons as
defined in the 1940 Act of any such party) at a meeting called
for the purpose and held on September 12, 1991. At a meeting
held on June 8, 1992, a majority of the outstanding voting
securities of the Fund approved the Advisory Agreement.
The Advisory Agreement remains in effect for successive
twelve-month periods (computed from July 1) if approved annually
(a) by the Trustees of the Fund or by the holders of a majority
of the outstanding voting securities of the Fund and (b) by a
majority of the Trustees who are not parties to the agreement, or
"interested persons", as defined in the 1940 Act, of any such
party, at a meeting called for the purpose of voting on such
matter. Most recently, continuance of the Advisory Agreement was
approved for the period ending June 30, 1999 by the Trustees of
the Fund, including a majority who are not "interested persons",
as defined in the 1940 Act, at their Regular Meeting held on
June 11, 1998.
The Advisory Agreement is terminable without penalty on
60 days' written notice, by a vote of a majority of the Fund's
outstanding voting securities or by a vote of a majority of the
Fund's Trustees on 60 days' written notice, or by a vote of the
Adviser, on 60 days' written notice, and automatically terminate
in the event of assignment. The Advisory Agreement provides that
in the absence of willful misfeasance, bad faith, gross
negligence, or reckless disregard of its obligations thereunder,
the Adviser shall not be liable for any action or failure to act
in accordance with its duties thereunder.
Under the Advisory Agreement, the Adviser furnishes
investment advice and recommendations to the Fund and provides
office space in New York, order placement facilities and persons
satisfactory to the Fund's Board of Trustees to act as officers
of the Fund. Such officers, as well as certain Trustees of the
Fund, may be employees of the Adviser or directors, officers or
employees of its affiliates.
18
<PAGE>
For the services rendered by the Adviser under the
Advisory Agreement, the Fund pays the Adviser a quarterly fee at
the maximum vote of one fourth of 1% of the value of the Fund's
aggregate net assets up to $500 million and three sixteenth of 1%
of the value of such assets above $500 million. The Adviser has
agreed to unilaterally waive for a minimum of two years ending
June 30, 1999 that portion of its advisory fee on the first $500
million of net assets in excess of the annualized rate of .85 of
1% (i.e., a waiver of .15 of 1% annualized). For the fiscal
years of the Fund ended in 1996, 1997 and 1998, the advisory fees
payable under the advisory agreement were $2,627,200, $2,891,923
and $2,718,678, respectively. Of such amounts $407,802 was
waived by the Adviser for its fiscal year ended in June 30,
1998.
The Fund has, under the Advisory Agreement, assumed the
obligation for payment of all its other expenses. As to the
obtaining of services other than those specifically provided to
the Fund by the Adviser, the Fund may employ its own personnel.
For such services, it also may utilize personnel employed by the
Adviser or by other subsidiaries of Equitable. In such event,
the services will be provided to the Fund at cost and the
payments therefor must be specifically approved by the Fund's
Trustees. The Fund paid to the Adviser a total of $127,000 in
respect of such services during the fiscal year ended June 30,
1998.
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 The Alliance Fund, Inc., AFD
Exchange Reserves, Alliance All-Asia Investment Fund, Inc.,
Alliance Balanced Shares, Inc., Alliance Bond Fund, Inc.,
Alliance Capital Reserves, Alliance Global Dollar Government
Fund, Inc., Alliance Global Environment Fund, Inc., Alliance
Global Small Cap Fund, Inc., Alliance Global Strategic Income
19
<PAGE>
Trust, Inc., Alliance Government Reserves, Alliance Greater China
'97 Fund, Inc., Alliance Growth and Income Fund, Inc., Alliance
High Yield Fund, Inc., Alliance Institutional Funds, Inc.,
Alliance Institutional Reserves, Inc., Alliance International
Fund, Alliance International Premier Growth Fund, Inc., Alliance
Limited Maturity Government Fund, Inc., Alliance Money Market
Fund, Alliance Mortgage Securities Income Fund, Inc., Alliance
Multi-Market Strategy Trust, Inc., Alliance Municipal Income
Fund, Inc., Alliance Municipal Income Fund II, Alliance Municipal
Trust, Alliance New Europe Fund, Inc., Alliance North American
Government Income Trust, Inc., Alliance Premier Growth Fund,
Inc., Alliance Quasar Fund, Inc., Alliance Real Estate Investment
Fund, Inc., Alliance Regent/Sector Opportunity Fund, Inc.,
Alliance Select Investor Series, Inc., Alliance Technology Fund,
Inc., Alliance Utility Income Fund, Inc., Alliance Variable
Products Series Fund, Inc., Alliance Worldwide Privatization
Fund, Inc., The Alliance Portfolios, and The Hudson River Trust,
all registered open-end investment companies; and to ACM
Government Income Fund, Inc., ACM Government Securities Fund,
Inc., ACM Government Spectrum Fund, Inc., ACM Government
Opportunity Fund, Inc., ACM Managed Dollar Income Fund, Inc., ACM
Managed Income Fund, Inc., ACM Municipal Securities Income Fund,
Inc., Alliance All-Market Advantage Fund, Inc., Alliance World
Dollar Government Fund, Inc., Alliance World Dollar Government
Fund II, Inc., The Austria Fund, Inc., The Korean Investment
Fund, Inc., The Southern Africa Fund, Inc. and The Spain Fund,
Inc., all registered closed-end investment companies.
Trustees And Officers
The Trustees and principal officers of the Fund, their
ages and their principal occupations during the past five years
are set forth below. Each such Trustee and officer is also a
trustee, director or officer of other registered investment
companies sponsored by the Adviser. Unless otherwise specified,
the address of each such person is 1345 Avenue of the Americas,
New York, New York 10105.
Trustees
John D. Carifa,* 53, Chairman of the Board, is the
President, Chief Operating Officer and a Director of ACMC, with
which he has been associated since prior to 1993.
David H. Dievler, 69, is an independent consultant. He
was formerly a Senior Vice President of ACMC until December 1994.
His address is P.O. Box 167, Spring Lake, New Jersey 07762.
____________________
* An "interested person" of the Fund as defined in the 1940
Act.
20
<PAGE>
John H. Dobkin, 56, has been the President of Historic
Hudson Valley (historic preservation) since prior to 1993.
Previously, he was Director of the National Academy of Design.
His address is 150 White Plains Road, Tarrytown, New York 10591.
W.H. Henderson, 71, joined the Royal Dutch/Shell Group
in 1948 and served in Singapore, Japan, South Africa, Hong Kong
and London. The greater part of his service was in Japan and
between 1969 and 1972 he was Managing Director and Chief
Executive Officer of the Shell Company of Hong Kong Limited.
Mr. Henderson retired from the Royal Dutch/Shell Group in 1974 in
order to establish his own oil and gas consultancy business.
Mr. Henderson is currently a Director of a number of investment
companies. His address is Quarrey House, Charlton Horethorne,
Sherborne, Dorset, DT9 4NY, England.
Stig Host, 72, is the Chairman and Chief Executive
Officer of International Energy Corp. (oil and gas exploration),
with which he has been associated since prior to 1993. He is
also Chairman and Director of Kriti Exploration, Inc. (oil and
gas exploration and production), Managing Director of Kriti Oil
and Minerals, N.V., Chairman of Kriti Properties and Development
Corporation (real estate), Chairman of International Marine
Sales, Inc. (marine fuels), and a Director of Florida Fuels, Inc.
(marine fuels) and President of Alexander Host Foundation. He is
a Trustee of the Winthrop Focus Funds. His address is 103 Oneida
Drive, Greenwich, Connecticut 06530.
Alan Stoga, 47, has been President of Zemi Investments,
L.P., since 1995, President of Zemi Communications, L.L.C. and
its predecessor company since 1996, and a Managing Director of
Kissinger Associates, Inc. until 1995. He has continued as a
member of the Board of Directors of Kissinger Associates. His
address is Kissinger Associates, Inc., 350 Park Avenue, New York,
New York 10022.
Officers
John D. Carifa, Chairman and President, see biography
above.
Bruce W. Calvert, Senior Vice President, 51, is Vice
Chairman of the Board and Chief Investment Officer of ACMC, with
which he has been associated since prior to 1993.
Kathleen A. Corbet, Senior Vice President, 38, is an
Executive Vice President of ACMC, with which she has been
associated since July 1993. Prior thereto she headed Equitable
Capital Management Corporation's Fixed Income Management
Department since prior to 1993.
21
<PAGE>
Edward Baker, Vice President, 47, is a Vice President of
ACMC, with which he has been associated since prior to 1993.
Thomas J. Bardong, Vice President, 53, is a Senior Vice
President of ACMC, with which he has been associated since prior
to 1993.
Mark H. Breedon, Vice President, 45, has been a Vice
President of ACMC since prior to 1993 and a Director and Senior
Vice President of Alliance Capital Limited ("ACL") since prior to
1993.
Russell Brody, Vice President, 31, is a Vice President
and Head Trader of the London desk of ACL, with which he has been
associated since July 1997. Prior thereto, he was Head of
European Equity Dealing with Lombard Odier et Cie, London office,
since prior to 1993.
Edmund P. Bergan, Jr., Secretary, 48, is Senior Vice
President and the General Counsel of Alliance Fund Distributors
Inc. ("AFD") and Alliance Fund Services, Inc. ("AFS"), with which
he has been associated since prior to 1993.
Andrew L. Gangolf, Assistant Secretary, 44, is a Vice
President and Assistant General Counsel of AFD, with which he has
been associated since December 1994. Prior thereto he was a Vice
President and Assistant Secretary of Delaware Management Company,
Inc. since prior to 1993.
Domenick Pugliese, Assistant Secretary, 37, is a Vice
President and Assistant General Counsel of AFD, with which he has
been associated since May 1995. Previously, he was a Vice
President and Counsel of Concord Financial Holding Corporation
since 1994, Vice President and Associate General Counsel of
Prudential Securities since prior to 1993.
Emilie D. Wrapp, Assistant Secretary, 42, is a Vice
President and Assistant General Counsel of AFD, with which she
has been associated since prior to 1993.
Mark D. Gersten, Treasurer and Chief Financial Officer,
48, is a Senior Vice President of AFS, with which he has been
associated since prior to 1993.
Vincent S. Noto, Controller, 33, is a Vice President of
Alliance Fund Services, Inc., with which he has been associated
since prior to 1993.
The aggregate compensation paid by the Fund to each of
the Trustees during its fiscal year ended June 30, 1998, the
aggregate compensation paid to each of the Trustees during
22
<PAGE>
calendar year 1997 by all of the funds to which the Adviser
provides investment advisory services (collectively, the
"Alliance Fund Complex") and the total number of registered
investment companies (and separate investment portfolios within
those companies) in the Alliance Fund Complex with respect to
which each of the Trustees serves as a trustee or director, are
set forth below. Neither the Fund nor any other fund in the
Alliance Fund Complex provides compensation in the form of
pension or retirement benefits to any of its trustees or
directors. Some of the Trustees is a trustee or director of one
or more other registered investment companies in the Alliance
Fund Complex.
Total Number
Total Number of Investment
of Funds in Portfolios
the Alliance Within the
Total Fund Complex, Funds,
Compensation Including the Including
From the Fund, as to the Fund, as
Alliance Fund which the to which the
Aggregate Complex, Trustee is a Trustee is
Compensation Including Trustee or a Trustee or
Name of Trustee From the Fund the Fund Director Director
________________ _____________ _____________ ______________ _____________
John D. Carifa $ 0 $ 0 53 118
David H. Dievler $4,908 $188,500 46 83
John H. Dobkin $4,863 $126,500 43 80
W.H. Henderson $4,851 $ 29,750 4 4
Stig Host $4,851 $ 29,750 4 4
Alan Stoga $2,663 $ 29,750 4 4
As of October 9, 1998, the Trustees and officers of the
Fund as a group owned less than 1% of the shares of the Fund.
_______________________________________________________________
EXPENSES OF THE FUND
_______________________________________________________________
The Fund has entered into a Distribution Services
Agreement (the "Agreement") with AFD, the Fund's principal
underwriter (the "Principal Underwriter"), to permit the
Principal Underwriter to distribute the Fund's shares and to
permit the Fund to pay distribution services fees to defray
expenses associated with distribution of its Class A shares,
Class B shares and Class C shares in accordance with a plan of
distribution which is included in the Agreement and has been duly
adopted and approved in accordance with Rule 12b-1 adopted by the
23
<PAGE>
Securities and Exchange Commission (the "Commission") under the
1940 Act (the "Rule 12b-1 Plan").
Distribution services fees are accrued daily and paid
monthly and are charged as expenses of the Fund as accrued. The
distribution services fees attributable to the Class B shares and
Class C shares are designed to permit an investor to purchase
such shares through broker-dealers without the assessment of an
initial sales charge, and at the same time to permit the
Principal Underwriter to compensate broker-dealers in connection
with the sale of such shares. In this regard, the purpose and
function of the combined contingent deferred sales charge and
distribution services fee on the Class B shares and Class C
shares are the same as those of the initial sales charge and
distribution services fee with respect to the Class A shares and
that in each case the sales charge and distribution services fee
provide for the financing of the distribution of the relevant
class of the Fund's shares.
Under the Agreement, the Treasurer of the Fund reports
the amounts expended under the Rule 12b-1 Plan and the purposes
for which such expenditures were made to the Trustees of the Fund
for their review on a quarterly basis. Also, the Agreement
provides that the selection and nomination of Trustees who are
not "interested persons" of the Fund, as defined in the 1940 Act,
are committed to the discretion of such disinterested Trustees
then in office.
The Agreement became effective on July 22, 1992, with
respect to Class A shares and Class B shares, and was amended as
of April 30, 1993 to permit the distribution of Class C shares
and again on June 20, 1996 to permit the distribution of Advisor
Class shares.
The Adviser may from time to time and from its own funds
or such other resources as may be permitted by rules of the
Commission, make payments for distribution services to the
Principal Underwriter; the latter may in turn pay part or all of
such compensation to brokers or other persons for their
distribution assistance.
During the Fund's fiscal year ended June 30, 1998, the
Fund paid distribution services fees for expenditures under the
Agreement, with respect to Class A shares, in aggregating amounts
of $251,400, which constituted approximately .21% of the Fund's
average daily net assets attributable to the Class A shares
during the period, and the Adviser made payments from its own
resources as described above, aggregating $860,373. Of the
$1,111,773 paid by the Fund and the Adviser under the Plan, with
respect to Class A shares, $94,514 was spent on advertising,
$14,020 on the printing and mailing of prospectuses for persons
24
<PAGE>
other than current shareholders, $515,636 for compensation to
broker-dealers and other financial intermediaries (including
$188,535 to the Fund's Principal Underwriter), $145,597 for
compensation to sales personnel and $342,006 was spent on
printing of sales literature, travel, entertainment, due
diligence and other promotional expenses.
During the Fund's fiscal year ended June 30, 1998, the
Fund paid distribution services fees for expenditures under the
Agreement, with respect to Class B shares, in aggregating amounts
of $729,494, which constituted 1.00% of the Fund's 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 $90,546. Of the $820,040 paid by the Fund and
the Adviser under the Plan, with respect to Class B shares,
$19,591 was spent on advertising, $4,267 on the printing and
mailing of prospectuses for persons other than current
shareholders, $640,499 for compensation to broker-dealers and
other financial intermediaries (including, $47,298 to the Fund's
Principal Underwriter), $12,070 for compensation to sales
personnel, $66,894 was spent on printing of sales literature,
travel, entertainment, due diligence and other promotional
expenses and $76,719 on interest on Class B shares financing.
During the Fund's fiscal year ended June 30, 1998, the
Fund paid distribution services fees for expenditures under the
Agreement, with respect to Class C shares, in aggregating amounts
of $211,941, which constituted approximately 1.0%, annualized of
the Fund's 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 $39,898. Of the
$251,839 paid by the Fund and the Adviser under the Plan, with
respect to Class C shares, $6,123 was spent on advertising,
$1,542 on the printing and mailing of prospectuses for persons
other than current shareholders, $196,670 for compensation to
broker-dealers and other financial intermediaries (including,
$15,550 to the Fund's Principal Underwriter), $3,113 for
compensation to sales personnel, and, $22,2647 was spent on
printing of sales literature, travel, entertainment, due
diligence, other promotional expenses and $22,127 was spent on
the financing interest relating to Class C shares.
The Agreement will continue in effect for successive
twelve-month periods (computed from each July 1), provided,
however, that such continuance is specifically approved at least
annually by the Trustees 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 Trustees 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 trustees of the Fund) and who have no direct
25
<PAGE>
or indirect financial interest in the operation of the Rule 12b-1
Plan or any agreement related thereto. Most recently the
Trustees approved the continuance of the Agreement until June 30,
1999 by a vote, cast in person, of the Trustees, including a
majority of the Trustees who are not "interested persons", as
defined in the 1940 Act, at their meeting held on June 11,
1998.
In the event that the Agreement is terminated or not
continued with respect to the Class A shares, Class B shares or
Class C shares, (i) no distribution services fees (other than
current amounts accrued but not yet paid) would be owed by the
Fund to the Principal Underwriter with respect to that class, and
(ii) the Fund would not be obligated to pay the Principal
Underwriter for any amounts expended under the Agreement not
previously recovered by the Principal Underwriter from
distribution services fees in respect of shares of such class or
through deferred sales charges.
All material amendments to the Agreement must be
approved by a vote of the Trustees or the holders of the Fund's
outstanding voting securities, voting separately by class, and in
either case, by a majority of the disinterested Trustees, cast in
person at a meeting called for the purpose of voting on such
approval; and the Agreement may not be amended in order to
increase materially the costs that the Fund may bear pursuant to
the Agreement without the approval of a majority of the holders
of the outstanding voting shares of the class or classes
affected. The Agreement may be terminated (a) by the Fund
without penalty at any time by a majority vote of the holders of
the outstanding voting securities of the Fund, voting separately
by class, or by a majority vote of the Trustees who are not
"interested persons" as defined in the 1940 Act, or (b) by the
Principal Underwriter. To terminate the Agreement, any party
must give the other parties 60 days' written notice; to terminate
the Rule 12b-1 Plan only, the Fund need give no notice to the
Principal Underwriter. The Agreement will terminate
automatically in the event of its assignment.
Transfer Agency Agreement
AFS, an indirect wholly-owned subsidiary of the Adviser,
receives a transfer agency fee per account holder of each of the
Class A shares, Class B shares, Class C shares and Advisor Class
shares of the Fund, plus reimbursement for out-of-pocket
expenses. The transfer agency fee with respect to the Class B
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
26
<PAGE>
ended June 30, 1998, the Fund paid Alliance Fund Services, Inc.
$512,895 for transfer agency services.
_______________________________________________________________
PURCHASE OF SHARES
_______________________________________________________________
The following information supplements that set forth in
the Fund's Prospectus under the heading "Purchase and Sale of
Shares--How To Buy Shares."
General
Shares of the Fund are offered on a continuous basis at
a price equal to their net asset value plus an initial sales
charge at the time of purchase ("Class A shares"), with a
contingent deferred sales charge ("Class B shares"), without any
initial sales charge and, as long as the shares are held for one
year or more, without any contingent deferred sales charge
("Class C shares"), or, to investors eligible to purchase Advisor
Class shares, without any initial, contingent deferred or asset-
based sales charge, in each case as described below. Shares of
the Fund that are offered subject to a sales charge are offered
through (i) investment dealers that are members of the National
Association of Securities Dealers, Inc. and have entered into
selected dealer agreements with the Principal Underwriter
("selected dealers"), (ii) depository institutions and other
financial intermediaries or their affiliates, that have entered
into selected agent agreements with the Principal Underwriter
("selected agents"), and (iii) the Principal Underwriter.
Advisor Class shares of the Fund may be purchased and
held solely (i) through accounts established under fee-based
programs, sponsored and maintained by registered broker-dealers
or other financial intermediaries and approved by the Principal
Underwriter, (ii) through self-directed defined contribution
employee benefit plans (e.g., 401(k) plans) that have at least
1,000 participants or $25 million in assets, (iii) by the
categories of investors described in clauses (i) through (iv)
below under "--Sales at Net Asset Value" (other than officers,
directors and present and full-time employees of selected dealers
or agents, or relatives of such person, or any trust, individual
retirement account or retirement plan account for the benefit of
such relative, none of whom is eligible on the basis solely of
such status to purchase and hold Advisor Class shares) or,
(iv) by directors and present or retired full-time employees of
CB 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 AFD for investment in Advisor Class shares.
27
<PAGE>
Investors may purchase shares of the Fund either through
selected broker-dealers, agents, financial intermediaries or
other financial representatives or directly through the Principal
Underwriter. A transaction, service, administrative or other
similar fee may be charged by your broker-dealer, agent,
financial intermediary or other financial representative with
respect to the purchase, sale or exchange of Class A, Class B,
Class C or Advisor Class shares made through such financial
representative. Such financial representative may also impose
requirements with respect to the purchase, sale or exchange of
shares that are different from, or in addition to, those imposed
by the Fund, including requirements as to the minimum initial and
subsequent investment amounts. Sales personnel of selected
dealers and agents distributing the Fund's shares may receive
differing compensation for selling Class A, Class B, Class C or
Advisor Class shares.
The Fund may refuse any order for the purchase of
shares. The Fund reserves the right to suspend the sale of its
shares to the public in response to conditions in the securities
markets or for other reasons.
The public offering price of shares of the Fund is their
net asset value, plus, in the case of Class A shares, a sales
charge which will vary depending on the purchase alternative
chosen by the investor, as shown in the table below under "-
- -Class A Shares." On each Fund business day on which a purchase
or redemption order is received by the Fund and trading in the
types of securities in which the Fund invests might materially
affect the value of Fund shares, the per share net asset value is
computed in accordance with the Fund's Agreement and Declaration
of Trust and By-Laws as of the next close of regular trading on
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 value 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.
28
<PAGE>
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
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
29
<PAGE>
a convenience to the subscriber, and to avoid unnecessary expense
to the Fund, share certificates representing shares of the Fund
are not issued except upon written request to the Fund by the
shareholder or his or her authorized selected dealer or agent.
This facilitates later redemption and relieves the shareholder of
the responsibility for and inconvenience of lost or stolen
certificates. No certificates are issued for fractional shares,
although such shares remain in the shareholder's account on the
books of the Fund.
In addition to the discount or commission paid to
dealers or agents, the Principal Underwriter from time to time
pays additional cash or other incentives to dealers or agents, in
connection with the sale of shares of the Fund. Such additional
amounts may be utilized, in whole or in part, to provide
additional compensation to registered representatives who sell
shares of the Fund. On some occasions, cash or other incentives
will be conditioned upon the sale of a specified minimum dollar
amount of the shares of the Fund and/or other Alliance Mutual
Funds, as defined below, during a specific period of time. On
some occasions, such cash or other incentives may take the form
of payment for attendance at seminars, meals, sporting events or
theater performances, or payment for travel, lodging and
entertainment incurred in connection with travel taken by persons
associated with a dealer or agent to urban or resort locations
within or outside the United States. Such dealer or agent may
elect to receive cash incentives of equivalent amount in lieu of
such payments.
Class A, Class B, Class C and Advisor Class shares each
represent an interest in the same portfolio of investments of the
Fund, have the same rights and are identical in all respects,
except that (i) Class A shares bear the expense of the initial
sales charge (or contingent deferred sales charge, when
applicable) and Class B and Class C shares bear the expense of
the deferred sales charge, (ii) Class B shares and Class C shares
each bear the expense of a higher distribution services fee than
that borne by Class A shares, and Advisor Class shares do not
bear such a fee, (iii) Class B and Class C shares bear higher
transfer agency costs than those borne by Class A and Advisor
Class shares, (iv) each of Class A, Class B and Class C shares
has exclusive voting rights with respect to provisions of the
Rule 12b-1 Plan pursuant to which its distribution services fee
is paid and other matters for which separate class voting is
appropriate under applicable law, provided that, if the Fund
submits to a vote of the Class A shareholders, an amendment to
the Rule 12b-1 Plan that would materially increase the amount to
be paid thereunder with respect to the Class A shares, then such
amendment will also be submitted to the Class B and Advisor Class
shareholders and the Class A shareholders, Class B shareholders
and the Advisor Class shareholders will vote separately by class,
30
<PAGE>
and (v) Class B and Advisor Class shares are subject to a
conversion feature. Each class has different exchange privileges
and certain different shareholder service options available.
The Trustees 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 Trustees 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
and contingent deferred sales charges on Class B shares prior to
conversion, or the accumulated distribution services fee and
contingent deferred sales charges on Class C shares, would be
less than the initial sales charge and accumulated distribution
services fee on Class A shares purchased at the same time, and to
what extent such differential would be offset by the higher
return of Class A shares. Class A shares will normally be more
beneficial than Class B shares to the investor who qualifies for
reduced initial sales charges on Class A shares, as described
below. In this regard, the Principal Underwriter will reject any
order (except orders from certain retirement plans and certain
employee benefit plans) for more than $250,000 for Class B
shares. (See Appendix C for information concerning the
eligibility of certain employee benefit plans to purchase Class B
shares at net asset value without being subject to a contingent
deferred sales charge and the ineligibility of certain such plans
to purchase Class A shares.) Class C shares will normally not be
suitable for the investor who qualifies to purchase Class A
shares at net asset value. For this reason, the Principal
Underwriter will reject any order for more than $1,000,000 for
Class C shares.
Class A shares are subject to a lower distribution
services fee and, accordingly, pay correspondingly higher
dividends per share than Class B shares or Class C shares.
However, because initial sales charges are deducted at the time
____________________
** Advisor Class shares are sold only to investors described
above in this section under "--General."
31
<PAGE>
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
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 on June 30, 1998,
1997 and 1996, the aggregate amount of underwriting commission
payable with respect to shares of the Fund were, $185,706,
$161,918 and $318,980, respectively. Of that amount, the
Principal Underwriter received the amounts of $-0-, $12,581 and
$11,734, 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 1998, 1997 and 1996, the Principal Underwriter received
contingent deferred sales charges of $2,606, $139 and $-0-,
respectively, on Class A Shares, $153,795, $157,738 and $105,187,
respectively, on Class B shares, and $6,763, $2,605 and $-0-,
respectively, on Class C shares.
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<PAGE>
Class A Shares
The public offering price of Class A shares is the net
asset value plus a sales charge, as set forth below.
Sales Charge
Discount Or
Commission
As % of to Dealers
As % of the Public or Agents
Amount of Net Amount Offering As % of
Purchase Invested Price Offering Price
_________ __________ __________ ______________
Less than
$100,000 4.44% 4.25% 4.00%
$100,000 but
less than
$250,000 3.36 3.25 3.00
$250,000 but
less than
$500,000 2.30 2.25 2.00
$500,000 but
less than
$1,000,000* 1.78 1.75 1.50
____________________
* There is no initial sales charge on transactions of $1,000,000
or more.
With respect to purchases of $1,000,000 or more, Class A
shares redeemed within one year of purchase will be subject to a
contingent deferred sales charge equal to 1% of the lesser of the
cost of the shares being redeemed or their net asset value at the
time of redemption. Accordingly, no sales charge will be imposed
on increases in net asset value above the initial purchase price.
In addition, no charge will be assessed on shares derived from
reinvestment of dividends or capital gain 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
33
<PAGE>
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
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, or (ii) in exchange for
Class A shares of other "Alliance Mutual Funds" (as that term is
defined under "Combined Purchase Privilege" below), except that
an initial sales charge will be imposed on Class A shares issued
in exchange for Class A shares of AFD Exchange Reserves ("AFDER")
that were purchased for cash without the payment of an initial
sales charge and without being subject to a contingent deferred
sales charge or (iii) upon the automatic conversion of Class B
shares or Advisor Class shares as described below under "Class B
Shares--Conversion Feature" and "--Conversion of Advisor Class
Shares to Class A Shares." The Fund receives the entire net
asset value of its Class A shares sold to investors. The
Principal Underwriter's commission is the sales charge shown
above less any applicable discount or commission "reallowed" to
selected dealers and agents. The Principal Underwriter will
reallow discounts to selected dealers and agents in the amounts
indicated in the table above. In this regard, the Principal
Underwriter may elect to reallow the entire sales charge to
selected dealers and agents for all sales with respect to which
orders are placed with the Principal Underwriter. A selected
dealer who receives reallowance in excess of 90% of such a sales
charge may be deemed to be an "underwriter" under the Securities
Act.
Set forth below is an example of the method of computing
the offering price of the Class A shares. The example assumes a
purchase of Class A shares of the Fund aggregating less than
$100,000 subject to the schedule of sales charges set forth above
at a price based upon the net asset value of Class A shares of
the Fund at June 30, 1998.
34
<PAGE>
Net Asset Value per Class A Share at
June 30, 1998 $18.55
Class A Per Share Sales Charge
- 4.25% of offering price (4.44% of
net asset value per share) .82
Class A Per Share Offering Price to
the public $19.37
======
Investors choosing the initial sales charge alternative
may under certain circumstances be entitled to pay (i) no initial
sales charge (but may be subject in most such cases to a
contingent deferred sales charge) or (ii) a reduced initial sales
charge. The circumstances under which investors may pay a reduced
initial sales charge are described below.
Combined Purchase Privilege. Certain persons may
qualify for the sales charge reductions indicated in the schedule
of such charges above by combining purchases of shares of the
Fund into a single "purchase," if the resulting "purchase" totals
at least $100,000. The term "purchase" refers to: (i) a single
purchase by an individual, or to concurrent purchases, which in
the aggregate are at least equal to the prescribed amounts, by an
individual, his or her spouse and their children under the age of
21 years purchasing shares of the Fund for his, her or their own
account(s); (ii) a single purchase by a trustee or other
fiduciary purchasing shares for a single trust, estate or single
fiduciary account although more than one beneficiary is involved;
or (iii) a single purchase for the employee benefit plans of a
single employer. The term "purchase" also includes purchases by
any "company," as the term is defined in the 1940 Act, but does
not include purchases by any such company which has not been in
existence for at least six months or which has no purpose other
than the purchase of shares of the Fund or shares of other
registered investment companies at a discount. The term
"purchase" does not include purchases by any group of individuals
whose sole organizational nexus is that the participants therein
are credit card holders of a company, policy holders of an
insurance company, customers of either a bank or broker-dealer or
clients of an investment adviser. A "purchase" may also include
shares, purchased at the same time through a single selected
dealer or agent, of any other "Alliance Mutual Fund." Currently,
the Alliance Mutual Funds include:
The Alliance Fund, Inc.
AFD Exchange Reserves
Alliance All-Asia Investment Fund, Inc.
Alliance Balanced Shares, Inc.
35
<PAGE>
Alliance Bond Fund, Inc.
-Corporate Bond Portfolio
-U.S. Government Portfolio
Alliance Global Dollar Government Fund, Inc.
Alliance Global Environment Fund, Inc.
Alliance Global Small Cap Fund, Inc.
Alliance Global Strategic Income Trust, Inc.
Alliance Greater China '97 Fund, Inc.
Alliance Growth and Income Fund, Inc.
Alliance High Yield Fund, Inc.
Alliance International Fund
Alliance International Premier Growth Fund, Inc.
Alliance Limited Maturity Government Fund, Inc.
Alliance Mortgage Securities Income Fund, Inc.
Alliance Multi-Market Strategy Trust, Inc.
Alliance Municipal Income Fund, Inc.
-California Portfolio
-Insured California Portfolio
-Insured National Portfolio
-National Portfolio
-New York Portfolio
Alliance Municipal Income Fund II
-Arizona Portfolio
-Florida Portfolio
-Massachusetts Portfolio
-Michigan Portfolio
-Minnesota Portfolio
-New Jersey Portfolio
-Ohio Portfolio
-Pennsylvania Portfolio
-Virginia Portfolio
Alliance New Europe Fund, Inc.
Alliance North American Government Income Trust, Inc.
Alliance Premier Growth Fund, Inc.
Alliance Quasar Fund, Inc.
Alliance Real Estate Investment Fund, Inc.
Alliance Technology Fund, Inc.
Alliance Utility Income Fund, Inc.
Alliance Worldwide Privatization Fund, Inc.
The Alliance Portfolios
-Alliance Growth Fund
-Alliance Conservative Investors Fund
-Alliance Growth Investors Fund
-Alliance Short-Term U.S. Government Fund
Prospectuses for the Alliance Mutual Funds may be
obtained without charge by contacting AFS at the address or the
"For Literature" telephone number shown on the front cover of
this Statement of Additional Information.
36
<PAGE>
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.
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 a 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.
37
<PAGE>
Investors qualifying for the Combined Purchase Privilege
described above may purchase shares of the Alliance Mutual Funds
under a single Statement of Intention. For example, if at the
time an investor signs a Statement of Intention to invest at
least $100,000 in Class A shares of the Fund, the investor and
the investor's spouse each purchase shares of the Fund worth
$20,000 (for a total of $40,000), it will only be necessary to
invest a total of $60,000 during the following 13 months in
shares of the Fund or any other Alliance Mutual Fund, to qualify
for the 3.25% sales charge on the total amount being invested
(the sales charge applicable to an investment of $100,000).
The Statement of Intention is not a binding obligation
upon the investor to purchase the full amount indicated. The
minimum initial investment under a Statement of Intention is 5%
of such amount. Shares purchased with the first 5% of such
amount will be held in escrow (while remaining registered in the
name of the investor) to secure payment of the higher sales
charge applicable to the shares actually purchased if the full
amount indicated is not purchased, and such escrowed shares will
be involuntarily redeemed to pay the additional sales charge, if
necessary. Dividends on escrowed shares, whether paid in cash or
reinvested in additional Fund shares, are not subject to escrow.
When the full amount indicated has been purchased, the escrow
will be released. To the extent that an investor purchases more
than the dollar amount indicated on the Statement of Intention
and qualifies for a further reduced sales charge, the sales
charge will be adjusted for the entire amount purchased at the
end of the 13-month period. The difference in the sales charge
will be used to purchase additional shares of the Fund subject to
the rate of the sales charge applicable to the actual amount of
the aggregate purchases.
Investors wishing to enter into a Statement of Intention
in conjunction with their initial investment in Class A shares of
the Fund should complete the appropriate portion of the
Subscription Application found in the Prospectus while current
Class A shareholders desiring to do so can obtain a form of
Statement of Intention by contacting 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 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
38
<PAGE>
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
categories of investors including:
(i) investment management clients of the Adviser or
its affiliates;
(ii) officers and present or former Trustees 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 and
full-time employees of selected dealers or
agents; or the spouse, sibling, direct ancestor
or direct descendant (collectively, "relatives")
of any such person; or any trust, individual
retirement account or retirement plan account for
the benefit of any such person or relative; or
39
<PAGE>
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, Principal Underwriter, AFS and their
affiliates; 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 who were shareholders of the Fund before
the commencement of sales of shares of the Fund
subject to a sales charge;
(vi) 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 persons pay an asset-based fee to such
broker-dealer or other financial intermediary, or
its affiliates or agents, for services in the
nature of investment advisory or administrative
services;
(vii) persons who establish to the Principal
Underwriter's satisfaction that they are
investing, within such time period as may be
designated by the Principal Underwriter, proceeds
of redemption of shares of such other registered
investment companies as may be designated from
time to time by the Principal Underwriter; and
(viii) employer-sponsored qualified pensions 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
40
<PAGE>
under programs sponsored by administrators or
other persons that have been approved by the
Principal Underwriter.
Class B Shares
Investors may purchase Class B shares at the public
offering price equal to the net asset value per share of the
Class B shares on the date of purchase without the imposition of
a sales charge at the time of purchase. The Class B shares are
sold without an initial sales charge so that the Fund will
receive the full amount of the investor's purchase payment.
Proceeds from the contingent deferred sales charge on
Class B 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 on or after November 19, 1993
an investor purchased 100 Class B shares at $10 per share (at a
cost of $1,000) and in the second year after purchase, the net
asset value per share is $12 and, during such time, the investor
has acquired 10 additional Class B shares upon dividend
reinvestment. If at such time the investor makes his or her
first redemption of 50 Class B shares (proceeds of $600), 10
Class B shares will not be subject to charge because of dividend
reinvestment. With respect to the remaining 40 Class B shares,
the charge is applied only to the original cost of $10 per share
and not to the increase in net asset value of $2 per share.
Therefore, $400 of the $600 redemption proceeds will be charged
41
<PAGE>
at a rate of 3.0% (the applicable rate in the second year after
purchase as set forth below).
The amount of the contingent deferred sales charge, if
any, will vary depending on the number of years from the time of
payment for the purchase of Class B shares until the time of
redemption of such shares.
Contingent Deferred Sales Charge as a %
of Dollar Amount Subject to Charge
Shares Purchased Shares Purchased
Before on or After
Year Since Purchase November 19, 1993 November 19, 1993
First 5.5% 4.0%
Second 4.5% 3.0%
Third 3.5% 2.0%
Fourth 2.5% 1.0%
Fifth 1.5% None
Sixth 0.5% None
Seventh and thereafter None None
In determining the contingent deferred sales charge
applicable to a redemption of Class B shares, it will be assumed
that the redemption is, first, of any shares that were acquired
upon the reinvestment of dividends or distributions and, second,
of shares held longest during the time they are subject to the
sales charge. When shares acquired in an exchange are redeemed,
the applicable contingent deferred sales charge and conversion
schedules will be the schedules that applied at the time of the
purchase of shares of the corresponding class of the Alliance
Mutual Fund originally purchased by the shareholder.
The contingent deferred sales charge is waived on
redemptions of shares (i) following the death or disability, as
defined in the Internal Revenue Code of 1986, as amended (the
"Code"), of a shareholder, (ii) to the extent that the redemption
represents a minimum required distribution from an individual
retirement account or other retirement plan to a shareholder who
has attained the age of 70-1/2, (iii) that had been purchased by
present or former Trustees 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
42
<PAGE>
shares and will no longer be subject to a higher distribution
services fee. Such conversion will occur on the basis of the
relative net asset values of the two classes, without the
imposition of any sales load, fee or other charge. The purpose
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
43
<PAGE>
and pay correspondingly lower dividends than Class A shares and
Advisor Class shares.
Class C shares that are redeemed within one year of
purchase will be subject to a contingent deferred sales charge of
1%, charged as a percentage of the dollar amount subject thereto.
The charge will be assessed on an amount equal to the lesser of
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 the 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, 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 a
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
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"Purchase of Shares--General" or (ii) the holder is otherwise no
longer eligible to purchase Advisor Class shares as described in
the Advisor Class Prospectus and this Statement of Additional
Information (each, a "Conversion Event"), then all Advisor Class
shares held by the shareholder will convert automatically and
without notice to the shareholder, other than the notice
contained in the Advisor Class Prospectus and this Statement of
Additional Information, to Class A shares of the Fund during the
calendar month following the month in which the Fund is informed
of the occurrence of the Conversion Event. The failure of a
shareholder or a fee-based program to satisfy the minimum
investment requirements to purchase Advisor Class shares will not
constitute a Conversion Event. The conversion would occur on the
basis of the relative net asset values of the two classes and
without the imposition of any sales load, fee or other charge.
Class A shares currently bear a .30% distribution services fee
and have a higher expense ratio than Advisor Class shares. As a
result, Class A shares may pay correspondingly lower dividends
and have a lower net asset value than Advisor Class shares.
The conversion of Advisor Class shares to Class A shares
is subject to the continuing availability of an opinion of
counsel to the effect that the conversion of Advisor Class shares
to Class A shares does not constitute a taxable event under
federal income tax law. The conversion of Advisor Class shares
to Class A shares may be suspended if such an opinion is no
longer available at the time such conversion is to occur. In
that event, the Advisor Class shareholder would be required to
redeem his Advisor Class shares, which would constitute a taxable
event under federal income tax law.
_______________________________________________________________
REDEMPTION AND REPURCHASE OF SHARES
_______________________________________________________________
The following information supplements that set forth in
the Fund's Prospectus under the heading "Purchase and Sale of
Shares--How to Sell Shares." If you are an Advisor Class
shareholder through an account established under a fee-based
program your fee-based program may impose requirements with
respect to the purchase, sale or exchange of Advisor Class shares
of the Fund that are different from those described herein. A
transaction fee may be charged by your financial representative
with respect to the purchase, sale or exchange of Advisor Class
shares made through such financial representative.
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Redemption
Subject only to the limitations described below, the
Fund's Agreement and Declaration of Trust require that the Fund
redeem the shares tendered to it, as described below, at a
redemption price equal to their net asset value as next computed
following the receipt of shares tendered for redemption in proper
form. Except for any contingent deferred sales charge which may
be applicable to Class A, Class B or Class C shares, there is no
redemption charge. Payment of the redemption price will be made
within 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 gains (or loss) depending upon
the shareholder's holding period and basis in respect of the
shares redeemed.
To redeem shares of the Fund for which no share
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.
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To redeem shares of the Fund represented by share
certificates, the investor should forward the appropriate share
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
share certificate surrendered to the Fund for redemption must be
signed by the registered owner or owners exactly as the
registered name appears on the face of the certificate or,
alternatively, a stock power signed in the same manner may be
attached to the share 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
fund transfer of shares for which no share 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 share 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 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. The Fund reserves the right to suspend
or terminate its telephone redemption service at any time without
notice. Telephone redemption by check is not available with
47
<PAGE>
respect to shares (i) for which certificates have been issued,
(ii) held in nominee or "street name" accounts, (iii) held by a
shareholder who has changed his or her address of record within
the preceding 30 calendar days or (iv) held in any retirement
plan account. Neither the Fund nor the Adviser, the Principal
Underwriter or AFS will be responsible for the authenticity of
telephone requests for redemptions that the Fund reasonably
believes to be genuine. The Fund will employ reasonable
procedures in order to verify that telephone requests for
redemptions are genuine, including, among others, recording such
telephone instructions and causing written confirmations of the
resulting transactions to be sent to shareholders. If the Fund
did not employ such procedures, it could be liable for losses
arising from unauthorized or fraudulent telephone instructions.
Selected dealers or agents may charge a commission for handling
telephone requests for redemptions.
Repurchase
The Fund may repurchase shares through the Principal
Underwriter, selected financial intermediaries or selected
dealers or agents. The repurchase price will be the net asset
value next determined after the Principal Underwriter receives
the request (less the contingent deferred sales charge, if any,
with respect to the Class A, Class B and Class C shares), except
that requests placed through selected dealers or agents before
the close of regular trading on the Exchange on any day will be
executed at the net asset value determined as of such close of
regular trading on that day if received by the Principal
Underwriter prior to its close of business on that day (normally
5:00 p.m. Eastern time). The financial intermediary or selected
dealer or agent is responsible for transmitting the request to
the Principal Underwriter by 5:00 p.m. 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
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is a voluntary service of the Fund and the Fund may suspend or
terminate this practice at any time.
General
The Fund reserves the right to close out an account that
through redemption has remained below $200 for 90 days.
Shareholders will receive 60 days' written notice to increase the
account value before the account is closed. No contingent
deferred sales charge will be deducted from the proceeds of this
redemption. In the case of a redemption or repurchase of shares
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
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cover of this Statement of Additional Information to establish an
automatic investment program.
Exchange Privilege
You may exchange your investment in the Fund for shares
of the same class of other Alliance Mutual Funds (including AFD
Exchange Reserves, a money market fund managed by the Adviser).
In addition, (i) present officers and full-time employees of the
Adviser, (ii) present Directors or Trustees of any Alliance
Mutual Fund and (iii) certain employee benefit plans for
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 by 4:00 p.m. Eastern time on a
Fund business day in order to receive that day's net asset
value.
Shares will continue to age without regard to exchanges
for purposes of determining the CDSC, if any, upon redemption
and, in the case of Class B shares, for the 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
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<PAGE>
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.
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 share
certificates. Shares acquired pursuant to a telephone request for
exchange will be held under the same account registration as the
shares redeemed through such exchange.
Eligible shareholders desiring to make an exchange
should telephone 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
exchanges 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
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<PAGE>
losses arising from unauthorized or fraudulent telephone
instructions. Selected dealers, agents or financial
representative, as applicable, may charge a commission for
handling telephone requests for exchanges.
The exchange privilege is available only in states where
shares of the Alliance Mutual Fund being acquired may be legally
sold. Each Alliance Mutual Fund reserves the right, at any time
on 60 days' notice to its shareholders, to reject any order to
acquire its shares through exchange or otherwise to modify,
restrict or terminate the exchange privilege.
Retirement Plans
The 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.
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If the aggregate net asset value of shares of the
Alliance Mutual Funds held by a qualified plan reaches $1 million
on or before December 15 in any year, all Class B or Class C
shares of the Fund held by the plan can be exchanged, at the
plan's request, without any sales charge, for Class A shares of
the Fund.
Simplified Employee Pension Plan ("SEP"). Sole
proprietors, partnerships and corporations may sponsor a SEP
under which they make annual tax-deductible contributions to an
IRA established by each eligible employee within prescribed
limits based on employee compensation.
403(b)(7) Retirement Plan. Certain tax-exempt
organizations and public educational institutions may sponsor
retirements plans under which an employee may agree that monies
deducted from his or her compensation (minimum $25 per pay
period) may be contributed by the employer to a custodial account
established for the employee under the plan.
The Alliance Plans Division of Frontier Trust Company, a
subsidiary of 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 Alliance
Fund Services, Inc.
Dividend Direction Plan
A shareholder who already maintains, in addition to his
or her Class A, Class B, Class C or Advisor Class Fund account, a
Class A, Class B, Class C or Advisor Class account with one or
more other Alliance Mutual Funds may direct that income dividends
and/or capital gains paid on the shareholder's Class A, Class B,
Class C or Advisor Class Fund shares be automatically reinvested,
in any amount, without the payment of any sales or service
charges, in shares of the same class of such other Alliance
Mutual Fund(s). Further information can be obtained by
contacting 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.
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<PAGE>
Systematic Withdrawal Plan
General. Any shareholder who owns or purchases shares
of the Fund having a current net asset value of at least $4,000
(for quarterly or less frequent payments), $5,000 (for bi-monthly
payments) or $10,000 (for monthly payments) may establish a
systematic withdrawal plan under which the shareholder will
periodically receive a payment in a stated amount of not less
than $50 on a selected date. Systematic withdrawal plan
participants must elect to have their dividends and distributions
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
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<PAGE>
3% quarterly of the value at the time of redemption of the
Class B or Class C shares in a shareholder's account may be
redeemed free of any contingent deferred sales charge.
With respect to Class B shares, the waiver applies only
with respect to shares acquired after July 1, 1995. Class B
shares that are not subject to a contingent deferred sales charge
(such as shares acquired with reinvested dividends or
distributions) will be redeemed first and will count toward the
foregoing limitations. Remaining Class B shares that are held
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 Agreement and Declaration of Trust and By-Laws at
the next close of regular trading on the Exchange (ordinarily
4:00 p.m. Eastern time) following receipt of a purchase or
redemption order by the Fund on each Fund business day on which
such order is received and on such other days as the Trustees
deem 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
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fair value as determined in good faith by the Trustees. The
Trustees have delegated to the Adviser certain of their duties
with respect to the following procedures. Readily marketable
securities listed on the Exchange or on a foreign securities
exchange (other than foreign securities exchanges whose
operations are similar to those of the United States over-the-
counter market) are valued, except as indicated below, at the
last sale price reflected on the consolidated tape at the close
of the Exchange or, in the case of a foreign securities exchange,
at the last quoted sales 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 Trustees. 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 source.
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
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<PAGE>
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 Trustees determine that this method
does not represent fair value).
Fixed-income securities may be valued on the basis of
prices provided by a pricing service when such prices are
believed to reflect the fair market value of such securities.
The prices provided by pricing services 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 Trustees.
Trading in securities on Far Eastern 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 Trustees at fair value.
The Trustees 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 payment on the
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
57
<PAGE>
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 Trustees.
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
_______________________________________________________________
Foreign Income Taxes. Investment income received by the
Fund from sources within foreign countries may be subject to
foreign income taxes withheld at the source. The United States
has entered into tax treaties with many foreign countries which
entitle the Fund to a reduced rate of such taxes or exemption
from taxes on such income. It is impossible to determine the
effective rate of foreign tax in advance since the amount of the
Fund's assets to be invested within various countries is not
known.
U.S. Federal Income Taxes. The Fund intends for each
taxable year to qualify as a "regulated investment company" under
the Code. To the extent that the Fund distributes all of its
taxable income and net capital gain to its shareholders,
qualification relieves the Fund of federal income and excise
taxes. Investors should consult their own counsel for a complete
understanding of the requirements the Fund must meet to qualify
for such treatment. The following discussion relates solely to
U.S. federal income taxes on dividends and distributions by the
Fund and assumes that the Fund qualifies as a regulated
investment company. Investors should consult their own counsel
for further details, including their entitlement to foreign tax
credits that might be "passed through" to them under the rules
described below, and the application of state and local tax laws
to his or her particular situation.
Income dividends and distributions of any realized
short-term capital gains are included in the income of U.S.
shareholders as ordinary income. Distributions of net capital
gain (i.e., the excess of net long-term capital gain over net
58
<PAGE>
short-term capital loss) are taxable as long-term capital gain,
regardless of how long a shareholder has held shares in the Fund.
The investment objective of the Fund is such that only a small
portion, if any, of the Fund's distributions is expected to
qualify for the dividends-received deduction for
corporations.
Under current Federal tax law, the amount of an income
dividend or capital gains distribution declared by the Fund
during October, November or December of a year to shareholders of
record as of a specified date during such a month that is paid
during January of the following year is includable in the prior
year's taxable income of shareholders that are calendar year
taxpayers.
There is no fixed dividend rate and there can be no
assurance that the Fund will pay any dividends or realize any
gains. It is the Fund's intention to distribute to its
shareholders each fiscal year substantially all of such year's
net income and net realized capital gains, if any. The amount and
time of any such distribution must necessarily depend upon the
realization by the Fund of income and capital gains from
investments. Shareholders will be advised annually as to the tax
status of dividends and capital gains distributions.
Foreign Tax Credits. Income received by the Fund from
sources within various foreign countries may be subject to
foreign income tax. If more than 50% of the value of the Fund's
total assets at the close of its taxable year consists of the
stock or securities of foreign corporations, the Fund may elect
to "pass through" to the Fund's stockholders the amount of
foreign income taxes paid by the Fund. Pursuant to such
election, a stockholder would be required: (i) to include in
gross income his pro-rata share of foreign taxes paid by the
Fund; (ii) treat his pro-rata share of such foreign taxes as
having been paid by him; and (iii) either to deduct his pro-rata
share of foreign taxes in computing his taxable income, or to use
it as a foreign tax credit against Federal income taxes (but not
both). No deduction for foreign taxes could be claimed by a
shareholder who does not itemize deductions. In addition,
certain shareholders may be subject to rules which limit their
ability to fully deduct, or claim a credit for, their pro rata
share of the foreign taxes paid by the Fund. A shareholder's
foreign tax credit with respect to a dividend received from the
Fund will be disallowed unless the shareholder holds shares in
the Fund on the ex-dividend date and for at least 15 other days
during the 30-day period beginning 15 days prior to the ex-
dividend date.
The Fund has met for each fiscal year to date, and
intends to meet for each future fiscal year, the requirements of
59
<PAGE>
the Code to "pass through" to its shareholders foreign income
taxes paid, but there can be no assurance that the Fund will be
able to do so. Each shareholder will be notified within 60 days
after the close of each taxable year of the Fund whether the
foreign taxes paid by the Fund will "pass through" for that year,
and, if so, the amount of each shareholder's pro-rata share (by
country) of (i) the foreign taxes paid, and (ii) the Fund's gross
income from foreign sources. Of course, shareholders who are not
liable for federal income taxes, such as retirement plans
qualified under Section 401 of the Code, will not be affected by
any such "pass through" of foreign tax credits.
Backup Withholding. The Fund may be required to
withhold United States federal income tax at the rate of 31% of
all taxable distributions payable to shareholders who fail to
provide the Fund with their correct taxpayer identification
numbers or to make required certifications, or who have been
notified by the Internal Revenue Service that they are subject to
backup withholding. Corporate shareholders and certain other
shareholders specified in the Code are exempt from such backup
withholding. Backup withholding is not an additional tax; any
amounts so withheld may be credited against a shareholder's
United States federal income tax liability or refunded.
Taxation of Foreign Stockholders. The foregoing
discussion relates only to U.S. Federal income tax law as it
affects shareholders who are U.S. 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.
Currency Fluctuations - "Section 988" Gains or Losses.
Under the Code, gains or losses attributable to fluctuations in
exchange rates which occur between the time the Fund accrues
interest or other receivables or accrues expenses or other
liabilities denominated in a foreign currency and the time the
Fund actually collects such receivables or pays such liabilities
are treated as ordinary income or ordinary loss. Similarly,
gains or losses from the disposition of foreign currencies, from
the disposition of debt securities denominated in a foreign
currency, from the disposition of over-the-counter options with
respect to foreign currency, or from the disposition of a forward
contract denominated in a foreign currency (and from regulated
futures contracts and certain non-equity options if the Fund so
elects) which are attributable to fluctuations in the value of
the foreign currency between the date of acquisition of the asset
and the date of disposition also are treated as ordinary gain or
loss. These gains or losses, referred to under the Code as
"section 988" gains or losses, increase or decrease the amount of
60
<PAGE>
the Fund's investment company taxable income available to be
distributed to its shareholders as ordinary income, rather than
increasing or decreasing the amount of the Fund's net capital
gain. Because section 988 losses reduce the amount of ordinary
dividends the Fund will be allowed to distribute for a taxable
year, such section 988 losses may result in all or a portion of
prior dividend distributions for such year being recharacterized
as a non-taxable return of capital to shareholders, rather than
as an ordinary dividend, reducing each shareholder's basis in his
Fund shares. To the extent that such distributions exceed such
shareholder's basis, each will be treated as a gain from the sale
of shares.
Options, Futures Contracts, and Forward Foreign Currency
Contracts. Certain listed options, forward foreign currency
contracts and regulated futures contracts are considered "section
1256 contracts" for Federal income tax purposes. Section 1256
contracts held by the Fund at the end of each taxable year will
be "marked to market" and treated for Federal income tax purposes
as though sold for fair market value on the last business day of
such taxable year. Gain or loss realized by the Fund on forward
foreign currency contracts will be treated as section 988 gain or
loss, as described above. In general, gain or loss realized by
the Fund on other types of section 1256 contracts 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. These results could vary if the
Fund makes one or more elections available under sections 988 and
1256.
The Treasury Department has the authority to issue
regulations that would permit or require the Fund either to
integrate a foreign currency hedging transaction with the
investment that is hedged and treat the two as a single
transaction, or otherwise to treat the hedging transaction in a
manner that is consistent with the hedged investment. Regulations
under this authority generally should not apply to the type of
hedging transactions in which the Fund intends to engage.
Gain or loss realized by the Fund upon the lapse or sale
of put and call equity 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 option. 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
61
<PAGE>
of gain or loss upon disposition of the property underlying the
option.
Gain or loss realized by the Fund on the lapse or sale
of put and call options on foreign currencies which are traded
over-the-counter or on certain foreign exchanges will be treated
as section 988 gain or loss and will therefore be characterized
as ordinary income or loss and will increase or decrease the
amount of the Fund's net investment income available to be
distributed to shareholders as ordinary income, as described
above. The amount of such gain or loss shall be determined by
subtracting the amount paid, if any, for or with respect to the
option (including any amount paid by the Fund upon termination of
an option written by the Fund) from the amount received, if any,
for or with respect to the option (including any amount received
by the Fund upon termination of an option held by the Fund). In
general, if the Fund exercises such an option on a foreign
currency, or if such an option that the Fund has written is
exercised, gain or loss on the option will be recognized in the
same manner as if the Fund had sold the option (or paid another
person to assume the Fund's obligation to make delivery under the
option) on the date on which the option is exercised, for the
fair market value of the option.
Tax Straddles. Any option, futures contract, or other
position entered into or held by the Fund in conjunction with any
other position held by the Fund may constitute a "straddle" for
federal income tax purposes. A straddle of which at least one,
but not all, the positions are section 1256 contracts may
constitute a "mixed straddle". In general, straddles are subject
to certain rules that may affect the character and timing of the
Fund's gains and losses with respect to straddle positions by
requiring, among other things, that (i) loss realized on
disposition of one position of a straddle not be recognized to
the extent that the Fund has unrealized gains with respect to the
other position in such straddle; (ii) the Fund's holding period
in straddle positions be suspended while the straddle exists
(possibly resulting in gain being treated as short-term capital
gain rather than long-term capital gain); (iii) losses recognized
with respect to certain straddle positions which are part of a
mixed straddle and which are non-section 1256 positions be
treated as 60% long-term and 40% short-term capital loss;
(iv) losses recognized with respect to certain straddle positions
which would otherwise constitute short-term capital losses be
treated as long-term capital losses; and (v) the deduction of
interest and carrying charges attributable to certain straddle
positions may be deferred. Various elections are available to
the Fund which may mitigate the effects of the straddle rules,
particularly with respect to mixed straddles.
62
<PAGE>
_______________________________________________________________
BROKERAGE AND PORTFOLIO TRANSACTIONS
_______________________________________________________________
Transactions on stock exchanges involve the payment of
brokerage commissions. In transactions on stock exchanges in the
United States, these commissions are negotiated, whereas on
foreign stock exchanges these commissions are generally fixed. In
the case of securities traded in the foreign and domestic over-
the-counter markets, there is generally no stated commission, but
the price usually includes an undisclosed commission or markup.
In underwritten offerings, the price includes a disclosed fixed
commission or discount.
Investment information provided to the Adviser is of the
type described in Section 28(e) of the Securities Exchange Act of
1934, as amended, and is designed to augment the Adviser's own
internal research and investment strategy capabilities. Research
services furnished by broker-dealers 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. There may be occasions where
the transaction cost charged by a broker-dealer may be greater
than that which another broker-dealer may charge if the Fund
determines in good faith that the amount of such transaction cost
is reasonable in relationship to the value of the brokerage and
research services provided by the executing broker-dealer.
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 is permitted to place brokerage orders with
Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ"), a
U.S. registered broker-dealer and an affiliate of the Adviser.
With respect to orders placed with DLJ for execution on a
63
<PAGE>
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
connection with comparable transactions involving similar
securities during a comparable period of time.
During the fiscal years ended in 1998, 1997 and 1996,
the Fund incurred brokerage commissions amounting in the
aggregate to $1,675,091, $2,289,060 and $887,354, respectively.
During the fiscal years ended in 1998, 1997 and 1996, brokerage
commissions amounting in the aggregate to $0, $0 and $0,
respectively, were paid to DLJ and brokerage commissions
amounting in the aggregate to $0, $0, and $0, respectively, were
paid to brokers utilizing the Pershing Division of DLJ. During
the fiscal year ended in June 30, 1998, 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 0% of the
Fund's aggregate brokerage commissions. During the fiscal year
ended in June 30, 1998, of the Fund's aggregate dollar amount of
brokerage transactions involving the payment of commissions, 0%
were effected through DLJ and 0% were effected through brokers
utilizing the Pershing Division of DLJ. During the fiscal year
ended June 30, 1998, transactions in portfolio securities of the
Fund aggregating $686,020,488 with associated brokerage
commissions of approximately $694,393 were allocated to persons
or firms supplying research services to the Fund or the
Adviser.
_______________________________________________________________
GENERAL INFORMATION
_______________________________________________________________
Capitalization. The Fund was organized as a Maryland
Corporation in 1980. In November 1985 the Fund was reorganized
under the laws of Massachusetts as a Massachusetts business
trust. The Fund has an unlimited number of authorized Class A,
Class B, Class C and Advisor Class shares of beneficial interest,
par value $.01 per share. All shares of the Fund, when issued,
are fully paid and nonassessable. The Trustees are authorized to
reclassify and issue any unissued shares to any number of
additional classes or series without shareholder approval.
Accordingly, the Trustees in the future, for reasons such as the
desire to establish one or more additional portfolios with
different investment objectives, policies or restrictions, may
create additional classes or series of shares. Any issuance of
64
<PAGE>
shares of another class would be governed by the 1940 Act and the
law of the Commonwealth of Massachusetts. If shares of another
class 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
Trustees and on any other matter that affected both portfolios in
substantially the same manner. As to matters affecting each
portfolio differently, such as approval of the Advisory Agreement
and changes in investment policy, shares of each portfolio would
vote as separate classes.
The Fund's shares have non-cumulative voting rights,
which means that the holders of more than 50% of the shares
voting for election of Trustees can elect 100% of the directors
if they choose to do so, and in such event the holders of the
remaining less than 50% of the shares voting for such election of
Trustees will not be able to elect any persons or persons as
Trustees.
Procedures for calling a shareholders meeting for the
removal of Trustees of the Fund, similar to those set forth in
Section 16(c) of the 1940 Act, are available to shareholders of
the Fund. Meetings of shareholders may be called by 10% of the
Fund's outstanding shareholders. The rights of the holders of
shares of a series may not be modified except by vote of a
majority of the outstanding shares of such series.
As of the close of business on October 9, 1998, there
were 5,343,489 Class A shares, 3,988,320 Class B shares,
1,146,609 Class C shares and 1,952,749 Advisor Class shares of
beneficial interest of the Fund outstanding. To the knowledge of
the Fund, the following persons owned of record or beneficially
5% or more of the outstanding shares of the Fund as of October 9,
1998:
No. of % of
Name and Address Shares Class
MLPF&S For the Sole Benefit
of Its Customers
Attn Fund Administration
4800 Deer Lake Dr.
East 2nd Floor
Jacksonville,
FL 32246-6484 924,150 17.46%
of Class A
MLPF&S For the Sole Benefit
of Its Customers
65
<PAGE>
Attn Fund Administration
4800 Deer Lake Dr.
East 3rd Floor
Jacksonville,
FL 32246-6486 552,287 13.84%
of Class B
MLPF&S For the Sole Benefit
of Its Customers
Attn Fund Administration
4800 Deer Lake Dr.
East 3rd Floor
Jacksonville, FL 32246-6486 367,073 32.05%
of Class C
Trust For Profit Sharing Plan
For Employees of Alliance
Capital Mgmt. L.P. Plan-G
Attn Jill Smith 32nd Flr
1345 Avenue of the Americas
New York, NY 10105-0302 402,226 20.60%
Of Advisor
Class
Dingle & Co.
FBO Ford General Ret Plan #112
c/o Comerica Bank
PO Box 75000
Attn M/C 3446 Mutual Funds
Detroit MI 48275-0001 1,518,811 77.78%
of Advisor
Class
Principal Underwriter. Alliance Fund Distributors,
Inc., 1345 Avenue of the Americas, New York, New York 10105,
serves as the Fund's Principal Underwriter, as such may solicit
orders from the public to purchase shares of the Fund. Under the
Distribution Services Agreement, the Fund has agreed to indemnify
the Principal Underwriter, in the absence of its willful
misfeasance, bad faith, gross negligence or reckless disregard of
its obligations thereunder, against certain civil liabilities,
including liabilities under the Securities Act.
Counsel. Legal matters in connection with the issuance
of the Shares offered hereby are passed upon by Seward & Kissel,
New York, New York. Seward & Kissel has relied upon the opinion
of Sullivan & Worcester, Boston, Massachusetts, for matters
relating to Massachusetts law.
Independent Auditors. Ernst & Young LLP, New York, New
York, have been appointed as independent auditors for the Fund.
66
<PAGE>
Custodian. Brown Brothers & Harriman Co. ("Brown
Brothers"), 40 Water Street, Boston, Massachusetts 02109, will
act as the Fund's custodian for the assets of the Fund, but plays
no part in deciding the purchase or sale of portfolio securities.
Subject to the supervision of the Fund's Trustees, Brown Brothers
may enter into sub-custodial agreements for the holding of the
Fund's foreign securities.
Performance Information
From time to time the Fund advertises its "total
return." Computed separately for each class, the Fund's "total
return" is its average annual total return for its most recently
completed one-, five- and ten-year periods (or the periods since
the Fund's inception). 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 such investment at the end of the
period. For purposes of computing total return, income dividends
and capital gains distributions paid on shares of the Fund are
assumed to have been reinvested when received and the maximum
sales charge applicable to purchases of Fund shares is assumed to
have been paid.
The Fund's average annual compounded total return for
the one-, five- and ten-year periods ended June 30, 1998 (or
since inception through that date, as noted) were as follows:
Year Ended 5 Years Ended 10 Years Ended
6/30/98 6/30/98 6/30/98
Class A 6.79% 10.05% 8.47%
Class B 5.92% 9.13% 6.56%*
Class C 5.85% 9.13%* 8.57%*
Advisor Class 6.98%* 10.64%* 10.64%*
*Inception Dates: Class B - September 17, 1990
Class C - May 3, 1993
Advisor Class - October 1, 1996
The Fund's total return is computed separately for
Class A, Class B, Class C and Advisor Class shares. The Fund's
total return is not fixed and will fluctuate in response to
prevailing market conditions or as a function of the type and
quality of the securities in the Fund's portfolio and the Fund's
expenses. Total return information is useful in reviewing the
Fund's performance, but such information may not provide a basis
for comparison with bank deposits or other investments which pay
a fixed yield for a stated period of time. An investor's
67
<PAGE>
principal invested in the Fund is not fixed and will fluctuate in
response to prevailing market conditions.
Advertisements quoting performance rankings or ratings
of the Fund as measured by financial publications or by
independent organizations such as Lipper Analytical Services,
Inc., and Morningstar, Inc. and advertisements presenting the
historical record of payments of income dividends by the Fund
may also from time to time be sent to investors or placed in
newspapers and magazines such as The New York Times, The Wall
Street Journal, Barrons, Investor's Daily, Money Magazine,
Changing Times, Business Week and Forbes or other media on behalf
of the Fund. The Fund has been ranked by Lipper in the category
known as "international" funds.
Additional Information. Any shareholder inquiries may
be directed to the shareholder's broker or to Alliance Fund
Services, Inc. at the address or telephone numbers shown on the
front cover of this Statement of Additional Information. This
Statement of Additional Information does not contain all the
information set forth in the Registration Statement filed by the
Fund with the Commission. 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.
_______________________________________________________________
REPORT OF INDEPENDENT AUDITORS AND FINANCIAL
STATEMENTS
_______________________________________________________________
68
<PAGE>
ALLIANCE INTERNATIONAL FUND
ANNUAL REPORT
JUNE 30, 1998
ALLIANCE CAPITAL
PORTFOLIO OF INVESTMENTS
JUNE 30, 1998 ALLIANCE INTERNATIONAL FUND
_______________________________________________________________________________
COMPANY SHARES U.S. $ VALUE
- -------------------------------------------------------------------------
COMMON & PREFERRED STOCKS-98.6%
AUSTRALIA-0.3%
Normandy Mining, Ltd. 1,000,000 $ 819,390
BRAZIL-2.4%
Telebras (ADR) 60,000 6,551,250
CANADA-0.6%
Newcourt Credit Group, Inc. (a) 37,600 1,845,830
DENMARK-2.0%
Ratin AS Cl. B 25,000 5,297,270
FINLAND-8.3%
Nokia AB Series A 220,000 16,206,735
Orion-Yhtyma OY Series B 205,195 6,331,153
------------
22,537,888
FRANCE-6.4%
Sanofi SA 61,387 7,224,391
Seita (b) 70,000 3,174,708
Total, SA Cl. B (b) 50,000 6,505,007
Union des Assurances Federales, SA 1,800 283,936
------------
17,188,042
GERMANY-7.1%
Adidas Salomon AG 35,000 6,057,748
Merck KG AA 18,410 824,168
Prosieben Media AG pfd. (a) 91,360 4,753,872
Volkswagen AG 6,000 5,774,832
Wella AG pfd. 1,500 1,697,501
------------
19,108,121
HONG KONG-3.2%
Cheung Kong Holdings 450,600 2,221,595
Dickson Concepts International, Ltd. 404,500 563,836
Hong Kong Electric Holdings, Ltd. 500,000 1,548,787
Hutchison Whampoa, Ltd. 800,000 4,212,700
------------
8,546,918
ITALY-4.3%
Credito Italiano 1,300,000 6,810,858
Telecom Italia Spa 640,000 4,715,154
------------
11,526,012
JAPAN-15.6%
Bridgestone Corp. (b) 150,000 3,561,475
Canon, Inc. 117,000 2,667,849
Daiwa Securities Co., Ltd. 700,000 3,025,082
Fuji Photo Film Co. 78,000 2,727,135
Honda Motor Co. (b) 135,000 4,827,536
Japan Tobacco, Inc. 271 1,842,043
Nintendo Co. (b) 40,000 3,720,728
Orix Corp. 30,000 2,034,818
Rohm Co., Ltd. (b) 36,000 3,713,489
Sankyo Co., Ltd. 40,000 914,981
Sony Corp. (b) 50,000 4,325,166
TDK Corp. (b) 54,000 4,006,660
Tokai Bank 390,000 2,156,864
Yamanouchi Pharmaceutical Co., Ltd. (b) 130,000 2,719,606
------------
42,243,432
MEXICO-1.1%
Coca-Cola Femsa, SA (ADR) 25,000 434,375
Panamerican Beverages Cl. A 80,000 2,515,000
------------
2,949,375
NETHERLANDS-14.5%
Akzo Nobel NV 70,000 15,576,088
ASM Lithography Holding NV (a) 120,000 3,554,738
International Nederlander Groep NV 160,000 10,487,067
Philips Electronics NV 50,000 4,207,227
Wolters Kluwer CVA 38,776 5,327,313
------------
39,152,433
8
ALLIANCE INTERNATIONAL FUND
_______________________________________________________________________________
SHARES OR
PRINCIPAL
AMOUNT
COMPANY (000) U.S. $ VALUE
- -------------------------------------------------------------------------
SOUTH KOREA-0.0%
S.K. Telecom Co., Ltd. (ADR) 4,269 $ 23,746
SPAIN-3.9%
Tabacalera, SA Cl. A 230,000 4,719,708
Telefonica, SA 120,000 5,560,132
Unidad Editorial, SA (c) 297,500 311,075
------------
10,590,915
SWEDEN-2.9%
Astra AB Series A 200,000 4,090,125
Sparbanken Sverige AB Series A 40,000 1,204,454
Volvo AB Cl. B 90,000 2,681,792
------------
7,976,371
SWITZERLAND-10.1%
Ciba Specialty Chemical Holding 40,000 5,144,291
Nestle AG (b) 5,000 10,717,823
Novartis AG 4,000 6,667,107
Zurich Vericher Namen 7,482 4,782,788
------------
27,312,009
UNITED KINGDOM-15.9%
BPB Industries Plc. 600,000 3,636,607
Bank of Scotland 375,000 4,201,383
Compass Group Plc. 500,000 5,760,465
Diageo Plc. 760,000 9,028,736
Granada Group Plc. 130,000 2,392,012
Ladbroke Group Plc. 1,500,000 8,239,970
Stolt Comex Seaway, SA 75,600 1,464,750
(ADR) 37,800 661,500
Tomkins Plc. 750,000 4,073,024
United Assurance Group Plc. 300,000 2,845,169
United News & Media, Inc. 50,000 699,604
------------
43,003,220
Total Common & Preferred Stocks
(cost $230,736,625) 266,672,222
TIME DEPOSIT-1.7%
Royal Bank of Canada,
5.75%, 7/01/98
(cost $4,500,000) $4,500 4,500,000
TOTAL INVESTMENTS-100.3%
(cost $235,236,625) 271,172,222
Other assets less liabilities-(0.3)% (654,914)
NET ASSETS-100% $ 270,517,308
(a) Non-income producing security.
(b) Securities, or a portion thereof, with an aggregate market value of
$31,068,988 have been segregated to collateralize forward exchange currency
contracts.
(c) Restricted and illiquid securities valued at fair value (See Notes A & F).
Glossary:
ADR - American Depositary Receipt
See notes to financial statements.
9
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1998 ALLIANCE INTERNATIONAL FUND
_______________________________________________________________________________
ASSETS
Investments in securities, at value (cost $235,236,625) $271,172,222
Cash, at value (cost $1,378,373) 1,375,633
Receivable for investment securities and foreign currency sold 3,101,710
Receivable for shares of beneficial interest sold 2,077,550
Dividends and interest receivable 358,999
Foreign taxes receivable 306,707
Unrealized appreciation of forward exchange currency contract 2,276
Total assets 278,395,097
LIABILITIES
Payable for shares of beneficial interest redeemed 3,827,886
Payable for investment securities and foreign currency purchased 3,032,022
Advisory fee payable 574,849
Distribution fee payable 97,843
Accrued expenses 345,189
Total liabilities 7,877,789
NET ASSETS $270,517,308
COMPOSITION OF NET ASSETS
Shares of beneficial interest, at par $ 149,083
Additional paid-in capital 222,024,226
Undistributed net investment income 1,829,171
Accumulated net realized gain on investments and foreign
currency transactions 10,576,194
Net unrealized appreciation of investments and foreign
currency denominated assets and liabilities 35,938,634
$270,517,308
CALCULATION OF MAXIMUM OFFERING PRICE
CLASS A SHARES
Net asset value and redemption price per share ($131,564,997/
7,094,137 shares of beneficial interest issued and outstanding) $18.55
Sales charge--4.25% of public offering price .82
Maximum offering price $19.37
CLASS B SHARES
Net asset value and offering price per share ($71,370,335/
4,098,451 shares of beneficial interest issued and outstanding) $17.41
CLASS C SHARES
Net asset value and offering price per share ($20,427,825/
1,172,543 shares of beneficial interest issued and outstanding) $17.42
ADVISOR CLASS SHARES
Net asset value, redemption and offering price per share
($47,154,151 / 2,543,195 shares of beneficial interest
issued and outstanding) $18.54
See notes to financial statements.
10
STATEMENT OF OPERATIONS
YEAR ENDED JUNE 30, 1998 ALLIANCE INTERNATIONAL FUND
_______________________________________________________________________________
INVESTMENT INCOME
Dividends (net of foreign taxes withheld
of $519,257) $4,115,694
Interest 242,699 $ 4,358,393
EXPENSES
Advisory fee 2,718,678
Distribution fee - Class A 251,400
Distribution fee - Class B 729,494
Distribution fee - Class C 211,941
Custodian 635,742
Transfer agency 512,895
Audit and legal 141,724
Administrative 127,000
Printing 111,563
Registration 70,853
Trustees' fees 25,000
Miscellaneous 88,476
Total expenses 5,624,766
Less: expenses waived by adviser (407,802)
Net expenses 5,216,964
Net investment loss (858,571)
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
AND FOREIGN CURRENCY TRANSACTIONS
Net realized gain on investment transactions 18,748,042
Net realized gain on foreign currency transactions 3,357,394
Net change in unrealized appreciation of:
Investments (882,601)
Foreign currency denominated assets and liabilities (156,892)
Net gain on investments and foreign currency transactions 21,065,943
NET INCREASE IN NET ASSETS FROM OPERATIONS $20,207,372
See notes to financial statements.
11
STATEMENT OF CHANGES IN NET ASSETS ALLIANCE INTERNATIONAL FUND
_______________________________________________________________________________
YEAR ENDED YEAR ENDED
JUNE 30, JUNE 30,
1998 1997
------------- -------------
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS
Net investment income (loss) $ (858,571) $ 136,758
Net realized gain on investments and foreign
currency transactions 22,105,436 11,103,038
Net change in unrealized appreciation
(depreciation)of investments and foreign
currency denominated assets and liabilities (1,039,493) 13,688,698
Net increase in net assets from operations 20,207,372 24,928,494
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income
Class A (340,015) (1,212,031)
Advisor Class (164,972) (6,456)
Net realized gain on investments and foreign
currency transactions
Class A (8,564,124) (11,329,853)
Class B (5,015,932) (4,543,388)
Class C (1,492,502) (1,515,641)
Advisor Class (2,849,305) (47,863)
CAPITAL STOCK TRANSACTIONS
Net decrease (31,125,975) (2,106,765)
Total increase (decrease) (29,345,453) 4,166,497
NET ASSETS
Beginning of year 299,862,761 295,696,264
End of year (including undistributed net
investment income of $1,829,171 and
$91,546, respectively) $270,517,308 $299,862,761
See notes to financial statements.
12
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1998 ALLIANCE INTERNATIONAL FUND
_______________________________________________________________________________
NOTE A: SIGNIFICANT ACCOUNTING POLICIES
Alliance International Fund (the "Fund"), which is a Massachusetts business
trust, is registered under the Investment Company Act of 1940, as a
diversified, open-end management investment company. The Fund offers Class A,
Class B, Class C, and Advisor Class shares. Class A shares are sold with a
front-end sales charge of up to 4.25% for purchases not exceeding $1,000,000.
With respect to purchases of $1,000,000 or more, Class A shares redeemed within
one year of purchase will be subject to a contingent deferred sales charge of
1%. Class B shares are 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
expenses. Advisor Class shares are offered to investors participating in fee
based programs and to certain retirement plan accounts. All four classes of
shares have identical voting, dividend, liquidation and other rights, except
that each class bears different distribution expenses and has exclusive voting
rights with respect to its distribution plan. The 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 exchange or on a foreign
securities exchange (other than foreign securities exchanges whose operations
are similar to those of the United States over-the-counter market) are
generally valued at the last reported sales price or if no sale occurred, at
the mean of the closing bid and asked price 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 price. 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 Trustees. 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. CURRENCY TRANSLATION
Assets and liabilities denominated in foreign currencies and commitments under
forward exchange currency contracts are translated into U.S. dollars at the
mean of the quoted bid and asked price of such currencies against the U.S.
dollar. Purchases and sales of portfolio securities are translated at the rates
of exchange prevailing when such securities were acquired or sold. Income and
expenses are translated at rates of exchange prevailing when accrued.
Net realized foreign exchange gains and losses represent gains and losses from
sales and maturities of debt securities, holding of foreign currency contracts,
foreign currencies, exchange gains and losses realized between the trade and
settlement dates on security transactions, and the difference between the
amounts of dividends, interest and foreign taxes receivable recorded on the
Fund's books and the U.S. dollar equivalent of the amounts actually received or
paid. Net currency gains and losses from valuing foreign currency denominated
assets and liabilities at period end exchange rates are reflected as a
component of net unrealized appreciation of investments and foreign currency
denominated assets and liabilities.
3. TAXES
It is the Fund's policy to meet the requirements of the Internal Revenue Code
applicable to regulated investment companies and to distribute all of its
investment company taxable income and net realized gains, if any, to
shareholders. Therefore, no provisions for federal income or excise taxes are
required.
13
NOTES TO FINANCIAL STATEMENTS (CONTINUED) ALLIANCE INTERNATIONAL FUND
_______________________________________________________________________________
4. INVESTMENT INCOME AND INVESTMENT TRANSACTIONS
Dividend income is recorded on the ex-dividend date. Interest income is accrued
daily. Investment transactions are accounted for on the date securities are
purchased or sold. Investment gains and losses are determined on the identified
cost basis. The Fund accretes discounts on short-term securities as adjustments
to interest income.
5. INCOME AND EXPENSES
All income earned and expenses incurred by the Fund are borne on a pro-rata
basis by each outstanding class of shares, based on the proportionate interest
in the Fund represented by the net assets of such class, except that the Fund's
Class B and Class C shares bear higher distribution and transfer agent fees
than Class A shares and the Advisor Class shares have no distribution fees.
6. DIVIDENDS AND DISTRIBUTIONS
Dividends and distributions to shareholders are recorded on the ex-dividend
date.
Income and capital gains distributions are determined in accordance with
federal tax regulations and may differ from those determined in accordance with
generally accepted accounting principles. To the extent these differences are
permanent, such amounts are reclassified within the capital accounts based on
their federal tax basis treatment; temporary differences do not require such
reclassification. During the current fiscal year, permanent differences,
primarily due to net foreign currency gains, resulted in a net increase in
undistributed net investment income, and a corresponding decrease in
accumulated net realized gain on investments and foreign currency transactions.
This reclassification had no affect on net assets.
NOTE B: ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Under an investment advisory agreement, the Fund pays Alliance Capital
Management L.P. (the "Adviser") a fee at a quarterly rate equal to 1/4 of 1%
(approximately 1% on an annual basis) of quarter end net assets up to $500
million and 3/16 of 1% (approximately .75% on an annual basis) of quarter end
net assets in excess of $500 million. Effective July 1, 1997 the Adviser has
voluntarily agreed to waive unilaterally, for a minimum of two years, that
portion of the Fund's advisory fee on the first $500 million of net assets in
excess of the annualized rate of .85 of 1%. Such waiver amounted to $407,802.
Pursuant to the advisory agreement, the Fund paid $127,000 to the Adviser
representing the cost of certain legal and accounting services provided to the
Fund by the Adviser for the year ended June 30, 1998.
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 $376,447 for the year ended June 30, 1998.
Alliance Fund Distributors, Inc. (a wholly-owned subsidiary of the Adviser)
serves as the Distributor of the Fund's shares. The Distributor received
$2,606, $153,795 and $6,763 in contingent deferred sales charges from the
redemptions of Class A, Class B and Class C shares, respectively for the year
ended June 30, 1998.
Brokerage commissions paid on investment transactions for the year ended June
30, 1998, amounted to $1,675,091, none of which was paid to brokers utilizing
the services of the Pershing Division of Donaldson, Lufkin & Jenrette
Securities Corp. ("DLJ"), an affiliate of the Adviser, nor 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
Agreement the Fund pays a distribution fee to the Distributor at an annual rate
of up to .30 of 1% of the average daily net assets attributable to Class A
shares and 1% of the average daily net assets attributable to the Class B and
Class C shares. There is no distribution fee on the Advisor Class shares. The
fees are accrued daily and paid monthly. The Agreement provides that the
Distributor will use such payments in their entirety for distribution
14
ALLIANCE INTERNATIONAL FUND
_______________________________________________________________________________
assistance and promotional activities. The Distributor has incurred expenses in
excess of the distribution costs reimbursed by the Fund in the amount of
$2,638,659 and $838,475, 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 unreimbursed distribution costs, incurred by the Distributor,
beyond the current fiscal year for Class A shares. The Agreement also provides
that the Adviser may use its own resources to finance the distribution of the
Fund's shares.
NOTE D: INVESTMENT TRANSACTIONS
Purchases and sales of investment securities (excluding short-term and U.S.
government securities) aggregated $321,444,896 and $364,575,592, respectively,
for the year ended June 30, 1998. There were no purchases or sales of U.S.
government or government agency obligations for the year ended June 30, 1998.
At June 30, 1998, the cost of investments for federal income tax purposes was
$239,602,853. Accordingly, gross unrealized appreciation of investments was
$43,956,953 and gross unrealized depreciation of investments was $12,387,584
resulting in net unrealized appreciation of $31,569,369 (excluding foreign
currency transactions).
FORWARD EXCHANGE CURRENCY CONTRACTS
The Fund enters into forward foreign exchange currency contracts in order to
hedge its exposure to changes in foreign currency exchange rates on its foreign
portfolio holdings and to hedge certain firm purchase and sale commitments
denominated in foreign currencies. A forward foreign exchange currency contract
is a commitment to purchase or sell a foreign currency at a future date at a
negotiated forward rate. The gain or loss arising from the difference between
the original contract and the closing of such contract is included in net
realized gain or loss on foreign currency transactions. Fluctuations in the
value of open forward foreign exchange currency contracts are recorded for
financial reporting purposes as unrealized gains or losses by the Fund.
The Fund's custodian will place and maintain cash not available for investment
or liquid assets having a value equal to the aggregate amount of the Fund's
commitments under forward foreign exchange currency contracts entered into with
respect to position hedges.
Risks may arise from the potential inability of a counterparty to meet the
terms of a contract and from unanticipated movements in the value of a foreign
currency relative to the U.S. dollar.
At June 30, 1998, the Fund had one outstanding forward foreign exchange
currency contract as follows:
CONTRACT VALUE ON U.S. $
AMOUNT ORIGINATION CURRENT UNREALIZED
(000) DATE VALUE APPRECIATION
--------- ----------- ----------- ------------
FOREIGN CURRENCY SALE CONTRACT
Japanese Yen,
settling 9/24/98 2,921,639 $21,416,500 $21,414,224 $2,276
15
NOTES TO FINANCIAL STATEMENTS (CONTINUED) ALLIANCE INTERNATIONAL FUND
_______________________________________________________________________________
NOTE E: SHARES OF BENEFICIAL INTEREST
There is an unlimited number of $.01 par value shares of beneficial interest
authorized, divided into four classes, designated Class A, Class B, Class C and
Advisor Class. Transactions in shares of beneficial interest were as follows:
SHARES AMOUNT
-------------------------- ------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
JUNE 30, JUNE 30, JUNE 30, JUNE 30,
1998 1997 1998 1997
------------ ------------ -------------- --------------
CLASS A
Shares sold 24,484,292 6,622,075 $ 429,262,692 $ 114,715,975
Shares issued in
reinvestment of
dividends and
distributions 434,528 663,141 7,195,776 11,054,555
Shares converted
from Class B 135,142 117,002 2,418,317 2,047,012
Shares redeemed (28,137,023) (7,939,629) (501,332,312) (137,402,166)
Net decrease (3,083,061) (537,411) $ (62,455,527) $ (9,584,624)
CLASS B
Shares sold 5,858,963 2,125,113 $ 98,173,143 $ 35,155,961
Shares issued in
reinvestment of
distributions 253,584 214,830 3,960,979 3,409,345
Shares converted
to Class A (143,173) (123,261) (2,422,365) (2,047,012)
Shares redeemed (6,258,880) (1,982,904) (105,349,658) (32,750,197)
Net increase
(decrease) (289,506) 233,778 $ (5,637,901) $ 3,768,097
CLASS C
Shares sold 1,285,146 1,792,800 $ 21,956,475 $ 29,797,881
Shares issued in
reinvestment of
distributions 55,617 50,633 869,855 804,053
Shares redeemed (1,480,320) (2,075,557) (25,121,032) (34,583,108)
Net decrease (139,557) (232,124) $ (2,294,702) $(3,981,174)
YEAR ENDED OCT. 2,1996(A) YEAR ENDED OCT. 2,1996(A)
JUNE 30 TO JUNE 30, TO
1998 JUNE 30,1997 1998 JUNE 30, 1997
------------ ------------ -------------- --------------
ADVISOR CLASS
Shares sold 2,988,364 501,850 $ 56,300,890 $ 8,317,799
Shares issued in
reinvestment of
dividends and
distributions 181,876 2,960 3,008,222 49,249
Shares redeemed (1,092,832) (39,023) (20,046,957) (676,112)
Net increase 2,077,408 465,787 $ 39,262,155 $ 7,690,936
(a) Commencement of distribution.
16
ALLIANCE INTERNATIONAL FUND
_______________________________________________________________________________
NOTE F: RESTRICTED AND ILLIQUID SECURITIES
DATE
SECURITY ACQUIRED U.S. $ COST
- -------- -------- -----------
Unidad Editorial, SA 1/20/92 $369,591
The security shown above is restricted as to sale and has been valued at fair
value in accordance with procedures described in Note A. The value of this
security at June 30, 1998 was $311,075 representing 0.1% of net assets.
NOTE G: CONCENTRATION OF RISK
Investing in securities of foreign companies involves special risks which
include revaluation of currency and future adverse political and economic
developments. Moreover, securities of many foreign companies and their markets
may be less liquid and their prices more volatile than those of comparable U.S.
companies.
NOTE H: BANK BORROWING
A number of open-end mutual funds managed by the Adviser, including the Fund,
participate in a $500 million revolving credit facility (the "Facility") to
provide for short-term financing if necessary in connection with abnormal
redemption activity. Commitment fees related to the Facility are paid by the
participating funds and are included in the miscellaneous expenses in the
statement of operations. During the year ended June 30, 1998, the Fund had
borrowings outstanding for 6 days and the weighted average interest on such
borrowings was 6.12%. The Fund had no borrowings outstanding on June 30, 1998.
17
FINANCIAL HIGHLIGHTS ALLIANCE INTERNATIONAL FUND
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING THROUGHOUT EACH
YEAR
<TABLE>
<CAPTION>
CLASS A
----------------------------------------------------------------
YEAR ENDED JUNE 30,
----------------------------------------------------------------
1998 1997 1996 1995 1994
------------ ----------- ----------- ---------- ------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $18.69 $18.32 $16.81 $18.38 $16.01
INCOME FROM INVESTMENT OPERATIONS
Net investment income (loss) (.01)(a) .06(a) .05(a) .04 (.09)
Net realized and unrealized gain on
investments and foreign currency
transactions 1.13 1.51 2.51 .01 3.02
Net increase in net asset value from
operations 1.12 1.57 2.56 .05 2.93
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (.05) (.12) -0- -0- -0-
Distributions from net realized gains
on investments and foreign currency
transactions (1.21) (1.08) (1.05) (1.62) (.56)
Total dividends and distributions (1.26) (1.20) (1.05) (1.62) (.56)
Net asset value, end of year $18.55 $18.69 $18.32 $16.81 $18.38
TOTAL RETURN
Total investment return(b) 6.79% 9.30% 15.83% .59% 18.68%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000's omitted) $131,565 $190,173 $196,261 $165,584 $201,916
Ratios to average net assets of:
Expenses, net of waivers 1.65% 1.73% 1.72% 1.73% 1.90%
Expenses, before waivers 1.80% 1.74%(c) 1.72% 1.73% 1.90%
Ratio of net investment income (loss)
to average net assets (.05)% .31% .31% .26% (.50)%
Portfolio turnover rate 121% 94% 78% 119% 97%
</TABLE>
See footnote summary on page 21.
18
ALLIANCE INTERNATIONAL FUND
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING THROUGHOUT EACH
YEAR
<TABLE>
<CAPTION>
CLASS B
-----------------------------------------------------------------
YEAR ENDED JUNE 30,
-----------------------------------------------------------------
1998 1997 1996 1995 1994
------------ ----------- ------------ ---------- ------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $17.71 $17.45 $16.19 $17.90 $15.74
INCOME FROM INVESTMENT OPERATIONS
Net investment loss (.16)(a) (.09)(a) (.07)(a) (.01) (.19)(a)
Net realized and unrealized gain (loss)
on investmentsand foreign currency
transactions 1.07 1.43 2.38 (.08) 2.91
Net increase (decrease) in net asset
value from operations .91 1.34 2.31 (.09) 2.72
LESS: DISTRIBUTIONS
Distributions from net realized gains on
investments and foreign currency
transactions (1.21) (1.08) (1.05) (1.62) (.56)
Net asset value, end of year $17.41 $17.71 $17.45 $16.19 $17.90
TOTAL RETURN
Total investment return(b) 5.92% 8.37% 14.87% (.22)% 17.65%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $71,370 $77,725 $72,470 $48,998 $29,943
Ratios to average net assets of:
Expenses, net of waivers 2.49% 2.58% 2.55% 2.57% 2.78%
Expenses, before waivers 2.64% 2.59%(c) 2.55% 2.57% 2.78%
Ratio of net investment loss to average
net assets (.90)% (.51)% (.46)% (.62)% (1.15)%
Portfolio turnover rate 121% 94% 78% 119% 97%
</TABLE>
See footnote summary on page 21.
19
FINANCIAL HIGHLIGHTS (CONTINUED) ALLIANCE INTERNATIONAL FUND
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING THROUGHOUT EACH
YEAR
<TABLE>
<CAPTION>
CLASS C
---------------------------------------------------------------
YEAR ENDED JUNE 30,
---------------------------------------------------------------
1998 1997 1996 1995 1994
------------ ----------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $17.73 $17.46 $16.20 $17.91 $15.74
INCOME FROM INVESTMENT OPERATIONS
Net investment loss (.15)(a) (.09)(a) (.07)(a) (.14) (.11)
Net realized and unrealized gain on
investments and foreign currency
transactions 1.05 1.44 2.38 .05 2.84
Net increase (decrease) in net asset
value from operations .90 1.35 2.31 (.09) 2.73
LESS: DISTRIBUTIONS
Distributions from net realized gains
on investments and foreign currency
transactions (1.21) (1.08) (1.05) (1.62) (.56)
Net asset value, end of year $17.42 $17.73 $17.46 $16.20 $17.91
TOTAL RETURN
Total investment return(b) 5.85% 8.42% 14.85% (.22)% 17.72%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000's omitted) $20,428 $23,268 $26,965 $19,395 $13,503
Ratios to average net assets of:
Expenses, net of waivers 2.48% 2.56% 2.53% 2.54% 2.78%
Expenses, before waivers 2.63% 2.58%(c) 2.53% 2.54% 2.78%
Ratio of net investment loss to
average net assets (.90)% (.51)% (.47)% (.88)% (1.12)%
Portfolio turnover rate 121% 94% 78% 119% 97%
</TABLE>
See footnote summary on page 21.
20
ALLIANCE INTERNATIONAL FUND
_______________________________________________________________________________
SELECTED DATA FOR A SHARE OF BENEFICIAL INTEREST OUTSTANDING THROUGHOUT EACH
PERIOD
ADVISOR CLASS
--------------------------
OCTOBER 2,
YEAR ENDED 1996(D)
JUNE 30, TO
1998 JUNE 30, 1997
---------- --------------
Net asset value, beginning of period $18.67 $17.96
INCOME FROM INVESTMENT OPERATIONS
Net investment income(a) .02 .16
Net realized and unrealized gain on investments
and foreign currency transactions 1.13 1.78
Net increase in net asset value from
operations 1.15 1.94
LESS: DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (.07) (.15)
Distributions from net realized gains on
investments and foreign currency transactions (1.21) (1.08)
Total dividends and distributions (1.28) (1.23)
Net asset value, end of period $18.54 $18.67
TOTAL RETURN
Total investment return based on net asset value(b) 6.98% 11.57%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted) $47,154 $8,697
Ratios to average net assets of:
Expenses, net of waivers 1.47% 1.69%(e)
Expenses, before waivers 1.62% 1.69%(c)(e)
Ratio of net investment income to average net assets .13% 1.47%
Portfolio turnover rate 121% 94%
(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 year ended June 30, 1997, the net expense ratio was
1.73%, 2.58%, 2.56% and 1.69% for Class A, B, C and Advisor Class shares,
respectively.
(d) Commencement of distribution.
(e) Annualized.
21
REPORT OF ERNST & YOUNG LLP
INDEPENDENT AUDITORS ALLIANCE INTERNATIONAL FUND
_______________________________________________________________________________
TO THE SHAREHOLDERS AND BOARD OF TRUSTEES ALLIANCE INTERNATIONAL FUND
We have audited the accompanying statement of assets and liabilities of
Alliance International Fund, including the portfolio of investments, as of June
30, 1998, 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 generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of June
30, 1998, by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Alliance International Fund at June 30, 1998, 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 generally accepted accounting principles.
New York, New York
August 7, 1998
TAX INFORMATION (UNAUDITED)
_______________________________________________________________________________
In order to meet certain requirements of the Internal Revenue Code we are
advising you that $3,412,498 and $6,496,032 of the capital gain distributions
paid by the fund during the fiscal year June 30, 1998 are subject to maximum
tax rates of 28% and 20% respectively.
In addition, the Fund intends to make an election under Internal Revenue Code
Section 853 to pass through foreign taxes paid by the Fund to its shareholders.
The total amount of foreign taxes that may be passed through to the
shareholders for the fiscal year ended June 30, 1998 is $519,257. The foreign
source income for information reporting purposes in $3,029,126.
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 1999.
22
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_______________________________________________________________
APPENDIX A: Futures Contracts and Options on
Futures Contracts and Foreign
Currencies
_______________________________________________________________
Futures Contracts
The Fund may enter into financial futures contracts,
including contracts for the purchase or sale for future delivery
of foreign currencies and futures contracts based on stock
indices. U.S. futures contracts have been designed by exchanges
which have been designated "contracts markets" by the Commodity
Futures Trading Commission ("CFTC"), and must be executed through
a futures commission merchant, or brokerage firm, which is a
member of the relevant contract market. Futures contracts trade
on a number of exchange markets, and, through their clearing
corporations, the exchanges guarantee performance of the
contracts as between the clearing members of the exchange.
At the same time a futures contract is purchased or
sold, the Fund must allocate cash or securities as a deposit
payment ("initial deposit"). It is expected that the initial
deposit would be approximately 1/2%-5% of a contract's face
value. Daily thereafter, the futures contract is valued and the
payment of "variation margin" may be required, since each day the
Fund would provide or receive cash that reflects any decline or
increase in the contract's value.
At the time of delivery of securities pursuant to such a
contract, adjustments are made to recognize differences in value
arising from the delivery of securities with a different interest
rate from that specified in the contract. In some (but not many)
cases, securities called for by a futures contract may not have
been issued when the contract was written.
Although futures contracts by their terms call for the
actual delivery or acquisition of securities, in most cases the
contractual obligation is fulfilled before the date of the
contract without having to make or take delivery of the
securities. The offsetting of a contractual obligation is
accomplished by buying (or selling, as the case may be) on a
commodities exchange an identical futures contract calling for
delivery in the same month. Such a transaction, which is
effected through a member of an exchange, cancels the obligation
to make or take delivery of the securities. Since all
transactions in the futures market are made, offset or fulfilled
through a clearinghouse associated with the exchange on which the
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contracts are traded, the Fund will incur brokerage fees when it
purchases or sells futures contracts.
The ordinary spreads between prices in the cash and
futures markets, due to differences in the nature of those
markets, are subject to distortions. First, all participants in
the futures market are subject to initial deposit and variation
margin requirements. Rather than meeting additional variation
margin requirements, investors may close futures contracts
through offsetting transactions which could distort the normal
relationship between the cash and futures markets. Second, the
liquidity of the futures market depends on participants entering
into offsetting transactions rather than making or taking
delivery. To the extent participants decide to make or take
delivery, liquidity in the futures market could be reduced, thus
producing distortion. Third, from the point of view of
speculators, the margin deposit requirements in the futures
market are less onerous than margin requirements in the
securities market. Therefore, increased participation by
speculators in the futures market may cause temporary price
distortions. Due to the possibility of distortion, a correct
forecast of general interest rate trends by the Adviser may still
not result in a successful transaction.
In addition, futures contracts entail risks. Although
the Fund believes that use of such contracts will benefit the
Fund, if the Adviser's investment judgment is incorrect about the
general direction of a stock market index for example, the Fund's
overall performance would be poorer than if it had not entered
into any such contract. For example, if the Fund has hedged
against the possibility of a bear market in equities in a
particular country that would adversely affect the price of
equities held in its portfolio and there is a bull market
instead, the Fund will lose part or all of the benefit of the
increased value of the equities that it has hedged because it
will have offsetting losses in its futures positions. In
addition, in such situations, if the Fund has insufficient cash,
it may have to sell equities from its portfolio to meet daily
variation margin requirements. Such sales may be, but will not
necessarily be, at increased prices which reflect the rising
market. The Fund may have to sell securities at a time when it
may be disadvantageous to do so.
Options On Futures Contracts
The Fund intends to purchase and write options on
futures contracts. The purchase of a call option on a futures
contract is similar in some respects to the purchase of a call
option on an individual security. Depending on the pricing of
the option compared to either the price of the futures contract
upon which it is based or the price of the underlying securities,
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it may or may not be less risky than ownership of the futures
contract or underlying securities.
The writing of a call option on a futures contract
constitutes a partial hedge against declining prices of the
security or foreign currency which is deliverable upon exercise
of the futures contract. If the futures price at expiration of
the option is below the exercise price, the Fund will retain the
full amount of the option premium which provides a partial hedge
against any decline that may have occurred in the Fund's
portfolio holdings. The writing of a put option on a futures
contract constitutes a partial hedge against increasing prices of
the security or foreign currency which is deliverable upon
exercise of the futures contract. If the futures price at
expiration of the option is higher than the exercise price, the
Fund will retain the full amount of the option premium which
provides a partial hedge against any increase in the price of
securities which the Fund intends to purchase. If a put or call
option the Fund has written is exercised, the Fund will incur a
loss which will be reduced by the amount of the premium it
receives. Depending on the degree of correlation between changes
in the value of its portfolio securities and changes in the value
of its futures positions, the Fund's losses from existing options
on futures may to some extent be reduced or increased by changes
in the value of portfolio securities.
The purchase of a put option on a futures contract is
similar in some respects to the purchase of protective put
options on portfolio securities. For example, the Fund may
purchase a put option on a futures contract to hedge the Fund's
portfolio against the risk of a general market decline.
The amount of risk the Fund assumes when it purchases an
option on a futures contract is the premium paid for the option
plus related transaction costs. In addition to the correlation
risks discussed above, the purchase of an option also entails the
risk that changes in the value of the underlying futures contract
will not be fully reflected in the value of the option purchased.
Options On Foreign Currencies
The Fund may purchase and write options on foreign
currencies in a manner similar to that in which futures contracts
on foreign currencies, or forward contracts, will be utilized.
For example, a decline in the dollar value of a foreign currency
in which portfolio securities are denominated will reduce the
dollar value of such securities, even if their value in the
foreign currency remains constant. In order to protect against
such diminutions in the value of portfolio securities, the Fund
may purchase put options on the foreign currency. If the value
of the currency does decline, the Fund will have the right to
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sell such currency for a fixed amount in dollars and will thereby
offset, in whole or in part, the adverse effect on its portfolio
which otherwise would have resulted.
Conversely, where a rise in the dollar value of a
currency in which securities to be acquired are denominated is
projected, thereby increasing the cost of such securities, the
Fund may purchase call options thereon. The purchase of such
options could offset, at least partially, the effects of the
adverse movements in exchange rates. As in the case of other
types of options, however, the benefit to the Fund deriving from
purchases of foreign currency options will be reduced by the
amount of the premium and related transaction costs. In
addition, where currency exchange rates do not move in the
direction or to the extent anticipated, the Fund could sustain
losses on transactions in foreign currency options which would
require it to forego a portion or all of the benefits of
advantageous changes in such rates.
The Fund may also write options on foreign currencies
for the same purposes. For example, where the Fund anticipates a
decline in the dollar value of foreign currency denominated
securities due to adverse fluctuations in exchange rates it
could, instead of purchasing a put option, write a call option on
the relevant currency. If the expected decline occurs, the
option will most likely not be exercised, and the diminution in
value of portfolio securities will be offset by the amount of the
premium received.
Similarly, instead of purchasing a call option to hedge
against an anticipated increase in the dollar cost of securities
to be acquired, the Fund could write a put option on the relevant
currency which, if rates move in the manner projected, will
expire unexercised and allow the Fund to hedge such increased
cost up to the amount of the premium. As in the case of other
types of options, however, the writing of a foreign currency
option will constitute only a partial hedge up to the amount of
the premium, and only if rates move in the expected direction. If
this does not occur, the option may be exercised and the Fund
would be required to purchase or sell the underlying currency at
a loss which may not be offset by the amount of the premium.
Through the writing of options on foreign currencies, the Fund
also may be required to forego all or a portion of the benefits
which might otherwise have been obtained from favorable movements
in exchange rates.
The Fund intends to write covered call options on
foreign currencies. A call option written on a foreign currency
by the Fund is "covered" if the Fund owns the underlying foreign
currency covered by the call or has an absolute and immediate
right to acquire that foreign currency without additional cash
A-4
<PAGE>
consideration (or for additional cash consideration held in a
segregated account by its Custodian) upon conversion or exchange
of other foreign currency held in its portfolio. A call option
is also covered if the Fund has a call on the same foreign
currency and in the same principal amount as the call written
where the exercise price of the call held (a) is equal to or less
than the exercise price of the call written or (b) is greater
than the exercise price of the call written if the difference is
maintained by the Fund in cash, U.S. Government Securities or
other appropriate liquid securities in a segregated account with
its Custodian.
The Fund also intends to write call options on foreign
currencies that are not covered for cross-hedging purposes. A
call option on a foreign currency is for cross- hedging purposes
if it is not covered, but is designed to provide a hedge against
a decline in the U.S. dollar value of a security which the Fund
owns or has the right to acquire and which is denominated in the
currency underlying the option due to an adverse change in the
exchange rate. In such circumstances, the Fund collateralizes
the option by maintaining in a segregated account with the Fund's
Custodian, cash or U.S. government securities or other
appropriate liquid securities in an amount not less than the
value of the underlying foreign currency in U.S. dollars marked
to market daily.
Additional Risks Of Options On Futures Contracts, Forward
Contracts and Options on Foreign Currencies
Unlike transactions entered into by the Fund in futures
contracts, options on foreign currencies and forward contracts
are not traded on contract markets regulated by the CFTC or (with
the exception of certain foreign currency options) by the
Commission. To the contrary, such instruments are traded through
financial institutions acting as market-makers, although foreign
currency options are also traded on certain national securities
exchanges, such as the Philadelphia Stock Exchange and the
Chicago Board Options Exchange, subject to regulation by the
Commission. Similarly, options on currencies may be traded over-
the-counter. In an over-the-counter trading environment, many of
the protections afforded to exchange participants will not be
available. For example, there are no daily price fluctuation
limits, and adverse market movements could therefore continue to
an unlimited extent over a period of time. Although the
purchaser of an option cannot lose more than the amount of the
premium plus related transaction costs, this entire amount could
be lost. Moreover, the option writer and a trader of forward
contracts could lose amounts substantially in excess of their
initial investments, due to the margin and collateral
requirements associated with such positions.
A-5
<PAGE>
Options on foreign currencies traded on national
securities exchanges are within the jurisdiction of the
Commission, as are other securities traded on such exchanges. As
a result, many of the protections provided to traders on
organized exchanges will be available with respect to such
transactions. In particular, all foreign currency option
positions entered into on a national securities exchange are
cleared and guaranteed by the Options Clearing Corporation
("OCC"), thereby reducing the risk of counterparty default.
Further, a liquid secondary market in options traded on a
national securities exchange may be more readily available than
in the over-the-counter market, potentially permitting the Fund
to liquidate open positions at a profit prior to exercise or
expiration, or to limit losses in the event of adverse market
movements.
The purchase and sale of exchange-traded foreign
currency options, however, is subject to the risks of the
availability of a liquid secondary market described above, as
well as the risks regarding adverse market movements, margining
of options written, the nature of the foreign currency market,
possible intervention by governmental authorities and the effects
of other political and economic events. In addition, exchange-
traded options on foreign currencies involve certain risks not
presented by the over-the-counter market. For example, exercise
and settlement of such options must be made exclusively through
the OCC, which has established banking relationships in
applicable foreign countries for this purpose. As a result, the
OCC may, if it determines that foreign governmental restrictions
or taxes would prevent the orderly settlement of foreign currency
option exercises, or would result in undue burdens on the OCC or
its clearing member, impose special procedures on exercise and
settlement, such as technical changes in the mechanics of
delivery of currency, the fixing of dollar settlement prices or
prohibitions on exercise.
In addition, futures contracts, options on futures
contracts, forward contracts and options on foreign currencies
may be traded on foreign exchanges. Such transactions are
subject to the risk of governmental actions affecting trading in
or the prices of foreign currencies or securities. The value of
such positions also could be adversely affected by (i) other
complex foreign political and economic factors, (ii) lesser
availability than in the United States of data, on which to make
trading decisions, (iii) delays in the Fund's ability to act upon
economic events occurring in foreign markets during nonbusiness
hours in the United States, (iv) the imposition of different
exercise and settlement terms and procedures and margin
requirements than in the United States, and (v) lesser trading
volume.
A-6
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_____________________________________________________________
APPENDIX B: ADDITIONAL INFORMATION ABOUT JAPAN
_____________________________________________________________
The information in this section is based on material
obtained by the Fund from various Japanese governmental and other
sources believed to be accurate but has not been independently
verified by the Fund or the Adviser. It is not intended to be a
complete description of Japan, its economy or the consequences of
investing in Japanese securities.
Japan, located in eastern Asia, consists of four main
islands: Hokkaido, Honshu, Kyushu and Shikoku, and many small
islands. Its population is approximately 126 million.
GOVERNMENT
The government of Japan is a representative democracy
whose principal executive is the Prime Minister. Japan's
legislature (known as the Diet) consists of two houses, the House
of Representatives (the lower house) and the House of Councillors
(the upper house).
POLITICS
From 1955 to 1993, Japan's government was controlled by
the Liberal Democratic Party (the "LDP"), the major conservative
party. In August 1993, after a main faction left the LDP over
the issue of political reform, a non-LDP coalition government was
formed consisting of centrist and leftist parties and was headed
by Prime Minister Morihiro Hosokawa. In April 1994, Mr. Hosokawa
resigned due to allegations of personal financial irregularities.
The coalition members thereafter agreed to choose as prime
minister the foreign minister, Tsutomu Hata. As a result of the
formation of a center-right voting bloc, however, the Japan
Socialist Party (the "JSP"), a leftist party, withdrew from the
coalition. Consequently, Mr. Hata's government was a minority
coalition, the first since 1955, and was therefore unstable. In
June 1994, Mr. Hata and his coalition were replaced by a new
coalition made up of the JSP (since renamed the "Social
Democratic Party (the "SDP")), the LDP and the small New Party
Sakigake (the "Sakigake"). This coalition, which surprised many
because of the historic rivalries between the LDP and the SDP,
was led by Tomiichi Murayama, the first Socialist prime minister
in 47 years. Mr. Murayama stepped down in January 1996 and was
succeeded as Prime Minister by Liberal Democrat Ryutaro
Hashimoto. By September 1996, when Prime Minister Hashimoto
called for a general election on October 20, 1996, the stability
of the SDP-LDP-Sakigake coalition had become threatened. Both
the SDP and the Sakigake had lost more than half their seats in
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the lower house of the Diet when a faction of the Sakigake split
off to form the Democratic Party of Japan. Their strength was
further diminished as a result of the October 20, 1996 general
election. Although the LDP was 12 seats short of winning a
majority in the election, it has been able to reduce the margin
to three seats and to achieve enough support from its two former
coalition parties, the SDP and the Sakigake, as well as
independents and other conservatives, to return Japan to a
single-party government for the first time since 1993. Mr.
Hashimoto was reappointed as Prime Minister on November 7, 1996.
The opposition is dominated by the New Frontier Party, which was
established in December 1994 by various opposition groups and
parties.
ECONOMY
The Japanese economy maintained an average annual growth
rate of 2.1% in real GDP terms from 1990 through 1994, compared
with 2.4% for the United States during the same period. In 1995
and 1996, Japan's real GDP growth was 1.4% and 3.6%,
respectively. A growth rate of approximately 2.0% has been
forecast for 1997; however, in September 1997 the government
announced that GDP shrank by 2.9% in the second quarter, the
largest quarterly drop in 25 years, causing the forecast to drop
to 1.1%. Inflation has remained low, 1.3% in 1993, 0.7% in 1994,
- -0.1% in 1995 and 0.1% in 1996. It is estimated that inflation
in 1997 will be about 1%. As a result of the growing economy and
low inflation, private consumer demand has grown strongly but
will be affected by higher consumer taxes that went into effect
in 1997. Unemployment is still at its highest level in forty
years and is not expected to fall appreciably in the foreseeable
future. In addition, employment has been shifting from the
manufacturing sector to the service sector, a trend that was
expected to continue in 1997.
Japan's post World War II reliance on heavy industries
has shifted to higher technology products assembly and, most
recently, to automobile, electrical and electronic production.
Japan's success in exporting its products has generated sizable
trade surpluses. Japan is in a difficult phase in its relations
with its trading partners that is partly due to the concentration
of Japanese exports in products such as automobiles, machine
tools and semiconductors and the large trade surpluses ensuing
therefrom, recent large and visible Japanese real estate
investments in the United States and an overall trade imbalance
as indicated by Japan's balance of payments. Although it is
probable that the recent improvement of the United States economy
and an increased competitiveness and success in manufacturing,
such as with the U.S. automobile industry, has had a negative
effect on Japan's growth, Japan's overall trade surplus for 1994
was the largest in its history, amounting to almost $145 billion.
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Exports totaled $386 billion, up 9.3% from 1993, and imports were
$242 billion, up 13.6% from 1993. The current account surplus in
1994 was $130 billion, down 1.5% from from a record high in 1993.
In 1995, Japan's overall trade surplus amounted to $132 billion.
Exports totaled $429 billion, up 10.0% from 1994, and imports
were $297 billion, up 22.8% from 1994. In 1995, the current
account surplus decreased 14.6% to $111 billion. In 1996,
Japan's overall trade surplus amounted to $83 billion, exports
totaled $400 billion, down 6.8% from 1995, and imports totaled
$317 billion, up 6.7% from 1995. During the first nine months of
1997, the trade surplus, which had been declining since its 1994
high, reversed course and increased approximately 37% from the
same period in 1996. This upward trend of the trade surplus is
expected to continue in the near future. Japan remains the
largest creditor nation and a significant donor of foreign aid.
On October 1, 1994, the U.S. and Japan reached an
agreement that may lead to more open Japanese markets with
respect to insurance, glass and medical and telecommunications
equipment. In June 1995, the two countries agreed in principal
to increase Japanese imports of American automobiles and
automotive parts. The final wording of the agreement is
ambiguous, and therefore it is likely that this issue will
continue to be a source of tension between the two countries.
Other current sources of tension between the two countries, are
disputes in connection with trade in semiconductors and
photographic supplies, deregulation of the Japanese insurance
market, a dispute over aviation rights and access to Japanese
ports. It is expected that the friction between the United
States and Japan with respect to trade issues will continue for
the foreseeable future.
In response to pressures caused by the slumping Japanese
economy, the fragile financial markets and the appreciating Yen,
the Japanese government, in April and June 1995, announced
emergency economic packages that focused on higher and
accelerated public works spending and increased aid for post-
earthquake reconstruction in the Kobe area. These measures
helped to increase public investment and lead to faster GDP
growth, but failed to produce fundamental changes.
In addition to the government's emergency economic
packages announced in 1995, the Bank of Japan attempted to assist
the financial markets by lowering its official discount rate to a
record low in 1995. However, large amounts of bad debt have
prevented banks from expanding their loan portfolios despite low
discount rates. Japanese banks have suffered several years of
declining profits and many banks have required public funds to
avert insolvency. In June 1995, the Finance Ministry announced
an expansion of deposit insurance and restrictions on rescuing
insolvent banks. In June 1996, six bills designed to address the
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large amount of bad debt in the banking system were passed by the
Diet. By March 1997, the Finance Ministry estimated that the
extent of non-performing debt at all financial institutions had
declined 19.8% from its estimate a year earlier. Nevertheless,
the financial system's fragility is expected to continue for the
foreseeable future.
In November 1996, Prime Minister Hashimoto announced a
set of initiatives to deregulate the financial sector by the year
2001. Known as "Tokyo's Big Bang," the proposed reforms include
changes in tax laws to favor investors, the lowering of barriers
between banking, securities and insurance, abolition of foreign
exchange restrictions and other measures designed to revive
Tokyo's status in the international capital markets and to
stimulate the economy. In June 1997, the government announced a
detailed blueprint for implementing the Big Bang. Legislation to
implement certain reforms has already been approved. These
include a liberalization of foreign exchange restrictions and a
repeal of the ban on holding companies.
A growing budget deficit and the threat of a budget
crisis have resulted in a tightening of fiscal policy. In March
1997, Prime Minister Hashimoto announced the first detailed plan
for fiscal reform. The plan calls for the lowering of the budget
deficit to below 3% of GDP by Fiscal Year 2003/2004. In June
1997, specific proposals for spending cuts were approved by the
cabinet and a Fiscal Reform Law, incorporating the proposals into
binding targets, will be presented to the Diet late in 1997.
Measures to control and reduce the budget deficit mitigate
against the government utilizing a direct fiscal stimulus package
to stimulate the economy. Instead, the emphasis will remain on
monetary policy to stimulate the economy.
Between 1985 and 1995, the Japanese Yen generally
appreciated against the U.S. Dollar. Between 1990 and 1994 the
Yen's real effective exchange rate appreciated by approximately
36%. On April 19, 1995, the Japanese Yen reached an all time
high of 79.75 against the U.S. Dollar. Since its peak of April
19, 1995, the Yen has generally decreased in value against the
U.S. Dollar. On April 30, 1997, the exchange rate reached a low
of 127.03 Yen per U.S. Dollar, the lowest the exchange rate had
been in almost five years. On September 30, 1997, the exchange
rate was 120.50 Yen per U.S. Dollar.
JAPANESE STOCK EXCHANGES. Currently, there are eight
stock exchanges in Japan. The Tokyo Stock Exchange (the "TSE"),
the Osaka Securities Exchange and the Nagoya Stock Exchange are
the largest, together accounting for approximately 98.9% of the
share trading volume and for about 98.8% of the overall trading
value of all shares traded on Japanese stock exchanges during the
year ended December 31, 1996. The other stock exchanges are
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located in Kyoto, Hiroshima, Fukuoka, Niigata and Sapporo. The
chart below presents annual share trading volume (in millions of
shares) and overall year-end market value (in billions of yen)
information with respect to each of the three major Japanese
stock exchanges for the years 1989 through 1996. Trading volume
and the value of foreign stocks are not included.
All Exchanges TOKYO OSAKA NAGOYA
VOLUME VALUE VOLUME VALUE VOLUME VALUE VOLUME VALUE
________ ______ _____ _____ ______ _____ ______ _____
1989 256,296 386,395 222,599 332,617 25,096 41,679 7,263 10,395
1990 145,837 231,837 123,099 186,667 17,187 35,813 4,323 7,301
1991 107,844 134,160 93,606 110,897 10,998 18,723 2,479 3,586
1992 82,563 80,456 66,408 60,110 12,069 15,575 3,300 3,876
1993 101,173 106,123 86,935 86,889 10,440 14,635 2,780 3,459
1994 105,937 114,622 84,514 87,356 14,904 19,349 4,720 5,780
1995 120,149 115,840 92,034 83,564 21,094 24,719 5,060 5,462
1996 126,496 136,170 101,170 101,893 20,783 27,280 4,104 5,391
Source: The Tokyo Stock Exchange 1994, 1995, 1996 and 1997 Fact
Books.
THE TOKYO STOCK EXCHANGE
OVERVIEW OF THE TOKYO STOCK EXCHANGE. The TSE is the
largest of the Japanese stock exchanges and as such is widely
regarded as the principal securities exchange for all of Japan.
In 1996, the TSE accounted for 74.8% of the market value and
79.2% of the share trading volume on all Japanese stock
exchanges. A foreign stock section on the TSE, consisting of
shares of non-Japanese companies, listed 67 non-Japanese
companies at the end of 1996. The market for stock of Japanese
issuers on the TSE is divided into a First Section and a Second
Section. The First Section is generally for larger, established
companies (in existence for five years or more) that meet listing
criteria relating to the size and business condition of the
issuing company, the liquidity of its securities and other
factors pertinent to investor protection. The TSE's Second
Section is for smaller companies and newly listed issuers.
SECTOR ANALYSIS OF THE FIRST AND SECOND SECTIONS. The
TSE's domestic stocks include a broad cross-section of companies
involved in many different areas of the Japanese economy. At the
end of 1996, the three largest industry sectors, based on market
value, listed on the first section of the TSE were banking, with
100 companies representing 20.0% of all domestic stocks listed on
the TSE; electric appliances, with 129 companies representing
12.5% of all domestic stocks so listed; and transportation
equipment with 60 companies representing 9.6% of all domestic
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stocks so listed. No other industry sector represented more than
5% of TSE listed domestic stocks.
MARKET GROWTH OF THE TSE. The First and Second Sections
of the TSE grew in terms of both average daily trading value and
aggregate year-end market value from 1982, when they were l28,320
million yen and 98,090 billion yen, respectively, through the end
of 1989, when they were 1,335,810 million yen and 611,152 billion
yen, respectively. Following the peak in 1989, both average
daily trading value and aggregate year-end market value declined
through 1992 when they were 243,362 million yen and 289,483
billion yen, respectively. In 1993 and 1994, both average daily
trading value and aggregate year-end market value increased and
were 353,208 and 353,666 million yen, respectively, and 324,357
and 358,392 billion yen, respectively. In 1995, average daily
trading value decreased to 335,598 million yen and aggregate
year-end market value increased to 365,716 billion yen. In 1996,
average daily trading volume increased to 412,521 million yen and
aggregate year-end market value decreased to 347,578 billion yen.
MARKET PERFORMANCE OF THE FIRST SECTION. As measured by
the TOPIX, a capitalization-weighted composite index of all
common stocks listed in the First Section, the performance of the
First Section reached a peak of 2,884.80 on December 18, 1989.
Thereafter, the TOPIX declined approximately 45% through
December 29, 1995. On December 30, 1996 the TOPIX closed at
1,470.94, down approximately 7% from the end of 1995. On
September 30, 1997, the TOPIX closed at 1,388.32, down
approximately 6% from the end of 1996. The price/earnings ratios
of First Section companies are on average high in comparison with
other major stock markets.
JAPANESE FOREIGN EXCHANGE CONTROLS
Under Japan's Foreign Exchange and Foreign Trade Control
Law and cabinet orders and ministerial ordinances thereunder (the
"Foreign Exchange Controls"), prior notification to the Minister
of Finance of Japan (the "Minister of Finance") of the
acquisition of shares in a Japanese company from a resident of
Japan (including a corporation) by a non-resident of Japan
(including a corporation) is required unless the acquisition is
made from or through a securities company designated by the
Minister of Finance or if the yen equivalent of the aggregate
purchase price of shares is not more than 100 million Yen. Even
in these situations, if a foreign investor intends to acquire
shares of a Japanese corporation listed on a Japanese stock
exchange or traded on a Japanese over-the-counter market
(regardless of the person from or through whom the foreign
investor acquires such shares) and as a result of the acquisition
the foreign investor would directly or indirectly hold 10% or
more of the total outstanding shares of that corporation, the
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foreign investor must file a report within 15 days from the day
of such acquisition with the Minister of Finance and any other
minister with proper jurisdiction. In instances where the
acquisition concerns national security or meets certain other
conditions specified in the Foreign Exchange Controls, the
foreign investor must file a prior notification with respect to
the proposed acquisition with the Minister of Finance and any
other minister with proper jurisdiction. The ministers may make
a recommendation to modify or prohibit the proposed acquisition
if they consider that the acquisition would impair the safety and
maintenance of public order in Japan or harmfully influence the
smooth operation of the Japanese economy. If the foreign
investor does not accept the recommendation, the ministers may
issue an order modifying or prohibiting the acquisition. In
certain limited and exceptional circumstances, the Foreign
Exchange Controls give the Minister of Finance the power to
require prior approval for any acquisition of shares in a
Japanese company by a non-resident of Japan.
In general, the acquisition of shares by non-resident
shareholders by way of stock splits, as well as the acquisition
of shares of a Japanese company listed on a Japanese stock
exchange by non-residents upon exercise of warrants or conversion
of convertible bonds, are not subject to any of the foregoing
notification or reporting requirements. Under the Foreign
Exchange Controls, dividends paid on share, held by non-residents
of Japan and the proceeds of any sales of shares within Japan
may, in general, be converted into any foreign currency and
remitted abroad.
Certain provisions of the Foreign Exchange Controls are
scheduled to be repealed or liberalized beginning in April 1998,
pursuant to legislation that was approved in May 1997 as part of
the plan to implement the Big Bang.
REGULATION OF THE JAPANESE EQUITIES MARKETS
The principal securities law in Japan is the Securities
and Exchange Law ("SEL") which provides overall regulation for
the issuance of securities in public offerings and private
placements and for secondary market trading. The SEL was amended
in 1988 in order to liberalize the securities market; to regulate
the securities futures, index, and option trade; to add
disclosure regulations; and to reinforce the prevention of
insider trading. Insider trading provisions are applicable to
debt and equity securities listed on a Japanese stock exchange
and to unlisted debt and equity securities issued by a Japanese
corporation that has securities listed on a Japanese stock
exchange or registered with the Securities Dealers Association
(the "SDA"). In addition, each of the eight stock exchanges in
Japan has its own constitution, regulations governing the sale
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and purchase of securities and standing rules for exchange
contracts for the purchase and sale of securities on the
exchange, as well as detained rules and regulations covering a
variety of matters, including rules and standards for listing and
delisting of securities.
The loss compensation incidents involving preferential
treatment of certain customers by certain Japanese securities
companies, which came to light in 1991, provided the impetus for
amendments to the SEL, which took effect in 1992, as well as two
reform bills passed by the Diet in 1992. The amended SEL now
prohibits securities companies from the operation of
discretionary accounts, loss compensation or provision of
artificial gains in securities transactions, directly or
indirectly, to their customers and making offers or agreements
with respect thereto. Despite these amendments, there have been
certain incidents involving loss compensation. To ensure that
securities are traded at their fair value, the SDA and the TSE
have promulgated certain rules, effective in 1992, which, among
other things, explicitly prohibit any transaction undertaken with
the intent to provide loss compensation of illegal gains
regardless of whether the transaction otherwise technically
complies with the rules. The reform bill passed by the Diet,
which took effect in 1992 and 1993, provides for the
establishment of a new Japanese securities regulator and for a
variety of reforms designed to revitalize the Japanese financial
and capital markets by permitting banks and securities companies
to compete in each other's field of business, subject to various
regulations and restrictions.
Further reforms in the regulation of the securities
markets are anticipated over the next several years as the Big
Bang is implemented.
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____________________________________________________________
APPENDIX C:
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
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by Merrill Lynch as of the date the plan
becomes an Active Plan.
For purposes of applying (a) and (b), there
are to be aggregated all assets of any Tax-
Qualified Plan maintained by the sponsor of
the Merrill Lynch Plan (or any of the
sponsor's affiliates) (determined to be such
by Merrill Lynch) which are being invested
in shares of or interests in MLAM Funds,
Alliance Mutual Funds or other mutual funds
made available pursuant to an agreement
between Merrill Lynch and the principal
underwriter thereof (or one of its
affiliates) and which are being held in a
Merrill Lynch account.
(ii) Plans for which the recordkeeper is not Merrill Lynch,
but which are recordkept on a daily valuation basis by
a recordkeeper with which Merrill Lynch has a
subcontracting or other alliance arrangement for the
performance of recordkeeping services, if the plan is
determined by Merrill Lynch to be so eligible and the
assets of the plan are less than $3 million.
Class B shares of the Fund held by any of the
above-described Merrill Lynch Plans are to be replaced at
Merrill Lynch's direction through conversion, exchange or
otherwise by Class A shares of the Fund on the earlier of
the date that the value of the plan's aggregate assets first
equals or exceeds $5 million or the date on which any Class
B share of the Fund held by the plan would convert to a
Class A share of the Fund as described under "Purchase of
Shares" and "Redemption and Repurchase of Shares."
Any Tax Qualified Plan, including any Merrill Lynch
Plan, which does not purchase Class B shares of the Fund
without being subject to a contingent deferred sales charge
under the above criteria is eligible to purchase Class B
shares subject to a contingent deferred sales charge as well
as other classes of shares of the Fund as set forth above
under "Purchase of Shares" and "Redemption and Repurchase of
Shares.
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PART C
OTHER INFORMATION
ITEM 24. Financial Statements and Exhibits
(a) Financial Statements
Included in the Prospectus:
Financial Highlights
Included in the Statement of Additional Information:
Portfolio of Investments - June 30, 1998
Statement of Assets and Liabilities - June 30,
1998
Statement of Operations for the year ended
June 30, 1998
Statement of Changes in Net Assets - years ended
June 30, 1997 and June 30, 1998.
Notes to Financial Statements - June 30, 1998
Report of Independent Auditors
All other schedules are either omitted because they are not
required under the related instructions, they are inapplicable,
or the required information is presented in the financial
statements or notes which are included in the Statement of
Additional Information of the Registration Statement.
(b) Exhibits
(1) (a) First Amended and Restated Agreement and
Declaration of Trust of Registrant dated
December 13, 1990 - Incorporated by reference to
Exhibit 1 to Post-Effective Amendment No. 29 of
Registrant's Registration Statement on Form N-1A
(File Nos. 2-70428 and 811-3130) filed with the
Securities and Exchange Commission on October 31,
1997.
(b) Certificate of Amendment of Agreement and
Declaration of Trust of Registrant dated April 27,
1993 - Filed herewith.
(c) Certificate of Amendment of Agreement and
Declaration of Trust of Registrant dated
September 30, 1996 - Filed herewith.
(2) By-Laws of Registrant - Incorporated by reference to
Exhibit 2 to Post-Effective Amendment No. 29 of
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Registrant's Registration Statement on Form N-1A (File
Nos. 2-70428 and 811-3130) filed with the Securities
and Exchange Commission on October 31, 1997.
(3) Not applicable.
(4) Not applicable.
(5) Investment Advisory Agreement between the Registrant
and Alliance Capital Management L.P. - Incorporated by
reference to Exhibit 5 to Post-Effective Amendment
No. 29 of Registrant's Registration Statement on Form
N-1A (File Nos. 2-70428 and 811-3130) filed with the
Securities and Exchange Commission on October 31, 1997.
(6) (a) Distribution Services Agreement between the
Registrant and Alliance Fund Distributors, Inc. -
Filed herewith.
(b) Amendment to Distribution Services Agreement
between Registrant and Alliance Fund Distributors,
Inc. dated June 20, 1996 - Incorporated by
reference to Exhibit 6 to Post-Effective Amendment
No. 24 of Registrant's Registration Statement on
Form N-1A (File Nos. 2-70428 and 811-3130) filed
with the Securities and Exchange Commission on
October 1, 1996.
(c) Selected Dealer Agreement between Alliance Fund
Distributors, Inc. and selected dealers offering
shares of Registrant - Incorporated by reference
to Exhibit 6(b) to Post-Effective Amendment No. 29
of Registrant's Registration Statement on Form
N-1A (File Nos. 2-70428 and 811-3130) filed with
the Securities and Exchange Commission on
October 31, 1997.
(d) Selected Agent Agreement between Alliance Fund
Distributors, Inc. and selected agents making
available shares of Registrant - Incorporated by
reference to Exhibit 6(c) to Post-Effective
Amendment No. 29 of Registrant's Registration
Statement on Form N-1A (File Nos. 2-70428 and
811-3130) filed with the Securities and Exchange
Commission on October 31, 1997.
(7) Not applicable.
(8) Custodian Contract between the Registrant and Brown
Brothers Harriman & Co. - Filed herewith.
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(9) Transfer Agency Agreement between the Registrant and
Alliance Fund Services, Inc. - Filed herewith.
(10) Opinion and Consent of Seward & Kissel - Incorporated
by reference to Exhibit 10 to Post-Effective Amendment
No. 23 of Registrant's Registration Statement on Form
N-1A (File Nos. 2-70428 and 811-3130) filed with the
Securities and Exchange Commission on August 28, 1995.
(11) Consent of Independent Auditors - Filed herewith.
(12) Not applicable.
(13) Not applicable.
(14) Not applicable.
(15) Rule 12b-1 Plan - See Exhibit 6 hereto.
(16) Not applicable.
(17) Financial Data Schedule - Filed herewith.
(18) Rule 18f-3 Plan - Incorporated by reference to
Exhibit 18 to Post-Effective Amendment No. 26 of
Registrant's Registration Statement on Form N-1A (File
Nos. 2-70428 and 811-3130) filed with the Securities
and Exchange Commission on April 23, 1996.
Other Exhibits:
Powers of Attorney for John D. Carifa, David H. Dievler,
John H. Dobkin, W. H. Henderson, Stig Host and Alan Stoga - Filed
herewith.
ITEM 25. Persons Controlled by or under Common Control with
Registrant.
None.
ITEM 26. Number of Holders of Securities.
Not applicable.
ITEM 27. Indemnification.
It is the Registrant's policy to indemnify its trustees
and officers, employees and other agents as set forth
in Article VIII and Article III of Registrant's
Agreement and Declaration of Trust, filed as Exhibit 1
in response to Item 24 and Section 6 of the
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Distribution Agreement filed as Exhibit 6 in response
to Item 24, all as set forth below. The liability of
the Registrant's trustees and officers is dealt with in
Article VIII of Registrant's First Amended and Restated
Agreement and Declaration of Trust, as set forth below.
The Adviser's liability for loss suffered by the
Registrant or its shareholders is set forth in Section
4 of the Advisory Agreement filed as Exhibit 5 in
response to Item 24, as set forth below.
Article VIII of Registrant's First Amended and Restated
Agreement and Declaration of Trust reads as follows:
SECTION 8.1 Trustees, Shareholders, etc. Not Personally
Liable; Notice. The Trustees and officers of the
Trust, in incurring any debts, liabilities or
obligations, or in limiting or omitting any other
actions for or in connection with the Trust, are or
shall be deemed to be acting as Trustees or officers of
the Trust and not in their own capacities. No
Shareholder shall be subject to any personal liability
whatsoever in tort, contract or otherwise to any other
Person or Persons in connection with the assets or the
affairs of the Trust or of any Portfolio, and subject
to Section 8.4 hereof, no Trustee, officer, employee or
agent of the Trust shall be subject to any personal
liability whatsoever in tort, contract, or otherwise,
to any other Person or Persons in connection with the
assets or affairs of the Trust or of any Portfolio,
save only that arising from his own willful
misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of his
office or the discharge of his functions. The Trust
(or if the matter relates only to a particular
Portfolio, that Portfolio) shall be solely liable for
any and all debts, claims, demands, judgments, decrees,
liabilities or obligations of any and every kind,
against or with respect to the Trust or such Portfolio
in tort, contract or otherwise in connection with the
assets or the affairs of the Trust or such Portfolio,
and all Persons dealing with the Trust or any Portfolio
shall be deemed to have agreed that resort shall be had
solely to the Trust Property of the Trust or the
Portfolio Assets of such Portfolio, as the case may be,
for the payment or performance thereof.
The Trustees shall use their best efforts to ensure
that every note, bond, contract, instrument,
certificate or undertaking made or issued by the
Trustees or by any officers or officer shall give
notice that this Declaration of Trust is on file with
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the Secretary of The Commonwealth of Massachusetts and
shall recite to the effect that the same was executed
or made by or on behalf of the Trust or by them as
Trustees or Trustee or as officers or officer, and not
individually, and that the obligations of such
instrument are not binding upon any of them or the
Shareholders individually but are binding only upon the
assets and property of the Trust, or the particular
Portfolio in question, as the case may be, but the
omission thereof shall not operate to bind any Trustees
or Trustee or officers or officer or Shareholders or
Shareholder individually, or to subject the Portfolio
Assets of any Portfolio to the obligations of any other
Portfolio.
SECTION 8.2 Trustees' Good Faith Action; Expert
Advice; No Bond or Surety. The exercise by the
Trustees of their powers and discretions hereunder
shall be binding upon everyone interested. Subject to
Section 8.4 hereof, a Trustee shall be liable for his
own willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the
conduct of the office of Trustee, and for nothing else,
and shall not be liable for errors of judgment or
mistakes of fact or law. Subject to the foregoing,
(i) the Trustees shall not be responsible or liable in
any event for any neglect or wrongdoing of any officer,
agent, employee, consultant, Adviser, Administrator,
Distributor or Principal Underwriter, Custodian or
Transfer Agent, Dividend Disbursing Agent, Shareholder
Servicing Agent or Accounting Agent of the Trust, nor
shall any Trustee be responsible for the act or
omission of any other Trustee; (ii) the Trustees may
take advice of counsel or other experts with respect to
the meaning and operation of this Declaration of Trust
and their duties as Trustees, and shall be under no
liability for any act or omission in accordance with
such advice or for failing to follow such advice; and
(iii) in discharging their duties, the Trustees, when
acting in good faith, shall be entitled to rely upon
the books of account of the Trust and upon written
reports made to the Trustees by any officer appointed
by them, any independent public accountant, and (with
respect to the subject matter of the contract involved)
any officer, partner or responsible employee of a
Contracting Party appointed by the Trustees pursuant to
Section 5.2 hereof. The Trustees as such shall not be
required to give any bond or surety or any other
security for the performance of their duties.
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SECTION 8.3 Indemnification of Shareholders. If any
Shareholder (or former Shareholder) of the Trust shall
be charged or held to be personally liable for any
obligation or liability of the Trust solely by reason
of being or having been a Shareholder and not because
of such Shareholder's acts or omissions or for some
other reason, the Trust (upon proper and timely request
by the Shareholder) shall assume the defense against
such charge and satisfy any judgment thereon, and the
Shareholder or former Shareholder (or the heirs,
executors, administrators or other legal
representatives thereof, or in the case of a
corporation or other entity, its corporate or other
general successor) shall be entitled (but solely out of
the assets of the Portfolio of which such Shareholder
or former Shareholder is or was the holder of Shares)
to be held harmless from and indemnified against all
loss and expense arising from such liability.
SECTION 8.4 Indemnification of Trustees, Officers, etc.
Subject to the limitations set forth hereinafter in
this Section 8.4, the Trust shall indemnify (from the
assets of the Portfolio or Portfolios to which the
conduct in question relates) each of its Trustees and
officers (including Persons who serve at the Trust's
request as directors, officers or trustees of another
organization in which the Trust has any interest as a
shareholder, creditor or otherwise [hereinafter,
together with such Person's heirs, executors,
administrators or personal representative, referred to
as a "Covered Person"]) against all liabilities,
including but not limited to amounts paid in
satisfaction of judgments, in compromise or as fines
and penalties, and expenses, including reasonable
accountants' and counsel fees, incurred by any Covered
Person in connection with the defense or disposition of
any action, suit or other proceeding, whether civil or
criminal, before any court or administrative or
legislative body, in which such Covered Person may be
or may have been involved as a party or otherwise or
with which such Covered Person may be or may have been
threatened, while in office or thereafter, by reason of
being or having been such a Trustee or officer,
director or trustee, except with respect to any matter
as to which it has been determined that such Covered
Person (i) did not act in good faith in the reasonable
belief that such Covered Person's action was in or not
opposed to the best interests of the Trust or (ii) had
acted with willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved
in the conduct of such Covered Person's office (either
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and both of the conduct described in (i) and (ii) being
referred to hereafter as "Disabling Conduct"). A
determination that the Covered Person is entitled to
indemnification may be made by (i) a final decision on
the merits by a court or other body before whom the
proceeding was brought that the Covered Person to be
indemnified was not liable by reason of Disabling
Conduct, (ii) dismissal of a court action or an
administrative proceeding against a Covered Person for
insufficiency of evidence of Disabling Conduct, or
(iii) a reasonable determination, based upon a review
of the facts, that the indemnitee was not liable by
reason of Disabling Conduct by (a) a vote of a majority
of a quorum of Trustees who are neither "interested
persons" of the Trust as defined in Section 2(a)(19) of
the 1940 Act nor parties to the proceeding, or (b) an
independent legal counsel in a written opinion.
Expenses, including accountants' and counsel fees so
incurred by any such Covered Person (but excluding
amounts paid in satisfaction of judgments, in
compromise or as fines or penalties), may be paid from
time to time by the Portfolio or Portfolios to which
the conduct in question related in advance of the final
disposition of any such action, suit or proceeding;
provided, that the Covered Person shall have undertaken
to repay the amounts so paid to such Portfolio or
Portfolios if it is ultimately determined that
indemnification of such expenses is not authorized
under this Article VIII and (i) the Covered Person
shall have provided security for such undertaking,
(ii) the Trust shall be insured against losses arising
by reason of any lawful advances, or (iii) a majority
of a quorum of the disinterested Trustees, or an
independent legal counsel in a written opinion, shall
have determined, based on a review of readily available
facts (as opposed to a full trial-type inquiry), that
there is reason to believe that the Covered Person
ultimately will be found entitled to indemnification.
SECTION 8.5 Compromise Payment. As to any matter
disposed of by a compromise payment by any such Covered
Person referred to in Section 8.4 hereof, pursuant to a
consent decree or otherwise, no such indemnification
either for said payment or for any other expenses shall
be provided unless such indemnification shall be
approved (i) by a majority of a quorum of the
disinterested Trustees or (ii) by an independent legal
counsel in a written opinion. Approval by the Trustees
pursuant to clause (i) or by independent legal counsel
pursuant to clause (ii) shall not prevent the recovery
from any Covered Person of any amount paid to such
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Covered Person in accordance with either of such
clauses as indemnification if such Covered Person is
subsequently adjudicated by a court of competent
jurisdiction not to have acted in good faith in the
reasonable belief that such Covered Persons action was
in or not opposed to the best interests of the Trust or
to have been liable to the Trust or its Shareholders by
reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved
in the conduct of such Covered Persons office.
SECTION 8.6 Indemnification Not Exclusive, etc. The
right of indemnification provided by this Article VIII
shall not be exclusive of or affect any other rights to
which any such Covered Person may be entitled. As used
in this Article VIII, a "disinterested" Person is one
against whom none of the actions, suits or other
proceedings in question, and no other action, suit or
other proceeding on the same or similar grounds is then
or has been pending or threatened. Nothing contained
in this Article VIII shall affect any rights to
indemnification to which personnel of the Trust, other
than Trustees and officers, and other Persons may be
entitled by contract or otherwise under law, nor the
power of the Trust to purchase and maintain liability
insurance on behalf of any such Person.
SECTION 8.7 Liability of Third Persons Dealing with
Trustees. No person dealing with the Trustees shall be
bound to make any inquiry concerning the validity of
any transaction made or to be made by the Trustees or
to see to the application of any payments made or
property transferred to the Trust or upon its order.
Article III of Registrant's First Amended and Restated
Agreement and Declaration of Trust reads, in pertinent
part, as follows:
"Without limiting the foregoing and to the extent
not inconsistent with the 1940 Act or other
applicable law, the Trustees shall have power and
authority:
(s) Indemnification. In addition to the
mandatory indemnification provided for in
Article VIII hereof and to the extent
permitted by law, to indemnify or enter into
agreements with respect to indemnification
with any Person with whom this Trust has
dealings, including, without limitation, any
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independent contractor, to such extent as the
Trustees shall determine."
The Advisory Agreement between Registrant and Alliance
Capital Management L.P. provides that Alliance Capital
Management L.P. will not be liable under such agreement
for any mistake of judgment or in any event whatsoever
except for lack of good faith and that nothing therein
shall be deemed to protect, or purport to protect,
Alliance Capital Management L.P. against any liability
to Registrant or its security holders to which it would
otherwise be subject by reason of willful misfeasance,
bad faith or gross negligence in the performance of its
duties thereunder, or by reason of reckless disregard
of its obligations and duties thereunder.
The Distribution Services Agreement between the
Registrant and Alliance Fund Distributors, Inc.
provides that the Registrant will indemnify, defend and
hold Alliance Fund Distributors, Inc., and any person
who controls it within the meaning of Section 15 of the
Investment Company Act of 1940, free and harmless from
and against any and all claims, demands, liabilities
and expenses which Alliance Fund Distributors, Inc. or
any controlling person may incur arising out of or
based upon any alleged untrue statement of a material
fact contained in Registrant's Registration Statement
or Prospectus and Statement of Additional Information
or arising out of, or based upon any alleged omission
to state a material fact required to be stated in or
necessary to make the statements in either thereof any
one of the foregoing not misleading, provided that
nothing therein shall be so construed as to protect
Alliance Fund Distributors, Inc. against any liability
to Registrant or its security holders to which it would
otherwise be subject by reason of willful misfeasance,
bad faith or gross negligence in the performance of its
duties thereunder, or by reason of reckless disregard
of its obligations and duties thereunder.
The foregoing summaries are qualified by the entire
text of Registrant's First Amended and Restated
Agreement and Declaration of Trust, the Advisory
Agreement between Registrant and Alliance Capital
Management L.P. and the Distribution Services Agreement
between Registrant and Alliance Fund Distributors, Inc.
Insofar as indemnification for liabilities arising
under the Securities Act of 1933 (the "Securities Act")
may be permitted to trustees, officers and controlling
persons of the Registrant pursuant to the foregoing
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provisions, or otherwise, the Registrant has been
advised that, in the opinion of the Securities and
Exchange Commission, such indemnification is against
public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities
(other than the payment by the Registrant of expenses
incurred or paid by a trustee, officer or controlling
person of the Registrant in the successful defense of
any action, suit or proceeding) is asserted by such
trustee, officer or controlling person in connection
with the securities being registered, the Registrant
will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question of
whether such indemnification by it is against public
policy as expressed in the Securities Act and will be
governed by the final adjudication of such issue.
In accordance with Release No. IC-11330 (September 2,
1980), the Registrant will indemnify its trustees,
officers, investment adviser and principal underwriters
only if (1) a final decision on the merits was issued
by the court or other body before whom the proceeding
was brought that the person to be indemnified (the
"indemnitee") was not liable by reason of willful
misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of his
office ("disabling conduct") or (2) a reasonable
determination is made, based upon a review of the
facts, that the indemnitee was not liable by reason of
disabling conduct, by (a) the vote of a majority of a
quorum of the trustees who are neither "interested
persons" of the Registrant as defined in section
2(a)(19) of the Investment Company Act of 1940 nor
parties to the proceeding ("disinterested, non-party
trustees"), or (b) an independent legal counsel in a
written opinion. The Registrant will advance attorneys
fees or other expenses incurred by its trustees,
officers, investment adviser or principal underwriters
in defending a proceeding, upon the undertaking by or
on behalf of the indemnitee to repay the advance unless
it is ultimately determined that he is entitled to
indemnification and, as a condition to the advance,
(1) the indemnitee shall provide a security for his
undertaking, (2) the Registrant shall be insured
against losses arising by reason of any lawful
advances, or (3) a majority of a quorum of
disinterested, non-party trustees of the Registrant, or
an independent legal counsel in a written opinion,
shall determine, based on a review of readily available
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<PAGE>
facts (as opposed to a full trial-type inquiry), that
there is reason to believe that the indemnitee
ultimately will be found entitled to indemnification.
The Registrant participates in a joint
trustees/directors and officers liability insurance
policy issued by the ICI Mutual Insurance Company.
Coverage under this policy has been extended to
directors, trustees and officers of the investment
companies managed by Alliance Capital Management L.P.
Under this policy, outside trustees and directors are
covered up to the limits specified for any claim
against them for acts committed in their capacities as
trustee or director. A pro rata share of the premium
for this coverage is charged to each investment company
and to the Adviser.
ITEM 28. Business and Other Connections of Adviser.
The descriptions of Alliance Capital Management L.P.
under the captions "Management of the Fund" in the
Prospectus and in the Statement of Additional
Information constituting Parts A and B, respectively,
of this Registration Statement are incorporated by
reference herein.
The information as to the directors and executive
officers of Alliance Capital Management Corporation,
the general partner of Alliance Capital Management
L.P., set forth in Alliance Capital Management L.P.'s
Form ADV filed with the Securities and Exchange
Commission on April 21, 1988 (File No. 801-32361) and
amended through the date hereof, is incorporated by
reference.
ITEM 29. Principal Underwriters.
(a) Alliance Fund Distributors, Inc. the Registrant's
Principal Underwriter in connection with the sale of
shares of the Registrant, also acts as Principal
Underwriter or Distributor for the following investment
companies:
AFD Exchange Reserves
Alliance All-Asia Investment Fund, Inc.
Alliance Balanced Shares, Inc.
Alliance Bond Fund, Inc.
Alliance Capital Reserves
Alliance Global Dollar Government Fund, Inc.
Alliance Global Environment Fund, Inc.
Alliance Global Small Cap Fund, Inc.
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<PAGE>
Alliance Global Strategic Income Trust, Inc.
Alliance Government Reserves
Alliance Greater China '97 Fund, Inc.
Alliance Growth and Income Fund, Inc.
Alliance High Yield Fund, Inc.
Alliance Institutional Funds, Inc.
Alliance Institutional Reserves, Inc.
Alliance International Fund
Alliance International Premier Growth Fund, Inc.
Alliance Limited Maturity Government Fund, Inc.
Alliance Money Market Fund
Alliance Mortgage Securities Income Fund, Inc.
Alliance Multi-Market Strategy Trust, Inc.
Alliance Municipal Income Fund, Inc.
Alliance Municipal Income Fund II
Alliance Municipal Trust
Alliance New Europe Fund, Inc.
Alliance North American Government Income Trust,
Inc.
Alliance Premier Growth Fund, Inc.
Alliance Quasar Fund, Inc.
Alliance Real Estate Investment Fund, Inc.
Alliance Select Investor Series, Inc.
Alliance Technology Fund, Inc.
Alliance Utility Income Fund, Inc.
Alliance Variable Products Series Fund, Inc.
Alliance Worldwide Privatization Fund, Inc.
The Alliance Fund, Inc.
The Alliance Portfolios
(b) The following are the Directors and Officers of
Alliance Fund Distributors, Inc., the principal place
of business of which is 1345 Avenue of the Americas,
New York, New York, 10105.
POSITIONS AND POSITIONS AND
OFFICES WITH OFFICES WITH
NAME UNDERWRITER REGISTRANT
Michael J. Laughlin Director and Chairman
John D. Carifa Director
Robert L. Errico Director and President
Geoffrey L. Hyde Director and Senior
Vice President
Dave H. Williams Director
David Conine Executive Vice President
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Richard K. Saccullo Executive Vice President
Edmund P. Bergan, Jr. Senior Vice President, Secretary
General Counsel and
Secretary
Richard A. Davies Senior Vice President
Managing Director
Robert H. Joseph, Jr. Senior Vice President
and Chief Financial
Officer
Anne S. Drennan Senior Vice President
& Treasurer
Karen J. Bullot Senior Vice President
James S. Comforti Senior Vice President
James L. Cronin Senior Vice President
Daniel J. Dart Senior Vice President
Byron M. Davis Senior Vice President
Mark J. Dunbar Senior Vice President
Donald N. Fritts Senior Vice President
Bradley F. Hanson Senior Vice President
Richard E. Khaleel Senior Vice President
Stephen R. Laut Senior Vice President
Susan L. Matteson-King Senior Vice President
Daniel D. McGinley Senior Vice President
Ryne A. Nishimi Senior Vice President
Antonios G. Poleondakis Senior Vice President
Robert E. Powers Senior Vice President
Raymond S. Sclafani Senior Vice President
Gregory K. Shannahan Senior Vice President
Joseph F. Sumanski Senior Vice President
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<PAGE>
Peter J. Szabo Senior Vice President
Nicholas K. Willett Senior Vice President
Richard A. Winge Senior Vice President
Gerard J. Friscia Vice President &
Controller
Jamie A. Atkinson Vice President
Benji A. Baer Vice President
Kenneth F. Barkoff Vice President
Casimir F. Bolanowski Vice President
Michael E. Brannan Vice President
Timothy W. Call Vice President
Kevin T. Cannon Vice President
John R. Carl Vice President
William W. Collins, Jr. Vice President
Leo H. Cook Vice President
Richard W. Dabney Vice President
Stephen J. Demetrovits Vice President
John F. Dolan Vice President
John C. Endahl Vice President
Sohaila S. Farsheed Vice President
Shawn C. Gage Vice President
Andrew L. Gangolf Vice President and Assistant
Assistant General Secretary
Counsel
Mark D. Gersten Vice President Treasurer
and Chief
Financial
Officer
Joseph W. Gibson Vice President
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<PAGE>
John Grambone Vice President
George C. Grant Vice President
Charles M. Greenberg Vice President
Alan Halfenger Vice President
William B. Hanigan Vice President
Scott F. Heyer Vice President
George R. Hrabovsky Vice President
Valerie J. Hugo Vice President
Scott Hutton Vice President
Richard D. Keppler Vice President
Gwenn M. Kessler Vice President
Donna M. Lamback Vice President
Henry Michael Lesmeister Vice President
James M. Liptrot Vice President
James P. Luisi Vice President
Jerry W. Lynn Vice President
Christopher J. MacDonald Vice President
Michael F. Mahoney Vice President
Shawn P. McClain Vice President
Jeffrey P. Mellas Vice President
Thomas F. Monnerat Vice President
Christopher W. Moore Vice President
Timothy S. Mulloy Vice President
Joanna D. Murray Vice President
Nicole Nolan-Koester Vice President
John C. O'Connell Vice President
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<PAGE>
John J. O'Connor Vice President
James J. Posch Vice President
Domenick Pugliese Vice President and Assistant
Assistant General Secretary
Counsel
Bruce W. Reitz Vice President
Karen C. Satterberg Vice President
John P. Schmidt Vice President
Robert C. Schultz Vice President
Richard J. Sidell Vice President
Teris A. Sinclair Vice President
Scott C. Sipple Vice President
Elizabeth Smith Vice President
Martine H. Stansbery, Jr. Vice President
Andrew D. Strauss Vice President
Michael J. Tobin Vice President
Joseph T. Tocyloski Vice President
Thomas J. Vaughn Vice President
Martha D. Volcker Vice President
Patrick E. Walsh Vice President
Mark E. Westmoreland Vice President
William C. White Vice President
David E. Willis Vice President
Emilie D. Wrapp Vice President and Assistant
Assistant General Secretary
Counsel
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<PAGE>
Patrick Look Assistant Vice
President &
Assistant Treasurer
Michael W. Alexander Assistant Vice President
Richard J. Appaluccio Assistant Vice President
Charles M. Barrett Assistant Vice President
Robert F. Brendli Assistant Vice President
Maria L. Carreras Assistant Vice President
John P. Chase Assistant Vice President
Russell R. Corby Assistant Vice President
Jean A. Cronin Assistant Vice President
John W. Cronin Assistant Vice President
Terri J. Daly Assistant Vice President
Ralph A. DiMeglio Assistant Vice President
Faith C. Deutsch Assistant Vice President
John E. English Assistant Vice President
Duff C. Ferguson Assistant Vice President
James J. Hill Assistant Vice President
Theresa Iosca Assistant Vice President
Erik A. Jorgensen Assistant Vice President
Eric G. Kalender Assistant Vice President
Edward W. Kelly Assistant Vice President
Michael Laino Assistant Vice President
Nicholas J. Lapi Assistant Vice President
Kristine J. Luisi Assistant Vice President
Kathryn Austin Masters Assistant Vice President
Richard F. Meier Assistant Vice President
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<PAGE>
Mary K. Moore Assistant Vice President
Richard J. Olszewski Assistant Vice President
Catherine N. Peterson Assistant Vice President
Rizwan A. Raja Assistant Vice President
Carol H. Rappa Assistant Vice President
Clara Sierra Assistant Vice President
Gayle S. Stamer Assistant Vice President
Eileen Stauber Assistant Vice President
Vincent T. Strangio Assistant Vice President
Marie R. Vogel Assistant Vice President
Wesley S. Williams Assistant Vice President
Matthew Witschel Assistant Vice President
Christopher J. Zingaro Assistant Vice President
Mark R. Manley Assistant Secretary
(c) Not applicable.
ITEM 30. Location of Accounts and Records.
The majority of the accounts, books and other documents
required to be maintained by Section 31(a) of the
Investment Company Act of 1940 and the Rules thereunder
are maintained as follows: journals, ledgers,
securities records and other original records are
maintained principally at the offices of Alliance Fund
Services, Inc., 500 Plaza Drive, Secaucus, New Jersey
07094 and at the offices of Brown Brothers Harriman &
Company, the Registrant's Custodian, 40 Water Street,
Boston, Massachusetts 02109. All other records so
required to be maintained are maintained at the offices
of Alliance Capital Management L.P., 1345 Avenue of the
Americas, New York, New York, 10105.
ITEM 31. Management Services.
Not applicable.
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<PAGE>
ITEM 32. Undertakings.
(c) The Registrant undertakes to furnish each person to
whom a prospectus is delivered with a copy of the
Registrant's latest report to shareholders, upon
request and without charge.
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of
1933, as amended, and the Investment Company Act of 1940, as
amended, the Registrant certifies that it meets all of the
requirements for effectiveness of this Amendment to its
Registration Statement pursuant to Rule 485(b) under the
Securities Act of 1933 and has duly caused this Amendment to its
Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in The City of New York
and the State of New York, on the 30th day of October, 1998.
ALLIANCE INTERNATIONAL FUND
By /s/ John D. Carifa
____________________________
John D. Carifa
Chairman
Pursuant to the requirements of the Securities Act of
1933, as amended, this Amendment to the Registration Statement
has been signed below by the following persons in the capacities
and on the date indicated.
Signature Title Date
(1) Principal Executive
Officer
/s/ John D. Carifa Chairman October 30, 1998
_________________
John D. Carifa
(2) Principal Financial and
Accounting Officer
/s/ Mark D. Gersten Treasurer October 30, 1998
__________________ and Chief
Mark D. Gersten Financial
Officer
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<PAGE>
(3) All of the Trustees
John D. Carifa
David H. Dievler
John H. Dobkin
William H. Henderson
Stig Host
Alan J. Stoga
By /s/ Edmund P. Bergan, Jr. Secretary October 30, 1998
________________________
(Attorney-in-fact)
Edmund P. Bergan, Jr.
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<PAGE>
Index to Exhibits
Page
(1)(a) Agreement and Declaration of Trust dated
October 2, 1985
(1)(b) Certificate of Amendment of Agreement
and Declaration of Trust dated
April 27, 1993
(1)(c) Certificate of Amendment of Agreement
and Declaration of Trust dated
September 30, 1996
(6)(a) Distribution Services Agreement between
Registrant and Alliance Fund Distributors,
Inc.
(8) Custodian Contract between Registrant and
Brown Brothers Harriman & Co.
(9) Transfer Agency Agreementbetween
Registrant and Alliance Fund Services,
Inc.
(11) Consent of Independent Auditors
(17) Financial Data Schedules
Other Exhibits: Powers of Attorney for John D. Carifa,
David H. Dievler, John H. Dobkin, W. H. Henderson,
Stig Host and Alan Stoga.
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00250086.AU5
<PAGE>
AGREEMENT AND DECLARATION OF TRUST
OF
ALLIANCE INTERNATIONAL FUND
This AGREEMENT AND DECLARATION OF TRUST, made at Boston,
Massachusetts this 2nd day of October, 1985, by and between the
Settlor and the Trustee whose signature is set forth below (the
"Initial Trustee"),
W I T N E S S E T H T H A T:
WHEREAS, Bryan G. Tyson, an individual residing in
Brookline, Massachusetts (the "Settlor"), proposes to deliver to
the Initial Trustee the sum of one hundred dollars ($100.00)
lawful money of the United States of America in trust hereunder
and to authorize the Initial Trustee and all other Persons acting
as Trustees hereunder to employ such funds, and any other funds
coming into their hands or the hands of their successor or
successors as such Trustees, to carry on the business of an
investment company, and as such of buying, selling, investing in
or otherwise dealing in and with stocks, bonds, debentures,
warrants, options, future contracts and other securities and
interests therein, or calls or puts with respect to any of the
same, or such other and further investment media and other
property as the Trustees may deem advisable, which are not
prohibited by law or the terms of this Declaration; and
WHEREAS, the Initial Trustee is willing to accept such
sum, together with any and all additions thereto and the income
or increments thereof, upon the terms, conditions and trusts
hereinafter set forth; and
WHEREAS, it is proposed that the assets held by the
Trustees be divided into separate funds, each with its own
separate investment portfolio, investment objectives, policies
and purposes, and that the beneficial interest in each such fund
shall be divided into transferable Shares of Beneficial Interest,
a separate Series of Shares for each fund, all in accordance with
the provisions hereinafter set forth; and
WHEREAS, it is desired that the trust established hereby
(the "Trust") be managed and operated as a trust with
transferable shares under the laws of Massachusetts, of the type
commonly known as and referred to as a Massachusetts business
trust, in accordance with the provisions hereinafter set forth,
NOW, THEREFORE, the Initial Trustee, for himself and his
successors as Trustees, hereby declares, and agrees with the
<PAGE>
Settlor, for himself and for all Persons who shall hereafter
become holders of Shares of Beneficial Interest of the Trust, of
any Series, that the Trustees will hold the sum delivered to them
upon the execution hereof, and all other and further cash,
securities and other property of every type and description which
they may in any way acquire in their capacity as such Trustees,
together with the income therefrom and the proceeds thereof, IN
TRUST NEVERTHELESS, to manage and dispose of the same for the
benefit of the holders from time to time of the Shares of
Beneficial Interest of the several Series being issued and to be
issued hereunder and in the manner and subject to the provisions
hereof, to wit:
ARTICLE I
THE TRUST
SECTION 1.1. Name. The name of the Trust shall be
"ALLIANCE INTERNATIONAL FUND",
and so far as may be practicable the Trustees shall conduct the
Trusts activities, execute all documents and sue or be sued under
that name, which name (and the word "Trust" wherever used in this
Agreement and Declaration of Trust, except where the context
otherwise requires) shall refer to the Trustees in their capacity
as Trustees, and not individually or personally, and shall not
refer to the officers, agents or employees of the Trust or of
such Trustees, or to the holders of the Shares of Beneficial
Interest of the Trust, of any Series. If the Trustees determine
that the use of such name is not practicable, legal or convenient
at any time or in any jurisdiction, or if the Trust is required
to discontinue the use of such name pursuant to Section 10.5
hereof, then subject to that Section, the Trustees may use such
other designation, or they may adopt such other name for the
Trust as they deem proper, and the Trust may hold property and
conduct its activities under such designation or name.
SECTION 1.2. Location. The Trust shall have an office
in Boston, Massachusetts, unless changed by the Trustees to
another location in Massachusetts or elsewhere, but such office
need not be the sole or principal office of the Trust. The Trust
may have such other offices or places of business as the Trustees
may from time to time determine to be necessary or expedient.
SECTION 1.3. Nature of Trust. The Trust shall be a
trust with transferable shares under the laws of The Commonwealth
of Massachusetts, of the type referred to in Section 1 of Chapter
182 of the Massachusetts General Laws and commonly termed a
Massachusetts business trust. The Trust is not intended to be,
shall not be deemed to be, and shall not be treated as, a general
2
<PAGE>
partnership, limited partnership, joint venture, corporation or
joint stock company. The Shareholders shall be beneficiaries and
their relationship to the Trustees shall be solely in that
capacity in accordance with the rights conferred upon them
hereunder.
SECTION 1.4. Definitions. As used in this Agreement
and Declaration of Trust, the following terms shall have the
meanings set forth below unless the context thereof otherwise
requires:
"Accounting Agent" shall have the meaning designated in
Section 5.2(g) hereof.
"Administrator" shall have the meaning designated in
Section 5.2(b) hereof.
"Affiliated Person" shall have the meaning assigned to
it in the 1940 Act.
"By-Laws" shall mean the By-Laws of the Trust, as
amended from time to time.
"Certificate of Designation" shall have the meaning
designated in Section 6.1 hereof.
"Certificate of Termination" shall have the meaning
designated in Section 6.1 hereof.
"Commission" shall have the same meaning as in the 1940
Act.
"Contracting Part" shall have the meaning designated in
the preamble to Section 5.2 hereof.
"Covered Person" shall have the meaning designated in
Section 8.4 hereof.
"Custodian" shall have the meaning designated in Section
5.2(d) hereof.
"Declaration" and "Declaration of Trust" shall mean this
Agreement and Declaration of Trust and all amendments or
modifications thereof as from time to time in effect. References
in this Agreement and Declaration of Trust to "hereof", "herein"
and "hereunder" shall be deemed to refer to the Declaration of
Trust generally, and shall not be limited to the particular text,
Article or Section in which such words appear.
"Disabling Conduct" shall have the meaning designated in
Section 8.4 hereof.
3
<PAGE>
"Distributor" shall have the meaning designated in
Section 5.2(c) hereof.
"Dividend Disbursing Agent" shall have the meaning
designated in Section 5.2(e) hereof.
"General Items" shall have the meaning defined in
Section 6.2(a) hereof.
"Initial Trustee" shall have the meaning defined in the
preamble hereto.
"Investment Advisor" shall have the meaning stated in
Section 5.2(a) hereof.
"Majority of the Trustees" shall mean a majority of the
Trustees in office at the time in question. At any time at which
there shall be only one (1) Trustee in office, such term shall
mean such Trustee.
"Majority Shareholder Vote," as used with respect to the
election of any Trustee at a meeting of Shareholders, shall mean
the vote for the election of such Trustee of a plurality of all
outstanding Shares of the Trust, without regard to Series,
represented in person or by proxy and entitled to vote thereon,
provided that a quorum (as determined in accordance with the
By-Laws) is present, and as used with respect to any other action
required or permitted to be taken by Shareholders, shall mean the
vote for such action of the holders of that majority of all
outstanding Shares (or, where a separate vote of Shares of any
particular Series is to be taken, the affirmative vote of that
majority of the outstanding Shares of that Series) of the Trust
which consists of: (i) a majority of all Shares (or of Shares of
the particular Series) represented in person or by proxy and
entitled to vote on such action at the meeting of Shareholders at
which such action is to be taken, provided that a quorum (as
determined in accordance with the By-Laws) is present; or (ii) if
such action is to be taken by written consent of Shareholders, a
majority of all Shares (or of Shares of the particular Series)
issued and outstanding and entitled to vote on such action;
provided, that (iii) as used with respect to any action requiring
the affirmative vote of "a majority of the outstanding voting
securities", as the quoted phrase is defined in the 1940 Act, of
the Trust or of any Portfolio, "Majority Shareholder Vote" means
the vote for such action at a meeting of Shareholders of the
smallest majority of all outstanding Shares of the Trust (or of
Shares of the particular Portfolio) entitled to vote on such
action which satisfies such 1940 Act voting requirement.
"1940 Act" shall mean the provisions of the Investment
Company Act of 1940 and the rules and regulations thereunder,
4
<PAGE>
both as amended from time to time, and any order or orders
thereunder which may from time to time be applicable to the
Trust.
"Person" shall mean and include individuals, as well as
corporations, limited partnerships, general partnerships, joint
stock companies, joint ventures, associations, banks, trust
companies, land trusts, business trusts or other organizations
established under the laws of any jurisdiction, whether or not
considered to be legal entities, and governments and agencies and
political subdivisions thereof.
"Portfolio" or "Portfolios" shall mean one or more of
the separate components of the assets of the Trust which are now
or hereafter established and designated under or in accordance
with the provisions of Article VI hereof.
"Portfolio Assets" shall have the meaning defined in
Section 6.2(a) hereof.
"Principal Underwriter" shall have the meaning
designated in Section 5.2(c) hereof.
"Prospectus," as used with respect to any Portfolio or
Series of Shares, shall mean the prospectus relating to such
Portfolio or Series which constitutes part of the currently
effective Registration Statement of the Trust under the
Securities Act of 1933, as such prospectus may be amended or
supplemented from time to time.
"Securities" shall mean any and all bills, notes, bonds,
debentures or other obligations or evidences of indebtedness,
certificates of deposit, bankers acceptances, commercial paper,
repurchase agreements or other money market instruments; stocks,
shares or other equity ownership interests; and warrants, options
or other instruments representing rights to subscribe for,
purchase, receive or otherwise acquire or to sell, transfer,
assign or otherwise dispose of, and scrip, certificates, receipts
or other instruments evidencing any ownership rights or interests
in, any of the foregoing and "when issued" and "delayed delivery"
contracts for securities, issued, guaranteed or sponsored by any
governments, political subdivisions or governmental authorities,
agencies or instrumentalities, by any individuals, firms,
companies, corporations, syndicates, associations or trusts, or
by any other organizations or entities whatsoever, irrespective
of their forms or the names by which they may be described,
whether or not they be organized and operated for profit, and
whether they be domestic or foreign with respect to The
Commonwealth of Massachusetts or the United States of America.
5
<PAGE>
"Securities of the Trust" shall mean any Securities
issued by the Trust.
"Series" shall mean one or more of the series of Shares
authorized by the Trustees to represent the beneficial interest
in one or more of the Portfolios.
"Settlor" shall have the meaning stated in the first
"Whereas" clause set forth above.
"Shareholder" shall mean as of any particular time any
Person shown of record at such time on the books of the Trust as
a holder of outstanding Shares of any Series, and shall include a
pledgee into whose name any such Shares are transferred in
pledge.
"Shareholder Servicing Agent" shall have the meaning
designated in Section 5.2(f) hereof.
"Shares" shall mean the transferable units into which
the beneficial interest in the Trust and each Portfolio of the
Trust (as the context may require) shall be divided from time to
time, and includes fractions of Shares as well as whole Shares.
All references herein to "Shares" which are not accompanied by a
reference to any particular Series or Portfolio shall be deemed
to apply to outstanding Shares without regard to Series.
"Single Class Voting" as used with respect to any matter
to be acted upon at a meeting or by written consent of
Shareholders, shall mean a style of voting, in which each holder
of one or more Shares shall be entitled to one vote on the matter
in question for each Share standing in his name on the records of
the Trust, irrespective of Series, and all outstanding Shares of
all Series vote as a single class.
"Statement of Additional Information," as used with
respect to any Portfolio or Series of Shares, shall mean the
statement of additional information relating to such Portfolio or
Series, which constitutes part of the currently effective
Registration Statement of the Trust under the Securities Act of
1933, as such statement of additional information may be amended
or supplemented from time to time.
"Transfer Agent" shall have the meaning defined in
Section 5.2(e) hereof.
"Trust" shall have the meaning stated in the fourth
"Whereas" clause set forth above.
"Trust Property" shall mean, as of any particular time,
any and all property which shall have been transferred, conveyed
6
<PAGE>
or paid to the Trust or the Trustees, and all interest,
dividends, income, earnings, profits and gains therefrom, and
proceeds thereof, including any proceeds derived from the sale,
exchange or liquidation thereof, and any funds or payments
derived from any reinvestment of such proceeds in whatever form
the same may be, and which at such time is owned or held by, or
for the account of, the Trust or the Trustees, without regard to
the Portfolio to which such property is allocated.
"Trustees" shall mean, collectively, the Initial
Trustee, so long as he shall continue in office, and all other
individuals who at the time in question have been duly elected or
appointed as Trustees of the Trust in accordance with the
provisions hereof and who have qualified and are then in office.
At any time at which there shall be only one (1) Trustee in
office, such term shall mean such single Trustee.
SECTION 1.5. Real Property to be Converted into
Personal Property. Notwithstanding any other provision hereof,
any real property at any time forming part of the Trust Property
shall be held in trust for sale and conversion into personal
property at such time or times and in such manner and upon such
terms as the Trustees shall approve, but the Trustees shall have
power until the termination of this Trust to postpone such
conversion as long as they in their uncontrolled discretion shall
think fit, and for the purpose of determining the nature of the
interest of the Shareholders therein, all such real property
shall at all times be considered as personal property.
ARTICLE II
PURPOSE OF THE TRUST
The purpose of the Trust shall be to engage in the
business of being an investment company, and as such of
subscribing for, purchasing or otherwise acquiring, holding for
investment or trading in, borrowing, lending and selling short,
selling, assigning, negotiating or exchanging and otherwise
disposing of, and turning to account, realizing upon and
generally dealing in and with, in any manner, (a) Securities of
all kinds, (b) precious metals and other minerals, contracts to
purchase and sell, and other interests of every nature and kind
in, such metals or minerals, and (c) rare coins and other
numismatic items, and all as the Trustees in their discretion
shall determine to be necessary, desirable or appropriate, and to
exercise and perform any and every act, thing or power necessary,
suitable or desirable for the accomplishment of such purpose, the
attainment of any of the objects or the furtherance of any of the
powers given hereby which are lawful purposes, objects or powers
of a trust with transferable shares of the type commonly termed a
Massachusetts business trust; and to do every other act or acts
7
<PAGE>
or thing or things incidental or appurtenant to or growing out of
or in connection with the aforesaid objects, purposes or powers,
or any of them, which a trust of the type commonly termed a
Massachusetts business trust is not now or hereafter prohibited
from doing, exercising or performing.
ARTICLE III
POWERS OF THE TRUSTEES
SECTION 3.1. Powers in General. The Trustees shall
have, without other or further authorization, full, entire,
exclusive and absolute power, control and authority over, and
management of, the business of the Trust and over the Trust
Property, to the same extent as if the Trustees were the sole
owners of the business and property of the Trust in their own
right, and with such powers of delegation as may be permitted by
this Declaration, subject only to such limitations as may be
expressly imposed by this Declaration of Trust or by applicable
law. The enumeration of any specific power or authority herein
shall not be construed as limiting the aforesaid power or
authority or any specific power or authority. Without limiting
the foregoing, the Trustees may adopt By-Laws not inconsistent
with this Declaration of Trust providing for the conduct of the
business and affairs of the Trust and may amend and repeal them
to the extent that such By-Laws do not reserve that right to the
Shareholders; they may select, and from time to time change, the
fiscal year of the Trust; they may adopt and use a seal for the
Trust, provided, that unless otherwise required by the Trustees,
it shall not be necessary to place the seal upon, and its absence
shall not impair the validity of, any document, instrument or
other paper executed and delivered by or on behalf of the Trust;
they may from time to time in accordance with the provisions of
Section 6.1 hereof establish one or more Portfolios to which they
may allocate such of the Trust Property, subject to such
liabilities, as they shall deem appropriate, each such Portfolio
to be operated by the Trustees as a separate and distinct
investment medium and with separately defined investment
objectives and policies and distinct investment purposes, all as
established by the Trustees, or from time to time changed by
them; they may as they consider appropriate elect and remove
officers and appoint and terminate agents and consultants and
hire and terminate employees, any one or more of the foregoing of
whom may be a Trustee; they may appoint from their own number,
and terminate, any one or more committees consisting of one or
more Trustees, including without implied limitation an Executive
Committee, which may, when the Trustees are not in session and
subject to the 1940 Act, exercise some or all of the power and
authority of the Trustees as the Trustees may determine; in
accordance with Section 5.2 they may employ one or more
Investment Advisors, Administrators and Custodians and may
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authorize any Custodian to employ subcustodians or agents and to
deposit all or any part of such assets in a system or systems for
the central handling of Securities, retain Transfer, Dividend
Disbursing, Accounting, or Shareholder Servicing Agents or any of
the foregoing, provide for the distribution of Shares by the
Trust through one or more Distributors, Principal Underwriters or
otherwise, set record dates or times for the determination of
Shareholders entitled to participate in, benefit from or act with
respect to various matters; and in general they may delegate to
any officer of the Trust, to any Committee of the Trustees and to
any employee, Investment Advisor, Administrator, Distributor,
Custodian, Transfer Agent, Dividend Disbursing Agent, or any
other agent or consultant of the Trust, such authority, powers,
functions and duties as they consider desirable or appropriate
for the conduct of the business and affairs of the Trust,
including without implied limitation the power and authority to
act in the name of the Trust and of the Trustees, to sign
documents and to act as attorney-in-fact for the Trustees.
Without limiting the foregoing and to the extent not inconsistent
with the 1940 Act or other applicable law, the Trustees shall
have power and authority:
(a) Investments. To invest and reinvest cash
and other property; to buy, for cash or on margin,
and otherwise acquire and hold, Securities created
or issued by any Persons, including Securities
maturing after the possible termination of the
Trust; to make payment therefor in any lawful
manner in exchange for any of the Trust Property;
and to hold cash or other property uninvested
without in any event being bound or limited by any
present or future law or custom in regard to
investments by trustees;
(b) Disposition of Assets. Upon such terms
and conditions as they deem best, to lend, sell,
exchange, mortgage, pledge, hypothecate, grant
security interests in, encumber, negotiate, convey,
transfer or otherwise dispose of, and to trade in,
any and all of the Trust Property, free and clear
of all trusts, for cash or on terms, with or
without advertisement, and on such terms as to
payment, security or otherwise, all as they shall
deem necessary or expedient;
(c) Ownership Powers. To vote or give
assent, or exercise any and all other rights,
powers and privileges of ownership with respect to,
and to perform any and all duties and obligations
as owners of, any Securities or other property
forming part of the Trust Property, the same as any
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individual might do; to exercise powers and rights
of subscription or otherwise which in any manner
arise out of ownership of Securities, and to
receive powers of attorney from, and to execute and
deliver proxies or powers of attorney to, such
Person or Persons as the Trustees shall deem
proper, receiving from or granting to such Person
or Persons such power and discretion with relation
to Securities or other property of the Trust, all
as the Trustees shall deem proper;
(d) Form of Holding. To hold any Security or
other property in a form not indicating any trust,
whether in bearer, unregistered or other negotiable
form, or in the name of the Trustees or of the
Trust, or of the Portfolio to which such Securities
or property belong, or in the name of a Custodian,
subcustodian or other nominee or nominees, or
otherwise, upon such terms, in such manner or with
such powers, as the Trustees may determine, and
with or without indicating any trust or the
interest of the Trustees therein;
(e) Reorganization, etc. To consent to or
participate in any plan for the reorganization,
consolidation or merger of any corporation or
issuer, any Security of which is or was held in the
Trust or any Portfolio; to consent to any contract,
lease, mortgage, purchase or sale of property by
such corporation or issuer, and to pay calls or
subscriptions with respect to any Security forming
part of the Trust Property;
(f) Voting Trusts, etc. To join with other
holders of any Securities in acting through a
committee, depository, voting trustee or otherwise,
and in that connection to deposit any Security
with, or transfer any Security to, any such
committee, depository or trustee, and to delegate
to them such power and authority with relation to
any Security (whether or not so deposited or
transferred) as the Trustees shall deem proper, and
to agree to pay, and to pay, such portion of the
expenses and compensation of such committee,
depository or trustee as the Trustees shall deem
proper;
(g) Contracts, etc. To enter into, make and
perform all such obligations, contracts, agreements
and undertakings of every kind and description,
with any Person or Persons, as the Trustees shall
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in their discretion deem expedient in the conduct
of the business of the Trust, for such terms as
they shall see fit, whether or not extending beyond
the term of office of the Trustees, or beyond the
possible expiration of the Trust; to amend, extend,
release or cancel any such obligations, contracts,
agreements or understandings; and to execute,
acknowledge, deliver and record all written
instruments which they may deem necessary or
expedient in the exercise of their powers;
(h) Guarantees, etc. To endorse or guarantee
the payment of any notes or other obligations of
any Person; to make contracts of guaranty or
suretyship, or otherwise assume liability for
payment thereof; and to mortgage and pledge the
Trust Property or any part thereof to secure any of
or all such obligations;
(i) Partnerships, etc. To enter into joint
ventures, general or limited partnerships and any
other combinations or associations;
(j) Insurance. To purchase and pay for
entirely out of Trust Property such insurance as
they may deem necessary or appropriate for the
conduct of the business, including, without
limitation, insurance policies insuring the assets
of the Trust and payment of distributions and
principal on its portfolio investments, and
insurance policies insuring the Shareholders,
Trustees, officers, employees, agents, consultants,
Investment Advisors, managers, Administrators,
Distributors, Principal Underwriters, or other
independent contractors, or any thereof (or any
Person connected therewith), of the Trust,
individually, against all claims and liabilities of
every nature arising by reason of holding, being or
having held any such office or position, or by
reason of any action alleged to have been taken or
omitted by any such Person in any such capacity,
including any action taken or omitted that may be
determined to constitute negligence, whether or not
the Trust would have the power to indemnify such
Person against such liability;
(k) Pensions, etc. To pay pensions for
faithful service, as deemed appropriate by the
Trustees, and to adopt, establish and carry out
pension, profit-sharing, share bonus, share
purchase, savings, thrift and other retirement,
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incentive and benefit plans, trusts and provisions,
including the purchasing of life insurance and
annuity contracts as a means of providing such
retirement and other benefits, for any or all of
the Trustees, officers, employees and agents of the
Trust;
(l) Power of Collection and Litigation. To
collect, sue for and receive all sums of money
coming due to the Trust, to employ counsel, and to
commence, engage in, prosecute, intervene in, join,
defend, compound, compromise, adjust or abandon, in
the name of the Trust, any and all actions, suits,
proceedings, disputes, claims, controversies,
demands or other litigation or legal proceedings
relating to the Trust, the business of the Trust,
the Trust Property, or the Trustees, officers,
employees, agents and other independent contractors
of the Trust, in their capacity as such, at law or
in equity, or before any other bodies or tribunals,
and to compromise, arbitrate or otherwise adjust
any dispute to which the Trust may be a party,
whether or not any suit is commenced or any claim
shall have been made or asserted;
(m) Issuance and Repurchase of Shares. To
issue, sell, repurchase, redeem, retire, cancel,
acquire, hold, resell, reissue, dispose of,
transfer, and otherwise deal in Shares of any
Series, and, subject to Article VI hereof, to apply
to any such repurchase, redemption, retirement,
cancellation or acquisition of Shares of any
Series, any of the Portfolio Assets belonging to
the Portfolio to which such Series relates, whether
constituting capital or surplus or otherwise, to
the full extent now or hereafter permitted by
applicable law; provided, that any Shares belonging
to the Trust shall not be voted, directly or
indirectly;
(n) Offices. To have one or more offices,
and to carry on all or any of the operations and
business of the Trust, in any of the States,
Districts or Territories of the United States, and
in any and all foreign countries, subject to the
laws of such State, District, Territory or country;
(o) Expenses. To incur and pay any and all
such expenses and charges as they may deem
advisable (including without limitation appropriate
fees to themselves as Trustees), and to pay all
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such sums of money for which they may be held
liable by way of damages, penalty, fine or
otherwise;
(p) Agents, etc. To retain and employ any
and all such servants, agents, employees,
attorneys, brokers, investment advisers,
accountants, architects, engineers, builders,
escrow agents, depositories, consultants, ancillary
trustees, custodians, agents for collection,
insurers, banks and officers, as they think best
for the business of the Trust or any Portfolio, to
supervise and direct the acts of any of the same,
and to fix and pay their compensation and define
their duties;
(q) Accounts. To determine, and from time to
time change, the method or form in which the
accounts of the Trust shall be kept;
(r) Valuation. Subject to the requirements
of the 1940 Act, to determine from time to time the
value of all or any part of the Trust Property and
of any services, Securities, property or other
consideration to be furnished to or acquired by the
Trust, and from time to time to revalue all or any
part of the Trust Property in accordance with such
appraisals or other information as is, in the
Trustees sole judgment, necessary and satisfactory;
(s) Indemnification. In addition to the
mandatory indemnification provided for in Article
VIII hereof and to the extent permitted by law, to
indemnify or enter into agreements with respect to
indemnification with any Person with whom this
Trust has dealings, including, without limitation,
any independent contractor, to such extent as the
Trustees shall determine; and
(t) General. To do all such other acts and
things and to conduct, operate, carry on and engage
in such other lawful businesses or business
activities as they shall in their sole and absolute
discretion consider to be incidental to the
business of the Trust or any Portfolio as an
investment company, and to exercise all powers
which they shall in their discretion consider
necessary, useful or appropriate to carry on the
business of the Trust or any Portfolio, to promote
any of the purposes for which the Trust is formed,
whether or not such things are specifically
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mentioned herein, in order to protect or promote
the interests of the Trust or any Portfolio, or
otherwise to carry out the provisions of this
Declaration.
SECTION 3.2. Borrowings; Financings; Issuance of
Securities. The Trustees have power to borrow or in any other
manner raise such sum or sums of money, and to incur such other
indebtedness for goods or services, or for or in connection with
the purchase or other acquisition of property, as they shall deem
advisable for the purposes of the Trust, in any manner and on any
terms, and to evidence the same by negotiable or non-negotiable
Securities which may mature at any time or times, even beyond the
possible date of termination of the Trust; to issue Securities of
any type for such cash, property, services or other
considerations, and at such time or times and upon such terms, as
they may deem advisable; and to reacquire any such Securities.
Any such Securities of the Trust may, at the discretion of the
Trustees, be made convertible into Shares of any Series, or may
evidence the right to purchase, subscribe for or otherwise
acquire Shares of any Series, at such times and on such terms as
the Trustees may prescribe.
SECTION 3.3. Deposits. Subject to the requirements of
the 1940 Act, the Trustees shall have power to deposit any moneys
or Securities included in the Trust Property with any one or more
banks, trust companies or other banking institutions, whether or
not such deposits will draw interest. Such deposits are to be
subject to withdrawal in such manner as the Trustees may
determine, and the Trustees shall have no responsibility for any
loss which may occur by reason of the failure of the bank, trust
company or other banking institution with which any such moneys
or Securities have been deposited, other than liability based on
their gross negligence or willful fault.
SECTION 3.4. Allocations. The Trustees shall have
power to determine whether moneys or other assets received by the
Trust shall be charged or credited to income or capital, or
allocated between income and capital, including the power to
amortize or fail to amortize any part or all of any premium or
discount, to treat any part or all of the profit resulting from
the maturity or sale of any asset, whether purchased at a premium
or at a discount, as income or capital, or to apportion the same
between income and capital, to apportion the sale price of any
asset between income and capital, and to determine in what manner
any expenses or disbursements are to be borne as between income
and capital, whether or not in the absence of the power and
authority conferred by this Section 3.4 such assets would be
regarded as income or as capital or such expense or disbursement
would be charged to income or to capital; to treat any dividend
or other distribution on any investment as income or capital, or
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to apportion the same between income and capital; to provide or
fail to provide reserves, including reserves for depreciation,
amortization or obsolescence in respect of any Trust Property in
such amounts and by such methods as they shall determine; to
allocate less than all of the consideration paid for Shares of
any Series to the shares of beneficial interest account of the
Portfolio to which such Shares relate and to allocate the balance
thereof to paid-in capital of that Portfolio, and to reallocate
such amounts from time to time; all as the Trustees may
reasonably deem proper.
SECTION 3.5. Further Powers; Limitations. The Trustees
shall have power to do all such other matters and things, and to
execute all such instruments, as they deem necessary, proper or
desirable in order to carry out, promote or advance the interests
of the Trust, although such matters or things are not herein
specifically mentioned. Any determination as to what is in the
interests of the Trust made by the Trustees in good faith shall
be conclusive. In construing the provisions of this Declaration
of Trust, the presumption shall be in favor of a grant of power
to the Trustees. The Trustees shall not be required to obtain
any court order to deal with the Trust Property. The Trustees
may limit their right to exercise any of their powers through
express restrictive provisions in the instruments evidencing or
providing the terms for any Securities of the Trust or in other
contractual instruments adopted on behalf of the Trust.
ARTICLE IV
TRUSTEES AND OFFICERS
SECTION 4.1. Number, Designation, Election, Term, etc.
(a) Initial Trustee. Upon his execution of
this Declaration of Trust or a counterpart hereof
or some other writing in which he accepts such
Trusteeship and agrees to the provisions hereof,
the individual whose signature is affixed hereto as
Initial Trustee shall become the Initial Trustee
hereof.
(b) Number. The Trustees serving as such,
whether named above or hereafter becoming Trustees,
may increase (to not more than twenty (20)) or
decrease the number of Trustees to a number other
than the number theretofore determined by a written
instrument signed by a Majority of the Trustees (or
by an officer of the Trust pursuant to the vote of
a Majority of the Trustees). No decrease in the
number of Trustees shall have the effect of
removing any Trustee from office prior to the
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expiration of his term, but the number of Trustees
may be decreased in conjunction with the removal of
a Trustee pursuant to subsection (e) of this
Section 4.1.
(c) Election and Term. The Trustees shall be
elected by the Shareholders of the Trust at the
first meeting of Shareholders immediately prior to
the initial public offering of Shares of the Trust,
and the term of office of any Trustees in office
before such election shall terminate at the time of
such election. Subject to Section 16(a) of the
1940 Act and to the preceding sentence of this
subsection (c), the Trustees shall have the power
to set and alter the terms of office of the
Trustees, and at any time to lengthen or shorten
their own terms or make their terms of unlimited
duration, to elect their own successors and,
pursuant to subsection (f) of this Section 4.1, to
appoint Trustees to fill vacancies; provided, that
Trustees shall be elected by a Majority Shareholder
Vote at any such time or times as the Trustees
shall determine that such action is required under
Section 16(a) of the 1940 Act or, if not so
required, that such action is advisable; and
further provided, that, after the initial election
of Trustees by the Shareholders, the term of office
of any incumbent Trustee shall continue until the
termination of this Trust or his earlier death,
resignation, retirement, bankruptcy, adjudicated
incompetency or other incapacity or removal, or if
not so terminated, until the election of such
Trustees successor in office has become effective
in accordance with this subsection (c).
(d) Resignation and Retirement. Any Trustee
may resign his trust or retire as a Trustee, by a
written instrument signed by him and delivered to
the other Trustees or to any officer of the Trust,
and such resignation or retirement shall take
effect upon such delivery or upon such later date
as is specified in such instrument.
(e) Removal. Any Trustee may be removed with
or without cause at any time: (i) by written
instrument, signed by at least two-thirds (2/3) of
the number of Trustees prior to such removal,
specifying the date upon which such removal shall
become effective; or (ii) by vote of Shareholders
holding not less than two-thirds (2/3) of the
Shares of each Series then outstanding, cast in
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person or by proxy at any meeting called for the
purpose; or (iii) by a written declaration signed
by Shareholders holding not less than two-thirds
(2/3) of the Shares of each Series then outstanding
and filed with the Trusts Custodian.
(f) Vacancies. Any vacancy or anticipated
vacancy resulting from any reason, including an
increase in the number of Trustees, may (but need
not unless required by the 1940 Act) be filled by a
Majority of the Trustees, subject to the provisions
of Section 16(a) of the 1940 Act, through the
appointment in writing of such other individual as
such remaining Trustees in their discretion shall
determine; provided, that if there shall be no
Trustees in office, such vacancy or vacancies shall
be filled by vote of the Shareholders. Any such
appointment or election shall be effective upon
such individuals written acceptance of his
appointment as a Trustee and his agreement to be
bound by the provisions of this Declaration of
Trust, except that any such appointment in
anticipation of a vacancy to occur by reason of
retirement, resignation or increase in the number
of Trustees to be effective at a later date shall
become effective only at or after the effective
date of said retirement, resignation or increase in
the number of Trustees.
(g) Acceptance of Trusts. Any individual
appointed as a Trustee under subsection (f), and
any individual elected as a Trustee under
subsection (c), of this Section 4.1 who was not,
immediately prior to such election, acting as a
Trustee, shall accept such appointment or election
in writing and agree in such writing to be bound by
the provisions hereof, and whenever such individual
shall have executed such writing and any conditions
to such appointment or election shall have been
satisfied, such individual shall become a Trustee
and the Trust Property shall vest in the new
Trustee, together with the continuing Trustees,
without any further act or conveyance.
(h) Effect of Death, Resignation, etc. No
vacancy, whether resulting from the death,
resignation, retirement, removal or incapacity of
any Trustee, an increase in the number of Trustees
or otherwise, shall operate to annul or terminate
the Trust hereunder or to revoke or terminate any
existing agency or contract created or entered into
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pursuant to the terms of this Declaration of Trust.
Until such vacancy is filled as provided in this
Section 4.1, the Trustees in office (if any),
regardless of their number, shall have all the
powers granted to the Trustees and shall discharge
all the duties imposed upon the Trustees by this
Declaration. A written instrument certifying the
existence of such vacancy signed by a Majority of
the Trustees shall be conclusive evidence of the
existence of such vacancy.
(i) Conveyance. In the event of the
resignation or removal of a Trustee or his
otherwise ceasing to be a Trustee, such former
Trustee or his legal representative shall, upon
request of the continuing Trustees, execute and
deliver such documents as may be required for the
purpose of consummating or evidencing the
conveyance to the Trust or the remaining Trustees
of any Trust Property held in such former Trustees
name, but the execution and delivery of such
documents shall not be requisite to the vesting of
title to the Trust Property in the remaining
Trustees, as provided in subsection (g) of this
Section 4.1 and in Section 4.13 hereof.
(j) No Accounting. Except to the extent
required by the 1940 Act or under circumstances
which would justify his removal for cause, no
Person ceasing to be a Trustee (nor the estate of
any such Person) stall be required to make an
accounting to the Shareholders or remaining
Trustees upon such cessation.
(k) Filings. Whenever there shall be a
change in the composition of the Trustees, the
Trust shall cause to be filed in the office of the
Secretary of The Commonwealth of Massachusetts and
in each other place where the Trust is required to
file amendments to this Declaration a copy of
(i) the instrument by which (in the case of the
appointment of a new Trustee, or the election of an
individual who was not theretofore a Trustee) the
new Trustee accepted his appointment or election
and agreed to be bound by the terms of this
Declaration, or (in the case of a resignation) by
which the former Trustee resigned as such, together
in either case with a certificate of one of the
other Trustees as to the circumstances of such
election, appointment or resignation, or (ii) in
the case of the removal or death of a Trustee, a
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certificate of one of the Trustees as to the
circumstances of such removal or resignation.
SECTION 4.2. Trustees' Meetings; Participation by
Telephone, etc. An annual meeting of Trustees shall be held not
later than the last day of the fourth month after the end of each
fiscal year of the Trust and special meetings may be held from
time to time in each case, upon the call of such officers as may
be thereunto authorized by the By-Laws or vote of the Trustees,
or by any two (2) Trustees, or pursuant to a vote of the Trustees
adopted at a duly constituted meeting of the Trustees, and upon
such notice as shall be provided in the By-Laws. The Trustees
may act with or without a meeting, and a written consent to any
matter, signed by a Majority of the Trustees, shall be equivalent
to action duly taken at a meeting of the Trustees, duly called
and held. Except as otherwise provided by the 1940 Act or other
applicable law, or by this Declaration of Trust or the By-Laws,
any action to be taken by the Trustees may be taken by a majority
of the Trustees present at a meeting of Trustees (a quorum,
consisting of at least a Majority of the Trustees, being
present), within or without Massachusetts. If authorized by the
By-Laws, all or any one or more Trustees may participate in a
meeting of the Trustees or any Committee thereof by means of
conference telephone or similar means of communication by means
of which all Persons participating in the meeting can hear each
other, and participation in a meeting pursuant to such means of
communication shall constitute presence in person at such
meeting. The minutes of any meeting thus held shall be prepared
in the same manner as a meeting at which all participants were
present in person.
SECTION 4.3. Committees; Delegation. The Trustees
shall have power, consistent with their ultimate responsibility
to supervise the affairs of the Trust, to delegate from time to
time to an Executive Committee, and to one or more other
Committees, or to any single Trustee, the doing of such things
and the execution of such deeds or other instruments, either in
the name of the Trust or the names of the Trustees or as their
attorney or attorneys in fact, or otherwise as the Trustees may
from time to time deem expedient, and any agreement, deed,
mortgage, lease or other instrument or writing executed by the
Trustee or Trustees or other Person to whom such delegation was
made shall be valid and binding upon the Trustees and upon the
Trust.
SECTION 4.4. Officers. The Trustees shall annually
elect such officers or agents, who shall have such powers, duties
and responsibilities as the Trustees may deem to be advisable,
and as they shall specify by resolution or in the By-Laws.
Except as may be provided in the By-Laws, any officer elected by
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the Trustees may be removed at any time with or without cause.
Any two (2) or more offices may be held by the same individual.
SECTION 4.5. Compensation of Trustees and Officers.
The Trustees shall fix the compensation of all officers and
Trustees. Without limiting the generality of any of the
provisions hereof, the Trustees shall be entitled to receive
reasonable compensation for their general services as such, and
to fix the amount of such compensation, and to pay themselves or
any one or more of themselves such compensation for special
services, including legal, accounting, or other professional
services, as they in good faith may deem reasonable. No Trustee
or officer resigning and (except where a right to receive
compensation for a definite future period shall be expressly
provided in a written agreement with the Trust, duly approved by
the Trustees) no Trustee or officer removed shall have any right
to any compensation as such Trustee or officer for any period
following his resignation or removal, or any right to damages on
account of his removal, whether his compensation be by the month,
by the year or otherwise.
SECTION 4.6. Ownership of Shares and Securities of the
Trust. Any Trustee, and any officer, employee or agent of the
Trust, and any organization in which any such Person is
interested, may acquire, own, hold and dispose of Shares of any
Series and other Securities of the Trust for his or its
individual account, and may exercise all rights of a holder of
such Shares or Securities to the same extent and in the same
manner as if such Person were not such a Trustee, officer,
employee or agent of the Trust; subject, in the case of Trustees
and officers, to the same limitations as directors or officers
(as the case may be) of a Massachusetts business corporation; and
the Trust may issue and sell or cause to be issued and sold and
may purchase any such Shares or other Securities from any such
Person or any such organization, subject only to the general
limitations, restrictions or other provisions applicable to the
sale or purchase of Shares of such Series or other Securities of
the Trust generally.
SECTION 4.7. Right of Trustees and Officers to Own
Property or to Engage in Business; Authority of Trustees to
Permit Others to Do Likewise. The Trustees, in their capacity as
Trustees, and (unless otherwise specifically directed by vote of
the Trustees) the officers of the Trust in their capacity as
such, shall not be required to devote their entire time to the
business and affairs of the Trust. Except as otherwise
specifically provided by vote of the Trustees, or by agreement in
any particular case, any Trustee or officer of the Trust may
acquire, own, hold and dispose of, for his own individual
account, any property, and acquire, own, hold, carry on and
dispose of, for his own individual account, any business entity
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or business activity, whether similar or dissimilar to any
property or business entity or business activity invested in or
carried on by the Trust, and without first offering the same as
an investment opportunity to the Trust, and may exercise all
rights in respect thereof as if he were not a Trustee or officer
of the Trust. The Trustees shall also have power, generally or
in specific cases, to permit employees or agents of the Trust to
have the same rights (or lesser rights) to acquire, hold, own and
dispose of property and businesses, to carry on businesses, and
to accept investment opportunities without offering them to the
Trust, as the Trustees have by virtue of this Section 4.7.
SECTION 4.8. Reliance on Experts. The Trustees and
officers may consult with counsel, engineers, brokers,
appraisers, auctioneers, accountants, investment bankers,
securities analysts or other Persons (any of which may be a firm
in which one or more of the Trustees or officers is or are
members or otherwise interested) whose profession gives authority
to a statement made by them on the subject in question, and who
are reasonably deemed by the Trustees or officers in question to
be competent, and the advice or opinion of such Persons shall be
full and complete personal protection to all of the Trustees and
officers in respect of any action taken or suffered by them in
good faith and in reliance on or in accordance with such advice
or opinion. In discharging their duties, Trustees and officers,
when acting in good faith, may rely upon financial statements of
the Trust represented to them to be correct by any officer of the
Trust having charge of its books of account, or stated in a
written report by an independent certified public accountant
fairly to present the financial position of the Trust. The
Trustees and officers may rely, and shall be personally protected
in acting, upon any instrument or other document believed by them
to be genuine.
SECTION 4.9. Surety Bonds. No Trustee, officer,
employee or agent of the Trust shall, as such, be obligated to
give any bond or surety or other security for the performance of
any of his duties, unless required by applicable law or
regulation, or unless the Trustees shall otherwise determine in
any particular case.
SECTION 4.10. Apparent Authority of Trustees and
Officers. No purchaser, lender, transfer agent or other Person
dealing with the Trustees or any officer of the Trust shall be
bound to make any inquiry concerning the validity of any
transaction purporting to be made by the Trustees or by such
officer, or to make inquiry concerning or be liable for the
application of money or property paid, loaned or delivered to or
on the order of the Trustees or of such officer.
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SECTION 4.11. Other Relationships Not Prohibited. The
fact that:
(i) any of the Shareholders, Trustees or
officers of the Trust is a shareholder, director,
officer, partner, trustee, employee, manager,
adviser, principal underwriter or distributor or
agent of or for any Contracting Party (as defined
in Section 5.2 hereof), or of or for any parent or
affiliate of any Contracting Party, or that the
Contracting Party or any parent or affiliate
thereof is a Shareholder or has an interest in the
Trust or any Portfolio, or that
(ii) any Contracting Party may have a
contract providing for the rendering of any similar
services to one or more other corporations, trusts,
associations, partnerships, limited partnerships or
other organizations, or have other business or
interests, shall not affect the validity of any
contract for the performance and assumption of
services, duties and responsibilities to, for or of
the Trust and/or the Trustees or disqualify any
Shareholder, Trustee or officer of the Trust from
voting a upon or executing the same or create any
liability or accountability to the Trust or to the
holders of Shares of any Series; provided, that, in
the case of any relationship or interest referred
to in the preceding clause (i) on the part of any
Trustee or officer of the Trust, either (x) the
material facts as to such relationship or interest
have been disclosed to or are known by the Trustees
not having any such relationship or interest and
the contract involved is approved in good faith by
a majority of such Trustees not having any such
relationship or interest (even though such
unrelated or disinterested Trustees are less than a
quorum of all of the Trustees), (y) the material
facts as to such relationship or interest and as to
the contract have been disclosed to or are known by
the Shareholders entitled to vote thereon and the
contract involved is specifically approved in good
faith by vote of the Shareholders, or (z) the
specific contract involved is fair to the Trust as
of the time it is authorized, approved or ratified
by the Trustees or by the Shareholders.
SECTION 4.12. Payment of Trust Expenses. The Trustees
are authorized to pay or to cause to be paid out of the principal
or income of the Trust, or partly out of principal and partly out
of income, and according to any allocation to particular
Portfolios made by them pursuant to Section 6.2(b) hereof, all
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expenses, fees, charges, taxes and liabilities incurred or
arising in connection with the business and affairs of the Trust
or in connection with the management thereof, including, but not
limited to, the Trustees compensation and such expenses and
charges for the services of the Trusts officers, employees,
Investment Advisor, Administrator, Distributor, Principal
Underwriter, auditor, counsel, Custodian, Transfer Agent,
Dividend Disbursing Agent, Accounting Agent, Shareholder
Servicing Agent, and such other agents, consultants, and
independent contractors and such other expenses and charges as
the Trustees may deem necessary or proper to incur.
SECTION 4.13. Ownership of the Trust Property. Legal
title to all the Trust Property shall be vested in the Trustees
as joint tenants, except that the Trustees shall have power to
cause legal title to any Trust Property to be held by or in the
name of one or more of the Trustees, or in the name of the Trust,
or of any particular Portfolio, or in the name of any other
Person as nominee, on such terms as the Trustees may determine;
provided, that the interest of the Trust and of the respective
Portfolio therein is appropriately protected. The right, title
and interest of the Trustees in the Trust Property shall vest
automatically in each Person who may hereafter become a Trustee.
Upon the termination of the term of office of a Trustee as
provided in Section 4.1(c), (d) or (e) hereof, such Trustee shall
automatically cease to have any right, title or interest in any
of the Trust Property, and the right, title and interest of such
Trustee in the Trust Property shall vest automatically in the
remaining Trustees. Such vesting and cessation of title shall be
effective whether or not conveyancing documents have been
executed and delivered pursuant to Section 4.1(i) hereof.
ARTICLE V
DELEGATION OF MANAGERIAL RESPONSIBILITIES
SECTION 5.1. Appointment; Action by Less than All
Trustees. The Trustees shall be responsible for the general
operating policy of the Trust and for the general supervision of
the business of the Trust conducted by officers, agents,
employees or advisers of the Trust or by independent contractors,
but the Trustees shall not be required personally to conduct all
the business of the Trust and, consistent with their ultimate
responsibility as stated herein, the Trustees may appoint, employ
or contract with one or more officers, employees and agents to
conduct, manage and/or supervise the operations of the Trust, and
may grant or delegate such authority to such officers, employees
and/or agents as the Trustees may, in their sole discretion, deem
to be necessary or desirable, without regard to whether such
authority is normally granted or delegated by trustees. With
respect to those matters of the operation and business of the
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Trust which they shall elect to conduct themselves, except as
otherwise provided by this Declaration or the By-Laws, if any,
the Trustees may authorize any single Trustee or defined group of
Trustees, or any committee consisting of a number of Trustees
less than the whole number of Trustees then in office without
specification of the particular Trustees required to be included
therein, to act for and to bind the Trust, to the same extent as
the whole number of Trustees could do, either with respect to one
or more particular matters or classes of matters, or generally.
SECTION 5.2. Certain Contracts. Subject to compliance
with the provisions of the 1940 Act, but notwithstanding any
limitations of present and future law or custom in regard to
delegation of powers by trustees generally, the Trustees may, at
any time and from time to time in their discretion and without
limiting the generality of their powers and authority otherwise
set forth herein, enter into one or more contracts with any one
or more corporations, trusts, associations, partnerships, limited
partnerships or other types of organizations, or individuals
("Contracting Party"), to provide for the performance and
assumption of some or all of the following services, duties and
responsibilities to, for or on behalf of the Trust and/or any
Portfolio, and/or the Trustees, and to provide for the
performance and assumption of such other services, duties and
responsibilities in addition to those set forth below, as the
Trustees may deem appropriate:
(a) Advisory. An investment advisory or
management agreement whereby the Investment Advisor
shall undertake to furnish the Trust such
management, investment advisory or supervisory,
administrative, accounting, legal, statistical and
research facilities and services, and such other
facilities and services, if any, as the Trustees
shall from time to time consider desirable, all
upon such terms and conditions as the Trustees may
in their discretion determine to be not
inconsistent with this Declaration, the applicable
provisions of the 1940 Act or any applicable
provisions of the By-Laws. Any such advisory or
management agreement and any amendment thereto
shall be subject to approval by a Majority
Shareholder Vote at a meeting of the Shareholders
of the Trust. Notwithstanding any provisions of
this Declaration, the Trustees may authorize the
Investment Advisor (subject to such general or
specific instructions as the Trustees may from time
to time adopt) to effect purchases, sales, loans or
exchanges of portfolio securities of the Trust on
behalf of the Trustees or may authorize any officer
or employee of the Trust or any Trustee to effect
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such purchases, sales, loans or exchanges pursuant
to recommendations of the Investment Advisor (and
all without further action by the Trustees). Any
such purchases, sales, loans and exchanges shall be
deemed to have been authorized by all of the
Trustees. The Trustees may, in their sole
discretion, call a meeting of Shareholders in order
to submit to a vote of Shareholders at such meeting
the approval of continuance of any such investment
advisory or management agreement. If the
Shareholders of any Portfolio should fail to
approve any such investment advisory or management
agreement, the Investment Advisor may nonetheless
serve as Investment Advisor with respect to any
other Portfolio whose Shareholders shall have
approved such contract.
(b) Administration. An agreement whereby the
agent, subject to the general supervision of the
Trustees and in conformity with any policies of the
Trustees with respect to the operations of the
Trust and each Portfolio, will supervise all or any
part of the operations of the Trust and each
Portfolio, and will provide all or any part of the
administrative and clerical personnel, office space
and office equipment and services appropriate for
the efficient administration and operations of the
Trust and each Portfolio (any such agent being
herein referred to as an "Administrator").
(c) Distribution. An agreement providing for
the sale of Shares of any one or more Series to net
the Trust not less than the net asset value per
Share (as described in Section 6.2(h) hereof) and
pursuant to which the Trust may appoint the other
party to such agreement as its principal
underwriter or sales agent for the distribution of
such Shares. The agreement shall contain such
terms and conditions as the Trustees may in their
discretion determine to be not inconsistent with
this Declaration, the applicable provisions of the
1940 Act and any applicable provisions of the
By-Laws (any such agent being herein referred to as
a "Distributor" or a "Principal Underwriter", as
the case may be).
(d) Custodian. The appointment of a bank or
trust company having an aggregate capital, surplus
and undivided profits (as shown in its last
published report) of at least two million dollars
($2,000,000) as custodian of the Securities and
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cash of the Trust and of each Portfolio and of the
accounting records in connection therewith (any
such agent being herein referred to as a
"Custodian").
(e) Transfer and Dividend Disbursing Agency.
An agreement with an agent to maintain records of
the ownership of outstanding Shares, the issuance
and redemption and the transfer thereof (any such
agent being herein referred to as a "Transfer
Agent"), and to disburse any dividends declared by
the Trustees and in accordance with the policies of
the Trustees and/or the instructions of any
particular Shareholder to reinvest any such
dividends (any such agent being herein referred to
as a "Dividend Disbursing Agent").
(f) Shareholder Servicing. An agreement with
an agent to provide service with respect to the
relationship of the Trust and its Shareholders,
records with respect to Shareholders and their
Shares, and similar matters (any such agent being
herein referred to as a "Shareholder Servicing
Agent").
(g) Accounting. An agreement with an agent
to handle all or any part of the accounting
responsibilities, whether with respect to the
Trusts properties, Shareholders or otherwise (any
such agent being herein referred to as an
"Accounting Agent").
The same Person may be the Contracting Party for some or all of
the services, duties and responsibilities to, for and of the
Trust and/or the Trustees, and the contracts with respect thereto
may contain such terms interpretive of or in addition to the
delineation of the services, duties and responsibilities provided
for, including provisions that are not inconsistent with the 1940
Act relating to the standard of duty of and the rights to
indemnification of the Contracting Party and others, as the
Trustees may determine. Nothing herein shall preclude, prevent
or limit the Trust or a Contracting Party from entering into
sub-contractual arrangements relative to any of the matters
referred to in subsections (a) through (g) of this Section 5.2.
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ARTICLE VI
PORTFOLIOS AND SHARES
SECTION 6.1. Description of Portfolios and Shares.
(a) Shares; Portfolios; Series of Shares.
The beneficial interest in the Trust shall be
divided into Shares having a nominal or par value
of one cent ($.01) per Share, and all of one class,
of which an unlimited number may be issued. The
Trustees shall have the authority from time to time
to establish and designate one or more separate,
distinct and independent Portfolios into which the
assets of the Trust shall be divided, and to
authorize a separate Series of Shares for each such
Portfolio (each of which Series, including without
limitation each Series authorized in Section 6.2
hereof, shall represent interests only in the
Portfolio with respect to which such Series was
authorized), as they deem necessary or desirable.
Except as otherwise provided as to a particular
Portfolio herein, or in the Certificate of
Designation therefor, the Trustees shall have all
the rights and powers, and be subject to all the
duties and obligations, with respect to each such
Portfolio and the assets and affairs thereof as
they have under this Declaration with respect to
the Trust and the Trust Property in general.
(b) Establishment, etc. of Portfolios;
Authorization of Shares. The establishment and
designation of any Portfolio in addition to the
Portfolios established and designated in Section
6.2 hereof and the authorization of the Shares
thereof shall be effective upon the execution by a
Majority of the Trustees (or by an officer of the
Trust pursuant to the vote of a Majority of the
Trustees) of an instrument setting forth such
establishment and designation and the relative
rights and preferences of the Shares of such
Portfolio and the manner in which the same may be
amended (a "Certificate of Designation"), and may
provide that the number of Shares of such Series
which may be issued is unlimited, or may limit the
number issuable. At any time that there are no
Shares outstanding of any particular Portfolio
previously established and designated, including
any Portfolio established and designated in Section
6.2 hereof, the Trustees may by an instrument
executed by a Majority of the Trustees (or by an
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officer of the Trust pursuant to the vote of a
Majority of the Trustees) terminate such Portfolio
and the establishment and designation thereof and
the authorization of its Shares (a "Certificate of
Termination"). Each Certificate of Designation,
Certificate of Termination and any instrument
amending a Certificate of Designation shall have
the status of an amendment to this Declaration of
Trust, and shall be filed and become effective as
provided in Section 9.4 hereof.
(c) Character of Separate Portfolios and
Shares Thereof. Each Portfolio established
hereunder shall be a separate component of the
assets of the Trust, and the holders of Shares of
the Series representing the beneficial interest in
the assets of that Portfolio shall be considered
Shareholders of such Portfolio, but such
Shareholders shall also be considered Shareholders
of the Trust for purposes of receiving reports and
notices and, except as otherwise provided herein or
in the Certificate of Designation of a particular
Portfolio as to such Portfolio, or as required by
the 1940 Act or other applicable law, the right to
vote, all without distinction by Series. The
Trustees shall have exclusive power without the
requirement of Shareholder approval to establish
and designate such separate and distinct
Portfolios, and to fix and determine the relative
rights and preferences as between the shares of the
respective Portfolios as to rights of redemption
and the price, terms and manner of redemption,
special and relative rights as to dividends and
other distributions and on liquidation, sinking or
purchase fund provisions, conversion rights, and
conditions under which the Shareholders of the
several Portfolios shall have separate voting
rights or no voting rights.
(d) Consideration for Shares. The Trustees
may issue Shares of any Series for such
consideration (which may include property subject
to, or acquired in connection with the assumption
of, liabilities) and on such terms as they may
determine (or for no consideration if pursuant to a
Share dividend or split-up), all without action or
approval of the Shareholders. All Shares when so
issued on the terms determined by the Trustees
shall be fully paid and non-assessable (but may be
subject to mandatory contribution back to the Trust
as provided in Section 6.2(h) hereof). The
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Trustees may classify or reclassify any unissued
Shares, or any Shares of any Series previously
issued and reacquired by the Trust, into Shares of
one or more other Portfolios that may be
established and designated from time to time.
SECTION 6.2. Establishment and Designation of the
International Portfolio; General Provisions for All Portfolios.
Without limiting the authority of the Trustees set forth in
Section 6.1(a) hereof to establish and designate further
Portfolios, there is hereby established and designated the
International Portfolio. The Shares of such Portfolio, and the
Shares of any further Portfolios that may from time to time be
established and designated by the Trustees shall (unless the
Trustees otherwise determine with respect to some further
Portfolio at the time of establishing and designating the same)
have the following relative rights and preferences:
(a) Assets Belonging to Portfolios. Any
portion of the Trust Property allocated to a
particular Portfolio, and all consideration
received by the Trust for the issue or sale of
Shares of such Portfolio, together with all assets
in which such consideration is invested or
reinvested, all interest, dividends, income,
earnings, profits and gains therefrom, and proceeds
thereof, including any proceeds derived from the
sale, exchange or liquidation of such assets, and
any funds or payments derived from any reinvestment
of such proceeds in whatever form the same may be,
shall be held by the Trustees in trust for the
benefit of the holders of Shares of that Portfolio
and shall irrevocably belong to that Portfolio for
all purposes, and shall be so recorded upon the
books of account of the Trust, and the Shareholders
of such Portfolio shall not have, and shall be
conclusively deemed to have waived, any claims to
the assets of any Portfolio of which they are not
Shareholders. Such consideration, assets,
interest, dividends, income, earnings, profits,
gains and proceeds, together with any General Items
allocated to that Portfolio as provided in the
following sentence, are herein referred to
collectively as "Portfolio Assets" of such
Portfolio, and as assets "belonging to" that
Portfolio. In the event that there are any assets,
income, earnings, profits, and proceeds thereof,
funds, or payments which are not readily
identifiable as belonging to any particular
Portfolio (collectively "General Items"), the
Trustees shall allocate such General Items to and
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among any one or more of the Portfolios established
and designated from time to time in such manner and
on such basis as they, in their sole discretion,
deem fair and equitable; and any General Items so
allocated to a particular Portfolio shall belong to
and be part of the Portfolio Assets of that
Portfolio. Each such allocation by the Trustees
shall be conclusive and binding upon the
Shareholders of all Portfolios for all purposes.
(b) Liabilities of Portfolios. The assets
belonging to each particular Portfolio shall be
charged with the liabilities in respect of that
Portfolio and all expenses, costs, charges and
reserves attributable to that Portfolio, and any
general liabilities, expenses, costs, charges or
reserves of the Trust which are not readily
identifiable as pertaining to any particular
Portfolio shall be allocated and charged by the
Trustees to and among any one or more of the
Portfolios established and designated from time to
time in such manner and on such basis as the
Trustees in their sole discretion deem fair and
equitable. The indebtedness, expenses, costs,
charges and reserves allocated and so charged to a
particular Portfolio are herein referred to as
"liabilities of" that Portfolio. Each allocation
of liabilities, expenses, costs, charges and
reserves by the Trustees shall be conclusive and
binding upon the Shareholders of all Portfolios for
all purposes. Any creditor of any Portfolio may
look only to the assets of that Portfolio to
satisfy such creditors debt.
(c) Dividends. Dividends and distributions
on Shares of a particular Portfolio may be paid
with such frequency as the Trustees may determine,
which may be daily or otherwise pursuant to a
standing resolution or resolutions adopted only
once or with such frequency as the Trustees may
determine, to the Shareholders of that Portfolio,
from such of the income, accrued or realized, and
capital gains, realized or unrealized, and out of
the assets belonging to that Portfolio, as the
Trustees may determine, after providing for actual
and accrued liabilities of that Portfolio. All
dividends and distributions on Shares of a
particular Portfolio shall be distributed pro rata
to the Shareholders of that Portfolio in proportion
to the number of such Shares held by such holders
at the date and time of record established for the
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payment of such dividends or distributions, except
that in connection with any dividend or
distribution program or procedure the Trustees may
determine that no dividend or distribution shall be
payable on Shares as to which the Shareholders
purchase order and/or payment have not been
received by the time or times established by the
Trustees under such program or procedure, or that
dividends or distributions shall be payable on
Shares which have been tendered by the holder
thereof for redemption or repurchase, but the
redemption or repurchase proceeds of which have not
yet been paid to such Shareholder. Such dividends
and distributions may be made in cash or Shares of
that Portfolio or a combination thereof as
determined by the Trustees, or pursuant to any
program that the Trustees may have in effect at the
time for the election by each Shareholder of the
mode of the making of such dividend or distribution
to that Shareholder. Any such dividend or
distribution paid in Shares will be paid at the net
asset value thereof as determined in accordance
with subsection (h) of this Section 6.2.
(d) Liquidation. In the event of the
liquidation or dissolution of the Trust, the
Shareholders of each Portfolio of which Shares are
outstanding shall be entitled to receive, when and
as declared by the Trustees, the excess of the
Portfolio Assets over the liabilities of such
Portfolio. The assets so distributable to the
Shareholders of any particular Portfolio shall be
distributed among such Shareholders in proportion
to the number of Shares of that Portfolio held by
them and recorded on the books of the Trust. The
liquidation of any particular Portfolio may be
authorized by vote of a Majority of the Trustees,
subject to the affirmative vote of "a majority of
the outstanding voting securities" of that
Portfolio, as the quoted phrase is defined in the
1940 Act, determined in accordance with clause
(iii) of the definition of "Majority Shareholder
Vote" in Section 1.4 hereof.
(e) Voting. The Shareholders shall have the
voting rights set forth in or determined under
Article VII hereof.
(f) Redemption by Shareholder. Each holder
of Shares of a particular Portfolio shall have the
right at such times as may be permitted by the
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Trust, but no less frequently than once each week,
to require the Trust to redeem all or any part of
his Shares of that Portfolio at a redemption price
equal to the net asset value per Share of that
Portfolio next determined in accordance with
subsection (h) of this Section 6.2 after the Shares
are properly tendered for redemption; provided,
that the Trustees may from time to time, in their
discretion, determine and impose a fee for such
redemption. Payment of the redemption price shall
be in cash; provided, however, that if the Trustees
determine, which determination shall be conclusive,
that conditions exist which make payment wholly in
cash unwise or undesirable, the Trust may make
payment wholly or partly in Securities or other
assets belonging to such Portfolio at the value of
such Securities or assets used in such
determination of net asset value. Notwithstanding
the foregoing, the Trust may postpone payment of
the redemption price and may suspend the right of
the holders of Shares of any Portfolio to require
the Trust to redeem Shares of that Portfolio during
any period or at any time when and to the extent
permissible under the 1940 Act.
(g) Redemption at the Option of the Trust.
Each Share of any Portfolio shall be subject to
redemption at the option of the Trust at the
redemption price which would be applicable if such
Share were then being redeemed by the Shareholder
pursuant to subsection (f) of this Section 6.2:
(i) at any time, if the Trustees determine in their
sole discretion that failure to so redeem may have
materially adverse consequences to the holders of
the Shares of the Trust or of any Portfolio, or
(ii) upon such other conditions with respect to
maintenance of Shareholder accounts of a minimum
amount as may from time to time be determined by
the Trustees and set forth in the then current
Prospectus of such Portfolio. Upon such redemption
the holders of the Shares so redeemed shall have no
further right with respect thereto other than to
receive payment of such redemption price.
(h) Net Asset Value. The net asset value per
Share of any Portfolio at any time shall be the
quotient obtained by dividing the value of the net
assets of such Portfolio at such time (being the
current value of the assets belonging to such
Portfolio, less its then existing liabilities) by
the total number of Shares of that Portfolio then
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outstanding, all determined in accordance with the
methods and procedures, including without
limitation those with respect to rounding,
established by the Trustees from time to time. The
Trustees may determine to maintain the net asset
value per Share of any Portfolio at a designated
constant dollar amount and in connection therewith
may adopt procedures not inconsistent with the 1940
Act for the continuing declaration of income
attributable to that Portfolio as dividends payable
in additional Shares of that Portfolio at the
designated constant dollar amount and for the
handling of any losses attributable to that
Portfolio. Such procedures may provide that in the
event of any loss each Shareholder shall be deemed
to have contributed to the shares of beneficial
interest account of that Portfolio his pro rata
portion of the total number of Shares required to
be cancelled in order to permit the net asset value
per Share of that Portfolio to be maintained, after
reflecting such loss, at the designated constant
dollar amount. Each Shareholder of the Trust shall
be deemed to have expressly agreed, by his
investment in any Portfolio with respect to which
the Trustees shall have adopted any such procedure,
to make the contribution referred to in the
preceding sentence in the event of any such loss.
(i) Transfer. All Shares of each particular
Portfolio shall be transferable, but transfers of
Shares of a particular Portfolio will be recorded
on the Share transfer records of the Trust
applicable to that Portfolio only at such times as
Shareholders shall have the right to require the
Trust to redeem Shares of that Portfolio and at
such other times as may be permitted by the
Trustees.
(j) Equality. All Shares of each particular
Portfolio shall represent an equal proportionate
interest in the assets belonging to that Portfolio
(subject to the liabilities of that Portfolio), and
each Share of any particular Portfolio shall be
equal to each other Share thereof; but the
provisions of this sentence shall not restrict any
distinctions permissible under subsection (c) of
this Section 6.2 that may exist with respect to
dividends and distributions on Shares of the same
Portfolio. The Trustees may from time to time
divide or combine the Shares of any particular
Portfolio into a greater or lesser number of Shares
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of that Portfolio without thereby changing the
proportionate beneficial interest in the assets
belonging to that Portfolio or in any way affecting
the rights of the holders of Shares of any other
Portfolio.
(k) Rights of Fractional Shares. Any
fractional Share of any Series shall carry
proportionately all the rights and obligations of a
whole Share of that Series, including rights and
obligations with respect to voting, receipt of
dividends and distributions, redemption of Shares,
and liquidation of the Trust or of the Portfolio to
which they pertain.
(l) Conversion Rights. Subject to compliance
with the requirements of the 1940 Act, the Trustees
shall have the authority to provide that holders of
Shares of any Portfolio shall have the right to
convert said Shares into Shares of one or more
other Portfolios in accordance with such
requirements and procedures as the Trustees may
establish.
SECTION 6.3. Ownership of Shares. The ownership of
Shares shall be recorded on the books of the Trust or of a
Transfer Agent or similar agent for the Trust, which books shall
be maintained separately for the Shares of each Series that has
been authorized. Certificates evidencing the ownership of Shares
need not be issued except as the Trustees may otherwise determine
from time to time, and the Trustees shall have power to call
outstanding Share certificates and to replace them with book
entries. The Trustees may make such rules as they consider
appropriate for the issuance of Share certificates, the use of
facsimile signatures, the transfer of Shares and similar matters.
The record books of the Trust as kept by the Trust or any
Transfer Agent or similar agent, as the case may be, shall be
conclusive as to who are the Shareholders and as to the number of
Shares of each Portfolio held from time to time by each such
Shareholder.
The holders of Shares of each Portfolio shall upon
demand disclose to the Trustees in writing such information with
respect to their direct and indirect ownership of Shares of such
Portfolio as the Trustees deem necessary to comply with the
provisions of the Internal Revenue Code, or to comply with the
requirements of any other authority.
SECTION 6.4. Investments in the Trust. The Trustees
may accept investments in any Portfolio of the Trust from such
Persons and on such terms and for such consideration, not
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inconsistent with the provisions of the 1940 Act, as they from
time to time authorize. The Trustees may authorize any
Distributor, Principal Underwriter, Custodian, Transfer Agent or
other Person to accept orders for the purchase of Shares that
conform to such authorized terms and to reject any purchase
orders for Shares, whether or not conforming to such authorized
terms.
SECTION 6.5. No Pre-emptive Rights. No Shareholder, by
virtue of holding Shares of any Portfolio, shall have any
pre-emptive or other right to subscribe to any additional Shares
of that Portfolio, or to any shares of any other Portfolio, or
any other Securities issued by the Trust.
SECTION 6.6. Status of Shares. Every Shareholder, by
virtue of having become a Shareholder, shall be held to have
expressly assented and agreed to the terms hereof and to have
become a party hereto. Shares shall be deemed to be personal
property, giving only the rights provided herein. Ownership of
Shares shall not entitle the Shareholder to any title in or to
the whole or any part of the Trust Property or right to call for
a partition or division of the same or for an accounting, nor
shall the ownership of Shares constitute the Shareholders
partners. The death of a Shareholder during the continuance of
the Trust shall not operate to terminate the Trust or any
Portfolio, nor entitle the representative of any deceased
Shareholder to an accounting or to take any action in court or
elsewhere against the Trust or the Trustees, but only to the
rights of said decedent under this Declaration of Trust.
ARTICLE VII
SHAREHOLDERS' VOTING POWERS AND MEETINGS
SECTION 7.1. Voting Powers. The Shareholders shall
have power to vote only (i) for the election or removal of
Trustees as provided in Sections 4.1(c) and (e) hereof, (ii) with
respect to the approval or termination in accordance with the
1940 Act of any contract with a Contracting Party as provided in
Section 5.2 hereof as to which Shareholder approval is as
required by the 1940 Act, (iii) with respect to any termination
or reorganization of the Trust or any Portfolio to the extent and
as provided in Sections 9.1 and 9.2 hereof, (iv) with respect to
any amendment of this Declaration of Trust to the extent and as
provided in Section 9.3 hereof, (v) to the same extent as the
stockholders of a Massachusetts business corporation as to
whether or not a court action, proceeding or claim should or
should not be brought or maintained derivatively or as a class
action on behalf of the Trust or any Portfolio, or the
Shareholders of any of them (provided, however, that a
Shareholder of a particular Portfolio shall not in any event be
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entitled to maintain a derivative or class action on behalf of
any other Portfolio or the Shareholders thereof), and (vi) with
respect to such additional matters relating to the Trust as may
be required by the 1940 Act, this Declaration of Trust, the
By-Laws or any registration of the Trust with the Commission (or
any successor agency) or any State, or as the Trustees may
consider necessary or desirable. If and to the extent that the
Trustees shall determine that such action is required by law,
they shall cause each matter required or permitted to be voted
upon at a meeting or by written consent of Shareholders to be
submitted to a separate vote of the outstanding Shares of each
Portfolio entitled to vote thereon; provided, that (i) when
expressly required by this Declaration or by the 1940 Act,
actions of Shareholders shall be taken by Single Class Voting of
all outstanding Shares of each Series whose holders are entitled
to vote thereon; and (ii) when the Trustees determine that any
matter to be submitted to a vote of Shareholders affects only the
rights or interests of Shareholders of one or more but not all
Portfolios, then only the Shareholders of the Portfolios so
affected shall be entitled to vote thereon.
SECTION 7.2. Number of Votes and Manner of Voting;
Proxies. On each matter submitted to a vote of the Shareholders,
each holder of Shares of any Series shall be entitled to a number
of votes equal to the number of Shares of such Series standing in
his name on the books of the Trust. There shall be no cumulative
voting in the election of Trustees. Shares may be voted in
person or by proxy. A proxy with respect to Shares held in the
name of two (2) or more Persons shall be valid if executed by any
one of them unless at or prior to exercise of the proxy the Trust
receives a specific written notice to the contrary from any one
of them. A proxy purporting to be executed by or on behalf of a
Shareholder shall be deemed valid unless challenged at or prior
to its exercise and the burden of proving invalidity shall rest
on the challenger. Until Shares are issued, the Trustees may
exercise all rights of Shareholders and may take any action
required by law, this Declaration of Trust or the By-Laws to be
taken by Shareholders.
SECTION 7.3. Meetings. Meetings of Shareholders may be
called by the Trustees from time to time for the purpose of
taking action upon any matter requiring the vote or authority of
the Shareholders as herein provided, or upon any other matter
deemed by the Trustees to be necessary or desirable. Written
notice of any meeting of Shareholders shall be given or caused to
be given by the Trustees by mailing such notice at least seven
(7) days before such meeting, postage prepaid, stating the time,
place and purpose of the meeting, to each Shareholder at the
Shareholders address as it appears on the records of the Trust.
The Trustees shall promptly call and give notice of a meeting of
Shareholders for the purpose of voting upon removal of any
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Trustee of the Trust when requested to do so in writing by
Shareholders holding not less than ten percent (10%) of the
Shares then outstanding. If the Trustees shall fail to call or
give notice of any meeting of Shareholders for a period of thirty
(30) days after written application by Shareholders holding at
least ten percent (10%) of the Shares then outstanding requesting
that a meeting be called for any other purpose requiring action
by the Shareholders as provided herein or in the By-Laws, then
Shareholders holding at least ten percent (10%) of the Shares
then outstanding may call and give notice of such meeting, and
thereupon the meeting shall be held in the manner provided for
herein in case of call thereof by the Trustees.
SECTION 7.4. Record Dates. For the purpose of
determining the Shareholders who are entitled to vote or act at
any meeting or any adjournment thereof, or who are entitled to
participate in any dividend or distribution, or for the purpose
of any other action, the Trustees may from time to time close the
transfer books for such period, not exceeding thirty (30) days
(except at or in connection with the termination of the Trust),
as the Trustees may determine; or without closing the transfer
books the Trustees may fix a date and time not more than sixty
(60) days prior to the date of any meeting of Shareholders or
other action as the date and time of record for the determination
of Shareholders entitled to vote at such meeting or any
adjournment thereof or to be treated as Shareholders of record
for purposes of such other action, and any Shareholder who was a
Shareholder at the date and time so fixed shall be entitled to
vote at such meeting or any adjournment thereof or to be treated
as a Shareholder of record for purposes of such other action,
even though he has since that date and time disposed of his
Shares, and no Shareholder becoming such after that date and time
shall be so entitled to vote at such meeting or any adjournment
thereof or to be treated as a Shareholder of record for purposes
of such other action.
SECTION 7.5. Quorum and Required Vote. A majority of
the Shares entitled to vote shall be a quorum for the transaction
of business at a Shareholders meeting, but any lesser number
shall be sufficient for adjournments. Any adjourned session or
sessions may be held within a reasonable time after the date set
for the original meeting without the necessity of further notice.
A Majority Shareholder Vote at a meeting of which a quorum is
present shall decide any question, except when a different vote
is required or permitted by any provision of the 1940 Act or
other applicable law or by this Declaration of Trust or the
By-Laws, or when the Trustees shall in their discretion require a
larger vote or the vote of a majority or larger fraction of the
Shares of one or more particular Series.
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SECTION 7.6. Action by Written Consent. Subject to the
provisions of the 1940 Act and other applicable law, any action
taken by Shareholders may be taken without a meeting if a
majority of Shareholders entitled to vote on the matter (or such
larger proportion thereof or of the Shares of any particular
Series as shall be required by the 1940 Act or by any express
provision of this Declaration of Trust or the By-Laws or as shall
be permitted by the Trustees) consent to the action in writing
and if the writings in which such consent is given are filed with
the records of the meetings of Shareholders, to the same extent
and for the same period as proxies given in connection with a
Shareholders meeting. Such consent shall be treated for all
purposes as a vote taken at a meeting of Shareholders.
SECTION 7.7. Inspection of Records. The records of the
Trust shall be open to inspection by Shareholders to the same
extent as is permitted stockholders of a Massachusetts business
corporation under the Massachusetts Business Corporation Law.
SECTION 7.8. Additional Provisions. The By-Laws may
include further provisions for Shareholders votes and meetings
and related matters not inconsistent with the provisions hereof.
ARTICLE VIII
LIMITATION OF LIABILITY; INDEMNIFICATION
SECTION 8.1. Trustees, Shareholders, etc. Not
Personally Liable; Notice. The Trustees and officers of the
Trust, in incurring any debts, liabilities or obligations, or in
limiting or omitting any other actions for or in connection with
the Trust, are or shall be deemed to be acting as Trustees or
officers of the Trust and not in their own capacities. No
Shareholder shall be subject to any personal liability whatsoever
in tort, contract or otherwise to any other Person or Persons in
connection with the assets or the affairs of the Trust or of any
Portfolio, and subject to Section 8.4 hereof, no Trustee,
officer, employee or agent of the Trust shall be subject to any
personal liability whatsoever in tort, contract, or otherwise, to
any other Person or Persons in connection with the assets or
affairs of the Trust or of any Portfolio, save only that arising
from his own willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of his
office or the discharge of his functions. The Trust (or if the
matter relates only to a particular Portfolio, that Portfolio)
shall be solely liable for any and all debts, claims, demands,
judgments, decrees, liabilities or obligations of any and every
kind, against or with respect to the Trust or such Portfolio in
tort, contract or otherwise in connection with the assets or the
affairs of the Trust or such Portfolio, and all Persons dealing
with the Trust or any Portfolio shall be deemed to have agreed
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that resort shall be had solely to the Trust Property of the
Trust or the Portfolio Assets of such Portfolio, as the case may
be, for the payment or performance thereof.
The Trustees shall use their best efforts to ensure that
every note, bond, contract, instrument, certificate or
undertaking made or issued by the Trustees or by any officers or
officer shall give notice that this Declaration of Trust is on
file with the Secretary of The Commonwealth of Massachusetts and
shall recite to the effect that the same was executed or made by
or on behalf of the Trust or by them as Trustees or Trustee or as
officers or officer, and not individually, and that the
obligations of such instrument are not binding upon any of them
or the Shareholders individually but are binding only upon the
assets and property of the Trust, or the particular Portfolio in
question, as the case may be, but the omission thereof shall not
operate to bind any Trustees or Trustee or officers or officer or
Shareholders or Shareholder individually, or to subject the
Portfolio Assets of any Portfolio to the obligations of any other
Portfolio.
SECTION 8.2. Trustees' Good Faith Action; Expert
Advice; No Bond or Surety. The exercise by the Trustees of their
powers and discretions hereunder shall be binding upon everyone
interested. Subject to Section 8.4 hereof, a Trustee shall be
liable for his own willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the
conduct of the office of Trustee, and for nothing else, and shall
not be liable for errors of judgment or mistakes of fact or law.
Subject to the foregoing, (i) the Trustees shall not be
responsible or liable in any event for any neglect or wrongdoing
of any officer, agent, employee, consultant, Investment Advisor,
Administrator, Distributor or Principal Underwriter, Custodian or
Transfer Agent, Dividend Disbursing Agent, Shareholder Servicing
Agent or Accounting Agent of the Trust, nor shall any Trustee be
responsible for the act or omission of any other Trustee;
(ii) the Trustees may take advice of counsel or other experts
with respect to the meaning and operation of this Declaration of
Trust and their duties as Trustees, and shall be under no
liability for any act or omission in accordance with such advice
or for failing to follow such advice; and (iii) in discharging
their duties, the Trustees, when acting in good faith, shall be
entitled to rely upon the books of account of the Trust and upon
written reports made to the Trustees by any officer appointed by
them, any independent public accountant, and (with respect to the
subject matter of the contract involved) any officer, partner or
responsible employee of a Contracting Party appointed by the
Trustees pursuant to Section 5.2 hereof. The Trustees as such
shall not be required to give any bond or surety or any other
security for the performance of their duties.
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SECTION 8.3. Indemnification of Shareholders. If any
Shareholder (or former Shareholder) of the Trust shall be charged
or held to be personally liable for any obligation or liability
of the Trust solely by reason of being or having been a
Shareholder and not because of such Shareholders acts or
omissions or for some other reason, the Trust (upon proper and
timely request by the Shareholder) shall assume the defense
against such charge and satisfy any judgment thereon, and the
Shareholder or former Shareholder (or the heirs, executors,
administrators or other legal representatives thereof, or in the
case of a corporation or other entity, its corporate or other
general successor) shall be entitled (but solely out of the
assets of the Portfolio of which such Shareholder or former
Shareholder is or was the holder of Shares) to be held harmless
from and indemnified against all loss and expense arising from
such liability.
SECTION 8.4. Indemnification of Trustees, Officers,
etc. Subject to the limitations set forth hereinafter in this
Section 8.4, the Trust shall indemnify (from the assets of the
Portfolio or Portfolios to which the conduct in question relates)
each of its Trustees and officers (including Persons who serve at
the Trusts request as directors, officers or trustees of another
organization in which the Trust has any interest as a
shareholder, creditor or otherwise [hereinafter, together with
such Persons heirs, executors, administrators or personal
representative, referred to as a "Covered Person"]) against all
liabilities, including but not limited to amounts paid in
satisfaction of judgments, in compromise or as fines and
penalties, and expenses, including reasonable accountants and
counsel fees, incurred by any Covered Person in connection with
the defense or disposition of any action, suit or other
proceeding, whether civil or criminal, before any court or
administrative or legislative body, in which such Covered Person
may be or may have been involved as a party or otherwise or with
which such Covered Person may be or may have been threatened,
while in office or thereafter, by reason of being or having been
such a Trustee or officer, director or trustee, except with
respect to any matter as to which it has been determined that
such Covered Person (i) did not act in good faith in the
reasonable belief that such Covered Person's action was in or not
opposed to the best interests of the Trust or (ii) had acted with
willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of such Covered
Person's office (either and both of the conduct described in (i)
and (ii) being referred to hereafter as "Disabling Conduct"). A
determination that the Covered Person is entitled to
indemnification may be made by (i) a final decision on the merits
by a court or other body before whom the proceeding was brought
that the Covered Person to be indemnified was not liable by
reason of Disabling Conduct, (ii) dismissal of a court action or
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an administrative proceeding against a Covered Person for
insufficiency of evidence of Disabling Conduct, or (iii) a
reasonable determination, based upon a review of the facts, that
the indemnitee was not liable by reason of Disabling Conduct by
(a) a vote of a majority of a quorum of Trustees who are neither
"interested persons" of the Trust as defined in Section 2(a)(19)
of the 1940 Act nor parties to the proceeding, or (b) an
independent legal counsel in a written opinion. Expenses,
including accountants and counsel fees so incurred by any such
Covered Person (but excluding amounts paid in satisfaction of
judgments, in compromise or as fines or penalties), may be paid
from time to time by the Portfolio or Portfolios to which the
conduct in question related in advance of the final disposition
of any such action, suit or proceeding; provided, that the
Covered Person shall have undertaken to repay the amounts so paid
to such Portfolio or Portfolios if it is ultimately determined
that indemnification of such expenses is not authorized under
this Article VIII and (i) the Covered Person shall have provided
security for such undertaking, (ii) the Trust shall be insured
against losses arising by reason of any lawful advances, or
(iii) a majority of a quorum of the disinterested Trustees, or an
independent legal counsel in a written opinion, shall have
determined, based on a review of readily available facts (as
opposed to a full trial type inquiry), that there is reason to
believe that the Covered Person ultimately will be found entitled
to indemnification.
SECTION 8.5. Compromise Payment. As to any matter
disposed of by a compromise payment by any such Covered Person
referred to in Section 8.4 hereof, pursuant to a consent decree
or otherwise, no such indemnification either for said payment or
for any other expenses shall be provided unless such
indemnification shall be approved (i) by a majority of a quorum
of the disinterested Trustees or (ii) by an independent legal
counsel in a written opinion. Approval by the Trustees pursuant
to clause (i) or by independent legal counsel pursuant to clause
(ii) shall not prevent the recovery from any Covered Person of
any amount paid to such Covered Person in accordance with either
of such clauses as indemnification if such Covered Person is
subsequently adjudicated by a court of competent jurisdiction not
to have acted in good faith in the reasonable belief that such
Covered Person's action was in or not opposed to the best
interests of the Trust or to have been liable to the Trust or its
Shareholders by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the
conduct of such Covered Person's office.
SECTION 8.6. Indemnification Not Exclusive, etc. The
right of indemnification provided by this Article VIII shall not
be exclusive of or affect any other rights to which any such
Covered Person may be entitled. As used in this Article VIII, a
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"disinterested" Person is one against whom none of the actions,
suits or other proceedings in question, and no other action, suit
or other proceeding on the same or similar grounds is then or has
been pending or threatened. Nothing contained in this Article
VIII shall affect any rights to indemnification to which
personnel of the Trust, other than Trustees and officers, and
other Persons may be entitled by contract or otherwise under law,
nor the power of the Trust to purchase and maintain liability
insurance on behalf of any such Person.
SECTION 8.7. Liability of Third Persons Dealing with
Trustees. No person dealing with the Trustees shall be bound to
make any inquiry concerning the validity of any transaction made
or to be made by the Trustees or to see to the application of any
payments made or property transferred to the Trust or upon its
order.
ARTICLE IX
DURATION; REORGANIZATION; AMENDMENTS
SECTION 9.1. Duration and Termination of Trust. Unless
terminated as provided herein, the Trust shall continue without
limitation of time and, without limiting the generality of the
foregoing, no change, alteration or modification with respect to
any Portfolio or Series of Shares shall operate to terminate the
Trust. The Trust may be terminated at any time by a Majority of
the Trustees, subject to the favorable vote of the holders of not
less than a majority of the Shares outstanding and entitled to
vote of each Portfolio of the Trust, or by an instrument or
instruments in writing without a meeting, consented to by the
holders of not less than a majority of such Shares, or by such
greater or different vote of Shareholders of any Series as may be
established by the Certificate of Designation by which such
Series was authorized. Upon termination, after paying or
otherwise providing, for all charges, taxes, expenses and
liabilities, whether due or accrued or anticipated as may be
determined by the Trustees, the Trust shall in accordance with
such procedures as the Trustees consider appropriate reduce the
remaining assets to distributable form in cash, Securities or
other property, or any combination thereof, and distribute the
proceeds to the Shareholders, in conformity with the provisions
of Section 6.2(d) hereof.
SECTION 9.2. Reorganization. The Trustees may sell,
convey and transfer all or substantially all of the assets of the
Trust, or the assets belonging to any one or more Portfolios, to
another trust, partnership, association or corporation organized
under the laws of any state of the United States, or may transfer
such assets to another Portfolio of the Trust, in exchange for
cash, Shares or other Securities (including, in the case of a
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transfer to another Portfolio of the Trust, Shares of such other
Portfolio), or to the extent permitted by law then in effect may
merge or consolidate the Trust or any Portfolio with any other
Trust or any corporation, partnership, or association organized
under the laws of any state of the United States, all upon such
terms and conditions and for such consideration when and as
authorized by vote or written consent of a Majority of the
Trustees and approved by the affirmative vote of the holders of
not less than a majority of the Shares outstanding and entitled
to vote of each Portfolio whose assets are affected by such
transaction, or by an instrument or instruments in writing
without a meeting, consented to by the holders of not less than a
majority of such Shares, and/or by such other vote of any Series
as may be established by the Certificate of Designation with
respect to such Series. Following such transfer, the Trustees
shall distribute the cash, Shares or other Securities or other
consideration received in such transaction (giving due effect to
the assets belonging to and indebtedness of, and any other
differences among, the various Portfolios of which the assets
have so been transferred) among the Shareholders of the Portfolio
of which the assets have been so transferred; and if all of the
assets of the Trust have been so transferred, the Trust shall be
terminated. Nothing in this Section 9.2 shall be construed as
requiring approval of Shareholders for the Trustees to organize
or assist in organizing one or more corporations, trusts,
partnerships, associations or other organizations, and to sell,
convey or transfer less than substantially all of the Trust
Property or the assets belonging to any Portfolio to such
organizations or entities.
SECTION 9.3. Amendments; etc. All rights granted to
the Shareholders under this Declaration of Trust are granted
subject to the reservation of the right to amend this Declaration
of Trust as herein provided, except that no amendment shall
repeal the limitations on personal liability of any Shareholder
or Trustee or the prohibition of assessment upon the Shareholders
(otherwise than as permitted under Section 6.2(h)) without the
express consent of each Shareholder or Trustee involved. Subject
to the foregoing, the provisions of this Declaration of Trust
(whether or not related to the rights of Shareholders) may be
amended at any time, so long as such amendment does not adversely
affect the rights of any Shareholder with respect to which such
amendment is or purports to be applicable and so long as such
amendment is not in contravention of applicable law, including
the 1940 Act, by an instrument in writing signed by a Majority of
the Trustees (or by an officer of the Trust pursuant to the vote
of a Majority of the Trustees). Any amendment to this
Declaration of Trust that adversely affects the rights of all
Shareholders may be adopted at any time by an instrument in
writing signed by a Majority of the Trustees (or by an officer of
the Trust pursuant to a vote of a Majority of the Trustees) when
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authorized to do so by the vote in accordance with Section 7.1
hereof of Shareholders holding a majority of all the Shares
outstanding and entitled to vote, without regard to Series, or if
said amendment adversely affects the rights of the Shareholders
of less than all of the Portfolios, by the vote of the holders of
a majority of all the Shares entitled to vote of each Portfolio
so affected. Subject to the foregoing, any such amendment shall
be effective when the instrument containing the terms thereof and
a certificate (which may be a part of such instrument) to the
effect that such amendment has been duly adopted, and setting
forth the circumstances thereof, shall have been executed and
acknowledged by a Trustee or officer of the Trust and filed as
provided in Section 9.4 hereof.
SECTION 9.4. Filing of Copies of Declaration and
Amendments. The original or a copy of this Declaration and of
each amendment hereto (including each Certificate of Designation
and Certificate of Termination), as well as the certificates
called for by Section 4.1(k) hereof as to changes in the
Trustees, shall be kept at the office of the Trust where it may
be inspected by any Shareholder, and one copy of each such
instrument shall be filed with the Secretary of The Commonwealth
of Massachusetts, as well as with any other governmental office
where such filing may from time to time be required by the laws
of Massachusetts. A restated Declaration, integrating into a
single instrument all of the provisions of this Declaration which
are then in effect and operative, may be executed from time to
time by a Majority of the Trustees and shall, upon filing with
the Secretary of The Commonwealth of Massachusetts, be conclusive
evidence of all amendments contained therein and may thereafter
be referred to in lieu of the original Declaration and the
various amendments thereto.
ARTICLE X
MISCELLANEOUS
SECTION 10.1. Governing Law. This Declaration of Trust
is executed and delivered in The Commonwealth of Massachusetts
and with reference to the laws thereof, and the rights of all
parties and the construction and effect of every provision hereof
shall be subject to and construed according to the laws of said
Commonwealth.
SECTION 10.2. Counterparts. This Declaration of Trust
and any amendment thereto may be simultaneously executed in
several counterparts, each of which so executed shall be deemed
to be an original, and such counterparts, together, shall
constitute but one and the same instrument, which shall be
sufficiently evidenced by any such original counterpart.
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SECTION 10.3. Reliance by Third Parties. Any
certificate executed by an individual who, according to the
records in the office of the Secretary of The Commonwealth of
Massachusetts appears to be a Trustee hereunder, certifying to:
(a) the number or identity of Trustees or Shareholders, (b) the
due authorization of the execution of any instrument or writing,
(c) the form of any vote passed as a meeting of Trustees or
Shareholders, (d) the fact that the number of Trustees or
Shareholders present at any meeting or executing any written
instrument satisfies the requirements of this Declaration of
Trust, (e) the form of any By-Law adopted, or the identity of any
officers elected, by the Trustees, or (f) the existence or
non-existence of any fact or facts which in any manner relate to
the affairs of the Trust, shall be conclusive evidence as to the
matters so certified in favor of any Person dealing with the
Trustees, or any of them, and the successors of such Person.
SECTION 10.4. References; Headings. The masculine
gender shall include the feminine and neuter genders. Headings
are placed herein for convenience of reference only and shall not
be taken as a part of this Declaration or control or affect the
meaning, construction or effect hereof.
SECTION 10.5. Use of the Name "Alliance". Alliance
Capital Management Corporation ("Alliance") has consented to the
use by the Trust of the identifying name ("Alliance"), which is a
property right of Alliance. The Trust will only use the name
"Alliance" as a component of its name and for no other purpose,
and will not purport to grant to any third party the right to use
the name "Alliance" for any purpose. Alliance or any corporate
affiliate of Alliance may use or grant to others the right to use
the name "Alliance", as all or a portion of a corporate or
business name or for any commercial purpose, including a grant of
such right to any other investment company. At the request of
Alliance, the Trust will take such action as may be required to
provide its consent to the use of such name by Alliance, or any
corporate affiliate of Alliance, or by any Person to whom
Alliance or an affiliate of Alliance shall have granted the right
to the use of the name "Alliance". Upon the termination of any
investment advisory or management agreement into which Alliance
and the Trust may enter, the Trust shall, upon request by
Alliance, cease to use the name "Alliance" as a component of its
name, and shall not use such name or initials as a part of its
name or for any other commercial purpose, and shall cause its
officers and Trustees to take any and all actions which Alliance
may request to effect the foregoing and to reconvey to Alliance
or such corporate affiliate any and all rights to such name.
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IN WITNESS WHEREOF, the undersigned has hereunto set his
hand and seal, for himself and his assigns, and has thereby
accepted the Trusteeship as the Initial Trustee of Alliance
International Fund hereby granted and agreed to the provisions
hereof, all as of the day and year first above written.
/s/ Thomas E. Weesher
__________________________
Thomas E. Weesher
The undersigned Settlor of Alliance International Fund,
hereby accepts, approves and authorizes the foregoing Agreement
and Declaration of Trust of Alliance International Fund.
Dated: October 2, 1985
/s/ Bryan G. Tyson
__________________________
Bryan G. Tyson
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ACKNOWLEDGMENTS
M A S S A C H U S E T T S
Suffolk, ss.: October 2, 1985
Then personally appeared the above named Thomas E.
Weesner and acknowledged the foregoing instrument to be his free
act and deed.
Before me,
/s/ Kathleen A. McSharry
_____________________________
Notary Public
M A S S A C H U S E T T S
Suffolk, ss.: October 2, 1985
Then personally appeared the above named Bryan G. Tyson
and acknowledged the foregoing instrument to be his free act and
deed.
Before me,
/s/ Katleen A. McSharry
______________________________
Notary Public
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00250086.AU4
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ALLIANCE INTERNATIONAL FUND
Certificate of Amendment
The undersigned, being the Secretary of Alliance
International Fund (hereinafter referred to as the "Trust"), a
trust with transferable shares of the type commonly called a
Massachusetts business trust, DOES HEREBY CERTIFY that, pursuant
to the authority conferred upon the Trustees of the Trust by
Section 9.3 of the of the Agreement and Declaration of Trust,
dated October 2, 1985, as amended and restated December 13, 1990
hereinafter, as so amended and restated, referred to as the
"Declaration"), and by the affirmative vote of a Majority of the
Trustees duly cast at a meeting duly called and held on February
23, 1993, the Declaration is hereby amended as follows:
I. Section 1.4 of the Declaration is amended by adding thereto
the five additional definitions set forth in paragraphs (a)
through (e), below, and by amending and restating the definition
of "Majority Shareholder Vote" to read in its entirety as set
forth in paragraph (f), below:
"(a) "Class" or "Classes" shall mean, with respect to any
Series, any Shares of such Series in respect of which the
Trustees shall from time to time fix and determine any special
provisions relating to sales charges, any rights of redemption
and the price, terms and manner of redemption, special and
relative rights as to dividends and other distributions and on
liquidation, sinking or purchase fund provisions, conversion
rights, and conditions under which the Shareholders of such Class
shall have separate voting rights or no voting rights.
"(b) "Class A Shares" shall mean, with respect to Shares of
the International Portfolio, that class of such Shares which are
subject to a sales charge or "load" upon the purchase thereof but
the proceeds of the redemption of which are not subject to a
contingent deferred sales charge payable on such redemption.
"(c) "Class B Shares" shall mean, with respect to Shares of
the International Portfolio, that class of such Shares which are
not subject to a sales charge or "load" upon the purchase thereof
but the proceeds of the redemption of which may be reduced, to
the extent determined by the Trustees, by the amount of a
contingent deferred sales charge payable on such redemption
pursuant to subsection (e) of Section 6.2 hereof.
"(d) "Class C Shares" shall mean, with respect to shares of
the International Portfolio, that class of such Shares which are
not subject to a sales charge or "load" upon the purchase thereof
and the proceeds of the redemption of which may, but need not, be
<PAGE>
subject to a contingent deferred sales charge payable on such
redemption.
"(e) "Internal Revenue Code" shall mean the Internal Revenue
Code of 1986, as from time to time amended and in effect, or any
substituted statute dealing with the same general subject matter
as the Internal Revenue Code of 1986, as in effect on January 1,
1993, and in either the rules and regulations thereunder, as from
time to time interpreted and applied by applicable case law
thereunder.
"(f) "Majority Shareholder Vote," as used with respect to
the election of any Trustee at a meeting of Shareholders, shall
mean the vote for the election of such Trustee of a plurality of
all outstanding Shares of the Trust, without regard to Series or
Class, represented in person or by proxy at such meeting and
entitled to vote thereon, provided that a quorum (as determined
in accordance with the By-Laws) is present, and as used with
respect to any other action required or permitted to be taken by
Shareholders, shall mean the affirmative vote for such action of
the holders of that number of all outstanding Shares (or, where a
separate vote of Shares of any particular Series or Class is to
be taken, the affirmative vote of that number of the outstanding
Shares of that Series or Class) of the Trust which constitutes:
(i) a majority of all Shares (or of Shares of the particular
series or Class) represented in person or by proxy and entitled
to vote on such action at the meeting of Shareholders at which
such action is to be taken, provided that a quorum (as determined
in accordance with the By-Laws) is present; or (ii) if such vote
is to be given or such action is to be taken by written consent
of Shareholders without a meeting, a majority of all Shares (or
of Shares of the particular Series or Class) issued and
outstanding and entitled to vote on such action; provided, that
(iii) as used with respect to any action requiring the
affirmative vote of "a majority of the outstanding voting
securities", as the quoted phrase is defined in the 1940 Act, of
the Trust or of any Portfolio, "Majority Shareholder Vote" means
the vote for such action at a meeting of Shareholders of the
smallest majority of all outstanding Shares of the Trust (or of
Shares of the particular Series or Class) entitled to vote on
such action which satisfies such 1940 Act voting requirement."
II. Paragraph (c) of Section 5.2 ("Certain Contracts") is hereby
amended and restated in its entirety to read as follows:
"(c) Distribution. An agreement providing for the sale
of Shares of any one or more Series or Classes of any Series
to net the Trust not less than the net asset value per Share
(as described in Section 6.2(g) hereof) and pursuant to which
the Trust may appoint the other party to such agreement as
its principal underwriter or sales agent for the distribution
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of such Shares. The agreement shall contain such terms and
conditions as the Trustees may in their discretion determine
to be not inconsistent with this Declaration, the applicable
provisions of the 1940 Act and any applicable provisions of
the By-Laws (any such agent being herein referred to as a
"Distributor" or a "Principal Underwriter", as the case may
be)."
III. Sections 6.1 and 6.2 are hereby amended and restated in
their entirety to read as follows:
"SECTION 6.1. Description of Portfolios and Shares.
"(a) Shares; Portfolios; Series and Classes of Shares. The
beneficial interest in the Trust shall be divided into Shares
having a nominal or par value of one cent ($.01) per Share, of
which an unlimited number may be issued. The Trustees shall have
the power and authority, without any requirement of Shareholder
approval, from time to time to establish and designate one or
more separate, distinct and independent Portfolios, in addition
to the International Portfolio established and designated by
Section 6.2 hereof, into which the assets of the Trust shall be
divided, to authorize a separate Series of Shares for each such
additional Portfolio (each of which Series shall represent
interests only in the Portfolio for which such Series was
authorized), and to authorize two or more separate Classes of
Shares of any such Series, as they deem necessary or desirable.
The Trustees shall have the power to classify or reclassify any
unissued Shares of any Series, or any Shares of any Series
previously issued and reacquired by the Trust (including in
either case any Shares of the International Portfolio) into any
number of additional Classes of such Series by from time to time
setting or changing in one or more respects provisions applicable
to such Class or Classes relating to sales charges, any rights of
redemption and the price, terms and manner of redemption, special
and relative rights as to dividends and other distributions and
on liquidation, sinking or purchase fund provisions and
conversion rights, and (subject to Article 7 hereof) the
conditions under which the Shareholders of the several Classes
shall have separate voting rights or no voting rights. Except as
otherwise provided as to a particular Portfolio herein or in the
Certificate of Designation therefor, the Trustees shall have all
the rights and powers, and be subject to all the duties and
obligations, with respect to each such Portfolio and the assets
and affairs thereof as they have under this Declaration with
respect to the Trust and the Trust Property in general.
"(b) Establishment, etc. of Portfolios; Authorization of
Shares. In order to establish and designate any Portfolio in
addition to the International Portfolio, and to authorize the
Shares thereof, a Majority of the Trustees (or an officer of the
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Trust pursuant to the vote of a Majority of the Trustees) shall
execute an instrument setting forth such establishment and
designation and the relative rights and preferences of the Shares
of the Series representing interests in such Portfolio and the
manner in which the same may be amended (a "Certificate of
Designation"), which may provide that the number of Shares of
such Series or any Class thereof which may be issued is
unlimited, or may limit the number issuable. At any time that
there are outstanding no Shares of any particular Series or Class
previously established and designated, including any Class of the
International Portfolio, and also, in the case of any Class of a
Series, of which there are outstanding no Shares of any other
Class of such Series which are convertible into Shares of the
particular Class, the Trustees may by an instrument executed by a
Majority of the Trustees (or by an officer of the Trust pursuant
to the vote of a Majority of the Trustees) terminate such Series
or Class and the establishment and designation thereof and the
authorization of its Shares (a "Certificate of Termination").
Each Certificate of Designation or Certificate of Termination and
any instrument amending a Certificate of Designation shall have
the status of an amendment to this Declaration of Trust, and
shall be filed and become effective as provided in Section 9.4
hereof.
"(c) Character of Separate Portfolios and Shares Thereof.
Each Portfolio established hereunder shall be a separate
component of the assets of the Trust, and the holders of Shares
of the Series representing interests in that Portfolio shall be
considered Shareholders of such Portfolio, but such Shareholders
shall also be considered Shareholders of the Trust for purposes
of receiving reports and notices and, except as otherwise
provided herein or in the Certificate of Designation of a
particular Portfolio as to such Portfolio, or as required by the
1940 Act or other applicable law, the right to vote, all without
distinction by Series.
"(d) Consideration for Shares. The Trustees may issue
Shares of any Series for such consideration (which may include
property subject to, or acquired in connection with the
assumption of, liabilities) and on such terms as they may
determine (or for no consideration if pursuant to a Share
dividend or split-up), all without action or approval of the
Shareholders. All Shares when so issued on the terms determined
by the Trustees shall be fully paid and nonassessable (but may be
subject to mandatory contribution back to the Trust as provided
in Section 6.2(h) hereof).
"SECTION 6.2. Establishment and Designation of the
International Portfolio; General Provisions for All Portfolios.
Without limiting the authority of the Trustees set forth in
Section 6.1(a) hereof to establish and designate additional
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Portfolios, there is hereby established and designated the
International Portfolio, the Shares of which shall be divided
into three separate Classes, designated Class A, Class B and
Class C, which shall represent interests only in the
International Portfolio. An unlimited number of Shares of each
such Class may be issued. All Shares of the International
Portfolio outstanding on the date on which the amendments of this
Declaration first providing for three Classes of Shares of any
Series become effective shall continue to be Shares of the Class
to which they belonged immediately prior to the effectiveness of
such amendments. Subject to the power of the Trustees to
classify or reclassify any unissued Shares of a Series pursuant
to Section 6.1(a) above, the Shares of such Portfolio, and the
Shares of any further Portfolios that may from time to time be
established and designated by the Trustees shall (unless the
Trustees otherwise determine with respect to some further
Portfolio at the time of establishing and designating the same)
have the following relative rights and preferences:
"(a) Assets Belonging to Portfolios. Any portion of
the Trust Property allocated to a particular Portfolio, and
all consideration received by the Trust for the issue or sale
of Shares of such Portfolio, together with all assets in
which such consideration is invested or reinvested, all
interest, dividends, income, earnings, profits and gains
therefrom, and proceeds thereof, including any proceeds
derived from the sale, exchange or liquidation of such
assets, and any funds or payments derived from any
reinvestment of such proceeds in whatever form the same may
be, shall be held by the Trustees In trust for the benefit of
the holders of Shares of that Portfolio and shall irrevocably
belong to that Portfolio for all purposes, and shall be so
recorded upon the books of account of the Trust, and the
Shareholders of such Portfolio shall not have, and shall be
conclusively deemed to have waived, any claims to the assets
of any Portfolio of which they are not Shareholders. Such
consideration, assets, interest, dividends, income, earnings,
profits, gains and proceeds, together with any General Items
allocated to that Portfolio as provided in the following
sentence, are herein referred to collectively as "Portfolio
Assets" of such Portfolio, and as assets "belonging to" that
Portfolio. If the Trust shall have or realize any assets,
interest, dividends, income, earnings, profits, gains or
proceeds which are not readily identifiable as belonging to
any particular Portfolio (collectively, "General Items"), the
Trustees shall allocate such General Items to and among any
one or more of the Portfolios of the Trust in such manner and
on such basis as they, in their sole discretion, deem fair
and equitable; and any General Items so allocated to a
particular Portfolio shall belong to and be part of the
Portfolio Assets of that Portfolio. Each such allocation by
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the Trustees shall be conclusive and binding upon the
Shareholders of all Portfolios for all purposes.
"(b) Liabilities of Portfolios. The assets belonging
to each Portfolio shall be charged with the liabilities
incurred by or arising in respect of that Portfolio, and all
expenses, costs, charges and reserves attributable to that
Portfolio, and any general liabilities, expenses, costs,
charges or reserves of the Trust which are not readily
identifiable as pertaining to any particular Portfolio shall
be allocated and charged by the Trustees to and among any one
or more of the Portfolios of the Trust in such manner and on
such basis as the Trustees in their sole discretion deem fair
and equitable. The liabilities, expenses, costs, charges and
reserves so allocated and so charged to a particular
Portfolio are herein referred to as "liabilities of" that
Portfolio. Each allocation of liabilities, expenses, costs,
charges and reserves by the Trustees shall be conclusive and
binding upon the Shareholders of all Portfolios for all
purposes. The creditors of a particular Portfolio may look
only to the assets of that Portfolio to satisfy such
creditors' claims, and the creditors of a particular Class of
a Portfolio may look only to the share of that Class in the
assets of the Portfolio of which it is a part to satisfy
their claims.
"(c) Dividends. Dividends and distributions on Shares
of a particular Portfolio may be paid with such frequency as
the Trustees may determine, which may be daily or otherwise
pursuant to a standing resolution or resolutions adopted only
once or with such frequency as the Trustees may determine, to
the holders of Shares of that Portfolio, from such of the
income, accrued or realized, and capital gains, realized or
unrealized, and out of the assets belonging to such
Portfolio, as the Trustees may determine, after providing for
actual and accrued liabilities of that Portfolio. Dividends
and distributions on Shares of a Portfolio without separate
Classes of Shares shall be distributed pro rata to the
holders of Shares of that Portfolio in proportion to the
number of such Shares held by such holders at the date and
time of record established for the payment of such dividends
or distributions. Dividends and distributions on the Shares
of a Portfolio having separate Classes of Shares shall be in
such amount as may be declared from time to time by the
Trustees, and such dividends and distributions may vary as
between such Classes to reflect differing allocations among
such Classes of the liabilities, expenses, costs, charges and
reserves of such Portfolio, and any resultant differences
between the net asset value of such several Classes, to such
extent and for such purposes as the Trustees may deem
appropriate, but dividends and distributions on the Shares of
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a particular Class shall be distributed pro rata to the
Shareholders of that Class in proportion to the number of
such Shares held by such holders at the date and time of
record established for the payment of such dividends and
distributions. Notwithstanding the last two preceding
sentences, the Trustees may determine, in connection with any
dividend or distribution program or procedure, that no
dividend or distribution shall be payable on newly-purchased
Shares as to which the purchase order and/or payment have not
been received by the time or times established by the
Trustees under such program or procedure, or that dividends
or distributions shall be payable on Shares which have been
tendered by the holder thereof for redemption or repurchase,
but the redemption or repurchase proceeds of which have not
yet been paid to such Shareholder. Dividends and
distributions on the Shares of a Portfolio may be made in
cash or Shares of any Class of that Portfolio or a
combination thereof as determined by the Trustees, or
pursuant to any program that the Trustees may have in effect
at the time for the election by each Shareholder of the mode
of the making of such dividend or distribution to that
Shareholder. Any such dividend or distribution paid in
Shares will be paid at the net asset value thereof as
determined in accordance with subsection (g) of this Section
6.2.
"(d) Liquidation. In the event of the liquidation or
dissolution of the Trust, the Shareholders of each Portfolio
of which Shares are outstanding shall be entitled to receive,
when and as declared by the Trustees, the excess of the
Portfolio Assets over the liabilities of such Portfolio. The
assets so distributable to the Shareholders of any Portfolio
without separate Classes of Shares shall be distributed among
such Shareholders in proportion to the number of Shares of
that Portfolio held by them and recorded on the books of the
Trust. The assets so distributable to the Shareholders of
any Portfolio having separate Classes of Shares shall be
allocated among such Classes in proportion to the respective
aggregate net asset value of the outstanding Shares thereof,
and shall be distributed to the Shareholders of each such
Class in proportion to the number of Shares of that Class
held by them and recorded on the books of the Trust. The
liquidation of any Portfolio, or any Class of any Portfolio,
may be authorized by vote of a majority of the Trustees,
subject to the affirmative vote of "a majority of the
outstanding voting securities" of that Portfolio or Class, as
the quoted phrase is defined in the 1940 Act, determined in
accordance with clause (iii) of the definition of "Majority
Shareholder Vote" in Section 1.4 hereof.
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"(e) Redemption by Shareholder. Each holder of Shares
of a particular Series or Class shall have the right at such
times as may be permitted by the Trust, but no less
frequently than once each week, to require the Trust to
redeem all or any part of such Shares at a redemption price
equal to the net asset value per Share of that Series or
Class next determined in accordance with subsection (g) of
this Section 6.2 after the Shares are properly tendered for
redemption; provided, that the Trustees may from time to
time, in their discretion, determine and impose a fee for
such redemption, and the proceeds of the redemption of Shares
(including a fractional Share) of any Series or Class shall
be reduced by the amount of any applicable contingent
deferred sales charge payable on such redemption pursuant to
the terms of the initial issuance of the Shares of such
Series or Class (to the extent consistent with the 1940 Act
or regulations or exemptions thereunder). The redemption
price of Shares redeemed under this subsection (e) shall be
paid in cash; provided, however, that if the Trustees
determine, which determination shall be conclusive, that
conditions exist with respect to any Portfolio, or one or
more Classes of any Portfolio, which make payment wholly in
cash unwise or undesirable, the Trust may make payment wholly
or partly in Securities or other assets belonging to such
Portfolio, or to the Portfolio of which such Class or Classes
are a part, at the value of such Securities or assets used in
such determination of net asset value. Notwithstanding the
foregoing, the Trust may postpone payment of the redemption
price and may suspend the right of the holders of Shares of
any Series or Class to require the Trust to redeem Shares of
that Series or Class during any period or at any time when
and to the extent permissible under the 1940 Act.
"(f) Redemption at the Option of the Trust. Each Share
of any Portfolio shall be subject to redemption at the option
of the Trust at the redemption price which would be
applicable if such Share were then being redeemed by the
Shareholder pursuant to subsection (e) of this Section 6.2:
(i) at any time, if the Trustees determine in their sole
discretion that failure to so redeem may have materially
adverse consequences to the holders of the Shares of the
Trust or of any Portfolio, or (ii) upon such other conditions
with respect to maintenance of Shareholder accounts of a
minimum amount as may from time to time be determined by the
Trustees and set forth in the then-current Prospectus of such
Portfolio. Upon such redemption the holders of the Shares so
redeemed shall have no further right with respect thereto
other than to receive payment of such redemption price.
"(g) Net Asset Value. Subject to the provisions of the
two sentences immediately following, the net asset value per
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Share of any Portfolio without Classes, or of any Class of a
Portfolio having separate Classes of Shares, at any time
shall be the quotient obtained by dividing the value of the
net assets of such Portfolio or the share of such Class in
such assets, as the case may be, at such time (being the
current value of the assets belonging to such Portfolio, or
the share of such Class therein, less the then existing
liabilities of such Portfolio, or the share of such Class in
such liabilities) by the total number of Shares of that
Portfolio or Class then outstanding, all determined in
accordance with the methods and procedures, including without
limitation those with respect to rounding, established by the
Trustees from time to time. The aggregate net asset value of
the several Classes of a Portfolio having separate Classes of
Shares shall be separately computed, and may vary from one
another. The Trustees shall establish procedures for the
allocation of investment income or capital gains and expenses
and liabilities of a Portfolio having separate Classes of
Shares among the several Classes of such Portfolio, in order
to reflect the varying net asset values of, and the
liabilities and expenses attributable to, such Classes. The
Trustees may determine to maintain the net asset value per
Share of any Portfolio at a designated constant dollar amount
and in connection therewith may adopt procedures not
inconsistent with the 1940 Act for the continuing declaration
of income attributable to that Portfolio as dividends payable
in additional Shares of that Portfolio at the designated
constant dollar amount and for the handling of any losses
attributable to that Portfolio. Such procedures may provide
that in the event of any loss each Shareholder shall be
deemed to have contributed to the shares of beneficial
interest account of that Portfolio such Shareholder's pro
rata portion of the total number of Shares required to be
canceled in order to permit the net asset value per Share of
that Portfolio to be maintained, after reflecting such loss,
at the designated constant dollar amount. Each Shareholder
of the Trust shall be deemed to have expressly agreed, by
investing in any Portfolio with respect to which the Trustees
shall have adopted any such procedure, to make the
contribution referred to in the preceding sentence in the
event of any such loss.
"(h) Transfer. All Shares of the Trust shall be
transferable, but transfers of Shares of a particular
Portfolio will be recorded on the Share transfer records of
the Trust applicable to that Portfolio only at such times as
Shareholders shall have the right to require the Trust to
redeem Shares of that Portfolio and at such other times as
may be permitted by the Trustees.
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"(i) Equality. All Shares of each Portfolio without
Classes shall represent an equal proportionate interest in
the assets belonging to that Portfolio, subject to the
liabilities of that Portfolio, and each Share of any such
Portfolio shall be equal to each other Share thereof. All
Shares of each Class of Shares of any Portfolio having
separate Classes of Shares shall represent an equal
proportionate interest in the share of such Class in the
assets belonging to that Portfolio, subject to a like share
of the liabilities of such Portfolio, adjusted for any
liabilities specifically allocable to that Class, and each
Share of any such Class shall be equal to each other Share
thereof; but the interests represented by the Shares of the
different Classes of a Portfolio having separate Classes of
Shares shall reflect any distinctions among the several
Classes of such Portfolio existing under this Section 6.2 or
Section 7.1 hereof, or under the Certificate of Designation
for such Portfolio. The Trustees may from time to time
divide or combine the Shares of any Portfolio, or any Class
of any Portfolio, into a greater or lesser number of Shares
of that Portfolio or Class without thereby changing the
proportionate beneficial interest in the assets belonging to
that Portfolio or in any way affecting the rights of the
holders of Shares of any other Portfolio or Class.
"(j) Rights of Fractional Shares. Any fractional Share
of any Series or Class of Shares shall carry proportionately
all the rights and obligations of a whole Share of that
Series or Class, including rights and obligations with
respect to voting, receipt of dividends and distributions,
redemption of Shares, and liquidation of the Trust or of the
Portfolio or Class to which such Shares pertain.
"(k) Exchange and Conversion Rights. (i) Subject to
compliance with the 1940 Act, the Trustees may provide (A)
that the Shares of any Portfolio or Class are offered (either
exclusively or as one option among others) in exchange for
shares of any other investment company registered as such
under the 1940 Act and designated for the purpose in the
prospectus for the Shares so offered (an "eligible investment
company"), (B) that holders of any Shares of any Class of a
Portfolio shall have the right to convert such Shares into
Shares of one or more other Classes of such Portfolio, and
(C) that Shares of any Class of a Portfolio shall be
automatically converted into Shares of another Class of such
Portfolio, in each case in accordance with such requirements
and procedures as the Trustees may establish.
"(ii) Without limitation of the foregoing, each
Class B Share of the International Portfolio, other than
Shares purchased through the automatic reinvestment of
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dividends or distributions with respect to the Class B Shares
of such Portfolio, shall be converted automatically, and
without any action or choice on the part of the holder
thereof, into Class A Shares of such Portfolio on the
Conversion Date thereof, established as provided in the next
succeeding sentence. The term "Conversion Date", as to any
Class B Share, shall mean either (i) the date that is the
first Trust business day in the month following the month
which includes the eighth anniversary of the Original
Purchase Date thereof, determined as provided in the next
succeeding sentence, or (ii) any such other date as may be
determined by the Trustees and set forth in the Trust's
prospectus with respect to the Class B Shares, as the same
may be amended from time to time; provided, that any such
other date determined by the Trustees is one that will occur
prior to both (A) the date determined as provided in clause
(i) of this sentence and (B) any other date theretofore
determined by the Trustees pursuant to this clause (ii). The
"Original Purchase Date" of a Class B Share shall be the date
on which such Share was first subscribed and paid for by such
holder, provided, that if such Share was obtained by the
holder through an exchange of Shares of another eligible
investment company, the Original Purchase Date shall be the
Original Purchase Date of the Class B Shares of such other
eligible investment company, or if the Shares of such other
eligible investment company were held as the result of a
series of exchanges, the Original Purchase Date of the Class
B Shares of the eligible investment company to which the
holder originally subscribed. Each Class B Share of the
International Portfolio purchased through the automatic
reinvestment of a dividend or a distribution with respect to
the Class B Shares of such Portfolio shall be segregated in a
separate sub-account on the share records of the Trust for
each of the Shareholders of record thereof. On any
Conversion Date, a number of the Shares held in the sub-
account of the Shareholder of record of the Share or Shares
being converted, calculated in accordance with the next
following sentence, shall be converted automatically, and
without any action or choice on the part of the Shareholder,
into Class A Shares of such Portfolio. The number of Shares
in the Shareholder's sub-account so converted shall bear the
same relation to the total number of Shares maintained in the
sub-account on the Conversion Date (immediately prior to
conversion) as the number of Shares of the Shareholder
converted on the Conversion Date pursuant to paragraph (i) of
this subsection (k) bears to the total number of Class B
Shares of such Portfolio held by the Shareholder on the
Conversion Date (immediately prior to conversion) not
purchased through the automatic reinvestment of dividends or
distributions with respect to the Class B Shares of such
Portfolio.
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"(iii) The number of Class A Shares of the
International Portfolio into which a Class B Share of such
Portfolio is converted pursuant to paragraph (ii) of this
subsection (k) shall be the quotient (including for this
purpose fractions of a Share) obtained by dividing the net
asset value per Share of the Class B Shares by the net asset
value per Share of the Class A Shares, each determined as of
the close of business on the Conversion Date of such Class B
Shares.
"(iv) Class B Shares of the International
Portfolio converted into Class A Shares of such Portfolio
will cease to accrue dividends at the close of business on
the Conversion Date thereof, and will thenceforth no longer
be deemed outstanding, and the rights of the holders thereof
(except (A) the right to receive the number of Class A Shares
into which such Class B Shares have been converted and (B)
dividends declared on such Class B Shares but not paid prior
to the close of business on such Conversion Date, and (C) the
right to vote or give any consent in respect of Class B
Shares so converted that were held as of any record date
occurring before the Conversion Date and theretofore set with
respect to any meeting held or any written consent for which
the final date is set after the Conversion Date) will cease,
and such holder shall instead have all rights of a holder of
Class A Shares in respect of the Class A Shares issuable upon
such conversion, effective from and after the close of
business on such Conversion Date. Certificates representing
Class A Shares resulting from the conversion need not be
issued until certificates representing Class B Shares
converted, if issued, have been received by the Trust or its
agent, duly endorsed for transfer.
"(v) The Trust will appropriately reflect the
conversion of Class B Shares of the International Portfolio
into Class A Shares of such Portfolio on the first periodic
statements of account sent to Shareholders of record affected
which provide account information with respect to a reporting
period which includes the Conversion Date.
"(vi) Without limiting the generality of the
foregoing, except as otherwise expressly provided by the
Trustees pursuant to paragraph (i) of this subsection (k),
neither the Class A Shares nor the Class C Shares of the
International Portfolio shall be convertible into shares of
any other Class or Series.
"(1) Suspension of Automatic Conversion of Class B Shares.
Notwithstanding the provisions of subsection (k) of this Section
6.2, the automatic conversion of Class B Shares of the
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International Portfolio shall be subject to suspension, as
follows:
"(i) Such conversion shall be suspended at any time
that the Trustees determine (A) that there is not available a
reasonably satisfactory opinion of counsel to the effect
that, under the Internal Revenue Code, (1) the assessment of
the higher distribution services fee and transfer agency
costs with respect to the Class B Shares of such Portfolio
does not result in the Trust's dividends or distributions
constituting a "preferential dividend", and (2) the
conversion of the Class B Shares does not constitute a
taxable event, or (B) any other condition to conversion set
forth in the Trust's prospectus for the Class B Shares of
such Portfolio, as such prospectus may be amended from time
to time, is not satisfied; and
"(ii) Such conversion may be suspended at any time that
the Trustees determine such suspension to be appropriate in
order to comply with, or satisfy the requirements of, the
1940 Act relating to voting by the holders of the Class B
Shares on any plan with respect to the Class A Shares
proposed pursuant to Rule 12b-1 under the 1940 Act, and in
connection with, or in lieu of, any such suspension, the
Trustees may provide holders of Class B Shares with
alternative conversion or exchange rights into other Classes
or Series of Shares of the Trust in a manner consistent with
the provision of the 1940 Act giving rise to the possible
suspension of such conversion right."
IV. Section 7.1 is hereby amended and restated in its entirety
to read as follows:
"SECTION 7.1 Voting Powers. The Shareholders shall have
power to vote only (i) for the election or removal of Trustees as
provided in Sections 4.1(c) and (e) hereof, (ii) with respect to
the approval or termination in accordance with the 1940 Act of
any contract with a Contracting Party as provided in Section 5.2
hereof as to which Shareholder approval is required by the 1940
Act, (iii) with respect to any termination or reorganization of
the Trust or any Portfolio to the extent and as provided in
Sections 9.1 and 9.2 hereof, (iv) with respect to any amendment
of this Declaration of Trust to the extent and as provided in
Section 9.3 hereof, (v) to the same extent as the stockholders of
a Massachusetts business corporation as to whether or not a court
action, proceeding or claim should or should not be brought or
maintained derivatively or as a class action on behalf of the
Trust or any Portfolio, or the Shareholders of any of them
(provided, however, that a Shareholder of a particular Portfolio
shall not in any event be entitled to maintain a derivative or
class action on behalf of any other Portfolio or the Shareholders
13
<PAGE>
thereof), and (vi) with respect to such additional matters
relating to the Trust as may be required by the 1940 Act, this
Declaration of Trust, the By-Laws or any registration of the
Trust with the Commission (or any successor agency) or any State,
or as the Trustees may consider necessary or desirable. If and
to the extent that the Trustees shall determine that such action
is required by law or by this Declaration, they shall cause each
matter required or permitted to be voted upon at a meeting or by
written consent of Shareholders to be submitted to a separate
vote of the outstanding Shares of each Portfolio entitled to vote
thereon; provided, that (i) when expressly required by the 1940
Act or other law, actions of Shareholders shall be taken by
Single Class Voting of all outstanding Shares of each Series and
Class whose holders are entitled to vote thereon, and (ii) when
the Trustees determine that any matter to be submitted to a vote
of Shareholders affects only the rights or interests of
Shareholders of one or more but not all Portfolios or of one or
more but not all Classes of a single Portfolio (including without
limitation any distribution plan pursuant to Rule 12b-1 under the
1940 Act applicable to any such Portfolio or Class), then only
the Shareholders of the Portfolios or Classes so affected shall
be entitled to vote thereon. Without limiting the generality of
the foregoing, and except as required by the 1940 Act or other
law, the Shareholders of each Class shall have exclusive voting
rights with respect to the provisions of any distribution plan
adopted by the Trustees pursuant to Rule 12b-1 under the 1940 Act
applicable to such Class."
V. Section 9.3 is hereby amended and restated in its entirety to
read as follows:
"SECTION 9.3 Amendments; etc. All rights granted to the
Shareholders under this Declaration of Trust are granted subject
to the reservation of the right to amend this Declaration of
Trust as herein provided, except that no amendment shall repeal
the limitations on personal liability of any Shareholder or
Trustee or the prohibition of assessment upon the Shareholders
(otherwise than as permitted under Section 6.2(g)) without the
express consent of each Shareholder or Trustee involved. Subject
to the foregoing, the provisions of this Declaration of Trust
(whether or not related to the rights of Shareholders) may be
amended at any time, so long as such amendment does not adversely
affect the rights of any Shareholder with respect to which such
amendment is or purports to be applicable and so long as such
amendment is not in contravention of applicable law, including
the 1940 Act, by an instrument in writing signed by a Majority of
the Trustees (or by an officer of the Trust pursuant to the vote
of a Majority of the Trustees). Any amendment to this
Declaration of Trust that adversely affects the rights of all
Shareholders may be adopted at any time by an instrument in
writing signed by a Majority of the Trustees (or by an officer of
14
<PAGE>
the Trust pursuant to a vote of a Majority of the Trustees) when
authorized to do so by the vote in accordance with Section 7.1
hereof of Shareholders holding a majority of all the Shares
outstanding and entitled to vote, without regard to Series, or if
said amendment adversely affects the rights of the Shareholders
of less than all of the Portfolios or of less than all of the
Classes of Shares of any Portfolio, by the vote of the holders of
a majority of all the Shares entitled to vote of each Portfolio
or of each Class, as the case may be, so affected. Subject to
the foregoing, any such amendment shall be effective when the
instrument containing the terms thereof and a certificate (which
may be a part of such instrument) to the effect that such
amendment has been duly adopted, and setting forth the
circumstances thereof, shall have been executed and acknowledged
by a Trustee or officer of the Trust and filed as provided in
Section 9.4 hereof."
IN WITNESS WHEREOF, the undersigned has set his hand and seal
this 27th day of April, 1993.
/s/ Edmund P. Bergan, Jr.
______________________________
Name: Edmund P. Bergan, Jr.
Title: Secretary
ACKNOWLEDGMENT
STATE OF NEW YORK )
: ss.
COUNTY OF NEW YORK ) April 27, 1993
Then personally appeared the above named Edmund P. Bergan,
Jr., and acknowledged the foregoing instrument to be his free act
and deed.
Before me,
/s/ Lydia Montes
______________________________
Notary Public
15
00250086.AU2
ALLIANCE INTERNATIONAL FUND
CERTIFICATE OF AMENDMENT
The undersigned, being the Secretary of Alliance
International Fund (hereinafter referred to as the "Trust"), a
trust with transferable shares of the type commonly called a
Massachusetts business trust, DOES HEREBY CERTIFY that, pursuant
to the authority conferred upon the Trustees of the Trust by
Section 9.3 of the Agreement and Declaration of Trust, dated
October 2, 1985, as amended and restated on September 12, 1990
(hereinafter, as so amended and restated, referred to as the
"Declaration"), and by the affirmative vote of a Majority of the
Trustees duly cast at a meeting duly called and held on September
30, 1996, the Declaration is hereby amended as follows:
I. Section 1.4 of the Declaration is amended by adding thereto
the following definition:
"Advisor Class Shares" shall mean, with respect to
Shares of a Series established and designated by this
Declaration, that class of Shares which are not subject to a
sales charge or "load" upon the purchase thereof and the proceeds
of the redemption of which are not subject to a contingent
deferred sales charge payable on such redemption.
II. The first paragraph of Section 6.2 is hereby amended and
restated in its entirety to read as follows:
"SECTION 6.2. Establishment and Designation of the
International Portfolio; General Provisions for All Portfolios.
Without limiting the authority of the Trustees set forth in
Section 6.1(a) hereof to establish and designate additional
Portfolios, there is hereby established and designated the
International Portfolio, the Shares of which shall be divided
into four separate Classes, designated Class A, Class B, Class C
and Advisor Class, which shall represent interests only in the
International Portfolio. An unlimited number of Shares of each
such Class may be issued. All Shares of the International
Portfolio outstanding on the date on which the amendments of this
Declaration first providing for four Classes of Shares of any
Series become effective shall continue to be Shares of the Class
to which they belonged immediately prior to the effectiveness of
such amendments. Subject to the power of the Trustees to
classify or reclassify any unissued Shares of a Series pursuant
to Section 6.1(a), the Shares of such Portfolio, and the Shares
of any further Portfolios that may from time to time be
established and designated by the Trustees shall (unless the
Trustees otherwise determine with respect to some further
<PAGE>
Portfolio at the time of establishing and designating the same)
have the following relative rights and preferences:"
IN WITNESS WHEREOF, the undersigned has set his hand and
seal this 30th day of September, 1996.
/s/ Edmund P. Bergan, Jr.
______________________________
Name: Edmund P. Bergan, Jr.
Title: Secretary
2
<PAGE>
ACKNOWLEDGMENT
STATE OF NEW YORK )
: ss.
COUNTY OF NEW YORK) , 1996
Then personally appeared the above named Edmund P.
Bergan, Jr., and acknowledged the foregoing instrument to be his
free act and deed.
Before me,
/s/ Melanie S. Pangilinan
_____________________________
Notary Public
My Commission Expires ________
3
00250086.AN4
<PAGE>
DISTRIBUTION SERVICES AGREEMENT
AGREEMENT made as of July 22, 1992, as amended as of
April 30, 1993, between Alliance International Fund, a
Massachusetts business trust (the "Fund"), and ALLIANCE FUND
DISTRIBUTORS, INC., a Delaware corporation (the "Underwriter").
WITNESSETH
WHEREAS, the Fund is registered under the Investment
Company Act of 1940, as amended (the "Investment Company Act"),
as a diversified, open-end management investment company and it
is in the interest of the Fund to offer its shares for sale
continuously;
WHEREAS, the Underwriter is a securities firm engaged in
the business of selling shares of investment companies either
directly to purchasers or through other securities dealers;
WHEREAS, the Fund and the Underwriter wish to enter into
an amended agreement with each other with respect to the
continuous offering of the Fund's shares in order to promote the
growth of the Fund and facilitate the distribution of its shares;
NOW, THEREFORE, the parties agree as follows:
SECTION 1. Appointment of the Underwriter. The Fund
hereby appoints the Underwriter as the principal underwriter and
distributor of the Fund to sell to the public shares of its
Class A Common Stock (the "Class A shares"), Class B Common Stock
(the "Class B shares") and Class C Common Stock (the "Class C
shares") (the Class A shares, Class B shares and Class C shares
being collectively referred to herein as the "shares") and hereby
agrees during the term of this Agreement to sell shares to the
Underwriter upon the terms and conditions herein set forth.
SECTION 2. Exclusive Nature of Duties. The Underwriter
shall be the exclusive representative of the Fund to act as
principal underwriter and distributor except that the rights
given under this Agreement to the Underwriter shall not apply to
shares issued in connection with (a) the merger or consolidation
of any other investment company with the Fund, (b) the Fund's
acquisition by purchase or otherwise of all or substantially all
of the assets or stock of any other investment company or (c) the
reinvestment in shares by the Fund's shareholders of dividends or
other distributions.
<PAGE>
SECTION 3. Purchase of Shares from the Fund.
(a) The Underwriter shall have the right to buy from
the Fund the shares needed to fill unconditional orders for
shares of the Fund placed with the Underwriter by investors or
securities dealers, depository institutions or other financial
intermediaries acting as agent for their customers. The price
which the Underwriter shall pay for the shares so purchased from
the Fund shall be the net asset value, determined as set forth in
Section 3(d) hereof, used in determining the public offering
price on which such orders are based.
(b) The shares are to be resold by the Underwriter to
investors at a public offering price, as set forth in
Section 3(c) hereof, or to securities dealers, depository
institutions or other financial intermediaries acting as agent
for their customers having agreements with the Underwriter upon
the terms and conditions set forth in Section 8 hereof.
(c) The public offering price of the shares, i.e., the
price per share at which the Underwriter or selected dealers or
selected agents (each as defined in Section 8(a) below) may sell
shares to the public, shall be the public offering price
determined in accordance with the then current Prospectus and
Statement of Additional Information of the Fund (the "Prospectus"
and "Statement of Additional Information," respectively) under
the Securities Act of 1933, as amended (the "Securities Act"),
relating to such shares, but not to exceed the net asset value at
which the Underwriter is to purchase such shares, plus, in the
case of Class A shares, a front-end sales charge equal to a
specified percentage or percentages of the public offering price
of the Class A shares as set forth in the Prospectus. Class A
shares may be sold without such a sales charge to certain classes
of persons as from time to time set forth in the Prospectus and
Statement of Additional Information. All payments to the Fund
hereunder shall be made in the manner set forth in Section 3(f)
hereof.
(d) The net asset value of shares of the Fund shall be
determined by the Fund, or any agent of the Fund, as of the close
of regular trading on the New York Stock Exchange on each Fund
business day in accordance with the method set forth in the
Prospectus and Statement of Additional Information and guidelines
established by the Directors of the Fund.
(e) The Fund reserves the right to suspend the offering
of its shares at any time in the absolute discretion of its
Directors.
(f) The Fund, or any agent of the Fund designated in
writing to the Underwriter by the Fund, shall be promptly advised
2
<PAGE>
by the Underwriter of all purchase orders for shares received by
the Underwriter. Any order may be rejected by the Fund;
provided, however, that the Fund will not arbitrarily or without
reasonable cause refuse to accept or confirm orders for the
purchase of shares. The Fund (or its agent) will confirm orders
upon their receipt, will make appropriate book entries and upon
receipt by the Fund (or its agent) of payment thereof, will
deliver deposit receipts or certificates for such shares pursuant
to the instructions of the Underwriter. Payment shall be made to
the Fund in New York Clearing House funds. The Underwriter
agrees to cause such payment and such instructions to be
delivered promptly to the Fund (or its agent).
SECTION 4. Repurchase or Redemption of
Shares by the Fund.
(a) Any of the outstanding shares may be tendered for
redemption at any time, and the Fund agrees to redeem or
repurchase the shares so tendered in accordance with its
obligations as set forth in Section 6.2(f) of ARTICLE VI of
Agreement and Declaration of Trust and in accordance with the
applicable provisions set forth in the Prospectus and Statement
of Additional Information. The price to be paid to redeem or
repurchase the shares shall be equal to the net asset value
calculated in accordance with the provisions of Section 3(d)
hereof less, in the case of Class B shares, a deferred sales
charge equal to a specified percentage or percentages of the net
asset value of the Class B shares or their cost, whichever is
less. Class B shares that have been outstanding for a specified
period of time may be redeemed without payment of a deferred
sales charge as from time to time set forth in the Prospectus.
All payments by the Fund hereunder shall be made in the manner
set forth below. The redemption or repurchase by the Fund of any
of the Class A shares purchased by or through the Underwriter
will not affect the sales charge secured by the Underwriter or
any selected dealer or compensation paid to any selected agent
(unless such selected dealer or selected agent has otherwise
agreed with the Underwriter), in the course of the original sale,
regardless of the length of the time period between purchase by
an investor and his tendering for redemption or repurchase.
The Fund (or its agent) shall pay the total amount of
the redemption price and, except as may be otherwise required by
the Rules of Fair Practice of the National Association of
Securities Dealers, Inc. (the "NASD") and any interpretations
thereof ("NASD rules and interpretations"), the deferred sales
charges, if any, as defined in the above paragraph, pursuant to
the instructions of the Underwriter in New York Clearing House
funds on or before the seventh business day subsequent to its
having received the notice of redemption in proper form.
3
<PAGE>
(b) Redemption of shares or payment may be suspended at
times when the New York Stock Exchange is closed, when trading
thereon is closed, when trading thereon is restricted, when an
emergency exists as a result of which disposal by the Fund or
securities owned by it is not reasonably practicable or it is not
reasonably practicable for the Fund fairly to determine the value
of its net assets, or during any other period when the Securities
and Exchange Commission, by order, so permits.
SECTION 5. Plan of Distribution.
(a) It is understood that Sections 5, 12, and 16 hereof
together constitute a plan of distribution (the "Plan") within
the meaning of Rule 12b-1 adopted by the Securities and Exchange
Commission under the Investment Company Act ("Rule 12b-1").
(b) Except as may be required by NASD rules and
interpretations, the Fund will pay to the Underwriter each month
a distribution services fee with respect to each portfolio of the
Fund ("Portfolio") that will not exceed, on an annualized basis,
.30% of the aggregate average daily net assets of the Fund
attributable to the Class A shares, 1.00% of the aggregate
average daily net assets of the Fund attributable to the Class B
shares and 1.00% of the aggregate average daily net assets of the
Fund attributable to the Class C shares. With respect to each
Portfolio, the distribution services fee will be used in its
entirety by the Underwriter to make payments (i) to compensate
broker- dealers or other persons for providing distribution
assistance, (ii) to otherwise promote the sale of shares of each
Portfolio, including payment for the preparation, printing and
distribution of prospectuses and sales literature or other
promotional activities, and (iii) to compensate broker-dealers,
depository institutions and other financial intermediaries for
providing administrative, accounting and other services with
respect to each Portfolio's shareholders. A portion of the
distribution services fee that will not exceed, on an annualized
basis, .25% of the aggregate average daily net assets of the Fund
attributable to each of the Class A shares, Class B shares and
Class C shares will constitute a service fee that will be used by
the Underwriter for personal service and/or the maintenance of
shareholder accounts within the meaning of NASD rules and
interpretations.
(c) Alliance Capital Management L.P., the Fund's
investment adviser (the "Adviser"), may make payments from time
to time from its own resources for the purposes described in
Section 5(b) hereof.
(d) Payments to broker-dealers, depository institutions
and other financial intermediaries for the purposes set forth in
Section 5(b) are subject to the terms and conditions of the
4
<PAGE>
written agreements between the Underwriter and each broker-
dealer, depository institution or other financial intermediary.
Such agreements will be in a form satisfactory to the Directors
of the Fund.
(e) The Treasurer of the Fund will prepare and furnish
to the Fund's Directors, and the Directors will review, at least
quarterly, a written report complying with the requirements of
Rule 12b-1 setting forth all amounts expended hereunder and the
purposes for which such expenditures were made.
(f) The Fund is not obligated to pay any distribution
expense in excess of the distribution services fee described
above in Section 5(b) hereof. Any expenses of distribution of
the Fund's Class A shares accrued by the Underwriter in one
fiscal year of the Fund may not be paid from distribution
services fees received from the Fund in respect of Class A shares
in another fiscal year. Any expenses of distribution of the
Fund's Class B shares or Class C shares accrued by the
Underwriter in one fiscal year of the Fund may be carried forward
and paid from distribution services fees received from the Fund
in respect of such class of shares in another fiscal year. No
portion of the distribution services fees received from the Fund
in respect of Class A shares may be used to pay any interest
expense, carrying charges or other financing costs or allocation
of overhead of the Underwriter. The distribution services fees
received from the Fund in respect of Class B shares and Class C
shares may be used to pay interest expenses, carrying charges and
other financing costs or allocation of overhead of the
Underwriter to the extent permitted by Securities and Exchange
Commission rules, regulations or Securities and Exchange
Commission staff no- action or interpretative positions in effect
from time to time. In the event this Agreement is terminated by
either party or is not continued with respect to a class as
provided in Section 12 below: (i) no distribution services fees
(other than current amounts accrued but not yet paid) will be
owed by the Fund to the Underwriter with respect to that class,
and (ii) the Fund will not be obligated to pay the Underwriter
for any amounts expended hereunder not previously reimbursed by
the Fund from distribution services fees in respect of shares of
such class or recovered through deferred sales charges described
in Section 4(a) above. The distribution services fee of a
particular class may not be used to subsidize the sale of shares
of any other class.
SECTION 6. Duties of the Fund.
(a) The Fund shall furnish to the Underwriter copies of
all information, financial statements and other papers that the
Underwriter may reasonably request for use in connection with the
distribution of shares of the Fund, and this shall include one
5
<PAGE>
certified copy, upon request by the Underwriter, of all financial
statements prepared for the Fund by independent public
accountants. The Fund shall make available to the Underwriter
such number of copies of the Prospectus as the Underwriter shall
reasonably request.
(b) The Fund shall take, from time to time, but subject
to the necessary approval of its shareholders, all necessary
action to fix the number of authorized shares and such steps as
may be necessary to register the same under the Securities Act,
to the end that there will be available for sale such number of
shares as the Underwriter reasonably may be expected to sell.
(c) The Fund shall use its best efforts to qualify and
maintain the qualification of an appropriate number of its shares
under the securities laws of such states as the Underwriter and
the Fund may approve. Any such qualification may be withheld,
terminated or withdrawn by the Fund at any time in its
discretion. As provided in Section 9(b) hereof, the expense of
qualification and maintenance of qualification shall be borne by
the Fund. The Underwriter shall furnish such information and
other material relating to its affairs and activities as may be
required by the Fund in connection with such qualification.
(d) The Fund will furnish, in reasonable quantities
upon request by the Underwriter, copies of annual and interim
reports of the Fund.
SECTION 7. Duties of the Underwriter.
(a) The Underwriter shall devote reasonable time and
effort to effect sales of shares of the Fund, but shall not be
obligated to sell any specific number of shares. The services of
the Underwriter to the Fund hereunder are not to be deemed
exclusive and nothing in this Agreement shall prevent the
Underwriter from entering into like arrangements with other
investment companies so long as the performance of its
obligations hereunder is not impaired thereby.
(b) In selling shares of the Fund, the Underwriter
shall use its best efforts in all material respects duly to
conform with the requirements of all federal and state laws
relating to the sale of such securities. Neither the
Underwriter, any selected dealer, any selected agent nor any
other person is authorized by the Fund to give any information or
to make any representations, other than those contained in the
Fund's Registration Statement (the "Registration Statement"), as
amended from time to time, under the Securities Act and the
Investment Company Act or the Prospectus and Statement of
Additional Information or any sales literature specifically
approved in writing by the Fund.
6
<PAGE>
(c) The Underwriter shall adopt and follow procedures,
as approved by the officers of the Fund, for the confirmation of
sales to investors and selected dealers, the collection of
amounts payable by investors and selected dealers on such sales,
and the cancellation of unsettled transactions, as may be
necessary to comply with the requirements of the NASD, as such
requirements may from time to time exist.
SECTION 8. Selected Dealer and Agent Agreements.
(a) The Underwriter shall have the right to enter into
selected dealer agreements with securities dealers of its choice
("selected dealers") and selected agent agreements with
depository institutions and other financial intermediaries of its
choice ("selected agents") for the sale of shares and fix therein
the portion of the sales charge that may be allocated to the
selected dealers and selected agents; provided, that the Fund
shall approve the forms of agreements with selected dealers and
selected agents and the selected dealer and selected agent
compensation set forth therein and shall evidence such approval
by filing said forms and amendments thereto as exhibits to its
then currently effective Registration Statement. Shares sold to
selected dealers or through selected agents shall be for resale
by such selected dealers and selected agents only at the public
offering price set forth in the Prospectus and Statement of
Additional Information.
(b) Within the United States, the Underwriter shall
offer and sell shares only to such selected dealers as are
members in good standing of the NASD.
SECTION 9. Payment of Expenses.
(a) The Fund shall bear all costs and expenses of the
Fund, including fees and disbursements of its counsel and
auditors, in connection with the preparation and filing of its
Registration Statement and Prospectus and Statement of Additional
Information, and all amendments and supplements thereto, and
preparing and mailing annual and interim reports and proxy
materials to shareholders (including but not limited to the
expense of setting in type any such registration statements,
prospectuses, annual or interim reports or proxy materials).
(b) The Fund shall bear the cost of expenses of
qualification of shares for sale, and, if necessary or advisable
in connection therewith, of qualifying the Fund as an issuer or
as a broker or dealer, in such states of the United States or
other jurisdiction as shall be selected by the Fund and the
Underwriter pursuant to Section 6(c) hereof and the cost and
expenses payable to each such state for continuing qualification
therein until the Fund decides to discontinue such qualification
pursuant to Section 6(c) hereof.
7
<PAGE>
SECTION 10. Indemnification.
(a) The Fund agrees to indemnify, defend and hold the
Underwriter, and any person who controls the Underwriter within
the meaning of Section 15 of the Securities Act, free and
harmless from and against any and all claims, demands,
liabilities and expenses (including the cost of investigating or
defending such claims, demands or liabilities and any counsel
fees incurred in connection therewith) which the Underwriter or
any such controlling person may incur, under the Securities Act,
or under common law or otherwise, arising out of or based upon
any alleged untrue statement of a material fact contained in the
Fund's Registration Statement, Prospectus or Statement of
Additional Information in effect from time to time under the
Securities Act or arising out of or based upon any alleged
omission to state a material fact required to be stated in any
one thereof or necessary to make the statements in any one
thereof not misleading; provided, however, that in no event shall
anything herein contained be so construed as to protect the
Underwriter against any liability to the Fund or its security
holders to which the Underwriter would otherwise be subject by
reason of willful misfeasance, bad faith or gross negligence in
the performance of its duties, or by reason of the Underwriter's
reckless disregard of its obligations and duties under this
Agreement. The Fund's agreement to indemnify the Underwriter and
any such controlling person as aforesaid is expressly conditioned
upon the Fund's being notified of the commencement of any action
brought against the Underwriter or any such controlling person,
such notification to be given by letter or by telegram addressed
to the Fund at its principal office in New York, New York, and
sent to the Fund by the person against whom such action is
brought within ten days after the summons or other first legal
process shall have been served. The failure to so notify the
Fund of the commencement of any such action shall not relieve the
Fund from any liability which it may have to the person against
whom such action is brought by reason of any such alleged untrue
statement or omission otherwise than on account of the indemnity
agreement contained in this Section 10. The Fund will be
entitled to assume the defense of any suit brought to enforce any
such claim, and to retain counsel of good standing chosen by the
Fund and approved by the Underwriter. In the event the Fund does
not elect to assume the defense of any such suit and retain
counsel of good standing approved by the Underwriter, the
defendant or defendants in such suit shall bear the fees and
expenses of any additional counsel retained by any of them; but
in case the Fund does not elect to assume the defense of any such
suit, or in case the Underwriter does not approve of counsel
chosen by the Fund, the Fund will reimburse the Underwriter or
the controlling person or persons named as defendant or
defendants in such suit, for the fees and expenses of any counsel
retained by the Underwriter or such persons. The indemnification
8
<PAGE>
agreement contained in this Section 10 shall remain operative and
in full force and effect regardless of any investigation made by
or on behalf of the Underwriter or any controlling person and
shall survive the sale of any of the Fund's shares made pursuant
to subscriptions obtained by the Underwriter. This agreement of
indemnity will inure exclusively to the benefit of the
Underwriter, to the benefit of its successors and assigns, and to
the benefit of any controlling persons and their successors and
assigns. The Fund agrees promptly to notify the Underwriter of
the commencement of any litigation or proceeding against the Fund
in connection with the issue and sale of any of its shares.
(b) The Underwriter agrees to indemnify, defend and
hold the Fund, its several officers and directors, and any person
who controls the Fund within the meaning of Section 15 of the
Securities Act, free and harmless from and against any and all
claims, demands, liabilities, and expenses (including the cost of
investigating or defending such claims, demands or liabilities
and any counsel fees incurred in connection therewith) which the
Fund, its officers or directors, or any such controlling person
may incur under the Securities Act or under common law or
otherwise, but only to the extent that such liability, or expense
incurred by the Fund, its officers, directors or such controlling
person resulting from such claims or demands shall arise out of
or be based upon any alleged untrue statement of a material fact
contained in information furnished in writing by the Underwriter
to the Fund for use in its Registration Statement, Prospectus or
Statement of Additional Information in effect from time to time
under the Securities Act, or shall arise out of or be based upon
any alleged omission to state a material fact in connection with
such information required to be stated in the Registration
Statement, Prospectus or Statement of Additional Information or
necessary to make such information not misleading. The
Underwriter's agreement to indemnify the Fund, its officers and
directors, and any such controlling person as aforesaid is
expressly conditioned upon the Underwriter being notified of the
commencement of any action brought against the Fund, its officers
or directors or any such controlling person, such notification to
be given by letter or telegram addressed to the Underwriter at
its principal office in New York, and sent to the Underwriter by
the person against whom such action is brought, within ten days
after the summons or other first legal process shall have been
served. The Underwriter shall have a right to control the
defense of such action, with counsel of its own choosing,
satisfactory to the Fund, if such action is based solely upon
such alleged misstatement or omission on its part, and in any
other event the Underwriter and the Fund, and their officers and
directors or such controlling person, shall each have the right
to participate in the defense or preparation of the defense of
any such action. The failure so to notify the Underwriter of the
commencement of any such action shall not relieve the Underwriter
9
<PAGE>
from any liability which it may have to the Fund, to its officers
and trustees, or to such controlling person by reason of any such
untrue statement or omission on the part of the Underwriter
otherwise than on account of the indemnity agreement contained in
this Section 10.
SECTION 11. Notification by the Fund.
The Fund agrees to advise the Underwriter immediately:
(a) of any request by the Securities and Exchange
Commission for amendments to the Fund's Registration Statement,
Prospectus or Statement of Additional Information or for
additional information,
(b) in the event of the issuance by the Securities and
Exchange Commission of any stop order suspending the
effectiveness of the Fund's Registration Statement, Prospectus or
Statement of Additional Information or the initiation of any
proceeding for that purpose,
(c) of the happening of any material event which makes
untrue any statement made in the Fund's Registration Statement,
Prospectus or Statement of Additional Information or which
requires the making of a change in any one thereof in order to
make the statements therein not misleading, and
(d) of all actions of the Securities and Exchange
Commission with respect to any amendments to the Fund's
Registration Statement, Prospectus or Statement of Additional
Information which may from time to time be filed with the
Securities and Exchange Commission under the Securities Act.
SECTION 12. Term of Agreement.
(a) This Agreement shall become effective on the date
hereof and shall continue in effect until June 30, 1993, and
thereafter for successive twelve-month periods (computed from
each July 1) with respect to each class; provided, however, that
such continuance is specifically approved at least annually by
the Directors of the Fund or by vote of the holders of a majority
of the outstanding voting securities (as defined in the
Investment Company Act) of that class, and, in either case, by a
majority of the Directors of the Fund who are not parties to this
Agreement or interested persons, as defined in the Investment
Company 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 Plan or any agreement related thereto;
provided further, however, that if the continuation of this
Agreement is not approved as to a class or a Portfolio, the
Underwriter may continue to render to such class or Portfolio the
10
<PAGE>
services described herein in the manner and to the extent
permitted by the Act and the rules and regulations thereunder.
Upon effectiveness of this Agreement, it shall supersede all
previous agreements between the parties hereto covering the
subject matter hereof. This Agreement may be terminated (i) by
the Fund with respect to any class or Portfolio at any time,
without the payment of any penalty, by the vote of a majority of
the outstanding voting securities (as so defined) of such class
or Portfolio, or by a vote of a majority of the Directors of the
Fund who are not interested persons, as defined in the Investment
Company Act, of the Fund (other than as directors of the Fund)
and have no direct and indirect financial interest in the
operation of the Plan or any agreement related thereto, in any
such event on sixty days' written notice to the Underwriter;
provided, however, that no such notice shall be required if such
termination is stated by the Fund to relate only to Sections 5
and 16 hereof (in which event Sections 5 and 16 shall be deemed
to have been severed herefrom and all other provisions of this
Agreement shall continue in full force and effect), or (ii) by
the Underwriter with respect to any Portfolio on sixty days'
written notice to the Fund.
(b) This Agreement may be amended at any time with the
approval of the Directors of the Fund, provided that (i) any
material amendments of the terms hereof will become effective
only upon approval as provided in the first proviso of the first
sentence of Section 12(a) hereof, and (ii) any amendment to
increase materially the amount to be expended for distribution
services fees pursuant to Section 5(b) hereof will be effective
only upon the additional approval by a vote of a majority of the
outstanding voting securities as defined in the Investment
Company Act of the class or Portfolio affected.
SECTION 13. No Assignment. This Agreement may not be
transferred, assigned, sold or in any manner hypothecated or
pledged by either party hereto and this Agreement shall terminate
automatically in the event of any such transfer, assignment,
sale, hypothecation or pledge. The terms "transfer",
"assignment", and "sale" as used in this paragraph shall have the
meanings ascribed thereto by governing law and any interpretation
thereof contained in rules or regulations promulgated by the
Securities and Exchange Commission thereunder.
SECTION 14. Notices. Any notice required or permitted
to be given hereunder by either party to the other shall be
deemed sufficiently given if sent by registered mail, postage
prepaid, addressed by the party giving such notice to the other
party at the last address furnished by such other party to the
party given notice, and unless and until changed pursuant to the
foregoing provisions hereof addressed to the Fund or the
Underwriter.
11
<PAGE>
SECTION 15. Governing Law. The provisions of this
Agreement shall be, to the extent applicable, construed and
interpreted in accordance with the laws of the State of New York.
SECTION 16. Disinterested Directors of the Fund. While
the Agreement is in effect, the selection and nomination of the
Directors who are not "interested persons" of the Fund (as
defined in the Investment Company Act) will be committed to the
discretion of such disinterested Directors.
IN WITNESS WHEREOF, the parties hereto have executed
this Agreement.
ALLIANCE INTERNATIONAL FUND
By /s/ David H. Dievler
__________________________
David H. Dievler
Chairman
ALLIANCE FUND DISTRIBUTORS,
INC.
By /s/ Robert L. Errico
__________________________
Robert L. Errico
President
Accepted as to
Sections 5, 12 and 16
as of July 22, 1992, as amended
as of April 30, 1993:
ALLIANCE CAPITAL MANAGEMENT L.P.
By Alliance Capital Management Corporation,
General Partner
By /s/ John D. Carifa
_____________________________
John D. Carifa
Executive Vice President
12
00250086.AS2
<PAGE>
CUSTODIAN AGREEMENT
AGREEMENT made this 9th day of March, 1989 between
Alliance International Fund (the "Fund") and Brown Brothers
Harriman & Co. (the "Custodian").
WITNESSETH: That in consideration of the mutual
covenants and agreements herein contained, the parties hereto
agree as follows:
1. The Fund hereby employs and appoints the Custodian
as a custodian for the term and subject to the provisions of this
Agreement. The Custodian shall not be under any duty or
obligation to require the Fund to deliver to it any securities or
funds owned by the Fund and shall have no responsibility or
liability for or on account of securities or funds not so
delivered. The Fund will deposit with the Custodian copies of
the Declaration of Trust and By-Laws (or comparable documents) of
the Fund and all amendments thereto, and copies of such votes and
other proceedings of the Fund as may be necessary for or
convenient to the Custodian in the performance of its duties.
2. Except for securities and funds held by
subcustodians appointed pursuant to the provisions of Section 3
hereof, the Custodian shall have and perform the following powers
and duties:
A. Safekeeping - To keep safely the securities of the
Fund that have been delivered to the Custodian and from time to
time to receive delivery of securities for safekeeping.
<PAGE>
B. Manner of Holding Securities - To hold securities
of the Fund (1) by physical possession of the share certificates
or other instruments representing such securities in registered
or bearer form, or (2) in book-entry form by a Securities System
(as said term is defined in Section 2U).
C. Registered Name; Nominee - To hold registered
securities of the Fund (1) in the name or any nominee name of the
Custodian or the Fund, or in the name or any nominee name of any
agent appointed pursuant to Section 6E, or (2) in street
certificate form, so-called, and in any case with or without any
indication of fiduciary capacity.
D. Purchases - Upon receipt of Proper Instructions, as
defined in Section X on Page 15, insofar as funds are available
for the purpose, to pay for and receive securities purchased for
the account of the Fund, payment being made only upon receipt of
the securities (1) by the Custodian, or (2) by a clearing
corporation of a national securities exchange of which the
Custodian is a member, or (3) by a Securities System. However,
(i) in the case of repurchase agreements entered into by the
Fund, the Custodian may release funds to a Securities System or
to a Subcustodian prior to the receipt of advice from the
Securities System or Subcustodian that the securities underlying
such repurchase agreement have been transferred by book entry
into the Account (as defined in Section 2U) of the Custodian
maintained with such Securities System or Subcustodian, so long
2
<PAGE>
as such payment instructions to Securities System or Subcustodian
include a requirement that delivery is only against payment of
securities, and (ii) in the case of time deposits, call account
deposits, currency deposits, and other deposits, contracts or
options pursuant to Sections 2L, 2M and 2N, the Custodian may
make payment therefor without receiving an instrument evidencing
said deposit so long as such payment instructions detail specific
securities to be acquired.
E. Exchanges - Upon receipt of proper instructions, to
exchange securities held by it for the account of the Fund for
other securities in connection with any reorganization,
recapitalization, split-up of shares, change of par value,
conversion or other event, and to deposit any such securities in
accordance with the terms of any reorganization or protective
plan. Without such instructions, the Custodian may surrender
securities in temporary form for definitive securities, may
surrender securities for transfer into a name or nominee name as
permitted in Section 2C, and may surrender securities for a
different number of certificates or instruments representing the
same number of shares or same principal amount of indebtedness,
provided the securities to be issued are to be delivered to the
Custodian and further provided custodian shall at the time of
surrendering securities or instruments receive a receipt or other
evidence of ownership thereof.
3
<PAGE>
F. Sales of Securities - Upon receipt of proper
instructions, to make delivery of securities which have been sold
for the account of the Fund, but only against payment therefor
(1) in cash, by a certified check, bank cashiers check, bank
credit, or bank wire transfer, or (2) by credit to the account of
the Custodian with a clearing corporation of a national
securities exchange of which the Custodian is a member, or (3) by
credit to the account of the Custodian or an Agent of the
Custodian with a Securities System.
G. Depositary Receipts - Upon receipt of proper
instructions, to instruct a subcustodian appointed pursuant to
Section 3 hereof (a "Subcustodian") or an agent of the Custodian
appointed pursuant to Section 6E hereof (an "Agent") to surrender
securities to the depositary used by an issuer of American
Depositary Receipts or International Depositary Receipts
(hereinafter collectively referred to as "ADRs") for such
securities against a written receipt therefor adequately
describing such securities and written evidence satisfactory to
the Subcustodian or Agent that the depositary has acknowledged
receipt of instructions to issue with respect to such securities
ADRs in the name of the Custodian, or a nominee of the Custodian,
for delivery to the Custodian in Boston, Massachusetts, or at
such other place as the Custodian may from time to time
designate.
4
<PAGE>
Upon receipt of proper instructions, to surrender ADRs
to the issuer thereof against a written receipt therefor
adequately describing the ADRs surrendered and written evidence
satisfactory to the Custodian that the issuer of the ADRs has
acknowledged receipt of instructions to cause its depositary to
deliver the securities underlying such ADRs to a Subcustodian or
an Agent.
H. Exercise of Rights; Tender Offers - Upon timely
receipt of proper instructions, to deliver to the issuer or
trustee thereof, or to the agent of either, warrants, puts,
calls, rights or similar securities for the purpose of being
exercised or sold, provided that the new securities and cash, if
any, acquired by such action are to be delivered to the
Custodian, and, upon receipt of proper instructions, to deposit
securities upon invitations for tenders of securities, provided
that the consideration is to be paid or delivered or the tendered
securities are to be returned to the Custodian.
I. Stock Dividends, Rights, Etc. - To receive and
collect all stock dividends, rights and other items of like
nature; and to deal with the same pursuant to proper instructions
relative thereto.
J. Options - Upon receipt of proper instructions, to
receive and retain confirmations or other documents evidencing
the purchase of writing of an option on a security or securities
index by the Fund; to deposit and maintain in a segregated
5
<PAGE>
account, either physically or by book-entry in a Securities
System, securities subject to a covered call option written by
the Fund; and to release and/or transfer such securities or other
assets only in accordance with a notice or other communication
evidencing the expiration, termination or exercise of such
covered option furnished by The Options Clearing Corporation, the
securities or options exchange on which such covered option is
traded or such other organization as may be responsible for
handling such options transactions.
K. Borrowings - Upon receipt of proper instructions,
to deliver securities of the Fund to lenders or their agents as
collateral for borrowings effected by the Fund, provided that
such borrowed money is payable to or upon the Custodian's order
as Custodian for the Fund.
L. Demand Deposit Bank Accounts - To open and operate
an account or accounts in the name of the Fund on the Custodian's
books subject only to draft or order by the Custodian. All funds
received by the Custodian from or for the account of the Fund
shall be deposited in said account(s). The responsibilities of
the Custodian to the Fund for deposits accepted on the
Custodian's books shall be that of a U.S. bank for a similar
deposit.
If and when authorized by proper instructions, the
Custodian may open and operate an additional account(s) in such
other banks or trust companies as may be designated by the Fund
6
<PAGE>
in such instructions (any such bank or trust company so
designated by the Fund being referred to hereafter as a Banking
Institution), provided that such account(s) shall be in the name
of the Custodian for account of the Fund and subject only to the
Custodian's draft or order. Such accounts may be opened with
Banking Institutions in the United States and in other countries
and may be denominated in either U.S. Dollars or other currencies
as the Fund may determine. All such deposits shall be deemed to
be portfolio securities of the Fund and accordingly the
responsibility of the Custodian therefore shall be the same as
and no greater than the Custodian's responsibility in respect of
other portfolio securities of the Fund.
M. Interest Bearing Call or Time Deposits - To place
interest bearing fixed term and call deposits with such banks and
in such amounts as the Fund may authorize pursuant to proper
instructions. Such deposits may be placed with the Custodian or
with Subcustodians or other Banking Institutions as the Fund may
determine. Deposits may be denominated in U.S. Dollars or other
currencies and need not be evidenced by the issuance or delivery
of a certificate to the Custodian, provided that the Custodian
shall include in its records with respect to the assets of the
Fund, appropriate notation as to the amount and currency of each
such deposit, the accepting Banking Institution, and other
appropriate details. Such deposits, other than those placed with
the Custodian, shall be deemed portfolio securities of the Fund
7
<PAGE>
and the responsibilities of the Custodian therefor shall be the
same as those for demand deposit bank accounts placed with other
banks, as described in Section L of this agreement. The
responsibility of the Custodian for such deposits accepted on the
Custodian's books shall be that of a U.S. bank for a similar
deposit.
N. Foreign Exchange Transactions and Futures
Contracts - Pursuant to proper instructions, to enter into
foreign exchange contracts or options to purchase and sell
foreign currencies for spot and future delivery on behalf and for
the account of the Fund. Such transactions may be undertaken by
the Custodian with such Banking Institutions, including the
Custodian and Subcustodian(s) as principals, as approved and
authorized by the Fund. Foreign exchange contracts and options
other than those executed with the Custodian, shall be deemed to
be portfolio securities of the Fund and the responsibilities of
the Custodian therefor shall be the same as those for demand
deposit bank accounts placed with other banks as described in
Section 2-L of this agreement. Upon receipt of proper
instructions, to receive and retain confirmations evidencing the
purchase or sale of a futures contract or an option on a futures
contract by the Fund; to deposit and maintain in a segregated
account, for the benefit of any futures commission merchant or to
pay to such futures commission merchant, assets designated by the
fund as initial, maintenance or variation "margin" deposits
8
<PAGE>
intended to secure the Funds performance of its obligations under
any futures contracts purchased or sold or any options on futures
contracts written by the Fund, in accordance with the provisions
of any agreement or agreements among any of the Fund, the
Custodian and such futures commission merchant, designated to
comply with the rules of the Commodity Futures Trading Commission
and/or any contract market, or any similar organization or
organizations, regarding such margin deposits; and to release
and/or transfer assets in such margin accounts only in accordance
with any such agreements or rules.
O. Stock Loans - Upon receipt of proper instructions,
to deliver securities of the Fund, in connection with loans of
securities by the Fund, to the borrower thereof upon the receipt
of the cash collateral, if any, for such borrowing. In the event
U.S. Government securities are to be used as collateral, the
Custodian will not release the securities to be loaned until it
has received confirmation that such collateral has been delivered
to the Custodian. The Custodian and Fund understand that the
timing of receipt of such confirmation will normally require that
the delivery of securities to be loaned will be made one day
after receipt of the U.S. Government collateral.
P. Collections - To collect, receive and deposit in
said account or accounts all income and other payments with
respect to the securities held hereunder, and to execute
ownership and other certificates and affidavits for all federal
9
<PAGE>
and state tax purposes in connection with receipt of income or
other payments with respect to securities of the Fund or in
connection with transfer of securities, and pursuant to proper
instructions to take such other actions with respect to
collection or receipt of funds or transfer of securities which
involve an investment decision.
Q. Dividends, Distributions and Redemptions - Upon
receipt of proper instructions from the Fund, or upon receipt of
instructions from the Funds shareholder servicing agent or agent
with comparable duties (the "Shareholder Servicing Agent") (given
by such person or persons and in such manner on behalf of the
Shareholder Servicing Agent as the Fund shall have authorized),
the Custodian shall release funds or securities to the
Shareholder Servicing Agent or otherwise apply funds or
securities, insofar as available, for the payment of dividends or
other distributions to Fund shareholders. Upon receipt of proper
instructions from the Fund, or upon receipt of instructions from
the Shareholder Servicing Agent (given by such person or persons
and in such manner on behalf of the Shareholder Servicing Agent
as the Fund shall have authorized), the Custodian shall release
funds or securities, insofar as available, to the Shareholder
Servicing Agent or as such Agent shall otherwise instruct for
payment to Fund shareholders who have delivered to such Agent a
request for repurchase or redemption of their shares of capital
stock of the Fund.
10
<PAGE>
R. Proxies, Notices, Etc. - Promptly to deliver or
mail to the Fund all forms of proxies and all notices of meetings
and any other notices or announcements affecting or relating to
securities owned by the Fund that are received by the Custodian,
and upon receipt of proper instructions, to execute and deliver
or cause its nominee to execute and deliver such proxies or other
authorizations as may be required. Neither the Custodian nor its
nominee shall vote upon any of such securities or execute any
proxy to vote thereon or give any consent or take any other
action with respect thereto (except as otherwise herein provided)
unless ordered to do so by proper instructions.
S. Nondiscretionary Details - Without the necessity of
express authorization from the Fund, (1) to attend to all
nondiscretionary details in connection with the sale, exchange,
substitution, purchase, transfer or other dealings with
securities, funds or other property of the Portfolio held by the
Custodian except as otherwise directed from time to time by the
Trustees of the Fund, and (2) to make payments to itself or
others for minor expenses of handling securities or other similar
items relating to the Custodian's duties under this Agreement,
provided that all such payments shall be accounted for to the
Fund.
T. Bills - Upon receipt of proper instructions, to pay
or cause to be paid, insofar as funds are available for the
purpose, bills, statements, or other obligations of the Fund.
11
<PAGE>
U. Deposit of Fund Assets in Securities Systems - The
Custodian may deposit and/or maintain securities owned by the
Fund in (i) The Depository Trust Company, (ii) any book-entry
system as provided in Subpart 0 of Treasury Circular No. 300,
31 CFR 306, Subpart B of 31 CFR Part 350, or the book-entry
regulations of federal agencies substantially in the form of
Subpart 0, or (iii) any other domestic clearing agency registered
with the Securities and Exchange Commission under Section 17A of
the Securities Exchange Act of 1934 which acts as a securities
depository and whose use the Fund has previously approved in
writing (each of the foregoing being referred to in this
Agreement as a "Securities System"). Utilization of a Securities
System shall be in accordance with applicable Federal Reserve
Board and Securities and Exchange Commission rules and
regulations, if any, and subject to the following provisions:
1) The Custodian may deposit and/or maintain Fund
securities, either directly or through one or more Agents
appointed by the Custodian (provided that any such agent shall be
qualified to act as a custodian of the Fund pursuant to the
Investment Company Act of 1940 and the rules and regulations
thereunder), in a Securities System provided that such securities
are represented in an account ("Account") of the Custodian or
such Agent in the Securities System which shall not include any
assets of the Custodian or Agent other than assets held as a
fiduciary, custodian, or otherwise for customers;
12
<PAGE>
2) The records of the Custodian with respect to
securities of the Fund which are maintained in a Securities
System shall identify by book-entry those securities belonging to
the Fund;
3) The Custodian shall pay for securities purchased
for the account of the Fund upon (i) receipt of advice from the
Securities System that such securities have been transferred to
the Account, and (ii) the making of an entry on the records of
the Custodian to reflect such payment and transfer for the
account of the Fund. The Custodian shall Transfer securities
sold for the account of the Fund upon (i) receipt of advice from
the Securities System that payment for such securities has been
transferred to the Account, and (ii) the making of an entry on
the records of the Custodian to reflect such transfer and payment
for the account of the Fund. Copies of all advices from the
Securities System of transfers of securities for the account of
the Fund shall identify the Fund, be maintained for the Fund by
the Custodian or an Agent as referred to above, and be provided
to the Fund at its request. The Custodian shall furnish the Fund
confirmation of each transfer to or from the account of the Fund
in the form of a written advice or notice and shall furnish to
the Fund copies of daily transaction sheets reflecting each days
transactions in the Securities System for the account of the Fund
on the next business day;
13
<PAGE>
4) The Custodian shall provide the Fund with any
report obtained by the Custodian or any Agent as referred to
above on the Securities Systems accounting system, internal
accounting control and procedures for safeguarding securities
deposited in the Securities System; and the Custodian and such
Agents shall send to the Fund such reports on their own systems
of internal accounting control as the Fund may reasonably request
from time to time.
5) At the written request of the Fund, the Custodian
will terminate the use of any such Securities System on behalf of
the Fund as promptly as practicable.
V. Other Transfers - Upon receipt of Proper
Instructions, to deliver securities, funds and other property of
the Fund to a Subcustodian or another custodian of the Fund; and,
upon receipt of proper instructions, to make such other
disposition of securities, funds or other property of the Fund in
a manner other than or for purposes other than as enumerated
elsewhere in this Agreement, provided that the instructions
relating to such disposition shall include a statement of the
purpose for which the delivery is to be made, the amount of
securities to be delivered and the name of the person or persons
to whom delivery is to be made.
W. Investment Limitations - In performing its duties
generally, and more particularly in connection with the purchase,
sale and exchange of securities made by or for the Fund, the
14
<PAGE>
Custodian may assume unless and until notified in writing to the
contrary that proper instructions received by it are not in
conflict with or in any way contrary to any provisions of the
Funds Declaration of Trust or By-Laws (or comparable documents)
or votes or proceedings of the shareholders or Directors of the
Fund. The Custodian shall in no event be liable to the Fund and
shall be indemnified by the Fund for any violation which occurs
in the course of carrying out instructions given by the Fund of
any investment limitations to which the Fund is subject or other
limitations with respect to the Funds powers to make
expenditures, encumber securities, borrow or take similar actions
affecting its portfolio.
X. Proper Instructions - Proper instructions shall
mean a tested telex from the Fund or a written request,
direction, instruction or certification signed or initialled on
behalf of the Fund by one or more person or persons as the Board
of Trustees of the Fund shall have from time to time authorized,
provided, however, that no such instructions directing the
delivery of securities or the payment of funds to an authorized
signatory of the Fund shall be signed by such person. Those
persons authorized to give proper instructions may be identified
by the Board of Trustees by name, title or position and will
include at least one officer empowered by the Board to name other
individuals who are authorized to give proper instructions on
behalf of the Fund. Telephonic or other oral instructions given
15
<PAGE>
by any one of the above persons will be considered proper
instructions if the Custodian reasonably believes them to have
been given by a person authorized to give such instructions with
respect to the transaction involved. Oral instructions will be
confirmed by tested telex or in writing in the manner set forth
above but the lack of such confirmation shall in no way affect
any action taken by the Custodian in reliance upon such oral
instructions. The Fund authorizes the Custodian to tape record
any and all telephonic or other oral instructions given to the
Custodian by or on behalf of the Fund (including any of its
officers, Trustees, employees or agents) and will deliver to the
Custodian a similar authorization from any investment manager or
adviser or person or entity with similar responsibilities which
is authorized to give proper instructions on behalf of the Fund
to the Custodian. Proper instructions may relate to specific
transactions or to types or classes of transactions, and may be
in the form of standing instructions.
Proper instructions may include communications effected
directly between electro-mechanical or electronic devices or
systems, in addition to tested telex, provided that the Fund and
the Custodian agree to the use of such device or system.
3. Securities, funds and other property of the Fund
may be held by subcustodians appointed pursuant to the provisions
of this Section 3 (a "Subcustodian"). The Custodian may, at any
time and from time to time, appoint any bank or trust company
16
<PAGE>
(meeting the requirements of a custodian or a foreign custodian
under the Investment Company Act of 1940 and the rules and
regulations thereunder) to act as a Subcustodian for the Fund,
provided that the Fund shall have approved in writing (1) any
such bank or trust company and the subcustodian agreement to be
entered into between such bank or trust company and the
Custodian, and (2) if the subcustodian is a bank organized under
the laws of a country other than the United States, the holding
of securities, cash and other property of the Fund in the country
in which it is proposed to utilize the services of such
subcustodian. Upon such approval by the Fund, the Custodian is
authorized on behalf of the Fund to notify each Subcustodian of
its appointment as such. The Custodian may, at any time in its
discretion, remove any bank or trust company that has been
appointed as a Subcustodian but will promptly notify the Fund of
any such action.
Those Subcustodians, their offices or branches which the
Fund has approved to date are set forth on Appendix A hereto.
Such Appendix shall be amended from time to time as
Subcustodians, branches or offices are changed, added or deleted.
The Fund shall be responsible for informing the Custodian
sufficiently in advance of a proposed investment which is to be
held at a location not listed on Appendix A, in order that there
shall be sufficient time for the Fund to give the approval
required by the preceding paragraph and for the Custodian to put
17
<PAGE>
the appropriate arrangements in place with such Subcustodian
pursuant to such subcustodian agreement.
Although the Fund does not intend to invest in a country
before the foregoing procedures have been completed, in the event
that an investment is made prior to approval, if practical, such
security shall be removed to an approved location or if not
practical such security shall be held by such agent as the
Custodian may appoint. In such event, the Custodian shall be
liable to the Fund for the actions of such agent if and only to
the extent the Custodian shall have recovered from such agent for
any damages caused the Fund by such agent and provided that the
Custodian shall pursue its rights against such agent.
With respect to the securities and funds held by a
Subcustodian, either directly or indirectly, including demand and
interest bearing deposits, currencies or other deposits and
foreign exchange contracts as referred to in Sections 2K, 2L or
2M, the Custodian shall be liable to the Fund if and only to the
extent that such Subcustodian is liable to the Custodian;
provided, however, that the Custodian shall be liable to the Fund
for losses resulting from the bankruptcy or insolvency of a
Subcustodian if and only to the extent that such Subcustodian is
liable to the Custodian and the Custodian recovers from such
Subcustodian under the applicable subcustodian agreement. The
Custodian shall nevertheless be liable to the Fund for its own
negligence in transmitting any instructions received by it from
18
<PAGE>
the Fund and for its own negligence in connection with the
delivery of any securities or funds held by it to any such
Subcustodian.
In the event that any Subcustodian appointed pursuant to
the provisions of this Section 3 fails to perform any of its
obligations under the terms and conditions of the applicable
subcustodian agreement, the Custodian shall use its best efforts
to cause such Subcustodian to perform such obligations. In the
event that the Custodian is unable to cause such Subcustodian to
perform fully its obligations thereunder, the Custodian shall
forthwith upon the Funds request terminate such Subcustodian and,
if necessary or desirable, appoint another subcustodian in
accordance with the provisions of this Section 3. At the
election of the Fund, it shall have the right to enforce, to the
extent permitted by the subcustodian agreement and applicable
law, the Custodian's rights against any such Subcustodian for
loss or damage caused the Fund by such Subcustodian.
At the written request of the Fund, the Custodian will
terminate any subcustodian appointed pursuant to the provisions
of this Section 3 in accordance with the termination provisions
under the applicable subcustodian agreement. The Custodian will
not amend any subcustodian agreement or agree to change or permit
any changes thereunder except upon the prior written approval of
the Fund.
19
<PAGE>
In the event the Custodian receives a claim from a
Subcustodian under the indemnification provisions of any
subcustodian agreement, the Custodian shall promptly give written
notice to the Fund of such claim. No more than thirty days after
written notice to the Fund of the Custodian's intention to make
such payment, the Fund will reimburse the Custodian the amount of
such payment except in respect of any negligence or misconduct of
the Custodian.
4. The Custodian may assist generally in the
preparation of reports to Fund shareholders and others, audits of
accounts, and other ministerial matters of like nature.
5. The Fund hereby also appoints the Custodian as its
financial agent. With respect to the appointment as financial
agent, the Custodian shall have and perform the following powers
and duties:
A. Records - To create, maintain and retain such
records relating to its activities and obligations under this
Agreement as are required under the Investment Company Act of
1940 and the rules and regulations thereunder (including Section
31 thereof and Rules 31a-1 and 31a-2 thereunder) and under
applicable Federal and State tax laws. All such records will be
the property of the Fund and in the event of termination of this
Agreement shall be delivered to the successor custodian, and the
Custodian agrees to cooperate with the Fund in execution of
documents and other action necessary or desirable in order to
20
<PAGE>
substitute the successor custodian for the custodian under their
agreement.
B. Accounts - To keep books of account and render
statements, including interim monthly and complete quarterly
financial statements, or copies thereof, from time to time as
reasonably requested by proper instructions.
C. Access to Records - Subject to security
requirements of the Custodian applicable to its own employees
having access to similar records within the Custodian and such
regulations as may be reasonably imposed by the Custodian, the
books and records maintained by the Custodian pursuant to
Sections 5A and 5B shall be open to inspection and audit at
reasonable times by officers of, attorneys for, and auditors
employed by, the Fund.
D. Calculation of Net Asset Value - To compute and
determine the net asset value per share of capital stock of the
Fund as of the close of business on the New York Stock Exchange
on each day on which such Exchange is open, unless otherwise
directed by proper instructions. Such computation and
determination shall be made in accordance with (1) the provisions
of the Funds Declaration of Trust or By-Laws of the Fund, as they
may from time to time be amended and delivered to the Custodian,
(2) the votes of the Board of Trustees of the Fund at the time in
force and applicable, as they may from time to time be delivered
to the Custodian, and (3) proper instructions from such officers
21
<PAGE>
of the Fund or other persons as are from time to time authorized
by the Board of Trustees of the Fund to give instructions with
respect to computation and determination of the net asset value
on each day that the Custodian shall compute the net asset value
per share of the Fund, the Custodian shall provide the Fund with
written reports which permit the Fund to verify that portfolio
transactions have been recorded in accordance with the Funds
instructions.
In computing the net asset value, the Custodian may rely
upon any information furnished by proper instructions, including
without limitation any information (1) as to accrual of
liabilities of the Fund and as to liabilities of the Fund not
appearing on the books of account kept by the custodian, (2) as
to the existence, status and proper treatment of reserves, if
any, authorized by the fund, (3) as to the sources of quotations
to be used in computing the net asset value, including those
listed in Appendix B, (4) as to the fair value to be assigned to
any securities or other property for which price quotations are
not readily available, and (5) as to the sources of information
with respect to corporate actions affecting portfolio securities
of the fund, including those listed in Appendix B. (Information
as to corporate actions shall include information as to
dividends, distributions, stock splits, stock dividends, rights
offerings, conversions, exchanges, recapitalizations, mergers,
redemptions, calls, maturity dates and similar transactions,
22
<PAGE>
including the ex- and record dates and the amounts or other terms
thereof.)
In like manner, the Custodian shall compute and
determine the net asset value as of such other times as the Board
of Trustees of the Fund from time to time may reasonably request.
Notwithstanding any other provisions of this Agreement,
including Section 6C, the following provisions shall apply with
respect to the Custodian's foregoing responsibilities in this
Section 5D: The Custodian shall be held to the exercise of
reasonable care in computing and determining net asset value as
provided in this Section 5D, but shall not be held accountable or
liable for any losses, damages or expenses the Fund or any
shareholder or former shareholder of the Fund may suffer or incur
arising from or based upon errors or delays in the determination
of such net asset value unless such error or delay was due to the
Custodian's negligence, gross negligence or reckless or willful
misconduct in determination of such net asset value. (The
parties hereto acknowledge, however, that the Custodian's causing
an error or delay in the determination of net asset value may,
but does not in and of itself, constitute negligence, gross
negligence or reckless or willful misconduct.) In no event shall
the Custodian be liable or responsible to the Fund, any present
or former shareholder of the fund or any other party for any
error or delay which continued or was undetected after the date
of an audit performed by the certified public accountants
23
<PAGE>
employed by the Fund if, in the exercise of reasonable care in
accordance with generally accepted accounting standards, such
accountants should have become aware of such error or delay in
the course of performing such audit. The Custodian's liability
for any such negligence, gross negligence or reckless or willful
misconduct which results in an error in determination of such net
asset value shall be limited to the direct, out-of-pocket loss
the Fund, shareholder or former shareholder shall actually incur,
measured by the difference between the actual and the erroneously
computed net asset value, and any expenses the fund shall incur
in connection with correcting the records of the Fund affected by
such error (including charges made by the Funds registrar and
transfer agent for making such corrections) or communicating with
shareholders or former shareholders of the Fund affected by such
error.
Without limiting the foregoing, the Custodian shall not
be held accountable or liable to the Fund, any shareholder or
former shareholder thereof or any other person for any delays or
losses, damages or expenses any of them may suffer or incur
resulting from (1) the Custodian's failure to receive timely and
suitable notification concerning quotations or corporate actions
relating to or affecting portfolio securities of the fund or
(2) any errors in the computation of the net asset value based
upon or arising out of quotations or information as to corporate
actions if received by the Custodian either (i) from a source
24
<PAGE>
which the Custodian was authorized pursuant to the second
paragraph of this Section 5D to rely upon, or (ii) from a source
which in the Custodian's reasonable judgment was as reliable a
source for such quotations or information as the sources
authorized pursuant to that paragraph. Nevertheless, the
Custodian will use its best judgment in determining whether to
verify through other sources any information it has received as
to quotations or corporate actions if the Custodian has reason to
believe that any such information might be incorrect.
In the event of any error or delay in the determination
of such net asset value for which the Custodian may be liable,
the Fund and the Custodian will consult and make good faith
efforts to reach agreement on what actions should be taken in
order to mitigate any loss suffered by the Fund or its present or
former shareholders, in order that the custodians exposure to
liability shall be reduced to the extent possible after taking
into account all relevant factors and alternatives. Such actions
might include the Fund or the custodian taking reasonable steps
to collect from any shareholder or former shareholder who has
received any overpayment upon redemption of shares such overpaid
amount or to collect from any shareholder who has underpaid upon
a purchase of shares the amount of such underpayment or to reduce
the number of shares issued to such shareholder. It is
understood that in attempting to reach agreement on the actions
to be taken or the amount of the loss which should appropriately
25
<PAGE>
be borne by the Custodian, the Fund and the Custodian will
consider such relevant factors as the amount of the loss
involved, the Funds desire to avoid loss of shareholder good
will, the fact that other persons or entitles could have been
reasonably expected to have detected the error sooner than the
time it was actually discovered, the appropriateness of limiting
or eliminating the benefit which shareholders or former
shareholders might have obtained by reason of the error, and the
possibility that other parties providing services to the fund
might be induced to absorb a portion of the loss incurred.
D. Disbursements - Upon receipt of proper
instructions, to pay or cause to be paid, insofar as funds are
available for the purpose, bills, statements and other
obligations of the Fund (including but not limited to interest
charges, taxes, management fees, compensation to Fund officers
and employees, and other operating expenses of the Fund).
6. A. The Custodian shall not be liable for any
action taken or omitted in reliance upon proper instructions
believed by it to be genuine or upon any other written notice,
request, direction, instruction, certificate or other instrument
believed by it to be genuine and signed by the proper party or
parties.
The Secretary or Assistant Secretary of the Fund shall
certify to the Custodian the names, signatures and scope of
authority of all persons authorized to give proper instructions
26
<PAGE>
or any other such notice, request, direction, instruction,
certificate or instrument on behalf of the Fund, the names and
signatures of the officers of the Fund, the name and address of
the Shareholder Servicing Agent, and any resolutions, votes,
instructions or directions of the Funds Board of Trustees or
shareholders. Such certificate may be accepted and relied upon
by the Custodian as conclusive evidence of the facts set forth
therein and may be considered in full force and effect until
receipt of a similar certificate to the contrary.
So long as and to the extent that it is in the exercise
of reasonable care, the Custodian shall not be responsible for
the title, validity or genuineness of any property or evidence of
title thereto received by it or delivered by it pursuant to this
Agreement.
The Custodian shall be entitled, at the expense of the
Fund, to receive and act upon advice of counsel (who may be
counsel for the Fund) on all matters, and the Custodian shall be
without liability for any action reasonably taken or omitted
pursuant to such advice.
B. With respect to the portfolio securities, cash and
other property of the Fund held by a Securities System, the
Custodian shall be liable to the Fund only for any loss or damage
to the Fund resulting from use of the Securities System if caused
by any negligence, misfeasance or misconduct of the Custodian or
any of its agents or of any of its or their employees or from any
27
<PAGE>
failure of the Custodian or any such agent to enforce effectively
such rights as it may have against the Securities System.
C. Except as may otherwise be set forth in this
Agreement with respect to particular matters, the Custodian shall
be held only to the exercise of reasonable care and diligence in
carrying out the provisions of this Agreement, provided that the
Custodian shall not thereby be required to take any action which
is in contravention of any applicable law. However, nothing
herein shall exempt the Custodian from liability due to its own
negligence or willful misconduct. The Fund agrees to indemnify
and hold harmless the Custodian and its nominees from all claims
and liabilities (including counsel fees) incurred or assessed
against it or its nominees in connection with the performance of
this Agreement, except such as may arise from its or its nominees
breach of the relevant standard of conduct set forth in this
Agreement. Without limiting the foregoing indemnification
obligation of the Fund, the Fund agrees to indemnify the
Custodian and its nominees against any liability the Custodian or
such nominee may incur by reason of taxes assessed to the
Custodian or such nominee or other costs, liability or expense
incurred by the Custodian or such nominee resulting directly or
indirectly from the fact that portfolio securities or other
property of the Fund is registered in the name of the Custodian
or such nominee.
28
<PAGE>
In order that the indemnification provisions contained
in this Paragraph 6-C shall apply, however, it is understood that
if in any case the Fund may be asked to indemnify or hold the
Custodian harmless, the Fund shall be fully and promptly advised
of all pertinent facts concerning the situation in question, and
it is further understood that the Custodian will use all
reasonable care to identify and notify the Fund promptly
concerning any situation which presents or appears likely to
present the probability of such a claim for indemnification
against the Fund. The Fund shall have the option to defend the
Custodian against any claim which may be the subject of this
indemnification, and in the event that the Fund so elects it will
so notify the Custodian, and thereupon the Fund shall take over
complete defense of the claim, and the Custodian shall in such
situation initiate no further legal or other expenses for which
it shall seek indemnification under this Paragraph 6-C. The
Custodian shall in no case confess any claim or make any
compromise in any case in which the Fund will be asked to
indemnify the Custodian except with the Funds prior written
consent.
It is also understood that the Custodian shall not be
liable for any loss involving any securities, currencies,
deposits or other property of the Fund, whether maintained by it,
a Subcustodian, an agent of the Custodian or a Subcustodian, a
Securities System, or a Banking Institution, or a loss arising
29
<PAGE>
from a foreign currency transaction or contract, resulting from a
Sovereign Risk. A "Sovereign Risk" shall mean nationalizaton,
expropriation, devaluation, revaluation, confiscation, seizure,
cancellation, destruction or similar action by any governmental
authority, de facto or de jure; or enactment, promulgation,
imposition or enforcement by any such governmental authority of
currency restrictions, exchange controls, taxes, levies or other
charges affecting the Fund's property; or acts of war, terrorism,
insurrection or revolution; or any other similar act or event
beyond the Custodian's control.
D. The Custodian shall be entitled to receive
reimbursement from the Fund on demand, in the manner provided in
Section 7, for its cash disbursements, expenses and charges
(including the fees and expenses of any Subcustodian or any
Agent) in connection with this Agreement, but excluding salaries
and usual overhead expenses.
E. The Custodian may at any time or times in its
discretion appoint (and may at any time remove) any other bank or
trust company as its agent (an "Agent") to carry out such of the
provisions of this Agreement as the Custodian may from time to
time direct, provided, however, that the appointment of such
Agent (other than an Agent appointed pursuant to the third
paragraph of Section 3) shall not relieve the Custodian of any of
its responsibilities under this agreement.
30
<PAGE>
F. Upon request, the Fund shall deliver to the
Custodian such proxies, powers of attorney or other instruments
as may be reasonable and necessary or desirable in connection
with the performance by the Custodian or any Subcustodian of
their respective obligations under this Agreement or any
applicable subcustodian agreement.
7. The Fund shall pay the Custodian a custody fee
based on such fee schedule as may from time to time be agreed
upon in writing by the Custodian and the Fund. Such fee,
together with all amounts for which the Custodian is to be
reimbursed in accordance with Section 6D, shall be billed to the
Fund in such a manner as to permit payment by a direct cash
payment to the Custodian.
8. This Agreement shall continue in full force and
effect until terminated by either party by an instrument in
writing delivered or mailed, postage prepaid, to the other party,
such termination to take effect not sooner than seventy five (75)
days after the date of such delivery or mailing. In the event of
termination the Custodian shall be entitled to receive prior to
delivery of the securities, funds and other property held by it
all accrued fees and unreimbursed expenses the payment of which
is contemplated by Sections 6D and 7, upon receipt by the Fund of
a statement setting forth such fees and expenses.
In the event of the appointment of a successor
custodian, it is agreed that the funds and securities owned by
31
<PAGE>
the Fund and held by the Custodian or any Subcustodian shall be
delivered to the successor custodian, and the Custodian agrees to
cooperate with the Fund in execution of documents and performance
of other actions necessary or desirable in order to substitute
the successor custodian for the Custodian under this Agreement.
9. This Agreement constitutes the entire understanding
and agreement of the parties hereto with respect to the subject
matter hereof. No provision of this Agreement may be amended or
terminated except by a statement in writing signed by the party
against which enforcement of the amendment or termination is
sought.
In connection with the operation of this Agreement, the
Custodian and the Fund may agree in writing from time to time on
such provisions interpretative of or in addition to the
provisions of this Agreement as may in their joint opinion be
consistent with the general tenor of this Agreement. No
interpretative or additional provisions made as provided in the
preceding sentence shall be deemed to be an amendment of this
Agreement.
10. This instrument is executed and delivered in The
Commonwealth of Massachusetts and shall be governed by and
construed according to the laws of said Commonwealth.
11. Notices and other writings delivered or mailed
postage prepaid to the Fund addressed to the Fund at 500 Plaza
Drive 3rd Floor, Secaucus, NJ 07094 or to such other address as
32
<PAGE>
the Fund may have designated to the Custodian in writing, or to
the Custodian at 40 Water Street, Boston, Massachusetts 02109,
Attention: Manager, Securities Department, or to such other
address as the Custodian may have designated to the Fund in
writing, shall be deemed to have been properly delivered or given
hereunder to the respective addressee.
12. This Agreement shall be binding on and shall inure
to the benefit of the Fund and the Custodian and their respective
successors and assigns, provided that neither party hereto may
assign this Agreement or any of its rights or obligations
hereunder without the prior written consent of the other party.
13. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original. This
Agreement shall become effective when one or more counterparts
have been signed and delivered by each of the parties.
IN WITNESS WHEREOF, each of the parties has caused this
Agreement to be executed in its name and behalf on the day and
year first above written.
ALLIANCE INTERNATIONAL FUND BROWN BROTHERS HARRIMAN & CO.
/s/ Edmund P. Bergan, Jr. /s/ Douglas A. Donahue
By _________________________ per pro ______________________
Edmund P. Bergan, Jr. Douglas A. Donahue
33
<PAGE>
ALLIANCE WORLD EQUITIES
ALLIANCE INTERNATIONAL FUND
CANADIAN FUND
CENTRAL
COUNTRY SUBCUSTODIAN(S) DEPOSITORY
AUSTRALIA NATIONAL AUSTRALIA NONE
BANK LIMITED AGMT DTD 5/1/85
AUSTRIA MORGAN BRUSSELS OEKB-WSB
CREDITANSTALT BANKVEREIN
AGMT DTD 6/2/87
BELGIUM MORGAN BRUSSELS AGMT DTD 2/25/86 CIK
CANADA CANADIAN IMPERIAL BANK CDS
OF COMMERCE AGMT DTD 9/9/88
DENMARK MORGAN BRUSSELS VP
COPENHAGEN HANDELSBANK AGMT
DTD 10/27/87
FINLAND MORGAN BRUSSELS NONE
UNION BANK OF FINLAND AGMT
DTD 4/13/87
FRANCE MORGAN BRUSSELS AGMT DTD 2/25/86 SICOVAM
MORGAN PARIS
HONG KONG CHASE MANHATTAN BANK NONE
HONG KONG AGMT DTD, 6/4/79
IRELAND MORGAN BRUSSELS NONE
ALLIED IRISH BANK
AGMT DTD 7/27/87
ITALY MORGAN BRUSSELS MONTE TITOLI
BANCA COMMERCIALE ITALIANA
AGMT DTD 6/17/86
JAPAN CITIBANK TOKYO AGMT DTD 7/16/81 NONE
MEXICO CITIBANK MEXICO AGMT DTD 7/16/81 NONE
NETHERLANDS MORGAN BRUSSELS NECIGEF
MORGAN BANK NEDERLAND AGMT
DTD 3/19/86
A-1
<PAGE>
NEW ZEALAND NATIONAL BANK OF NEW ZEALAND NONE
AGMT DTD 5/13/83
NORWAY MORGAN BRUSSELS VPS
DEN NORSKE CREDITBANK
AGMT DTD 6/2/87
PHILIPPINES CITIBANK MANILA AGMT DTD 7/16/81 NONE
PORTUGAL MORGAN BRUSSELS NONE
BANCO ESPIRITO SANTO
E COMERCIAL DE LISBOA 12/31/87
SINGAPORE CHASE MANHATTAN BANK NONE
(MALAYSIA) SINGAPORE AGMT DTD 6/9/80
SPAIN MORGAN BRUSSELS NONE
BANCO DE SANTANDER
AGMT DTD 2/27/86
SWEDEN MORGAN BRUSSELS VPC
SKANDINAVISKA ENSKILDA BANKEN
AGMT DTD 4/17/87
SWITZERLAND MORGAN BRUSSELS AGMT DTD 2/25/86 SEGA
MORGAN ZURICH
THAILAND MORGAN BRUSSELS NONE
HONGKONG & SHANGHAI BKG CORP
AGMT DTD 3/17/87
TRANSNATIONAL BROWN BROTHERS HARRIMAN & CO EUROCLEAR
OR MORGAN BRUSSELS
UNITED KINGDOM MORGAN BRUSSELS AGMT DTD 2/25/86 TALISMAN
MORGAN LONDON
WEST GERMANY MORGAN BRUSSELS AGMT DTD 2/25/86 KASSENVEREIN
MORGAN FRANKFURT
/s/ Edmund P. Bergan, Jr. March 9, 1989
APPROVED _________________________ DATE ___________________
A-2
<PAGE>
APPENDIX B
ALLIANCE INTERNATIONAL FUND
THE FOLLOWING AUTHORIZED SOURCES ARE TO BE USED FOR PRICING AND
FOREIGN EXCHANGE QUOTATIONS, CORPORATE ACTIONS, DIVIDENDS AND
RIGHTS OFFERINGS:
AUTHORIZED SOURCES
QUOTRON
REUTERS
INTERACTIVE DATA CORPORATION
VALORINFORM (GENEVA)
SUBSCRIPTION BANKS
FUND MANAGERS
EXTEL (LONDON)
REPUTABLE FOREIGN BROKERS
APPROVED: /s/ Edmund P. Bergan, Jr. DATE March 9, 1989
_________________________ _____________
B-1
<PAGE>
BROWN BROTHERS HARRIMAN & C0 - GLOBAL CUSTODY NETWORK
ALLIANCE INTERNATIONAL FUND
ALLIANCE GLOBAL FUND
ALLIANCE GLOBAL ENVIRONMENT FUND, INC.
APPENDIX A
CENTRAL
COUNTRY SUBCUSTODIAN DEPOSITORY
ARGENTINA CITIBANK N A, BUENOS AIRES CDV
AGMT 7/16/81*
AUSTRALIA NATIONAL AUSTRALIA BANK LTD. AUSTRACLEAR
AGMT 5/1/85 NAB AMENDMENT 2/13/92
AUSTRIA CREDITANSTALT BANKVEREIN KONTROLLBANK
AGMT 12/18/89
BELGIUM JPMORGAN BRUSSELS AGMT 2/25/86 CIK
BOTSWANA STANDARD CHARTERED BANK BOTSWANA NONE
LTD AGMT 08/10/92
BRAZIL THE FIRST NATIONAL BANK OF BOSTON NONE
RIO DE JANEIRO AND SAO PAOLO
AGMT 1/5/88
CANADA CANADIAN IMPERIAL BK OF COMMERCE CDS
AGMT 9/9/88
CHILE CITIBANK N A, SANTIAGO AGMT 7/16/81* NONE
CHINA STANDARD CHARTERED BANK, SHANGHAI NONE
SCB REGIONAL AGMT 2/28/92
STANDARD CHARTERED BANK, SHENZHEN NONE
SCB REGIONAL AGMT 2/28/92
COLOMBIA CITIBANK TRUST COLUMBIA, BOGOTA NONE
AGMT 7/16/81* SUBSIDIARY
AMENDMENT 08/07/92
DENMARK DEN DANSKE BANK AGMT 1/1/89 VP
FINLAND KANSALLIS-OSAKE-PANKKI AGMT 6/10/92 NONE
FINLAND UNION BANK OF FINLAND AGMT 2/27/89 NONE
<PAGE>
FRANCE MORGAN PARIS (DIRECT) AGMT SICOVAM
DTD 2/25/86
GERMANY MORGAN FRANKFURT GMBH (DIRECT) KASSENVEREIN
AGMT 2/25/86
GREECE CITIBANK N A, ATHENS AGMT 7/16/81* NONE
HONG KONG CHASE MANHATTAN BANK, HONG KONG CCASS
AGMT 6/4/79 CMB HONG KONG
AGMT AMENDMENT 9/17/90 CMB HONG
KONG AGMT SUPPLEMENT 8/12/92
HUNGARY CITIBANK BUDAPEST R T AGMT 7/16/81* NONE
SUBSIDIARY AMENDMENT 08/07/92
INDIA CITIBANK N A, BOMBAY AGMT 7/16/81* NONE
INDONESIA CITIBANK N A, JAKARTA AGMT 7/16/81* NONE
IRELAND ALLIED IRISH BANKS PLC AGMT 1/10/89 NONE
ISRAEL BANK HAPOALIM B M, TEL-AVIV AGMT NONE
PROPOSED
ITALY BANCA COMMERCIALE ITALIANA AGMT MONTE TITOLI
5/8/89
JAPAN SUMITOMO TRUST & BANKING CO LTD JASDEC
AGMT 7/17/92
KOREA CITIBANK N A, SEOUL AGMT 7/16/81* KSSC
MALAYSIA HONGKONG & SHANGHAI BKG CORP, KUALA NONE
LUMPUR HSBC REGIONAL AGMT
DTD 4/19/91
MEXICO CITIBANK N A, MEXICO CITY AGMT INDEVAL
7/16/81
NETHERLANDS AMRO BANK AGMT 12/19/88 NECIGEF
NEW ZEALAND NATIONAL AUSTRALIA BANK LTD NONE
AGMT 5/1/85 NEW ZEALAND
ADDENDUM 3/7/89
NORWAY JPMB/DEN NORSKE CREDITBANK AGMT VPS
6/2/87
<PAGE>
PAKISTAN STANDARD CHARTERED BANK, GABORONE NONE
SCB REGIONAL AGMT 2/18/92
PERU CITIBANK N A, LIMA AGMT 7/16/81* NONE
PHILIPPINES CITIBANK N A, MANILA AGMT 7/16/81* NONE
POLAND POLSKA KASA OPIEKI AGMT PROPOSED NDS
PORTUGAL BANCO ESPIRITO SANTO E COMMERCIAL NONE
DE LISBOA AGMT 4/26/89
SINGAPORE CHASE MANHATTAN BANK, SINGAPORE AGMT CDP
6/9/80 CMB SINGAPORE AGMT
AMENDMENT 9/17/90 CMB SINGAPORE
AGMT SUPPLEMENT 5/19/92
SOUTH AFRICA FIRST NATL BANK OF SOUTHERN AFRICA NONE
AGMT 8/7/91
SPAIN BANCO SANTANDER AGMT 12/14/88 NONE
SRI LANKA HONGKONG & SHANGHAI BKG CORP, CDS
COLOMBO HSBC REGIONAL AGMT 4/19/91
SWEDEN SKANDINAVISKA ENSKILDA BKN AGMT VPC
2/20/89
SWITZERLAND MORGAN ZURICH (DIRECT) AGMT 2/25/86 SEGA
TAIWAN STANDARD CHARTERED BANK, TAIPEI TSCD
SCB REGIONAL AGMT 2/18/92
THAILAND HONGKONG & SHANGHAI BKG CORP, SDC
SINGAPORE FOR BANGKOK - HSBC
REGIONAL AGMT 4/19/91
TRANSNATIONAL BROWN BROTHERS HARRIMAN & CO EUROCLEAR
CEDEL
TURKEY CITIBANK N A, ISTANBUL, AGMT 7/16/81* NONE
UNITED MORGAN LONDON (DIRECT) AGMT 2/25/86 TALISMAN
KINGDOM CGO, CMO
URUGUAY CITIBANK N A, MONTEVIDEO AGMT NONE
7/16/81*
VENEZUELA CITIBANK N A, CARACAS AGMT 7/16/81* NONE
<PAGE>
ZIMBABWE STANDARD CHARTERED BANK ZIMBABWE LTD NONE
AGMT PROPOSED
* CITIBANK N A AGREEMENT AMENDMENT DATED 8/31/90
I HEREBY CERTIFY THAT AT ITS MEETING ON SEPTEMBER 18, 1992 THE
BOARD APPROVED THE COUNTRIES, SUBCUSTODIANS, AGREEMENTS, AND
CENTRAL DEPOSITORIES LISTED ON THIS APPENDIX.
/s/ George O. Martinez November 5, 1992
______________________ ________________
(SIGNATURE) (DATE)
Assistant Secretary
______________________
(TITLE)
5
00250086.AU0
<PAGE>
ALLIANCE FUND SERVICES, INC.
TRANSFER AGENCY AGREEMENT
AGREEMENT, dated as of September 15, 1988, between
ALLIANCE INTERNATIONAL FUND, a Massachusets business trust
and an open-end investment company registered with the
Securities and Exchange Commission (the "SEC") under the
Investment Company Act of 1940 (the "Investment Company
Act"), having its principal place of business at 1345 Avenue
of Americas, New York, New York 10105 (the "Fund"), and
ALLIANCE FUND SERVICES, INC., a Delaware corporation
registered with the SEC as a transfer agent under the
Securities Exchange Act of 1934, having its principal place
of business at 500 Plaza Drive, Secaucus, New Jersey 07094
("Fund Services"), provides as follows:
WHEREAS, Fund Services has agreed to act as
transfer agent to the Fund for the purpose of recording the
transfer, issuance and redemption of shares of each series
of the common stock or shares of beneficial interest, as
applicable, of the Fund ("Shares" or "Shares of a Series"),
transferring the Shares, disbursing dividends and other
distributions to shareholders of the Fund, and performing
such other services as may be agreed to pursuant hereto;
NOW THEREFORE, for and in consideration of the
mutual covenants and agreements contained herein, the
parties do hereby agree as follows:
<PAGE>
SECTION 1. The Fund hereby appoints Fund Services
as its transfer agent, dividend disbursing agent and
shareholder servicing agent for the Shares, and Fund
Services agrees to act in such capacities upon the terms set
forth in this Agreement. Capitalized terms used in this
Agreement and not otherwise defined shall have the meanings
assigned to them in SECTION 30.
SECTION 2.
(a) The Fund shall provide Fund Services with
copies of the following documents:
(1) Specimens of all forms of certificates
for Shares;
(2) Specimens of all account application
forms and other documents relating to Shareholders'
accounts;
(3) Copies of each Prospectus;
(4) Specimens of all documents relating to
withdrawal plans instituted by the Fund, as described in
SECTION 16; and
(5) Specimens of all amendments to any of the
foregoing documents.
(b) The Fund shall furnish to Fund Services a
supply of blank Share Certificates for the Shares and, from
time to time, will renew such supply upon Fund Services'
request. Blank Share Certificates shall be signed manually
2
<PAGE>
or by facsimile signatures of officers of the Fund
authorized to sign by law or pursuant to the by-laws of the
Fund and, if required by Fund Services, shall bear the
Fund's seal or a facsimile thereof.
SECTION 3. Fund Services shall make original
issues of Shares in accordance with SECTIONS 13 and 14 and
the Prospectus upon receipt of (i) Written Instructions
requesting the issuance, (ii) a certified copy of a
resolution of the Fund's Board of Directors or Trustees
authorizing the issuance, (iii) necessary funds for the
payment of any original issue tax applicable to such Shares,
and (iv) an opinion of the Fund's counsel as to the legality
and validity of the issuance, which opinion may provide that
it is contingent upon the filing by the Fund of an
appropriate notice with the SEC, as required by Rule 24f-2
of the Investment Company Act, as amended from time to time.
SECTION 4. Transfers of Shares shall be registered
and, subject to the provisions of SECTION 10 in the case of
Shares evidenced by Share Certificates, new Share
Certificates shall be issued by Fund Services upon surrender
of outstanding Share Certificates in the form deemed by Fund
Services to be properly endorsed for transfer, which form
shall include (i) all necessary endorsers' signatures
guaranteed by a member firm of a national securities
exchange or a domestic commercial bank or through other
3
<PAGE>
procedures mutually agreed to between the Fund and Fund
Services, (ii) such assurances as Fund Services may deem
necessary to evidence the genuineness and effectiveness of
each endorsement and (iii) satisfactory evidence of
compliance with all applicable laws relating to the payment
or collection of taxes.
SECTION 5. Fund Services shall forward Share
Certificates in "non-negotiable" form by first-class or
registered mail, or by whatever means Fund Services deems
equally reliable and expeditious. While in transit to the
addressee, all deliveries of Share Certificates shall be
insured by Fund Services as it deems appropriate. Fund
Services shall not mail Share Certificates in "negotiable"
form, unless requested in writing by the Fund and fully
indemnified by the Fund to Fund Services' satisfaction.
SECTION 6. In registering transfers of Shares,
Fund Services may rely upon the Uniform Commercial Code as
in effect from time to time in the State in which the Fund
is incorporated or organized or, if appropriate, in the
State of New Jersey; provided, that Fund Services may rely
in addition or alternatively on any other statutes in effect
in the State of New Jersey or in the state under the laws of
which the Fund is incorporated or organized that, in the
opinion of Fund Services' counsel, protect Fund Services and
the Fund from liability arising from (i) not requiring
4
<PAGE>
complete documentation in connection with an issuance or
transfer, (ii) registering a transfer without an adverse
claim inquiry, (iii) delaying registration for purposes of
an adverse claim inquiry or (iv) refusing registration in
connection with an adverse claim.
SECTION 7. Fund Services may issue new Share
Certificates in place of those lost, destroyed or stolen,
upon receiving indemnity satisfactory to Fund Services; and
may issue new Share Certificates in exchange for, and upon
surrender of, mutilated Share Certificates as Fund Services
deems appropriate.
SECTION 8. Unless otherwise directed by the Fund,
Fund Services may issue or register Share Certificates
reflecting the signature, or facsimile thereof, of an
officer who has died, resigned or been removed by the Fund.
The Fund shall file promptly with Fund Services' approval,
adoption or ratification of such action as may be required
by law or by Fund Services.
SECTION 9. Fund Services shall maintain customary
stock registry records for Shares of each Series noting the
issuance, transfer or redemption of Shares and the issuance
and transfer of Share Certificates. Fund Services may also
maintain for Shares of each Series an account entitled
"Unissued Certificate Account," in which Fund Services will
record the Shares, and fractions thereof, issued and
5
<PAGE>
outstanding from time to time for which issuance of Share
Certificates has not been requested. Fund Services is
authorized to keep records for Shares of each Series
containing the names and addresses of record of
Shareholders, and the number of Shares, and fractions
thereof, from time to time owned by them for which no Share
Certificates are outstanding. Each Shareholder will be
assigned a single account number for Shares of each Series,
even though Shares for which Certificates have been issued
will be accounted for separately.
SECTION 10. Fund Services shall issue Share
Certificates for Shares only upon receipt of a written
request from a Shareholder and as authorized by the Fund.
If Shares are purchased or transferred without a request for
the issuance of a Share Certificate, Fund Services shall
merely note on its stock registry records the issuance or
transfer of the Shares and fractions thereof and credit or
debit, as appropriate, the Unissued Certificate Account and
the respective Shareholders' accounts with the Shares.
Whenever Shares, and fractions thereof, owned by
Shareholders are surrendered for redemption, Fund Services
may process the transactions by making appropriate entries
in the stock transfer records, and debiting the Unissued
Certificate Account and the record of issued Shares
6
<PAGE>
outstanding; it shall be unnecessary for Fund Services to
reissue Share Certificates in the name of the Fund.
SECTION 11. Fund Services shall also perform the
usual duties and function required of a stock transfer agent
for a corporation, including but not limited to (i) issuing
Share Certificates as treasury Shares, as directed by
Written Instructions, and (ii) transferring Share
Certificates from one Shareholder to another in the usual
manner. Fund Services may rely conclusively and act without
further investigation upon any list, instruction,
certification, authorization, Share Certificate or other
instrument or paper reasonably believed by it in good faith
to be genuine and unaltered, and to have been signed,
countersigned or executed or authorized by a duly-authorized
person or persons, or by the Fund, or upon the advice of
counsel for the Fund or for Fund Services. Fund Services
may record any transfer of Share Certificates which it
reasonably believes in good faith to have been duly
authorized, or may refuse to record any transfer of Share
Certificates if, in good faith, it reasonably deems such
refusal necessary in order to avoid any liability on the
part of either the Fund or Fund Services.
SECTION 12. Fund Services shall notify the Fund of
any request or demand for the inspection of the Fund's share
records. Fund Services shall abide by the Fund's
7
<PAGE>
instructions for granting or denying the inspection;
provided, however, Fund Services may grant the inspection
without such instructions if it is advised by its counsel
that failure to do so will result in liability to Fund
Services.
SECTION 13. Fund Services shall observe the
following procedures in handling funds received:
(a) Upon receipt at the office designated by the
Fund of any check or other order drawn or endorsed to the
Fund or otherwise identified as being for the account of the
Fund, and, in the case of a new account, accompanied by a
new account application or sufficient information to
establish an account as provided in the Prospectus, Fund
Services shall stamp the transmittal document accompanying
such check or other order with the name of the Fund and the
time and date of receipt and shall forthwith deposit the
proceeds thereof in the custodial account of the Fund.
(b) In the event that any check or other order for
the purchase of Shares is returned unpaid for any reason,
Fund Services shall, in the absence of other instructions
from the Fund, advise the Fund of the returned check and
prepare such documents and information as may be necessary
to cancel promptly any Shares purchased on the basis of such
returned check and any accumulated income dividends and
capital gains distributions paid on such Shares.
8
<PAGE>
(c) As soon as possible after 4:00 p.m., Eastern
time or at such other times as the Fund may specify in
Written or Oral Instructions for any Series (the "Valuation
Time") on each Business Day Fund Services shall obtain from
the Fund's Adviser a quotation (on which it may conclusively
rely) of the net asset value, determined as of the Valuation
Time on that day. On each Business Day Fund Services shall
use the net asset value(s) determined by the Fund's Adviser
to compute the number of Shares and fractional Shares to be
purchased and the aggregate purchase proceeds to be
deposited with the Custodian. As necessary but no more
frequently than daily (unless a more frequent basis is
agreed to by Fund Services), Fund Services shall place a
purchase order with the Custodian for the proper number of
Shares and fractional Shares to be purchased and promptly
thereafter shall send written confirmation of such purchase
to the Custodian and the Fund.
SECTION 14. Having made the calculations required
by SECTION 13, Fund Services shall thereupon pay the
Custodian the aggregate net asset value of the Shares
purchased. The aggregate number of Shares and fractional
Shares purchased shall then be issued daily and credited by
Fund Services to the Unissued Certificate Account. Fund
Services shall also credit each Shareholder's separate
account with the number of Shares purchased by such
9
<PAGE>
Shareholder. Fund Services shall mail written confirmation
of the purchase to each Shareholder or the Shareholder's
representative and to the Fund if requested. Each
confirmation shall indicate the prior Share balance, the new
Share balance, the Shares for which Stock Certificates are
outstanding (if any), the amount invested and the price paid
for the newly-purchased Shares.
SECTION 15. Prior to the Valuation Time on each
Business Day, as specified in accordance with SECTION 13,
Fund Services shall process all requests to redeem Shares
and, with respect to each Series, shall advise the Custodian
of (i) the total number of Shares available for redemption
and (ii) the number of Shares and fractional Shares
requested to be redeemed. Upon confirmation of the net
asset value by the Fund's Adviser, Fund Services shall
notify the Fund and the Custodian of the redemption, apply
the redemption proceeds in accordance with SECTION 16 and
the Prospectus, record the redemption in the stock registry
books, and debit the redeemed Shares from the Unissued
Certificates Account and the individual account of the
Shareholder.
In lieu of carrying out the redemption procedures
described in the preceding paragraph, Fund Services may, at
the request of the Fund, sell Shares to the Fund as
repurchases from Shareholders, provided that the sale price
10
<PAGE>
is not less than the applicable redemption price. The
redemption procedures shall then be appropriately modified.
SECTION 16. Fund Services will carry out the
following procedures with respect to Share redemptions:
(a) As to each request received by the Fund from
or on behalf of a Shareholder for the redemption of Shares,
and unless the right of redemption has been suspended as
contemplated by the Prospectus, Fund Services shall, within
seven days after receipt of such redemption request, either
(i) mail a check in the amount of the proceeds of such
redemption to the person designated by the Shareholder or
other person to receive such proceeds or, (ii) in the event
redemption proceeds are to be wired through the Federal
Reserve Wire System or by bank wire pursuant to procedures
described in the Prospectus, cause such proceeds to be wired
in Federal funds to the bank or trust company account
designated by the Shareholder to receive such proceeds.
Funds Services shall also prepare and send a confirmation of
such redemption to the Shareholder. Redemptions in kind
shall be made only in accordance with such Written
Instructions as Fund Services may receive from the Fund.
The requirements as to instruments of transfer and other
documentation, the determination of the appropriate
redemption price and the time of payment shall be as
provided in the Prospectus, subject to such additional
11
<PAGE>
requirements consistent therewith as may be established by
mutual agreement between the Fund and Fund Services. In the
case of a request for redemption that does not comply in all
respects with the requirements for redemption, Fund Services
shall promptly so notify the Shareholder and shall effect
such redemption at the price in effect at the time of
receipt of documents complying with such requirements. Fund
Services shall notify the Fund's Custodian and the Fund on
each Business Day of the amount of cash required to meet
payments made pursuant to the provisions of this paragraph
and thereupon the Fund shall instruct the Custodian to make
available to Fund Services in timely fashion sufficient
funds therefor.
(b) Procedures and standards for effecting and
accepting redemption orders from Shareholders by telephone
or by such check writing service as the Fund may institute
may be established by mutual agreement between Fund Services
and the Fund consistent with the Prospectus.
(c) For purposes of redemption of Shares that have
been purchased by check within fifteen (15) days prior to
receipt of the redemption request, the Fund shall provide
Fund Services with Written Instructions concerning the time
within which such requests may be honored.
(d) Fund Services shall process withdrawal orders
duly executed by Shareholders in accordance with the terms
12
<PAGE>
of any withdrawal plan instituted by the Fund and described
in the Prospectus. Payments upon such withdrawal orders and
redemptions of Shares held in withdrawal plan accounts in
connection with such payments shall be made at such times as
the Fund may determine in accordance with the Prospectus.
(e) The authority of Fund Services to perform its
responsibilities under SECTIONS 15 and 16 with respect to
the Shares of any Series shall be suspended if Fund Services
receives notice of the suspension of the determination of
the net asset value of the Series.
SECTION 17. Upon the declaration of each dividend
and each capital gains distribution by the Fund's Board of
Directors or Trustees, the Fund shall notify Fund Services
of the date of such declaration, the amount payable per
Share, the record date for determining the Shareholders
entitled to payment, the payment and the reinvestment date
price.
SECTION 18. Upon being advised by the Fund of the
declaration of any income dividend or capital gains
distribution on account of its Shares, Fund Services shall
compute and prepare for the Fund records crediting such
distributions to Shareholders. Fund Services shall, on or
before the payment date of any dividend or distribution,
notify the Fund and the Custodian of the estimated amount
required to pay any portion of a dividend or distribution
13
<PAGE>
which is payable in cash, and thereupon the Fund shall, on
or before the payment date of such dividend or distribution,
instruct the Custodian to make available to Fund Services
sufficient funds for the payment of such cash amount. Fund
Services will, on the designated payment date, reinvest all
dividends in additional shares and promptly mail to each
Shareholder at his address of record a statement showing the
number of full and fractional Shares (rounded to three
decimal places) then owned by the Shareholder and the net
asset value of such Shares; provided, however, that if a
Shareholder elects to receive dividends in cash, Fund
Services shall prepare a check in the appropriate amount and
mail it to the Shareholder at his address of record within
five (5) business days after the designated payment date, or
transmit the appropriate amount in Federal funds in
accordance with the Shareholder's agreement with the Fund.
SECTION 19. Fund Services shall prepare and
maintain for the Fund records showing for each Shareholder's
account the following:
A. The name, address and tax identification
number of the Shareholder;
B. The number of Shares of each Series held by
the Shareholder;
C. Historical information including dividends
paid and date and price for all transactions;
14
<PAGE>
D. Any stop or restraining order placed against
such account;
E. Information with respect to the withholding of
any portion of income dividends or capital gains
distributions as are required to be withheld under
applicable law;
F. Any dividend or distribution reinvestment
election, withdrawal plan application, and correspondence
relating to the current maintenance of the account;
G. The certificate numbers and denominations of
any Share Certificates issued to the Shareholder; and
H. Any additional information required by Fund
Services to perform the services contemplated by this
Agreement.
Fund Services agrees to make available upon request
by the Fund or the Fund's Adviser and to preserve for the
periods prescribed in Rule 31a-2 of the Investment Company
Act any records related to services provided under this
Agreement and required to be maintained by Rule 31a-1 of
that Act, including:
(i) Copies of the daily transaction register for each
Business Day of the Fund;
(ii) Copies of all dividend, distribution and
reinvestment blotters;
15
<PAGE>
(iii) Schedules of the quantities of Shares of each
Series distributed in each state for purposes of
any state's laws or regulations as specified in
Oral or Written Instructions given to Fund
Services from time to time by the Fund or its
agents; and
(iv) Such other information, including Shareholder
lists, and statistical information as may be
agreed upon from time to time by the Fund and Fund
Services.
SECTION 20. Fund Services shall maintain those records
necessary to enable the Fund to file, in a timely manner, form N-
SAR (Semi-Annual Report) or any successor report required by the
Investment Company Act or rules and regulations thereunder.
SECTION 21. Fund Services shall cooperate with the
Fund's independent public accountants and shall take reasonable
action to make all necessary information available to such
accountants for the performance of their duties.
SECTION 22. In addition to the services described
above, Fund Services will perform other services for the Fund as
may be mutually agreed upon in writing from time to time, which
may include preparing and filing Federal tax forms with the
Internal Revenue Service, and, subject to supervisory oversight
by the Fund's Adviser, mailing Federal tax information to
Shareholders, mailing semi-annual Shareholder reports, preparing
16
<PAGE>
the annual list of Shareholders, mailing notices of Shareholders'
meetings, proxies and proxy statements and tabulating proxies.
Fund Services shall answer the inquiries of certain Shareholders
related to their share accounts and other correspondence
requiring an answer from the Fund. Fund Services shall maintain
dated copies of written communications from Shareholders, and
replies thereto.
SECTION 23. Nothing contained in this Agreement is
intended to or shall require Fund Services, in any capacity
hereunder, to perform any functions or duties on any day other
than a Business Day. Functions or duties normally scheduled to
be performed on any day which is not a Business Day shall be
performed on, and as of, the next Business Day, unless otherwise
required by law.
SECTION 24. For the services rendered by Fund Services
as described above, the Fund shall pay to Fund Services an
annualized fee at a rate to be mutually agreed upon from time to
time. Such fee shall be prorated for the months in which this
Agreement becomes effective or is terminated. In addition, the
Fund shall pay, or Fund Services shall be reimbursed for, all
out-of-pocket expenses incurred in the performance of this
Agreement, including but not limited to the cost of stationery,
forms, supplies, blank checks, stock certificates, proxies and
proxy solicitation and tabulation costs, all forms and statements
used by Fund Services in communicating with Shareholders of the
17
<PAGE>
Fund or especially prepared for use in connection with its
services hereunder, specific software enhancements as requested
by the Fund, costs associated with maintaining withholding
accounts (including non-resident alien, Federal government and
state), postage, telephone, telegraph (or similar electronic
media) used in communicating with Shareholders or their
representatives, outside mailing services, microfiche/microfilm,
freight charges and off-site record storage. It is agreed in
this regard that Fund Services, prior to ordering any form in
such supply as it estimates will be adequate for more than two
years' use, shall obtain the written consent of the Fund. All
forms for which Fund Services has received reimbursement from the
Fund shall be the property of the Fund.
SECTION 25. Fund Services shall not be liable for any
taxes, assessments or governmental charges that may be levied or
assessed on any basis whatsoever in connection with the Fund or
any Shareholder, excluding taxes assessed against Fund Services
for compensation received by it hereunder.
SECTION 26.
(a) Fund Services shall at all times act in good faith
and with reasonable care in performing the services to be
provided by it under this Agreement, but shall not be liable for
any loss or damage unless such loss or damage is caused by the
negligence, bad faith or willful misconduct of Fund Services or
its employees or agents.
18
<PAGE>
(b) The Fund shall indemnify and hold Fund Services
harmless from all loss, cost, damage and expense, including
reasonable expenses for counsel, incurred by it resulting from
any claim, demand, action or suit in connection with the
performance of its duties hereunder, or as a result of acting
upon any instruction reasonably believed by it to have been
properly given by a duly authorized officer of the Fund, or upon
any information, data, records or documents provided to Fund
Services or its agents by computer tape, telex, CRT data entry or
other similar means authorized by the Fund; provided that this
indemnification shall not apply to actions or omissions of Fund
Services in cases of its own bad faith, willful misconduct or
negligence, and provided further that if in any case the Fund may
be asked to indemnify or hold Fund Services harmless pursuant to
this Section, the Fund shall have been fully and promptly advised
by Fund Services of all material facts concerning the situation
in question. The Fund shall have the option to defend Fund
Services against any claim which may be the subject of this
indemnification, and in the event that the Fund so elects it will
so notify Fund Services, and thereupon the Fund shall retain
competent counsel to undertake defense of the claim, and Fund
Services shall in such situations incur no further legal or other
expenses for which it may seek indemnification under this
paragraph. Fund Services shall in no case confess any claim or
make any compromise in any case in which the Fund may be asked to
19
<PAGE>
indemnify Fund Services except with the Fund's prior written
consent.
Without limiting the foregoing:
(i) Fund Services may rely upon the advice of the Fund
or counsel to the Fund or Fund Services, and upon statements of
accountants, brokers and other persons believed by Fund Services
in good faith to be expert in the matters upon which they are
consulted. Fund Services shall not be liable for any action
taken in good faith reliance upon such advice or statements;
(ii) Fund Services shall not be liable for any action
reasonably taken in good faith reliance upon any Written
Instructions or certified copy of any resolution of the Fund's
Board of Directors or Trustees, including a Written Instruction
authorizing Fund Services to make payment upon redemption of
Shares without a signature guarantee; provided, however, that
upon receipt of a Written Instruction countermanding a prior
Instruction that has not been fully executed by Fund Services,
Fund Services shall verify the content of the second Instruction
and honor it, to the extent possible. Fund Services may rely
upon the genuineness of any such document, or copy thereof,
reasonably believed by Fund Services in good faith to have been
validly executed;
(iii) Fund Services may rely, and shall be protected by
the Fund in acting, upon any signature, instruction, request,
letter of transmittal, certificate, opinion of counsel,
20
<PAGE>
statement, instrument, report, notice, consent, order, or other
paper or document reasonably believed by it in good faith to be
genuine and to have been signed or presented by the purchaser,
the Fund or other proper party or parties; and
(d) Fund Services may, with the consent of the
Fund, subcontract the performance of any portion of any
service to be provided hereunder, including with respect to
any Shareholder or group of Shareholders, to any agent of
Fund Services and may reimburse the agent for the services
it performs at such rates as Fund Services may determine;
provided that no such reimbursement will increase the amount
payable by the Fund pursuant to this Agreement; and provided
further, that Fund Services shall remain ultimately
responsible as transfer agent to the Fund.
SECTION 27. The Fund shall deliver or cause to be
delivered over to Fund Services (i) an accurate list of
Shareholders, showing each Shareholder's address of record,
number of Shares of each Series owned and whether such
Shares are represented by outstanding Share Certificates or
by non-certificated Share accounts and (ii) all Shareholder
records, files, and other materials necessary or appropriate
for proper performance of the functions assumed by the under
this Agreement (collectively referred to as the
"Materials"). The Fund shall indemnify Fund Services and
hold it harmless from any and all expenses, damages, claims,
suits, liabilities, actions, demands and losses arising out
of or in connection with any error, omission, inaccuracy or
other deficiency of such Materials, or out of the failure of
the Fund to provide any portion of the Materials or to
provide any information in the Fund's possession needed by
Fund Services to knowledgeably perform its functions;
provided the Fund shall have no obligation to indemnify Fund
Services or hold it harmless with respect to any expenses,
damages, claims, suits, liabilities, actions, demands or
losses caused directly or indirectly by acts or omissions of
Fund Services or the Fund's Adviser.
SECTION 28. This Agreement may be amended from
time to time by a written supplemental agreement executed by
the Fund and Fund Services and without notice to or approval
of the Shareholders; provided this Agreement may not be
amended in any manner which would substantially increase the
Fund's obligations hereunder unless the amendment is first
approved by the Fund's Board of Directors or Trustees,
including a majority of the Directors or Trustees who are
not a party to this Agreement or interested persons of any
such party, at a meeting called for such purpose, and
thereafter is approved by the Fund's Shareholders if such
21
<PAGE>
approval is required under the Investment Company Act or the
rules and regulations thereunder. The parties hereto may
adopt procedures as may be appropriate or practical under
the circumstances, and Fund Services may conclusively rely
on the determination of the Fund that any procedure that has
been approved by the Fund does not conflict with or violate
any requirement of its Articles of Incorporation or
Declaration of Trust, By-Laws or Prospectus, or any rule,
regulation or requirement of any regulatory body.
SECTION 29. The Fund shall file with Fund Services
a certified copy of each operative resolution of its Board
of Directors or Trustees authorizing the execution of
Written Instructions or the transmittal of Oral Instructions
and setting forth authentic signatures of all signatories
authorized to sign on behalf of the Fund and specifying the
person or persons authorized to give Oral Instructions on
behalf of the Fund. Such resolution shall constitute
conclusive evidence of the authority of the person or
persons designated therein to act and shall be considered in
full force and effect, with Fund Services fully protected in
acting in reliance therein, until Fund Services receives a
certified copy of a replacement resolution adding or
deleting a person or persons authorized to give Written or
Oral Instructions. If the officer certifying the resolution
is authorized to give Oral Instructions, the certification
shall also be signed by a second officer of the Fund.
SECTION 30. The terms, as defined in this Section,
whenever used in this Agreement or in any amendment or
supplement hereto, shall have the meanings specified below,
insofar as the context will allow.
(a) Business Day: Any day on which the Fund is
open for business as described in the Prospectus.
(b) Custodian: The term Custodian shall mean the
Fund's current custodian or any successor custodian acting
as such for the Fund.
(c) Fund's Adviser: The term Fund's Adviser shall
mean Alliance Capital Management L.P. or any successor
thereto who acts as the investment adviser or manager of the
Fund.
(d) Oral Instructions: The term Oral Instructions
shall mean an authorization, instruction, approval, item or
set of data, or information of any kind transmitted to Fund
Services in person or by telephone, vocal telegram or other
electronic means, by a person or persons reasonably believed
in good faith by Fund Services to be a person or persons
authorized by a resolution of the Board of Directors or
Trustees of the Fund to give Oral Instructions on behalf of
the Fund. Each Oral Instruction shall specify whether it is
applicable to the entire Fund or a specific Series of the
Fund.
22
<PAGE>
(e) Prospectus: The term Prospectus shall mean a
prospectus and related statement of additional information
forming part of a currently effective registration statement
under the Investment Company Act and, as used with the
respect to Shares or Shares of a Series, shall mean the
prospectuses and related statements of additional
information covering the Shares or Shares of the Series.
(f) Securities: The term Securities shall mean
bonds, debentures, notes, stocks, shares, evidences of
indebtedness, and other securities and investments from time
to time owned by the Fund.
(g) Series: The term Series shall mean any series
of Shares of the common stock of the Fund that the Fund may
establish from time to time.
(h) Share Certificates: The term Share
Certificates shall mean the stock certificates or
certificates representing shares of beneficial interest for
the Shares.
(i) Shareholders: The term Shareholders shall
mean the registered owners from time to time of the Shares,
as reflected on the stock registry records of the Fund.
(j) Written Instructions: The term Written
Instructions shall mean an authorization, instruction,
approval, item or set of data, or information of any kind
transmitted to Fund Services in original writing containing
original signatures, or a copy of such document transmitted
by telecopy, including transmission of such signature, or
other mechanical or documentary means, at the request of a
person or persons reasonably believed in good faith by Fund
Services to be a person or persons authorized by a
resolution of the Board of Directors or Trustees of the Fund
to give Written Instruction shall specify whether it is
applicable to the entire Fund or a specific Series of the
Fund.
SECTION 31. Fund Services shall not be liable for
the loss of all or part of any record maintained or
preserved by it pursuant to this Agreement or for any delays
or errors occurring by reason of circumstances beyond its
control, including but not limited to acts of civil or
military authorities, national emergencies, fire, flood or
catastrophe, acts of God, insurrection, war, riot, or
failure of transportation, communication or power supply,
except to the extent that Fund Services shall have failed to
use its best efforts to minimize the likelihood of
occurrence of such circumstances or to mitigate any loss or
damage to the Fund caused by such circumstances.
SECTION 32. The Fund may give Fund Services sixty
(60) days and Fund Services may give the Fund (90) days
written notice of the termination of this Agreement, such
termination to take effect at the time specified in the
notice. Upon notice of termination, the Fund shall use its
23
<PAGE>
best efforts to obtain a successor transfer agent. If a
successor transfer agent is not appointed within ninety (90)
days after the date of the notice of termination, the Board
of Directors or Trustees of the Fund shall, by resolution,
designate the Fund as its own transfer agent. Upon receipt
of written notice from the Fund of the appointment of the
successor transfer agent and upon receipt of Oral or Written
Instructions Fund Services shall, upon request of the Fund
and the successor transfer agent and upon payment of Fund
Services reasonable charges and disbursements, promptly
transfer to the successor transfer agent the original or
copies of all books and records maintained by Fund Services
hereunder and cooperate with, and provide reasonable
assistance to, the successor transfer agent in the
establishment of the books and records necessary to carry
out its responsibilities hereunder.
SECTION 33. Any notice or other communication
required by or permitted to be given in connection with this
Agreement shall be in writing, and shall be delivered in
person or sent by first-class mail, postage prepaid, to the
respective parties.
Notice to the Fund shall be given as follows until
further notice:
1345 Avenue of the Americas
New York, New York 10105
Attention: Secretary
Notice to Fund Services shall be given as follows
until further notice:
Alliance Fund Services, Inc.
500 Plaza Drive
Secaucus, New Jersey 07094
SECTION 34. The Fund represents and warrants to
Fund Services that the execution and delivery of this
Agreement by the undersigned officer of the Fund has been
duly and validly authorized by resolution of the Fund's
Board of Directors or Trustees. Fund Services represents
and warrants to the Fund that the execution and delivery of
24
<PAGE>
this Agreement by the undersigned officer of Fund Services
has also been duly and validly authorized.
SECTION 35. This Agreement may be executed in more
than one counterpart, each of which shall be deemed to be an
original, and shall become effective on the last date of
signature below unless otherwise agreed by the parties.
Unless sooner terminated pursuant to SECTION 32, this
Agreement will continue until and will continue
in effect thereafter for successive 12 month periods only if
such continuance is specifically approved at least annually
by the Board of Directors or Trustees or by a vote of the
stockholders of the Fund and in either case by a majority of
the Directors or Trustees who are not parties to this
Agreement or interested persons of any such party, at a
meeting called for the purpose of voting on this Agreement.
SECTION 36. This Agreement shall extend to and
shall bind the parties hereto and their respective
successors and assigns; provided, however, that this
Agreement shall not be assignable by the Fund without the
written consent of Fund Services or by Fund Services without
the written consent of the Fund, authorized or approved by a
resolution of the Fund's Board of Directors or Trustees.
Notwithstanding the foregoing, either party may assign this
Agreement without the consent of the other party so long as
the assignee is an affiliate, parent or subsidiary of the
25
<PAGE>
assigning party and is qualified to act under the Investment
Company Act, as amended from time to time.
SECTION 38. This Agreement shall be governed by
the laws of the State of New Jersey.
WITNESS the following signatures:
ALLIANCE INTERNATIONAL FUND
BY: /s/ Daniel V. Panker
___________________________
Daniel V. Panker
TITLE: Vice President
________________________
ALLIANCE FUND SERVICES, INC.
BY: /s/ Robert H. Joseph
___________________________
Robert H. Joseph
TITLE: Vice President
________________________
26
00250086.AS7
<PAGE>
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the captions
"Financial Highlights," "Shareholders Services - Statements and
Reports" and "General Information - Independent Auditors" and to
the use of our report dated August 7, 1998 included in this
Registration Statement (Form N-1A Nos. 2-70428 and 811-3130) of
Alliance International Fund.
/s/ERNST & YOUNG LLP
New York, New York
October 27, 1998
00250086.AU7
<PAGE>
[ARTICLE] 6
[SERIES]
[NUMBER] 001
[NAME] Class A
[MULTIPLIER] 1
<TABLE>
<S> <C>
[PERIOD-TYPE] 12 months
[FISCAL-YEAR-END] Jun-30-1998
[PERIOD-START] Jul-01-1997
[PERIOD-END] Jun-30-1998
[INVESTMENTS-AT-COST] 235236625
[INVESTMENTS-AT-VALUE] 271172222
[RECEIVABLES] 5844966
[ASSETS-OTHER] 1377909
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 278395097
[PAYABLE-FOR-SECURITIES] 3032022
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 4845767
[TOTAL-LIABILITIES] 7877789
[SENIOR-EQUITY] 149083
[PAID-IN-CAPITAL-COMMON] 222492762
[SHARES-COMMON-STOCK] 7094137
[SHARES-COMMON-PRIOR] 10177198
[ACCUMULATED-NII-CURRENT] 1360635
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] 10576194
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 35938634
[NET-ASSETS] 270517308
[DIVIDEND-INCOME] 4115694
[INTEREST-INCOME] 242699
[OTHER-INCOME] 0
[EXPENSES-NET] 5216964
[NET-INVESTMENT-INCOME] (858571)
[REALIZED-GAINS-CURRENT] 22105436
[APPREC-INCREASE-CURRENT] (1039493)
[NET-CHANGE-FROM-OPS] 20207372
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] (340015)
[DISTRIBUTIONS-OF-GAINS] (8564124)
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 431681009
[NUMBER-OF-SHARES-REDEEMED] (501332312)
[SHARES-REINVESTED] 7195776
[NET-CHANGE-IN-ASSETS] (29345453)
[ACCUMULATED-NII-PRIOR] 91546
[ACCUMULATED-GAINS-PRIOR] 9493804
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
<PAGE>
[GROSS-ADVISORY-FEES] 2310876
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 5216964
[AVERAGE-NET-ASSETS] 273077625
[PER-SHARE-NAV-BEGIN] 18.69
[PER-SHARE-NII] (0.01)
[PER-SHARE-GAIN-APPREC] 1.13
[PER-SHARE-DIVIDEND] (0.05)
[PER-SHARE-DISTRIBUTIONS] (1.21)
[RETURNS-OF-CAPITAL] 0.00
[PER-SHARE-NAV-END] 18.55
[EXPENSE-RATIO] 1.65
[AVG-DEBT-OUTSTANDING] 0.00
[AVG-DEBT-PER-SHARE] 0.00
</TABLE>
00250086.AT6
<PAGE>
[ARTICLE] 6
[SERIES]
[NUMBER] 001
[NAME] Class B
[MULTIPLIER] 1
<TABLE>
<S> <C>
[PERIOD-TYPE] 12 months
[FISCAL-YEAR-END] Jun-30-1998
[PERIOD-START] Jul-01-1997
[PERIOD-END] Jun-30-1998
[INVESTMENTS-AT-COST] 235236625
[INVESTMENTS-AT-VALUE] 271172222
[RECEIVABLES] 5844966
[ASSETS-OTHER] 1377909
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 278395097
[PAYABLE-FOR-SECURITIES] 3032022
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 4845767
[TOTAL-LIABILITIES] 7877789
[SENIOR-EQUITY] 149083
[PAID-IN-CAPITAL-COMMON] 222492762
[SHARES-COMMON-STOCK] 4098451
[SHARES-COMMON-PRIOR] 4387957
[ACCUMULATED-NII-CURRENT] 1360635
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] 10576194
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 35938634
[NET-ASSETS] 270517308
[DIVIDEND-INCOME] 4115694
[INTEREST-INCOME] 242699
[OTHER-INCOME] 0
[EXPENSES-NET] 5216964
[NET-INVESTMENT-INCOME] 858571
[REALIZED-GAINS-CURRENT] 22105436
[APPREC-INCREASE-CURRENT] (1039493)
[NET-CHANGE-FROM-OPS] 20207372
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 0
[DISTRIBUTIONS-OF-GAINS] (5015932)
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 98173143
[NUMBER-OF-SHARES-REDEEMED] (107772023)
[SHARES-REINVESTED] 3960979
[NET-CHANGE-IN-ASSETS] (29345453)
[ACCUMULATED-NII-PRIOR] 91546
[ACCUMULATED-GAINS-PRIOR] 9493804
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
<PAGE>
[GROSS-ADVISORY-FEES] 2310876
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 5216964
[AVERAGE-NET-ASSETS] 273077625
[PER-SHARE-NAV-BEGIN] 17.71
[PER-SHARE-NII] (0.16)
[PER-SHARE-GAIN-APPREC] 1.07
[PER-SHARE-DIVIDEND] 0.00
[PER-SHARE-DISTRIBUTIONS] (1.21)
[RETURNS-OF-CAPITAL] 0.00
[PER-SHARE-NAV-END] 17.41
[EXPENSE-RATIO] 2.49
[AVG-DEBT-OUTSTANDING] 0.00
[AVG-DEBT-PER-SHARE] 0.00
</TABLE>
00250086.AT7
<PAGE>
[ARTICLE] 6
[SERIES]
[NUMBER] 001
[NAME] Class C
[MULTIPLIER] 1
<TABLE>
<S> <C>
[PERIOD-TYPE] 12 months
[FISCAL-YEAR-END] Jun-30-1998
[PERIOD-START] Jul-01-1997
[PERIOD-END] Jun-30-1998
[INVESTMENTS-AT-COST] 235236625
[INVESTMENTS-AT-VALUE] 271172222
[RECEIVABLES] 5844966
[ASSETS-OTHER] 1377909
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 278395097
[PAYABLE-FOR-SECURITIES] 3032022
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 4845767
[TOTAL-LIABILITIES] 7877789
[SENIOR-EQUITY] 149083
[PAID-IN-CAPITAL-COMMON] 222492762
[SHARES-COMMON-STOCK] 1172543
[SHARES-COMMON-PRIOR] 1312100
[ACCUMULATED-NII-CURRENT] 1360635
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] 10576194
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 35938634
[NET-ASSETS] 270517308
[DIVIDEND-INCOME] 4115694
[INTEREST-INCOME] 242699
[OTHER-INCOME] 0
[EXPENSES-NET] 5216964
[NET-INVESTMENT-INCOME] (858571)
[REALIZED-GAINS-CURRENT] 22105436
[APPREC-INCREASE-CURRENT] (1039493)
[NET-CHANGE-FROM-OPS] 20207372
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 0
[DISTRIBUTIONS-OF-GAINS] (1492502)
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 21956475
[NUMBER-OF-SHARES-REDEEMED] (25121032)
[SHARES-REINVESTED] 869855
[NET-CHANGE-IN-ASSETS] (29345453)
[ACCUMULATED-NII-PRIOR] 91546
[ACCUMULATED-GAINS-PRIOR] 9493804
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
<PAGE>
[GROSS-ADVISORY-FEES] 2310876
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 5216964
[AVERAGE-NET-ASSETS] 273077625
[PER-SHARE-NAV-BEGIN] 17.73
[PER-SHARE-NII] (0.15)
[PER-SHARE-GAIN-APPREC] 1.05
[PER-SHARE-DIVIDEND] 0.00
[PER-SHARE-DISTRIBUTIONS] (1.21)
[RETURNS-OF-CAPITAL] 0.00
[PER-SHARE-NAV-END] 17.42
[EXPENSE-RATIO] 2.48
[AVG-DEBT-OUTSTANDING] 0.00
[AVG-DEBT-PER-SHARE] 0.00
</TABLE>
00250086.AT8
<PAGE>
[ARTICLE] 6
[SERIES]
[NUMBER] 001
[NAME] Advisor Class
[MULTIPLIER] 1
<TABLE>
<S> <C>
[PERIOD-TYPE] 12 months
[FISCAL-YEAR-END] Jun-30-1998
[PERIOD-START] Jul-01-1997
[PERIOD-END] Jun-30-1998
[INVESTMENTS-AT-COST] 235236625
[INVESTMENTS-AT-VALUE] 271172222
[RECEIVABLES] 5844966
[ASSETS-OTHER] 1377909
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 278395097
[PAYABLE-FOR-SECURITIES] 3032022
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 4845767
[TOTAL-LIABILITIES] 7877789
[SENIOR-EQUITY] 149083
[PAID-IN-CAPITAL-COMMON] 222492762
[SHARES-COMMON-STOCK] 2543195
[SHARES-COMMON-PRIOR] 465787
[ACCUMULATED-NII-CURRENT] 1360635
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] 10576194
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 35938634
[NET-ASSETS] 270517308
[DIVIDEND-INCOME] 4115694
[INTEREST-INCOME] 242699
[OTHER-INCOME] 0
[EXPENSES-NET] 5216964
[NET-INVESTMENT-INCOME] (858571)
[REALIZED-GAINS-CURRENT] 22105436
[APPREC-INCREASE-CURRENT] (1039493)
[NET-CHANGE-FROM-OPS] 20226886
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] (164972)
[DISTRIBUTIONS-OF-GAINS] (2849305)
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 56300890
[NUMBER-OF-SHARES-REDEEMED] (20046957)
[SHARES-REINVESTED] 3008222
[NET-CHANGE-IN-ASSETS] (29345453)
[ACCUMULATED-NII-PRIOR] 91546
[ACCUMULATED-GAINS-PRIOR] 9493804
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
<PAGE>
[GROSS-ADVISORY-FEES] 2310876
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 5216964
[AVERAGE-NET-ASSETS] 273077625
[PER-SHARE-NAV-BEGIN] 18.67
[PER-SHARE-NII] 0.02
[PER-SHARE-GAIN-APPREC] 1.13
[PER-SHARE-DIVIDEND] (0.07)
[PER-SHARE-DISTRIBUTIONS] (1.21)
[RETURNS-OF-CAPITAL] 0.00
[PER-SHARE-NAV-END] 18.54
[EXPENSE-RATIO] 1.47
[AVG-DEBT-OUTSTANDING] 0.00
[AVG-DEBT-PER-SHARE] 0.00
</TABLE>
00250086.AT9
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the person
whose signature appears below hereby revokes all prior powers
granted by the undersigned to the extent inconsistent herewith
and constitutes and appoints John D. Carifa, Edmund P. Bergan,
Jr., Domenick Pugliese, Andrew L. Gangolf and Emilie D. Wrapp and
each of them, to act severally as attorneys-in-fact and agents,
with power of substitution and resubstitution, for the
undersigned in any and all capacities, solely for the purpose of
signing the respective Registration Statements, and any
amendments thereto, on Form N-1A of AFD Exchange Reserves,
Alliance All-Asia Investment Fund, Inc., Alliance Balanced
Shares, Inc., Alliance Bond Fund, Inc., Alliance Capital
Reserves, Alliance Global Dollar Government Fund, Inc., Alliance
Global Environment Fund, Inc., Alliance Global Small Cap Fund,
Inc., Alliance Global Strategic Income Trust, Inc., Alliance
Government Reserves, Alliance Greater China '97 Fund, Inc.,
Alliance Growth and Income Fund, Inc., Alliance High Yield Fund,
Inc., Alliance Income Builder 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,
<PAGE>
Alliance Municipal Trust, Alliance New Europe Fund, Inc.,
Alliance North American Government Income Trust, Inc., Alliance
Premier Growth Fund, Inc., Alliance Quasar Fund, Inc., Alliance
Real Estate Investment Fund, Inc., Alliance/Regent Sector
Opportunity Fund, Inc., Alliance Select Series, Inc., Alliance
Short-Term Multi-Market Trust, Inc., Alliance Technology Fund,
Inc., Alliance Utility Income Fund, Inc., Alliance Variable
Products Series Fund, Inc., Alliance World Income Trust, Inc.,
Alliance Worldwide Privatization Fund, Inc., The Alliance Fund,
Inc., The Alliance Portfolios, and The Hudson River Trust, and
filing the same, with exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange
Commission, hereby ratifying and confirming all that said
attorneys-in-fact, or their substitute or substitutes, may do or
cause to be done by virtue hereof.
/s/ John D. Carifa
______________________________
John D. Carifa
Dated: October 8, 1998
2
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the person
whose signature appears below hereby revokes all prior powers
granted by the undersigned to the extent inconsistent herewith
and constitutes and appoints John D. Carifa, Edmund P. Bergan,
Jr., Domenick Pugliese, Andrew L. Gangolf and Emilie D. Wrapp and
each of them, to act severally as attorneys-in-fact and agents,
with power of substitution and resubstitution, for the
undersigned in any and all capacities, solely for the purpose of
signing the respective Registration Statements, and any
amendments thereto, on Form N-1A of AFD Exchange Reserves,
Alliance All-Asia Investment Fund, Inc., Alliance Balanced
Shares, Inc., Alliance Bond Fund, Inc., Alliance Global Dollar
Government Fund, Inc., Alliance Global Environment Fund, Inc.,
Alliance Global Small Cap Fund, Inc., Alliance Global Strategic
Income Trust, Inc., Alliance Greater China '97 Fund, Inc.,
Alliance Growth and Income Fund, Inc., Alliance High Yield Fund,
Inc., Alliance Income Builder Fund, Inc., Alliance Institutional
Funds, Inc., Alliance Institutional Reserves, 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.,
Alliance Municipal Income Fund II, Alliance New Europe Fund,
Inc., Alliance North American Government Income Trust, Inc.,
3
<PAGE>
Alliance Premier Growth Fund, Inc., Alliance Quasar Fund, Inc.,
Alliance Real Estate Investment Fund, Inc., Alliance/Regent
Sector Opportunity Fund, Inc., Alliance Select Series, Inc.,
Alliance Short-Term Multi-Market Trust, Inc., Alliance Technology
Fund, Inc., Alliance Utility Income Fund, Inc., Alliance Variable
Products Series Fund, Inc., Alliance World Income Trust, Inc.,
Alliance Worldwide Privatization Fund, Inc., and The Alliance
Fund, Inc. and filing the same, with exhibits thereto, and other
documents in connection therewith, with the Securities and
Exchange Commission, hereby ratifying and confirming all that
said attorneys-in-fact, or their substitute or substitutes, may
do or cause to be done by virtue hereof.
/s/ David H. Dievler
_______________________________
David H. Dievler
Dated: October 8, 1998
4
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the person
whose signature appears below hereby revokes all prior powers
granted by the undersigned to the extent inconsistent herewith
and constitutes and appoints John D. Carifa, Edmund P. Bergan,
Jr., Domenick Pugliese, Andrew L. Gangolf and Emilie D. Wrapp and
each of them, to act severally as attorneys-in-fact and agents,
with power of substitution and resubstitution, for the
undersigned in any and all capacities, solely for the purpose of
signing the respective Registration Statements, and any
amendments thereto, on Form N-1A of AFD Exchange Reserves,
Alliance All-Asia Investment Fund, Inc., Alliance Balanced
Shares, Inc., Alliance Bond 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 Growth and Income Fund, Inc.,
Alliance High Yield Fund, Inc., Alliance Income Builder 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 Mortgage Securities
Income Fund, Inc., Alliance Multi-Market Strategy Trust, Inc.,
Alliance Municipal Income Fund, Inc., Alliance Municipal Income
Fund II, Alliance New Europe Fund, Inc., Alliance North American
Government Income Trust, Inc., Alliance Premier Growth Fund,
5
<PAGE>
Inc., Alliance Quasar Fund, Inc., Alliance Real Estate Investment
Fund, Inc., Alliance/Regent Sector Opportunity Fund, Inc.,
Alliance Select Series, Inc., Alliance Short-Term Multi-Market
Trust, Inc., Alliance Utility Income Fund, Inc., Alliance
Variable Products Series Fund, Inc., Alliance World Income Trust,
Inc., Alliance Worldwide Privatization Fund, Inc., The Alliance
Fund, Inc., and filing the same, with exhibits thereto, and other
documents in connection therewith, with the Securities and
Exchange Commission, hereby ratifying and confirming all that
said attorneys-in-fact, or their substitute or substitutes, may
do or cause to be done by virtue hereof.
/s/ John H. Dobkin
_______________________________
John H. Dobkin
Dated: October 8, 1998
6
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the person
whose signature appears below hereby revokes all prior powers
granted by the undersigned to the extent inconsistent herewith
and constitutes and appoints John D. Carifa, Edmund P. Bergan,
Jr., Domenick Pugliese, Andrew L. Gangolf and Emilie D. Wrapp and
each of them, to act severally as attorneys-in-fact and agents,
with power of substitution and resubstitution, for the
undersigned in any and all capacities, solely for the purpose of
signing the respective Registration Statements, and any
amendments thereto, on Form N-1A of Alliance All-Asia Investment
Fund, Inc., Alliance Global Environment Fund, Inc., Alliance
International Fund and Alliance New Europe Fund, Inc., and filing
the same, with exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange
Commission, hereby ratifying and confirming all that said
attorneys-in-fact, or their substitute or substitutes, may do or
cause to be done by virtue hereof.
/s/ William H. Henderson
_______________________________
William H. Henderson
Dated: October 8, 1998
7
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the person
whose signature appears below hereby revokes all prior powers
granted by the undersigned to the extent inconsistent herewith
and constitutes and appoints John D. Carifa, Edmund P. Bergan,
Jr., Domenick Pugliese, Andrew L. Gangolf and Emilie D. Wrapp and
each of them, to act severally as attorneys-in-fact and agents,
with power of substitution and resubstitution, for the
undersigned in any and all capacities, solely for the purpose of
signing the respective Registration Statements, and any
amendments thereto, on Form N-1A of Alliance All-Asia Investment
Fund, Inc., Alliance Global Environment Fund, Inc., Alliance
International Fund and Alliance New Europe Fund, Inc., and filing
the same, with exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange
Commission, hereby ratifying and confirming all that said
attorneys-in-fact, or their substitute or substitutes, may do or
cause to be done by virtue hereof.
/s/ Stig Host
_______________________________
Stig Host
Dated: October 8, 1998
8
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the person
whose signature appears below hereby revokes all prior powers
granted by the undersigned to the extent inconsistent herewith
and constitutes and appoints John D. Carifa, Edmund P. Bergan,
Jr., Domenick Pugliese, Andrew L. Gangolf and Emilie D. Wrapp and
each of them, to act severally as attorneys-in-fact and agents,
with power of substitution and resubstitution, for the
undersigned in any and all capacities, solely for the purpose of
signing the respective Registration Statements, and any
amendments thereto, on Form N-1A of Alliance All-Asia Investment
Fund, Inc., Alliance Global Environment Fund, Inc., Alliance
International Fund and Alliance New Europe Fund, Inc., and filing
the same, with exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange
Commission, hereby ratifying and confirming all that said
attorneys-in-fact, or their substitute or substitutes, may do or
cause to be done by virtue hereof.
/s/ Alan Stoga
_______________________________
Alan Stoga
Dated: October 8, 1998
9
00250086.AU1
